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'Financing' Category

9 Simple Ways To Be Mortgage Free In 10 Years

Imagine Being Mortgage Free!! Here Are 9 Simple Ways To Pay Off Your Mortgage Sooner

Of course the speed with which you pay off the mortgage depends on its size. But every little helps.

1. Pay off weekly or bi-weekly rather than monthly. In effect you make 13 “monthly” payments a year, not 12. The mortgage will be paid off in just under 21 years rather than 25.
2. Increase the mortgage payment by the same percentage that your income goes up. 5% raise? Pay off 5% more each week or month and this directly reduces the principal.
3. Pay off some of the mortgage with any windfalls or bonus. Again this can be as a percentage. If normally 25% of your income goes towards the mortgage then use 25% of a bonus as a prepayment.
4. Even if the mortgage rate lowers keep the payments the same. Again the difference directly pays off principal.
5. Pay off a lump sum with any tax rebates.
6. Simply decide to pay an extra amount each month. Cut out a large Timmies each day and pay an extra $50 a month off the mortgage.
7. Add just a little to each weekly payment by rounding the figure up. $375 instead of $362 for example would equal an extra $676 a year off the principle.
8. Choose a closed mortgage rather than an open one; these generally have better rates and still allow you to pay off an extra 20% or so in prepayments each year.
9. This tip depends on your attitude to risk but choose a variable rate rather than fixed. The interest payment will be much lower.  Studies show that historically home owners with a variable rate pay less interest than those with a fixed rate mortgage. But you may loose some sleep when rates start going up

Mortgage Interest Rates Are Going Up & Down

Fixed Rates Down But Variable Rates Up. Confused?

Nothing like a bit of financial reading on a Sunday morning! But please bear with me. “What type of mortgage” is one of the most frequent questions I hear.

Here’s a simple overview of variable and fixed rate mortgages in the wake of last week decision by two of Canada’s biggest lenders to cut their fixed mortgage interest rates. RBC cut their 5 year lending rate and were quickly followed by BMO.

With the new mortgage qualification requirements introduced earlier this year a drop in the 5 year rate is good news and improves mortgage affordability for those who otherwise might not qualify.

However variable rates are rising after the Central Bank raised the prime lending rate another basis point to 0.75% in July.This was the second increase this year and had been expected.

Why the seeming contradiction with rates going up and down?

Fixed Rates Follow Bond Market:
Fixed rates are tied to the bond market, and when bond yields drop, so do fixed rates. Last week’s announcements by RBC and BMO were in response to an unexpected jump in bond prices, which drove yields down.

Prime Rate Governs Variable:
Variable rates, however, are tied directly to the prime lending rate, and move up and down in step with the Bank of Canada’s announcements.

What type of mortgage to choose?

There is no answer to this as each individual is different.

Some people prefer the security of knowing what the payment would be each month for the next 3 or 5 years. A fixed mortgage means you do not have to worry about changes in the prime lending rate. Just be aware that when the fixed rate term ends you may be in for a shock as rates could then be much higher.

Others want to pay less each month and the variable rate will be cheaper when you start the mortgage. BUT rates can rise and you have no control over this. The variable rate can exceed the fixed rate, be prepared to meet higher payments as the prime rate rises.

Historically variable rates have worked out to be the better deal – in the long run.
A study by York University professor Moshe Milevsky compared fixed and variable rates from 1950 to 2007, and found that most of the time – 89% of the time – variable rates outdid fixed rates. In fact, Professor Milevsky found that a $100,000 mortgage on a variable interest rate would save a staggering $20,000 in interest payments over just 15 years, compared with a fixed rate.

HST- How It Affects 12 Matters In Ontario Real Estate

An Update On How HST Affects Real Estate

Stephen H. Shub is a Professional Corporation Barrister, Solicitor and Notary. Put another way “he knows his stuff.”

Below is his latest update regarding HST. There is a lot of information but it is broken up in to sub headings.

“Beginning July 1, 2010, there will be sales tax in Ontario of 5% + 8% = 13% (12% in British Columbia) replacing  the former 5% GST (Goods and Services Tax) and the  former 8% PST (Provincial Sales Tax).

1) HST and  Mortgage Brokerage Fees (to arrange a mortgage, if one uses a Mortgage Broker)

HST will not apply since mortgage brokerage services are exempt as part of the financial services industry.

Read the rest of this entry »

HST: Confused? You Will Be.

Or maybe not. A quick overview of Real Estate and the upcoming HST.

HST will be implemented on July 1st this year. Here is a quick summary of the more relevant points for home buyers and sellers:

• The new HST applies only to new construction or homes that are substantially renovated. It does not apply to resale houses or condominiums.
• If you are purchasing a new home with a value less than $400,000, you should receive a rebate that will effectively mean that you are not paying any more taxes than you would have before the implementation of the HST.
• There will be HST on the ancillary services related to the real estate transaction such as real estate commission and legal services.
• If your transaction is taking place after July 1, 2010, you cannot pre-pay for services and thereby avoid paying this tax .
• If you entered into your agreement of purchase and sale for your new home prior to the announcement of the new tax, you are grandparented into the tax and you will not have to pay it on closing.

As far as the actual real estate fees OREA issued this information today:

“Over the past few months, OREA has been working with our outside tax counsel, CREA and (indirectly) CREA’s consulting firm KPMG on HST transitional provisions.

KPMG recently provided us the following guidance with respect to calculating HST payable during the transition period.

‘Based on discussions with Canada Revenue Agency and Finance Canada officials, it is a question of fact when the service commences and ends for purposes of applying either GST or HST.  In general the service commences when the agent and client sign a listing agreement or buyer agency agreement.  The service may conclude when the deal has ‘closed” – (leased or sold).  It may not conclude when an agreement of purchase of sale/lease has been signed because the REALTOR® could still provide some services up to the time the REALTOR® is paid when the deal closes.  Canada Revenue Agency and Finance officials have agreed verbally that a reasonable basis to apply the 90/10 per cent rule and to determine how much HST will be payable on the services is to prorate the number of calendar days over the time period beginning with the listing of the property and ending on the completion of the sale/lease:

·         Before July 1, 2010 (GST applies); and

·         After June 30 (HST applies).’
We understand that this is not an official Canada Revenue tax bulletin but we believe it is the best information available.”

How Will The New HST Affect Home Buyers?

Benjamin Franklin quoted “but in the world nothing can be said to be certain except death and taxes.”

I resist the temptation to tell the joke about “death and nurses.”

HST is a combination of the current GST of 7% + Provincial Sales Tax of 8%, that is to say a 15% tax.

How will the new HST due on July 1st affect home buyers? It all depends if you are buying a resale or new home. Resale homes are not subject to HST BUT services that are part of the Home Buying process are:

Home Inspection, Appraisal, Real Estate Fees, Legal Fees, Moving costs etc are currently only taxed at 7% GST. Starting July 1st these services will all be taxed at 15%.

Buyers of new homes will have to pay the full 15% on the purchase price in addition to the increase in the cost of services mentioned above. There are however rebates available. As always with tax issues and when the government are involved this is not straight forward. Initially the rebate ensures that buyers of homes priced up to $400,000  will, on average, pay no more  tax than under the PST system. I question how long this will last. Not due to any knowledge of the governments plan but more a cynical view that if the powers that be can raise taxes and revenue they will.

The very fact that it is the Ministry of Revenue that explains the rebate should tell us all something.

4 Questions A First Time Buyer Should Know About Mortgages

Buying a home is exciting but first time buyers shouldn’t forget the realities of home ownership like the mortgage

Dropmyrate.ca provides this information for first time buyers:

How Much Down Payment Do I Need?
You only need to have a 5% down payment to purchase a home. You should also make sure that you have a little extra for closing costs; for example Land Transfer Tax, your Lawyers Fees, etc.

The 5% can be withdrawn from an RRSP. It can also be borrowed from another source, i.e. a credit card or line of credit. Your downpayment could also come from a Gift from a family member or friend.

What is a Pre-Approval?
A Pre-Approval is when your Mortgage Broker processes a Mortgage Application for you and gets you pre-qualified to purchase a home. This is beneficial in so many ways most importantly:

-tells you how much you can afford so you know what price range of home you should be shopping for

-gives you a competitive edge when placing an offer over another bidder who is not pre-approved

What is the First Time Home Buyers Tax Credit?
Visit the Government of Canada website for more information and speak to your Tax Accountant to see if you qualify

What type of Mortgage should I choose?
Speak to your Mortgage broker about the benefits of each type of mortgage. You probably will have a choice between a Fixed Rate Mortgage, and a Variable Rate Mortgage. With some lenders a Variable Rate mortgage can be converted at any time to a Fixed Rate, so you can have the benefit of both. Many first time homebuyers feel more comfortable with a Fixed Rate Mortgage, so they can easily budget their monthly payments.

7 Tax Deductions To Help Real Estate Investors Increase The Bottom Line

Tax advantages are one of the most positive aspects of investing in real estate.

An investor can make a profit on rentals but legitimately make a loss on paper. Every Canadians dream

Always, always take expert advice on tax matters just like legal issues.

Here though are 7 general ways to save money on your real estate investments.

1. Purchase Costs. These costs can include loan fees (origination fees, mortgage costs, title charges, appraisals, insurance premiums), title and escrow costs, as well as pre-paid taxes and items such as home warranties.

2. Interest. Interest payments are tax deductible.

3. Property expenses such as taxes and insuranceare tax deductible.

4. Maintenance and Repairs. These costs are inevitable if you wish to maintain and improve your property. You can deduct these costs.

5. Property Management Fees. Investors who use a management company to look after the property can deduct these costs.

6. Depreciation. This is one of my favorite real estate deductions. Despite being one of the best assets to invest in, there is a tax “loophole” called depreciation.

7. Legal and Accounting. Smart investors hire professionals to help protect their assets. Any costs you may incur with legal or accounting can also be deductible.

Property investing offers many advantages over other investments. Purchasing assets that produce passive income is the best way to become financially free. Taking advantage of the tax benefits is not only smart but will increase your bottom line.

Mortgage Rates Are Moving (Up)

Royal Bank of Canada and Toronto-Dominion Bank lead the way on the expected increase in mortgage rates

3 days ago I posted that “The Days Of Rock Bottom Mortgage Rates Could Be Numbered.” No fantastic insight on my part; firstly rock bottom rates can only go one way and secondly the Bank of Canada governor had announced they would be at some point.

Today the Royal Bank of Canada and Toronto-Dominion Bank announced that they were raising interest rates on some fixed-rate mortgages. Small increases but still an upward move; about $70 a month on a $200,000.

BUT if the 5 year rate starts hitting 7% in 12 months time then a $200,000 fixed rate  mortgage would cost two thousand dollars more a year than it does now.

How high will interest rates rise? I have no idea. Nor do the experts.

What I do know is is that if you are buying home in Wasaga Beach then now is a great time to secure a 5 year fixed loan.

Finally  and fortunately Canada is unlikely to suffer a U.S.-style housing collapse:

• Borrowers in most provinces can’t simply walk away from their debts as many U.S. homeowners are doing.
• High-risk mortgages are insured through Canada Mortgage and Housing Corporation (CHMC.)
• The strong recovery looks as if it will create jobs that will help people make their mortgage payments.

How Do First Time Home Buyers Work Out What Home They Can Afford?

Top Tips To Pay Down Your Mortgage Faster

Canadian Banking System Is The “Best In The World” & “Remains Solid”

The Days Of Rock Bottom Mortgage Rates Could Be Numbered

Act now to buy or re finance and lock in to the historically low interest rates being offered.

I am not an economist but even a simple look at the financial news this past week makes one thing very obvious:

Rising inflation = the end of low interest rates.

The Bank Of Canada has pledged not to increase interest rates until July this year. BUT there is a proviso by Bank of Canada governor Mark Carney that this is “expressly conditional” on inflation.

Without boring everyone with the details the inflation data for February exceeded the central bank’s expectations. Further economic growth has “surprised slightly on the upside” according to Carney due to strong domestic demand and a recovery in exports. The Canadian economy grew 5% annualized in the final three months of 2009, as opposed the central bank’s 3.3% expectation. This is as technical as I will get.

We all know that the “experts” can get it wrong a lot of the time; these “experts” helped cause the recent recession. However there is only one way for interest rates to go sooner or later and it is not down.

Thinking of buying a new home or re-financing? Please don’t delay.

Mortgage Rates Today

6 Month         3.85%
1 YEAR           2.49%
2 YEARS        2.85%
3 YEARS        3.25%
4 YEARS         3.69%
5 YEARS         3.69%
7 YEARS        4.65%
10 YEARS      4.99%

Courtesy of :

Bruce Hamm
Dominion Lending Centres Integrity Plus
Phone: 705.422.0807
Email: bhamm@dominionlending.ca
http://www.brucehamm.ca