Structural Issue or Why Not, it Looks Good There!

I was showing a house in Hillhurst was VERY surprised to see this… Put it this way we left!

All about VIRM’S (Variable Interest Rate Mortgages)

It seems like the VIRM is the more common mortgage option now adays, especially given the fact that the spread between the discounted 5 year variable closed and 5 year fixed is currently over 2%. Just to put it into perspective, the difference in monthly payments between the two on $100,000 is approximately $113 based on a 35 year amortization. But whether the variable mortgage may be the right option for you shouldn’t be solely dependant on rate. As you know, the interest rate on a variable mortgage fluctuates and more importantly is currently on its way up but not knowing how the product works may leave you with more challenges down the road. Aside from using IDEAS outlined in my blog Fixed or Variable to help you evaluate your situation, I thought I would go over everything you need to know about Variable Interest Rate Mortgages. Keep in mind that the products in my blog are specific to TD so always check with your lender on their mortgage products work.

There are two types of variable mortgages. Open and closed. Both with TD are 5 year terms but the 2 main differences are the rates and prepayment privileges. With the variable closed, the rate is usually priced below bank prime and with the open it’s usually priced above bank prime. In terms of pre-payment priviledges, the closed term does not allow the mortgage to be pre-paid in full without paying 3 months interest compensation. The open term allows pre-payment in full however administration fees apply if the mortgage is paid in full in the first or second year, $500 and $250 respectively. Two important things to note about variable mortgages with TD is that they are NOT assumable nor portable. To learn more about portability, please visit my article on Porting or Replacing your Mortgage.

The interest rate on a variable mortgage is calculated monthly, not in advance and changes when TD Mortgage Prime changes. This is different than a fixed rate mortgage in which the interest is calculated semi-anually and not in advance. The rate is set on the 1st day of each month based on the variable mortgage rate. So if the bank prime changes mid month, your variable rate will not be changed until the first of the following month. Keep in mind your lender’s rate adjustment policy if you choose to go with a variable mortgage. Your payments on our variable mortgage are fixed for the entire 5 year term. I always recommend to those who choose a variable mortgage to set their payments based on a higher rate to pay off the principal faster and to safeguard against interest rate increases. Since interest rate fluctuations can push the outstanding balance beyond the contractual amortization, it is always a good idea to increase the payment frequency and amount. For more information on how to pay off your mortgage faster, please visit my blog on Mortgage Payment Plans and Say Goodbye to your Mortgage Faster. When your interest rate reaches the point where your payments no longer cover the interest charged under the mortgage, this is referred to as the Trigger Rate. If this occurs, you may be asked to pay your mortgage down to the appropriate trigger point, re-evaluate your property, convert your mortgage to a fixed rate, or increase your regular payments.

If you currently have or choose to go with our closed variable mortgage, you have the option to early renew into a fixed rate mortgage with a minimum term equal to the lesser of 3 years or remaining period of the original term. If you have or choose to go with our open variable mortgage, you have the option of renewing into any fixed term mortgage. So as you can see, there is more to variable mortgages than just the rate. Knowing what your options are during your contract period can have an impact on your decision or situation down the road. Going forward, the variable may no longer win according to the Financial Post, but there never seems to be a clear answer on whether to lock in or stay variable. No matter what type of mortgage financing you are looking for, it makes sense to speak to me first. If you have any questions or would like to leave a comment, please do so below. Thank You!

Sincerely,
Josephine Ng
www.tdmortgage.wordpress.com

Calgary Real Estate Market Update ~ July 27, 2010

Jared Chamberlain a Calgary Realtor® video blogs about the current real estate market in Calgary Alberta. He talks about the numbers of July 2010 compared to last year and how the market is different. He suggests that if you are a Seller in the Calgary Real Estate market to make sure you focus on pricing and preparation. If you are a buyer in this market, then there are some good deals and potentially a few motivated sellers that are needing to sell their property. Please comment and share your thoughts below or email Jared at jared@tcgroup.ca.

Staging your Home

According to the Calgary Real Estate Board, the number of single family homes sold in June in the City of Calgary was down 42% from the same time a year ago and condominium sales saw a similar decrease at 40%. Increased inventory levels and fewer first time home buyers entering the market is making it tough for sellers but one concept that may lead to better success is to see your home through a stagers eyes. When putting a house on the market, home staging aims to capitalize on your home’s best features to sell it quickly for the highest price. In speaking to a few real estate professionals, it may be as simple as rearranging what you already have or bringing in new furniture and accessories, or a combination of both.  It wasn’t until I walked into a house last week with bright pink walls and red carpet that I realized how important home staging can be if you decide to put your house up for sale on the market.

According to Christine Rae, Ontario President of the U.S.-based Real Estate Staging Association, 63% of buyers will pay more money for a house that is move-in ready than one that needs renovations. Staging a home encourages buyers to see themselves living in the space and allows them to form an emotional connection to the property. Staging is not about hiding problems but showcasing a property’s integrity.

A stager will reveal things about your home that you may not want to hear because they must look at it through a buyer’s eyes and ultimately remove any reason for a buyer not to complete a purchase. This can be things like bad odours, outdated floors, drapery, wall colours etc. Remember that that renovations made to sell are not about personal taste but to meet the needs of potential buyers.

The cost to stage your home may vary but can hold potential payback in your price. Consult with your Real Estate Professional to see if they offer home staging as part of their services or can refer you to a home staging professional. If you have any questions or would like to leave a comment, please do so below. Thank You!

Sincerely,
Josephine Ng
www.tdmortgage.wordpress.com

Original Article: Comforts of Home

Canadian Mortgage Broker News – Rate is higher but still historically low

Canadian Mortgage Broker News - Rate is higher but still historically low

Why I Was Hibernating PLUS New $1000 Contest

Jared Chamberlain video blogs about why he has been hibernating over the past two weeks. As well, he talks about a brand new facebook photo contest that The Chamberlain Group will be launching and giving away $1000! Check out The Chamberlain Group on Facebook for more info.

Lending Rate now 2.75% (up 0.25%)

FOR IMMEDIATE RELEASE – 20 July 2010

Bank of Canada increases overnight rate target to 3/4 per cent

OTTAWA – The Bank of Canada today announced that it is raising its target for the overnight rate by one-quarter of one percentage point to 3/4 per cent. The Bank Rate is correspondingly 1 per cent and the deposit rate is 1/2 per cent.

The global economic recovery is proceeding but is not yet self-sustaining. Greater emphasis on balance sheet repair by households, banks, and governments in a number of advanced economies is expected to temper the pace of global growth relative to the Bank’s outlook in its April Monetary Policy Report (MPR). While the policy response to the European sovereign debt crisis has reduced the risk of an adverse outcome and increased the prospect of sustainable long term growth, it is expected to slow the global recovery over the projection horizon. In the United States, private demand is picking up but remains uneven.

Economic activity in Canada is unfolding largely as expected, led by government and consumer spending. Housing activity is declining markedly from high levels, consistent with the Bank’s view that policy stimulus resulted in household expenditures being brought forward into late 2009 and early 2010. While employment growth has resumed, business investment appears to be held back by global uncertainties and has yet to recover from its sharp contraction during the recession.

The Bank expects the economic recovery in Canada to be more gradual than it had projected in its April MPR, with growth of 3.5 per cent in 2010, 2.9 per cent in 2011, and 2.2 per cent in 2012. This revision reflects a slightly weaker profile for global economic growth and more modest consumption growth in Canada. The Bank anticipates that business investment and net exports will make a relatively larger contribution to growth.

Inflation in Canada has been broadly in line with the Bank’s April projection. While the Bank now expects the economy to return to full capacity at the end of 2011, two quarters later than had been anticipated in April, the underlying dynamics for inflation are little changed. Both total CPI and core inflation are expected to remain near 2 per cent throughout the projection period. The Bank will look through the transitory effects on inflation of changes to provincial indirect taxes.

Reflecting all of these factors, the Bank has decided to raise the target for the overnight rate to 3/4 per cent. This decision leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in light of the significant excess supply in Canada, the strength of domestic spending, and the uneven global recovery.
Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.

Information note:?A full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR on 22 July 2010. The next scheduled date for announcing the overnight rate target is 8 September 2010.

Mortgage Payment Plans

Choosing a mortgage with the right combination of features to meet your needs can save you money, reduce the amount of time it takes to pay off your mortgage and most importantly provide you with peace of mind. Knowing how to utilize those features to your full advantage can be confusing though so today I wanted to go over the various mortgage payment plan options that TD has to offer. Other lenders should have similar payment plan options but you may want to check with them to be sure.

With your TD Canada Trust mortgage, you can choose a payment frequency of weekly, bi-weekly, semi-monthly, or monthly. With the first 3 types of payment frequencies, you can also between regular or rapid repayment. Rapid plans basically accelerate the repayment of the mortgage by permitting the equivalent of 13 “monthly” payments per year instead of 12 on a regular plan. Of course, this will lower your amortization in the long run. Just to give you an example, for a $50,000 loan with an interest rate of 11%  amortized over a 25 year period, making a rapid weekly repayment reduces the period from 25 to 18 years. Since you can increase your minimum payments by up to 100% on all our fixed and variable term mortgages anyway, you can even pay more than the rapid option.

From time to time I get customers that don’t know the difference between semi-monthly and bi-weekly so just to clarify:

• Weekly payments are due on the same day each week
• Bi-weekly payments are due on the same day every other week
• Semi-monthly payments are due twice each month, usually on the 1st and 15th
• Monthly payments can be set up on any day of the month for a monthly payment frequency

Now here comes the important part. I get a lot of customers who aren’t familiar with conversion dates and interest adjustments so if you happen to request a change in payment frequency, please take note of this. If you are on a monthly payment plan, you are always paying for the month behind. Same goes for a semi-monthly plan, you are always paying for the 15 days before. In other words, on a monthly plan, your June 1st  payment is paying for the month of May. So if you decide to convert to semi-monthly and you want your semi-monthly payment to start on July 1st, you will have an interest only payment due on June 15th which is the conversion date. This covers the period between June 1st and June 15th. Your first semi-monthly payment would then begin on July 1st. Having to make that interest adjustment payment can throw people off so hopefully this clarifies things.

The easiest thing to do is to have your mortgage payments come out on the same day as pay day. Most of us are paid on a bi-weekly or semi-monthly basis so use this opportunity to increase the frequency of your payments. If its within your financial means, choose the rapid repayment feature to lower your amortization which will save you more money. For other strategies on how you can own your home faster, please visit my blog on Say Goodbye To Your Mortgage Faster. If you have any questions or would like to leave a comment, please do so below. Thank You!

Sincerely,
Josephine Ng
www.tdmortgage.wordpress.com

Confirming Down Payment

Every mortgage approval comes with different conditions but the one condition most common among most approvals is confirming the source of down payment. It may seem like the easiest condition to meet but suprisingly can create some challenges because of the way the banks want you to confirm it. So I wanted to go over the different sources of down payment and what kind of documents you may be asked to provide your bank. Knowing this may better prepare you and provide you with a more comfortable experience. Keep in mind that the guidelines in my blog are specific to TD so you may want to check with your lender on what their policies are when it comes to confirming down payment.

Savings
If your down payment is coming from a bank account, simply providing your latest balance from your bank online or from a bank machine won’t be good enough. We will want to see at least a 30 day history of savings or more and you may be asked to further verify any large deposits that were made in that period. If you take out a cashback mortgage, the cashback you receive cannot be used to confirm down payment as this is not considered your savings.

Gift
If your mortgage is insured by CMHC or genworth, a gifted down payment must come from a relative or immediate family member. You must provide a gift letter that states the funds requires no re-payment, the relationship of giftor to giftee, and also verify the existence of the gift. The existence of the gift also means verifying at least a 30 day history of savings or more. In addition to the gift letter we also need to verify that the funds are on deposit in your account prior to closing or sent directly to your solicitor. So as you can see, a simple gift letter will not suffice. The best thing to do is to contact your lender and find out exactly what documentation they require for confirming down payment if it’s in the form of a gift.

Other Liquid Assets
If you have other investments like bonds, stocks or RRSP’s, these can also be used to confirm down payment. You might have to pay witholding tax on your RRSP withdrawal unless youre utilizing the first time homebuyers plan. TD will require a recent statement showing the description of your assets and the current value. Remember that locked in RRSPs cannot be used for down payment as they represent pension assets. Borrowing against liquid assets or a home equity line of credit against another property is fine but payments will be included in your debt service ratio.

Proceeds from the sale of a property
If your down payment is coming from the sale of a property, we will ask you to provide a a firm unconditional offer to purchase and sale together with a recent mortgage statement. We will take into account real estate commissions, lawyer fees and other costs associated with the sale when calculating the net proceeds.

I hope this clarifies the different sources of down payment and more importantly how lenders may ask you to confirm it. If you have any questions or would like to leave a comment, please do so below. Thank You!

Sincerely,
Josephine Ng
www.tdmortgage.wordpress.com

CMHC/Genworth Mortgage Insurance

The first question I get from a lot of first time homebuyers is what is CMHC and what does it stand for? Now there are mainly two mortgage insurers but CMHC stands for Canada Mortgage and Housing Insurance and its basically mortgage loan insurance that you have to pay if you are making a down payment of less than 20% of the purchase price of your home. Mortgage loan insurance helps protects the lender against mortgage default and enables you to purchase a home with a minimum down payment of 5%. So to give you an example, it would look something like this:

Purchase Price: $300,000
Down Payment: $15000
Required loan: $285000
Mortgage Insurance (Standard Premum): $7837.50
Mortgage Amount: $292837.50

The premium payable is based on the size of your down payment. The lower your down payment, the higher percentage you will pay in insurance premiums. There are also extended amortization surcharges if you choose an amortization of greater than 25 years. To learn more about the insurance premiums, you can visit the CMHC website. With both mortgage insurers, you can pay the premium in full upfront or you can add the premium to the principal amount of the mortgage like the example above. TD Canada Trust no longer offers insured Home Equity Lines of Credits  therefore they are only available on a conventional basis. Remember if you choose a mortage term of less than 5 years or a variable rate option, we will qualify you by using the 5 year posted interest rate. For more information on qualifying rates, please visit my blog on New Mortgage Rules.

Keep in mind that Mortgage loan insurance enables you to purchase a home with only 5% downpayment but once you own your home, the maximum loan to value that lenders will grant is 90% if you refinance. In other words, you will need to have at least 10% equity in your home. Mortgage loan insurance is also not to be confused with mortgage life insurance which guarantees that your remaining mortgage at the time of your death will not be a burden to your estate. To learn more about TD Mortgage Life and Critical illness insurance and other home insurance, please visit our website. If you have any questions or would like to leave a comment, please do so below. Thank You!

Sincerely,
Josephine Ng
www.tdmortgage.wordpress.com

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