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TD, RBC End 2.99% Mortgage Deals Early

After a crazy month fielding calls about rates and competitive rates from the major banks, they have put a hault on them.  Although the product that were attached with them were limited and badly disclosed to consumers, there are still amazing rates to be had in the mortgage market.  The problem with banks is that they can choose to give one rate today and a different rate tomorrow.  All I can suggest be informed and do your homework and ask questions when shopping for a mortgage.  Its not always about rate its about having a mortgage plan that suits your needs and someone that can show you ways to save money on your mortgage long term!  If your interested in learning more about how to save money on your mortgage , no tricks no catch good ole information for you from me  http://bit.ly/AfD2RR    Here’s the article below;

After briefly offering record-low rates of less than 3% on some of its mortgages in response to its rivals, Canada’s two biggest banks have pulled back their offers prematurely.

Toronto-Dominion Bank, Canada’s second-largest bank, raised its special four-year closed fixed rate mortgage 40 basis points to 3.39%, effective Wednesday, while also introducing a special five-year closed fixed rate mortgage at 4.04%.

The bank also hiked its five-year closed mortgage 10 basis points to 5.24%.

TD had said it would offer the special rates until Feb. 29.

The moves put TD back in line with Royal Bank of Canada, which made the same rate decisions on Monday, coming into effect Wednesday.

RBC had also initially planned to keep its special rates available until Feb. 29

 

The only difference is RBC already had the special five-year closed fixed rate mortgage product, which it increased 10 basis points to 4.04%.

RBC had first cut its rate to 2.99% in January in response to a similar cut from BMO.

Matt Gierasimczuk, a spokesman with RBC, said the bank had to end its special prematurely because of rising funding costs.

“Our long-term funding costs have gone up considerably due to global economic concerns and, while we have held off in passing on these rate changes to our clients, it is now necessary for us to increase this mortgage rate,” he said in an interview with Bloomberg News on Monday.

With household debt-to-income ratios at at historic highs and still on the rise, the Bank of Canada has repeatedly voiced its concerns over the past year that Canadians are living beyond their means.

“We have expressed on numerous occasions our concerns about rising household indebtedness,” senior deputy governor Tiff Macklem said in a question-and-answer session following a speech in Toronto Tuesday. “The simple fact is that consumers are consuming more than they’re earning.”

With files from Reuters and Bloomberg News

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Calculating your mortgage penalty…

Todays market is bringing alot of questions about whether you should consider refinancing your mortgage for a better rate.  There are many different reasons people might re-negotiate their current mortgage.   You may be considering using some of the equity in your home you have built up and use it to buy a rental property,  Make and RRSP contribution or investment, pay off some high interest rate debt or just renegotiate your current rate for a better more competitive rate and lower monthly payment.

Below are some ways in which you can get a good idea on what kind of penalty you may be faced should you want to refinance your current mortgage.  Again these are used simply as a guideline and are in no way exact.   The lending institution you are currently dealing with will give you the exact amounts relating to your specifac situation.

Calculating Payout Penalties & Interest Rate Differentials (IRD)

Many closed mortgages include a clause stating that the payout privilege on the mortgage will be a three-month interest penalty, or interest differential, whichever is greater.

For the calculations below,  using the following scenario:
  • $300,000 remaining on the mortgage
  • 3 years into a 5-year fixed term at 5.5%
  • Today’s interest rate: 3.5%

We’ll just be using the simple interest amount – the actual amount of the penalty could be a little less than the amount quoted in the examples.

Three Month Interest Penalty :

Mortgage Balance X Interest Rate X 3 months

Plugging in the variables above, we would get:

=   $300,000   X   0.055    X   0.25                (5.5% = 0.055,  3/12 = 0.25)

= $4125.00 would be the 3 month interest penalty

Now we have to calculate the interest differential – and that’s where penalties can be quite substantial – especially since interest rates have dropped considerably lately.

Interest Differential Penalty:

Current Mortgage Balance  X Interest Rate Differencial  X Time remaining

=$300,000 X 0.02  X 2

(0.02 = 2% which is the difference from 5.5%-3.5%, and 2 years left in term)

=$12,000.00 would be the Interest Differential Penalty

In the example above, the bank would then use the Interest Differential Penalty since that amount is the greater of the two. Remember that the way banks calculates their penalties sometimes is a mystery to me and can be greater than the figures above so make sure you ask.

Please remember that its not always about RATE,  although important,  there are other important steps you need to take into consideration when considering paying a penalty and shopping for a mortgage.  Let a mortgage expert, put strategic steps and the right product in place that will ultimately make sure its in your best interest to pay a penalty and that your saving money.

I would also invite you to take a look at this link.  I am part of a community of mortgage brokers that created a forum to get our best ideas together a create a simple and educational strategy  showcased here on this website.    A program I implement with all my clients, wherever they are in the mortgage process.  Its a program created in mind to help consumers pay more attention to their mortgage and implement simple easy steps to save thousands of dollars.   When was the last time  your bank phone you up at any time to show you how to save money on your mortgage.  I think i know the answer…..Please click the link and learn something valuable  today then contact me to get started.

http://www.moneyinyourmortgage.com/af/194/lisaalentejano/about

I am a licensed mortgage broker with years of financial experience,  able to help you with your mortgage  any where in Canada and Alberta. Remember my services are free and never should you feel there is any obligation.   So please pick up the phone and contact me directly I would love to hear from you 1-888-819-6536. If your more comfortable with email please feel free to email me your questions at lisa@mortgageplayground.com

Expert, unbiased advice is what i offer to all of my clients.

Author, Lisa Alentejano

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Renewing and refinancing mortgages is saving Canadians big bucks

Canadians saved $2.7-billion in the past year renewing or refinancing their mortgages and the betting money among consumers seems to be that interest rates are not going up any time soon, according to a new survey.

The Canadian Association of Accredited Mortgage Professionals says 37% of Canadians opted for a variable rate mortgage in the last year, pushing up the overall percentage of Canadians floating with prime — and vulnerable to Bank of Canada rate hikes — to 31%.

But the group maintains Canadians are not overexposed to a potential rising rate environment with the survey finding 84% say they could handle a rate increase that boosted their mortgage payments by $200 per month. The average amount of room Canadians say they could afford on top of their current costs is $750 per month.

“Overall, our survey paints a picture of Canadians generally and homeowners in particular as very focused on their finances,” said Jim Murphy, president of CAAMP. “They are planning ahead, aggressively paying down their mortgage in advance of any economic jolt.”

Government policy that cracked down on refinancing rules may also be having an effect on the market. Earlier this year Ottawa tweaked the rules on refinancing, restricting consumers to 85% debt on the value of their home, down from 90%.

CAAMP said Canadians have become conservative about taking equity out of their home with 10% of mortgage holders doing so in the last year, a drop from 40% a year earlier.

“There is no need for policy makers to introduce new measures that would reduce housing activity,” said Mr. Murphy, his comments clearly aimed at suggestions the market needs even more governance and tighter measures such as increased minimum downpayments.

It’s clear Canadians are enjoying the low interest rate environment that CAAMP says lowered the average mortgage rate to 3.92% from 4.22%. The effect is that among the 1.35 million mortgage borrowers who renewed or refinanced in the past year, the savings was $2.7-billion.

“Some people are coming out of 5% plus mortgages and saving a lot of money,” says Rob McLister, editor of Canadian Mortgage Trends. Someone with a $500,000 mortgage going from 5% to 3.29% with 20-year amortization could save almost $40,000 in interest over a five-year term, he says.

Mr. McLister is seeing a growing line of people looking to break a mortgage and willing to pay the interest penalty.

CAAMP said 32% of Canadians reported making some sort of change to their mortgage in the past year with almost two-thirds of those people saying they were refinancing or renewing their mortgages. Among those who renewed, 78% got a rate reduction.

 

Canadians who are looking for that better rate appear ready to shop around with 21% of respondents who renewed or refinanced their mortgages in the last year saying they switched lenders.

Mortgage rates continue to be at or near all-time lows with a flatter yield curve reducing the steep discount on variable rates and making locking in more attractive. The website ratesupermarket.ca says the best variable rate product on the market now is 2.48% while a five-year fixed rate closed mortgage is now as low as 3.19%.

“What you are facing is whether you lock in today and know what my rate will be for the next five years or go variable and gamble,” says Mr. McLister. “There is risk there.”

Sal Guatieri, senior economist with BMO Capital Markets, said the savings are positive because it is putting extra money in the pockets of Canadians. “I almost expect more people to jump into variable given the long-term interest rate environment looks so benign,” says Mr. Guatieri.

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The Mortgage GameWith rates predicted to rise, should you lock in, or take a risk and how much should first timers spend?

With anticipated interest rate increases on the horizon, many homeowners are wondering whether to lock debt such as mortgages and secured lines of credit into a fixed-rate mortgage or stay variable. Even some who are mortgage free are concerned with how rate increases will impact secured lines of credit, the financing of vacation homes and recreational property.

First-time buyers may be particularly concerned with entering the national capital’s expensive real estate market.

What can you afford?

As a first time home buyer, it’s essential to figure out what you can afford. A quick rule of thumb is that your household expenses should not add up to more than 40 per cent of your pre-tax household income. Household expenses include mortgage payments, property taxes, condo fees, utility and heating costs, and any payments on other loans such as car loans, credit card debt and lines of credit.

Probably the first step should be to get a copy of your credit history from Equifax Canada and/or the credit bureau. As this is what lenders will look at, it’s important to review its accuracy.

Then do a household budget, list your assets and liabilities and meet with a bank or mortgage broker to get pre-approved for a mortgage. Try the monthly payments on for size. Let’s assume that your current rent is $1,000 and your anticipated payment as a homeowner is $2,350 for principal, interest, taxes, hydro, etc. Try putting aside the extra $1,350 immediately. Not only will this help you save some extra money, but it will get you in the habit of allocating this level of payment every month. Consider the maintenance costs as well, from normal upkeep to potentially larger expenses like a new roof or furnace.

It’s important to find out how much you can afford before falling in love with a house.

Start saving before you start shopping — the larger the down payment, the lower the financing costs. Although it’s not always possible for first-time home buyers, try to come up with at least a 20-per-cent down payment. Any down payments below this level must be insured with Canada Mortgage and Housing Corporation (CMHC) or Genworth Financial — another expense to factor in.

To assist with your down payment, consider using the Home Buyer’s Plan, which allows you to withdraw up to $25,000 from your RRSP for the purchase of a qualifying home.

Work with a real estate agent familiar with the area you would like to live in, an experienced home inspector and a real estate lawyer to help draft an offer and ensure that title is transferred properly.

Mortgage options

A recent survey indicated that more than 60 per cent of Canadians expect rates to rise over the next 12 months. With this in mind, here are some mortgage strategies to consider.

Fixed rate: If the prospect of rate increases is causing you significant concern, then perhaps you should consider locking in all or some of your debt. With the inflated home equity line of credit rates that consumers have been charged (prime plus 0.5 to one per cent instead of the traditional prime), it’s not that big a jump to a five-year fixed rate, perhaps as little as one per cent more.

If your fixed-rate mortgage is renewing in 2011 and you are interested in another fixed-rate mortgage, it may be worthwhile negotiating with your lender to close out your current mortgage and move into the new lower rate mortgage without penalty. As a strategy to pay off the mortgage sooner, consider increasing the payment and utilize weekly or accelerated bi-weekly payment schedules.

If you would like some level of security but don’t want a fixed rate on all your debt, consider a blend where a portion is at a fixed rate and the balance at a variable rate.

Variable rate: There are many studies that show that despite its volatility, a variable-rate mortgage tends to save more interest in the long term.

Variable-rate mortgages are best for consumers who are financially stable and can financially and emotionally handle the day-to-day fluctuations. One strategy is to benchmark your variable rate payment to that of a five-year, fixed-rate mortgage. Not only will you apply thousands of dollars against the principal and shorten the mortgage term, you will also build a higher potential payment into your budget.

Here are other tips for a variable-rate mortgage:

• Ask for a variable-rate mortgage at below prime. You might even be able to get prime minus 0.75 per cent.

• Negotiate a better rate on your home equity line of credit. Try to get the prime rate or prime plus 0.5 per cent, as opposed to the current prime plus one per cent that you are probably paying.

• Consider moving all of your debt to a combination of these two options.

For consumers who like the variable-rate mortgage option but are concerned about rate increases, ask your financial institution to give you a 120-day rate guarantee at their best discounted five-year rate. Keep the five-year, fixed-rate guarantee as insurance if rates increase significantly and renew it every 120 days until you feel rates have stabilized.

The windsor star

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Bank of Canada holds key rate

Widely predicted by economists, forecasters, banks and average people nationwide, Mark Carney held the rate again.  The BOC has maintained its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

A softening economy both south of the border, and globally, with the addition disconcertion of a full blown financial crisis simmering in Europe was enough  encouragement for Carney to hold steady.

Although commodity prices have slid somewhat recently, they are expected to remain high over the coming months, because of strong global demand, in particular from emerging markets.

The Bank of Canada predicts too, that inflation will stay higher than the optimum 2%: “While underlying inflation is relatively subdued, the Bank expects that high energy prices and changes in provincial indirect taxes will keep total CPI inflation above 3 per cent in the short term. Total CPI inflation is expected to converge with core inflation at 2 per cent by the middle of 2012 as excess supply in the economy is gradually absorbed, labour compensation growth stays modest, productivity recovers and inflation expectations remain well-anchored.”

Although some experts predict that a rate hike could take place over the summer, the vast majority of those in the know pick September as the likely month for the next rate hike to take place.  If that is the case, it will have been a full calendar year since the last rate hike- which took place in September 2010.

There is no question that a continued rate hold is promising news for the housing market- as prospective homebuyers may view this latest move as a temporary reprieve- and move towards action more readily- sensing that this is indeed a time limited offer.

There are concerns though, among many analysts, that affordability is an increasing concern in many regions across the country- and that the combination of rising property prices and higher interest rates may be enough to push home ownership out of reach for some- or land those home owners that are on the fringe in hot water.

There is a sense of ebb and flow in relation to the housing market, and the Canadian economy in general though, suggests the BOC: “The possibility of greater momentum in household borrowing and spending in Canada represents an upside risk to inflation. On the other hand, the persistent strength of the Canadian dollar could create even greater headwinds for the Canadian economy, putting additional downward pressure on inflation through weaker-than-expected net exports and larger declines in import prices.”

For now though, it is business as usual.

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Suprise: Low interest rates seen sticking around

Interest rates have recently being going somewhere unexpected: down.

At their trough last week, the yields on 10-year U.S. Treasuries, the benchmark North American rate, touched 3.11 per cent, the lowest level in six months and more than half a percentage point below their February peak.

Yields on 10-year Government of Canada bonds have fallen, too, and are now virtually identical to their U.S. counterparts.

The sliding rates have surprised many market watchers. With the United States government bumping up against its debt ceiling, inflation ticking upward, and a growing debt crisis in Europe, most expected interest rates to be increasing.

While predicting the future for rates is notoriously difficult, some observers believe that the current low-rate environment may continue for a while. If so, it will mean pain for savers, but good news for borrowers.

A drop in interest rates is equivalent to a sale on the price of money, and corporations are already rushing to take advantage of the easy lending conditions, even if they’re in no immediate need of funds. A case in point is Google Inc., which has $37-billion (U.S.) in cash and marketable securities on its balance sheet, but raised $3-billion from a bond issue last week anyway. Mortgage rates have fallen, too – good news for homeowners looking to refinance.

But lower rates have not turned out so well for some of the market’s savviest players, including Bill Gross, the founder of Pimco, the world’s biggest bond fund. Earlier this year, he sold his U.S. Treasuries, because he thought interest rates were poised to rocket higher, which would drive down prices of bonds.

It’s difficult to fault his logic: only a few months ago, the case for higher interest rates seemed so compelling.

Governments around the world are carrying bloated deficits and massive borrowing needs. In the United States, politicians have yet to agree on any clear path to deficit reduction, despite more than $1-trillion in annual red ink. Meanwhile, oil has been trading consistently around the $100-a-barrel level, thereby lifting inflation, another bond-market negative.

And the U.S. Federal Reserve is no longer putting its thumb on the scale. In less than six weeks, it is going to end its program of quantitative easing, under which it is buying $600-billion in Treasuries to goose the economy. Many bond-market followers believe the Fed’s massive buying binge has been propping up Treasury prices and keeping yields artificially low.

So what has been pushing rates lower in recent months?

A weaker-than-expected recovery is the major culprit. “The global economy, and the U.S. economy in particular, is not on quite as solid a recovery track as people were imagining in the very optimistic days of six months or so ago,” observes Peter Buchanan, senior economist at CIBC World Markets.

A slew of recent statistics underlines that weakness, ranging from the poor state of U.S. home sales to the slowing pace of U.S. manufacturing growth. Meanwhile, the Japanese economy, the world’s third-largest, is shrinking and creating a further drag on global commerce, although few foresee a double-dip recession.

“We’re looking ahead toward a bit of a cooling in economic growth,” said Paul Dales, senior U.S. economist at Capital Economics, who foresees output in the U.S. rising about 2 per cent this year.

That level of growth won’t be “anything to celebrate but it’s nothing like the recession we saw previously,” he said.

Another factor driving rates lower has been the early May rout in commodities, which dampened some of the worry on the inflation front. In addition, the recent sluggish performance of the stock market suggests that investors are getting nervous and growing more willing to buy super-safe government bonds.

Mr. Dales believes the current trends have room to run, and that rates will surprise to the downside.

He predicts U.S. 10-year Treasury yields could slip to 2.5 per cent in the low-growth, less inflation-spooked environment he foresees ahead.

If growth continues to be slow, lower rates might be staying around for a while.

Mr. Buchanan says the most likely scenario, given the poorer economic outlook, is for the Fed to hold off on raising rates until 2013. He believes the yield on Treasuries will rise gradually, instead of falling further, getting back to 3.4 per cent by the end of this year and to 4 per cent by the end of 2012.

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Fixed rate mortgages find few friends..

I’ve been doing this job long enough to remember when those rates looked quite competitive. By today’s standards, they’re too high to get much support at all from a panel of six mortgage brokers I surveyed by e-mail on TD’s deal.

They’re big fans of variable-rate mortgages, which today can be had for as little as 2.15 to 2.30 per cent. You ride in the front car of the interest rate roller coaster with these mortgages, though. Every time the Bank of Canada sets its rate benchmark higher, borrowing costs on variable rate mortgages rise as well.

The risk of rising rates is hard to quantify right now because of global economic cross-currents such as soaring commodity prices, economic troubles in Europe, what’s happening in Japan and an improving but still damaged U.S. economy. Our economy is on the upswing, and yet the Bank of Canada remains tentative on rates. It bumped up its overnight rate three times last summer by 0.25 percentage points each and hasn’t made a move since.

The bank has six more opportunities to raise rates this year, starting on April 12. It’s tough to be sure whether rates will increase in the rest of 2011, but you can be dead certain that over the next seven years, they’ll rise to levels that are much higher than they are now.

Seven- and 10-year mortgages are an extreme, and thus infrequently used, way of insuring yourself against a higher rate world. A survey released late last year by the Canadian Association of Accredited Mortgage Professionals showed just 7 per cent of mortgage holders had terms of five to 10 years and 1 per cent had terms longer than 10 years.

The CAAMP survey also found that roughly two-thirds of people have fixed-rate mortgages, about 30 per cent have variable-rate mortgages and the rest have hybrids with variable and fixed components. Clearly, Canadians like the idea of interest rate security. But seven years of it? Not so much.

“We have a small number of customers going into the odd terms, which are two, four, seven and 10 years,” said Chris Wisniewski, associate vice-president of real estate secured lending at TD Canada Trust. “We haven’t seen a significant rise in the last little while, but there’s more and more concern about the potential for rising interest rates.”

Several of the mortgage brokers surveyed for this column were strongly in favour of variable mortgages as opposed to fixed-rate mortgages of any term. “In my many years of experience, going fixed generally has not worked out well for my clients,” wrote Peter Majthenyi of Mortgage Architects in Toronto.

Vancouver mortgage broker Kim Arnold said she currently can get a variable-rate mortgage for clients at prime minus 0.85 percentage points or 2.15 per cent. For people who want fixed rates, she can arrange a three-year term at 3.42 per cent or a five-year term at 3.79 per cent.

The most aggressive stance against the seven-year mortgage came from veteran mortgage broker Vince Gaetano of Monster Mortgage. “It’s an ill-advised idea [for the consumer] and money maker for TD Canada Trust,” he wrote in his survey response.

Mr. Gaetano said the extra cost of locking in for seven years isn’t worth it. His preferred approach for people who want a locked-in mortgage is to take a five-year term, but make payments as if the rate was the 4.79 per cent charged on the seven-year term.

“It is important that Canadian consumers understand the need to accelerate the repayment of their debt rather than worry about where rates are going,” he wrote.

One mortgage broker who offers some support for the seven-year mortgage is Jake Abramowicz, who works mainly with first-time buyers in Toronto. “I think it would be a good idea if someone taking a fixed [mortgage] would extend for longer,” he wrote. “Problem is, most of my first-time buyers don’t see themselves in their places for seven years. The great majority, being between 25 to 40 years old, want to keep moving up the property ladder.”

Seven- and 10-year mortgages may be fringe products, but they do get you thinking about where rates will go in the next several years. Some people will decide to pay a higher rate today so they can tune out whatever’s ahead, and who are we to fault them?

Variable rules

Two mortgage brokers give their takes on the down side of fixed-rate mortgages:

David Larock of Integrated Mortgage Planners: “I have long thought that the five-year fixed-rate mortgage was overrated because you’re paying a premium for interest-rate protection, yet not really getting as much as you think. For example, if you take a five-year fixed today, and rates stay low for 2½ years and then start taking off, you have paid for five years’ worth of protection and, in the end, you’re only really getting a benefit for half of that time period.”

John Cocomile of Greedy Mortgage: “In theory, rates are at historical lows and they will trend up to where they’ve been historically, but not for a long time. The mess in the U.S. is going to keep rates low for the next 18 months to two years, likely longer. Most people in longer-term fixed-rate mortgages end up paying a big penalty, anyway.”

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