Rent or buy a home?
Rent or Buy?
Many of those who rent, but are getting ready to buy a home, watch the mortgage interest rates very closely. A recent study found that 28% of renters are planning to buy a home in the next two years. The study also revealed that more than half of those surveyed would buy a home much sooner if they expected the rates to increase in the next year.
With the TD and Royal Banks ending their 2.99% mortgage deals early, according to a recent article in the Financial Post, it makes one wonder if the rates are set to rise. Concerns about rising household debt levels and global economic uncertainty are seen as the cause of the quick change in policy. When the big banks have higher costs for funding mortgages, they quickly pass on the costs to the consumer.
Interest rates make a huge difference when buying a home and it makes sense to watch them closely if you are thinking of buying a home or refinancing a mortgage. A 2% increase in borrowing money to buy a home can costs thousands of dollars in increased costs, so it is best to shop around to get the best deal available. Even better is to get the help of a mortgage broker who can assist you in finding the best deal. Mortgage brokers are excellent at finding the best deal, since they have access to funding that is almost impossible to find on your own.
In the study, almost 70% of renters stated that they get mortgage information from mortgage brokers with fewer selecting their bank as a source for mortgage information. Over a third of those surveyed want flexibility in their mortgage and payment options as well as getting the lowest rates. Most of renters who are ready to buy have been doing some research and are aware of the buying process, but rely on mortgage brokers for fast and efficient mortgage options and solutions.
Time to leave your bank
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It seems that every big bank across the country is raising their service fees to all new levels that are at the point of being ridiculous. Sometimes it feels like it is more expensive to keep money in a big bank than to put it under your pillow. We need a secure place to put our money and we need to work with an institution where we are respected and more than just a number. When it comes to mortgages, the service fees can be ridiculous and there seem to be so many costs to getting a mortgage, renewing a mortgage, making a down payment and more so that you feel like you are paying more on service charges than you are for your monthly payments.
Most People are UNHAPPY with service charges at big banks
According to a survey conducted by First Ontario Credit Union the average Canadian has been with the same bank for more than 15 years, yet more than 40% are unhappy with the service fees their banks charge them. While many people are switching their main banking to credit unions, these institutions sometimes have higher interest rates on their financial products. Credit Unions are usually tied to their communities and have a better public image than the big banks that seem to be always posting profits every quarter in the billions. When it starts to cost you more and more to keep your money in the bank, it means that you need a change.
So where can you get a good deal on a mortgage rate, know exactly what your fees are going to be, and take advantage of low interest rates?
Good news for those with Mortgages and Credit Lines
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On January 17th, 2012, the Bank of Canada kept its rate at 1.25% which is great news for those looking to refinance their mortgage or looking to reduce their monthly credit payments. With the growth of the overall economy in Canada is expected to remain moderate, along with downgraded credit-rating in Europe, it is expected that rates will remain low for some time.
This is the 16th straight month that the Bank of Canada has kept its rates the same. This announcement also comes following recent announcements by the big banks that they are lowering their interest rates to historic lows.
What does this mean for the home owner?
For a home owner, it means the immediate result is that the prime rate should remain at 3%, so if you have a variable rate mortgage, your payments will stay the same.
It also means that competition for rates will continue to be aggressive. If you have a mortgage with a high rate of interest, it is worth your time to talk to a mortgage broker and see if you can lower your monthly payments. In a market like this, it is a good time to consider refinancing your home at a lower rate of interest to pay down your mortgage faster or take out a home equity loan to pay down credit cards.
What does this mean if I have a credit line?
Are Canadians getting better at paying off their debts?
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With household debts reaching all-time highs, the need to reduce spending and pay down debt is a necessity for Canadians. But how does one do this?
The global economic downturn has made many of us question our spending, and as a result Canadians are beginning to pay down debt faster. Equifax Canada released a promising report on January 10th showing that credit card debt had fallen by 3.4% in 2011. While the report also stated that overall debt was still growing although bankruptcies are down. Yet the average household still carries a great deal of debt and it is time to start addressing this issue.
One way that many Canadians reduce their credit card debt is to seek credit help and get advice from financial experts on how to manage their money better. Rather than risking credit collection companies and potential bankruptcy, it is a good idea to get some solid advice about how to deal with the issue of debt.
Reduce Monthly Payments
By reducing monthly payments, improving your credit-rating, and taking out home-equity mortgages, it is possible to save thousands of dollars. Instead of paying high interest on credit cards, with credit help you can create a single loan based on the equity in your home and reduce your monthly payments to give you more money to pay back the loan. This is a much less stressful approach to managing your money. It is important to pay off the debts before the interest rates rise and our monthly costs go up even more.
It's Time to Reassess your Mortgage and Debts
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With the beginning of a new year, it is an excellent time to reassess our spending, debts and mortgage. After an interesting year around the globe, it is going to be an important year to watch our finances. If you haven’t thought about your mortgage or the extra spending you did over the Christmas season, it is a good time to reflect.
The Canada Mortgage and Housing Corporation has released its 2011 Canadian Housing Observer report with some interesting new stats to give us insight into how our housing market is performing. There are many interesting trends included in the report, and it is worth a read if you are thinking about refinancing your home or are curious to learn more about the Canadian housing market.
The report stated that mortgages comprise 68% of the debt of Canadian households. While this number is lower than in 1993, this is still a significant number to consider. The big banks of Canada now hold less than 55% of mortgages, which shows that more and more Canadians are choosing to work with a mortgage broker to get them the best rates and the best deals in mortgages. Another interesting fact stated in the report is that by 2036, 24% of Canada’s population will be over 65, which not only increases demand for senior housing, but also could have a serious impact on houses and condos as people downsize for their retirement.
Consult a Mortgage Broker
With mortgage rates forecasted to remain low and fairly stable over 2012, it is a good time to consult a mortgage broker to see if you can secure a good deal on your home mortgage or loans to improve your financial stability over the next year. If you reassess your finances and discover that you are paying far too much interest and are paying more than 5% on your mortgage, it is time to get a better deal.
Real Estate Investment Opportunities in Alberta and BC
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Growth in Real Estate sales and value expected for Alberta
The Canadian Real Estate Association reported on Dec 15, that resale housing activity rose in November 2011, despite ongoing global financial uncertainty. This is good not only for the Canadian economy but also for the real estate investor. The association predicted that the province with the strongest growth in sales in 2012 is going to be Alberta, with a potential growth rate of 6.7%, according to a December 12th article in the Calgary Herald. With an increase in sales comes an increase in prices expected to be 1.6%, based on the continued job growth and balanced economic performance of Alberta.
Gary Morse, the president of CREA stated that homebuyers are expecting mortgage interest rates to rise, and are doing more research into how mortgages work and take into account their current and future debt (CREA, 2011). With this in mind, consumers are looking for excellent deals when securing mortgage financing. While many economists anticipate a slight rise in interest rates, they should remain close to current levels to support growth. With the strong energy sector growth in Alberta, it should be a stable real estate investment market for some time.
Real Estate as an Investment
Investing in real estate is an excellent way to get a positive return on your money through a rental property. Investors put a small percentage of their own money into a house, shop with a mortgage broker and find excellent mortgage rates to provide a solid return on investment. Since real estate generally appreciates by at least 5% on average, with that number changing dramatically in high growth areas like Calgary, Edmonton and Vancouver, the investment is further leveraged by tenants paying off the mortgage. This enables you to save money, take advantage of growth in equity and have the maintenance of your mortgage paid by renters. In times of economic uncertainty, real estate is a safer place to invest your money than the stock market. There are also a host of tax benefits and many other benefits to investing in real estate.
Reorganize your debt with a second mortgage
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A Second Mortgage is an excellent loan alternative
Anytime the holidays come along and our expenses increase, it is important to think about our debt as well. When the year ends and we begin to review our finances, think about new business projects and begin to assess how we did during the year. If we are carrying a high debt load on credit lines or credit cards, a 2nd mortgage is a good alternative.
A second mortgage can be used to pay off high interest debts, consolidate financing issues, provide money for renovations or can be used to buy additional property as an investment. It is another mortgage on your property and is secured by the value of your home and the amount of equity you have built up over the years.
There are many advantages of a 2nd mortgage, when compared to other loan types besides the fact that you can pay off your high interest debts.
Easier to qualify
When you build up equity in your home, it is one of the most secure financial bases available. Home equity is independent of your job security, income qualifications and overall cash flow. A second mortgage is easier to qualify for than unsecured loans, and because it is based on home equity, the interest rates available will be much lower than unsecured debt.
How to Survive Holiday Spending?
It's the season to spend
It’s the season to rack up the credit card debts through shopping for that “perfect gift” for your loved ones and participating in numerous social events over the holidays. This coupled with fewer working hours in December and increased costs as retailers try to increase their year-end and take advantage of stressed-out last-minute shoppers, can lead to a serious financial hangover in January when the bills come rolling in. Yet there is hope for the Canadian consumer to manage his/her debt and survive the holiday spending.
With increased costs of living, it is tempting to make up the balance by using credit cards to buy us some time so we don’t have to wait to buy something, or have to say “no” to social events. Despite the fact that many Canadians have slowed down their borrowing, according to TransUnion, the average consumer debt for 2011, not including mortgages, was $25 594, which is slightly higher than it was in 2010. This may be due to global economic issues and uncertainty, but since 2004 according to an article published in The Star last week, Canadian consumer debt has reached record levels. While interest rates are set to remain stable for at least another year, if they do increase, this can mean huge financial troubles to those with high credit card debt.
It can seem normal to have credit cards, unsecured lines of credit and mortgages, since we have been spending more than ever before, but in uncertain times this is dangerous, particularly if you carry debt on credit cards.
Financial Tips to survive the holidays
Here are some tips to get you through the holidays and maintain your financial health:
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Don’t spend more than you earn.
The Vanier Institute of the Family reported last February that average family spending hit a record of 150%, which means that families are spending 150% of what they earn after taxes on debt and living costs. Everyday spending habits, such as daily coffees, can quickly eat up a family budget.
How to know if it is a good time to buy a home?
Interest to remain low
On November 24th, Mark Carney, the governor of the Bank of Canada announced that the central bank will keep lending rates low to limit the impact of the global economic downturn, as financial troubles in Europe increase.
This is good news for those who want to invest in a home or in real estate. With interest rates at near historic lows, and rental rates increasing, it is a good time to buy a home.
Why invest in real estate?
While buying a home is a huge investment, there are many reasons to consider investing in real estate.
Consider the following:
- Investing in real estate means that you are putting money into something that has value
- Homes can go up in value, particularly if you are in a market with strong growth potential, such as Calgary, Edmonton, Vancouver, Surrey, or Abbottsford as well as many other cities in Alberta and BC
- It is possible to live in your investment. Why pay rent so that you pay off someone else’s mortgage?
- The cost of buying can be the same as renting. This allows you to save your money by building equity in your home. The more equity you build in your home, the better your credit rating becomes and the easier it is for you to take out a home equity line of credit in case you need to pay for your child’s tuition, invest in a business or pay off your credit card debts
- As long as you are aware of the costs of ownership, and research the neighbourhood carefully the odds are in your favour
- There are many tax benefits to owning a home
In order to make a good purchase it is important to understand the real estate market. You will need to do your homework and check out the areas of a city in which you want to live. A mortgage broker can be a big help, since they understand what is happening in the market and have access to market resources and lending sources.
Will you be able to retire without a mortgage?
RBC recently released its latest Housing Snapshot stats
Will you be able to retire mortgage free? This is a concern faced by many Canadians. With troubles in the financial markets hurting pension plans and retirement savings, rising tuition rates, increased housing costs, rising taxes and increased costs of living have made retirement for many a distant possibility. The government has also abandoned the mandatory retirement age of 65 in most provinces in Canada to ease the financial burden of retirement, as well as to make up for the upcoming shortages in the workforce in various occupations.
Saving for retirement through pensions, RRSP’s and real estate investment needs to start early and needs to be managed carefully. One growing reality for many Canadians is that they will still have to pay off their mortgage during their retirement. RBC recently released its latest Housing Snapshot stats and found that more than 50% of Canadians wills still be paying off their mortgage after 55 and almost 1/3 will be still be carrying their mortgage past 65. Will retirement be possible if so many are still carrying mortgages?
Mortgage Report from CAAMP - Is it still a good time to buy a home?
Mortgage Market Report
CAAMP (the Canadian Association of Accredited Mortgage Professionals) just released its mortgage report filled with interesting facts and information relevant to property owners, buyers and mortgage professionals.
Over the past year, according to Jim Murphy, the President and CEO of CAAMP, Canadians have worked hard to get their fiscal responsibilities in order and have room to handle a rise in mortgage rates. However, there are still approximately 650000 households who would find a rate increase of 1% challenging. Yet, many economists in Canada are now saying that a decrease in rates is possible, or even that rates will stay low for a very long time.
If you are thinking of purchasing a new home, the market and mortgage rates are still favourable.
From the CAAMP Report
According to the CAAMP mortgage report, the value of owner-occupied housing in Canada is now worth over $3 trillion, with over 72% of home owners surveyed agreeing that real estate is a good long-term investment in Canada. Last year, according to CAAMP, 9% of home owners took out a new mortgage, 23% renewed or renegotiated, and 1.9 million took out a new mortgage.
If your mortgage is coming up for renewal, starting a mortgage hunt now with a Mortgage Broker with a minimum of 120 days before the renewal date can ensure that you can get a rate hold as well as have enough time to shop around for the best mortgage product to suit your finances.
Debt Consolidation - a great alternative!
It's Time to Consolidate your Debt
Canada just announced that in October it had lost 54,000 jobs in just one month. This is due to economic slowdown caused by troubles in Europe with the debt crisis in Greece, a slowing Chinese economy and a stalled recovery in the United States. However, it is rare for Canada to lose so many jobs in one month, and it should cause the economists to recalculate their forecasts for our economy and the Bank of Canada to keep its loan rates frozen.
One of the biggest dangers in the Canadian economy is that the average person is carrying far too much debt, particularly on their credit cards. With credit card interest rates in the double digits, it makes it very difficult to pay them off. Debt problems are critical to face, particularly if all your money is going to pay interest on credit cards. A solution to avoid bankruptcy is a debt consolidation loan.
A debt consolidation loan is a single loan that allows you to repay your credit cards and other outstanding debt through one loan. The loan usually has a lower interest rate, which saves you money every month, enabling you to pay down your loan with the money that would have otherwise gone to paying credit card minimums and interest. With one simple monthly payment, it makes budgeting and money management much easier and allows to focus on repayment, reducing your stress and getting back your life.
With low interest rates, it's a great time to get a home equity loan!
It’s a good time for a Home Equity Loan!
On October 25, the Bank of Canada met and decided to not change its key lending rate from 1%. It has held this percentage for just over a year, which enabled prime rate to remain at 3%.
With Canadian inflation for core items hitting a 3 year high in September, US
economic growth that is faltering and continuing economic troubles in Europe, the Bank of Canada wanted to ensure that the Canadian economy continued its path to full recovery.
The Bank of Canada expects the Canadian economy to return to full capacity by the end of 2013, and our financial system is functioning well, so interest rates should remain low until then.
Consolidate your Debts with a Home Equity Loan
It is a good time to consolidate debts with a home equity loan. If you are paying high credit card bills, an unsecured credit line or need to invest in your business, home renovations or need a new vehicle, a home equity loan is a great option.
A home equity loan allows you to borrow money using the equity in your already in your home as collateral. Many people use this option to pay off credit cards, to pay for college/university tuitions or to consolidate debts.
What to do when the bank turns you down?
Banks turn down loan applications for many reasons, even if you have been working with the same institution for years. There is nothing worse than the feeling that you can’t get enough money by remortgaging your house to pay your credit cards off.
The financial pressures of the high cost of living, high bill payments and high interest rates can be overcome with some careful planning and financial help from an organization who understands your needs and helps to provide you with solutions.
Why do banks turn down mortgage applications or loans?
When a customer applies for a loan, the bank will look at your credit score, amount of outstanding debt, current income, monthly payments, assets and more.
If your income has changed, if you have missed payments on your credit card, if you are carrying too much debt, the bank might turn you down. If there have been too many checks into your credit rating, or you’ve had financial trouble in the past, these factors can also influence your likelihood of getting a loan.
This is not the time to get discouraged.
How to improve your credit rating?
In order to get your credit rating improved there are a number of steps you can take.
While this may not happen instantly, it will relieve a lot of pressure if you can pay down your bills and carry on with your life.
In order to improve your credit rating, and improve your chances of getting a loan the next time you need one, here are some tips:
Why work with a Mortgage Broker?
With mortgage rates set to rise in the near future, it’s time to start thinking about your home and finances.
Whether you are buying a new home, refinancing to take advantage of great interest rates, or repairing your credit, a mortgage broker can help you. Your home is your biggest investment, and decisions you make about buying, renovating and refinancing should be made carefully. Credit rating is another issue that needs to be protected. If you have lost your job, are setting up a new business, investing more into your business, paying off credit card debt, paying for your child’s tuition or need to buy a new car, a home equity line of credit can be an incredible tool to assist you.
To get mortgage financing in Canada, you can either go to a big bank where you negotiate yourself to get the best deal you can, or you go to a mortgage broker who does the shopping for you, finds the best rate in the market and enables financing that is very difficult to get on your own. Having access to various types of loans and a large group of lenders allows a mortgage broker to find a loan that fits your needs; at rates that are almost impossible to get on your own. This takes away the stress of financing a new home, or refinancing your current home to gain access to the money you need to fund your dreams.
There are many mortgage brokers out there, but finding someone who can work with you to get the best deal that fits your financing needs takes a mortgage professional who is highly trained, who cares, and who knows how to negotiate to get you the best deal. The interest rate you pay makes a huge difference over the years, and by refinancing, you can build the credit in your home more quickly, as well as save thousands of dollars.
According to the Canadian Association of Accredited Mortgage Professionals (CAAMP) over 30% of new mortgages in 2010 were obtained from Mortgage Brokers. (CAAMP is the national organization representing Canada's mortgage industry.) Out of over 5 million home owners who have mortgages (see CAAMP mortgage survey summary here), this is a huge number of people who have put their trust in a Mortgage Broker over a bank.
A good mortgage broker will consider your financial needs and put together the best financing package for you. He or she will consider such things as your outstanding debt including credit cards, loans and lines of credit in order to provide a solution that will improve your cash flow, reduce your borrowing costs and most importantly, reduce your stress. Having someone in your corner who understands all the aspects of mortgages, home equity loans, refinancing, credit rating and all the elements of financing is a key to building some financial freedom.
