Tips To Paying Your Mortgage Down Faster

Everyone knows they should make extra payments on their mortgage, but life tends to get in the way and make it a low priority on the overall budget.  Most of us will have something they could pay towards the mortgage, yet it doesn’t seem like much compared to the balance, so we spend it on other things…and let’s face it, paying down your mortgage isn’t sexy!

So is it important?  Let me show you an example of the impact of even small extra payments on your mortgage.  For example on a $250,000 mortgage over 30 years at 3.99%, 2 years into the mortgage if you were to start making $100 extra payments alone, you would knock 3.7 years off your mortgage and save $23,468!

So how do make this happen?

One of the easiest ways is to have your Bank or Credit Union deduct a small amount from your pay and have it automatically added to your mortgage or a savings account.  This makes it easier than having to remember every time you get paid to make that extra payment.  If your mortgage is with another institution, you will likely have to use the Savings account to save it up and then contact them to have the money transferred to the mortgage.  Most lenders can take out the extra payment automatically from the account your normal payments come out of.
The other way is to ask the lender to increase your payment amount by $x amount…obviously this is a more permanent solution.

What about Biweekly Payments, or Weekly Payments?
The sooner you make your payment the better.  As well, by paying in an accelerated manner, more money is being paid onto the mortgage, reducing your principal and interest costs.  For example:
$1,000 x 12 (monthly payments) = $12,000/year
$500 x 26 (biweekly accelerated) = $13,000/year
$250 x 52 (weekly accelerated) = $13,000/year
If you can manage this, it makes a significant impact on your mortgage!
Here we see just changing from Monthly to Biweekly accelerated alone knocks 4.1 years off of a 30 year mortgage!

Please note!  Some Bank’s offer weekly & Biweekly payment options which are not accelerated!!  This is useless, as it does not reduce your principal any more than Monthly payments…beware!
Other ways to pay down your mortgage faster!

•    Use your tax return to pay down your mortgage…this can make a big impact on your mortgage over the long term!
•    When you get a pay increase, increase the payment on your mortgage by the same amount.
•    If you receive any “extra” payment or gifts, put them on your mortgage asap!
•    Instead of gifts or presents on your Birthday, your spouse’s Birthday etc, pay extra down…a free & clear home is a much better gift!
•    Check with your lender consistently and ask for a new Amortization Schedule based on your new balance and payments…when you start to see the end date is getting closer (What we call Mortgage Freedom Day!) you will be able to focus on it more.

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

Top 7 Mortgage Tips For Newcomers

After you have immigrated to Canada, making the decision to buy a home can be an exciting but perhaps unfamiliar journey. As a mortgage broker who has worked with many newcomers, here are my “top 7 tips” to help you on your way to home ownership:

1. If you have not done so already, apply for credit. It is very important that you establish a credit report. When considering a new mortgage application, Canadian lenders will look at your credit standing.

2. Gather relevant overseas documents. Depending on your immigration status, you may need to provide copies of your work visa/permit. Make contact with your overseas bank in the event that you may need to provide a bank reference letter.

3. Get organized. Canadian lenders will need a job letter, pay stub or other forms of proof of income like income tax documents. If you are planning to transfer money from overseas for your down payment, you should also allow plenty of time to complete this.

4. Become informed. Research the basic procedures of buying real estate in Canada. For example, are you aware of the rules when buying a stratified property like a condo?

5. Create a budget. Housing costs in Vancouver and Toronto, for example, can be high. A financing budget can ensure your anticipated housing costs are manageable.

6. Get pre-approved. By providing a short application, a banker or mortgage broker can let you know exactly how much of a mortgage you can qualify for. the loans officer will review the mortgage payments, the interest rate and a closing cost budget with you in advance.

7. Use professional services. Rely on professional guidance, not the advice of friends or family members. Buying your first home can be time-consuming and frustrating at times, and the right guidance from realtors, mortgage brokers/lenders and lawyers/notaries can reduce some of the stress and the risks.

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

Discount Mortgages Dry Up As Canadian Borrowers Face Tough Test

The discount mortgages that stoked the Canadian housing boom are disappearing, increasing the likelihood of a correction in home values.

On Thursday, Royal Bank of Canada will hike its five-year fixed-rate mortgage to 3.89 per cent, one day after the Bank of Montreal raised its rate to 3.79 per cent. The other major lenders are all moving in the same direction.

The increases mean the cost of a new fixed-rate mortgage has climbed by more than a third in five months, signalling what could be the beginning of the end of ultra-cheap credit in Canada – and the start of fiscal pain for consumers who have overburdened themselves with debt.

“I think this is the real thing,” said Benjamin Tal, deputy chief economist at CIBC World Markets. “This is the end of extremely low interest rates. They’re simply unsustainable.”

So far, interest rates on other kinds of consumer debt are not on the rise, since they are often tied to the Bank of Canada’s benchmark rate, still sitting near a record low. Even so, the rise in mortgage rates will strain the ability of borrowers to juggle their debts.

“This is the beginning of a test for the mortgage market,” Mr. Tal said. “It’s a test of how Canadians are able to tolerate higher interest rates.”

And it is a test that came on swiftly and unexpectedly. Just five months ago, Finance Minister Jim Flaherty publicly scolded both BMO and Manulife Financial for offering mortgages he deemed irresponsibly cheap, advising against a “race to the bottom,” as mortgage rates sank as low as 2.89 per cent.

While the inevitable climb of mortgage rates has had false starts over the past couple of years, the recent hikes could be the first phase of a long-term trend.

“They’re going up every time we turn around,” said Paula Roberts, a Toronto mortgage broker. “It’s a shock to clients. Everybody just thinks they’re always going to stay low.”

As developing economies such as China falter, the United States has re-emerged as the likely engine of global economic growth. The improving U.S. outlook is already pushing up some lending rates, and should eventually reduce the need for central banks in the United States and Canada to hold down short-term interest rates to spur the economy. As long as the United States is making progress, mortgages here will probably continue to get more expensive.

The Canadian housing market is also still recoiling from regulatory changes Mr. Flaherty imposed in recent years in a deliberate attempt to engineer a “soft landing” for overpriced residential real estate. Last year, he reduced the maximum amortization period for a government-insured mortgage to 25 years from 30 years.

Speaking with reporters Wednesday outside a policy retreat in Wakefield, Que., Mr. Flaherty indicated that he sees no need at the moment for further intervention. “There are some bumps along the road in Toronto and Vancouver, in particular in the condo markets, but overall, I’m satisfied that the measures we’ve taken over the last several years have adequately calmed the markets.”

With multiple forces colluding on raising Canadian mortgage rates, the stubbornly strong housing market could finally relent. “Buying the same house will be more expensive this fall than this spring,” said Peter Routledge, an analyst at National Bank Financial.

An expected rise in rates could spur some to buy homes immediately to avoid the increased costs. Other prospective buyers will find they can no longer afford home ownership. “It’s going to limit the people that can buy,” Ms. Roberts said. “And it’s going to take longer for people to get into the market.”

Demand for homes could fall as a result. After that, the magnitude of the market’s reaction is difficult to anticipate. “Housing markets are prone to overreaction in both ways, the upside and the downside,” Mr. Routledge said. “The possibility that you get a vicious cycle goes up as rates go up.”

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

Buyers Today Want a House for the Long Haul

When Amy Lewis sits in her Lafayette, Calif., home, she can envision her three young daughters growing up there. She sees them forming lasting friendships with the neighborhood kids, graduating from the local schools, coming home for visits during college breaks.

It doesn’t stop there: The 43-year-old can also imagine grandchildren running around the halls.

It’s a different mentality than in years past, when people would buy a home, stay for several years and move up to something bigger or better. First and foremost, Lewis said she and her husband wanted an experience similar to one that they had growing up, one where the neighborhood kids went from preschool to high school together. Her parents still live in the same house they moved to when she was 2 years old (and they’re also flush with home equity in their 80s).

But Lewis adds there is another financial reason to staying put: Mortgage rates are very low, and there is a good chance it will be hard to trade in that monthly payment in several years.

“Definitely, for the next 30 years, we feel confident we want to be there,” Lewis said.

More home buyers today are planting deep roots in their communities, according to research from the National Association of Realtors. That’s especially true for buyers younger than 45 years old—those most likely to be move-up buyers, said Paul Bishop, NAR’s vice president of research.

In 2012, 27% of home buyers between the ages of 25 and 44 and 18% of buyers between the ages of 18 and 24 said that they planned to be in their homes for 16 years or longer, according to a NAR survey of 8,501 home buyers. In a comparable survey in 2006, 18% of buyers between the ages of 25 and 44 and 8% of buyers between the ages of 18 and 24 said the same.

Expectations have adjusted, and trading up is no longer the goal for many, Bishop said. People became accustomed to the move-up mentality when they’d see their neighbors move for extra square footage or a more desirable area. Now, your neighbors probably aren’t going anywhere.

“[Buying a home] is a very complex procedure—much, much more than before,” said Sherry Chris, chief executive of Better Homes and Gardens Real Estate, a national real-estate brand. “People are in it for the long haul, and it’s not just ‘I’m going to buy a house and see what happens in a few years.’”

Added Cara Ameer, broker associate with Coldwell Banker Vanguard Realty in Ponte Vedra, Fla.: “A lot of people tend now to think more logically than irrationally. They are really scrutinizing ‘do I need this?’ They’re looking at hard costs, and not throwing caution to the wind.”

Simple math

For many homeowners, it is a matter of simple math, said Jeff Taylor, co-founder of Digital Risk, a mortgage processor. Today’s buyers are capturing mortgage rates near historic lows—and that’s allowing them to get “double the house” today compared with what they could get several years ago. The monthly payment on a $300,000 mortgage for a home bought in 2005 at a 7% rate is roughly equivalent to a payment on a $600,000 mortgage obtained in 2013 at a 3.5% rate, he said.

These buyers may never even have the desire to refinance in the years ahead, since doing so would likely increase their rate. The Mortgage Bankers Association predicts rates on the 30-year fixed-rate mortgage will rise to 4.8% in the fourth quarter of 2013, and to 5.1% in the fourth quarter of 2014. A decade from now, a mortgage obtained this year will likely look very reasonable, Taylor said, compared with what’s available in the future market.

What’s more, these days home values don’t appreciate at the same rate they did seven, eight or nine years ago, Ameer said. So people don’t plan on their home appreciating by $100,000 in two years, giving them the equity to move up to a bigger home.

That said, “as you’re paying that [mortgage] down and home prices appreciate, 10 to 15 years down the road, that equity will build,” Taylor said. “We’re going to see the home being the nest egg.”

Of course, some homeowners will be tempted to tap their equity during their tenure in the home. For that, those who buy today are more likely to turn to home-equity loans instead of cash-out refinancing, so as to keep their low mortgage rates, Taylor added.

Seeing into the future

The tricky part about buying a home to live in for decades is anticipating your needs at different points of your life. Most importantly, make sure you’re buying in a prime location. A good school district might be important to you, or walkability to public transportation or shopping.

Another telltale sign of a neighborhood where you might be able to live for the long term: Blocks of homeowners who also have deeper ties to the community.

“Every area has those little places where no one moves. It can’t be replicated anywhere else,” whether the appeal is a good school district or highly sought after neighborhood amenities, Ameer said. Typically, “these areas are the best for that, for staying for a longer period of time.”

For Amy Lewis and family, their new neighborhood hits many of those points. In addition to good schools, there are many restaurants, mom-and-pop stores and ideal weather (without the kind of fog that nearby San Francisco gets). In fact, Lafayette almost feels like a “mini San Francisco,” she said.

“I grew up about 40 minutes from here, and it has a similar feel,” she said. “This is a perfect location.”

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

Bank of Canada Rate Stance Could Have Adverse Effect On Housing Market

The Bank of Canada is worried about the risk of a hot housing market. Ironically, it’s a risk the central bank is likely to make worse by changing its stance on rate hikes.

The central bank is keeping its key interest rate at 1 per cent, but decided to remove language in its policy statement that had previously implied it was leaning toward a rate hike down the road. Its decision comes as it weighs, among other things, the prospect of weak exports against the risks posed by overvalued real estate.

It warned of both possibilities on Wednesday, and noted that the latest data suggest the housing market is gaining traction again. While that would give the economy a temporary boost, it could increase the probability of a market correction later on. “Such a correction could have sizable spillover effects to other parts of the economy and to inflation,” the Bank of Canada said.

But by insinuating that interest rates will remain low for longer, and might even sink further, the bank could be fuelling the very problem it is warning about.

“At the margin, it will ease consumers’ nervousness about rising interest rates and therefore can add to the overall increase in credit,” Canadian Imperial Bank of Commerce economist Benjamin Tal said in an interview. He noted that the Bank of Canada’s statement led to a reduction in bond rates Wednesday, which could potentially lead to a very slight decrease in mortgage rates. The yield on the five-year government of Canada bond dropped to 1.737 per cent from 1.795 per cent.

But the key issue is how the bank’s decision influences consumer psychology, said Toronto-Dominion Bank chief economist Craig Alexander. Low interest rates have spurred consumers to rack up record debt levels in recent years. The rise in credit has fuelled a rise in house prices.

In an effort to counteract this, former central bank governor Mark Carney and Finance Minister Jim Flaherty have spent much time warning consumers about the risks of high debt loads.

“The Bank, in the past, has used verbal intervention to try to convince Canadians to be more cautious about their finances,” Mr. Alexander said. “By removing the bias, it reduces the voice the Bank has in terms of warning people that rates will rise at some point in the future.”

In a press conference Wednesday, central bank Governor Stephen Poloz said that he thinks the imbalances with respect to housing and household debt “if left on their own, will gradually unwind.

“We see lots of very positive behaviour at the ground level, people doing their arithmetic, self-policing, strong, strong underwriting in banks and other mortgage institutions, so a very positive thing,” he said. The bank noted that the rate at which households are piling on new debt has continued to slow and is below its historical average.

But Mr. Poloz also noted that it was consumers that did the heavy lifting to pull the economy through the crisis without a major downturn, enabling “extra growth in the housing market.”

“So part of that is a bit of a risk that it gets overdone, or that prices get a little higher than fundamentals would suggest,” he told reporters. “In that environment you have to admit that the risk as we outlined there, if it is worsened, that makes you worry about in some sense having a correction.”

His opinion is that, at the moment, it would take a negative shock from outside to spark such a correction.

Canada’s housing market has defied economists’ expectations in recent months, proving to be stronger than they thought possible in the wake of the sales slump that began in the summer of 2012 after Mr. Flaherty tightened mortgage insurance rules to cool the market off.

But many experts don’t think the strength will last. “We don’t expect the recent upward momentum to carry forward into 2014,” TD economists wrote in a recent note. “Some of the strength reflects buyers rushing into the market to beat out recent interest rate increases, which will result in a payback later this year.”

Indeed, the Bank of Canada said Wednesday that “the recent vigour in residential investment may partly reflect activity that has been pulled forward in anticipation of higher interest rates on mortgages.”

Policy makers will be keeping a close eye on the market. Canada’s banking regulator has spent months now considering potential changes to mortgage underwriting rules.

Mr. Poloz declined to weigh in on specific regional markets, suggesting that it’s not clear just how problematic they are.

“It’s true that we have, across the country, pockets of unusual strength in the housing market, unusual in the sense it’s different from the average, but there may be very good fundamental reasons for it,” he told reporters. As examples, he said it’s possible that a sizable portion of net migration is going to Toronto and creating a solid market for condos there, and strong income growth stemming from oil prices will cause strong housing markets in energy-producing areas of the country.

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

Canadian home sales edge higher in September

Ottawa, ON, October 15, 2013 – According to statistics released today by The Canadian Real Estate Association (CREA), national home sales posted a small month-over-month increase in September 2013.

The number of home sales processed through the MLS® Systems of Canadian real estate Boards and Associations and other co-operative listing systems edged up a modest eight-tenths of one percent on a month-over-month basis in September 2013.

Sales improved on a month-over-month basis in just over half of all local markets, with gains in Greater Vancouver and Greater Toronto offsetting declines in Calgary and Montreal.

Actual (not seasonally adjusted) activity remained roughly on par with the 10-year average in September. The 18.2 per cent increase compared to year-ago levels reflects weakened activity at that time.

Sales were up on a year-over-year basis in about 75 per cent of local markets, led by gains in Greater Vancouver, Calgary, Edmonton, and Greater Toronto.

“Year-over-year increases in the sales over the past couple of months highlights how activity softened across much of the country following the introduction of tighter mortgage rules last summer,” said Gregory Klump, CREA’s Chief Economist.

“While the momentum for sales activity began improving a few months ago, it may be losing steam after having only just climbed back in line with an average of the past 10 years,” Klump added. “Even so, one can see large year-on-year changes when comparing activity to a month like September 2012, when sales dropped to the lowest level for that month in more than a decade.”

Some 340,980 homes have traded hands across the country so far this year. That stands 1.8 per cent below levels recorded in the first three quarters of 2012.

The number of newly listed homes declined by 1.4 per cent on a month-over-month basis in September. Slightly more than half of all local markets recorded declines, led by Greater Vancouver, Fraser Valley, Calgary, Greater Toronto, London & St. Thomas, Ottawa, and Montreal.

The small monthly increase in sales activity combined with a decline in new listings pushed the national sales-to-new listings ratio to 56.1 per cent in September compared to 54.8 per cent in August. While the national housing market has firmed in recent months, it remains in balanced market territory where it has been since early 2010. Based on a sales-to-new listings ratio of between 40 to 60 per cent, about three of every five local markets were in balanced market territory in September.

“Sales activity across much of the country has improved in recent months following a slow start to the year and new listings in some areas have not kept pace,” said CREA President Laura Leyser. “Depending on where they are, there may be a bit more competition among buyers for limited inventory in the months ahead. Because all real estate is local, your REALTOR® remains your best resource for understanding how the housing market is shaping up either where you live or might like to.”

The number of months of inventory is another important measure of balance between housing supply and demand. It represents the number of months it would take to completely liquidate current inventories at the current rate of sales activity. There were 5.8 months of inventory at the national level at the end of September, down from 5.9 months one month earlier. As with the sales-to-new listings ratio, the current months of inventory measure marks a slightly firmer but still well balanced national market.

The actual (not seasonally adjusted) national average price for homes sold in September 2013 was $385,906, an increase of 8.8 per cent from the same month last year. Year-over-year average price gains in recent months reflect the decline in sales activity recorded last year in some of Canada’s larger and more expensive markets which caused the national average price to drop.

If Greater Toronto, Greater Vancouver, and Calgary are removed from the national average price calculation, the year-over-year increase is 4.3 per cent. A better gauge of what’s going on with prices is the MLS® Home Price Index (MLS® HPI), which is not affected by changes in the mix of sales the way that ‘average’ price is.

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

Good Solid Advice About Home Mortgages That Anyone Can Use

When you pursue financing on a home mortgage, there is a lot of information you will need to have. It maybe hard to find good information as you do your searches. Fortunately you will find some of the best tips consolidated in the following article. Read on for more information.

Don't put off a possible new mortgage any longer, or you're just wasting money. Chances are very good that with a new mortgage, you can pay a significantly lower amount of money every month. Look into all your options, shop around, and then decide on the terms that will suit your budget well, and save you the most cash!

Try getting a pre-approved loan to see what your mortgage payments will be monthly. Shop around a bit so you can get a good idea of your eligibility. After this point, you can easily calculate monthly payments.

If a 20% down payment is out of your league, do some shopping around. Different banks will have different offers for you to consider. Terms and rates will vary at each, some will give a lower downpayment, but a slightly higher interest rate. Look for the best mix for your current situation.

Before getting a mortgage, study your credit history. Good credit is what can help you get a mortgage. Obtain copies of your credit history and scores from the three major credit-reporting bureaus. Study your reports carefully to ensure that no issues or errors must be resolved before you apply. Many lenders need a minimum score of 680, which complies with Freddie Mac and Fannie Mae's guidelines. Most lenders want to avoid scores that are lower than 620.

Do not waste time in your home mortgage process. After you've submitted a mortgage application to the lender, this is when your clock start ticking. You have to send any necessary documents for the application process quickly. Any delays could destroy a purchase and cost you your deposit. Get an expected closing date, and then keep in touch with the lender periodically until your loan closes. Some lenders close quicker than others.

Though you may feel a little overwhelmed with financing your home mortgage, you can use the tips you got here to boost your confidence. Most of the stress of home buying is from not fully understanding the process. If you keep the information you got here in mind, you are already ahead of the game.

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

Are You Seeking Information About Home Mortgages? Then Check Out These Great Tips!

If you're looking into home mortgages, then you surely are excited. It's time to buy a home! However, what you might realize is there is quite a lot of information to take in, and how do you sort all of this out to get to the mortgage company and product that you need? Keep reading to find out how to do this.

Don't put off a possible new mortgage any longer, or you're just wasting money. Chances are very good that with a new mortgage, you can pay a significantly lower amount of money every month. Look into all your options, shop around, and then decide on the terms that will suit your budget well, and save you the most cash!

Get your documents ready before you go to a mortgage lender. You should have an idea of the documents they will require, and if you don't, you can ask ahead of time. Most mortgage lenders will want the same documents, so keep them together in a file folder or a neat stack.

Remember that the interest rate isn't the most important part of a mortgage. You also have to think about closing costs, points and other incidentals. There are different kinds of loan as well. That is why you have to find out as much as you can about what you're eligible for.

Get your financial paperwork together before you go to your bank to talk about home mortgages. Not having all relevant information handy can cause annoying delays. The lender will require you to provide this information, so you should have it all handy so you don't have to make subsequent trips to the bank.

Always read the fine print before you sign a home mortgage contract. There are many things that could be hidden inside of the contract that could be less than ideal. This contract is important for your financial future so you want to be sure that you know exactly what you are signing.

Save your money. When you are going to finance a home mortgage, you will need to have some cash for a down payment. The more money you pay down, the lower your payments and interest rates. The down payment goes directly to the principal of the mortgage and is a sum you will not owe yearly interest on.

If you have been wading through the mortgage world wondering what to do, surely now you have a better idea of the type of mortgage you need. It's up to you to pick the best situation for your largest investment. With the tips that have been provided, you should find yourself doing just that.

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.