For example, paying an extra $3,000 once every year toward the principle on a $250,000 mortgage can result in interest savings of $42,443 over the life of the mortgage, assuming a 25-year amortization and a fixed rate of 4.19 per cent.
Thursday, November 5, 2009
Friday, October 23, 2009
Fixed or a Variable Rate Mortgage?
Vancouver BC, Oct. 23, 2009 (Canada NewsWire) - MyMortgageBC.com
Every homebuyer faces the age-old question of whether to choose a fixed or variable rate mortgage. A new report released today by BMO's Economics Department provides valuable insights to help consumers make the right choice.
"The question of whether to lock in to a longer-term fixed mortgage rate or stay in a variable rate has become an increasingly complex and important issue," said Doug Porter, Deputy Chief Economist, BMO Capital Markets. "Short-term rates are at extreme lows and pressure is likely to build for higher rates in the year ahead."
According to the report, over the past 30 years it has been more cost-effective for borrowers to have a variable rate mortgage 82 per cent of the time. However, under the current environment, Porter points out there are a number of factors to consider before assuming the variable rate is the hands-down winner:
- Canada has been in a long-term declining rate environment since the
early 1980s.
- The Bank of Canada's overnight rate is now as low as it can go, so
there is no further downside for variable rates. The surprises can
only be to the high side from here.
- Fixed rates were advantageous during only two recent periods -
through the late 1970s and in the late 1980s; in both cases ahead of
a period of rising interest rates, as is the case now.
The Case for Staying Fixed A conventional fixed rate mortgage can mitigate a number of risks. Although inflation hasn't been a problem since 1991, there is a risk of an inflation flare-up as global central banks keep the pedal to the policy metal, and amid record government deficits. The Bank of Canada could be forced to raise interest rates aggressively, driving variable mortgage rates higher, but leaving Canadians with fixed rates unscathed. Plus, fixed rates are currently attractive given that short-term rates are already as low as they can go. The Case for Going Variable The advantage to a variable rate mortgage is that it has been consistently less costly over time. As well, the current outlook for inflation remains benign, which will likely keep price pressures at bay well into 2011. The soaring Canadian dollar is putting additional downward pressure on prices, reducing the near-term need for the Bank of Canada to raise rates. There is also some risk to locking in as fixed rates could fall if the economy performs worse than anticipated. Even as rates start to rise, Canadians can always lock into a fixed rate at a later date.
The Verdict The decision depends on the individual. For those who don't have a lot of financial flexibility - such as first-time home buyers and those who would run into difficulty from an upswing in interest rates - the moderate extra cost of peace of mind you can get from a fixed rate may be a price worth paying. There is also a reasonable scenario where fixed rates may actually prove to be a cheaper alternative at this point. However, BMO Economics' core view is that the most likely economic and interest rate outlook will ultimately again slightly favour the variable rate option. That's particularly the case given the variable rates being offered, such as BMO's current rate of 2.25 per cent for a five-year variable mortgage.
"The most important thing a current or first time homeowner can do is talk to a knowledgeable mortgage expert about their situation and make decisions based on their stage in life and their particular circumstances," said Jane Yuen, Senior Manager, Mortgages, BMO Bank of Montreal. "So come in to a branch or contact a mortgage expert to decide on the type of mortgage that is best for you at this point in your life."
Brent Irving
Mortgage Expert
Your friend in the mortgage business
Tel: 604-764-6336
Fax: 604-541-6323
Toll Free: 1-888-665-1344
Email: birving@dominionlending.ca
Wednesday, September 16, 2009
Interest Rate Forecast
When the Bank of Canada does start raising its key policy interest rate in either late 2010 or early 2011, Canadians should brace for “aggressive” increases of up to a percentage point at a time, says a report from the Chief Economist at Laurentian Bank Securities.
The call, from Carlos Leitao, adds a new wrinkle to the debate as to whether the central bank will be able to keep its pledge to leave its key policy rate at 0.25%, or the lowest level possible, until June 2010 in an effort to stimulate the economy. This analysis kicks off a debate in terms of how aggressively the central bank needs to act once it believes rate increases are in order.
The Montreal-based economist said he believes Mark Carney, the Bank of Canada Governor, will be able to keep his June 2010 promise, based on the amount of spare capacity in the economy and continuing job losses that are likely to peak early next year. The Bank of Canada is likely to begin hiking rates after unemployment peaks (in early 2010) and before inflation hits the preferred 2% target (sometime in mid-2011). Once that period comes, Canadians should prepare for steep rate hikes.
“An aggressive tightening – rather than a gradual one – will be necessary because rates are extremely low,” Leitao said in LBS’s weekly note to clients last week. “A ‘measured pace’ would not be appropriate to ‘normalize’ rates when the starting point is virtually zero.” – Financial Post
The Bank of Canada indicated Thursday it has become more confident about the economic recovery in this country and abroad, adding growth in Canada in the second half of this year could exceed previous expectations.
But the central bank warned “persistent strength” in the Canadian dollar remained a risk to growth, and it retained “considerable flexibility” through monetary policy to deal with a high-flying currency if necessary.
The upwardly revised outlook was delivered in the Bank of Canada’s latest interest-rate statement, in which it, as widely expected, left its benchmark rate unchanged at 0.25% and said the rate is expected to remain at that level until June 2010, pending the outlook on inflation.
In its last statement in July, the central bank said a number of factors, from aggressive monetary and fiscal policies to improved financial conditions, were spurring an uptick in domestic demand, but added that a recovery was “nascent”. – Financial Post
Monday, August 10, 2009
Buying a Home Versus Renting a Home
Buying a Home Versus Renting a Home
At some point in their lives, most Canadians have probably asked themselves whether it is better to buy or rent a home. And purchasing a home is one of the biggest decisions most people ever make.
Ultimately, the decision is a personal choice, but it helps to look at the pros and cons of buying to determine whether home ownership is right for you.
Some advantages of buying a home
Owning a home is generally considered to be a sound, long-term investment that can provide satisfaction and security for you and your family.
Each month when you make your mortgage payment, you are building equity in your home. Equity is the portion of the property that you actually build through your monthly payment versus the portion that you still owe the lender.
At the beginning of your mortgage, more of your payments go toward paying off the interest and less toward paying off the principal. But the longer you stay in your home and the more mortgage payments you make, the more principal you pay off and the more equity you accumulate.
Most mortgages also offer you the option of making additional monthly or annual payments to reduce your principal faster. Some prepayment privileges, for instance, enable you to pay up to 20% of the principal per calendar year. This will also help reduce your amortization period (the length of your mortgage), which, in turn, saves you money. You should always consult a mortgage broker when considering getting a mortgage.
There is also a tax advantage. If your home is your principal residence, any profit you make when you sell it is tax-free. A home can appreciate – or increase in value – as time passes, building more equity. As you build up equity, it’s usually easier to upgrade to a more expensive home in the future thanks to the profit you’ll make when selling your current home.
As an owner, you can also decorate and improve your home any way you like. Ownership tends to give you a sense of pride and can offer you and your family stronger ties to the community.
If you do decide that home ownership is right for you, it’s important to choose a home you can afford. If you can’t afford to buy your dream home, purchasing a more modest home can be a great place to start building equity that one day may allow you to buy the home of your dreams. Since we’re currently in a buyer’s real estate market and interest rates have been dropping, now may be an ideal time to enter into home ownership for the first time.
Some disadvantages of buying a home
Since it’s easy to get caught up in the excitement of buying a home, it’s important to remember that home ownership has some additional responsibilities as well.
For one thing, a home can be expensive. Chances are, your monthly payments will be more than what you are currently paying in rent when you factor in such things as your mortgage, property taxes, repairs and general maintenance.
Owning a home ties up some of your cash flow and is likely to reduce your flexibility to move to a new location or change jobs. While your home might increase in value as time goes by, don’t expect to get a big return quickly.
There are no guarantees that your home will increase in value, particularly during the first few years. In the beginning, you could actually lose money if you sell because your home may not have appreciated enough to cover the real estate fees, and moving, renovation and other selling costs.
Real estate is, however, usually considered a good investment over the long term. When making the decision about whether to buy or rent, it’s important to carefully choose a home you can afford, and then weigh the pros and cons. Millions of people enjoy the rewards of home ownership but, ultimately, it’s a personal decision based on your own priorities.
If you’re thinking of buying your first home, as a mortgage professionals I can answer all of your mortgage-related questions.
Brent Irving
Mortgage Expert
Your friend in the mortgage business
Tel: 604-764-6336
Fax: 604-541-6323
Toll Free: 1-888-665-1344
Email: birving@dominionlending.ca
Tuesday, July 14, 2009
Update on Mortgage Rates
This edition of Weekly Rate Minder has the latest, best rates for
Canadian mortgages. At Dominion Lending Centres, we work on your
behalf to find the mortgage that suits your needs. Best of all our service
is "free".* It's the selected lender that pays us and YOU
get the best rate. *(O.A.C., E.&O.E.)
>
Our Best Rates
Explore Mortgage Scenarios with Helpful Calculators on
http://www.BrentIrving.ca
TERMS BANK RATES OUR RATES
> 6 Month 4.60% 3.95%
> 1 YEAR 3.75% 2.75%
> 2 YEARS 4.05% 3.05%
> 3 YEARS 4.65% 3.59%
> 4 YEARS 5.14% 4.89%
> 5 YEARS 5.85% 4.19%
> 7 YEARS 6.80% 5.35%
> 10 YEARS 6.90% 5.25%
Rates are subject to change without notice. *OAC E&OE
PRIME RATE IS 2.25%
VARIABLE RATE MORTGAGES FROM AS LOW AS PRIME + .30%
Please note that rates shown above are subject to change without
notice. The rates shown are posted rates and the actual rate you
receive may be different, depending upon your personal financial
situation. Check with your Dominion Lending Centres Mortgage
Professional for full details and to determine what rate will be
available for you.
*O.A.C., E.& O.E.
Brent Irving
Mortgage Expert
Your friend in the mortgage business
Tel: 604-764-6336
Fax: 604-541-6323
Toll Free: 1-888-665-1344
Email: birving@dominionlending.ca
* We are Canada's premier online mortgage lender, and one of the
fastest growing mortgage companies nationwide!
* Our Brokers are Experts in their field and many are ranked amongst
the best nationally.
* We close loans in all 10 provinces and 3 territories.
* We can process your mortgage in as few as 7 days.
* We have more than 100 mortgage programs making it easy to choose
the best fit for your situation.
* We are the preferred mortgage lender for several of Canada's top
companies.
* Dominion Lending Centres' Mortgage Experts are available anytime,
anywhere, evenings and weekends; we'll even come to you!
Wednesday, July 8, 2009
Mortgage Rate Prediction Update
BC Real Estate Association’s latest Mortgage Update issued in mid-June
“You just might find the answer to: Where do we go after hitting bottom? BCREA anticipates rock-bottom mortgage rates should move up in the quarters ahead—particularly for longer fixed term mortgages. BCREA is predicting a cumulative rate increase of 75 basis-points by the end of 2010 as economic prospects improve and global interest rates rise from record lows. The report indicates that inflation in Canada, although expected to remain relatively low, will start to rise resulting in a modest increase in medium term interest rates.”
As a mortgage broker in Vancouver BC I don't feel that the BCREA's prediction that fixed mortgage rates will rise in the upcoming quarters is very bold. We're regressing back to the mean from all time low mortgage rates.
Brent Irving
Mortgage Expert
Your friend in the mortgage business
Tel: 604-764-6336
Fax: 604-541-6323
Toll Free: 1-888-665-1344
Email: birving@dominionlending.ca
Web: www.BrentIrving.ca
Tuesday, July 7, 2009
Mortgage brokers do the work for you
Mortgage brokers do the work for you
How does a mortgage broker do it and how they charge for their services
Why should I use a mortgage broker? It's a question I hear often. It's a fair question and hopefully I'll help shed some light on the benefits.
In Canada, about 30% - 35% per cent of all mortgages are done through mortgage brokers. In the US and Europe the figure is closer to 75%.
Unfortunately, in Canada, most people go about getting their mortgage by walking into their local bank and filling out the paperwork and often think they've just received the best deal.
Often that best deal is for the bank, and not you. When you go to your local bank, you'll be shown the mortgages products only offered by your bank. With the large number of lenders and vast array of mortgage options available today, just walking into your bank is a strategy that just doesn't make sense anymore. If you don't work with a qualified mortgage broker you'll never know what other mortgage options are available. As a mortgage broker, I with the major banks and also lenders that specialize in mortgage lending which also offer different types of mortgage products. With all these options available to you utilizing a mortgage broker's resources, you can be assured that you'll receive the best rates and mortgage products to match your individual credit and financial situation. In days gone by, it was thought only those who had poor credit ratings sought the help of a mortgage broker to obtain a home loan which is no longer the case. Today's mortgage borrower realizes that using the services of a mortgage broker will not only save them time and aggravation, but in most cases will save them a substantial amount of money throughout the term of their mortgage. Mortgage brokers can work with borrowers of all credit types and specialize in finding a mortgage of any size and type on any given day. A service I also offer to my clients as a mortgage broker is that I'll work with my clients on credit issues to improve their ability to obtain financing. They connect you to a lender and help you navigate through the steps the lender requires of you as well. You are better off going through a mortgage broker and letting them do the legwork to find you the best deal available. We're an advocate on your side during the mortgage borrowing process.
One of the great things about dealing with a mortgage broker (like myself) is that we will be happy to take whatever time is necessary for you to understand all the options and requirements for mortgages and the home buying process. The mortgage broker's experience will be able to identify the positives and negatives associated with all the mortgage options available to you. The mortgage broker is a negotiator and will make your case to the appropriate lenders if your situation should contain some financial or credit challenges. In most cases, the mortgage broker's negotiations will result in better terms or rates for those in situations that leave them not up to bank quality. In most cases a mortgage broker does not cost you money and is paid by the lender. In some cases where he/she has to go to a private lender, or a lender who does not provide compensation for the mortgage broker's service, payment is made by clients and taken out of the mortgage's proceeds. If the mortgage broker ever charges a fee it should be disclosed early in the process so there are no surprises.
Mortgage brokers build their business on referrals, providing personalized service and education to their clients, which larger banks are simply unable to provide. Because of this, you can rest assured that your mortgage broker has your best interests in mind with everything they do. Most mortgage brokers will work with you and your schedule. We know how busy you are without the added inconvenience of a 9 a.m. to 5 p.m. window to get mortgage advice. If you can't come to the mortgage broker, the mortgage broker will come to you.
By providing you with "one-stop shopping," a mortgage broker can get you a good deal and educate you along the way. If you are looking for a mortgage, discuss your needs with a mortgage broker and see what kind of deal they can offer you -- you might be pleasantly surprised at the results.
So let's recap. Who should use the services of a mortgage broker? Everyone from the investor looking to use the equity in their home for further investments, to the self entrepreneur who needs someone to understand what running a business is all about and the financial challenges that go with it. The first-time homebuyer will find a wealth of information and mortgage products through a mortgage broker. Such buyers will find options like purchasing with no down payment, cashback mortgages -- and even debt consolidation programs which will enable a purchase in the near future.
Contact me anytime and see why more and more people have discovered that using a mortgage broker just makes sense.
Brent Irving
Mortgage Expert
Your friend in the mortgage business
Tel: 604-764-6336
Fax: 604-541-6323
Toll Free: 1-888-665-1344
Email: birving@dominionlending.ca
Web: www.BrentIrving.ca
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