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'Financing' Category

Buying A Home In Wasaga Beach. Borrowing Money Has Just Got Harder

If you are thinking of buying a home in Wasaga Beach, Finance Minister Jim Flaherty has tightened the mortgage rules

In response to the growing concerns that Canada’s housing market is overheating the Finance Minister says all borrowers will need to meet stiffer criteria to take out mortgages.

However he stated:

“There’s no compelling evidence of a housing bubble, but we’re taking proactive, prudent, measured and cautious steps today to help prevent a housing bubble,”

From April 19th this year:

1. All borrowers must meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term;
2. The maximum amount one can withdraw in refinancing their mortgage will be reduced to 90% from the current 95% of the value of one’s home;
3. Non-owner occupied properties will require a minimum down payment of 20%.

There were no changes to down payment requirements or length of amortizations for owner-occupied residences.

I have checked and any mortgages already approved  or are approved before April 19th but have a closing after that date will not be liable to the new rules and still valid.

How Do You Make Money Out Of Investment Property?

4 ways to make money from an investment property:

1. Passive income.

2. Equity.

3. Tax advantages.

4. Appreciation.

Passive Income

Or more normally referred to as positive cash flow. It’s quite simple to work out:

Gross Rental Income
Minus: Vacancy rate
Equals: Adjusted Gross Income
Minus: Operating costs
Equals: Net Operating Income
Minus: Debt Service Payments (mortgage)
Equals: Cash Flow

What do you need to do to achieve a positive cash flow. Get the best rent possible whilst keeping vacancy periods as low as possible. Don’t be greedy. Holding out for that extra 50 bucks a month could result in a month’s vacancy and minus say $1200 that year.

Keep the money going out, the overheads as low as possible. Obviously the lower the price you pay for the property the less the mortgage payment will be. Again though don’t be greedy when purchasing. If the figure on the table is acceptable then pay it. Letting an ego get in the way, focusing more on the deal and the need to have the last word could let an excellent income generating property slip through your hands. Work with a mortgage broker to get the best rates and or possible.

Shop around for insurance or build a relationship with an insurance broker who you can trust to find you the best deal. I use Brent at Murphy Insurance ( 705 737 3630)   and no I don’t get any kick back for referrals.

Equity

The renters are paying down your principal. Even as you sleep your equity is growing. Use that positive cash flow to pay off more principal, pay less interest and see the equity grow even more quickly

Tax advantages

There are 2 certainties in life: “death & nurses taxes.”  The good news is that property is a very tax efficient investment. Get expert advice as tax laws are continually updated.

Appreciation

Historically property has always gone up in value. There are ups and downs but in the medium to long term the value will always increase.

Top Tips To Pay Down Your Mortgage faster

Whether it’s your own home or an investment property, paying down the mortgage principal more quickly can save you thousands of Dollars in interest

Beverley Brandl of Dominion Lending Centres Integrity Plus Inc. in Wasaga Beach recommends 6 tips to pay down your mortgage faster:

Tip #1 Prepay early in the mortgage
Make extra payments as early as you can after getting a mortgage because the loans are interest-heavy upfront and the faster you pay down your principal, the more interest savings you will accumulate over the long run. Within the first five to seven years of your mortgage is where the largest portions of interest payments are contained. This not only will save you thousands of dollars in interest payments, but it will also increase the speed at which you are accumulating equity in your property. Many mortgage products allow you to make up to 20% more in payments per year.

Tip #2 Make an annual lump sum payment
Whether you use your tax refund, receive an inheritance or get a Christmas bonus, you should apply as much as possible directly to your principal. Most lenders allow you to pay 20% in lump sum payments per year without penalty. I can help you determine exactly how much you can prepay and what maximum percentage of your principal you are allowed to pay without penalty each year.

Tip #3 If your payments go down, don’t lower the payment amount
If you are on a variable-rate mortgage and the rates go down your payment will also often go down. Instead of making the lower mortgage payments, however, it’s best to call your lender and let them know that you would like to continue making payments for the original amount. I can help you determine if there is a charge for making the extra payment. Even with the charge, in most cases, it is still worth it and will help you pay down your principal faster.

Tip #4 Round up your payments even if it’s just a little
If your monthly mortgage payment is $776.22 and you were to round up your payment an extra $23.78 a month to $800 – that’s less than a dollar a day – you would effectively reduce your mortgage amortization from 35 years to just over 32 years right away or from 25 years to just over 23 years.

TIP #5 Increase your payments with your pay increases
If your income increases, try not to keep your mortgage payments the same. Although the disposable income is a joy to spend on unnecessary luxuries in the short-term, the long-term benefits of being mortgage free faster and saving those interest payments will far outweigh the short-term joys. Pretend that your income did not increase and maintain the lifestyle that you are currently living.

Tip #6 Increase the frequency of your payments
You can also change the way you make your payments by opting for accelerated bi-weekly mortgage payments. Not to be confused with semi-monthly mortgage payments (24 payments per year), accelerated bi-weekly mortgage payments (26 payments per year) will not only pay your mortgage off quicker, but it’s guaranteed to save you a significant amount of money over the term of your mortgage. Basically, with accelerated bi-weekly mortgage payments, you’re making one additional monthly payment per year.

Recovery Points To Summer Increase In Interest Rates. How Will This Affect The Real Estate Market In Wasaga Beach?

The Globe And Mail believes ” Canadians should be preparing for higher interest rates sooner rather than later.” We can expect the real estate market in Wasaga Beach to be busy.

In an article on Friday Kevin Carmichael commented that “With the North American economy growing significantly faster than expected at the end of 2009, and with mounting evidence that Canada is pulling clear of recession, economists are increasingly of the view that central bank Governor Mark Carney will pull the trigger on an interest-rate hike this summer, rather than wait until later in the year.”

What does this mean for the real estate market here in Wasaga Beach?

Simply put lots of closings.

Buyers will want to purchase and tie into a low fixed rate before the expected increases. The belief that interest rayes will rise is enough to ensure a busy few months.

Add in the HST factor and again buyers will want to purchase before having to pay this extra tax on the transaction.

Although an increase in rates does not seem like good news it does mean that the Canadian economy is recovering and this can only be good for everyone. “Statistics Canada said gross domestic product expanded for the third consecutive month in November, and that growth in October and September was stronger than initially stated.”

Canada is puling clear of the recession

BUT it was only 2 days earlier that The Globe And Mail published an article entitled :

“Interest rate hike this summer?Don’t count on it. For the Bank of Canada to raise rates before the middle part of 2011 would be totally inconsistent with its current forecast”

What does this all mean when even the “experts” cannot agree?

We do know that home owners are enjoying rock-bottom mortgage rates.

To guarantee this now is the time to buy or refinance.

Bank of Canada Leaves Interest Rate Unchanged

Good news for mortgages as the Bank of Canada sees no hurry to raise intrest rates

As expected the Bank Of Canada left the interest rate unchanged at 0.25%, and reiterated its conditional pledge to keep it at that historically low level until the end of the second quarter in an effort to reach its 2% inflation target.

The news included several references to expected growth, targets, forecasts etc.

Simply put though it means that for anyone looking at buying a house or refinancing  there are still historically low rates available.

Mortgage Rates Today

Mortgage rates are still very attractive

The Bank of Canada will probably keep its benchmark interest rate at a record low tomorrow and repeat a pledge to leave it unchanged through June.

Low mortgage rates helped push existing home sales to a record in December. Importantly a 19 percent jump in home prices over the past year hasn’t pushed the inflation rate above the central bank’s target. Bank of Canada Adviser David Wolf said in a speech last week it’s “premature” to conclude there’s a bubble in the housing market, and a rate increase to slow it would “be dousing the entire Canadian economy with cold water, just as it emerges from recession.”

Such great mortgage rates make it a great time to buy a home.

Term
6 Month      3.85%
1 YEAR        2.35%
2 YEARS     2.95%
3 YEARS     3.25%
4 YEARS     3.85%
5 YEARS     3.79%
7 YEARS     5.25%
10 YEARS   5.35%

4 Quick Tips To Improve Your Credit Rating So You Can Buy That Dream Home For Sale In Wasaga Beach

Is a bad credit rating stopping you from getting a mortgage and looking at homes for sale in Wasaga Beach?

Here are 4 quick tips to improve your credit score:

1. Get a credit card. Start spending with it and paying the full amount off each month will help improve your credit score.
2. Pay your bills on time. Late or missed payments on any bills count against you.
3. Keep balances low. If you cannot afford to pay your credit card off then try to keep balances below 30% of the credit limit.
4. Use more than 1 type of credit. In addition to credit cards get a loan , store cards etc.

Get a good credit rating and that dream home for sale in Wasaga Beach may be yours.

How The Canada Mortgage and Housing Corporation (CHMC) Works

The CHMC and a strong conservative Canadian banking system were instrumental in Canada avoiding the same real estate disasters that the USA have experienced.

A recent article by CanadianMortgageTrends.com explains how the CHMC works:

Inside CMHC

Flaherty Threatens Changes To Canadian Mortgages & Tighter Lending Standards

The federal government is considering raising the minimum down payment for Canadian home buyers as well as reducing the amortization period for mortgages

Finance minister Jim Flaherty told CTV that that  would “take some action” to stop some consumers from taking on too much debt.

The measures will be taken if there’s evidence of excessive demand in the housing market.Flaherty said:  “The likely action we will take is to increase the size of the down payment from 5% to a higher figure, and probably once again, reduce the amortization period – so bring it down from a maximum of 35 years to something less.”

Last week, the central bank warned that when interest rates rise to normal levels, up to 10 per cent of households could face difficulties in meeting monthly payment requirements.

It seems to me that this may be a “knee jerk” reaction to the speed the Canadian economy has come out of the recession. It is only 12 months ago that equally “knee jerk” commentators were questioning if the recession would go on for years and would the economy ever recover.

I recently heard the recession referred to as the first of the internet age; everyone had instance access to the information and this resulted in a rapid spiraling down of the economy. The good news or should I say not so bad news was equally available and the recovery was similarly rapid. It all boils down to not over extending yourself. Basic maths to only borrow what you can afford to pay back and still maintain the lifestyle you have. Note not the lifestyle you wish for in this consumer age. Have a nice home you can afford but maybe not the 50″ flat screen, Playstation and X Box plus exotic holidays.

History has proved that real estate is a very safe investment over the medium to long term. First and foremost though it is a home to be enjoyed with family especially at this time of year. Banks will alwys lend and Canadians will always have access to mortgages.

Lowest Mortgage Rates Being Advertised By 30 Of Canada’s Best Mortgage Lenders Today

5 year rate still below 4%. remember that when looking at homes for sale in Wasaga Beach

TERM      6 Months    1 year      2 year     3 year    4 year    5 year    7 year    10 years

RATE       3.85%          2.35%     2.90%    3.25%     3.85%    3.79%   5.25%     5.35%

It’s easy to concentrate on just the actual cost of a home for sale when buying in Wasaga Beach. Equally important is how much it is going to cost each month to own that home. Mortgage rates have never been so attractive and this needs to be considered when looking at the overall picture.

Supplied by Sarah Hurson of TMG