Mortgages

As home buyers keep hearing about the “credit crunch” and doom and gloom, they wonder if they will ever be able to realize their dream of home ownership.

I guess it depends how you look at life, is the glass half empty or half full. I personally believe there is a wonderful opportunity, right now. Interest rates are at an all time low, plus there are tremendous “bargains” in the real estate market.

A little over a year ago we were paying 5.79% for a 5 year fixed rate. Today at a rate of 5.79% some financial institutions will give you 5% cash back that can be used as your down payment.

If you would like to find out about this program and many others please feel free to post a question or contact us www.designermortgages.ca

Whether you intend to finance your renovation yourself or borrow money, you should talk to a financial adviser and to your lender before you make firm plans. They can help you understand your options and advise on how much you can borrow. This information will help you plan realistically.

EXPLORE YOUR OPTIONS

• Your own resources: For smaller renovation projects, you may consider self-funding material costs, especially if you plan to do the work yourself.
• Credit card: Likewise, you can use your credit card to pay for materials for smaller renovations. But be careful not to carry the balance for too long as credit card interest rates can exceed 18%.
• Personal loan: With a personal loan, you pay regular payments of principal and interest for a set period, typically one to five years. You also have the option of a fixed or variable interest rate for the term of the loan. The interest rate on a personal loan is typically less than that of a credit card. Unlike a line of credit, once you pay off your loan you will have to reapply to borrow any new funds needed.
• Personal line of credit: It is ideal for ongoing or long-term renovations since it lets you access your funds at any time and provides a monthly statement to help track expenses. A line of credit offers lower interest rates than credit cards, and charges interest only on funds used each month. And, as you pay off your balance, you can access remaining funds, up to the line of credit’s limit, without having to reapply.
• Secured lines of credit and home equity loans: These options offer all the advantages of regular lines of credits or loans, but are secured by your home’s equity.
• Mortgage refinancing: When funding major renovations, refinancing your mortgage lets you spread repayment over a long period at mortgage interest rates, which are usually much lower than credit card or personal loan rates. This type of financing can allow you to borrow up to 80% of your home’s appraised value (less any outstanding mortgage balance).

This provides an overview of financing options available to you. But also make sure to research grants and rebates offered by the federal and provincial governments and local utilities to help fund your next renovation project.
(Source: CMHC)

Whether you intend to finance your renovation yourself or borrow money, talk to your Verico designer mortgage broker and to your lender before you make firm plans.

Charmaine Idzerda (AMP)
Mortgage Broker (FSCO Lic#: M08000747)
VERICO Designer Mortgages Inc. (FSCO#: 10194)
Office: (905) 336-5997

Economic forecasting seems to be getting more and more difficult. Who would have thought a year ago that interest rates would fall to the current level? We had an increase in fixed rates that started in 2007 and pretty much continued to December 2008. During this time many buyers thinking this was the trend decided to lock into fixed rates. Home buyers locked in their mortgage at the 5 year fixed rate which was around 5.75%. Today we can get a 5 year rate as low as 4.29%. If you have a fixed rate mortgage it makes sense to re-evaluate whether it would be worthwhile to switch to a lower interest rate mortgage.

Breaking your mortgage will result in a prepayment penalty payable to your current lender. The question is whether the savings from the lower interest rate is enough to cover the penalties and any closing costs on the new mortgage. Each situation would have to be addressed on an individual basis. I have run into several cases where there has been significant benefits to switching to a lower rate.

Here is one such scenario:

• Mortgage amount – $188,393
• Term – 5 yr term with 2 yrs remaining on mortgage, – 22 year amortization
• Interest rate at 5.75% – interest payable over next two years – $20,923
• Interest rate of 4.29% – interest payable over next two years – $15,587
• Difference equals $5336
• Prepayment penalty of $1,865 – 3 months interest penalty

Difference in monthly payment: $153.95
The other huge benefit is that you are now in a 5 year mortgage at a rate of 4.29%, imagine the additional savings you will receive from the remaining 3 years.
What if you are only 1 year into a 5 year term, most lenders would charge you interest rate differential!

• Mortgage Amount – $230,615
• 1 year into a 5 year term
• Interest rate at 5.75%
• New interest rate 4.29%
• Remaining interest on current mortgage $50,250
• Interest on new mortgage $37,274
• Penalty would be Interest rate differential =

Difference in monthly payment: $189.85

The borrower had 2 options in this case – switch to a 4 yr term mortgage at 4.39% or get a variable rate at 3.8%. Here is the total interest he would pay over the remaining 4 years of his mortgage based on these terms:

• 4 yr term – $59,263
• Variable rate mortgage – $50,037
• Stay at the current mortgage for the next 4 years – $75,500

The client saves $25,463 (or $75,500 less $50,037) by switching to a variable rate mortgage. The net savings is $15,463 (or $25,463 less $10,000 penalty).

Effective January 29, 2009, any Canadian who spends money on home renovations will be eligible to receive up to $1,350 in tax relief thanks to the new Home Renovation Tax Credit proposed in Harper Government’s Economic Action Plan.

“Every time Canadians invest in home renovations, they are helping to create construction and building-supplies jobs in their own communities,” said the Prime Minister. “By providing an incentive for Canadians to invest in their homes, we are also encouraging them to invest in local jobs.”To highlight the kind of projects that will be eligible under this plan, the Prime Minister visited an Ottawa-area home renovation site and met with a local contractor who will be better able to protect and create jobs thanks to the additional home renovation projects that will be encouraged through this tax credit.

The Home renovation Tax Credit will provide a one-year, temporary 15% income tax credit on eligible home renovation expenditures for work performed, or goods acquired between January 27, 2009 and February 1, 2010. The credit may be claimed on eligible expenditures exceeding $1,000 but no more than $10,000.

The Home Renovation Tax Credit is one of several initiatives to help homeowners and homebuyers that is contained within the Harper Government’s Economic Action Plan. Before homeowners, homebuyers, and local construction and building supply workers can benefit from these new initiatives, Parliament must pass the 2009-2010 Federal Budget. (Source: Office of the Prime Minister – pm.gc.ca)

This morning I met with Carole, a single mother, this wonderful lady has been fending for herself from the age of 14. She can be so proud of herself. She came to me, to help her and her 15 year old daughter obtain their dream of home ownership. They are not ready now and won’t be ready for at least 6 months, today they have walked away with a concrete plan so that their dream will become a reality.

If you are thinking of buying a home in the next 6 to 12 months or even longer, now is the time to contact your trusted mortgage agent/broker. Two tips I gave Carole this morning, firstly for her to look at reducing the interest she is paying on her auto loan and credit card. We worked out the reduction in her credit card interest alone would equate to $112 a month – this can be used to pay off her visa card. Secondly to draw up a budget, in order for the budget to be effective, I have suggested that she track her spending for the next month. Once she sees where her money is going she can create a budget that is realistic and at the same time she can eliminate unnecessary spending.

Another point I want to make is regarding credit card payments. Please pay your credit card before the due date. I have seen where clients’ credit scores have been drastically affected, not for a missed payment but a late payment. One client actually paid on the due date however he paid online, which takes 2 to 3 days to get credited to your account. On his credit bureau it showed up as a R2 (which previously used to mean 60 days in arrears). Due to the falling property prices, banks are also moving quicker to foreclosure when a mortgage payment is missed. If you find you are unable to meet your mortgage payments, please contact me so that we can discuss different strategies.

Charmaine Idzerda

Tel: 905.336.5997 or 1.866.824.8057

First of all, my warmest wishes for a very Happy New Year, wishing you a year full of happiness, good health and prosperity.

I hope 2008 was a good year for you, in the mortgage industry we saw major changes in 2008…

1. The U.S. sub-prime fiasco made lenders and mortgage investors run for cover. Canada lost some good lenders
2. Rate Premiums. Bond yields and the Bank of Canada’s key interest rates fell substantially in 2008.  Yet, heightened credit risk forced lenders to pay more for the money they lent out.  That led to record-high mortgage spreads, high fixed rates, and for the first time in a very long time we saw prime plus for variable rate mortgages and secured lines of credit.
3. Amortizations. 2008 saw the government eliminate the popular 40-year amortizations.
4. Minimum down payment The government brought back the 5% minimum down payment
5. Government Support of the Market. Canada Mortgage Bonds program is the main source and for non-bank lenders, sometimes the only source of capital.  In October, the Finance Department again came to the rescue with its mortgage buyback initiative.

2009

The Big 5 banks have forecasted that they expect further rate cuts by the Bank of Canada in 2009.  They are expecting between 1/2 % to 1%.

Here is what the big banks are forecasting for interest rates:

• TD Economics – TD expects a rate cut of 50 basis points in January 2009
• BMO expects 1/2 percent rate cut in January 2009 –
• RBC forecasts 1/2 percent drop in January 2009 –
• CIBC Wood Gundy expects a 3/4% rate reduction by February/March 2009
• Scotia is forecasting a 1% drop for 2009

The big question is, will the banks pass on the rate cuts made by the Bank of Canada!

Do you think the banks will pass on the full reductions!  What rate are you currently paying!

Next Bank of Canada announcement is January 20th

I have created a Video introducing Verico Designer Mortgages Inc. Take a look – and comment, please.

Profile

Charmaine Idzerda is the owner and broker of record of Verico Designer Mortgages Inc. Charmaine is an Accredited Mortgage Professional and been in the banking industry for more than 25 years. Prior to specializing in mortgages, she was a Relationship Manager for the private division of a large commercial bank.

Charmaine is an active member of the community, since 2003 she holds the position of Vice-President of the St Vincent de Paul Society in North Burlington. St Vincent de Paul Society helps those less fortunate in the community.

VERICO Designer Mortgages specializes in residential and commercial mortgages.

Charmaine’s focus has always been client service, “I believe in treating others as I would like to be treated” says Charmaine. “This has allowed me to create long term relationships with my clients and strong referrals of their friends and family.”

Charmaine joined the VERICO network three years ago. Charmaine and her team have laid the foundation for an incredibly successful business. All agents of VERICO Designer Mortgages go through a specified training program in order for them to represent VERICO Designer Mortgages in a professional manner.

Each Verico office is independently owned and operated.

Website: www.DesignerMortgages.ca

VERICO Designer Mortgages Inc.
#5 – 1253 Silvan Forest Drive, Burlington Ontario L7M0B7
Phone: (905) 336 5997
Fax: 1.866.824.8057
Toll free: 1.866.824.8057

Yes, I am afraid so. Daily I am receiving emails about products that are been discontinued and tightening of credit guidelines. Mortgages that I could get approved 6 months ago are now been declined. Fixed interest rates are increasing; the discount from prime on the variable has disappeared. Today, four banks have informed me that their variable rate is now prime plus 1% . CIBC broker division has totally discontinued their variable rate products.

The reason for this is that the banks own costs of funding is increasing, the banks are beginning to pass this cost on to their clients through higher lending rates in an effort to preserve profitability. This trend, in addition to a broader slowdown in the pace of lending due to higher risks has all contributed to higher interest rates.

FYI – The Big Five’s Canadian bank’s retail businesses, earned $2.73-billion in the last quarter.
“There’s no doubt the credit crunch has already squeezed profits, says Chris Hodgson, head of Canadian banking at Bank of Nova Scotia. The delicate balance, he explains, is how to pass on some of the banks’ pain via higher rates on mortgages and loans without squeezing the consumer too much and slowing things down further.”

The credit crunch means that banks are paying significantly more to obtain money to lend to customers.
The premium that banks now pay because of the liquidity crunch is now more than 100 basis points (1%) on five-year variable-rate mortgages, compared with about 5 basis (0.05%) points a year ago, Mr. Hodgson said. So far, “we’ve held the line, we haven’t really passed that on to consumers.”

Many of you have variable rate mortgages, you maybe wondering if this is the time to lock in. The information I am getting from economist is that we could see prime rate decreasing by 1% in the coming year, this could be the reason why lenders are now offering prime plus 1% on variable rate mortgages. Your bank would probably love you to lock into a fixed rate, do you think this is a good idea, when you are currently receiving prime (4.75%) less ……….?

The Bank of Canada’s next scheduled date for announcing the overnight rate target is 21 October 2008.

We should certainly count our blessings, but we should also make our blessings count.”
– Neil A. Maxwell

Wishing you all the best this Thanksgiving!

Have you ever thought of buying a property from which you can run your business? Have you signed a lease where you are paying the hydro, maintenance and property taxes? Have you ever asked yourself if there is a better way?

Like most business owners you may assume that a bank is the only place to go when you want to get a commercial mortgage. By using the services of a mortgage professional you have access not only to the traditional lenders but also lenders that specialize in commercial mortgages.

The main differences between the traditional lenders and the non-conforming lenders are that the non-conforming lenders:

• do not require income verification,
• require a lower down-payment, and
• are more flexible on the type of property.

Their rates are slightly higher than traditional sources; however compared to paying a lease it may be worth your while to investigate this option.

Charmaine Idzerda is a Mortgage Broker with Verico Designer Mortgages Inc. To discuss your mortgage options please call her now at 905.336.5997 (Burlington), toll-free in North America 1.866.824.8057 or visit www.DesignerMortgages.ca