2 Out of 3 Don’t Shop at Renewal

Every now and then we see a mortgage stat that’s a jaw-dropper. This finding from Manulife Bank is one of them. It suggests there are a lot more people with money to burn than one might expect.

Manulife recently surveyed 1,000 Canadian homeowners between the ages of 30 to 59. Among respondents with a mortgage, two-thirds (65%) did not compare mortgages from more than one lender when they last renewed.

More specifically:

• 20% stayed with their current lender after maturity and did not negotiate
• 45% stayed with their current lender and tried to negotiate a good deal, but did not shop around
• 35% compared mortgages from several lenders and choose the best overall lender and product.

The youngest group (ages 30-39) was most likely to shop around (41%), but was also most likely to accept their current lender’s offer without negotiating (24%).

We asked Doug Conick, President & CEO of Manulife Bank, why on earth people would give so much power to their lender.

“Most people lead very busy lives and may not have the time or expertise to fully investigate their options,” he said.

“Through our debt survey we’ve found that only about 3 out of 10 Canadians work with a financial adviser to manage their debt more effectively.”

“With busy lives and a lack of advice for most, this decision often gets left until very close to the renewal date, causing borrowers to follow the path of least resistance and renew with their current lender.”

“The unfortunate thing,” he added, “is that this could end up costing them a lot of extra money and keep them in debt longer than they need to be.”

That’s for sure.

In our experience, people who auto-renew often pay 1/2%-3/4% more than necessary, or worse! In fact, we’ve seen innumerable people sign renewal letters at their bank’s “special offer” rate, which is usually well above the market. (Example: Today’s 5-year fixed “special offer” bank rates are 3.94% to 4.09%. That’s up to 80 basis points above competitive rates on the street.)

Even a 1/4% rate difference amounts to over $4,000 more in interest over five years, on a $200,000 mortgage with a 20-year amortization. That’s money that could normally go towards prepaying a fat chunk of principal.

It’s hard to fathom why anyone would let a lender pick their pocket like this. At the very least, folks must find it within their strength to lift up the phone and call an independent mortgage planner.

Even if you’d rather stay with your current lender at renewal, seek out a second opinion. You absolutely owe it to yourself to keep your lender honest by surveying the market.

Of course, this all begs the question of why someone would ever want to deal exclusively with a lender that aims to maximize the interest they pay…but that’s a story for another day.

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Sidebar: The report also confirmed, yet again, the various studies which show that people underutilize their prepayment privileges.In the last year, out of respondents with a mortgage, 70% did not make any extra payments.

By far, the most common reason cited for not making an extra mortgage payment was “a lack of extra money.”

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Survey Details: The Manulife Bank of Canada polled 1,000 Canadian homeowners between ages 30 to 59 with household income of more than $50,000. The survey was conducted online by Research House between October 25 and November 7, 2011. In a similarly-sized random sample survey, the margin of error would be plus or minus 3.10% at a 95% confidence level.

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Before you sign your renewal agreement be sure to call and compare.  Dave Yeoman  Accredited Mortgage Professional.  at 877.725.7757 or on the web at www.YourMortgageMatters.ca

What’s your break point?

What’s your break point?

At what point does it make economic sense to break your existing mortgage and arrange new long-term financing?  Do you know?

In this fast changing economy, it’s more important than ever to protect yourself against market conditions.

But how do you know if you have the right mortgage, if you haven’t seen what’s available, how much you could increase your monthly cash flow and at the same time save thousands of dollars in interest.

Simply put if the mathematics confirm that what ever the cost is to rewrite your existing mortgage is less that what you will save in interest charges over the same period then do it.  Why wouldn’t you?

This not to mention the security of a new 5, 7, even 10 year term mortgage avoiding any risk at renewal time by protecting yourself against any future increases in rates.  But you have to act now!

I invite you to give me a call and we can arrange for either an in office or over the phone appointment to discuss all your options and see if the mathematics works for you to arrange a mortgage best suited to meet your needs and not the Lenders.  Call Dave at 705.725.7757 or on the web at www.YourMortgageMatters.ca

Home Buyers Plan + great link to Consumer Agency

First time buyers: Make the most of the Home Buyers Plan

If you’re a first time homebuyer, you can use the federal Home Buyers Plan (HBP) to take out funds from your registered retirement savings plan (RRSP) to use towards the purchase of a qualifying home. 

The Plan allows first time buyers to withdraw up to $25,000 from their RRSP (or, up to a maximum of $50,000 per couple) tax free, and have 15 years over which to pay the funds back into their RRSP. 

While 44 percent of first-time homebuyers are using the HBP to make a down payment, 46 percent of recent first-time buyers have no RRSP savings to use toward a down payment, according to mortgage insurer Genworth Financial Canada.  If you do not have RRSPs, we can show you how to establish an RRSP with borrowed funds, and use the resulting tax refund for a down payment or a lump-sum mortgage payment.

If you or someone you know would like to learn more about the HBP or about saving for a down payment, call Dave at 705.725.7757 or on the web: www.YourMortgageMatters.ca.

Another great resource; www.Moneytools.ca from the Financial Consumer Agency of Canada has useful information on making a budget and sticking to it.

Smart Home Renovations

Why not do a home renovation project that allows you to live better now and make your home more saleable later? Think cost-effective improvements that enhance curb appeal or boost energy efficiency.

The Appraisal Institute of Canada compared typical costs for renovations versus the impact on a home’s selling price to come up with a “payback range” for common projects.

Bathroom reno: 75% to 100%
Kitchen reno: 75% to 100%
Installing a deck: 25% to 75%
Exterior siding: 50% to 75%
Flooring upgrade: 50% to 75%
Basement reno: 50% to 75%

Talk to us today – we can introduce you to your renovation financing options, to get you started on making the most of your home.  Call Dave Yeoman today at 705.725.7757 or on the web at:  www.YourMortgageMatters.ca

P.S. if you have not already be sure to enter our NowICan $25,000 give-a-way.  This is a no obligation opportunity for you to help us celebrate our 500,000 client and win.  www.NotICanBarrie.ca

 

Paying down the mortgage early

In what category are you?  According to a recent survey by (CAAMP) the Canadian Association of Accredited Mortgage Professionals;

• 22 per cent of Canadians mortgage borrowers increased their payments during the past year.
• 18 per cent made a lump sum payment.
• 9 per cent did both
• 27 per cent who renewed increased their payments.
• Also, for mortgages repaid in the past 20 years, one third were paid off early.

Not just a mortgage but a “Mortgage Strategy”.  To discuss prepayment options better suited to meet your needs and not the Lender call Dave today at 705.725.7757 or on the web at: www.YourMortgageMatters.ca

Remember to entry into our $25,000 NowICan give-a-way contest at www.NowICanBarrie.ca 

Realtor is this House Not for Sale?

I am sure you will agree that given the nature of the Real Estate Industry we are often surprised where the next deal may come from but rarely do we hear about the deal we lost.

This is a real case study that played out in my office earlier today.

After completing the closing process with valued clients on a refinance deal, they asked my opinion on something.  That “something” was a property that they never inspected but did view on both  MLS® and the Realtors own website.

The question was; “if we decided not to refinance our current home could we have afforded to purchase that home”.

After a couple of quick calculations I suggested that it would be a little tight but they would have certainly qualified under CMHC guidelines.

Challenging my figures the client asked how I arrived at those numbers because to his best recollection they were no where close to what he calculated on the Realtor’s website.

I think you know where I am going with this but please indulge me.

The clients currently deal with the same Charter Bank recommended by the Realtor so they were satisfied to use the rate offered by the “Mortgage Specialist” and calculated what they thought would be their payment using the Realtor’s calculator.

As rare as this is, the rate offered was actually below the Banks typical posted rate but was still almost 1.0% higher than the rate currently offered by my office for exactly the same CMHC insured mortgage.

Further complicated by no allowance made for the $5,600 CMHC fee the client’s calculations resulted in a monthly payment $121.80 higher than it could / should have been.  Net result the client would have paid over $7,300 to much for this home over the term of the mortgage if financed with the Realtor recommended Mortgage Originator.

If all the Marketing Experts agree that a very high percentage of potential Purchasers start their home buying experience on-line, then maybe it’s time to review, not how to get the next deal but how not to lose it.

If not for a better on-line experience this property which is still listed for sale for in excess of $300,000 could have very well been already sold to these clients with approx. $35,000 down payment.

For details on how we can help you get results you have never had by doing things you have never done give Dave Yeoman a call at 705.725.7757 or on the web at www.YourMortgageMattes.ca

Appraisals Vs. Home Inspections

Appraisals Vs. Home Inspections – Do You Know the Difference?

A home is one of life’s most important purchases.  Before committing to a purchase it makes sense to learn as much as possible about any property you wish to acquire.  Understanding the important differences between an appraisal and a home inspection will help you to obtain detailed information about the home’s value and condition. 

An Appraisal 
An appraisal allows the lending institution to determine if the property being purchased is suitable as security for a mortgage. For conventional mortgages, a lender will in most cases require that a professional third party assess the property to ascertain its current market value.  In the case of a “high-ratio” mortgage (with a down payment of less than 20 per cent), the mortgage insurer will go through its own internal appraisal process.  In particular, lenders and insurers are concerned that the property (in terms of its age, condition, and remaining economic life) constitutes a good match with the borrower and their ability to repay the mortgage.  An appraisal does not usually include a detailed property inspection.

A Home Inspection 
A home inspection is not used to determine property value, but will provide an assessment of the physical condition of a property.  A well-trained home inspector will perform a comprehensive visual inspection to determine the condition of the building and all of its major systems (for example the roof, structural, heating, plumbing and electrical systems).  While an appraisal is intended to provide the lender with sufficient information to decide on mortgage financing, a home inspection will hopefully reveal to a potential homebuyer whether the building and its systems are in sound working order.  If there are outstanding issues, a good inspector will provide the potential purchaser with a schedule outlining the estimated costs and when  these repairs will need to be completed.  

Call Dave for further advice on how home inspections and appraisals can help you make a wise purchase.  Dave Yeoman, Accredited Mortgage Professional 705.725.7757 or on the web at www.YourMortgageMatters.ca

How much Dream Home can you afford?

The two most popular challenges I hear when it comes to qualifying for a home purchase; 

“We earn good money but because our rent is $1,100 a month we just can’t save the down payment, what can we do?

The other challenge I often hear; “As the price of homes continues to increase 4, 6 sometimes 8 percent year over year, by the time we get sufficient down payment the price of the home will be too high”.

These types of challenges are not unique to just first time buyers.   Current homeowners when asked the question why they have not moved up to a larger, newer, more practical home to meet their needs a popular response; “With our current monthly expenses we didn’t think we could afford it”.

So how much dream home can you afford?

As either a first time buyer or current homeowner wanting to upgrade how do you really know your “dream home” affordability until you get the qualified “unbiased” opinion on your “purchasing power” from an Accredited Mortgage Professional.

Here is just one example how many first time buyers are missing the opportunity of a lifetime. 

First time buyer: (down payment challenged)

Purchase Price:  $220,000
Monthly Carrying Cost:  $1,144.  Principal & Interest
Required Income:  $58,000 (salaried income with good credit)
Down Payment:  (little or no down payment)

No gimmick’s, not a Rent to Own, but by simply taking advantage of CMHC Qualified Mortgage Financing you can take title to your own home today with as little as $3,300 (1.5% of P/P) for legal & closing costs.  (rsp qualified)

Imagine your own home today, then with as little as 4% appreciation each year in 5 years your home could be worth over 267,000.  Your choice; do you want to have over $70,000 equity or still saving for a down payment.

Does a Bank Representative give you truly “unbiased” advice or work for the Bank?”  At Mortgage Intelligence we work for you.  Call us today and together with either one of our qualified Realtor Partners or yours, start searching for that Dream Home tomorrow.

Call David Yeoman, AMP today at 877.725.7757 or apply on-line on the web at:  www.YourMortgageMatters.ca

Example for information purposes only.  Rates are subject to Purchaser and Property Qualifications and change without notice.  OAC with minimum Beacon Score requirements.  Financial Services Commission of OntarioLicense Numbers  Brokerage: 10428  Broker M08002397

Tips to Reduce Your Credit Card Debt

Mounting credit card debt is a financial challenge for many Canadians these days.  If you find that you’ve been overspending, it makes sense to look into how to limit your exposure to credit card debt, and the stress that comes along with it.  Here are some suggestions:

· Pay off credit card debt in full monthly to avoid high interest costs. 

· Know the grace period on your credit card.

· Limit card usage for a specified period of time to help you reduce credit card debt.

· Limit cash advances.

· Make it a personal rule to spend only what you can pay off in a given month.

· Sign up for loyalty programs and make your dollar worth more.

· Make paying off debt a priority in your financial plan.

For more information on how you can pay off high interest rate debt using a practical lower interest rate mortgage strategy call Dave Yeoman at 705.725.7757 or on the web at: www.YourMortgageMatters.ca  You’ll soon be on track to financial freedom.

Choosing the right home for you

Some important questions to ask 

Before you start shopping, know what you’re looking for in a home. Consider what you want now, and what you might want in the future.

· Size requirements: Do you need several bedrooms, more than one bathroom, or a garage?

· Special features: Do you want air conditioning, storage or hobby space, a fireplace or a swimming pool?  Do you have family members with special needs?

· Lifestyles and stages: Do you plan to have children?  Do you have teenagers who will be moving away soon?  Are you close to retirement?

· Setting: Do you want to live in a city, the suburbs or a rural environment?

· Work: Are you willing to take on a long commute every morning?

· School: Where will your children go to school and how will they get there?

· Family and friends: How important is it to live close to them?

Source: Canada Mortgage and Housing Corporation

How much home can you afford to buy? 

When searching for a home, it makes sense to get a mortgage pre-approval – you’ll get a clear-cut sense of how much money you will be eligible to borrow.  You’ll also be assured of a locked-in mortgage rate for a set period of time. 

For more information on the ins and outs of pre-approvals as well as get you an extremely competitive interest rate and length of rate hold call Dave Yeoman at 705.725.7757 or on the web at: www.YourMortgageMatters.ca  You’ll soon be on track to finding the home that’s ideal for you and your family.