Protecting your biggest investment

Protecting your biggest investment

A fantastic article that really lays out what types of things you need to consider and be aware of when thinking of refinancing your mortgage.  There is alot of good points in here and again its about being aware of “ALL” your options.   Thanks to Thestar.com for posting it….

Interest rates have fallen sharply in the past six months, prompting questions about refinancing.

How much will you save if you “break” a closed mortgage to get a lower rate?

If you’re a tough negotiator, or have a mortgage broker on your side, you can get a five-year mortgage at 3.55 to 3.75 per cent – down from 5.75 per cent last November.

Here’s a guide to extricating yourself from a fixed mortgage without losing the savings to penalty charges.

Read your mortgage contract.

It spells out the conditions for getting out early before the end of the term and the charges paid to compensate the lender against losses.

Find out what kind of penalty you face. In most mortgages, you have to pay three months’ interest on your current balance or the interest rate differential (IRD), whichever is greater.

Check out the IRD. It’s based on the amount you’re prepaying and an interest rate that equals the difference between your original rate and the rate the lender can charge today when relending the funds for the remaining term of the mortgage.

Ask the lender what is the original rate used to calculate the IRD. Is it the posted rate or the discounted rate? Using the posted rate results in a wider gap and a higher penalty.

Estimate the penalty. Suppose you have a balance of $200,000 and 30 months left of a five-year mortgage term. The original rate is 5.5 per cent and the current rate for a comparable term is 3.5 per cent.

The calculator shows that the three months’ interest penalty is about $2,750, while the IRD penalty is about $12,000. (This is a rough guide.)

Estimate the savings, using a mortgage savings calculator at Industry Canada’s website, developed by finance professor Moshe Milevsky at York University. (Go to http://www.ic.gc.ca/eic/site/oca-bc.nsf/eng/ca01817.html, to Learn More)

 Suppose you pay a $12,000 IRD penalty, which is added to the mortgage principal when you refinance.

You get a three-year rate of 3.5 per cent, but keep your monthly payments the same.

The calculator shows that, by refinancing, you can pay off the mortgage in 15.17 years and save 23 months of payments.

Find out about prepayment privileges. How much of the outstanding balance can you prepay each year and when? Make the most prepayments you are allowed, because they reduce the amount on which IRD is calculated.

Ask about an unsecured line of credit for prepayments. It will be repaid when you refinance the mortgage with a different lender or sell your house.

Ask about portability. Can you take your existing mortgage with you when selling a home and buying another one?   This can be less costly than breaking the mortgage when you sell.

Negotiate a longer portability period.  Instead of three to four months, can you get six months? How about a year?

Always remember that an IRD penalty is a moving target. When interest rates fall, the penalty grows.

Recognize that a lender can quote you a penalty today and raise the amount substantially by the time the mortgage is refinanced or the house sale closes. Act quickly to keep the IRD low.

Think about making prepayments to reduce your mortgage instead of paying a penalty to refinance. For many borrowers, this can be the smartest decision.

Again its about weighing your options and making sure that paying a penalty makes sense in your situation.

Author- Lisa Alentejano

Variable Rate comes down – first lender up to bat…

 

Merix Financial announced today that their 5 year variable rate mortgage will now be offered at prime plus .40%.  Most lenders still offer prime plus .60-.75%.  They are the first of any lender to offer this reduction.  This will now get you a rate of 2.65% (prime rate is currently 2.5%)

 

Merix Financials variable rate mortgage offers you the options to convert it to a fixed rate at any time and your guaranteed the best rate at the time of locking in!    Thats not something all lenders can brag about,  a few lenders dont offer the “best rate” at lock in so its important to talk to your mortgage broker about these details when considering a variable rate type product and when chosing your lender.

Once again, with rates like these if your considering refinancing a higher interest rate mortgage or want to consolidate some higher interest rate debt,  theres no time better than now!

Merix Financial offers an extensive line up of competivie mortgage products for both conventional and high ratio mortgages.   Along with competivie rates and mortgage terms they have 6 billion in assets under administration.

Merix Financial partners only with a select group of experienced originators and can only be accessed through an approved mortgage broker.

Merix Financial

Affordability and job security most important factors for first-time homebuyers

Canadian First Time Buyers

Canadians who are considering purchasing their first home are primarily motivated by lower home prices and very low interest rates, but some require confidence in the economy and their employment prospects before they will enter the market, according to a report released today by Royal LePage Real Estate Services. Eighty-six per cent of potential first-time buyers say low interest rates make them more likely to purchase a home; 81 per cent cite lower housing prices as a motivating factor; while 76 per cent cite job security and 64 per cent say a stable economy is an important factor in their decision to buy.

Potential buyers were asked to rank their top incentives for purchasing a first property. While home prices and interest rates took the number one and two rankings, respectively, the third most popular incentive was the First-Time Home Buyers’ Tax Credit. The recently introduced Home Renovation tax Credit for 2009 was cited by 42 per cent of potential first-time buyers as either ‘very likely’ or ‘somewhat likely’ to impact their purchasing decision.

 ”When first time buyers stepped out of the market in the fourth quarter of 2008, at the height of the global recession, their absence was profoundly felt. Without significant volumes of entry-level homes trading hands, the entire market limped through the winter months. First time buyers are back in force this spring, and with them the beginnings of a market recovery. While these consumers appreciate government incentives such as tax credits, greater RSP deduction limits and rebates on home renovations, it is markedly improved affordability that is proving to be the powerful drawing card,” said Phil Soper, president and chief executive of Royal LePage Real Estate Services. “Our survey demonstrates how important affordability factors such as interest rates and house prices are in stimulating demand.”

Across the country, potential first-time homebuyers agreed that affordability was their top onsideration, however the survey also revealed differences amongst buyers in various regions of Canada.  In provinces such as British Columbia where high housing prices have kept some buyers out of the market in recent years, 92 per cent of potential first-time buyers are now motivated by low interest rates and 96 per cent say lower home prices are likely to prompt them to buy.

In Atlantic Canada, where local economies have been resilient in the face of a worldwide recession and housing markets remain stable, 43 per cent of first-time buyers say they that job security is a factor in their decision to buy, while 84 per cent of buyers in British Columbia and Alberta said job security will influence them.      Atlantic Canadians were less motivated than other Canadians by declining
interest rates, with only 72 per cent saying it will likely prompt a buying decision, compared to 86 per cent of Canadians overall. Buyers in Ontario and Quebec rated the Home Renovation Tax Credit as a bigger factor in their buying decision, compared to the Canadian average.  Mr Soper continued, “The significant response differences from region to region show how closely the residential real estate market is tied to broader economic trends and consumer confidence. Buying your first home is a major life decision, and people are more likely to purchase a home if they feel comfortable about the state of the economy and confident that they will have a job to support their new mortgage obligation.”

 Top Incentives for First-Time Buyers Across Canada

Potential first-time buyers were asked to choose their number one  incentive for purchasing a first property. The table shows the percentage  of respondents who selected each factor as their top incentive.

————————————————————————-
                              BC &
                 Overall Territories Alberta Prairies Ontario Quebec Atlantic
    ————————————————————————-
    Lower Housing
     Prices         33%        49%      48%      55%    32%      13%      26%
    ————————————————————————-
    Low Interest
     Rates          27%        32%      29%       4%    23%      41%      17%
    ————————————————————————-
    First-Time Home
     Buyers’ Tax
     Credit         12%         3%      10%      22%    15%      11%      10%
    ————————————————————————-
    Job Security    10%         6%       5%       2%    10%      16%      15%
    ————————————————————————-
    Additional
     Government
     Actions to
     Stabilize
     Housing                           less                             less
     Markets         3%         3%  than 1%      10%     3%       4%  than 1%
    ————————————————————————-
    Home Renovation                    less
     Tax Credit      2%         1%  than 1%       1%     1%       3%      11%
    ————————————————————————-
    Stable                             less     less                    less
     Economy         2%         2%  than 1%  than 1%     3%       2%  than 1%
    ————————————————————————-
    Greater RSP
     Deduction                less             less                     less
     Limits          1%    than 1%       1%  than 1%     1%       1%  than 1%
    ————————————————————————-
    Stable
     Financial     less       less     less     less            less     less
     Markets    than 1%    than 1%  than 1%  than 1%     1%  than 1%  than 1%
    ————————————————————————-

     REGIONAL SUMMARIES

    Atlantic

Overall activity in the housing market has remained steady in the Atlantic region with first-time homebuyers continuing to enter the market. Low interest rates and recent government incentives, such as the Home Renovation Tax Credit, greater RSP deduction limits and the First-Time Homebuyer’s Tax
Credit speak to affordability. Buyers in this area are entering the market that would not have a few years ago, due to these influencing factors.  Entry-level buyers in Newfoundland, Prince Edward Island, New Brunswick and Nova Scotia continue to search for detached bungalows, with the average price
ranging from $157,000 in Charlottetown to $215,667 in Halifax during the first quarter of 2009.

    Quebec

    First-time buyers continue to pursue the dream of home ownership in Montreal, as the number of entrants to the housing market has remained relatively stable. Low interest rates are contributing to increased market entry with 41 per cent of first-time buyers suggesting this is the key
incentive driving the purchase of their first property, followed by 13 per cent who suggest lower housing prices might influence their buying decision. With 47 per cent of new buyers in Quebec planning to settle in urban areas, buyers are planning to invest and live in their first home for ten or more
years. Fifty-six per cent of first-time buyers hope to purchase a property in the $150,000 to $300,000 price range.

    Ontario

    Encouraged by recent government initiatives, home ownership in Ontario is becoming a reality for an increasing number of younger purchasers. Across Ontario, 36 per cent of potential first-time buyers are most likely to purchase property in an urban setting. Condominiums continue to attract first-time buyers in the Greater Toronto Area with urban communities at accessible price points appealing most to market newcomers. In addition to affordability, location is a leading factor dictating condominium appeal.
Neighbourhoods in Toronto’s east and west downtown core are popular with first-time buyers. In Ottawa, affordability continues to drive activity and most first-time buyers are opting to purchase in suburban areas where properties typically cost $50,000 to $75,000 less than in the city centre. Active first-time buyer markets include Orleans, Barrhaven and Kanata.

    Manitoba & Saskatchewan

    Thirty per cent of Prairie buyers planning on purchasing their first home in the next three years will choose a detached bungalow. The second-most popular choice for first-time buyers is condominiums at 21 per cent, followed by detached two-story homes at 15 per cent. In Winnipeg, up-and-coming
neighbourhoods for first-time buyers include River Heights – which has traditionally been attractive for people entering the market – Fraser’s Grove and East / North Caldonin. With a good selection of older bungalows and two story homes, Broders Annex is the hottest neighbourhood for first-time buyers
in Regina.

    Alberta

    Alberta’s urban centres continue to be popular with first-time buyers, who make up nearly a third of home sales in both Calgary and Edmonton. Condominiums and detached bungalows are the most popular choices for first-time buyers in Edmonton, where lower housing prices and low interest rates are the biggest incentives for buyers entering the market for the first time. Popular areas for new buyers include the suburbs, where a new condominium may be within budget, the university area, where many parents are buying for their kids, Allendale and McKernan. In Calgary, new buyers are most interested in inner city condominiums and detached houses in the suburbs, with many seeking new or renovated homes.

    British Columbia

    With home prices either flat or declining in many communities in British Columbia and with interest rates at record lows, first-time buyers are taking advantage of greater affordability, with female buyers leading the trend. Sixty per cent of the buyers getting into BC’s housing market for the first time are women. In British Columbia, 40 per cent of prospective first-time buyers intend to purchase a ‘fixer-upper’ while 80 per cent would take advantage of the Federal Government’s Home Renovation Tax Credit in making upgrades to a home. First-time buyers in Vancouver are favouring condominiums and townhomes, however an increasing number of entry-level buyers are finding affordable detached homes outside the city in the Fraser Valley suburbs.

  The survey portion of the Royal LePage First-Time Homebuyers’ Report was conducted by Pollara from April 29, 2009 to May 8, 2009 among 474 first-time homebuyers in Canada. The online survey was conducted among a randomly-selected sample of 474 adult Canadians who are likely to purchase
their first home in the next 3 years. A probability sample of this size with a 100% response rate would have an estimated margin of error of +/- 4.5 %, 19 times out of 20. The data was statistically weighted to ensure the sample’s regional and age/gender composition reflects the actual Canadian population
according to the most recent Census data.

Author- Lisa Alentejano

CNW News