 |
 |
 | | FLORINA
CRAIU-BOTAN
416-704-5608
BROKER, B.Sc.
Sutton Group Summit Realty Inc.Brokerage | |
|
|  | |  | |  | | | | | | |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Friday, 25 March 2011, 08:49:13 PM | THE SMP MORTGAGE RATES CHANGED AS OF MARCH 25 ,2011:
5 YEARS FIXED RATE DECREASED TO 3.66%
PROMOTION :30 DAYS CLOSING-5 YEARS FIXED RATE IS 3.61%
WANT TO HAVE ACCESS TO THESE RATES? SOME RESTRICTIONS APPLY .
GIVE ME A CALL AND I'LL BE HAPPY TO HELP IF YOU NEED TO REFINANCE,OR THINKING TO PURCHASE OR SALE YOUR PROPERTY. | |
|
| Tuesday, 30 March 2010, 09:08:18 AM | | | | If you have a fixed-rate mortgage, you're immune to rate increases until renewal time. (Note that Royal Bank, Toronto-Dominion Bank and Laurentian Bank said they would raise their rates on five-year, closed, fixed-rate mortgages effective today.) With a variable-rate mortgage, however, your rate is adjusted up or down with each movement in the prime lending rate. The prime is influenced by the Bank of Canada's overnight rate, which will be set eight times in 2010. The next rate announcement is scheduled for April 20, and the ones after that happen June 1, July 20 and Sept. 8.
If you have a variable-rate mortgage but you don't have a plan, you're going to live and die by these dates.
Let's assume that you don't intend to use the provision that allows a variable-rate mortgage to be converted into a fixed-rate loan without penalty. Variable-rate mortgages usually cost you less interest over the long term, so this decision is certainly defensible.
A first step in preparing for higher rates is to ask your lender what will happen to your mortgage payments when the prime rate starts to increase.
Vince Gaetano, a mortgage broker and vice-president at MonsterMortgage.ca, mentioned two possibilities. The first is that your lender will adjust your payments higher to cover the increased interest costs and stay within the amortization period you selected when you arranged the mortgage. If your mortgage works this way, all you have to do to prepare for higher rates is clear some room for higher payments.
The second possible result of higher rates is that nothing will happen to your payments. In other words, you're on your own. "The lender won't do anything until negative amortization kicks in," Mr. Gaetano said.
Negative amortization means your payments aren't enough to cover the interest you owe. Whatever extra interest there is gets tacked onto your principal, thereby increasing both what you owe and the payback period for the mortgage.
Even without negative amortization occurring, you can still add years to the payback period. Mortgage broker Jake Abramowicz ran some projections and found that an extra 10 years or more is possible.
There's extra urgency here if you have a 35-year amortization and you made the minimum 5-per-cent down payment. If rates rise substantially and you don't increase your payments, you could be knocking off just a few dollars of principal every payment. "People might as well be paying rent," Mr. Abramowicz said.
There's a third group of variable-rate mortgage holders out there - those who had their payments pegged to the rate of a three-year fixed mortgage. Note: Lenders have traditionally made sure you could afford the higher three-year rate before selling you a variable-rate mortgage. Starting April 19, they'll have to use the posted Big Bank five-year rate.
If you've been making higher-than-needed payments on a variable-rate mortgage, then you've done yourself a huge favour in terms of chipping away at your principal. Just remember that unless you keep tabs on rates, a sustained rise in borrowing costs could remove your cushion and slow your repayment process down.
The simple solution is to bump up your payments to cover off the extra interest cost. Typically, you can increase your regular payments by up to 100 per cent in a year. If you want to pay even more, try a lump sum or use the double-up payments that some lenders allow you to make when it suits you (it's not necessary to pay exactly double your normal payment, by the way).
Mr. Gaetano said that even if the payments on your variable-rate mortgage remain unchanged as rates rise, you'll still receive notices from your lender each time the prime rate rises. This ain't junk mail, people: It's a warning you could slowly be falling behind in getting your mortgage paid off.
Want to avoid the hassle of rate watching? There's always the option of switching to a fixed-rate mortgage. Mr. Abramowicz's take on this idea: "It's never a bad idea to lock in under 4 per cent [for five years]." Rates are going up, so hurry.
Elevator going up
What can happen to a variable-rate mortgage when rates rise and the monthly payments stay the same:
Your current variable-rate mortgage
Details: $200,000 amortized over 35 years, monthly payments, semi-annual compound interest at 1.75 per cent Payments: $636/month Breakdown: principal = $345 and interest = $290
If Prime rises by 1 percentage point and your rate rises to 2.75 per cent
Payments: $636/month
Breakdown: principal = $180 and interest = $455
New amortization: 46 years
| |
|
| Posted on Fri, 05 Mar 2010, 09:15:05 PM in Home buying tips, Marketing strategies | | | |
Looking Ahead
No one likes to think they will get old but we all seem to. Equally, no one likes to think that they will be living in their parents' basement until they're thirty-something! While saving for a mortgage may be the last thing on young minds preoccupied with sports, dating, or academics, it's never too early to plan for the future. A few small steps can become giant leaps towards financial security!
Every dollar counts!
If there are two key words every young adult and teenager should know they are "compound interest". A simple mathematical calculation demonstrates how savings can build. If the initial investment is $100 at a conservative interest rate of 5% per year, by the end of that year the investment will be $105. If the money remains invested through the next year, the investment will grow to $110.25 ($105 x 5% = $110.25). The following year it would be $110.25 x 5% = $115.76. So it is easy to see how quickly an investment can grow. It's a great habit to get into setting aside a certain amount from every paycheck. Regular "payments" to your investment not only result in greater savings, they can help even out the ups and downs of the marketplace. There is nothing worse than investing one large sum of money and immediately afterwards seeing the stock market or interest rates plummet. Also try to think of invested money as being out of reach and avoid dipping into those savings.
Elephants aren't the only ones with good memories…
A credit history can go as far back as the first loan (even those co-signed by a parent) or the first credit card. A bad credit rating can make it hard to lease a car, get a mortgage, or any type of loan. Always pay at least your minimum monthly credit card payment and pay it on time. Of course, the best plan is to never carry a balance. The lure of credit, however, can be too hard for anyone to resist especially for a young adult on a limited budget. If you can establish good habits early, think of how much you will save by avoiding years of paying 18-20% credit card interest. (That's compound interest too, by the way.)
A poor credit rating can haunt you for years but a good rating can help you get a loan or mortgage in the future. Most lenders need to see that a borrower is financially responsible. Credit cards can be a great beginning. Most credit card companies will give accounts to students in their last year of university or most applicants over the age of 21.
Research the area where you would like to live.
No one can predict where the future will take him or her. Society is more mobile than ever. Educational pursuits or new jobs often force people to leave their hometowns and relocate in other cities or provinces. Wherever a person decides to put down roots, it's important to research the market. Talk to local real estate agents. Most will be happy to share their knowledge and experience. Some important questions to ask include How much will I expect to spend in order to purchase a house with a certain number of bedrooms or a certain square footage? What sort of features should I look for in a home? Is there a strong resale market in this area? Also check out the local real estate companies on the Internet to get an idea of local home prices and sizes.
Mortgage Calculators
The best place to start is a mortgage calculator on the Internet. You can simply type in "mortgage calculator" and several options come up. (Ensure that you are using a Canadian mortgage calculator since rules differ between countries. A good calculator can be found at (www.canadamortgage.com.) A mortgage calculator is a quick, easy way to see what you can afford. If you enter an approximate home value and current interest rates, the calculator will show the required monthly payments and the value of the mortgage. By changing the amount of your down payment or the length of the mortgage payment period (amortization period) you can see how monthly payments change. Remember that this calculator only provides general information. When an individual applies for a mortgage the lender will take numerous factors into account including income, length of employment, and of course that omnipresent credit rating!
The tortoise and the hare…
Even if buying a home is years away it's a good idea to start planning today! The slow steady building of your investments pays off richly in the end. Save a specific percentage of your income on a regular basis starting from your very first part-time job. Also try to make payments to your credit card on time and don't carry a balance. Eventually we all get to the finish line but it's nice to get there in style!
| |
|
|
|
|
|
|
|
|
