Category: Mortgage

The State of the Property Market in 2012

Posted Feb.23, 2012 under Mortgage

While the economy may be suffering in some areas, it is a buyer’s market when it comes to real estate. Property values are fair and it is the perfect time for consumers to purchase their dream home at a comparatively affordable price. Mortgage rates continue to be at an all time low, giving the consumers another easier entry barrier for home ownership.

Additionally, first time buyer mortgages are yielding low interest rates due to finance companies’ efforts to attract more customers.

Low Mortgage Interest Rates Are Here

According to the recent 2012 Freddie Mac Primary Mortgage Market Survey, 30-year fixed mortgage rates are averaging below four percent, which is a 40-year low. A year ago, rates were over five percent. For 15-year mortgages, the rates are just over three percent. This is not only good news for new home buyers, but also those who want to refinance their current home loans.

This is the time for want-to-be homeowners who were fortunate enough to survive the troubled economy to look at taking out their first mortgage. With a large down payment and a good credit score, those consumers can find rates as low as 2.24 percent. For a smaller down payment of 10 percent, those consumers can still get low interest rates that range from 3.79 to 4.89 percent.

 

Getting More House Than You Pay For

Some homeowners who need to get out of their mortgages are taking big losses on their homes. Studies show that losses of 40 percent or more of the original value are common. In a situation like that, a young couple who is looking for their first home loan may be able to buy a house that would be worth 300,000 dollars for only 180,000. Some buyers are reporting even deeper discounts in some areas.

Preparing for Your First Mortgage

Lenders used to require at least a 20 percent down payment for first time buyers. Mortgage companies are more lenient now because they desperately need new customers. Many companies are offering loans for only 10 percent down and some are offering them for as low as four to five percent down.

To get ready for your first purchase:

  • Make sure you have clean credit. Pay all debts on time and try to reduce the total amount you owe.
  • If you have no credit, start building it with small loans or credit cards. If you have to get a secured loan, do so, but pay it on time.
  • Start saving your down payment. Save as much as you can, but try to put down as little as you can. Many experts agree that it’s not a good idea to put a large down payment on a house, so shop around and learn the minimum you will need. Remember, you will probably have closing fees too.
  • Do some math to learn what you can afford. Financial experts typically recommend budgeting more than 28 percent of your income for housing. After you know that number, you will know how much house you can afford.

Take the Plunge As Soon As You Can

Economic downturns have always reversed. Financial experts expect that to happen again. If you are planning to buy a home in the future, make it as soon as possible. The day will surely come when property values will increase again and first time buyer mortgages will have higher interest rates. If you can comfortably make your purchase now, your home will gain equity fast as the economy recovers.

 

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Upcoming Mortgage Renewal? Use a Mortgage Broker!

Posted Feb.20, 2012 under Mortgage

mortgage broker, home financing, for sale, real estate, torontoI purchased my first property over three years ago. The overall experience was a pretty smooth one. I signed the deal to buy a my first property,  put down my deposit, and through the good help of my Realtor, I was pre-approved for a mortgage.

The only thing left to do, was that I had to sign a final deal with the bank to lend me hundreds of thousands of dollars.Part of me was excited, and another part of me was overwhelmed. Is this the best rate I can get? What if I go search elsewhere, will they even give me a mortgage? What if they don’t? I may lose this deal, and a wonderful opportunity to become a first time homeowner. So, I went ahead and signed on the dotted line to complete the transaction.

Three years later, after settling in my first home, and after thousands of dollars of upgrades, I’m glad that I bought at the time that I did. I made all the right moves, except one; I wish that I researched more mortgage options, I’m certain I would have gotten a better rate.

Three years later though, a rate of 3.5% is still fairly competitive amongst the big five banks. I could have used a mortgage brokers, and got a slightly more attractive rate through a smaller institution. However, I didn’t used a mortgage broker, and instead I’m stuck for another two years, with a fixed five year rate that is just alright.

Let my past mini mistake be a lesson to you, and hopefully you’ll get out there, use a mortgage broker to get you the most attractive rate possible.

Who are mortgage brokers?

Mortgage brokers are independent agents who only are self employed. They are responsible for adding additional business to the big banks. Rather than working for one specific lender, mortgage brokers essentially are middle men, brokering the deal between you (their client), and the lending institution.

Rather than shopping at multiple financial institutions and negotiating with each financial institution and hoping that they give you the best deal, it’s one phone call to a mortgage broker and they do the rest for you.

A mortgage broker can do A LOT for you.

Mortgage brokers can help you with all aspects of a mortgage, from figuring out how much you can truly afford, to determining the best mortgage product for you, to finding ways to save you money and pay off your mortgage faster.

Mortgage brokers work best for people who are inexperienced with negotiating, first time home buyers and those who aren’t sure what the best mortgage product is for them or have a less-than-stellar credit rating, they can save time, money and hassle by using a mortgage broker.

For the average Joe who lacks good negotiating skills or someone who might feel they are not in the position to ask for a better rate, possibly due to their credit history, they definitely will find  it easier to not only obtain mortgage rates with Ratesupermarket , but they will find a mortgage broker that works for them and not the lender.

Mortgage brokers are the way to go!

There are so many different mortgage products out there, so anyone can get easily confused, especially first time home buyers. Essentially one becomes overwhelmed with all the information. Enter mortgage brokers, who work for you and not the lender. Mortgage brokers are paid a  fee by the lender, and not by the person who is using the mortgage broker’s service. There is zero cost to the clients, and if a broker ever asks for some sort of a retainer, do your self a favor and walk away, because that’s not the person you want to work with.

Mortgage brokers are the way to go, if you want to save time and eventually money in the long run. According to a survey conducted a few months ago by the Canadian Association of Accredited Mortgage Professionals, roughly 27% of consumers obtained their mortgage from a broker in the previous 12 months. This figured is up 25% from the same time last year.

Consumers are looking for new ways to save money. You’d be foolish to visit each lender, and negotiate each time. Rather you could use a mortgage broker, who already has an established relationships with various lenders, and he or she can do all the negotiating on your behalf. All you have to do is say “Yes” or “No” to what’s being offered to you. You are in control, and who doesn’t like control at the of the day.

Readers, have you ever used a mortgage broker?

Eddie

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Are 2.99% Mortgages Worth It?

Posted Jan.26, 2012 under Mortgage

 

rbc, bmo, td, banks, mortgage rate, interest rate,Bank of Montreal did the unthinkable to attract new mortgage customers by dropping their pants on the five-year fixed mortgage with an ultra low 2.99% interest rate. Something that was simple unheard of before. January, which  is a traditionally sluggish month for mortgage sales has sparked other banks to follow suit. A few days later RBC and TD introduced their own ultra low interest rate mortgages. Last week TD  lowered its four-year fixed-rate mortgage to 2.99 per cent, down from 4.79 per cent, and RBC dropped its four-year fixed rate mortgage to 2.99 per cent, and 3.99 per cent on a seven-year fixed-rate mortgage.

Think before signing on the dotted line. A good read of the fine print is a must. These mortgages have restrictions that don’t come with other products. These mortgages offer Canadians a way to be mortgage-free faster due to great rates and a shorter amortization.

However, these ultra low interest rate mortgages do differ from traditional mortgages in several ways.

  1. You are locked in for the term of five years. In other words you cannot refinance or switch your mortgage to another lender for five years.  On average, most home owners switch their mortgages during the period of the last two years of their mortgage by either refinancing into a better rate or move onto a better rate.
  2. A typical mortgage offers an amortization period of up to 30 years. The maximum amortization period is 25 years on these ultra low interest rate mortgages.
  3. Unfortunately you cannot skip or double-up on a payment. Sad, I know.
  4. You can make as lump sum payment  only once a year equal and increase your monthly payments. The catch is that it has to be 10% of the principal amount owed or less. Most traditional mortgages let you make monthly and lump sum pre payments of 20% or more.
So, are these new mortgages right for you?
Yes and no is the answer. These new mortgages are best-suited for those who plans to be in their home for a longer period of time. If you’re looking to move, these mortgages are not right for you. Instead stick more traditional mortgages that offer you higher flexibility.
If you don’t have intentions to move within the next five years, a mortgage with a 2.99% interest rate may be right for you. However, don’t be fooled. Even though I’m locked into a five year mortgage rate of 3.8% almost three years ago, I had other options at the time. Despite having the ability to grab a lower interest rate, I chose a slightly higher rate due to security. Correction – my own insecurity. I was a first time home owner and didn’t want to worry about whether my payments will changes over a certain period of time. I knew I could afford “x-amount” of dollars now and for the next five year, so I chose security.
I also have the option to contribute up to 20% in lump sum or in extra payments as a faster way to reduce my mortgage. I’ve yet to contribute even one yet. Truth of the matter is that very few Canadians with a mortgages contribute extra payments to reduce their mortgage. Count me in, I’m one of those.
If you’re a young first time home buyer, these new mortgages may be right for you. They give you the security and peace of mind for the next five years. You have a little wiggle room as well towards reducing your mortgage faster. You can only make a lump sum payment once  a year and it has to be less than 10% of the total amount left that you’re owing. Be true to your self though. If you’re like most Canadians, you probably will never contribute extra payments. And even if you do choose to contribute extra payments, being limited to a maximum of 10% is not the end of world either.
One other point. Please don’t be fooled by such low interest rates. These rates have been around for a while. Maybe not in as a fixed rate, but definately as a variable rate. I am certain you get a lower interest rate in a variable rate mortgage, probably as low as 2.5%. The difference is the security. In a variable rate mortgage, as the rates rise, so does your monthly payments. So, is half a percent worth the hassle? For some it may be, for others who prefer security, not so much.
What do you think of the 2.99% mortgages?
Eddie
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