With the current volatility in the economy, one thing is certain; namely, that real estate in Guelph will remain stable and low interest rates will benefit those who are buying in 2009.

Here are a couple of areas where you can benefit if you’re buying real estate in 2009:

Real Estate Investment Properties

Because of the credit crisis around the world, most financial institutions have tightened the reins as to whom they will give mortgages. This means that people who were qualified to buy a house a year ago may not be able to buy a house now because of the new mortgage lending guidelines. In Guelph, we’ve seen vacancy rates go down, which means there are more people renting and fewer rental options available. If you have good equity built-up in your home you can tap into this equity wisely and buy an investment property, which will have a significant impact on your personal net worth.

Moving to a bigger home

Although you may not get as much as you hoped for if you’re selling your home this year, you’ll find that you can easily make up the difference on the purchase of a home. If you’re making a significant upgrade to your home you will benefit from competitive home prices and good interest rates.

Keep in mind that going directly to a mortgage broker can significantly benefit you. Most mortgage brokers deal with all of the traditional chartered banks and can offer you a comparison of what your own financial institution has to offer you versus other options on the market.

First-time buyer

If you have 5% as a down payment and have good credit, you’re likely in the market to buy a home. However, you don’t want to delay in buying a home. You can never predict the bottom of the market until it has actually taken a turn for the better. As a first-time home buyer you’ll have a lot of choose from but, if you hesitate to buy, you’ll lose out on the really good homes that are priced competitively.

The most important thing to remember about a shifting real estate market is to do your homework.

Look-out for lower fixed-rates in 2009

In the last week, we've seen the rate on five-year fixed rate mortgages come down. If you're renewing your mortgage in the next four to six months, ask your mortgage broker to have a closer look at fixed-rate mortgages.

Remember that fixed-rate mortgages are set based on what's happening in the bond market, not what's occurring with the prime rate. I often have clients call me when the Bank of Canada makes a change in their overnight lending rate, which can impact a financial institutions prime rate. I've even heard people in the industry look at the wrong indicator. As a consumer, ensure that the person who is helping you with your mortgage is looking at the correct indicator.

The average yield of five-year bonds has been coming down and that has had a positive impact on fixed-rate mortgages. For example on December 10th the yield on the five-year bond was 2.2 and on December 11th the yield was 2.15. The bond yields bounce around and they are a good indication of what's to come with fixed rate mortgages.

If we think that historically five-year fixed rate mortgages where based on the five-year bond plus a two percent margin, five-year fixed rate mortgages should be priced at about 4.5%. As of today, many institutions are offering 4.99%.

Stay-tuned for more good news if you're renewing a fixed rate mortgage at the beginning of 2009. Sandra

Mortgages that work like bank accounts can help you save on interest

If you have at least 20% equity in your home and have a couple of mortgages under you belt, you may want to consider having a closer look at a mortgage that works like a bank account. The main benefit of this type of mortgage is that you are able to deposit your pay directly into your mortgage account. What this does is automatically accelerate the payment on your mortgage thereby decreasing the amount of interest that you pay.

It's thinking about your mortgage as a financial tool, rather than a liability.

This type of mortgage works best if you have a family budget. Essentially you would deposit your pay directly into your "mortgage account". You can then set up a separate account that has a pre-set amount that you can use as your family operating account for things such as groceries and other incidentals.

Be wary of mortgages such as the Manulife One mortgage. Many financial planners have access to this mortgage and sell it as a part of their financial planning package. Understand that financial planners are essential in helping you plan your assets, but not necessarily pros when it comes to helping you manage your liabilities. I work in conjunction with several financial planners to help their clients determine the best mortgage that will fit their short- and long-term plans. The Manulife One mortgage is a great tool, but overspending is often a problem with this mortgage. As a mortgage broker we've helped people get out of this mortgage because what they've found after a few years is that they're not paying down the principal on their mortgage and the balance is about the same as when they started.

If you're talking to your financial planner now (I'm sure you are, given the state of the stock market and the economy), you may want to ask them if they could refer you to someone who could show you how to use your mortgage in a way that can benefit you financially.

Or you could contact me directly via e-mail. Sandra

Take a closer look at a Convertible Mortgage

The Bank of Canada will announce a lowering of it's overnight lender rate today, which will have a positive impact on Variable Rate Mortgages (VRMs) if financial institutions lower their own prime rate.

The pricing on VRMs however has not made them as attractive as some fixed-rate mortgages. Until September 2008 most VRMs were priced at the prime rate minus a percentage. So a typical rate of a VRM would be prime minus 0.6%. Now most VRMs are priced at prime plus 1%.

If you haven't considered a convertible mortgage for 2009, you may want to do so. The way a convertible mortgage works is that the lender guarantee a low rate for six months or a year (so you're entering into a one-year fixed rate term) and then you have an opportunity to review the economic and your own personal financial situation in a year and decide to go from there. I think it's worthwhile strategy to consider if you're into variable rate mortgages. That's because we will likely start to see the pricing change on VRMs in a year and you may see the VRM at prime (which is better than prime plus 1%).

Don't hesitate to contact me if you have any further thoughts. Sandra

Chartered banks are reining in their lending to consumers, reputable mortgage brokers continue to have options

Today the Bank of Nova Scotia announced that it is pulling back on lending to consumers as the economy slides into a recession. As a mortgage broker, and being at the front-end of mortgage lending, I've already noticed that RBC and CIBC have done this. At my office we're seeing more and more people walk through our doors that are not being approved for mortgage-financing at their own banking institutions. Perhaps they could have been approved a year ago, but not now because of credit-market tightening, they can't get a mortgage.

As the local Guelph real estate market moves into a buyers market, they'll be some good buys to be had in 2009. Consumers should ensure that they get a full pre-approval, not a pre-qualification from their mortgage broker or banker. If your lending institution hasn't pulled your credit history and asked for preliminary documents on income qualification and downpayment they have done a disservice to you. The reason is that when you do find a home, you'll want to feel confident that you will be approved for a mortgage.

If you have any specific questions about this, please don't hesitate to e-mail me.

Newspapers sell doom and gloom, we could be a light in a dim economy

Today The National Post reported that the US economy has been in a recession for a year and they didn't even know it! Canada is heading into an economic recession as well. How will Guelph and the K/W area fair in the continued slowdown? Likely better than most regions in Ontario if not Canada. Our economy is diversified and is predicted to absorb many of the losses in manufacturing. Although I am cautiously optimistic, we continue to see people buying and selling real estate and coming in to see us about their mortgage financing.