Tuesday, July 31, 2012

Run the Numbers..

RUN THE NUMBERS: First, determine what you can afford.
It happens: you fall in love with a home that seems perfect, but it is way outside your possible price range. Before you go looking at homes - and long before you consider putting an offer on one – you need to run the numbers. Get some professional guidance – there's more to home ownership than a mortgage payment – and determine exactly what you can comfortably afford.
Meet with us first. Independent mortgage brokers are expert at providing the advice, education and resources that first-time buyers need. We can offer advice on boosting your credit rating, determining an affordable mortgage payment, and advising you on the extra costs that come with buying a home. Generally, you can expect to pay between 1.5% and 4% of the home's selling price in total closing costs.
We can also make sure you have a pre-approval with an attractive rate – usually good for 90 to 120 days – so you're house-shopping with a plan and a budget. Doing this work ahead of time will make you a confident and informed homebuyer. You'll know exactly how much house you can afford – before you ever start dreaming of home!

Wednesday, July 25, 2012


The Following is a reprint and forward of the Monday Morning Motivator written by Adam Drago of Adamadgroup.com
This week we share a powerful message from speaker and author, Tom Hopkins. We all are capable of doing great things and achieving amazing results, the problem though is that often times procrastination gets in the way. Tom's message encourages us to develop a do-it-now attitude that will help us move forward to do and accomplish more in all areas of our lives.
Self-discipline really encompasses nearly everything in life. Do you remember in school when you were given 30 days to write a term paper? Did you start it that first night?

Most of us didn't. Instead, we thought about it every night. "Got to get moving on that ratty project. But I've got almost a whole month left—it can wait." As time goes by, worry about getting a failing grade looms larger in our minds. At first the pain of starting the term paper is greater than our concern about the failing grade, so after a week we still haven't started. Two weeks go by. What are we doing every night before we go to sleep? Worrying about that F. "I better start. Tomorrow I'll get moving on it."
A week before the term paper is due, the F is getting larger, but it's still not quite large enough to offset the pain of working at preventing it. All of a sudden there are only three days left before it's due, and at last the F looms larger than the pain of working on the term paper. So we start.

As you lay it out you begin feeling some enthusiasm. "This isn't bad. I may get an A if I do this and do that." When you walk in with your paper you're happy, but you wasted 27 days worrying about starting. In other words, you operated at a deficit emotionally for 27 days when you could have been in the profit column the whole time. Move into the emotional profit column right now; starting today, get your priority tasks and actions handled promptly. Plan your actions then act on your plans. Apply this determination to every area of your life and it will make an enormous difference in your income, growth rate in business as well as your satisfaction and growth rate personally.

The portrait of a man who was being called the Whiz Kid on Wall Street appeared on the cover of a national magazine many years ago. He was one of the first to put a conglomerate together, and some of the federal laws affecting business in the early '70s came about because of the trends that his creativity set off. At the time he was 42; he was running one of the largest industrial combines in the country, the conglomerate he had built himself. So the magazine had assigned a journalist and a team of researchers to do an in-depth report on this entrepreneur.

One of the researchers went to the small city the dynamic executive had left 15 years earlier. A few items turned up there about an alcoholic with the same name who had been sleeping on park benches at that time. The researcher passed this information along, and as the journalist was concluding his interview with the Wall Street powerhouse in his plush office, the journalist laughed and said, "Believe it or not, a man with your exact name was sleeping on park benches and getting ousted by the police when you lived in your hometown. I guess the poor guy was a real wino. Isn't that something?"
The president looked up and smiled. "That was me," he said."
The reporter was flabbergasted. "This can't be. You're kidding."
The president of the conglomerate leaned back in his leather chair and shook his head. "I'm not kidding. The wino sleeping off drinks on park benches was me."
The journalist stared at him for a moment and realized that the man was telling the truth. He also realized that now he had a whole new story. When his apologies were waved aside, he said, "I have to ask, what made you change?"
Listen to what he said because so many people fit this mold: "When I was sleeping under newspapers in the park 15 years ago, I knew that someday I would do what I'm doing now. I was just waiting until I was ready to start."
Do you know how many people are like that? "Well, next year's my year. I'm going to get to work then. You just wait and see—right after the first of the year I'm gonna start shaping up." But, of course, the time to get going never quite comes for most people. They have good intentions but are lacking the two most vital components of any good deed: the motivation to begin and a strategic plan to keep them moving forward.
You see, by not beginning, you're not risking failure, but you're also confining yourself to the level of success you currently have. If you're happy with that, fine. If not, make that plan and get fired up!
If your potential for greater success is nagging at you, don't wait. Time is flying by so fast. Start today to achieve the greatness you know is within you.
If your business needs help liberating greatness, don't wait. Give us a call, we're here to help!

Thursday, July 19, 2012

Bank of Canada's Carney defends maverick rate-hike view

OTTAWA (Reuters) - Canada cannot "cut and paste" monetary policy from elsewhere and, unlike its struggling peers, will need higher interest rates as the economy inches closer to its speed limit, Bank of Canada Governor Mark Carney said on Wednesday.
Carney is in a lonely position as the only central bank chief in the major advanced economies who is talking of raising rates while everyone else is moving in the opposite direction.
But he was quick to defend that stance in a news conference even though the quarterly report he was releasing downgraded growth forecasts for Canada, the United States and the global economy.
"We make monetary policy for conditions in Canada. Monetary policy is extremely accommodative, financial conditions are extremely accommodative," Carney told reporters.
"We're in a situation where there's a very small amount of excess capacity in this economy. Rates are at 1 percent. They're very low ... Global monetary policy is not a cut and paste."
Carney was the first in the Group of Seven industrialized nations to hike rates after the global financial crisis but has kept the bank's benchmark rate frozen at 1.0 percent since September 2010.
Now, with the economy running at just half a percent below its production capacity - the speed at which it can grow without fueling inflation - he is preparing to tighten the screws again.
"This projection includes a gradual reduction in monetary stimulus over the projection horizon, consistent with achieving the inflation target," the bank said in its Monetary Policy Report.
Most economists expect the first hike to come in the second quarter of next year, but traders in the overnight index swaps market are pricing in a small chance of a rate cut this year.
"The underlying bias to take interest rates higher confirms our view that the next move in the overnight rate is up and not down," said David Tulk, chief macro strategist at TD Securities.
Others were skeptical. Derek Holt of Scotia Capital suspects Carney of talking tough in an attempt to influence overly-dovish markets.
"I continue to think that the main point to the Bank of Canada repeating its upward rate guidance is to fight the market bias in favor of a rate cut more so than to actually signal that it will raise rates," Holt wrote in a note to clients.
The bank also predicted Canadian households will see their debt burden worsen further in coming months even after the government stepped in to tighten mortgage rules, pointing to signs of "overbuilding" in the housing market.
It said the measures the government announced in June to curb mortgage borrowing would help make the housing market more sustainable, but it still expressed concern.
"Despite the lower forecast for household spending ... the bank continues to expect further increases in the household debt-to-income ratio in coming quarters," it said in its quarterly Monetary Policy Report.
The debt-to-income ratio of Canadian households soared to an all-time high of 152 percent in the first quarter as ultra-low borrowing costs lured more people into buying homes and as home prices in some cities rose sharply.
The central bank, which has warned the trend is the top domestic risk to the economy, said the pace of growth in household credit had slowed this year and consumer spending would likely be weaker than it anticipated last quarter as global economic troubles bite into incomes and wealth.
But housing investment remains robust due to construction of multi-family buildings and home renovations, and this is taking a toll on household finances.
"While growth in household spending has been moderate in recent quarters, it has been disproportionately supported by housing investment, which is around historical highs and showing signs of overbuilding," the bank said.
A good deal of the mortgage growth is likely to be transitory, caused by strong activity in the housing market in early 2012 before the government tightened mortgage rules.
The bank sees economic growth troughing in the second quarter at an annualized 1.8 percent, down from its 2.5 percent projection in April. It sees growth of 2.0 percent and 2.3 percent in the third and fourth quarters, respectively.
The 2012 revisions largely reflect weaker-than-expected government spending, business investment and consumer spending while the outlook for net exports improved slightly.
The bank sees inflation sharply lower at 1.7 percent in the second quarter, 1.2 percent in the third and 1.6 percent in the fourth.

Monday, July 16, 2012

Mortgage Freedom, Faster!

It's exciting to buy a home and feel free of the restraints of paying off someone else's property through rent. But once the initial euphoria wears off, many homeowners have woken up in a cold sweat, thinking, "How am I ever going to pay off this mortgage?" It can be done and certainly has been done in a reasonable amount of time, and here are some tips on how.
A recent Harris-Decima poll questioned Canadian homeowners about how they managed to become mortgage-free faster. The majority of them used one or more of the following strategies to pay off their mortgages:
  • 52 percent made lump-sum payments when they could
  • 42 percent increased the amount of their regular mortgage payments
  • 40 percent increased the frequency of their regular mortgage payments
Sound easy? Maybe, but it didn't come without certain sacrifices.
In fact, the poll showed that the Canadians who paid off their mortgages followed one or more of these habits:
  • 53 percent said they skipped large, "unnecessary" purchases
  • 53 percent said they created a budget to track their spending
  • 49 percent cut down on extra spending, including restaurant and entertainment costs
  • 38 percent skipped vacations
Today's low interest rates are allowing more people to move up in the market. With smart planning and the guidance of your real estate support team, you can afford to own your dream home within a realistic time frame.
Please call today for a no-obligation discussion on the value of your current condo, the trends in the local real estate market and the latest market activity!

Tuesday, July 10, 2012

DREAMING OF HOME: First-time homebuyers shouldn't worry

Talk about mixed messages. There's concern that the new mortgage rules might push first-time home buyers out of the market. But mortgages are still a pretty amazing bargain – historically speaking. In fact, some are calling it the great Canadian mortgage sale. So what's a first-time home buyer to do? Is buying a home right now a reckless risk... or a great, time-limited opportunity?

Home ownership can make great financial sense. Over the long term, residential real estate has been a very strong asset – showing excellent appreciation. Renters who add up what they've shelled out during their renting years are often shocked to see how much mortgage help they've given their landlord. Most would prefer to have that money build their own home equity.

If you're dreaming of a home of your own, then there's good news. Getting into today's housing marketing isn't out of the question if you do some good common-sense planning.

Over the next few weeks we'll offer some tips for first-time home buyers – to ensure that you get off on the right foot in your home buying journey!

Monday, July 9, 2012

Compound Interest: Unravelling the Mystery

“If you start saving early in life, the power of compound interest will allow you to retire comfortably.”
This is what financial planners tell young Canadians.  And it’s true. But what is compound interest?  The most basic definition is that compound interest is interest on interest. If you have an RRSP, compound interest is your best friend because the interest (or other income) you earn on your investments within your plan is also invested (rather than paid out to you) and these earnings are put to work for you, thereby “compounding” your return. The earlier you start saving for retirement, the more compound interest will work for you.
As a borrower who pays compound interest on a loan or a mortgage, the definition doesn’t change - it’s still interest on interest - but compound interest on a loan means that you will pay a little more interest than you would if your loan was a simple interest loan.
Interest on fixed rate mortgages in Canada is, by law, “compounded semi-annually not in advance”. Let’s use an example to break down this term and see what it really means. Our mortgage borrower, Barry, has a $200,000 fixed rate mortgage at 6%. If it was a simple interest mortgage, Barry’s annual interest would be $12,000. But Barry’s mortgage interest is compounded which means that interest which accrues (or accumulates) is added to the principal and included in future interest calculations. The “semi-annually” part refers to how often this happens - in this case, every six months. Assuming for the moment that Barry makes no payments, his balance when he first takes out the mortgage is $200,000.
After six months, the accrued interest is $6,000. This is then added to the original principal for purposes of calculating Barry’s interest for the next six months – $206,000 at 6% for six months which is $6,180. After one year, Barry’s balance is $212,180 and his interest for the following six months is $6,365. This “compounding” effect continues every six months – or semi-annually.  Just like saving for retirement (except in reverse), the power of compound interest increases as more time goes by.
Let’s look at what “not in advance” means. In the example above, the accrued interest is added to the principal after it has accrued – rather than before it has accrued. If accrued interest was added to the principal balance before it had accrued – or at the beginning of a six month period – Barry would be paying interest calculated semi-annually “in advance”. The term “not in advance” implies that there are mortgages or loans which compound interest “in advance” but really, there are not. “Not in advance” is a standard legal term which is used for clarity only.
We have seen how compounding works when Barry makes no payments on his mortgage. Let’s say that Barry is a typical Canadian borrower who makes monthly blended payments of principal and interest on a 25 year amortization schedule. The arithmetic becomes a little more complicated because allowance must be made not only for compounding interest every six months, but for Barry’s monthly payments aswell. When the compounding frequency is different from the payment frequency (and it almost always is because lenders generally do not offer an option to make mortgage payments every six months), a mathematical conversion to a “monthly” interest rate must be made for purposes of calculating payment amounts.
We have all seen references to the terms “Annual Percentage Rate” (APR) or “Annual Effective Rate” (AER) in Cost of Borrowing disclosure sections of mortgage documents. These terms refer to the conversion of the mortgage rate (6% for Barry) compounded semi-annually to a simple annual interest rate. In Barry’s case, his 6% mortgage has an APR of 6.09%. The effect of compounding adds .09% to Barry’s quoted rate when expressed in simple interest terms. To calculate Barry’s monthly mortgage payments, his lender will convert his rate to a monthly compounding rate which also has an APR of 6.09%. This rate is actually 5.926%. This conversion to a monthly rate is further evidence of the effect of compounding because both 5.926% compounded monthly and 6% compounded semi-annually have the same APR of 6.09%.
Most Canadians end up pulling their hair out if they try to figure out how their mortgage lender calculated their payment amounts.  This is usually because they forget that two conversions are required – first, the mortgage rate is converted to an APR and then that APR is converted to a monthly (or bi-weekly, weekly etc. depending on the payment frequency chosen) compounded rate with the same APR.

Many Americans shut out of cheap housing market

With Canadian mortgage rules tightening again for the third time, will our housing market soon resemble the US as a buyers market?

One night last spring, David Hall returned home to his studio apartment outside Boston to learn that his monthly rent had spiked from $725 to $995.
It would be much cheaper for the maintenance manager to buy a nearby starter house than to stay put. But his mortgage broker told him that while his credit score was good, it was not high enough to meet banks' tough standards, he said.
"I know if I walk into a bank, they are just going to laugh at me," Hall says. "So I'm stuck."
He is not alone.
Five years after the housing bubble burst, the United States is in the midst of a housing affordability crisis. Home prices have fallen a third from their peaks, but many Americans cannot benefit because they cannot get a mortgage.
With credit tight, many consumers have no choice but to rent. Others who can afford to buy are also renting, because they view real estate as a lousy investment. With this increased demand, rents in some cities have jumped by double-digit percentage rates.
In the 12 months ended in May, rents rose 14 percent in San Francisco and 11 percent in San Jose, California, according to real estate data provider Zillow. Last year in Minneapolis, they spiked 11 percent even as home values sank 8 percent.
People with lower incomes have long struggled to find affordable housing, but many in the middle class are now hurting, too.
Most personal finance experts recommend allocating no more of 30% of family income to housing, but nearly 40% of Americans are paying more than a third, according to the U.S. Census Bureau's American Community Survey.
In New York City, one-third of households are spending more than half their pay on rent.
"We have falling incomes, rising rents and nothing but substantial upward pressure on those rents," says Chris Herbert, director of Harvard University's Joint Center for Housing Studies. "And nothing in the cards suggests it will turn around anytime soon."
Today's housing market is a buyer's paradise.
It is now cheaper to buy a home than it is to rent in virtually every major city in the United States, according to John Burns Real Estate Consulting.
But for many in the renter class, buying even a modest home is impossible because financing is so hard to secure.
Lending for home purchases hit a 12-year low of $404 billion last year, down from $1.4 trillion in 2006, according to trade publication Inside Mortgage Finance. That means mortgage credit is tighter than it was even before the housing boom.
This year, lending is expected to drop even more, according to Inside Mortgage Finance.
A recent Morgan Stanley research report states that the average credit score is 762 for a consumer securing a mortgage backed by government-sponsored enterprises like Fannie Mae. But 65 percent of Americans have scores below 750.
In other words, a disproportionate number of mortgages are going to people with unusually good credit. A perfect score is 850, and anything below 660 is considered subprime.
"Basically, access to credit for borrowers with less than spotless credit is severely limited," the Morgan Stanley report states. "A good chunk" of U.S. households are "cut off from mortgage credit on this count alone."
For people who can get mortgages, rates are at their lowest levels in several generations. Add that to the cheap home prices, and houses are at their most affordable since at least 1970, when the National Association of Realtors began tracking this metric.
Normally, high affordability translates into higher sales. And the housing market is showing some signs of recovery – the S&P/Case Shiller index of home prices had its third consecutive monthly gain in April. Last week, the NAR said pending home sales had matched a two-year high in May.
But any recovery has been tepid. The NAR said existing home sales had declined 1.5% to a seasonally adjusted annual rate of 4.55 million in May from 4.62 million in April. That is 34.2 percent above the July 2010 bottom of 3.39 million, but far short of the 5.5 million pace that the NAR considers healthy.
"Home sales have just barely picked up from their cyclical lows, and that's because there are still constraints to borrowing," said Moody's Analytics economist Celia Chen.
Part of the lender pullback has to do with the stringent regulations Washington put in place after the housing crash, says Michael Fratantoni, vice president of the Mortgage Bankers Association. These rules put more of the losses from bad mortgages onto lenders, instead of investors or government-sponsored enterprises.
Then there is the climate of unstable home prices and a shaky labor market: "There's a risk that even a borrower with moderately good credit may fall behind," Fratantoni says.
Consumers who cannot buy must rent, and that is where many Americans are feeling the pressure. A rent index from Zillow shows year-over-year gains for 70% of the U.S. metropolitan areas, while its home value index rose in only 7.3%.
Only a few years ago, landlords in cities like San Francisco and New York were tossing in a month or two of free rent, sometimes with parking, to lure tenants into signing leases.
Today, applicants are showing up at apartment viewings with copies of their unblemished credit reports and letters of recommendation from bosses and prominent friends, in the hopes of snatching up a place to rent.
Equity Residential, one of the biggest apartment owners in the United States, has more renters with high credit scores than ever, vice-president of Operations David Santee said on an April conference call with analysts.
Demand for apartments is also higher because many potential buyers in their 20s and 30s want to stay flexible – home ownership is not as attractive as it was to earlier generations.
Still, plenty of people would prefer entry into the ownership class.
Last spring Rosemary Wynder, a physician order specialist, found her rent shooting up. She decided to buy a house.
But a bank glitch in February had caused one late car loan payment, dinging her credit score. The Utica, New York, resident has been unable to straighten out the mistake, and five banks have rejected her for a mortgage.
"I've been crying," says Wynder. "I've been praying."

Have a great day!

Thursday, July 5, 2012

Snapshot of Canadians' finances

Who is the average Canadian — financially speaking? According to the Association for Canadian Studies, our median household income is $68,560 per year. Personal incomes are lowest in Prince Edward Island at $21,620 and highest in Alberta at $36,010. We pay $11,000 per year in income tax, donate $260 to charity, contribute $2,790 to our RRSPs and carry a credit card balance of $3,462. Mortgage and household debt comes in at a total of $112,329.
Our net worth per capita has continued to rise, most recently clocking in at $193,500 per capita according to Statistics Canada. Real estate gains have continued to drive the increase to our net worth, though many have suggested the Canadian market could be in for a correction — or at least a pause.
The Toronto Stock Exchange has risen 59% over the past 10 years, compared with a 3% gain for the MSCI World Index and a 4% loss for the S&P 500 (excluding dividends).
Our Canadian dollar has appreciated 47% against the U.S. dollar and 16% against the euro over the past 10 years. This has made global and U.S. stock market returns even worse in Canadian dollar terms.
Canada had a double-digit personal savings rate in the '90s, but over the past two decades, this has dropped dramatically to the current 3.1% — one of the lowest savings rates of all OECD countries. The flipside of this coin is that our current personal debt to income has simultaneously reached an all-time high of 153%. So gains in real estate and stocks have been tempered by a corresponding increase in personal debt. person at about US$39,883 or 81.6% of GDP. This compares with the U.S. at $37,953 or 76.3%. Go figure! That said, Greece's public debt is currently $35,874 or 141.0% and Japan is at $87,601 or 204.9%.
Canada's federal government has been consistently posting budget surpluses of about 1% of GDP since the mid-1990s, a time when many people thought Canada was on the path to a sovereign debt crisis of its own. Quite to the contrary, Canada entered and emerged from the 2008 recession relatively unscathed. And this is the asterisk beside Canada's 81.6% debt-to-GDP ratio when compared with the 76.3% figure for the U.S. — given our neighbours are currently spending US$1.50 for every US$1 of federal revenue. Call it a "Tale of Two Countries."
Some people suggest the U.S. and Europe could learn something from the Canadian government debt experience of the 1990s. While many people in other Western countries are now suffering as a result of their government's debt problems, our government is sitting pretty. Our personal debt is the one black spot for the red and white as we celebrate our country's birthday. http://business.financialpost.com/2012/06/30/snapshot-of-canadians-finances/
Have a great day!