A common misconception about more frequent payments is that they help you pay down your mortgage faster. Bob and Alice brought in their(bank mortgage) amortization schedule. They had been on biweekly payments for 5 years and thought they were paying down their mortgage faster. What they did not know was that the bank put them on biweekly alright, but not biweekly ‘accelerated’. The net result was no different than had they made monthly payments. We see this happen too often, which begs the question. Why would the bank put them on a more frequent, non-accelerated payment that does not help them pay their mortgage down faster?

The only benefit to the customer was the ‘convenience’ of having it tied to their paycheck, but there was no financial benefit at all since the remaining principal balance was virtually the same as a monthly payment mortgage.  That’s no benefit to the customer, but it was a benefit to the bank. Why? Because, payments are only(required) monthly. So by receiving payments sooner, the bank can use the funds for two weeks each month before applying it to the mortgage, thus making extra interest (profit).

What the bank absolutely should have done was put them on biweekly ‘accelerated’ payments (which Bob & Alice did not know to ask about) which would have saved them approximately $5,000. Presumably the bank was able to do this for the duration of the term. We are talking about a huge amount of ‘free’ money at the bank’s disposal to utilize as they wish.

And did you know that default on a mortgage occurs after 3 paymentsbethey 3 weeks, 6 weeks or 3 months. So the bank can foreclose on you much more quickly when you make more frequent payments. Obviously in case of job loss etc., this represents a much higher risk to homeowners and most people do not know this.

Financial Details:

Monthly payments $931.50 x 12 = $11,178/year. Balance at term end  $160,453

Biweekly: Bank divided yearly by 26 = $429.92    Balance at end of term  $160,479

Biweekly Accelerated divide yearly by 24 = $465.75   Balance at end of term $155,497 Savings = $4,982

Remember, we are on your side, we protect you and save you money, and our services are free, OAC.

Three years ago we helped a client who was a former bankrupt get a no money down mortgage.  These were the so called ‘subprime mortgages’ which were all over the news as the main culprit for the real estate downfall in the States.  Here in Canada we also had some subprime mortgages for clients who could not qualify due to credit or income.    We had stricter rules for these sub prime mortgages  but nevertheless a small percentage  of mortgages got done here in Canada. 

Lee wanted a home very badly and his bankruptcy was caused by a job loss and bad advice.  He had no money saved so he knew he home ownership would cost him more, but he did not want to rent any longer.  We found a lender who would do the deal.  He had steady employment now and worked part-time (hard worker with great attitude) in addition to his $50,000 a year job.  He found a modest  home in Cambridge for $150,000.  We arranged a mortgage at 9.2% for  the full amount of his purchase price and  the mortgage payment of $1,300 was similar to what he paid in rent, so it was tough but affordable.  Under our  tutelage over the past three years Lee re-established excellent credit.  People with credit scores of 620 and above are considered prime by  many mortgage companies.  Lee did his penance and this week we were able to get  him a mortgage at an unbelievable rate of 3.79 percent.  He has to pay a penalty of $13,000 to get out of the old mortgage which we were able to amalgamate into the new mortgage at $155,000.  His mortgage payments even with the higher mortgage have been cut in half to $750 a month.  Lee is now on  firm financial footing and can save money. 

Subprime mortgages have received so much bad press and we just wanted to let you know that some of them work out just fine and actually help worthy people into homeownership.

Three clients (that’s right 3 new clients…what is happening?) called this week all at the end of their rope.  Welling up in our office, all of them told us how the house of cards was caving in.  All three couples had a common denominator.   The financial pressure was so great that they feared losing their homes for the first time and needed solutions fast.  They blamed their banks for rolling out large lines of credit which of course over time, all had used, eventually maxing them out.  Now they were using one credit card to pay another or throwing it on their credit line.  They all tried to keep up but the writing was on the wall. 

These are responsible hard working couples, two of them make over $100K who prided themselves on their credit and now the stellar credit was starting to suffer.  It doesn’t take much to take a financially solid couple and turn their lives upside down, a reduction in overtime, reduced work hours,  maternity and paternity leaves and or sickness.  Luckily, for two of the couples,  they called us in the nick of time.  We were able to refinance their homes and there was enough equity that we were able to get their lines of credit and credit cards paid and their mortgage payment  is  still very affordable.   One couple had let their credit slide with late payments so we had to organize a private second mortgage in order to pay off their credit lines and overdue income taxes.  In less than a year, their credit score will rebound and we will be able to get them the best mortgage available.  Don’t stick your head in the sand.  If you are feeling you are on the slippery slope call us.  We’re hear to help. 

Until just recently there was a strong consensus that rates would start rising later this year. Then with last week’s downgrading of the United States credit rating, everything has changed 180 degrees.

Peter Gibson, CIBC World Markets was quoted as saying a few days ago, “I think it’s now clear that there are a lot of serious problems in the world and it’s more likely that we’re setting the stage for a sustainably low level of interest rates for a very long time”.

With the U.S. nearly defaulting on their international debt, the historic downgrading of their credit rating by Standard & Poors, and the continued turmoil from the European Union stretching to Greece and beyond, financial volatility will absolutely continue to be the norm. In addition, the U.S. Federal Reserve last week, attempted to calm the stock markets by stating that they would not raise rates until the end of 2013. That’s two years away. The Bank of Canada has little choice but to follow suit. So it is all but certain, that we can expect mortgage rates to remain low for another couple of years, perhaps even longer. So please forget any media hype about rates rising soon. Such negative hype is designed to sell more magazines and newspapers, and is rarely credible.

Folks, this is good news, no it’s GREAT NEWS! House prices, house sales and affordability should now continue to remain healthy. However, with global financial volatility becoming entrenched, the prospect of a ‘double dip’ recession is still not out of the question.

What all this means is that this we have an opportunity of a lifetime to get into home ownership and for existing homeowners to get their financial houses in order. In other words, eliminate credit card debt and lines of credit, STOP PAYING HIGH INTEREST & START SAVING.

For expert advice and financial solutions beyond what you’re bank can give you, please call us to help you eliminate consumer debt and generate wealth. We’ve got you covered.

Jason bought a house based on a preapproval he received from his bank. When he went to waive the financing condition the bank told him that he wasn’t approvable. That’s when we got involved.

We determined that he bought too high, and could not afford the property he wanted. It gets better. His credit score was below the minimum and he had too much consumer debt to qualify at that price level.

How could this happen? How could he get a bank preapproval in the first place? Well, he told the bank where he worked and how much he earned, and the bank did the calculations and told him he could afford up to $300,000. Telling the realtor he was preapproved, he went out and bought a house. Everyone was happy, including the sellers who thought they had sold their house.

Unfortunately, the bank did not look at his credit score, his debt load (they did not look at his credit report) and so with his high car payment and two maxed out credit cards, Jason did not qualify anyway, that is,  even if his score were satisfactory.

Had he come to us in the first place, we would have told him he would have to wait to buy because he needed time to pay down his credit card balances and let his credit score rise. We also told him he should not purchase for more than $250,000.

What a waste of everyone’s time. We see this happen all the time. The moral of this story is if you are selling your home, (whether on MLS or privately)  insist on having your prospective buyer get                preapproved by us, because bank preapprovals often cannot be relied upon. We verify everything, and we will provide a GUARANTEED PRE-APPROVAL in writing. You can take that to the bank. LOL just kidding, you won’t have to will you?

Remember, we’ve got you covered, we are on your side, and we will save you money with the lowest rates anywhere. Call THE PRICE TEAM FIRST.

BEWARE OF BANK RENEWALS

A new client of ours told her bank that she was not renewing with them, and that she was looking for a new mortgage. Banks have the right to put you in a 6 month mortgage, but not a 5 year closed, fixed rate mortgage like her bank did to her. When she went to pay them out, they told her she would have to pay a $9,200. penalty, She was shocked. The penalty should have been no more than 3 months.

 She didn’t know her rights and she didn’t know the proper procedure. Folks when you are a client of ours, you never have to worry about stuff like this. We contact you prior to maturity and explain all your options. In short, it is our mantra to protect you from such unpleasant surprises, and to save you money at every opportunity.

As experts, we knew that the bank had made a mistake. We told her to ask them to produce ‘in writing’ anything she had signed to commit her to a new 5 year mortgage.  When they could not, they said it was a mistake and apologized. We got her penalty reduced to 3 months which was all they were entitled to. Had she been an existing client of ours, there would have been ZERO PENALTY because we would have had her go ‘month to month’.

By the way, the reason she went past her maturity date was because the bank sent her their renewal letter only a few weeks left and she didn’t have sufficient time to search elsewhere.  The bank offered her a renewal rate of 4.89%  when she was deserved of much less since she had not missed a payment.

When it comes to the biggest financial obligation of a lifetime, it no longer makes sense to get a bank mortgage on your own when you can have a professional (independent) mortgage broker (THE PRICE TEAM) protect and look after your best interests, one hundred per cent of the time. Alone, your bank will win. With us, you will win, and we will guarantee you tens of thousands of dollars (savings) in your pocket over the longer term, all at no cost from our end, OAC.

For your next mortgage need, do yourself a favour. Don’t call your bank and don’t use a bank mortgage specialist either.  Call us first. You’ll be so glad you did. Our best 5 year fixed rate is 3.74% versus the banks’ 5.39% and we are also below credit union best rates. In fact our rates are the best in the country. Our best variable rate is 2.25%. The banks are around 2.8%. Also, forget anonymous online or telephone mortgage lenders when you can deal with us face to face right here in Fergus. We open up the entire mortgage market to you and we are always on your side. 

The opportunity to buy a vacation or investment property in the U.S.A. has NEVER been better. Consider this. U.S. house prices, especially in Florida and Arizona have dropped upwards to 60 per cent. The loonie is now above par giving you extra buying power like never before AND mortgage rates are still near all time lows. Savvy Canadians are snapping up tremendous bargains. It’s almost like a new ‘gold rush’ said a friend who recently bought a new two bedroom condo apartment in Orlando for a mere $40,000 all cash. You know the saying “Cash is king”. Well it has never been more true than today. Think about it. The same condo here costs a minimum of $173,900. In simple terms this means you can purchase 4 condos in Florida (including closing costs) for the cost of 1 condo here. Wow. And the U.S. condo comes with a resort style pool, club and state of the art fitness centre. Oh and don’t forget about the free sunshine and warm weather, when ours is not. What a bonus!

A single family 3/2/2 bungalow (that’s 3 bdrm, 2 full bath, 2 car garage) can be had for $100,000 and up. Compared to here, the same home costs close to $400,000 so the 4 to 1 ratio still applies. Mind boggling isn’t it? Rent your new dream home out say 8 weeks a year at $1,000/week to Canadians and you live/play in the sunbelt for free, because you don’t have a mortgage if you can use your home equity here to purchase for ‘all cash’ there. Add a $25K to $50K premium for waterfront location and boating, and voila, you have a winter cottage in Florida. If you want to be an investor and buy multiple U.S. properties, call us for guidance. With a long term ‘hold’ strategy producing positive cash flows, the potential returns appear to be excellent as well. The keys are to pay cash, hold long term, and be rewarded handsomely.

As far as your personal vacation dream home is concerned, because it is so inexpensive (in relative terms) don’t even think about selling for profit. Future profits will come but think about keeping it in the family as your ‘Southern Cottage’. Has a nice ring to it, doesn’t it? And please, by all means, call us first to give you the best advice going forward.

Our contest is over and the grand prize winner of a one week summer vacation at a beautiful log home/cottage (Lantern Lane) in Port Elgin in late August is Kim Lesperance from Fergus. Congratulations Kim.

Thank you to participating sponsors, The Breadalbane Inn, Tandoori, Stone Creek, The Goofie Newfie, O’Brien’s and The Brew House. Donny lived it up this past weekend at the Brew House enjoying Canada Day Weekend festivities and the great tastes around town all June long.

By the way, our life size cut out of Don was returned anonymously just 3 days before the end of the contest. Yeah, welcome back Don. We certainly had a lot of fun, especially meeting so many wonderful people at the local establishments in town. Happy summer everyone!

ON THE MORTGAGE FRONT: If you are getting a new mortgage from a bank, make sure you ask them up front if it is a Collateral Mortgage. If the answer is yes, ask lots of questions, and do so when you make an application; that is, do not wait until signing when all the legal work and expense has been incurred.  Ask if it will be registered above sale price/value and ask if the fine print gives the bank the right to increase the rate without your permission. We think that the new collateral mortgage product is definitely in their favour and we do not recommend them to our clients.

Better yet. Save yourself the time and hassle by calling us first for your next mortgage. We’ve got your back covered.

They say the more you earn the more you spend.  And lately we have had clients with big paycheques but with big headaches over debt.

The Big Banks love BIG INCOMES.  If you are making six figures or more, you are a target for your bank.  Let’s face it, they have more money they can grab off your paycheque.  Your bank has products they love to sell, mortgages, line of credit, visa and car loans.  And you will pay as much as the bank feels you will tolerate.  When all is said and done, you find that every cent you earn is going to make payments and it gets more difficult as the compounding interest escalates.

So goes the story for Tarah and Del from Guelph.  They earn 150K per year but were finding their monthly obligations crippling.  Last year, they tried to sell their home but the only offer they got would only pay off their 300K mortgage.  So they struggled through another year with the debt continuing to mount.

The couple were paying  $2,000 per month for a mortgage of 300K at 5.5% and other $1,500 per month in debt payments including their 50K line of credit which was maxed.  Tarah was juggling the credit cards to keep afloat and when she called she was at her wits end.  “I don’t think you can do anything, but I am really afraid we are going to lose our house if we don’t  do something now.  Tarah was embarrassed about her financial situation and she blamed herself for her family’s financial mess.  We assured her that it wasn’t mismanagement of her affairs but more a case of no one looking after her family’s  best interest.  That’s where we come in.

We were able to refinance the Guelph couple’s home and pay off their 80K debt.  Their payments are a comfortable $1,500 per month and with the 20% pre payment options they can use some of their monthly savings and pay their mortgage down.  Tarah couldn’t be happier.  “For once I feel we can finally get ahead,” she added.

DON CHERRY UPDATE:  Don was spotted last week at The Goofie Newfie by David Meyer amongst others, who won a dinner for two and eligibility to win our Grand Prize, a one week summer vacation in Port Elgin to be drawn on Canada Day. Doug Kenny was the winner of Stone Creek’s dinner for two prize. Congrats to both.  By the way, WE FOUND OUT WHO STOLE DON CHERRY and will let him know that it will be in his best interest to bring Don back by Friday, voluntarily.

Attention small business owners. Need working capital? We now offer Merchant Cash Advances from Dominion Lending Centres Leasing.

It’S FLEXIBLE: There are no fixed payments

IT’S FAST: Funds for your business in ten days

NO COLLATERAL: Your Sales Are Your Security.

There are no limigtations on how you spend the money. Purchase inventory, Renovations, Advertising & Marketing, Acquisitions, Debt Management, Emergency Cash Flow.

Don Cherry Update: Don was spotted at Stone Creek Tap & Grill and the Goofie Newfie last week. Obviously he is having a great time this sumer in fergus. Get your ballot in to win our grand prize, a one week summer vacation at a beautiful log home/cottage, Lantern Lane in Port Elgin