It seems that Canadians are talking as much about real estate and interest rates today as they do about the weather, and we love to talk about the weather don’t we…lol.  With mortgage rates still at historical lows and only one way to go but up, it would seem logical to perhaps forget about getting a variable rate tied to prime and simply ‘lock in’ to a fixed rate right? Well if you will lose sleep at night over your rate/payments going up, then fix, fix, fix. However, just know that you are paying a big premium for such ‘peace of mind’. If you are a first time home buyer, adjusting to a new ‘home ownership’ budget, we recommend you take the safe  route by choosing ‘fixed’.

For those of you willing to take a little risk in order to save(perhaps a lot) statistics have proven that from 1950 to 2007 Canadians 88% of the time have saved more by having variable mortgages tied to prime versus taking the fixed rate mortgage. The spread between variable and fixed is a whopping  2.64% which represents very significant savings and there always is a ‘spread’. If the prime rate begins rising this June as expected(as will fixed rates) it would have to climb all the way to4.84% before you stop saving vs fixed rates. Experts predict prime will rise about 1.25% to around 3.5% in late 2011 when it should stabalize. We believe that by then you will be so far ahead of the game, that you then should stay with your subprime mortgage rate to the end of term. Regardless of choosing variable or fixed, we all have to deal with market realities at the end of each term don’t we.

We have received numerous calls from people thinking of renewing early and not waiting until next year when their mortgage matures. We show them that the penalty is insignificant relative to the savings they can realize by going with a subprime mortgage now. Our best is .50% below prime or 1.75%, our best 5 year fixed rate is 4.39%.

If your current mortgage is $200,000 at 5.1% your monthly payment is $1015. If you renew now, your payment would be reduced to only $637/month and if your new variable averages over 3.0% over 5 years, your average payment would be $736/month. For the very astute who plough the savings against the mortgage(called prepayments) they will pay down faster than before, saving even more in interest in the years ahead. Which do you prefer? Call us today and we’ll help you decide. Talk to you soon. would                                                                                                                                            

The Big banks are pushing their hybrid products and their popularity has grown immensely over the years.  This is the mortgage and line of credit products or straight line of credit product.  But these mortgages should come with huge warning labels.  The problem is that most consumers are unaware of what they are signing and the impact it can have on future borrowing.  Basically what the banks are doing is putting a collateral first mortgage on the entire value of your property.  So even if you are borrowing less than that, the mortgage is registered on title for the value of your home.  We see this as anti competitive  and not in the favour of the consumer. 

We recently ran into this when a client purchase another property.  They owed $200,000 on their mortgage statement and their current property was worth $400,000.  They wanted to tap into the equity on their present property in order to purchase the new one.  When the lawyer was doing the title search he found a mortgage registered for $400,000.  The bank refused to allow any mortgage behind their existing mortgage and there was no equity left.  The client was enraged when he found out the dirty trick the bank had pulled on his and he had no idea a mortgage for twice the value which had borrowed was attached to his home. 

Many of these hybrid mortgages are singed up the bank branches and so clients have no idea that their properties have been encumbered for their full value.  We think full disclosure should take place prior to mortgages being put on property.  Often that disclosure comes later in a 30 prage documents called, The Standard Terms and it has a lot of legal jargon which the common person would never understand let alone take time to read.  And we think it is anti competitive it its nature. It forces a client to back to their original bank for any new borrowing ie car loans.  So shop around for the best rate..forget about it…You’ve got one choice.  As well, this practive affects the total amount of debt the client is carrying which can negatively impact future borrowing.  The equity you have built up in your property should be yours not the banks.  That’s why you need us, trusted mortgage professionals who have served this area for ten years.  We take the time to explain what are signing.  We deal with 47 different lenders including all the major banks and we look out for your interests.

The government snuck in through the back door.  There should be a public outcry but very few know.

There was no annoucnement from the Finance Minister Jim Flaherty in his recent speech about changes to mortgages in Canada.  But last week we received a communique which states that as of April 9th, CMCH will not be insured mortgages for self employed if their income does not debt service.  We made several calls to find out if this is correct.  It is.  Over the last five year over self employed clients were able to state a reasonable income as long as they had good credit.  We proved they were self employed through a GST statement or  Articles of Incorporation.  We did not have to prove their income.  Self employeds traditionally write down their gross income and they were able to purchase with minimum down and refinance their homes up to 90 per cent o the value.

As of April 9th, self employed people will have to show what they earn on Line 150 of their tax returns, average it for two years and add 15% to the amount.  Accountants need to be aware of this because they are in the business of finding ways to reduce taxes for self employed clients which could spell financial suicide.

This new initiative will make it much more difficult for self employeds to get prime mortgages in Canada.  This makes us angry.  Why would the government want to make it tougher and more difficult for self employeds to obtain financing during a recession.  This is a big step backward in a time when the government should be encouraging the low of money.

Self employed people are now not being treated equal to their employed cousins because they are able to use an an employees gross income to debt service whereas self employeds are being told the banks are going to judge them by their ‘net’ earnings.  This is discrimination and unfair.

So bottom line is if you are sel employed you have only a few weeks if you plan to refinace or plan to purchase a house.  We are going back to the old days where sel employeds as second class citizens.  Higher rates and minimum equity take outs will now be the standard for self employeds.  We are being punished for the sins across the border.  Unlike the States, Canadians can be sued personally if they walk away from their mortgages and we are not able to write of our mortgage interest.  We see this as the government’s way of getting self employed people to pay more tax.

The governement has forgotten who has helped to make this country strong.  Self employed people , the backbone of the Canadian economy will again be left to their own means to finding money at a time when we should be encouraging businesses to expand and thrive. 

If you are self employed and have been contemplating refinancing or purchasing call us immediately to an approval before the new rules take effect and if you know someone who is self employed please tell them to call us as soon as possible.

If you need a private mortgage, please stay local.  Every time without fail, people come to us after they arranged a private mortgage out of the area (especially Toronto…look out) from an unknown source, usually via a phone number in the yellow pages or an ad with a toll free number.  Well they have nightmarish stories to tell us.  They are also pretty much in dire straights. Folks, why play with fire when you are likely to get burnt.

We have a pool on wonderful private lenders with whom we have established relationships with.  These are reputable, caring people who want to meet with you personally and develop a good relationship.  They are not out to gouge you and take over your property either.  Please if you need a private mortgage solution, or if you know someone who does, please call us first.  We will find you the best solution designed to get you through your short term problem, and we’ll help you get your credit back in ship shape in order to refinance into a prime mortgage as soon as possible.

IT’S NOW OR NEVER FOR INVESTMENT PROPERTIES

With mortgage rates at ‘ALL TIME LOWS’  and with down payments set to increase to 20 % from 5% on April 19th, now is the last opportunity to buy a great investment property  with a huge upside return.  Buy a duplex, triplex, second home even a new house to built under contract with a builder you can rent out giving you excellent cash flow (with low expenses).  We also have an excellent, Rent to Own Program where our investors buys properties for RTO clients.  The program has an excellent return on your money. Call us today . We are here to help you increase your wealth portfolio. 

Our best rates this week  1.95% variable,  3.69% 5 year fixed