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Save on Interest Payments
 If you ever watch HGTV Canada, you’ve most likely seen shows like “Til Debt Do Us Part” or Slice channel’s “Princess” – shows that bring in a professional to help people come to their senses and manage their debt.
Everywhere you turn these days, you’ll hear people talking about debt. The economic crisis in the United States and Europe has shone a light on just how volatile markets can be if not managed properly. Now that it’s after the holiday, you’re probably feeling a little pinch in your wallet as well.
Not all news is doom and gloom though. A recent report by Equifax Canada says that Canadians are doing a lot better in paying off credit card debt. It shows that we are taking heed of all the warnings about rising Canadian debt.
That being said, we need to make more of an effort to curb our debt. It was mentioned on the radio that many Canadians have actually made debt reduction a New Year’s resolution. How many succeed remains to be seen, but there are options out there to help you manage your spending and debt. Most solutions will require you to cut back your lifestyle and stop spending so much money! The solution seems logical, but it’s not always attainable.
At CENTUM, we want to help our customers figure out a blue print to manage their finances and become debt free faster WITHOUT having to cut spending. We’ve created a partnership with the SMARTEquity™ Program to help you ultimately pay less interest on your mortgage and other debt.
The SMARTEquity Program provides both online software and personal consultation to create individualized scenarios based on personal financial parameters with built-in flexibility and variability. Through the service, you as a CENTUM client would be assigned a Certified SMARTEquity Coach to help plan out monthly payments and track your progress.
It’s a great tool for anyone who has a mortgage and is interested in reducing the amount of interest they pay in a lifetime.
Come talk to us to get more details on how you can use SMARTEquity to your advantage.
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What Happened in 2011?
It’s that time of year again. The market slows to a crawl as Canadians prepare for the holiday season, and we all stop to reflect on the year that has passed. What did 2011 mean to CENTUM and to the mortgage industry? When we think about it, one word comes to mind as the best description: Change.
The vast majority of Canadians have been sheltered from the economic turmoil seen around the world this year. There has been an ongoing debt crisis in Europe and the United States. There has been a significant shift to the political landscape in the east, most notably, the Middle East. Those feeling disenfranchised are now participating in the worldwide OCCUPY movement, which has been experienced in all major Canadian cities, and though most of them are now fading into memory, there is still a movement against the burgeoning separation between the rich and the poor.
This is even more evident with the release of a recent Statistics Canada report that states that Canadian Household debt has reached a record high. With ever increasing debt levels and continued instability, more and more Canadians are in jeopardy of overextending themselves. So far, the Bank of Canada has held interest rates at a historical low, but there is speculation that interest rates will rise in 2012.
Efforts have been made to rein in debt, starting with changes to the mortgage rules. In January of 2011, the Government of Canada announced adjustments to the rules for government-backed insured mortgages. The maximum amortization period was reduced to 30 years. The maximum amount Canadians can borrow in refinancing their mortgages was reduced to 85% of the value of their home. Lastly, government insurance backing was withdrawn on lines of credits secured by homes, like home equity lines of credits. There was fear that the adjustments would hurt the housing market in Canada, but as we’ve seen, it’s been fairly stable around the country.
So what’s in store for the industry in the future? Debt reduction will continue to be a big topic in 2012. Technology and social media will continue playing a big part in creating competition in the mortgage industry. Our clients have access to more information than ever before and CENTUM Mortgage Professionals will be here to help you make sense of it all. CENTUM will continue to be an industry leader in providing their Network with tools and programs that will help our clients manage debt levels and become mortgage-free faster.
We are here to look out for your best interest.
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“Snowbirds” Escape for Winter
 Everywhere you turn, people are talking about the economic slowdown and if it’s still a good time to buy that vacation home in the U.S. or someplace else. According to the National Association of Realtors, Canadians were the biggest foreign buyers of American real estate in 2010. That shouldn’t be surprising considering our proximity and the strong Canadian dollar.
Real estate companies in places like Florida or California are regularly holding special information seminars for the “snowbirds” interested in finding that escape for winter months. For those considering taking advantage of low housing prices in many parts of the world, do your research before you jump into the market.
Whether it’s in Florida, Hong Kong, or even a cottage by the lake in Canada, make sure you’re informed of all the factors that may affect you as a property owner.
Local Rules and regulations
Many countries have limits on how long you can stay or whether you need a visa. If you own a vacation property in the U.S. you may fall under the “Substantial Presence” rule, which could result in having to file taxes with the IRS. You may also have to pay capital gains when you sell the property. Speak with a local real estate professional to understand what you need to take into consideration.
Taxes
Depending on where you are purchasing a vacation home, there may be tax implications that you need to be aware of. For example, you may be responsible for “non-resident property taxes” if you purchase in Florida or California.
If you’re thinking about renting out your vacation home, your rental income may be subject to local taxes and must be reported on your Canadian personal income tax return. It's important to maintain records of any related expenses that you may have with the vacation property. Talk to a local tax specialist to find out the tax implications of owning a vacation home in the area.
 Financing Options
There are many financing options available for people looking to buy a vacation home, but if you’re buying outside of Canada, getting a mortgage isn’t one of them. Canadian lenders do not provide mortgages for properties outside the country. Many Canadians have found financing through a home equity loan, but this option is not for everyone. Some places like the U.S. will allow non-residents to get a mortgage. Start by talking to your mortgage broker or lender.
A vacation property can be a great investment and a perfect excuse to escape life’s daily routines. Staying informed will help you make better decisions on where that vacation home should be and if it fits your lifestyle.
CENTUM Mortgage Professionals may be able to help you get started in your search for that perfect vacation home. Contact an office near you to get started.
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How Do You Choose Which One is Better - Fixed or Variable?
 As promised in our blog last month, I thought we would do an overview of fixed versus variable rates, as this is a constant water cooler topic. As predicated, lenders have made significant changes to variable rate products. Most of the leading lenders are still offering prime rates at 3.00%, and five-year fixed mortgage rates are hovering in the 3.40% – 3.69% range.
What does this mean to you today? Taking a mortgage balance of $100,000.00 and a 25 year amortization, your payment:
- Based on variable rate 3.00%, would be $473.01
- Based on the current five year fixed rate of 3.69%, would be $509.35
The cost savings for this example would be $2180.40 over a five year term.
Now, looking back to one year ago when lenders were offering .90% below prime the cost savings were far more tempting, using the same data as above, the cost savings over a five year term would be $5043.60.
Remember, this is based on a mortgage for $100,000.00, so if you owe $300,000.00 then you would triple the savings for a total savings over five years of $15,130.80. So you should be able to see from these examples why the masses have opted to pay the lenders’ penalty and move into variable rate mortgages.
How do you choose which one is better - fixed or variable? The answer can be as simple as looking in the mirror.
- Would a potential increase in your current mortgage payment cause you hardship?
- Would the unknown or constant media attention for pending increases in Bank of Canada rate cause you stress?
- Do you have a low risk tolerance?
If you answered yes to any of these questions then a variable rate mortgage is possibly not the best choice for you.
Although historically variable rates mortgages have provided a lower rate versus fixed it doesn’t mean that variable is for everyone. There is a certain amount of risk associated with variable rate mortgages and the effects that an increase can have a direct impact on your monthly expenses. That means that when choosing a variable rate product, it’s important to ensure that you have a cushion to protect you against payment increases. Fixed rate products give you the guarantee of a set payment for the term of your mortgage.
 Variable rates do offer historically lower rates, and that can often translate into long term savings in the amount of thousands of dollars. If you can comfortably weather any possible rate changes or increases then variable rate products are the way to go. If not, then staying with a fixed rate and a set payment could save you a lot of needless stress and worry over your mortgage.
An independent Mortgage Professional, like a CENTUM Mortgage Professional, can provide you with the information you will need to make an informed decision on how to best approach the question of Fixed verses Variable.
According to CanEquity, the average five year fixed rate mortgage taken over the past 10 years is 6.35%, whilst the variable option taken over the same time period shows and average of 4.24%
What does this mean to you in dollars? Based on the 10-year average mortgage rates mentioned above, a $100,000.00 mortgage and a 25 year amortization, if you chose a variable rate mortgage and you stuck it out for the full 10 years then you would have saved $12,165.00 versus staying in the fixed rate mortgage.
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Giving Thanks to Low Mortgage Rates
 At this time last year, sitting around the feast laden table, many economic forecasts indicated that mortgage rates would be on the rise in 2011. Here we are on the fleeting end of the year and rates for the most part have remained at a historical 30 year low.
Although prime rate remains unchanged, a noticeable trend over the second half of the year seems to be the pricing by the mortgage facilitators or lackthereof on any variable rate products offered. This said most lenders are offering prime minus -0.30% to -0.60% of which still remains a ridiculously great rate, should one be tempted to the fate of the variable option, stay tuned for our discussion on fixed versus variable mortgages.
So should you need to search the corners of your mind to find something to be thankful for, here it is - Prime rate has been below 10% since May 1991, and one has to wonder whether or not we will ever see double digit rates lending again.
 With increased purchase power, affordability is relatively attainable in the majority of Canadian cities. As more Generation X and Y’s move into homeownership and Boomers are buying the vacation or pre-retirement homes, now is the time to make the leap of faith. Equity and prices have leveled off in almost every major city with of course the notable exception of Vancouver.
Here are some fun facts for you, while we are talking about increased purchase power:
- 1981 Prime Rate 22.75% based on mortgage of $300,000 and an amortization of 25 years, the monthly payment would be $5460.28
- 2011 Prime Rate 3.00% based on mortgage of $300,000 and an amortization of 25 years, the monthly payment would be $1419.74
What does this mean to you? With the likelihood that mortgage rates will rise in 2012 now is the time to look into early renewal options, refinancing or making that purchase you have been holding off on.
Contact your CENTUM mortgage broker post haste.
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Fighting Canadian Debt
With Canadian debt levels reaching record highs, we have joined forces with 4 Pillars Consulting Group to help homeowners deal with debt.
 CENTUM and 4 Pillars Consulting Group, a leading provider of debtor assistance services, are going to change how the mortgage industry deals with consumer debt by using home equity as part of a long term debt restructuring plan.
Quite often, people who are experiencing financial challenges need more than just a quick fix solution that could leave them vulnerable to huge fees and high interest rates. A recent report conducted by the Certified General Accountants of Canada, stated that “While the pace of debt expansion declined in 2010 and the first quarter of 2011, household debt levels still reached a record high of $1.5 trillion in the first quarter of 2011. If household debt was spread evenly across all Canadians, a family with two children would owe an estimated $176,461”.
 For most part, Canadian’s feel that their debt levels will remain manageable, but there are hints that for some, household finances are becoming less favourable. One option that is commonly used to remedy household debit is debt consolidation. This however doesn’t teach you responsible financial habits.
4 Pillars Consulting Group has 12 years of creating financial restructuring plans for Canadians dealing with unexpected debt levels and financial challenges. A detailed financial restructuring plan creates an essential framework to guide decision making during what can be a very challenging time.
This partnership will help more Canadians learn how to effectively manage their debt and meet long term financial goals which would ultimately create financial stability for families.
To find out more about the program, contact your local CENTUM mortgage broker.
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Know the Mortgage Process Before You Start
 Many first-time homebuyers may be wondering where they should start with the mortgage process. A common source of confusion is the difference between mortgage pre-qualification, pre-approval and rate holds. Recently, the Toronto Star published a good explanation of the difference between these three terms.
Mortgage Pre-qualification
A mortgage pre-qualification provides an estimate of the mortgage total that you may be approved for. The estimate is based on your income, your current debts and estimated down-payment.
It doesn’t take into account your credit rating nor does it give you a detailed analysis of what you can afford. It does however give you an opportunity to better understand what mortgage rates and options are open to you.
Mortgage pre-qualifications take place prior to a mortgage pre-approval and it is important not to use the terms interchangeably.
Mortgage Pre-approval
A mortgage pre-approval comes after a pre-qualification.
This process will provide you with detailed information about the home you can afford based on your savings and income, and the corresponding mortgage payments for a range of purchase prices.
You’ll need to provide the lender specific documentation so they can assess your financial situation and current credit rating and ensure that you satisfy all the requirements. There is usually no application fee associated with a pre-approval and you are in no way committed to the bank or mortgage broker from whom you obtained your mortgage pre-approval. Remember, however, that if you pull your credit score more than three times within six months, you may lower your credit rating.
Once your application is approved, you will get a written conditional commitment for a defined loan amount, which you can show to sellers when purchasing a home.
Mortgage Rate Hold
A rate hold refers to the locking in of a certain mortgage rate for a specified number of days - usually 60, 90 or 120 days. It’s important to note that just because a rate hold ensures you will receive a certain interest rate, it does not mean that a lender has accepted your mortgage application. A lender could still refuse to provide you with a mortgage stating that all conditions were not met.
If you are going with a mortgage broker, you can potentially lock in a few different mortgage rates with various lenders versus locking in with only one bank at a set rate. If your current mortgage rate declines, your lender will typically match it.
If you receive a mortgage pre-approval, you can be automatically signed up for a rate hold so it’s best to get a mortgage pre-approval before you get a mortgage rate hold.
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How Much Do You Know About Your Mortgage Protection Insurance?
 If you've ever bought a home, you've probably been there: you meet with a lender to sign your mortgage documents and he or she offers you mortgage protection insurance. It can be as simple as ticking off a box and signing on the dotted line to accept the premiums and insure you and your family against death, disability or other catastrophic event that might leave you unable to make your mortgage payments.
But are those premiums competitive? How much will you pay annually for what type of coverage; and what is written in the fine print?
Lending institutions ancillary mortgage products are not the only ones on the market. Independent insurance companies also offer varying types of mortgage protection that can save consumers hundreds of dollars annually.
This month, CENTUM announced an arrangement with Benesure Canada Inc., to make its Mortgage Protection Plan coverage available through participating CENTUM mortgage broker offices and franchises. The plan was first made available to clients of Canadian mortgage brokers in 1995 – today it insures more than 160,000 Canadians.
Says Paul Therien, Director of Business Development for CENTUM, “Mortgage protection is an extremely important part of every transaction and warrants an ongoing review of the best products out there. Based on what we think is the best fit for CENTUM and our clients, we chose Mortgage Protection Plan to recommend to our people.”
Whichever mortgage insurance plan you select, it’s good to know that even with mortgage protection insurance, there is competition. There is nothing stopping you from shopping around for the best mortgage protection for you with the most affordable premiums - the same as you would for any product.
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