Wednesday, November 30, 2011

Smart Home Renovations

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.   

Tuesday, November 29, 2011

Break the mortgage before debt breaks you

Debt junkies, here’s how to break your borrowing habit by breaking your mortgage.
Warning: This will take discipline. If you follow this plan, you’ll commit yourself to a major debt paydown that will leave you little or no room to pay for new stuff on credit. But your mortgage will be paid off sooner, and you’ll get out from under that never-ending credit card or line of credit debt.

This Article backs up my strategy for refinancing......

Let’s start with the breaking the mortgage part. Mortgage broker John Cocomile says you need to have a fixed-rate mortgage at a rate of at least 4 to 4.5 per cent to make a refinancing worthwhile. Also, you want to have debts to roll into your new mortgage.
The rationale for this starts with the fact that a penalty applies when you break a mortgage contract. For fixed-rate mortgages, the penalty is the larger of three months’ interest or what’s known as the interest rate differential (IRD). That’s basically the difference between your existing rate and current mortgage rates.
Mr. Cocomile said today’s low mortgage rates mean IRDs can be steep. So much so, in fact, that he questions the value of breaking a mortgage unless you do it as part of a larger debt consolidation.
“If there’s no other debt, the argument for breaking a mortgage is not really that compelling,” he said.
Let’s look at a real-life example based on one of Mr. Cocomile’s clients. This person owed $30,000 on an unsecured line of credit with a rate of 6 per cent and $19,000 on a credit card with a very low introductory rate that expires next month. The mortgage to be refinanced was three years into a five-year term, it had a rate of 4.5 per cent and there was a balance of $240,000.
Breaking the existing mortgage cost about $4,500 in penalties, an amount that was thrown into the new mortgage along with the line of credit and credit card debts. The client ended up with a new $295,000 mortgage at 3.09 per cent for four years.
The easy option for Mr. Cocomile’s client would have been to keep the 22-year amortization of the old mortgage. That would have kept payments low, but it wouldn’t have helped get the mortgage paid off as efficiently as it could be.
So here’s what Mr. Cocomile did. He took the total amount of monthly payments the client was making on various debts before the refinancing and made that the new mortgage payment. The amount of the payment is $2,330, which breaks down as $1,430 for the mortgage, plus $900 for the line of credit (it required a minimum monthly payment of 3 per cent of the outstanding balance).
Now for the payoff from this refinancing strategy: The new and larger mortgage will be paid off in 13 years, compared to the original 22 years. A subsidiary benefit is that the client gets to lock in a new mortgage at today’s ultra-low levels. The question is, what mortgage rate is best right now?
Up until recently, the slam-dunk move was to use a variable rate. These mortgages are pegged to the prime rate, now at 3 per cent, and discounts of 0.75 per cent were common. Now, the best discount around on variable-rate mortgages is 0.2 of a percentage point, and no discount at all off the prime rate is reality at some lenders.
Mr. Cocomile said there’s good value in three- and four-year fixed rates today. Both terms actually carry the same rate at some lenders right now, which suggests there’s little reason not to take a four-year term.
As an aside, Mr. Cocomile pointed out that attractive three- and four-year rates actually work against people who want to refinance. The lower these rates are, the bigger the interest rate differential that someone breaking a mortgage must pay.
There’s more to breaking your borrowing habit than breaking your mortgage, of course. A large amount of your cash flow will be sucked up by debt repayment, but you could still, in theory, use credit cards or a credit line to buy more stuff and ratchet your debt higher again.
So consider a borrowing holiday while you’re paying off your refinanced mortgage. Forget about your line of credit and cut up your credit cards, freeze them in a block of ice or stick them in a drawer. Mr. Cocomile’s advice to debt junkies who can’t break the habit but plan to refinance their mortgage, anyway: “Don’t bother – it’s not worth it.”
Here's a plan for refinancing your mortgage, adding in your other debts and paying everything off sooner and at lower cost. This is a real-life example based on a client of mortgage broker John Cocomile.
Client's Debt Profile
Mortgage with $240,000 owing at 4.5 per cent
Unsecured line of credit with a $30,000 balance at 6 per cent
$19,000 owing on a credit card with a low introductory rate of 1.99 per cent that rises to normal levels next month
The Plan
Break the mortgage and fold the credit line and credit card debts into a new mortgage.
End Result
A $295,000 mortgage at 3.09 per cent for four years (includes a $4,500 mortgage breakage penalty)
Old mortgage payment: $1,430 a month
New mortgage payment: $2,330 a month
Old mortgage amortization: 22 years
New mortgage amortization: 13 years
Old mortgage renewal: November, 2013
New mortgage renewal: November, 2015
Estimated interest savings: $14,396 over two years (based on lowering the mortgage rate and saving on debt carrying costs for the credit card and credit line)

tara perkins

Globe and Mail Update
Published Tuesday, Nov. 29, 2011 11:02AM EST

Did You Know....

Did you know, and more importantly do your contacts in your data base know, that the S & P 500 index delivered a whopping 3.71% return to investors over the last 10 years?  That is not an annual rate of return, but rather the total return over the 10 year period. 
How do you think that compares to investing in real estate?  Well let me tell you... and I hope you're sitting down!  Based on the average house price in Canada, over the same 10 year period, real estate went up 232%.
In dollars and cents that means if you invested $10,000 in the index, you would have earned $371. That same $10,000 invested in real estate, would have earned you $23,200.  It gets better, the real estate earnings could be tax free if you invested in a principle residence.
Why is this important?  I think these figures might motivate some people to re think their investment strategy, and maybe look at investing in real estate instead of the roller coaster stock market.  Perhaps a marketing campaign targeting potential revenue property investors, or first time buyers may be in order?
How do you deliver such a marketing campaign you ask?  Well, we have the perfect solution to easily and inexpensively target these potential clients!  GoMax has already created the templates for you, and they are ready to go today. Simply select a template, set up a Project in your GoMax inTouch system and target those potential investors.  You may just generate some new business for yourself, and as a bonus, some great referrals for your favorite realtor.
There are 3 ways to do anything - the old way, working harder at the old way, or doing something different.  Lets start educating more people about the true value our industry can deliver.
Staying connected and delivering value to your clients consistently will grow your business, and having a system like GoMax do it for you, just makes life that much better.  To learn more or to arrange a demo, please contact us today.
Compliments of:

The Content Team
GoMax Solutions Inc

Monday, November 21, 2011

Money Management 101...same rules apply for countries as individuals!

Let me begin with some observations on the basic mechanics of sovereign debt default management, or to the average person, balancing ones budget.  If you borrow $1 at a 5% interest rate, next year you're going to owe $1.05.  If you don't pay any of it back and just roll over the debt, you'd then have to borrow $1.05 next year and on and on and on.  This is obviously a slippery slope, even if it's a sovereign government doing the borrowing.
Though the previous example seems obviously wrong, countries and individuals alike often justify the continued borrowing based on increasing incomes or increasing GDP.  If a country's GDP growth rate for example, is higher than the interest rate they borrow at, then the debt they owe, although growing, would still shrink as a percentage of their GDP.  But if GDP growth is below the interest cost, then the debt that's continually rolled over would grow to become a larger percentage of their GDP.  As soon as lenders recognize that's where the country is headed, the government is going to find it much more difficult and expensive to borrow the necessary new sums of money needed to fund the country and it's debt burden.
To prevent this from happening, government and individuals need to run a budget surplus, meaning that tax receipts or income must exceed expenditures.  In doing so, a portion of the surplus can be used to reduce the debt, avoiding the downward spiral faced by a number of countries and individuals around the world today.
According to ECB data, Greek government debt was already 120% of GDP in 2008.  The budget deficit was over 10% of GDP in 2009 and almost 5% in 2010.  That, plus the rapidly increasing interest rate costs (higher risk, higher cost) facing Greece, pushed their debt to 156% of GDP in 2010.
If Greece were an individual coming to you for a mortgage, I'm guessing they would be hearing "declined" and put on a serious debt counseling program!

 Compliments of:

The Content Team
GoMax Solutions Inc

Thursday, November 17, 2011

Financial Comfort and Joy

If you or you know of someone in this situation, please forward to them….
In a few weeks we’ll be in full gear getting ready for the holiday season. But before you begin your holiday baking, or get started on your holiday shopping list, here’s a tip for enjoying real financial comfort and joy this festive season: do a holiday debt-check!

Why do a debt-check just when you’re getting excited about the holidays? Well… that excitement is the reason you want to have a cool, intelligent appraisal of your financial situation. It’s tempting to overspend at this time of year. That’s why so many Canadians suffer from “plastic shock” when their credit card bills arrive in January.

Do a quick assessment. Are you carrying too much credit card or other high interest debt right now? Do you have a fund set aside for holiday shopping? Are you struggling to keep up with your monthly obligations? If you answered “yes” to any of the above, it’s worth having a conversation about streamlining your finances before the holidays are upon us.

We have access to some great rates right now (3.14% 5 year closed), and can help set you up with a smart plan with sensible payments, and smooth sailing through the hectic holidays and into the new year.

Worried that your locked-in mortgage means your options are limited? We can do a quick check – there’s a good chance the savings each month will far outweigh any penalties. Here’s one client example:

Joe’s mortgage, car loan and credit cards totalled $225,000. We helped Joe roll that debt into a new $233,000 mortgage, and even paid a fee to break the existing mortgage. But look at the payoff:
                                                            Current                                    NEW
                           Today            Monthly Payments*               Monthly Payment*
Mortgage            $175,000                  $969                                        $1,176
Car loan              $ 25,000                   $495                                        $     0
All credit cards   $ 25,000                    $655                                        $     0
Total                                                    $2,119                                     $1,176
That’s $943 less each month - a huge improvement in cash flow! Joe’s planning to put tax returns and holiday bonuses against his mortgage principal – and he’ll be out of debt well before his original timeline – with some real peace of mind about his finances.
Give me a call. I would  love to help at this time of year. Financial comfort and joy: that could be one of your best gifts!
*4.5% current mortgage, 3.6% new mortgage, 25 year am. Credit cards 19.5% and car loan 7%, both at 5 year am. OAC. Subject to change. For illustration purposes only.

Tuesday, November 15, 2011

How to qualify for a brand new mortgage

If you have just graduated from university with student debts, the prospect of buying your own home may seem remote. Advisors suggest formulating a plan early on to help get on track to qualify for that mortgage.

“For new graduates, once they’ve got their job and regular income, they need to [pinpoint] what it is they want to buy,” says John Nardi, a financial advisor with Edward Jones in Mississauga. “Have a budget in place. Don’t get caught up in the emotion of buying a home,” which can lead to over spending, he says. “The last thing you want to be is mortgage poor — you can’t enjoy your life at all.”

A mortgage professional can advise on what a lender will be looking for.

“There are three criteria that are really important when you come out of school: No. 1 is credit, No. 2 is employment and then there’s the down payment,” says Victor Peca, a broker with Mortgage Intelligence in Toronto. “At least a year of employment will make the lender see [you] have stability.”

Student debt does not have to be all bad news.

“Having some student debt when you graduate isn’t necessarily the worst thing,” Mr. Nardi says. “Having the debt and paying it back on a regular basis, without missing payments, can actually help improve your credit rating.”

Mr. Peca agrees that the key is not whether or not you have a debt, but how you handle it that is of interest to mortgage lenders.

“The beacon score is really a blueprint of how someone spends. They have to make payments on their debts. It will reflect on their credit report,” Mr. Peca says. “The lenders view this as the client’s first chance to prove they are responsible and credit-worthy.”

Mr. Nardi says every situation is different, but recent graduates should take tax and financial advice before switching their student loans from the government to a bank or other lender just to secure a lower interest rate.

If your credit score falls short of the rough threshold of 620 required to get a good mortgage deal, Mr. Peca says, maintaining payments will help increase the score.

“Do not listen to friends when they say ‘Hey, don’t pay it off, it comes off your record in seven years,’” Mr. Peca says. Clients with high salaries but low credit scores can struggle to get a good mortgage deal. “[Your low credit score] proved to the bank that you don’t like making payments.”

Mr. Nardi says get rid of all but one of your credit cards. With too many cards, the lender will assume that you are making use of all your available credit and will reduce the amount of mortgage lending accordingly. Mr. Nardi says try to keep the balance below 15% of your credit limit. “That shows you are disciplined and you’ve got a strong commitment to paying it back.”

If a mainstream lender tells you that you do not qualify at this time, Mr. Peca suggests working with a professional to improve your credit score and deposit, rather than get yourself into a situation you cannot afford.

Monday, November 14, 2011

Make Sure You Understand Closing Costs

If you are considering a move, it pays to be informed about the closing costs you may have to incur when completion date comes on the closing of your real estate purchase. Many homebuyers are startled to learn that after they arrange their mortgage they have to pay a range of additional fees to finalize the deal.

Your exact closing costs will depend on where you live, how much you are borrowing, how you finance your mortgage and your closing date. The rules and regulations surrounding the various mortgage fees can be complex, and can vary from lender to lender.

At Mortgage Intelligence, we can offer you a wealth of advice on what these closing costs are, which ones you'll have to pay, and even how to minimize them. Here are some of the most common:

  • Lawyer's fees - these vary across the country, and we can refer you to a lawyer who offers a competitive "legal package."
  •  Mortgage appraisal fees - lenders require an evaluation of the mortgage lending value of a property.  
  •  Land survey - the legal written and/or mapped description of the location and dimensions of your land, obtained from an accredited land surveyor.  
  • Title insurance - may be purchased in lieu of a land survey in some cases. Provides protection against several defects such as problems with the property that would have been revealed by an up-to-date land survey.
  • Land transfer tax - buyers must pay this tax to their provincial government when the property's title passes from the seller to new buyer.
  • High ratio mortgage insurance - needed if you are buying a home with less than 20% down payment. You have the option to add this to your mortgage amount versus paying an upfront fee.
  • Home inspection fee - an objective visual examination of the physical structure and systems of a house.
  • Homeowners Insurance - provides coverage against losses on the physical home and its contents, along with personal liability coverage. When buying a home, mortgage lenders require proof of adequate homeowners coverage prior to advancing funds
For expert advice on getting the best mortgage for your individual needs, contact us today.

Monday, November 7, 2011

How Late Payments Affect Credit Reports -Secrets Revealed!

Figuring out exactly how credit scores work is problematic. Like nuclear fission, learning Chinese and setting the clock on your DVD player, credit scoring is not something that most people can easily master. In this article, our experts reveal secret information about late payments and how they impact your credit scores:

Credit scores are used by financial institutions, insurance companies and utility companies as an efficient way to predict how risky a customer you will be. If your credit score is low, it indicates that you are more likely to make late payments or file costly insurance claims. In turn, this means that the creditor is more likely to lose their investment by lending you money. Once you understand that credit scores predict this specific behavior, it’s a lot easier to figure out the best way to manage your credit.

Because scoring systems are so focused on predicting whether or not you’ll go at least 90 days late, surprisingly, an old 30 or 60 day late payment is actually not that damaging to your credit scores as long as it is an isolated incident. Only when your accounts are currently being reported 30 or 60 days past due on your credit reports, will your credit scores plummet temporarily.

If you’re 30 or 60 day late payments are an infrequent occurrence, this kind of low level late payment will damage your credit score only while it is being reported as currently past due. They shouldn’t cause lasting damage to your credit score after this period passes unless you make 30 or 60 day late payments on a regular basis. In this case, the fact that you are habitually late with your payments will cause long term damage to your credit scores.

Here’s a summary of how late payments impact your credit scores:

    30 days late – This record will damage your credit scores only when it is reported as “currently 30 days late.” The exception is if you are 30 days late often. Otherwise, a 30-day late payment will not cause lasting damage.
    60 days late – This record will also damage your credit scores when it is reported as “currently 60 days late.” Again, the exception is if you are 60 days late often.
    90 days late – This record will damage your credit scores significantly for up to 7 years. It doesn’t make a difference whether or not your account is currently 90 days late. Remember, the goal of the scoring model is to predict whether or not you will pay 90 days late or later on any credit obligation. By showing that you have already done so means that you are more likely to do it again compared to someone who has never been 90 days late. As such, your credit scores will drop.
    120+ days late – Late payment reporting beyond the initial 90 day missed payment does not cause additional credit score damage directly. However, there is an indirect impact to your scores. At this point, your debt is usually “charged off” or sold to a 3rd party collection agency. Both of these occurrences are reported on your credit files and will lower your credit scores further.

If you continue to miss your payments beyond 90 or 120 days, the following records may also harm your credit score:

Collections – Collections are the result of late payments. There are two types of collections; those that have been sold to a 3rd party collection agency or those that have been turned over to an internal collection department
Tax liens – Tax liens are obviously not preceded with late payments on any sort of account. However, when tax liens are reported on your credit reports they have the same negative impact to your credit scores as any other seriously delinquent account.    Settlements – Settlements are deals made between you and a creditor who is trying to collect a past due debt. Normally, you and the creditor would agree on an amount that is less than what you really owe them. Once you pay them, they consider the matter closed and paid off. However, they will report that you have made a debt settlement for less than your contractual obligation.
Repossessions or foreclosures – Having a home foreclosed upon or a car repossessed are both considered serious delinquencies and will lower your credit scores considerably for up to seven years. The assumption normally made by the consumer is “hey, I gave the home or car back to the lender, why are they going to show me as delinquent?” The answer you’ll get from lenders is that you signed a contract with them to buy a home or car and pay it in full over a period of time. You failed to do so therefore they consider you to be in default of your agreement with them and will report this on your credit reports.

Remember, the goal of most credit scoring models is to predict whether or not you will go 90 days past due or worse on any obligation. What’s missing? The scoring models are not designed to predict whether you will default for any specific dollar amount. As such, having a 90 day past due of only $100 is as bad as having a 90 day past due of $10,000. The same goes for low dollar collections, judgments or liens. The dollar amount doesn’t matter. The fact that you paid late is what’s most important in the eyes of a credit scoring model.

If you already have a 90 day late payment record on your credit history then your scores are already suffering. Be certain that the information is being accurately reported. If it isn’t then you have the right to dispute it with not only the credit reporting agencies but also with the lenders who reported it. Your goal is to have the item corrected or removed, especially if it is in error. Once removed or corrected your credit scores will immediately recover.