Interest Rate Hike: 4 Ways Canadians Should Prepare

The Bank of Canada is expected at some point in the year to hike interest rates, and even a small and gradual hike would affect millions of Canadians with car loans, mortgages and lines of credit.

“Definitely not going to take much of a hike to make a difference and impact your payments,” says Toronto-based financial planner Jason Heath. “As soon as there’s a quarter-point increase in interest rates, I think it’s going to have an immediate impact on people’s psychology.”

A Canadian increase would likely follow an American rise in the rates and may not come until the third quarter. But by the end of the year, Canadians could be facing a 1.5 per cent benchmark rate (it’s currently at 1.0 per cent) and higher borrowing costs.

1. Pay down debt

Some consumers may be tempted to make large purchases before the rates go up, but analysts advise against that, saying consumers should instead focus on paying down debt first. 

“I find that there’s a feeling that because interest rates are low, you shouldn’t pay down the debt — what’s the point, what’s the rush? But now may be an opportunity to focus more aggressively on debt repayment while interest rates are low,” Heath says. 

“If you make a lump sum payment against a mortgage or a line of credit, that’s going directly to your principal and reducing the interest you’re going to pay in the future when rates do rise.”

Although people may be tempted to pay down mortgage debt first, they should instead focus on department store or credit card debt where interest rates are much higher and unlikely to be affected by the Bank of Canada interest rate hike.

2. Lock in mortgage or line of credit rates

Common advice, says Ian Lee, assistant professor at Carleton University’s Sprott School of Business, is that those who have a floating-rate mortgage or floating-rate loan should lock in with a fixed interest rate. But the downside, he noted, is having a fixed payment, meaning the principal and interest must be paid back over a specified time, unlike, for example, a home equity line of credit.

“But the question was how will you save more money, and the answer is: lock in your debts,” Lee said. “If you have a variable rate mortgage, switch to a closed rate mortgage and lock it in for as long a term as possible, because once those rates start going up, we’re never going to see them again.”

3. Don’t rush to buy a home

Higher interest rates could also lead to a correction in the housing market.

“The big issue as far as I can see is that people panic and think they have to get into the housing market before interest rates climb. But they have to recognize the overall long-term impact of interest rates actually climbing,” says Laurie Campbell, CEO of Credit Canada Debt Solutions.

Homebuyers who rush out to purchase homes to beat a spike in rates could end up with homes dropping in value.

“I think people have to be vigilant about any big purchases they may be making in the next little while. Housing in particular,” Heath says. “If someone is considering purchasing a house, they have to really look at more normal interest rates during their budgeting.”

4. Sell the house?

Some Canadians have financially overextended themselves in their homes, leaving them barely any wiggle room in the event of an interest rate increase, says Chad Viminitz, an Edmonton-based financial planner and author of Money Assassins.

“To really put themselves in a good financial position, saving a cup of coffee or doing all those things you hear about, is really not going to help,” said Viminitz.

“Because when you already have everything built into your house and into your vehicle and you get a one per cent change in interest rates? Well, a one per cent change on 50 per cent of your spending — you’re in a really really difficult position.”

And it’s a development that could force homeowners to make some difficult decisions, he says. 

“If someone has the courage and that long-term view, and if they just bought a house in the last couple of years and they are really worried about interest rates going up, it may also be the right time to sell and to downsize to something that is more affordable,” Viminitz suggests. 

“And that’ s difficult. But we do come across a few people who said, ‘I need to make a change, because I can’t afford this, and saving money on coffee is not going to do this.'”

 

Source: CBC News

2015 Westman Wedding Expo

Being asked to blog first for the Westman Wedding Expo makes me aware of a common question readers might ask:

Why is Brandon’s only Mortgage Brokerage a part of a wedding show anyway? 

I like to think of it this way; you’re going to the Westman Wedding Expo because you want to plan for your wedding.  You want to see all the exhibitors, their services and you’ve got questions!  This is YOUR day and it’s got to be perfect and you’re going to the experts to make sure it ends up that way.  Well, buying your first home as a married couple is JUST as important.  In fact, for most people, it’s the single most important purchase in your lives so why not have THOSE professionals there too?

But who should use a mortgage broker?  What exactly do they even do?  Why don’t I just go to the bank for my mortgage?  All good questions, so now I have a few of my own:

– Would you rather keep more money in your pocket and not in a lenders pocket from higher interest rates?

– Do you want options on your mortgage that suit your particular needs, not just the one type of mortgage being offered by your lender?

– Do you want the flexibility of getting your mortgage done on your schedule, not banking hours?

If you answered yes to any of those questions then you and one of our 10 local mortgage brokers should talk.  As mortgage brokers, all we do are mortgages.  We don’t open accounts, do car loans, mutual funds, etc.  We’re the very best at mortgages because it’s our only focus.  Getting you the best product to meet your specific needs and saving you money is our only priority.  So drop in and have a coffee from our coffee bar, shoot us an email, give us a call or contact us through our website to chat about how we can help.  You’ve went to all the right people for your wedding and now its time to make sure the next step of your lives together goes just are perfect.

As an added bonus to the blog, our first commercial just came out of production and is ready for the world!  Give it a quick watch, it’s sure to give you a chuckle or two! 

For more information on the 2015 Westman Wedding Expo here in Brandon, Mb, visit the official website HERE. Hope to see you all there!

 

What Affects Your Credit?

Lately I have run into a lot of people who have had some “innocent” issues with their credit. Things that they really had no idea was going to affect them negatively when it comes to buying a house. I thought maybe a little refresher on what will affect your credit would be in order.

1) Payment history – This is one of the most important things to keep on top of. Paying your bills on time is so important. I recently had a young couple looking to buy a house. We got them approved to buy their house but the deal ended up falling apart (they didn’t sell their current house and the offer expired). Just over 2 and half months later, they found a new house for $30,000 less, should be a slam dunk but I had to pull new credit reports, as they have to be pulled within 3 months of your possession date to be up to date. His credit score dropped below the insurer’s guidelines. After reviewing the report, the only difference on his credit report is that he had been late on one payment in the last couple months. That was enough to put it below guidelines and I had to decline their financing. They didn’t realize something so small could cost them their house. Nothing can be done to fix a late/missed payment except for time passing.

2) Debt Load – Do you have a lot of debt? Things like high balances on your credit cards, credit cards being maxed out or several different credit cards with outstanding balances on them can really pull down your credit score. Even if you make all your payments on time, having a credit card that is maxed out or has gone over the limit, never looks good to lenders. At least this category is one that can adjust your score by paying down your debt as soon as possible.

3) The length of time you’ve had credit – Your credit history is another important factor. Typically lenders like to see at least 2 different trade lines (credit cards, loans, line of credits) for at least 2 years! Having a credit card for only a few months, even when paid on time, doesn’t give the lender a very good idea of how you can maintain debt long term. It’s not terribly hard to keep up with your bills for a couple month, but a couple years can be another story. If you have a credit card that you really don’t use anymore, as long as there is no annual fee to keep it open, then just let it sit there. Having a card, in good standing, for a long period of time, always looks good and helps boost your credit score.

4) Applying for new credit – every time you apply for some type of credit, your score can take a hit. Too many inquires (credit report being pulled) in a short period of time can affect your score in a negative way. For example, car shopping! This is a big one. Each dealership you visit will pull a credit report. Every time your credit is pulled, it shows up on your credit report. This is one of the advantages of working with a mortgage broker when shopping for a home. We pull your credit report only once and then submit it to different lenders. There aren’t multiple checks done on your credit.

5) Variety in your credit – By variety, I mean having a mix of different types of credit, credit cards, line of credit, car loans, and personal loans. By having a variety of different types of trade lines, it can improve your score and allow lenders to see how you handle different types of payments.

Hopefully some of these tips can help you work on your credit score so you have an easier time when it comes to purchasing your home. I am always here to help if you have any questions.

Naomi 1

 Naomi Hamm, Mortgage Broker & Partner

 Office: (204) 727-2177

 Cell: (204) 724-7290

 Email: naomi_hamm@centum.ca

Purchase Plus Improvments Mortgage

Found a home that is almost perfect you, if only the kitchen was updated or the bathroom had new fixtures? Now you can update the house in your price range to make it the home of your dreams with the purchase plus improvements program. By allowing you to add the cost of your renovations to your mortgage, your dream home is closer than you think. 

 

Source: Genworth

Five Steps to Selling Your First Home

"For sale" real estate signBuying your first home is a big step. But selling that first home is just as big a step. While it is exciting to be moving on to another home, or a new adventure in life, there’s still a lot to consider when it comes time to sell.

I’ve talked to enough people about selling that first home to understand it can be a stressful experience. But it doesn’t have to be. Follow these basic 5 steps to selling your first home, and you’ll be well on your way.

1 – Secure pre-approval for a new mortgage. I’ve talked about the importance of gaining pre-approval before you start shopping for a home here before. Not only is it a courtesy to your real estate agent that will save the both of you countless hours, it allows you to actually shop within your means. Do this before you as soon as you know you’re serious about shopping for a new home. You won’t be sorry.

2 – It’s important to know your costs. This was true when you bought your home, and it’s still true. Factoring in costs like lawyer fees, land-transfer tax, and mortgage insurance before you close your deal with definitely save you some headache and last minute stress.

3 – Choose the right time to sell. If you feel it’s time to move, plan accordingly, and don’t just jump headfirst into the housing market. In the end, the best time of year to sell comes down to your own needs, but there is certainly an advantage to listing your home in the spring, rather than the late fall or the dead of winter. Give it some thought, and plan to sell strategically if you can.

4 – You’ve made it this far, now make sure your home is ready for sale. There are easy ways to prepare your home for showing, but you need to make sure that it’s ready for that. If you have renos you haven’t finished, get them done before listing. When you’re ready to sell, it’s time to de-clutter the inside of your home, and spruce up the outside. A few small touches here and there can go a long way to convincing a would-be buyer that your home is the just right for them.

5 – Now that your home is ready for sale, it would be ideal for you to sell your house before buying a new one. This isn’t always possible, but the benefits are that you won’t be stuck with two-mortgages if your home doesn’t sell immediately, and you won’t be faced with a tight schedule.

Of course, there are a lot of intricacies involved with selling any home, whether it’s your first or your fifth. If you have any questions about the process, and about pre-approval or costs in particular, give us a call. We’re happy to help you through buying your next home, from step one and beyond.

At CENTUM we are always Looking out for your best interest.

IMG_2894 Chris Turcotte, Owner/Broker

 Office: (204) 727-2177

 Cell: (204) 720-4002

 Email: chris@christurcotte.ca

 

Why More Home Sellers are Listing in January

A slow real estate market and savvy buyers are helping to drive January housing sales

Traditionally, January is a slow month for real estate as most sellers choose to wait until the middle of February in the hopes of capitalizing on the early spring market. However, more and more sellers are opting to put their house on the market in January.

This presents an opportunity for buyers. Most people are reluctant to uproot their families during the school year, so that means less competition — and fewer bidding wars. Lenders will not be as busy, so buyers can expect a more efficient process to get approved for a mortgage to ensure they have financing in place before making an offer. But there are things you simply won’t be able to inspect during the winter.

Here are some tips for protecting yourself when making a deal during the winter months:

Sellers

Spruce up the outside: Use urns with light wood branches to brighten up the exterior of your home, to compensate for any overcast day or snow on the ground. Get rid of the Christmas lights: homes that look dated on the outside give the impression that they are probably dated on the inside.

Make sure your fireplace is working during any showing, that the temperature is comfortable in the home and that any interior lighting compensates for what is usually grey lighting from outside.

Have pictures of your landscaping available from the summer and autumn, showing how beautiful your home looks year round.

Have available any inspections that you may have done on your air-conditioning unit or swimming pool before they were closed for the winter, as buyers will likely not be able to conduct inspections on these items and will have questions.

Consider inviting a company to do an environmental audit on your home in advance, confirming that there is no moisture behind the walls that could lead to mould and that you have sufficient insulation behind the walls.

Buyers

If there is anything that cannot be inspected because of the winter, such as the air-conditioning system or any swimming pool, then negotiate an extended warranty in the agreement, to give you until at least May 1, to inspect and have the seller be responsible for any damages. In addition, also negotiate a holdback of, say, $2,000 so that if a problem arises, the money comes out of that fund to fix it and you don’t have to chase the seller in court later.

Be careful about snow accumulating around the base of the home. It will be difficult for a home inspector to figure out whether the grading is likely to cause water problems in the basement later. Consider doing your own environmental audit to check for moisture behind any walls.

If the snow on the roof looks like it is evaporating faster than the snow around the house, it is likely a sign that there is not enough insulation in the home.

Check with your insurance company early as to whether you will have any difficulty obtaining insurance on the home; for example, by finding out whether there have been claims made in the neighbourhood about water damages or sewage backups.

Check whether snow accumulation makes it more difficult for street parking, as this may be the only parking available on certain streets. Also see how bad weather may affect your morning commute.

Check the last electric/gas bills, to determine how energy efficient the home is in winter. People tend to hibernate and stay at home in the winter, so take the opportunity to get to know the neighbours before you finalize your purchase.

By being properly prepared in advance, buyers and sellers can negotiate a safe and successful winter home sale

 

Source: Genworth

Becoming a Guarantor or Co-signer

Thinking about becoming a co-signer or guarantor to help someone get a house?  Here are some points to consider:

Guarantor

Co-signer

–     Does not have their name on the property title

–     Completes the mortgage application as well as the primary applicant

–     Personally guarantees that payments will be made if the original applicant defaults

–     Can be used if the primary applicant qualifies with their income, but may have credit problems

–     Lenders may offer early release policies that allow the guarantor to remove their name if the original applicant can qualify on their own for the mortgage. 

 

–          Become a co-owner of the property as their name will be on the property title

–          Completes the mortgage application as well as the primary applicant

–          Is accountable for missed mortgage payments, though it is understood that they are not the going to make payments. 

–          Helps the primary applicant if they do not qualify income wise

–          Need to see a lawyer to remove their name from the property title.  Original applicant must be able to qualify on their own for the mortgage

When deciding to become a guarantor or a co-signer it is important to realize, that in either case, it may be a lengthy time commitment and should feel confident in the person they are assisting.

If you have any questions about this or any other mortgage details, please contact us. It’s important to have all the proper information before committing to a mortgage.


 

Canadians Losing Money on their Mortgages

For most Canadians, when shopping for a mortgage the simple solution is to walk through the doors of your local bank or credit union branch.  It seems to be that old saying “better the devil you know” is true.  We believe that the bank, trust company or credit union that we have been dealing with for years is the best place to be.

In fact in 2012 a whopping 72% of people did just that when they were looking for a mortgage.  The result?

Canadians lost over 41 Million Dollars by simply not shopping around for the best mortgage product for their needs.

As consumers, people typically believe that if they get the lowest rate they will save the most money, and that is largely true, but you will notice that we did not mention rate in the above statement.  Why?  Well contrary to what most people might believe, rate is not the single all important item to consider when looking at getting financing for your home.  Things like term, prepayment options, amortization, and payment schedule (to name just a few things) can have a dramatic impact on the true cost of the mortgage you are obtaining.

Canadians are very web savvy consumers when it come to getting a mortgage, in fact 2 in 3 of us will research our mortgage online before we make a decision.  What is not talked about typically is what we are researching and there are two very key items, rate and mortgage calculators.

Rate is pretty self explanatory – we want to find the lowest possible.  Mortgage calculators help us to figure out what we qualify for, what our payment will be, etc.  What we do not do is research what different product options are available, and how those options can impact us – for good or bad.  If you try to find that information you soon discover that it is not so easy, and when you do find some it is very complicated to understand.  It is because of the complexity of mortgages that the majority of people simply put their faith in the banks and are resigned to the fact that taking 25 years and at the end paying almost twice the value of the home is normal.

Mortgage brokers offer Canadians a solution to the stress of shopping around, and they typically do it at no charge.  Their role is to do the work for you and find the right mortgage to suit your financial and home ownership goals.

At Centum Mortgage Choice we believe that all Canadians should have the opportunity to achieve their financial goals and dreams.  It’s why we do not just offer mortgages, rather we offer Home Ownership Solutions.

If you want to discover how you can stop losing money on your mortgage, contact a Centum Mortgage Choice broker today.


IMG_2894 Chris Turcotte, Owner/Broker

 Office: (204) 727-2177

 Cell: (204) 720-4002

 Email: chris@christurcotte.ca