HOW TO AVOID THE 7 BIGGEST MISTAKES REFINANCE SHOPPERS MAKE

Whenever interest rates drop or housing values jump, a refinancing frenzy follows. Whether you are looking to trim your mortgage payments, eliminate credit card debt or renovate, experts say you should fully understand all the options available to you before deciding to refinance. Here are some common pitfalls that consumers can avoid when refinancing:

1. Check interest rates to see if your new rate will pay off the penalty for leaving your present mortgage. It is best to decrease your interest rate by at least .75% to 1%. This would save you $100.00 a month on a $150,000 mortgage.

2. Know what your costs are – Check with your bank to find out what the penalty would be for an early payout.. It may be 3 month’s interest or more.. Don’t tell them you are moving your mortgage or they will pass you on to a high pressure salesperson who will try to talk you into coming into the branch to discuss the issue. It’s easier to say you are thinking about paying out your mortgage early.

3. Be sure to compare apples to apples- Make certain the rate you were quoted over the telephone was for a similar product. Comparing 3 year rates at one lender to 5 year rates at another is like comparing apples to oranges.

4. Overvaluing your Home – pride of ownership sometimes overshadows our common sense. You may expect the value of renovations to be equal to the cost of labour and materials. While return on investment for new carpeting or new paint jobs is close to 100%, it can be as low as 15% for a granite entranceway. Some people use their tax evaluations which may be too high or too low. Consider checking with your realtor or someone who recently sold their home on your street.

5. Not considering future plans – getting locked into a 10 year fixed rate when your kids will be leaving for college in 3-5 years may not be a smart move. If you are planning on buying a vacation home or an investment property why not plan for it now? You might be able to get it sooner than you expect.

6 Don’t let low interest rates or catchy slogans stop you from shopping around. Often the lower rates come with unattractive conditions: they may not be portable to a new home, the interest rate may only be available in one province, or you may be tied to the mortgage unless you have a bonafide sale of the home.

7 Finally don’t go to your present bank first. If you don’t know the rates you won’t get the best rate. The major reason people go to their present lender is convenience. There is comfort in “being known” and a belief that they should receive special treatment. The reality is that all lenders are under pressure trying to process the unprecedented volume of refinances. They have to set priorities. And you would be a low one as they already have your loan. They may lower your present rate from 3.99% to 3.79% to pacify you but if you shopped around you might find that other lenders are offering 3.19% at this time.

In conclusion, be a good consumer. Consult with your  mortgage professional who can review the best options with you. We can help you make an informed decision on your finances.

Welcome to the October issue of the Mortgage Financing Journal, which is designed to help keep you in the know regarding Real Estate and Mortgage related matters! Fall is here! Bundle up in wool socks and turtle necks! The crisp autumn air is upon us!  This month's edition takes a look at consumer proposals and how to prepare your garden for the fall months. Please let me know if you have any questions or feedback regarding anything outlined below. Thanks again for your continued support and referrals! How to Qualify for a Mortgage Post Consumer Proposal There is no shame in going through either a consumer proposal or bankruptcy. Life throws wrenches into our well laid out plans. This is why we have these financial resources to get us back on our feet.  What is most important is that we don’t make the same mistakes again, really get to know how the mortgage and credit world works and use a mortgage planner along with your trustee or debt counsellor to have a plan of action! There are no quick fixes or programs to get you back on track! Don’t get sold on some “swindler” taking advantage of your situation. There is a company out there that will loan you $2,500 that you pay back over 2 years and they report it to bureau for you. The cost - $900! That’s crazy and completely unnecessary. Here are the Coles notes on what you need to know for those in consumer proposal. Remember, every situation is unique, so always have an experienced broker work with you: You can refinance your home when in a consumer proposal and pay it out. You need more than 20% equity to do this. The sooner you pay it off, the faster it comes off your credit bureau. If you are going with an INSURED mortgage (ie. 5-20% down) then you must be discharged from consumer proposal for two years and your credit has to be re-established. Most lenders want the consumer proposal paid in full prior to mortgage approval. Very few will look your deal while in proposal. Area dependent - small rural communities are harder to get approvals. You want to plan to have some savings that are more than just your down payment if you are buying. Don’t be house rich and cash poor. Sometimes we can use secondary credit like your car insurance, cell phone, or your rental payments to a landlord. If we can prove good repayment for the last couple years, we should be able to take it to a bank. Also, you really need to ensure that, at the three year mark after you are done, that your consumer proposal is removed from credit bureau. I have seen someone refinance 2 years into their 5 year proposal and pay it out and forget to remove it from the bureau a year later, so it keeps hurting your score and years of damage for no reason. How long does a consumer proposal stay on a credit report?  Once you enter into a consumer proposal, it will start reporting on both Equifax and TransUnion credit reports within 30 days. Depending on your consumer proposal agreement with creditors, you will be making payments in a consumer proposal generally between three to five years. Consumer Proposal will stay on your credit report for 3 years from the date you are discharged (made your last payment) regardless if you are looking at your Equifax or TransUnion report. Where do I start in building my credit again?  You can start rebuilding your credit as soon as you file your proposal. Bankruptcy is a bit different. You need to aim for TWO credit cards, open for TWO years, with an eventual available credit of $2500 each.  Just get TWO that start reporting. For more information on which credit cards are right for you, click here. Your credit and what have you can do to make it better:  They are lending YOU money, so a good broker will need to explain your situation, who you are, why you had issues and what you have done to improve your situation. This is called the 5 C’s of credit. This is a method used by lenders to determine the credit worthiness of potential borrowers. The system weighs five characteristics of the borrower, attempting to gauge the chance of default or you being a chronic mismanager of debts. Character - When lenders evaluate character, they look at stability - for example, how long you’ve lived at your current address, how long you’ve been in your current job, and whether you have a good record of paying your bills on time and in full. If you want a loan for your business, the lender may consider your experience and track record in your business and industry to evaluate how trustworthy you are to repay. Capacity - refers to considering your other debts and expenses when determining your ability to repay the loan. Creditors evaluate your debt-to-income ratio, that is, how much you owe compared to how much you earn. The lower your ratio, the more confident creditors will be in your capacity to repay the money you borrow. Capital - refers to your net worth - the value of your assets minus your liabilities. In simple terms, how much you own (for example, car, real estate, cash, and investments) minus how much you owe. Collateral - refers to any asset of a borrower (for example, a home) that a lender has a right to take ownership of and use to pay the debt if the borrower is unable to make the loan payments as agreed. Some lenders may require a guarantee in addition to collateral. A guarantee means that another person signs a document promising to repay the loan if you can’t. Conditions - Lenders consider a number of outside circumstances that may affect the borrower’s financial situation and ability to repay, for example what’s happening in the local economy. If the borrower is a business, the lender may evaluate the financial health of the borrower’s industry, their local market, and competition. It all starts with the planning the day you decide to file for a consumer proposal. If you are finding you are starting to fall behind in payments or considering a consumer proposal call us - we may be able to help. Getting Your Garden Ready for Fall Summer is not the only season to nurture your garden. Find out how to keep your garden fresh during the cooler monthshere. Thanksgiving Leftovers After cooking all day, preparing the place settings and enjoying the long weekend, we have a few ways to show you how to maximize your Thanksgiving leftovers. Here are some recipes to get the most out of your feast!

Election Promises

Market Commentary

Ahhh, election promises. Those snappy little sound bites that grab your attention and get you talking. The latest is Stephen Harper's pledge to create 700,000 new homeowners in Canada by 2020.

Based on the latest available numbers – which are from 2011 – that would push the Canadian home ownership rate from 69% to 72.5%; a record high.

It sounds exciting: job creation, financial stability, strong communities. But how? The Harper announcement was light on details and it turns out the 700,000 figure is based on projections already in place from CMHC and the Canadian Home Builders Association. They are calling for 140,000 new homeowners per year over the next six years.

It also turns out the Harper pledge is somewhat aspirational. The Conservatives "hope" to see this kind of home ownership growth. The plan to get there includes existing programs like the increased, $10,000 contribution limit for TFSAs along with previous election promises like expanding the Home Buyer's Plan, a permanent home renovation tax credit and (yet to be defined) measures to control foreign ownership.

But economists and market watchers agree, the two biggest factors in driving home ownership will be real wage growth and continued low interest rates.

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Joel's Mini Blog

We have noticed some lenders with a lot of rate activity and warnings about changes, I don't expect a big impact on them but I do expect them to grant smaller discounts.

It seems like banks want to make more money therefore Variable rates discounts might be affected as they are becoming more popular and the consumer is going for them more and more. Banks always prefer when consumers go for 5 years fixed so they can have them in their books for longer and can forecasts their numbers.


PS:  My phone is on - all the time (including weekends).  Text me to get my attention, I'll call you back within 10 minutes.  

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