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'Financing' Category

Should You Only Put The Minimum Down Payment On A New Home?

Mortgage choice is not solely about interest rates.

The size of a down payment is driven by a number of factors including income, financial obligations and lifestyle. A buyer has to sensibly know what he or she can afford and not over extend themselves.

A larger down payment…

• Reduces the amount of your monthly principal and interest payment
• Reduces the total amount of interest you pay over the life of your mortgage

5% is the minimum down payment when you buy and finance a new home but anything under 20% will require an insurance premium. This extra cost can be added to the loan but will increase the monthly payments. One way for first time buyers to increase the funds available is to use part of a  Retirement Savings Plan (RSP) towards the down payment. The federal government’s Home Buyers’ Plan (HBP) allows first-time buyers and their partners to borrow up to $25,000 ($50,000 for couples) from their RSP tax-free, provided the money is repaid to the plan over the next 15 years.

As well as interest rates a buyer should also consider the type of mortgage, payment structure, terms and flexibility. All these factors will affect your day to day life and also how much the loan eventually costs:

• Variable vs. fixed rates. A variable rate mortgage fluctuates with the Prime rate, which allows you to take advantage of changing interest rates. When rates go down, more of your payment goes to pay the principal and less to interest, enabling you to pay off your mortgage sooner. When rates go up, the reverse happens: less of your payment goes toward the principal and more to interest, extending the time it takes to pay off your mortgage. A fixed rate mortgage locks in your interest rate for the term of your mortgage, which can provide the peace of mind of knowing exactly how much principal and interest you’ll pay for the entire term, as well as what your mortgage balance will be at the end of term.

• Payment schedule. Making more frequent payments is one of the ways you can pay off your mortgage sooner and save on interest costs. You can normally make weekly, biweekly, semi-monthly or monthly payments.

• Amortization. The amortization period is the number of years it will take to pay off your mortgage in full. Amortization periods can range from five to 35 years. The typical, and most recommended, is 25 years. Remember, the shorter the amortization period, the higher the mortgage payment, but the more you’ll save in interest costs over time. So, while an amortization period of 30 or 35 years can make a home more affordable by keeping monthly payments lower, it can increase your interest costs by as much as 50% over the life of your mortgage compared to a 25-year amortization. You can re-evaluate your amortization period each time you renew your mortgage.

• Payment options. Most lenders offer flexible payments options to allow for changes in personal circumstances.

Choosing the right mortgage option and terms depends on your housing needs, financial situation and lifestyle goals. Please do contact me for further advice. Make the correct decision and feel secure about your future.

Right and Wrong Actions After Mortgage Approval- And Little Pointers That Will Ensure Funding

Some mortgage lenders are checking credit scores prior to funding especially if closing occurs a long time after the initial mortgage offer. What can you do to ensure there are no problems?

• Pay all bills even if there are disputes.
• Do not apply or open up any new credit card accounts.
• Do not transfer large amounts of money between accounts.
• Do not make any unusual deposits., especially if it is a large amount of cash.
• Do not buy a new car or take on a more expensive lease.
• Do not change jobs or worse quit your job.
• Do not make any large purchases on a “buy now pay later” scheme.

Any of the above actions can raise a red flag on a credit report. Even more so if the initial credit score was “just” ok to start with.

Obviously in real life some actions are unavoidable. If you think your credit score may be affected talk to your mortgage broker or lender beforehand.

Learn How To Erase Bad Credit

In the current economic climate it is more important than ever to have a good credit rating.

Lenders are tightening credit requirements and buyers need to be aware of this.

What actions can you take to become more credit worthy if you have some blemishes ? What can be done now to ensure you have no problems when you wish to buy?

For any home owner with some equity and a manageable credit score then it may be worth refinancing your existing mortgage. Use the money raised to pay off high interest credit card debt. Intrest rates are at an all time low. Even if you have no other debt now is the time to refinance and possibly save thousands of Dollars a year in interst payments. This saving can pay down the principle more quickly and either pay off the loan sooner or create more equity when you decide to sell. Just keep the payments the same each month.

If the situation is more serious here are five steps that will help improve your credit score:

1. The most important step you can take is to pay down credit cards AND then only use 30% of their limit.Credit card use seems to have more impact than car loans, lines of credits etc.
2. Even if you pay it off each month do not go above this 30% ceiling.
3. Limit the use of credit cards. A balance at the end of the month has a negative effect even if you pay it off the next month.Pay off the balance before the statement is produced.
4. Do not apply and use new cards.
5. Keep using old cards.Dispute any mistakes on your statement immediately. Do not let a period of time pass without the situation being resolved and at the very least make the credit bureau aware of the situation.

If the situation is more serious then then please contact me for information on credit counsellors, mortgage professionals and experts that can help you..

Year Of Rock-Bottom Rates Promised By Central Bank

Move to explore new ways to instill confidence in economy.

Governor Mark Carney is not known for his openness but with total transparency Canada’s central bankers said yesterday that they intend to leave the benchmark lending rate at a record low of 0.25 per cent and “at its current level until the end of the second quarter of 2010″.

Lenders will be able to set prices for mortgages, credit lines and other loans with the certainty that the central bank will not suddenly increase rates.

Now is the time to refinance.The cost of borrowing has dropped by 4.25 percentage points since December of 2007.

I have found a number of potential buyers sitting on the fence waiting to see what happens. Understandable in these uncertain times. However I can only emphasise that prices in this area are not plummeting, the average price in Wasaga beach, Collingwood and Barrie rose in 2008.

And mortgage rates have never been this attractive.

5 Year Mortgage Rate at All Time Low

The 5 year interest rate for most Canadian lenders is  below 3.95%.

The best 5 year rate is currently at 3.69%.

The rates are pretty much at the bottom. Whether you are looking to purcahse or to refinance, now is the time to lock in as the rates have nowhere to go but up.