Renew With Confidence!

As a mortgage broker, I see clients with all types of situations and all types of needs. There is no one size fits all in the mortgage and financing industry. If you are being told this, it comes from a place of trying to make a sale and make things simple so things can proceed quickly. Time is money in the banking industry.

 

The reality is that people have different habits, values, and needs. It takes time to discuss, investigate and find the appropriate solutions. It takes time, and that is something that is rarely given in our industry.

 

Now what is considered acceptable in one situation is highly suspect in another. Let me give you an example. John and Mary (not their real names), needed to renew their mortgage with an outstanding balance of $180,000.00, but had consumer debt in the amount of $30,000.00. Their incomes were over the national average, and they have a good retirement nest egg. John is three years away from retiring at age 65 from his 30 year job that provides him with a pension income upon retirement. Mary is 61 and already retired. She collects early CPP, receiving $680.00 per month, but she will not be collecting any company pension plan.
What would you offer to these clients?
A standard suggestion is to either simply renew the mortgage for the common five years fixed term. In some cases a clerk at the bank, might offer them a variable-rate term. If John and Mary ask enough questions, they might investigate a shorter fixed term instead, if they are clear about their goals. When they discover that they will have to pay legal fees and appraisal fees to add the consumer debt into the mortgage, their decision to do so will be based on if they have the cash available to pay that, and if they see the value in spending the money.
However, there are several other possible solutions – like a reverse mortgage, taking a shorter fixed term for one to two years, or taking a secured Line of Credit in second position. The correct answer is not easily discernable because there is a lot of missing information in the above explanation of their situation.
We should have to know how comfortable they are with their current budget. What are their future plans in the short, medium and long-term? Do they work with a financial advisor? Do they have life insurance, disability insurance, critical life insurance coverage? How much longer do they intend to stay in their current home, and what kind of lifestyle are they planning on in retirement. Are they looking for the lowest-cost mortgage options or increasing their cash flow instead? Do they have a contingency plan if John retires earlier than planned for any reason?
We can see that there is much more information missing than we had, to base our decision on. Any one of the options might be the correct one for John and Mary, but we won’t know that until a thorough, interview reveals their situation and their financial and lifestyle goals. The last thing I want to do as their mortgage broker is to renew a mortgage without ensuring that it fits the client’s short and long-term plans. Your banker should be taking the time to assess the same things. The difference is, that as a Mortgage Broker, we have a lot more options that your banker simple cannot offer.

 

However, how interested are John and Mary in spending an hour or two in a thorough mortgage review and renewal process in also a factor? A mortgage renewal at your bank is designed to take as little as a signature, maybe a few questions, and you are off to more exciting things.

 

A better process is, the next time your mortgage comes up for renewal, decide to consult with an expert early. This way, you can ensure that you make the right decision and obtain the best option the market has to offer you, potentially saving you thousands of dollars over the life of your mortgage. Mortgages are not simple, but they can be easily understood, and the optimal option obtained, if you consult with a mortgage expert who works in your foremost interests.

This Weeks Bottom Line

Here is the economic update – for this week…

Weekly Bottom Line – March 18, 2016

Highlights:

United States

• A dovish Fed gave support to financial markets this week. While leaving rates unchanged, the Fed’s state­ment noted the downside risks to growth from global economic and financial developments.

•     Just as important, the Fed’s dot projections moved the expected pace of rate hikes down significantly, with the median estimate falling 50 basis points to just 0.9% at the end of 2016, implying two rate hikes instead of four this year.

• The Fed also moved down its estimate of the longer-run fed funds rate to 3.25% (from 3.5%) previously, helping to put downward pressure on long-term bond yields.

 

Canada

• Data for this week was unambiguously positive, improving the outlook for near-term economic growth.

• January retail sales rebounded from a sharp decline in December, spurred by strong new car sales. This boosts our outlook for household consumption in the first quarter.

• Manufacturing shipments for January were robust, and volumes have now recovered from their 2015 slump.

• We anticipate that next week’s budget will include revenue and expenditure estimates resulting in annual deficits of $30 billion in each of the next five years. Overall, we expect that the extra stimulus spending will add 0.1%   and 0.3% to 2016 and 2017 growth respectively, and we will be finalizing these estimates in our quarterly economic forecast update next week.

Bank Of Canada and Interest Rates

Here are some key notes from the Bank of Canada:

“Although downside risks remain, the Bank still expects global growth to strengthen this year and next. Recent data indicate that the U.S. expansion remains broadly on track.”

“At the same time, the low level of oil prices will continue to dampen growth in Canada and other energy-producing countries.”

While we are still enjoying these low interest rates this is a perfect time to assess your debt situation and take advantage of repositioning your finances.  Often consumers are scared away because of the legal and appraisal costs involved.

However, in many cases this is a very minor when compared to the interest charges on our consumer debt. A quick assessment with a mortgage strategist can reveal if paying a small fee has value in achieving a stronger financial foundation.

A stronger financial foundation will bode well when those interest rates finally start rising to normal levels again.

Reverse Mortgages Are Better Than Ever

There are a lot of myths and misinformation out there about Reverse Mortgages or “CHIPS,” but since obtaining my Certified Reverse Mortgage Expert designation, I’ve found it to be a tremendous option for the correct situations.

A recent client was told by their banker, “Sorry, you will have to sell your house!” Luckily they didn’t give in, but instead they continued to look for someone to  help them. In their particular situation, not only could they stay living in the family home they loved, but they were also able to defer their property taxes. This allowed them to take care of some health needs and eliminate the pressure on their monthly fixed income.

If you are approaching retirement, don’t wait until you have a financial crisis to look at your options. Get educated on your options now, before retiring, so that you can plan for a happy, stress-free “retirement.” Live the life you want on your terms.

To book a Credit assessment and Mortgage planning consultation call me 604-882-3643. This complimentary service can save you thousand of dollars down the road, and provide some peace of mind and proper planning.

 

Three Myths Of Mortgage Renewals

Check your options before you commit.

“Ah – Where did the time go? Five years have just flown by, and it’s time to renew my mortgage term again. My nice banker has made it so easy, just sign the forms they mailed me,…” but wait! Did you know that’s the biggest mistake you can make? If your mortgage is coming up for renewal in the next 12 months – read on.

1. Renewing early is a good thing – False!

You do not need to renew early. Banks will normally call 6 months before the renewal date and offer to ” renew early, and we will waive the penalty and give you the best rate.” However, the best strategy is to research their competitors and secure a rate hold.

Find out what the competition offers first before you sign. This is what mortgage brokers do, we watch the market for you and then secure better options that may be offered during the remaining last 4 months of your term. If you have already renewed early at your bank then you lose out.

For example, we can lock in a rate at 3.09% today. If rates go up before your renewal date, we will use the 3.09%. If rates decrease, we secure the lower rate for you instead.

2. Renewal Mail Outs are my best option – No, don’t ever sign this!

Banks will send out renewal letters for your convenience. Sometimes they will offer you rates .5% higher then what they are currently offering new clients.

Banks know that a certain percentage of people will just sign this document without question. A .5% difference over 5 years, is a significant profit for a bank. On a $400,000 mortgage, that’s $10,000 you lost and the bank gained.

3. The last-second renewal letter – Don’t fall for the “It’s too late and now you have no options” ploy.

Your bank will contact you a week or two before your renewal date. If you are unprepared, you may agree to whatever they offer you. Never agree! Find out what your best options are before you sign anything because it’s not too late!

HOW TO AVOID THE ABOVE THREE SITUATIONS:

If you want to save money you need to be pro-active. Email me your renewal date at winonareinsma@gmail.com. I will get in touch with you 6 months before your renewal and build a strategy with you. Worse case scenario, if I can’t find a better mortgage option, I will negotiate directly with your current bank to ensure you receive their best offer.

It’s your money, so take control and find out how to keep more of it.

Get Out of Debt with a Plan

We are reminded daily about Canadian’s rising debts, now reported to be over $1.63 for every dollar earned. Bank of Canada has been stressing their concerns about the rising debt levels at every opportunity, as they warn us that interest rates will eventually rise.

Credit cards are so common today, that many of us don’t even realize when we are heading into financial dangers from the pressure credit card debts put on our budgets. Are you relying on your credit cards to get through the month? Do you worry or cringe when you are at the cashier, watching the bill add up and wonder if you are at your credit limit yet?

For most of us, our debt issues are not much fun to think about, but the worry, stress and stain on our lives and relationships make it a necessity, that is if we want to weather the eventual mortgage interest rate hikes. Oops, you never thought of that? Have you sat down and calculated what your mortgage payment would be if your interest rate goes up 1 or 2 percent at the end of your mortgage term?

Many of us have relied on a debt consolidation or equity-take-outs to set our budgeting straight either at the end of the term or even in the middle of it. While most people have heard about tightening mortgage rules, the realization of how this impacts you directly usually doesn’t happen until you apply for new financing. The new mortgage regulations, along with the uncertainty in housing prices (are they going up, are they going down?), makes mortgage financing much more difficult to obtain than it was earlier this year.

While interest rates have not increased, loan to value, debt ratios, and beacon score requirements have changed, and for some that change is dramatic.  If you are counting on a mortgage refinance to get your debt into control, you might be surprised with new conditions that add to your costs, or being told to seek a “B” lenders assistance instead. “B” lenders are willing to provide financing to those declined by the “A” side, but at a premium cost. In the current market however, “B” lenders and private lenders, including MICs, are decidedly more cautious as well.

There are steps to set your budget and credit card spending on the right path so that you you won’t be faced with any of these problems. It will take time and perseverance.  You have to decide if you want to continue to bear the strain of debt problems, or if self-discipline paving the road to firm financial ground is worth attaining. It really is in your control, you just have to take action.

The first step is to schedule a meeting time to review the household budget and debt situation with everyone involved. Ask yourself honestly if your habits are putting you further and further into debt. There are many programs and internet sources, such as Ways to Reduce Your Debt that can help if you want to change your situation. The cycle of increasing debt stops the minute you decide to do something about it.

Assess your situation honestly, design a plan, and then live that plan one hundred percent. Getting out of debt is worth it, short term pain for long term financial freedom. It’s worth it!

Canadian Real Estate Market

In its latest policy announcement the Bank of Canada continued to forecast a soft landing for Canadian real estate. That projection received some support from the latest CMHC figures for housing starts. The agency says the pace of construction slowed by about 6,000 units in November falling to an adjusted, annualized rate of about 192,000, down from 198,000 in October.

Household formation in Canada stands at about 180,000 annually. This appears to contrast with the latest building permit numbers which showed the value of permits issued in October climbed a significant 7.4% over September. (September’s numbers were revised upward to a 4.1% gain, from the 1.7% increase initially reported.) Despite the increase, though, October’s numbers are 6.2% below what they were a year ago.

Housing Market Outlook Vancouver and Abbotsford

Housing Market Outlook Vancouver and Abbotsford

An interesting read on CMHC’s Housing Market Outlook for Abbotsford and Vancouver in 2014. If you don’t want to read a lot of detail and just want the stats, scroll down to page 12 and beyond.

CMHC also says “mortgage rates are expected to rise gradually over the forecast horizon but remain near historical low levels”. These are fixed rates they’re speaking of and are separate from the Prime rate which affects variable rate mortgages and Lines Of Credit.

RRSP and Tax Deadlines for 2013

As we approach the end of 2013, there are several deadlines to keep in mind:

• Age 71 RRSP Conversion. If you turned 71 in 2013, you have until December 31 to convert your RRSP to a retirement income vehicle, such as a Registered Retirement Income Fund (RRIF).
• Tax-Loss Selling Deadline. The deadline to sell securities to realize a capital gain or capital loss on a Canadian exchange for the 2013 tax year is December 24, 2013. The deadline for selling securities on a U.S. exchange is December 26, 2013.
• RRSP Contribution Deadline. The deadline to contribute to your RRSP for the 2013 tax year is March 3, 2014.

The Lowest Mortgage Interest Rate Can Be Costly

Comparing mortgage interest rates is really very simple and something anyone can do. Unfortunately, basing your decision on interest rates alone can be a very expensive way to choose a mortgage.

So how do you choose the best mortgage? Here are three options.

First, you can do all the research yourself. You need to learn about how mortgage packages really differ in how they are registered, what fees are applied throughout the life of that mortgage, what privileges are included, and how penalties are calculated. Unfortunately, this information is not found on their websites.

Be prepared to “go door-to-door” to interview each lender, and give yourself lots of time because there are as many as 50 different lending institutions. Also, rules and products change regularly, so you need to follow up before your final decision is made.

Second, you can just go to your regular bank, the one where you have your accounts, RSPs or any other number of products they sell. They only have a limited number of mortgage options, which makes it an easy decision. However, how will you know if it’s really your best option?

The third option is to see an independent mortgage consultant that works only in your best interest. They will do all the research, oversee the process, and help you ensure that your mortgage is part of your overall financial wellness plan.

Here’s an example of how we helped a recent client who wanted the lowest variable rate mortgage possible.  There were three options in the marketplace, each with a different discount rate (variable mortgages are based on a prime and currently offering a discount) so we presented the choice of  2.4%, 2.5% and 2.6%? Which would you choose?

Most people would choose 2.4% if you based it solely on the rate, right? However, while this was the cheapest rate, it also came with a 3% prepayment penalty clause that is calculated on the mortgage balance! In this situation, for a mere $1200.00 interest payment difference between the 3 options over the next 5 years (based on today’s rate), the 3% penalty could cost them an extra $12,000.00 or more penalty than the other two mortgage options, which had entirely different prepayment penalties.

Most people think that nothing will change over the next five years and therefore they won’t be paying the penalty anyway. The statistics however, show that the odds are in the lenders favor, as unexpected events cause many people to break their terms early and then have to suffer the consequences of paying the extra thousands of dollars over and above their interest rate.

So, next time you are shopping for a mortgage, make sure that you are well prepared with the right questions to ask. If you need help, contact me for the 4 questions you should be asking every lender before asking for their interest rates. It can save you from making a very costly mortgage mistake.