1. Think Diversification
2. Be rational, not emotional
3. Missed days, means missed opportunities
4. Measure performance over time, not overnight
5. Turn market volatility to your advantage
Read the entire article here
For those of you that get uncomfortable during market fluctuations from Jocelyn Willowghby Wealth management
1. Think Diversification 2. Be rational, not emotional 3. Missed days, means missed opportunities 4. Measure performance over time, not overnight 5. Turn market volatility to your advantage Read the entire article here
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Through Canada’s Economic Action Plan, the federal government introduced the First-Time Home Buyers’ Tax Credit (HBTC) to help with the purchase of a first home.
About the InitiativeThe HBTC assists first-time home buyers with the costs associated with the purchase of a home, such as legal fees, disbursements and land transfer taxes, which are a particular burden for first-time home buyers, who must also save for a down payment. The $5,000 non-refundable HBTC amount applies to qualifying homes acquired after January 27, 2009, and provides up to $750 in federal tax relief. An individual is considered a first-time home buyer if neither the individual nor the individual’s spouse or common-law partner owned and lived in another home in the year of the home purchase or in any of the four preceding calendar years. Special rules apply for the purchase of homes that are more accessible or better suited to the personal needs and care of an individual who is eligible for the Disability Tax Credit. In these situations, the HBTC can be claimed, even if the first-time home buyer requirement is not met. A qualifying home is generally considered to be a housing unit located in Canada that the individual or individual’s spouse or common-law partner intends to occupy as their principal place of residence no later than one year after its acquisition. Any unused portion of an individual’s HBTC may be claimed by the individual’s spouse or common-law partner. When two or more eligible individuals jointly purchase a home, the credit may be shared but the total credit amount claimed cannot exceed $5,000. Claimants should ensure that documentation supporting the purchase transaction is available if requested by the Canada Revenue Agency. Claimants are also responsible for making sure that all applicable eligibility conditions are met. Who Will BenefitFirst-time home buyers purchasing a home may claim the HBTC on their income tax returns, starting with the 2009 taxation year. Initiative Update HBTC received Royal Assent on December 15, 2009. Canadians purchasing their first home after January 27, 2009 can claim the HBTC on their income tax return for the year in which they make their purchase. Find Out MoreFor more information, please visit the Department of Finance Canada website or the Canada Revenue Agency website. - See more at: http://actionplan.gc.ca/en/initiative/first-time-home-buyers-tax-credit#sthash.narTwBmD.dpuf Whether you’re applying for a mortgage for the first time, or are a seasoned homeowner preparing to renew, feeling comfortable with your choices is an important part of the mortgage selection process.
One of the key considerations is whether a fixed interest rate mortgage or a variable interest rate mortgage may be right for you. We explain a few of the key differences. Fixed interest rate mortgageWhat this means: This type of mortgage is a loan for which the rate of interest is fixed over a specific period of time (the term) and will not change. Benefits: For many, the biggest benefit is peace of mind, since you can be certain that your interest rate won't increase during the mortgage term you select. Important to know: Whatever happens in the financial markets or with interest rates, your agreed-upon rate stays the same. Variable interest rate mortgageWhat this means: This kind of mortgage has an interest rate that may fluctuate up or down during the term, whenever the base rate changes. Benefits: If the base interest rate goes down during the term, you could pay less in interest than with a fixed interest rate mortgage. Important to know: Some mortgage options may allow you to convert to a fixed rate during the term if, for example, you are concerned that the base rate may begin to climb. Keep in mind that there’s much more to choosing the right mortgage than rates alone. Having access to flexible mortgage features and repayment terms can be valuable in many ways, and even help save you money over the span of your mortgage in the Governing Council’s deliberations, because the state of total demand in the economy relative to our production capacity is what drives our inflation outlook. The economy has been operating below full capacity for some time, which is why we estimate that the underlying trend in inflation is running at around 1.5 per cent to 1.7 per cent. Core inflation is higher than the underlying trend, because a decline in the dollar is raising the prices of imports. Total inflation is much lower, because of past declines in fuel prices. As the temporary effects dissipate, all these measures of inflation will converge on the underlying trend.
Read more In this declining interest rate environment, I am receiving many questions from customers who want to break the terms of their existing mortgage to take advantage of the new lower rates. However, it is important that customers are aware that Interest Rate Differential (IRD) compensation may result.
Lets assume the following: $100,000 5 year fixed rated mortgage Rate = 6.5% Mortgage Broken after 3 years Prevailing rate = 5%* (posted rate for the closest remaining term minus the most recent discount) IRD = 6.5% - 5.0% =1.5% Remaining Term = 2 years IRD Compensation = $100,000 x 1.5% x 2 years = $3,000.00 (equal to the Bank’s lost revenue) Given today’s market conditions, some IRD amounts will be much greater than anything we have seen in the past. Further, when interest rates change, IRD compensation rates will also change, so it is important that customers act quickly once they have made the decision to discharge their mortgage. Customers who have decided to discharge their mortgage can request a formal discharge statement for information purposes only, via their own solicitor or they can order one directly from the Institution they are with. Remember to request this information in writing. · When determining the comparison rate, some lenders round up your remaining months to the next longest term. Some round down. · The Interest Act prohibits IRD penalties on terms over 5 years, after five years has elapsed. In such cases, a maximum 3-month interest penalty may apply. For example, someone who has been in a 6-year mortgage for 60 months or more would pay a 3-month interest penalty (maximum) to break it before maturity. · A small number of lenders prohibit breaking a mortgage early—regardless of the penalty—unless in the case of an approved bona fide sale. · The moral: Always contact your lender directly for an exact penalty quote. Have a question or comment? Write to me: [email protected] There’s another set of mortgage rules coming this summer. CMHC sent out a notice recently with implementation dates for three policies related to OSFI’s B-21 guideline.
We knew this stuff was coming but these rules could nonetheless make it harder to get low-ratio insured variable-rate mortgages, self-employed mortgages and 100% financing. Here’s what’s happening: The qualifying interest rate for low-ratio variable and fixed terms of less than five years will officially become the Benchmark Qualifying Rate (currently 4.64%). This change only applies to transactionally insured mortgages, not bulk insured mortgages, says CMHC. Effective date: “As early as possible after June 30, 2015, and no later than December 31, 2015.” Lenders will officially be required to obtain “third-party verification” of income for all borrowers, “including substantiation of employment status and income history.” CMHC did away with “stated income” financing many moons ago, but the private insurers still offer a form of non-traditional income verification (see Genworth’s program and Canada Guaranty’s program). We don’t yet know if/how their programs might change. For CMHC’s part, this announcement “is simply [meant] to add additional clarity and re-affirm CMHC’s position,” spokesperson Charles Sauriol says. Effective date: June 30, 2015. Cash-back down payment mortgages will be eliminated unless the borrower can come up with 5% down on their own. Ever since OSFI’s Guideline B-20 killed these products at the banks, this type of 100% financing has only been offered by a small number of credit unions. Effective date: June 30, 2015. With this last rule, you might be wondering why people can borrow their down payment from a 20%-interest credit card but not derive their down payment from lender-provided cash rebates. “To differentiate the two—in other words, use of lender cash backs versus borrowed funds to satisfy minimum equity requirements—lender cash-back mortgages are typically associated with higher interest rates charged to the borrower,” says Sauriol. That “translates into a larger insured loan amount and in the event of a default, into potential additional risks for the mortgage insurer.” “In cases where funds are borrowed to satisfy minimum equity requirements, the borrowing is outside of the insured loan amount and is also factored in the total debt service ratio, and therefore taken into account for borrower qualification purposes.” The end result is that the insurer incurs less severe losses on default (e.g., after five years, the loan balance being insured can be 3% to 4% less if the down payment was borrowed). Unfortunately, borrowed down payments can also result in higher interest costs and/or payments for the homeowner, depending on what interest rate and amortization applies to the borrowed down payment. In cases where this makes it tougher for the borrower to debt service, that could theoretically increase the probability of default. Thanks to Canada mortgage trends for the update These flexible payment features can help you pay off your mortgage sooner or pay less for a while.
Increase your payment frequency: Paying rapid bi-weekly instead of monthly can reduce your interest costs over the long term and help you to pay off your mortgage much faster. Make lump-sum payments: You can pay off up to 15% - 20% of the original borrowed amount of your fixed rate closed term mortgage every year, saving on interest costs and the time it takes to pay off your mortgage. The amounts vary by institution. So if you borrowed $120,000 originally, they will allow you to pay up to $24,000 in a lump sum payment. This is usually allowed on only one occasion per year. Pre Payment Privileges: You can pay off up to 15% - 20% of your monthly payment every month, For example: If your present mortgage payment is $1,000 per month you may be able to increase it to $1,200 per month ($1,000 X 20% = $1,200). The extra payment amount reduces a greater amount of your mortgage principal and therefore pays your mortgage off faster. Over the course of a mortgage transaction there are a number of different liens that can arise. We invest time in performing preliminary searches on Properties before submitting the mortgage application to the lender to avoid issues, that often come up on closing.
Some liens are much easier to overcome, but on the other hand, depending on the lender, the type of lien or even the mere presence of a lien can significantly impact your commitment for financing. Let’s review some of the different types of liens that commonly come up: Tax Liens – CRA liens can be a huge problem. A bank may refuse to fund without proof the tax debt is paid (even if there are proceeds in the mortgage to pay the tax debt). In addition, sometimes a tax lien can total more than the equity available in the house. The only saving grace is that if the tax debt exceeds the equity available for financing and your lender is a higher risk lender and not a bank it is possible that you can negotiate a lump sum payment to CRA on behalf of your client for a “postponement” so that they allow your mortgage to go on title in front of their lien. Construction Liens - A Construction Lien is also known as a Builders' Lien. A Construction Lien is a risk management tool a contractor can use to protect themselves on a job site. This type of lien is typically used when a contractor is not receiving payment on a job or installation that helps to improve the land. Condo Liens – If a client gets behind on their condo fees or for some other reason owes the condo corporation money and hasn’t paid – the condo corporation can put a lien on the condo. Condo liens can typically be overcome by paying the debt. Condo liens are less impactful to a mortgage closing than a tax lien. Property Tax Liens – Much like condo liens, property tax liens can be applied when property taxes or water bills are not paid. Unlike tax liens, the likelihood of obtaining a postponement related to property taxes are slim to none and property tax liens can actually supersede the lien related to the first mortgage. The best way to overcome a lien on a property is to uncover it quickly. You can search encumbrances on a property to learn about liens as well as any other registered encumbrances. Discovering a lien even before your application is submitted to a lender for financing allows us to help you come up with solutions to resolve this issue. To you this could mean the difference between securing financing or not and can even result in you paying a higher interest rate and cost to borrow. We go that extra step to investigate your application to ensure a quick and seemless close. For further information on how to obtain a free property search we can be reached at 1-888-693-1439 or email us at [email protected] Building, Improving and Securing Credit Through Safe, Secure and Affordable Solutions Lic #M08009255 There are 9 million Millennials in Canada, representing more than 25 percent of the population. Born between 1980 and 1999, the eldest are in the early stages of their careers, forming households and buying their first homes. Buying a home is a daunting process for anyone, but especially so for the first-time home buyer. This is the largest and most important financial decision you will ever make and it should be done with the appropriate investment in time and energy. Making the effort to be financially literate will save you thousands of dollars and assure you make the right decisions for your longer-term financial security.
1. Don’t rush into the housing market--do your homework: learn the basics of savings, credit and budgeting. Lifelong savings is a crucial ingredient to financial prosperity. You must spend less than you earn, ideally saving at least 10 percent of your gross income. Put your savings on automatic pilot, having at least 10 percent of every paycheck automatically deducted. Money you don’t see you won’t spend. Contributing to an RRSP, at least enough to gain any matching funds your employer will provide, is essential. The Tax Free Savings Account (TFSA) is an ideal vehicle for saving for a down payment and now you can contribute as much as $10,000 a year. You also need to establish a good credit record. Lenders want to see a record of your ability to pay your bills. As early as possible, get a credit card and put your name on cable, phone or other utility bills. Pay your bills and your rent in full and on time. Do not run up credit card lines of credit. The interest rates are exorbitant and the only one who benefits is your bank. Keep your credit card balances well below their credit limit. Do a free credit check with Equifax every six months to learn your credit score and to see if there are any problems. Equifax tracks all of your credit history, which includes school loans, car loans, credit cards and computer loans. Equifax grades you based on your responsible usage and payments. Budgeting is also essential and it is easier than ever with online apps. You need to know how you spend your money to discover where there is waste and opportunity for savings. The CMHC Household Budget Calculator helps you take a realistic look at your current monthly expenses. 2. Make a realistic projectory of your future household income and lifestyle and understand its implications for choosing the right property for you. Millennials are likely relatively new to the working world. Lenders want to see stability in employment and you generally need to show at least two years of steady income before you can be considered for a mortgage. This also applies if you have been working for a few years in one career and then decide to change careers to something completely different. Lenders want to see continuous employment in the same field. If you are self-employed, it is more challenging, and you need professional advice on taking the proper steps to qualify for a mortgage. Assess the stability of your job and the likely trajectory of your income. Millennials will not follow in the footsteps of their parents, working for one employer for forty years. In today’s world, no one has guaranteed job security. Take a realistic view of your future. Will your household income be rising? Will there be one income or two? Are there children in your future? Will you remain in the same city? The answers to these questions help to determine how much space you need, the appropriate type of residence, its location and the best mortgage for you. Financial planning is key and it is dependent on your goals and expectations. 3. This is not a Do-It-Yourself project: build a team of trusted professionals to guide you along. You need expert advice. The first person you should talk to is an accredited mortgage professional. There is no out-of-pocket cost for their services. Indeed, they will save you money. These people are trained financial planners and understand the ever-changing mortgage market. Take some time with them to understand the process before you jump in and find your head spinning with all the decisions you will ultimately have to make. They will give you a realistic idea of your borrowing potential. Before you fall in love with a house or condo, make sure you understand where you stand on the mortgage front. Mortgages are complex and one size does not fit all. You need an expert who will shop for the right mortgage for you. There are more than 200 mortgage lenders in Canada and they will compete for your business. It is a very good idea to get a pre-approved mortgage amount before you start shopping. This is a more detailed process than just a rate hold (where a particular mortgage rate is guaranteed for a specified period of time). For a pre-approval, the lender will review all of your documentation except for the actual property. There is far more to the correct mortgage decision than the interest rate you will pay. While getting the lowest rate is usually the first thing on every buyer's mind, it shouldn't be the most important. Six out of ten buyers break a five-year term mortgage by the third year, paying enormous penalties. These penalties vary between lenders. The fine print of your mortgage is key and that’s where an expert can save you money. How the penalty for breaking a mortgage is calculated is key and many monoline lenders have significantly more consumer-friendly calculations than the major banks. [2] A mortgage broker will help you find a mortgage with good prepayment privileges. The next step is to engage a real estate agent. The seller pays the fee and a qualified realtor with good references will understand the housing market in your location. Make sure the property has lasting value. Once you find the right home, you will need a real estate lawyer, a home inspector, an insurance agent and possibly an appraiser. Make any offer contingent on a home inspection and remediation of significant deficiencies. 4. Down payments, closing costs, moving expenses and basic upgrades need to be understood to avoid nasty surprises. The size of your down payment is key and, obviously, the bigger the better. You need a minimum of 5 percent of the purchase price and anything less than 20 percent will require you to pay a hefty CMHC mortgage loan insurance premium, which is frequently added to the mortgage principal and amortized over the life of the mortgage as part of the regular monthly payment. Your lender will want to know the source of your down payment. Many Millennials will depend on the largesse of their parents to top up their down payment. The down payment, however, is only part of the upfront cost. You can expect to pay from 1.5-to-4 percent of the purchase price of your home in closing costs. These costs include legal fees, appraisals, property transfer tax, HST (where applicable) on new properties, home and title insurance, mortgage life insurance and prepaid property tax and utility adjustments. These amount to thousands of dollars. Don’t forget moving costs and essential upgrades to the property such as draperies or blinds in the bedroom. 5. Test drive your monthly housing payments to learn how much you can truly afford. Affordability is not about how much credit you can qualify for, but how much you can reasonably tolerate given your current and future income, stability, lifestyle and budget. Most Millennials underestimate what it costs to run a home, be it a condo or single-family residence. The formal qualification guidelines used by lenders are two-fold: 1) your housing costs must be no more than 32 percent of your gross (pre-tax) household income; and, 2) your housing costs plus all other debt servicing must be no more than 40 percent of your gross income. Lenders define housing costs as mortgage payments, property taxes, condo fees (if any) and heating costs.[3] But homes cost more than that. In your planning, you should also other utilities (such as cable, water and air conditioning), ongoing maintenance, home insurance and unexpected repairs. Taking all of these costs into consideration, the 32 percent and 40 percent guidelines might well put an unacceptable crimp in your lifestyle, keeping in mind that future children also add meaningfully to household expenses and two incomes can unexpectedly turn into one. The best way to know what you can afford is to try it out. Say, for example, you qualify for a mortgage payment of $1400 a month and adding property taxes and condo fees might take your monthly housing expense to $1650. A far cry from the $500 you pay now to split a place with 3 roommates. Start making the full payment before you buy to your savings account and see how it feels. Do you have enough money left over to maintain a tolerable lifestyle without going further into debt? Keep in mind that this is not a normal interest rate environment. Don’t over-extend because there is a good chance interest rates will be higher when your term is up. Do the math (or better yet have your broker do it for you) on what a doubling of interest rates five years from now would do to your monthly payment. A doubling of rates may be unlikely, but it makes sense to know the implication. Do Your Calculations Look Discouraging? If so, here are some things you can do to improve your situation:
Chief Economist, Dominion Lending Centres Changes effecting home owners looking at obtaining a variable rate mortgage, in the past clients could qualify based on the variable rate lowering ratio’s for qualification purposes. Effective June 30 2015 all Low ratio variable and fixed terms of less than five years will have to qualify on the Bench Mark Rate currently 4.64% making it more difficult to qualify.
CMHC will no longer accept stated income deals, all income to verified via “third-party verification” (Notice of Assessments, T1 Generals or Business Financials. CHMC has been doing this for a while however there are 2 other insurers Genworth Financial and Canada Guarantee that are still accepting stated income applications for those self-employed, however reasonability of income will be a key factor. CMHC is also eliminating the Cash-Back Down payment, unless the borrow can come up with their own 5% down payment. The Great news is there are credit Unions that are not governed under these new rules and still provide 5% Cash-back for down payment, however the interest is higher. For complete details on the changes read the link attached. Need help understanding these changes feel free to contact us at “no cost” at 905-778-8100 Giuseppe Strazzeri Service First Mortgages Dominion Lending Centres Mortgage Agent Lic #M08009255 |
Keeping informed, educated and up to date is very important as it provides the tools to help you make better decisions. visit my blog regularly as information is updated on a daily basis. Keep Informed of Market Trends, Changes in Regulations, Money saving Tips, Market Conditions, Tips and Strategies on Saving Money, Building and maintaining Credit.
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