It was awesome to meet so many new and old acquaintances at last week’s Fergus Home Show.  Check out Tracy Luciani Facebook page; please send us your ‘likes’.

The draw was held Monday morning and the winner’s are: Joyce Sweeney of Elora for a Free Mortgage Payment, Rick Yuill of Elora  for the Classic Harley Davidson painting, and Debbie Denhoed for the Enriched Academy.Com  – Smart Start System for Financial Genius. Debbie has 3 kids…perfect! Congratulations to all of you.

We would like to suggest to all parents out there, that if you have teenagers, the Enriched Academy program is a wonderful, invaluable resource that they must have in their hands as soon as they reach age 13.  It encompasses more than saving, investing, budgeting, managing credit/debt to include Goal Setting, Building Character, Choosing Careers etc. Any youth or young adult who follows this program will become financially independent/wealthy. One of our DLC colleagues developed it for young people since our educational system does not teach them this stuff. It is a very worthwhile program and represents one of the greatest ‘gifts’ that you can give your child. Better yet, don’t give it to them, ‘encourage’ them to buy it with their first job earnings, or if you purchase it for them, have them pay you back right? That’s teaching them responsibility.  The 5 DVD series/package retails for $149.95 however for those of you who do your next mortgage or refer a new mortgage client to us (or a Home One Canada.Ca service bundle) will receive one free from us.

Congrats to Tracy for being honoured as the #1 Producer (3 years in a row now) with our franchise that includes over 70 mortgage consultants. Way to go Trace, you’re the best.  The Price Team/DLC  also placed in the top 12 with Dominion Lending Centres, Canada wide in 2011.

Happy Victoria Day Weekend everyone, what a great forecast.

BOUGHT BUT NOT SOLD

Mary Anne a new ‘senior’ had been reading us but never thought she would need us.  After all she had always dealt with her bank.   She purchased a new ‘to be built’ home in Elora with a long six month closing.   She thought it would be no problem to sell her home in Puslinch within the time period.  But it took her 3 months to get her property ready for sale.  She had a several showings through her realtor and some open houses but no offers.  

In the very beginning her bank told her they saw no problem.  Until there was a problem.  She was later told that without a sale of her property she could not finalize the purchase of the new one. She went back to her builder to see if he would extend the closing of her purchase, but he said he could not wait for his money beyond the agreed contract date.  Panicking, the retired teacher came to see us.  Walking away from the purchase and forfeiting her $25,000 deposit was not positive option.  We suggested she either close her purchase with short  term private money until her house sold and closed, or that we refinance her property, pay off all her debts and get some money to provide toward to purchase.   With the closing date fast approaching, her realtor was pressuring her to reduce the price of her home.  Mary Anne was feeling like she needed to take any reasonable offer despite being assured before that her house was well priced to move.  Bridge financing was out of the question because her house was not sold.

We ended up refinancing her home, pulled out what we could for the purchase and got her enough private short term money to close on her new home.   A few weeks later, Mary Anne came into our office and announced she had sold her home for almost full price to close the end of July. She said, “Now I understand that mortgage brokers find solutions, when the Bank can’t.” You see, the banks only think ‘inside the box’. Now she will be sitting pretty with no debts with a small affordable mortgage on her new bungalow.  Now that’s what we call a good solution.  We pride ourselves in ‘out of the box thinking’ when it comes to mortgages solutions.  

The federal government just announced that CMHC will now be run by OSFI, the Office of the Superintendent for Financial Services. What this means is that getting a mortgage will become more difficult, ‘across the board’.  Also because the banks will no longer be allowed to ‘insure’ their low risk mortgages, this will put new pressure on lending costs and likely lead them to charge higher mortgage rates. The Bank of Canada will now not have to increase their ‘floor’ wholesale lending rate which would cause the loonie to soar and in turn would hurt the economy.

Experts suggest the effect of tougher mortgage lending and higher rates will definitely slow down the ‘overheated’ housing market, so if you are thinking of buying or selling, do it soon, very soon.

For those of you who are worried about possible job layoff/loss, and those who have high interest consumer debt, act now.  Be proactive, don’t wait until it is too late. Take yourself to safety.

If your mortgage is renewing this year, you may want to take advantage of today’s ultra low rates. How would you like to lock into our incredible (all time low) 10 year fixed mortgage rate of 3.99% (the equivalent bank rate is 6.75%). No one ever foresaw long term money this cheap. And hear this. There is no IRD or Interest Rate Differential beyond 5 year terms and so no IRD on a 10 year term mortgage, after 5 years. What an incredible bonus if you sell your house between 5 and 10 years.  You can also port (take it with you) or have it assumed when you sell (it will be a very attractive rate to buyers). Talk about a ‘Win/Win’ scenario.

Inevitably rates have nowhere to go but up. It’s only a matter of time. With the world in financial turmoil the future is uncertain. With these circumstances, ‘Going Long’ now makes more sense than before.

Call us for a mortgage checkup and to discuss the advantages of ‘Going Long’ today. You will be so glad you did!

Exasperated, Jillian called us saying her bank told her that she needed a co-signor to purchase after she and her husband Bob had put an offer on a home in Fergus. She told us she didn’t have anyone in her family who could co-sign and wanted to know if there was any way they could do it without one. Nothing is set in stone in the mortgage business. We asked Jillian to come in for a chat and discovered that she had been pre-approved at the bank which is why she went house hunting only to be later disappointed. Mortgage lenders usually ask for a co-signor when there is an issue with credit or income.

As it turned out Bob had barely acceptable credit and he had only been working as a plumber for 8 months. Most lenders like to have more job stability. The bank saw it as a ‘weak’ purchase transaction. Her employment and credit were strong and the property was fine.  

We went to work and asked Bob about his job. He told us that he is highly regarded and his job is very secure. He also gets all the hours he wants. So we asked him to get a letter from his employer with their endorsement of him. Problem solved, we found a lender that was willing to do the mortgage at ‘best’ rate and terms.

This is a good example of our ability to structure deals creatively so they will work, and also to present a mortgage application in the most positive light. The bank’s are very restricted in their parameters and usually think inside the box.  We also have over 40 lender’s to source, many of whom are more ‘common sense’. We have excellent relationships with them as well, and can get them to ‘bend’ a little when it makes sense to them.

Again as we have stated in past articles, unfortunately bank pre-approvals are not really approvals at all because they do not review credit or confirm employment/income. People go out and purchase only to be embarrassed when they are ultimately declined. With us we look carefully at credit, employment and incomes ensure there are no nasty surprises; only the property has to pass mustard when you buy.  So our pre-approval certificates mean something you can count on.

If you get turned down at the bank, don’t be discouraged. Come to us, in fact why not forget the banks and just call us first?

With the news of rates rising, Cindy a client of ours came into our office the other day asking whether she should ‘lock in’ her variable rate to a fixed rate. Cindy has a 2.25% variable which is at .75% below prime (discounts are gone now). Her new fixed rate would be 3.39% for the next 5 years. She would also being going to ‘safety’.  It would however take a 1.14% increase in prime for Cindy’s rate to reach today’s fixed rate.  That is four to five one quarter per cent increases which could be one or two years away.  

For new mortgages the fixed rate appears to be the logical choice, and most people are choosing fixed because the spread between fixed and variable is so small, and it’s not worth the risk. Or so conventional thinking goes. Rates aren’t going any lower and in fact ‘gradual’ increases are now expected over the next year and beyond.  Any big increases are not in the cards due to fragile economic recovery in North America and even more perilous financial footing globally.

If rates have in fact started their ascent, then the decision to fix should be a slam dunk right? But hold on. What none of the experts ever factor in, is the prospect of a ‘penalty’. We asked Cindy if she expected to stay in her house for 5 more years, and she said ‘probably not’, and she told us she had to pay $18,000 to the bank for breaking my mortgage the last time she moved.

Folks that is a lot of interest.  Huge in fact. You see, the maximum penalty on a variable mortgage is 3 months interest whereas it is usually the ‘interest rate differential’ (IRD) with fixed rate mortgages.  We then told Cindy that if she sells within the next 5 years and a similar $18,000 penalty were to apply, the effective interest rate she would be paying becomes a whopping  5.169%.

No wonder why the banks always say go ‘fixed’ for new mortgages, and “lock in” to variable rate customers. They also know that Canadian households move on average every 3.5 years and that most people take 5 year terms. Funny that the so called ‘experts’ never include into the argument mention of the much greater penalty one must pay with a ‘fixed’ versus ‘variable’ rate mortgage.

There you have it. The ‘Secret’ is out. We would love to see a disclosure of how many hundreds of millions the banks must make on IRD’s every year.  Needless to say, Cindy is staying with the great variable mortgage we put her in.

Good news on the mortgage lending front. The headline read “TD Economist to Gov’t: Raise Minimum Down Payment” and the reaction from the mortgage brokerage industry was swift. The Minister of Finance did not take the bait thrown at him recently from big bank economists who called for a bigger minimum down payment of 7 per cent, and a further reduction in maximum amortization to 25 years, making it tougher to get a mortgage. TD bank economist Craig Alexander said that the real culprit in spiking debt levels ‘has been growing home purchases in the current low interest rate environment’. Riiiight! Funny none of the banks said a word about ‘loading people up with revolving consumer debt, then billing interest only minimum payments (so principal doesn’t get paid down) then put them in a corner with their new collateral mortgage product registered at 100%+ of property value’ thereby limiting future options.

Alexander also stated “If the current overvaluation (of real estate) unwound rapidly, it would be three times the correction (we suffered) in the early 1990’s”, which resulted in property values declining by as much as 50%. In our view this is pure ‘fear mongering’ and is so easy to see through that it’s absurd.

Everybody knows that the real culprit is credit cards and lines of credit, and while we salute Flaherty for showing some guts, the government does not seem to have the will to focus on consumer credit which is THE PROBLEM. By making it more difficult to refinance, Canadians have less ability to eliminate high cost debt much of which the big banks have found ways to manipulate into ‘secured’ debt versus unsecured debt, yet rates remain excessive.

How much power and how much profit should the banks be allowed to get away with? Clearly they have already gone too far and done it ‘all together’. Some may view this as ‘collusionary’ even ‘anti-competitive’ when an entire industry acts ‘in concert’. Until OSFI, the regulatory body of financial institutions investigates their new collateral mortgage product, the view of the mortgage brokerage industry (although admittedly not unbiased) is that it is wise to avoid taking a bank mortgage. Period.

One final thought. Mr. Flaherty, how about putting a moratorium on new credit card and lines of credit for one year, and see what happens to ‘growing’ household debt loads.

Is it time to give your financial life a checkup?  If you are living on your credit cards you have to stop now. 

There are people out there (we meet them every day) who  make modest incomes but are using credit card and lines of credit as if it was extra income.  It’s easy, too easy in fact.  I remember getting my first Canadian Tire Card over 30 years ago and I remember thinking wow I have an extra $2,000 to spend.   It’s so kind of psychological mind game.  Some people have been able to acquire as much as $100,000 dollars in credit cards and get way over their heads by maxing many of them out.

I just had a client in their 60’s show me their credit card statement.  It said on the statement that in making just the minimum payment it will take 102 years to pay it off.  Well do the math!  Last time I checked people we’re not living to 162.  It is the power of compounding interest and it is not in our favour.  If you are using credit to pay credit you are already in the danger zone. Call us immediately before you start missing payments. 

The other day I was in the grocery store and I saw a young couple pull out a credit card to pay for groceries.  We as a society have to get back to basics and stop the insanity.  Live below your means if you can and watch the pennies because that will take care of the dollars.  For goodness sakes stop livin in La La Land. Stop spending and start saving. If you can’t save because you are paying too much interest, then call us to see if we can help eliminate your high cost (bad) debt, and help you get your life back on the rails. Your need a budget. You need to look at your bank statements to see where you spend your money.

Call us for a complimentary copy of ‘MY KIDS ARE GONNA BE RICH’ by Stuart Lyall. It’s for everyone and it will help you.

Since the 2008 meltdown, qualifying for a mortgage has become more difficult as lending restrictions get tougher for self-employed and commissioned workers. Some 2.67 million Canadians or 15% of the work force are (BFS business for self) self-employed. For many years the pendulum swung in their favour as lenders competed for business based on ‘stated income’ with good credit ratings. Today, good credit is not good enough and many lenders have dramatically tightened or terminated such lending as has CMHC resulting in larger down payment requirements, the return of provable income and higher interest rates and fees. Some lenders consider BFS’s higher risk even with established  businesses.  

The banks now only lend to BFS with large equity and down payments. Fortunately we still have lenders who have a strong interest and belief in BFS borrowers who will lend up to 85%, with longer amortizations, less paperwork, and who will allow secondary financing.  

If you currently have a mortgage with one of the big banks, beware. They may not renew with you at maturity, which happened to a new client of ours who had not missed a payment and his credit and business status was still good. Usually at renewal no new qualification is required. However, more lenders are now reviewing files of ‘Stated Income’ borrowers. Caution; do not write your income down to less than $15,000 since there is no tax below that amount. A surprising number of BFS’ers (their book keepers should know better) write their income down to zero.  Stated incomes are still allowed by some of our lenders but with more scrutiny, and must make sense.

Our advice is to be proactive with your income tax returns by showing a more reasonable income, and most importantly keeping up to date. Call us to do a review of your to ensure that you will be in good shape next time your mortgage matures. If you know you will have a need to borrow this year, it would  be a good idea for you to act before the Feds spring budget when more tightening is expected.

According to a recent poll conducted by Sun Life Financial Inc., most Canadians are being forced to rethink traditional plans to retire at age 65, with only 30% now thinking they can retire at 65.

Debt is playing a big role in this change, as 61% are worried about the amount of debt they will carry into retirement.  Longer life expectancy and lack of planning are also major factors behind this shift towards working beyond the ‘official’ retirement age.

From our perspective, we see many folks trying to pay down/off their mortgages while carrying lines of credit (LOC’s and credit cards. This is completely counter-productive. Most people believe they can pay off LOC’s but for whatever the reasons it does not happen. Curiously most do not see an LOC as real estate related debt when in fact it is. One couple recently told us they had no mortgage but had a $150,000 LOC which they did not think was secured. when it is. Many have substantial equity and approach or enter retirement with minimal income and therefore end up living ‘poor’ instead of enjoying their lives without financial stress. And these are the fortunate ones. Others carry high mortgages as well as other high interest debt and with the prospect of declining income, they will end up renters.

For those of you who have good equity in your homes we suggest that the key is to make your equity work for you to create a second income stream for later years. A couple of options are to purchase an investment property. Another is to invest in private mortgages. We have many clients who have done this and within five to ten years have generated significant income and asset wealth.

In effect, they now have not just one (income) basket but several that will allow them to work less and/or retire sooner than they otherwise would, because they have realized that a house with no mortgage no longer works well in our world, and in fact robs them of a more carefree lifestyle.

Call us today to discuss your future and to determine what better financial options are available to you.

If you have a business loan or a line of credit and a mortgage and you are not able to pay them down, please call us now.  We will give you a financial plan to reduce interest costs such that you can use the savings to pay down your debt much faster.

Often business lines of credit are at prime plus one-two or three per cent or more and we have seen many cases where they are secured against the home without the knowledge of the borrower, effectively making it a 2^nd mortgage.  Why pay these high rates when you can refinance at rates are hovering around prime or 3% for 5 year mortgages or 10 year fixed rates at an unbelievable 3.99%.  We can get you more cost effective financing with another lender, while you maintain your business and savings accounts at your bank without any consequence.

Getting your money at the lowest rate at the best terms makes financial sense.

We recently helped a Fergus business owner  who was paying  5.79% on his mortgage of $310,000 and prime plus 1 on a $100K business line of credit. He also had credit cards of $30,000 with total payments in excess of $5,000 per month. 

By reviewing his financial situation, we found that a new five year fixed rate mortgage at 3% (prime) could reduce his payments to less  than half and save him thousands of dollars in interest every year.

Interest chews away at your income so you have less to operate your business.  Now John can take the savings and start working at improving his operation while paying his debt off sooner.    He doesn’t have to change banks for day to day banking;  the new lender is using a void cheque from their account for the new mortgage. 

We are business owners just like you, so we understand completely what you are up against, especially if your business is still fledgling. Call us today for a consultation. We look forward to meeting you.