Mortgage Solutions for Sherwood Park and the Capital Region

Customers who are nearing the end of their fixed-rate term may be better off paying early exit penalties and securing a new deal
By Helen Morris, National Post

Even though there was a drop in some of this week’s fixed-rate mortgage products, some rates are expected to go up this year. Why the inconsistency between fixed and open rates? Fixed-rate mortgages follow bond yields, which have fallen recently. Variable rate mortgages reflect changes in the Bank of Canada’s prime rate, which is expected to rise.

There are ways to cushion the blow of rate hikes and make sure mortgage hikes are not a shock to your financial system.

“If the client is in a variable rate, which has the most fluctuation potential in the short term, I suggest they base their payments on a 4% fixed rate rather than making the lower payments based on today’s 2.25% variable rate,” says Gerri Vaughan, mortgage broker with Invis in Edmonton. “That way, they’re paying more towards the principal and they won’t have a payment shock when rates do start climbing.”

For clients who are already locked into a fixed rate, Ms. Vaughan says now is a good time to review their mortgage to work out if they should pay a penalty and renew early.

“It will really depend on what kind of pay-out penalty their existing lender is going to charge,” Ms. Vaughan says. “You have to look at those on a case-by-case scenario.”

Ms. Vaughan says borrowers who recently secured a low fixed-rate mortgage, and have a number of years remaining on their deal, are unlikely to benefit from an early renewal. However, customers who are nearing the end of their fixed-rate term may be better off paying early exit penalties and securing a new deal.

“Do an annual review of where things are with the mortgage. What are their plans over the next 12 months, are they planning to consolidate debt are they planning to do some renovations?” says Ernest MacDonald, a mortgage broker with Mortgage Intelligence in Halifax. “Does it make sense to renegotiate the mortgage now, to lock in low rates for the next five years, say?”

For clients considering buying a home within the next few months, the advice is get pre-approved.

“Even if they think they’re not buying for a few months most lenders will hold their rate for 120 days. If they’re locked in and rates shoot up, it protects them. If rates go down they always get the lower rate,” Mr. MacDonald says.

About 18% of respondents to a BMO Bank of Montreal survey last month said they would struggle to meet mortgage payment if rates rose. Ms. Vaughan says it is critical to be certain of your finances before contemplating homeownership.

“Be secure in your financial position and be comfortable that you’re going to have a job going forward,” Ms. Vaughan says. “The rates are good, the prices are good depending on where you are in Canada. It’s a good time to look at homeownership without overextending and being house poor; that’s no fun.”

Mr. MacDonald says having an overall financial plan is crucial.

“We’ve had pretty easy access to credit over the past 15 years. It has led to a lot of people not really knowing where all their dollars are going,” Mr. MacDonald says. “It really comes down to paying attention to where your money is going and being prepared if rates do go up.”

Read more: http://www.vancouversun.com/life/lock+mortgage+rates/4514754/story.html#ixzz1I6mKALpI

The average price of a home in British Columbia is forecast to increase two per cent to $517,000 this year, the B.C. Real Estate Association said in a news release this morning.
Photograph by: Jason Payne, Canwest News ServiceVANCOUVER – The average price of a home in British Columbia is forecast to increase two per cent to $517,000 this year, the B.C. Real Estate Association said in a news release this morning.

Read more: http://www.vancouversun.com/business/Average+home+price+this+year+BCREA/4332337/story.html#ixzz1EtzyWQBK

This is probably one of the most common questions asked by potential and existing homeowners. With so many factors to consider – from personal finances to the economy – the answer can change from year to year, and mortgage to mortgage.

Right now, if you’re looking at a 5-year mortgage, chances are if you go variable, you’re likely going to see some rate increases in the coming years. That being said, the global economy can shift at any given second, and something unexpected could occur that would force the government to stand pat when it comes to interest rates. The thing is, you never know!

What you do know is how much your household can safely afford – and how much risk you’re likely to tolerate. The new mortgage rules state that, to qualify for a variable rate mortgage, you have to be able to afford the current 5-year fixed rate. So right away that should give you a little bit of breathing room. The lowest 5-year fixed rate available right now is 3.65%. With that rate, the monthly payment on a $100,000 mortgage would be $507.22.

With the Bank of Canada’s overnight rate sitting at a record-low 1% right now, variable 5-year interest rates are sitting at 2.25%. The monthly interest rate on a $100,000 mortgage at that rate would be $435.61. Many economists predict that between now and the end of 2012, variable rates will increase to about 4.75%, which equals a monthly payment of $567.46.

The thing is, nobody knows for sure if or when a rate hike will happen – so either way, you’re taking a gamble. You could be missing out on months of a 2.25% interest rate or, if rates start to hike right away, you could come out ahead with a 3.65% fixed. In the end, you have to make the decision that makes the most sense to you – and that you feel most comfortable with.

TORONTO — Most of Canada’s primary securities dealers now expect the Bank of Canada to resume raising interest rates in the first half of this year with economic prospects having brightened in the past month.

In a Reuters poll on Friday the dealers — the institutions that deal directly with the central bank to help it carry out monetary policy — also say the bank will keep its benchmark rate at 1% at its next policy-setting date on Jan. 18.

There are 12 primary dealers, and seven of the 11 surveyed said they expect a rate hike in the first half of the year.

Three of those said it will come on March 1. One of the 12 dealers was not immediately available for comment.

In a December poll, the majority forecast rate increases in the second half of this year with the median prediction of a first hike in July. In the December poll, two dealers predicted a hike in January.

Some dealers cited factors such as the U.S. tax cut deal and risk warnings from the Bank of Canada for revising their views since then.

Rate forecasts by the dealers in Friday’s poll were otherwise scattered through the year and depended on views of when U.S. economic growth would become entrenched and when euro-zone debt woes might subside. The Bank of Canada in recent months has highlighted these variables as risks to economic recovery.

One dealer said the central bank would raise rates by the end of the first quarter to help stem the flood of cheap money that has spurred Canadians to take on heaps of personal debt over the past two years. Personal debt recently reached record

high levels in Canada.

“Don’t blame the consumer for merely following the pricing signals for money they are provided with a low rate environment,” said Stewart Hall, economist at HSBC Securities.

“(It is) an environment that is providing the incentive to borrow and spend while reducing the incentive to save. It is this calculus that is driving our view to a rate hike at the end of Q1/11.”

Another two dealers forecast the first hike would be on April 12, while two more see the first move May 31. Another two said the central bank would push rates higher in July, while there was one call each for September and October.

Read more: http://www.financialpost.com/news/Rate+hike+expected+first+half+year/4085803/story.html#ixzz1B29vO09S

A lot of people wait until spring to give their house a good cleaning and organizing – but why waste those first warm, fresh days of the year cooped up inside? With the days still dark and dismal, and most of your time spent in the house, why not get it in order so you can enjoy it just a little bit more?

Maybe your home’s problem areas lie in those out-of-sight-out-of-mind places. If your linen closet is driving you nuts, check out this article by Martha Stewart. She has some great ideas to keep your linens in order – such as folding all sheet sets into one pillow case. An under-sink organizer, like this one from Bed, Bath & Beyond can also help with frustration clutter by preventing toiletry and cleaning supply avalanches in the bathroom and kitchen

http://www.marthastewart.com/article/good-thing-3-organizing-tips-for-the-linen-closet

If you have clients who are trying to sell their home over the holidays, Royal LePage have released a helpful guide to selling in this season, which you may find useful to share with your client!

http://propertywire.ca/real-estate/features/648-top-10-things-to-avoid-when-selling-your-home-over-the-holidays.html

Vacation time and slower work schedules create an ideal time for open houses. However, as homes fill up with presents, decorations and visitors, sellers are often faced with the challenge of striking the right balance between cozy and crammed. Keeping your home tidy and sparingly-decorated doesn’t mean sellers can’t celebrate the season in style, but remember that buyers are looking for just the right amount of sparkle

2010 has been a year that resembled an amusement park roller coaster ride, complete with twists & turns . But the year will also go down in the record books as the year that realtors took a good look at the value added services clients are paying for. Or choosing not to.

Here’s a look at some of the events that made headlines this past year:

January

The year in Toronto got off to a good start with reports that 87,308 transactions were processed during 2009 – a 17% increase over 2008. That included 5,541 properties bought and sold during the month of December 2009 alone. The average home price climbed 4 % in 2009 to $395,460, according to the Toronto Real Estate Board (TREB).

A survey of 1,225 Royal LePage agents and brokers across Canada revealed buyers were still nervous about the stability of the economy. When asked to comment on the most common fears they heard from home buyers during the last three months, 38% of Royal LePage agents and brokers cited economic stability and related factors such as job security. 23% said home buyers fear they may not be able to sell their existing homes at the price they are hoping for, while 12% said buyers are hesitant because they believe prices have not yet hit the bottom of the cycle.

http://propertywire.ca/real-estate/features/643-2010-a-year-of-real-estate-in-review.html