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What does the Bank of Canada interest rate mean for YOU!

April 23rd, 2009 No comments

It means that you can get a 5 year fixed rate Mortgage for as little as 3.69% Quick Close Special (the lowest in Canadian history) and a variable rate at 2.85% (Prime plus 0.60).

Another important point, never before made, is that the Bank of Canada is going to hold the overnight lending rate steady until June 2010.  

So if you currently have a variable rate, now is not the time to lock in if the Bank holds true to its promise.

Many people who are in fixed rates are looking at refinancing their mortgages into lower rates.  The penalty to break an existing mortgage is the greater of three months interest or what is called the interest rate differential. The interest rate differential is the lost interest between your current rate and market rates.  Whether this is worth your while can only be decided on a case-by-case basis.

I listened to Benjamin Tal, chief economist of CIBC and his comments regarding the variable rate mortgages where as follows:

“You might do better the first two years [of a five-year mortgage] but not the remaining three. I’m convinced long-term interest rates will rise. I can see [long-term] rising 200 basis points. These are emergency rates and at some point this emergency will end,” says the economist.

The banks and the mortgage insurers are becoming more stringent on their lending criteria; minimum credit score requirements have increased, if you are self-employed they are wanting more documentation and appraisals are getting harder too – they look at the appraised value as opposed to the purchase price.  If your credit is less than perfect, this can also be challenging, that is why we are finding more and more people seeking out the expertise of an accredited mortgage professional.

Written by:  Charmaine Idzerda, (AMP) Mortgage Broker   FSCO# M080000747
Verico Designer Mortgages Inc. 
www.DesignerMortgages.ca    FSCO# 10194
Tel: 905.336.5997, Tollfree 1.866.824. 8057

 

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OVERPRICED AND OVERBUILT: CANADIAN HOUSING

April 8th, 2009 No comments

During Canada’s “Housing Boom”, that occurred roughly from 2002 to 2008, unsound price increases drove up levels of building. Affordability of these prices have diminished significantly leaving a large disconnect between house prices and income. This situation was in great need of a correction. Our view is that house prices exceeded the value of housing that was justified by fundamentals by approximately 9% nationwide. This overpricing forced a level of residential construction that exceeded its fundamental-justified level by approximately 12%, an excess that was exaggerated in the past three years. The current unwinding of house prices reflects both a cyclical downturn and a return of house prices to fundamentally justified levels. We consider “overbuilding” of two forms: “demand driven” where homebuyers buy up too many houses and that this demand cannot be sustained; and “supply-driven” where builders accumulate excessive inventories. Although there is evidence of both types, we contend that Canada’s “overbuilding” was mainly of the first type, where homebuyers pushed homebuilding to an unsustainable pitch that is now being rapidly reined in. While most markets won’t face U.S.-style overhangs, the construction of too many new homes over the boom means a deepened slump. While Ontario homebuilding will reel from a cyclical downturn, the degree of structural weakness appears limited – with the important exception of the Toronto condo market. Both in Toronto and Vancouver, historically high levels of apartment-style units presently under construction mean that record numbers of condos will reach completion during 2009. If absorption rates fall, as cyclical factors would indicate, condo inventories could spike severely. However, Canada will not experience a U.S.-style housing crash, owing to less overbuilding and more conservative lending institutions

Source: www.td.com/economics

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Home Renovation Financing Options

March 2nd, 2009 No comments

Whether you intend to finance your renovation yourself or borrow money, you should talk to a financial adviser and to your lender before you make firm plans. They can help you understand your options and advise on how much you can borrow. This information will help you plan realistically.
EXPLORE YOUR OPTIONS
Your own resources: For smaller renovation projects, you may consider self-funding material costs, especially if you plan to do the work yourself.
Credit card: Likewise, you can use your credit card to pay for materials for smaller renovations. But be careful not to carry the balance for too long as credit card interest rates can exceed 18%.
Personal loan: With a personal loan, you pay regular payments of principal and interest for a set period, typically one to five years. You also have the option of a fixed or variable interest rate for the term of the loan. The interest rate on a personal loan is typically less than that of a credit card. Unlike a line of credit, once you pay off your loan you will have to reapply to borrow any new funds needed.
Personal line of credit: It is ideal for ongoing or long-term renovations since it lets you access your funds at any time and provides a monthly statement to help track expenses. A line of credit offers lower interest rates than credit cards, and charges interest only on funds used each month. And, as you pay off your balance, you can access remaining funds, up to the line of credit’s limit, without having to reapply.
Secured lines of credit and home equity loans: These options offer all the advantages of regular lines of credits or loans, but are secured by your home’s equity.
Mortgage refinancing: When funding major renovations, refinancing your mortgage lets you spread repayment over a long period at mortgage interest rates, which are usually much lower than credit card or personal loan rates. This type of financing can allow you to borrow up to 80% of your home’s appraised value (less any outstanding mortgage balance).
This provides an overview of financing options available to you. But also make sure to
research grants and rebates offered by the federal and provincial governments and local utilities to help fund your next renovation project.
(Source: CMHC)

Whether you intend to finance your renovation yourself or borrow money, talk to your Verico designer mortgage broker and to your lender before you make firm plans.

Charmaine Idzerda (AMP)
Mortgage Broker (FSCO Lic#: M08000747)

VERICO Designer Mortgages Inc. (FSCO#: 10194)

Office: (905) 336-5997

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New Home Renovation Tax Credit Introduced

February 2nd, 2009 No comments

Effective January 29, 2009, any Canadian who spends money on home renovations will be eligible to receive up to $1,350 in tax relief thanks to the new Home Renovation Tax Credit proposed in Harper Government’s Economic Action Plan. “Every time Canadians invest in home renovations, they are helping to create construction and building-supplies jobs in their own communities,” said the Prime Minister. “By providing an incentive for Canadians to invest in their homes, we are also encouraging them to invest in local jobs.”To highlight the kind of projects that will be eligible under this plan, the Prime Minister visited an Ottawa-area home renovation site and met with a local contractor who will be better able to protect and
create jobs thanks to the additional home renovation projects that will be encouraged through this tax credit. The Home renovation Tax Credit will provide a one-year, temporary 15% income tax credit on eligible home renovation expenditures for work performed, or goods acquired between January 27, 2009 and February 1, 2010. The credit may be claimed on eligible expenditures exceeding $1,000 but no more than $10,000. The Home Renovation Tax Credit is one of several initiatives to help homeowners and homebuyers that is contained within the Harper Government’s Economic Action Plan. Before homeowners, homebuyers, and local construction and building supply workers can benefit from these new initiatives, Parliament must pass the 2009-2010 Federal Budget.
(Source: Office of the Prime Minister – pm.gc.ca)

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