Monday, November 21, 2011

What's in store for Guelph's housing market in 2012?

As I’m doing my own business planning for 2012, many should also consider what their housing prospects will be for 2012. If you’re thinking about buying your first house or moving to another home, understanding the forecast and the local housing will help you be better prepared.


Thanks to Canada Market and Housing Corporation who has collected housing data for decades in Canada, they have a library of historical information and have a good handle on what may happen in 2012.

A few highlights for Guelph housing in 2012:

2012 will be your opportunity if you do not own a home

Price appreciation in Guelph on average is modest for 2011. That’s great news for individuals who currently do not own a home. With consistently low mortgage rates predicted into 2012, if you’re in the market to buy your first home, it will be an affordable purchase.

I should also mention that the mortgage industry is riddled with bankers and mortgage brokers who have varying levels of experience and motives. If you’re a first-time buyer the best way to find a good mortgage profession to get your mortgage pre-approval is to go through a recommendation or source a company that has an established business and reputation. Remember that a true mortgage broker (one who doesn’t work for the major banks) has several options from many institutions available so that you get the best combination of rates and features to help you achieve your budget goals.

Own a house and moving up? Don’t be surprised at your home’s value

Net appreciation growth in home values in 2011 is expected to be modest in Guelph and throughout 2012. The final appreciation growth number for 2011 in Guelph will be approximately 2%, and less than 1% in 2012.

Guelph will continue to be in an overall balanced home market, which means that there are an equal number of buyers and sellers. This translates into little upward pressure on home prices. If you are moving up into the >$500,000 price range this is certainly an opportunity for you if you’ve done a good job at paying down your existing mortgage.

More to come...stay tuned!

Saturday, October 22, 2011

Be your best, reach your goals...

I'm just returning from The Sales Mastery Conference in Palm Desert, California. The Duncan Group is a company that is commited to helping mortgage professionals be the best that they can be.

Below is a list of some key ideas that will not only help mortgage professionals but anyone who's interested in being their best! I've summarized some key thoughts:

- Own the clock: do one thing at a time, don't multi-task. Do fewer things, more often and get better at them.

- Who do I need to become to achieve the goals that I want and the people that I want to attract?

- Become an expert for my clients and my strategic business partners.

- Think BIG don't be fearful of disrupting the status quo - operate at level 10.

- Seek out failure and embrace it.

- Often the thing that you don't want to do the most, is the thing you should be doing the most.

- Little changes over time create mammoth impacts in the future.

Monday, September 19, 2011

Divorced/Separated: Avoid going back to renting

When a couple decides to separate, normally their largest asset is their matrimonial home. I have worked with several lawyers who see the value of consulting an experienced mortgage broker for their clients. Why not call a mortgage broker directly and have them review your options, even if your mortgage is through a chartered bank? Mortgage brokers can be a good, unbiased source of information that will help you be financially objective in a time which is often emotional.


If your budget will allow, attempt to make your next move into a house that you purchase instead of resorting to renting. It can be difficult once you begin renting to get back into home ownership. Rent is expensive in Guelph, and if you have a family, you may find yourself paying more money towards rent, that could otherwise go to paying down a mortgage.

Here are some key things to consider if you’re going through a separation or divorce when reviewing how to divide the asset of your matrimonial home:

Understand how much equity you have in the matrimonial home

Getting pre-approved is always a good first step even if you’ve owned a home before your separation. Work with your mortgage professional to help you determine home much equity you have when this asset is divided. In many instances if you’ve owned your home for 10 years, and the equity in your house is divided – after paying out consumer debts there may only be 5 to 10 percent left over to put as a down payment on your next house. I often find that people over-estimate how much equity they actually have. Ensure that you consider the penalty to discharge the current mortgage on your matrimonial home including the legal and the land-transfer tax on your next purchase (in the case you are selling the matrimonial home).

Child support can be used if there is a 6 month history

Explain to your mortgage professional what child support you’re entitled to receive as noted in your separation agreement. If the separation is recent, you may not be able to use child support as a supplement to your income to help you qualify for a new mortgage. That’s because most financial institutions require a six-month history of the child support payments. However, if you are required to pay child support, this will immediately count as a liability which will limit the new amount you can qualify for in a mortgage.

Mortgage brokers have more options than your bank

Don’t be discouraged if you initially went to your own bank and they told you could be pre-approved for a mortgage significantly less than what your own living expectations are. Banks aren’t flexible in their mortgage-lending criteria. True mortgage brokers who have access to mortgage products outside of chartered banks can give you options. Your mortgage broker can help you work through scenarios because they have good, cost-effective options that will help you buy your next home after a separation or divorce.

Friday, July 15, 2011

If you want to pay off your mortgage faster – read this article

If you got a new mortgage before 2008, you may have a mortgage that has an extended amortization of 35 or 40 years. In 2008, many first-time home buyers where keen to choose longer amortizations to keep monthly mortgage payments low. Although longer amortizations can keep mortgage payments affordable, it also means that it takes longer to pay down the principal on the mortgage.


I normally recommend going with as short of an amortization as your budget can afford. There is considerable interest cost savings on shorter amortizations.

Here are a few tips to help you pay down your mortgage faster…

Know the difference between bi-weekly and bi-weekly accelerated payments

There is a difference between bi-weekly and bi-weekly accelerated payments. The difference lies in how the payments are calculated, which make them accelerated. Here is an example of a $200,000 at 4% based on a 25 year amortization. Look at the savings!

                         Principal        Interest      Total payment   Real amortization       Balance 5 years

Bi-weekly            $180.24       $304.89       $485.13              25 years                        $174,107.21

Bi-weekly            $221.1        $304.89        $526.03               21 years, 11 mnths        $168,231.61
Accelerated

 I’ve have clients bring their mortgage statements to my office looking for mortgage advice and had no idea that they were not paying accelerated payments, which was their originally request.

Set lifestyle priorities that include making extra payments on your mortgage

I did a mortgage earlier this year for a client who became angry that the option of a bi-weekly payment was not available to her, instead of only a bi-weekly accelerated payment. The difference in payment between the two options was about $40 per payment higher on the accelerated option. The bi-weekly accelerated payments on a 30 year amortization also allowed her to shave three years off of her mortgage. When I asked why the accelerated option was problematic, she stated that she had a certain material lifestyle she wanted to lead and that extra money would help with that lifestyle.

In times of economic and financial instability, setting priorities that include debt pay down, such as mortgage principal pay down is crucial. Your home is virtually the most valuable financial asset you have. By paying down your mortgage it will place you in a better financial position, now and in the future.

Saturday, June 18, 2011

No problem? Get it in writing...

This past week I've worked with two separate clients and in each case things where tight with their mortgage approvals. And both of these borrowers owned homes and where not first time home buyers.

In both cases each client was told that their financing would be "no problem" but weren't given anything in writing.  In both cases neither client understood how much equity they had available in their house.  This is always the first step in looking at home-financing, especially if you already own a house. 

Here's one scenario:

These borrowers where selling their home for $275,000 and wanted to move up to a $420,000 house.  They had two good incomes but last year they refinanced their home to consolidate debt so their current mortgage on their home was about $225,000.  When I took into account the real estate commission plus the legal and land transfer tax on the purchase of their new home of $420,000 there was barely 5% to put down on the purchase of $420,000. 

Up until now they had worked with their own bank and I recommended that they get something in writing from their bank regarding their pre-approval.  Their banker had previously recommended paying out some more debt from the equity in their home, but it was obvious through the first calculations that there would not be enough equity to pay out any debt.

When they finally did get an answer from their banker the bank told them they couldn't guarantee the pre-approval because "CMHC doesn't do pre-approvals".  This is absolutely true, but CMHC (the company that insures mortgages against default for banks - this is normally required if you have less than 20% as a down payment), their guidelines are clear.  They're even posted on the CMHC web site!  It was obvious after pulling their credit history that they wouldn't fall under some of the requirements of CMHC. Nonetheless through a little maneuvering I was able to get them a pre-approval, but this was not a mortgage pre-approval that was "no problem".

The moral of the story - work with someone who has the experience to help you.  Get it in writing.

Friday, June 3, 2011

Should you buy a house even if you have consumer debt or student loans to pay?

In the last week, I've see three clients in similar situations. All three clients had good paying jobs, where in their late 30's and had over $20,000 of consumer debt outside of traditional car loans. Should they be considering buying a home? Here's my opinion...if you have any comments on this topic, please share them on my blog!

A home is one of the only appreciating assets you'll own. The trouble with these particular clients is that they have kept waiting to pay off their debt and are now almost 40 years old and still do not own a home. My recommendation would be to review their family budget with them and find a monthly mortgage payment that will help them get into a house, while also developing a plan to pay down their debt.

If they had savings to put as a down payment they could also look at paying their debt down with their savings and getting a cashback mortgage, which gives them the money for the down payment. Remember that you can withdraw up to $25,000 from an RRSP the year you buy a home under the RRSP Home Buyer's Plan.  That money does not need to go to the down payment, it could go to paying off debt.  Now that's a good idea!

Monday, May 30, 2011

Will your variable rate mortgage increase in rate tomorrow?

It's safe to say that the Bank of Canada (BofC) will eventually lift interest rates. But what's less clear is when. We can expect that the BofC will maintain the current interest rates, with no rise in tomorrow's interest rate announcement.  That means if you have a Variable Rate Mortgage (VRM), your rate will remain the same.

If you own a house in Guelph or the Tri-City area you know that our housing market has been strong and steady.  On the mortgage front, one area of concern is the mortgages choices I'm seeing. A VRM is a great option if you're looking at paying down your mortgage in the next few years. Accelerating the payments while rates are low will help you pay down your mortgage principal.  If however you're choosing a VRM just to keep the payments low to help with your budget - then you may want to reconsider a fixed-rate mortgage.

Your mortgage broker can get you a five-year fixed rate mortgage now for under 4% which is a great option.

Tuesday, April 19, 2011

Inflation is up - what about my Varible Rate Mortgage?

With the price of oil affecting other items in the consumer price index, can we expect the overnight lending rate to rise on May 31?  The overnight lending rate has an impact on the a bank's prime rate, directly effecting variable rate mortgages.

If you have a variable rate mortgage - don't panic!  If the bank of Canada raises rates at the end of May, the benefit of locking into a fixed-rate mortgage may not be the best choice. Remember that the economic indicators that affect the prime rate, don't directly affect fixed-rate mortgages.  Over the last week, we've actually seen a slight decrease in the bond market, which impacts fixed rate mortgages.

Stay-tuned to find out if you should fix your mortgage or keep it floating with the prime rate.

Thursday, April 14, 2011

65 and I still have a mortgage

If you own a home in Guelph, often a goal is to have your mortgage paid-off by the time they reach 60.  What I'm noticing in my mortgage practice is more and more people over the age of 55 require the assistance of a mortgage agent because they haven't yet paid their mortgage off. 

There are a few consistent reasons that have come up recently on why a mortgage balance still exists (even after the age of 60):

- overspending on grandchildren (not wanting to let their own children know that they are having problems making ends meet on a retirement income, so the overspending happens on credit cards to "treat" grandchildren)

- unexpected job loss (given we're still in a recession, many older employees have been "let go" close to retirement.  The unexpected job loss and the reduced income means a change in lifestyle, which is often a difficult transition)

If you're in this situation and are wondering what your next course of action is...please don't hesitate to contact me directly.  I'll also be writing a few articles on this topic over the next week.

Thursday, April 7, 2011

Using your home’s equity to “get ahead”

If you’re in your 40’s or 50’s and have looked at your investments and thought, “How can I generate more revenue?” – this article is for you. Using the equity in your home for good investments can help you spring ahead financially.


This can be a smart financial move, but you need to work with individuals who are experts. Seek the advice of a professional who has first-hand experience on using home equity as a financial tool. I always recommend getting a referral from someone you know and trust.

There are specialized mortgages available that allow you to easily access the equity in your home for cash investments or real estate. They allow you to convert equity in your home into money and then use that money to invest.

What kind of investments?

Whenever you use your home’s equity to invest in non-RRSP investments or real estate, that portion of your mortgage becomes a tax deduction. Often called “leveraging”, you’re essentially using someone else’s money to make money for yourself. By having a plan of action and a goal in mind, leveraging can help you increase your net worth and help you become financially-free sooner.

I’ve had many clients come to me who had good net worth and ask, “How can I purchase an investment property when all my money is tied up in RRSP’s?”. Often the best place to look is your own home. If you’ve done a good job at paying down the mortgage on your principal residence there is equity that you can access. Financial institutions will allow you to easily access the equity in your home to 80% of the appraised value. This is normally done through a secured-line-of-credit (SLOC). However, not all secured-lines are the same.

What features should I be looking for?

There are certain nuances in the repayment terms and how the interest is charged that you can be a benefit or detriment. An example of a feature that benefits you financially on a SLOC would include having a bank account tied directly to the secured line. When using the SLOC for real estate investing, you can deposit your rent cheques directly into the account, thus making your payment on the SLOC.

Another important feature may be having third-party access to the SLOC. In this case if you’re using your money to buy dividend-paying investments, then the dividends can go directly into paying the interest on the SLOC.

There’s more to mortgages and SLOC’s that can help you become financially free sooner. Ask the advice of someone who has first -hand experience and that you know and trust.

Tuesday, March 15, 2011

New mortgage rules in place for March 18, 2011

New mortgage-lending rules will be in place on March 18, 2011.

These new changes are two-fold:
1.       People looking to buy a home with less than a 20% down payment will be allowed to have a maximum amortization of 30 years (down from 35 years).  How this impacts first-time home buyers is that it will decrease their borrowing capacity by about $25,000 in purchase price.  This is less than 5% of the total market for first-time home buyers.
2.       People looking to refinance their mortgage to consolidate dept will have the options to refinance to 85% of the value of their home (down from 90%).

How will this impact you personally if you’re looking for your first home?
If you’re looking for your first home, you may need to consider a lesser value home.  In Guelph, the majority of first-time buyers purchase in the price range of less than $250,000.  I find the majority of first-time homebuyers understand the maximum amount of mortgage they can be approved for, and how that differs from what their budget can manage.  Most first-time buyers who I see don’t want to be house poor. 

How will it impact you personally if you’re carrying high-interest credit debt you’d like to consolidate?
If you’re looking to consolidate debt into your mortgage, you will be limited to how much debt can be wrapped into your mortgage.  Once you’ve looked at better ways to manage your debt, your mortgage broker can also show you how to set up a budget to help pay down the debt that you could not consolidate.

How will these changes impact the market?
Remember, the media often publishes stories to sell papers and create buzz. For instance, there have been some recent reports that the housing market will tumble by 25 percent.  There have also been reports that say the exact opposite.  With so many opposing views, what will actually happen?  Locally, the Guelph market has been protected by the downturn in the housing market that some other Canadian cities have experienced.  On average, price appreciation in Guelph will plateau compared to previous years.  When speaking to realtors, they note that we are in a “seller’s market”, which means that there is more buyer demand than houses available to purchase. On the other hand, buyers are being more picky about prices and the types of home they are buying.

Friday, February 4, 2011

Look at getting your pre-approval rate "locked-in" as fixed-rates jump up

The Bond Market affects the pricing on fixed-rate mortgages.  With unemployment figures holding steading, and jobs being added to the economy, bond yields are up and are putting pressure to mortgage lenders to move fixed-rates up.

If you're thinking about buying or selling a home in the next 4 months, one of the best ways to ensure that you'll get a five-year fixed rate below 4%, is to reset your pre-approval rate. You may also want to consider having a second opinion on your pre-approval considering that there will be major changes occurring to mortgage-lending starting on March 18th.

Not only does a mortgage pre-approval help you secure an interest rate for 120 days (4 months), it also can ensure that when you do find a house that there will be no issues with solidifying the mortgage-financing.  Ensure that your mortgage professional has pulled a credit score and asked for income confirmation by way of an employment letter and pay stub.  Credit score and income confirmation are necessary to issue a full pre-approval.  Many banks are getting lazy and only pre-qualifying their customers, which can lead to problems when you've finally found a home.

Tuesday, February 1, 2011

Beware: Your bank may not be thorough in their mortgage pre-approval

At least once a week, my office receives a call from a panicked customer who thought they where pre-approved for a mortgage, only to find out they weren't.  The reason why the person is often panicked is because the pre-approval for the mortgage was in fact only a pre-qualification.

Here's the main difference between a pre-approval and a pre-qualification for a mortgage.  Protect yourself from any unexpected surprises and ensure that a thorough pre-approval is done before you decide to sell your home and move or even if you're buying your first home.

Also, it's extremely important to speak to you mortgage broker before you list your home (I'll cover this topic in another posting).

Credit Check
Your mortgage broker can pull your credit report almost instantly once you've completed an application.  The broker will review your credit history and accounts to confirm balances on your credit cards and lines-of-credit and car loans.  A credit bureau will also show if there are any collections including any spousal support or child support payments outstanding.  I've also found that in cases where people have common names, there may be errors on the credit history (e.g. someone else's credit can appear mistakenly on your credit history).

Employment letters
If you're an employee an employment or job letter is always a good thing to have when you're applying for a mortgage.  The job letter states the length of time you've been with your employer and how you get paid.  If you've just started a new job, and plan on buying a house, try and negotiate a no probationary period for your employment.  Getting a mortgage approved while your on a probationary period at work can be tricky because technically the individual is not employed "full-time"

Wednesday, January 26, 2011

Beware: Banks scare customers into not talking to mortgage brokers (part 1)

Just this week, I've spoken to two clients who came to me despite their banks advice, which was "don't go to a mortgage broker for your mortgage".  I asked them why they still decided to shop around for their mortgage and visit a mortgage broker after the banker told them not to.  They both answered in a similar way, "I wanted to see what all the bankers anxiety was about".

The realty is that the majority of people who need to revisit their mortgage because they are moving or refinancing, normally go to their bank and then a mortgage broker.  I suggest it's two hours of time well spent (one for the bank and one for the broker) considering it's the largest debt that most people have and the largest household expense.

I'll be writing a series of articles on the bankers' myths about mortgage brokers:


It's not a good idea to shop around for your mortgage because it hurts your credit score.

For most people who have good credit history, having a few credit inquiries in a short period of time is the normal course of doing business for them and it will not be detrimental to your credit history. 

In fact, I've found that banks have become lazy in qualify people for mortgages and don't necessarily do a credit check until there is an actual mortgage to process.  This could be detrimental for the client who's looking to buy a house.  That's because if there are any issues that the client is not aware of regarding their credit history, and the credit history is not checked before an offer is made on a house, the client may be disappointed to find that the mortgage they thought they could qualify for, is not in fact the case.

At my office we receive about one referral each week from either the bank directly or the client where this has happened.  The client is normally angry or in tears that the proper credit history checks were not completed by their bank. When I do a pre-approval for my clients, we ensure a credit history is done immediately so there are no surpises.

Also, mortgage brokers can shop your mortgage to multiple lenders with one credit history.  If you where to do the same, each bank would (hopefully) do a credit check.

Regardless, when someone does a credit check on you ensure you give them authorization to do so.

More to come on the facts around mortgage brokers...stay tuned.

Tuesday, January 18, 2011

New lending impacts first-time home buyers

The new changes that have been put into motion by the Canadian Minister of Finance will have a significant impact on first-time buyers.  The impact is the limit on a first-time home buyer’s borrowing capacity.
In Guelph and the surrounding area, most first-time home buyers choose to purchase a townhouse condo.  Most “nice” detached, free-hold homes are out of the price range of a first-time home buyer.  I believe that the average price of a detached home in Guelph is over $350,000.
You can purchase a “nice” town house condo in Guelph for approximately $225,000 – the condo fee is on average $200/month, and property taxes would be approximately $2800 per year. The average household income to support a mortgage with 5% down is approximately $55,000 in this scenario (without any household debt).  Under the new lending guidelines, with a decreased amortization to 30 years from 35 years, the household income would need to be approximately $5000 more per year.  Big deal?  Actually it is.  What I’m finding in my business is that many first-time homebuyers require two jobs just to carry a mortgage on a decent home.  Given the country is in a recession few employers are giving their employees pay raises.
I believe expectations will change among first-time buyers on what they can afford to purchase – and there will be a change in expectations on what sellers ought to sell their home for.
So here’s one important point to consider.  If you know someone who is looking to buy a home in the next six months ensure they speak to a mortgage broker, who has the experience to help. In this market – experience counts.