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An “interesting” start to 2017

As January has seemed to fly by, I thought I would pass along a few ideas on saving money and paying less interest.

Awareness is the key. You would be shocked how many people I speak with who don’t know what is owing on their mortgage and more importantly what is owing on their other debts. Credit cards and Lines of Credit (secured and unsecured), being the biggest headaches/threats to our financial independence. It is likely that we feel better not knowing how much we owe, where in fact knowing is the first step towards getting out of debt.

Your 2016 End of Year Mortgage Statement will be coming to you soon- check your current balance and be aware of how much you paid in principle and interest last year. Force yourself to make one extra payment a year, and it will save thousands in interest over the term of the mortgage.
If you are currently paying your mortgage MONTHLY, change to an accelerated bi-weekly basis, this alone forces the extra payment each year without you really feeling it.

On the topic of interest cost, if you are carrying a balance on CREDIT CARDS, look at a monthly statement on them as well. The banks now must disclose the length of time in years to pay the card balance to zero, with making minimum monthly payments.
It can show a depressing length of time! So if you’re carrying card balances, work on those and forget about paying any extra against the mortgage. Try and automate the monthly credit card payment with a set larger amount. You will get used to it, and in no time, start to see the balance start to drop. The high interest rate of credit cards, should make them the priority over paying extra principle on a mortgage.

Regarding savings, start with looking at who you do your banking with and what your monthly account and cheque fees are. Monthly bank account fees can easily be from $10 to $50 dollars. A set of cheques alone can be $30.00.
For the last 15 years or more I have dealt with Presidents Choice Financial for my banking. There are NO BANK ACCOUNT FEES, and they give you your cheques for FREE. You can access your money either online(an easy to use on line platform) or from an ATM at any CIBC bank branch, Loblaws or SuperStore. If you don’t want P.C. Financial, then take a look at Tangerine. It is owned by Scotia Bank and runs on the same concept as P.C does- NO-FEE BANKING. They also offer high interest savings accounts.

I believe the most reliable and easiest way to save money is to automate the process. Pick a monthly amount, anything is better than nothing, but make it a reasonable amount. Then schedule for that amount to be automatically transferred out of your everyday chequing account into a savings account that you don’t have easy access to. With the transfer of money into savings done for you, you won’t even miss the money. Start today, and save for that well-deserved holiday or RRSP contribution.

If nothing else, take that change out of your pocket or purse each day and throw it in a bottle. You will be amazed how quickly it adds up. Remember that a dollar here and there is always better in your pocket than someone else’s, especially the big bad banks!

So that’s my two “sense” on paying less interest and saving money!

Who Governs Mortgage Brokers in Ontario?

mortgage-lawWho Governs Mortgage Brokers in Ontario?

I would love to assume that in a perfect world, and in all lines of work, you would have customers who use services from professionals, and always have extremely satisfying experiences. You would think that having a satisfied client is what keeps people coming back, and therefore all professionals in business would want that result. But in reality, there are bad apples in every business, and with that comes dissatisfied clients.

So when a friend asked me about who governs my business, and where does someone who has had a bad experience go to report it, I figured this was a great opportunity to let people know.

The Financial Services Commission of Ontario(FSCO) licenses mortgage brokers, agents, brokerages and administrators in Ontario. The “Mortgage Brokerages, Lenders and Administrators Act” requires all individuals and businesses in Ontario who carry out mortgage brokering activities to be licensed with FSCO.

See the site link below…

In the center of the page under “How the mortgage broker law protects you”, and “Resolve a complaint about a mortgage broker, agent, brokerage or administrator” you will find explanations about the responsibilities and rules governing mortgage professionals. You will also find the procedure for filing a complaint regarding a mortgage related transaction. You can even search the name or licence# of a mortgage agent or broker on this FSCO site to confirm that they are in good standing.

As a mortgage professional, we are licenced as either a Mortgage Broker or a Mortgage Agent.

A mortgage broker, requires more educational requirements than an agent, longer work experience, and is able to apply to operate their own brokerage.

A mortgage agent is only licenced to operate through a mortgage brokerage.

If you ever have a complaint, your first call or letter should be to the owner/operator of the brokerage that your mortgage professional works under. The owner of the brokerage (the broker of record), has in his/her interest to resolve any complaints of the agent or brokers who work under him/her, as it is their licence that could be impacted by his/her employee’s actions.
If you are not satisfied after dealing directly through the brokerage , your next step would be to make the complaint directly through FSCO.

The wrong or incomplete advice given to that friend of mine, I’m afraid can still happen today. Even with the stricter guidelines of disclosure today, if the mortgage professional chooses not to follow them, trouble can arise. The reality is, as in her case, she is told one thing in a general statement, not in writing, and the end result becomes different and costly. Someone’s life impacted by one bad apple.

So in summary, all I can say again is to read carefully what you sign, and if concerns about anything, get it in writing.
Most importantly, ask questions if you don’t understand what you are told.

If you are using a mortgage broker or agent, google them, and search for reviews on the individual. The likelihood is greater that if you have good reviews on a business or individual, your experience should also end well.

Our job is to provide a mortgage service that always ends with a positive experience for you the borrower. Then and only then will you come back personally or refer us your friends and family.

As always, feel free to call and ask questions “almost anytime” on my cell, 613-222-2624.

Dan 🙂

Mortgage Penalties- Do I Break During Term

I thought I would remind everyone about the cost of penalties when breaking a mortgage during term. A lot of people think that one lender is the same as the other, but you can be terribly wrong with that mindset. The Globe and Mail published an article called “The Hidden Trap of Mortgage Penalties” and is worth reading. It is likely a wake-up call to most.

When you go to one of the Big Five banks web sites and look at their mortgage rates, a 5 yr fixed term with most is 4.64%, where as if you go to some of the other trust and credit Unions(we call them Mono Line lenders),a posted 5 yr fixed rate can be as low as 2.69%. As the article points out, it is these “posted” rates that can dramatically affect your penalty when the IRD(Interest rate differential) part of the penalty formula is used.
Just another reason you should shop around and talk to a good mortgage broker(hopefully me 🙂 ) and NOT just your banker.  Have a mortgage question? Please feel free to drop me a line anytime, 7 days a week.

Remember When, What Have We Learned From High Mortgage Rates

This is a great Globe and Mail article taking us back a little in the history of mortgage rates…
Yes rates will go up, but the debt we have is what we have. Simply be aware and start to manage it responsibly.
If you have it now, minimize future borrowing especially for unnecessary items. Now, in a time of low rates is the best time to crack down and pay down the debt, when more of your hard earned dollars will go to the principle and less to interest.

Consolidate loan and credit card debt where possible and maximize payments to pay the debt off sooner, again, minimizing your interest cost. If necessary, use the equity in your home to consolidate debt, but keep the amortization of the mortgage short so that the debt is paid off quickly.

Don’t consolidate debt into a secured Line of Credit with interest only payments. Even at a low rate, interest only payments will never make the debt go away.
Remember we currently have the lowest rates in history. Plan your financial future wisely.

Bridge Financing OR Refinancing Your Home?

I often hear the question, can I use bridge financing if my house doesn’t sell? There is a common misunderstanding about what is, and when “bridge financing” is used, so I thought I would help in clearing this up.

To clarify, bridge financing is used when you have purchased a home, for example closing August 1st, and you have your current home unconditionally sold, closing Sept 1st, one month later than your purchase date. It is this short period of time between the purchase of a home and the sale of a home that bridge financing fills the gap.

The key is that the house you own is UNCONDITIONALLY SOLD, meaning you have an accepted agreement of purchase and ALL conditions that are part of that agreement have been waived by the purchaser (i.e. building inspection and financing clause).

In this scenario it is a simple bridge. The same lender that is giving you your mortgage on the new home, will lend you your expected down payment from your sale (that you won’t get till your house sale closes) on a short term bridge loan at a minimal cost. A setup fee of approximately $250 and interest of up to Prime +4% is commonly charged but can differ from one lender to the next. Depending on the size of the bridge loan required, and the lender you use (let’s assume over $100,000) the lender also may require your lawyer to register the loan as a mortgage against your residence.

If your existing home is NOT sold, then bridge financing is NOT available.

In this scenario you have to simply REFINANCE your home if there is sufficient equity in your home to borrow the down payment. Remember that you can ONLY REFINANCE up to 80% of a property’s value, therefore you’re not always able to refinance a home for down payment when it does not sell.
You must also qualify with income and credit when refinancing which can be an issue at times when you are carrying two properties.

Refinancing requires a mortgage to be arranged on your existing home. It often involves paying for an appraisal of your home and a lawyer to register the mortgage.

It is very important to look at this worse case scenario when purchasing a home without a condition of selling your existing home. And I’m afraid this is usually the case when purchasing a builder built home a year down the road. If you don’t have the ability to borrow the down payment from your home or access it from family if your home doesn’t sell, or qualify to carry both properties, then you really should reconsider the whole purchase.
The ideal scenario is purchasing a home with a condition of selling your existing home. This way eliminating any concerns.

For all of you out there that have purchased already, closing down the road, and have a home to sell, make sure you look into the worse case scenario(of your home not selling before your purchase date) with your lender. It is best to know your options earlier than later. Plan ahead and get your house listed (ideally with a knowledgeable REALTOR) with plenty of time to sell, and make sure it’s priced right for the market. Today is currently a buyer’s market.

I am currently seeing more scenarios of houses NOT being sold, and unless planned for, it’s not a position you really want to be in.