Canadian $20 Polymer Banknote

Today the Canadian government officially introduced the $20 polymer banknote. Unlike the rollout of the polymer $50s and $100s, the old $20s will not immediately be taken out of circulation. As the new polymer notes start making their way into the bank's branches over the coming weeks, they will be accepting both types of bills.

Be careful with these bills as they have a way of sticking together, and since they are so thin, it is hard to tell.

Will Your Mortgage Retire With You?

 

 

 

This Scotia Bank Poll Found out that 1/3 of Canadians believe they will still have their mortgage once they retire.
That will be a huge portion of their retirement income spent on a mortgage.
Read poll below:

Snapshot: Canadian mindset on mortgages

Some Canadians with mortgages think they might carry them into retirement

TORONTO, Nov. 5, 2012 /CNW/ - According to a recent Scotia bank poll, the role of the Canadian home is key, with the majority of Canadians (77 per cent) indicating their home is an investment rather than an expense. The investment may extend beyond retirement for some; among those mortgage holders not yet retired, one-third (32 per cent) say they will likely still have their mortgage when they retire. That said, Canadians are eager to leave their mortgages behind, with almost three-quarters (72 per cent) of Canadian mortgage holders taking at least one step to becoming mortgage-free faster. When it comes to mortgage-mindset - Canadians are thinking in the right direction:

• Two-thirds (69 per cent) of Canadians report owning a home. For Canadian home owners, 40 per cent are living mortgage-free.
• The majority (81 per cent) of Canadians agree it is important to become mortgage-free as soon as possible.
• The most common step Canadians are taking to pay off their mortgage faster is to increase the frequency of their regular payments (29 per cent).
• One-third of Canadians (34 per cent) say they will be relying on their home equity to support them in retirement.

HOW TO PAY OFF MORTGAGE FASTER

--- The easiest way is to make accelerated biweekly payments-- there is only a few dollars difference but it will make a difference in years.
This Chart shows you how much you can save
Example: monthly vs. accelerated biweeklyJohn is trying to decide between paying his mortgage monthly and paying accelerated biweekly.
Details

• mortgage principal: $150,000
• amortization: 25 years
• interest rate: 5.45% for the entire mortgage amortization period.

Monthly and Accelerated Biweekly Payment Comparison

	Monthly	Accelerated biweekly
Number of payments per year	12	26 (52 weeks a year ÷ 2)
Payment	$911	$456
Total payments per year (principal and interest)	$10,932	$11,856
Principal paid over the amortization period	$150,000	$150,000
Interest paid over the amortization period	$123,368	$102,113
Interest saved	-	$21,255
Number of years to repay the mortgage	25.0	21.3
Years saved	-	3.7

With the accelerated biweekly payments, John will pay off his mortgage 3.7 years faster and save more than $21,000 in interest.

---Make Use of Your Prepayment Options: Monthly and or yearly
Mortgage prepayment options outline the flexibility you have to increase your monthly or lump sum yearly mortgage payments without penalty. The monthly prepayment provision is a percentage increase allowance on your original monthly mortgage payment, while the lump sum provision allows you to put money towards your mortgage principal. According to the Canadian Association of Accredited Mortgage Professionals (CAAMP), 28% of Canadians took advantage of prepayment privileges in 2010.
Many lenders have 15/15 or 20/20 prepayment allowances usually on the original amount of the mortgage and they will accept as little as $100.00 per each prepayment. So you do not have to save a lot to take advantage of the prepayment programs.

----Keep Tabs of Current Interest Rates
Sometimes even with a penalty it makes sense to break your mortgage and go with a lower rate.

By setting some more money aside for extra mortgage payments, it can shave years off of your mortgage, and will let you retire without a mortgage payment, a winning combination.

Time for a mortgage Checkup?
Call me and I will check your mortgage and let you know what you can do to shorten your mortgage thereby saving you money and years off your mortgage.
This is a free service.

 

 

 

 

 

 

 

Angela Kroemer, AMP

Mortgage Professional

TMG The Mortgage Group Canada Inc.

TMG Sharie Marie Mortgage Team

Local: 1.250.650.4182

TFP: 1.888.679.0190

Fax: 1.888.679.0192

akroemer@mortgagegroup.com

www.KROEMERmortgages.com

 

I Remember - Veterans' Week

I Remember - Veterans' Week


http://veterans.gc.ca/eng/remembrance/iremember

10 Easily Avoidable Factors That Devalue A Home

As blogged on freshome.com, Buyers have an upper hand when purchasing a home in a down market with limited inventory. As they survey the market, it's important, as sellers to have the best possible product available. In order do to that, you need to avoid factors that will devalue your home. Many times, it is the buyer's perception that influences whether they walk away or offer a seller less than an asking price. Before you decide to list your home for sale note these ten factors that will devalue your house and make changes as you can.



Buyers have an upper hand when purchasing a home in a down market with limited inventory. As they survey the market, it’s important, as sellers to have the best possible product available. In order do to that, you need to avoid factors that will devalue your home. Many times, it is the buyer’s perception that influences whether they walk away or offer a seller less than an asking price. Before you decide to list your home for sale note these ten factors that will devalue your house and make changes as you can.

1. Lack of Curb Appeal

The first thing any prospective buyer will see as they approach your home is the front of the home. Everyone wants to live in a home that is beautiful on the outside as well as the inside. A poorly kept landscape, whether overgrown, or non-existent will turn a buyer off. They may fear the cost of redoing landscaping, or be overwhelmed at the thought of it. This undoubtedly will affect the perceived value of your home. By planting a few annuals, keeping the grass cut and weeding the flowerbeds regularly you will improve your curb appeal. Front landscaping that is welcoming and has good visual appeal will keep a buyer interested in your home.

2. Exterior of the House

Chipped or faded paint, dirty windows, broken railings or busted sidewalks will all devalue your home. Just as a buyer will notice the front gardens, they will also notice the disrepair of the outside of your home. Buyers may wonder if the exterior is so neglected, what has been neglected on the interior. If selling your home is in your future, invest in a fresh coat of paint, wash the windows, and repair any issues with your walkways. Potential buyers will notice the pride you take in your home and will reflect in their offer price.

3. Outdated Kitchens

Kitchens can make or break how buyers will perceive your home. They want to walk in and fall in love with your kitchen. Moms want to be able to envision making cookies with their kids or perhaps hosting dinner parties. That vision will not work for them if the kitchen is dark, dingy, or outdated. There are two ways to update a kitchen. A full-blown renovation will update the space to a buyers liking, but at a substantial cost. The good news is you will reap close to a 90% return on investment. A fresh coat of paint on the cabinets, new door pulls and fresh laminate on the counter tops are all options for a small budget.

4. Outdated Baths

Outdated bathrooms are certain to affect the sale of a house. Buyers want updated baths just as they want updated kitchens. If you are able to renovate the bathroom from top to bottom, you should recognize an 80% return. If not, make small changes to update it. Add new the fixtures, new lighting and if your budget allows, tile the floor. No matter how you update the space, a buyer should walk in to a bathroom that is clean, fresh smelling and decorated nicely. These simple changes will do a lot for the buyer’s perception of the space.

5. Taste Specific Decorating

Taste is subjective when it comes to decorating a home. What you may love, a buyer may hate. Buyers want to see themselves in the space, and if they walk in to a home with, red walls, shag carpeting and wood paneling, they will have a hard time envisioning themselves living there. Instead, they will see the cost of replacing carpeting, and tearing down the paneling. All of these factors could cause a buyer to offer less than the asking price. Before you sell, paint your home a more neutral color that has a broad appeal.

6. Design Specific Renovations

Have you ever wandered into an open house and wondered what the owners were thinking as you faced an ultra-modern kitchen or a futuristic fireplace. These design choices will be difficult to sell to the average buyer with a more mainstream style and most buyers will be thinking about ripping out a kitchen and redoing it to their liking. It will take someone with a similar aesthetic to be interested in a home with such design specific features. Keep that in mind when you contemplate any renovations.

7. DIY Projects Gone Awry

DIY projects can be fun to do, but if you riddle your home with projects that are half-done or poorly done, buyers will cringe at the thought of redoing projects or hiring someone to complete them. Buyers who see dollar signs will either walk away or deduct from their bid. A general rule of thumb is to hire someone for a project if you lack the confidence it will look professional.

8. Pets

Pets are wonderful additions to a home, but bring unwanted issues when trying to sell. Damage to walls, carpeting or woodwork needs repair before you list the house. A good carpet cleaning will lessen the smell of pet odors too. Buyers would rather not move into a home that has lingering evidence of pets, especially if they have allergies. So, farm Fido out while the home is on the market to ensure the best offer you can get.

9. Wasted Square Footage

We like our home to work with our lifestyle and to accommodate specific interests or needs we may turn a bedroom into a closet, or a garage into a gym. While these highly personalized spaces work for a homeowner, the perceived wasted space is a turn off for most buyers. Ultimately, the missing square footage detracts from the value of your home. Changing the space back to its intended use is a huge endeavor; buyers may focus on cost of such a project.

10. Water Features

You may love your pool, covet your hot tub or adore that waterfall, but for a buyer water features are another expense that will be incurred to maintain the home. Over time, in-ground pools will need to be resurfaced and resealed at an additional cost to the buyer. Families with small children will see the pool as a potential danger as well. A buyer may love everything about your home, except the pool and request it removed or filled in before closing on the sale.
From kitchen renovations to wasted space it’s the simple things that devalue your home, with a little forethought and practicality you will reap the most value from the sale of your home. How would you avoid these factors that devalue a home?

B-20 Mortgage Brokers will get Friendly With Their Credit Unions

B-20 Mortgage Brokers will get Friendly With Their Credit Unions

B-20 formally came into full-effect this week, but  mortgage brokers  have learned to live with the stricter underwriting guidelines from OSFI months ago and have even put a positive spin on it.

_{The guidelines cover banks that are federally regulated but we have access to many more lenders that are not under OSFI.}

 

_{Earlier this year, OSFI said it would compel federally regulated lenders to implement a series of lending changes by their fiscal year end (October 31 for most banks). Among those changes were: reduction of HELOC loan-to-value from 80 per cent to 65 per cent; the elimination of 100 per cent financing, aka 5-per-cent cash-back mortgages; and the requirement that variable rate mortgages and mortgages with fewer than 5 years, must now be qualified using the mortgage qualifying rate or contract rate.}

 

_{A few weeks from now, when more borrowers get turned down by the banks, brokers will probably see more business.}

 

_{Many federally regulated banks and some monolines began implementing the changes well before the October 31 deadline, other lenders like ING Direct have until the end of 2012 given fiscal years that end December 31.}

 

_{It’s getting harder for some borrowers to get a loan. The new rules affect maybe 10 % of clients looking for a mortgage, but Brokers can still get the loans from other lenders.}

_{The situation has led many brokers to take some of their deals to credit unions, which traditionally haven’t traditionally been a mortgage professionals first stop.}

 

 _{Previously credit unions were not very popular among many brokers because clients preferred to borrow from the better-known banks. Credit unions also typically require borrowers to appear personally at the lender’s office and become a member of the credit union before getting a loan.}

 

_{Credit unions are now ideal for borrowers seeking an 80 per cent LTV on a HELOC, require a 5-per-cent cash-back mortgage or need to qualify for a one- to four-year term mortgage at the posted rate.}

 

 

_{For more information on the new rules or to qualify for a mortgage , give me a call.}

 

 

 

 

Look Who's Talking .....And Borrowing

Canadian goverment debt has risen much faster than household debt since 2008

John Shmuel | Nov 1, 2012 10:44 AM ET | Last Updated: Nov 1, 2012 11:36 AM ET

Chastising Canadian households for their high levels of debt is a favoured past time of economists and policymakers in this country. But a new report from BMO Capital Markets argues that more of the chastising should be focused at government debt.

“In the past two years—when the hectoring of households began in earnest—public sector debt has risen much more notably than household debt,” said Douglas Porter, deputy chief economist of BMO Capital Markets.

Mr. Porter points out that since 2008, when the financial crisis broke out, government spending has risen much more quickly than household debt. Before that, rising household debt was actually on par to surpass government debt as a percentage of Canada’s gross domestic product. Check out the graph from BMO Capital Markets below:

 

 

To be fair, the blame can’t be placed solely on Ottawa. The Conservative government has reduced its budget deficit and debt-to-GDP at the federal level has stabilized in the last year. Unfortunately, however, provincial governments have not done the same. The chart below from BMO shows how other levels of government in Canada continue to see their debt levels rise:

 

The rise in provincial debt is happening even as provincial budgets are reporting smaller deficits. As Mr. Porter points out, it is not the budgets you need to pay attention to, but rather the bottom line build up of net provincial debt. And hidden in that debt build up are things like capital spending programs, which may not be immediately reflected in annual budgets.

All this is happening while households appear to be finally cutting down on debt.

“On the household side, there are plenty of signs that debt growth was moderating on its own accord, even before Ottawa’s latest tightening of mortgage rules in July,” said Mr. Porter. “Total household credit slowed to a 5.6% year-over-year pace in the third quarter, from 6.3% a year ago.”

And while Canadian debt levels are still unnervingly high — the latest data from Statistics Canada showed household debt-to-income hit a record 163.4% in Q2 — government debt is also uncomfortably high.

“Canada’s hefty current account gap (4.1% of GDP in Q2) warns that the economy is living beyond its means,” said Mr. Porter. “The current account—merchandise trade, services, and investment income—morphed from a steady diet of surpluses from 1999-2008 to a string of deficits of 3% of GDP or more, a level not seen since the early 1990′s.”

Of course, we all remember what happened to Canada in the 1990′s following the massive amount of debt the country built up, leading the Wall Street Journal to call Canada an “honorary member of the third world.”

With that in mind, Mr.Porter says it would be more productive for the debt debate in Canada to include governments as much as households.

“The focus should be less intense on households, and instead directed at the broader public sector,” Mr. Porter said. “After all, when governments point the finger at households, they should recall there are four more pointing back at them.”

 

 

Angela Kroemer, AMP

Mortgage Professional

TMG The Mortgage Group Canada Inc.

TMG Sharie Marie Mortgage Team

Local: 1.250.650.4182

TFP: 1.888.679.0190

Fax: 1.888.679.0192

akroemer@mortgagegroup.com

www.KROEMERmortgages.com

 

 

Are You Prepared For Higher Mortgage Rates?

 

 

Luckily you probably won't have to worry about that until 2013, which is fast approaching.

Have you got a plan ready for action?

The questions you could be asking yourself is:

 

How high can my mortgage payments become before it is a problem ?

How high can interest rates raise before I cannot afford my mortgage?

Should I get a mortgage now and lock in for 5 years before the rates raise?

When I renew my mortgage after the rates have been raised will I be okay with my new mortgage payments?

If housing prices fall and rates raise will I have enough equity in my home to renew with the different scenarios?

 

There are many different ways to plan for this uncertainty, which will create a great outcome.  You can not control the interest rates or the housing market.

But, you can control your personal debt, your personal expenses and to some degree your wage.

Do you need to get those credit cards paid off?

Do you need to stop eating out so often and saving money that way?

Do you need to look for a better paying job?

 

OR

Look into  getting locked in for a low 5 or 10 year term now?

That way you will have at least another 5 years of low mortgage payments that fits with your budget and lifestyle now.

 

Change is coming.

How will you deal with it?

 

Not very many people find household finances a lot of fun.

If you would like to go through the different scenarios, I am here to help and go through those scenarios with you.

You know what you are most comfortable with and I know how to get you those answers.

 

Plan For The Future

With a solid plan put into place now, this will save you lots of stress, time and money in the future.

 

This is a free service, no obligation. 

Call me and lets get the planning done now.

 

Angela Kroemer, AMP

Mortgage Professional

TMG The Mortgage Group Canada Inc.

TMG Sharie Marie Mortgage Team

Local: 1.250.650.4182

TFP: 1.888.679.0190

Fax: 1.888.679.0192

akroemer@mortgagegroup.com

www.KROEMERmortgages.com

 

 

 

 

 

 

 

 

 

 

 

New Rules -- Unregulated Prepaid Credit Card Market

Canadian government moves to regulate prepaid credit cards, ban expiry dates

Ottawa is stepping in with new rules for the largely unregulated prepaid credit card market.

Finance Minister Jim Flaherty is to announce Wednesday that in the future, issuers of prepaid cards will not be able to impose expiry dates and must be up front about hidden fees and conditions.
The move is part of the government's expanding code of conduct measures to govern credit and debit transactions, that had previously not applied to the relatively new prepaid market.
While still a small segment of the market, prepaid plastic has become an option for consumers without conventional credit or debit cards, young adults, and for parents who want to introduce their children to using credit while limiting the risk of theft and over-spending.

But the sector has also faced criticism for exorbitant hidden fees that reduced their face value and fooled customers. These can include monthly or annual fees, maintenance costs, as well as ATM charges.
The most notorious example occurred two years ago when Hollywood celebrity Kim Kardashian backed away from endorsing a prepaid card bearing her name after a public outcry over the card's usage fees, including a close to $60 activation fee.
The card even grabbed the attention of the attorney general of Connecticut.

The new regulations in Canada would require an information box disclosing the fees displayed prominently on the exterior package and other documentation prior to issuance.

A government official said the measures are in response to concerns about some features of prepaid cards issued by large financial institutions, adding that in some products, "terms, conditions, fees and limitations" were not always made clear.
The official said the government wants to make sure consumers know what they are agreeing to before making the purchase.

 The Canadian Press October 23, 2012

TMG Awards

We are proud to be honoured with CAAMP's Partner in Excellence Award. This award recognizes a company whose contributions will have a significant impact on the Canadian Mortgage Industry beyond the time of their incumbency. To be presented at the CAAMP's Conference in Vancouver.

 

 

 

Angela Kroemer, AMP

Mortgage Professional

TMG The Mortgage Group Canada Inc.

TMG Sharie Marie Mortgage Team

Local: 1.250.650.4182

TFP: 1.888.679.0190

Fax: 1.888.679.0192

akroemer@mortgagegroup.com

www.KROEMERmortgages.com

The World's Thinnest House - Opens in Poland

How much space does one Really need?

That's the question facing anyone who decides to live in the world's thinnest house, which opened its door recently in Warsaw, Poland.
The house is definitely not for claustrophobes: at its widest point, it's five feet across. And in places, it's only three feet wide.
The structure is squeezed into an alleyway between a pre-Second World War house and a modern apartment block, and it was originally intended as an art installation.


Still, according to architect Jakub Szczesny, the house has everything a tenant needs.
"It contains all necessary amenities such as a micro-kitchen, mini-bathroom, sleeping cubicle and tiny work area, all accessible via ladders," he said.
The key to reducing the fear of a tight space? Plenty of light.
And by using a translucent material for the roof, Szczesny has ensured that the house receives lots of natural light during the day.

The extreme thinness of the house may seem like a gimmick, but there's some serious thinking behind it.
"Research shows we are approaching a social disaster because too little living space is built," Szczesny said. "You don't need that much space to live in, so it is worth considering building smaller scaled, cheaper housing."

And there's another level of symbolism at work in the placement of the building.
Israeli writer Etgar Keret will be the first person to live in the house, which was named Keret House in his honour.
Many members of Keret's family died during the Holocaust under Nazi Germany's occupation of Poland. The house was built at the point where one of the largest Jewish ghettos in occupied Europe was created.

Mortgage prepayment: Know your options

Overview
Mortgage prepayment refers to paying more than the regular mortgage payments you have agreed to pay in your mortgage contract.
Examples of prepayment:

• increasing the amount of your regular mortgage payments
• making lump-sum payments to reduce your mortgage balance
• paying off your mortgage in part or in full before your term is over.

If your mortgage gives you prepayment privileges, you can save thousands of dollars in interest charges by paying down your mortgage faster.
However, if you have a closed mortgage, your lender will generally require you to pay a charge to make a prepayment that is more than your privileges allow.
Prepayment charges can be costly, so it is important to know when they can apply and how they are calculated. Prepayment charges are sometimes called penalties or breakage costs.
If you have an open mortgage, you can prepay any amount without paying a prepayment charge.
When you shop around for a mortgage, look carefully at the prepayment privileges and charges as you consider your options.

What are prepayment privileges?

Prepayment privileges are terms of your mortgage contract that allow you to pay an amount toward a closed mortgage on top of your regular payments, without triggering a prepayment charge.
For example, each year, your privileges might allow you to:

• make a lump-sum payment up to 15 percent of the original mortgage amount, and
• increase your regular payments by up to 15 percent.

Privileges vary from lender to lender. Generally, if you do not use a privilege, you cannot carry it over to the next year.

Example: Savings using prepayment privileges

Farah received a raise which allowed her to save $20,000. She wants to use it to make a prepayment on her mortgage at the beginning of the second year.

• Mortgage amount: $200,000, amortized over 25 years
• Prepayment privileges: lump-sum payment of up to 10% of original mortgage amount allowed once a year
• Assumptions: for this example, the interest rate will be 5.45% for the entire 25-year mortgage.
  (In reality, interest rates are only valid for the length of a fixed-rate term and will likely change.)

By using her privileges, Farah can make a lump-sum payment of $20,000. This prepayment will reduce the amount of interest Farah will pay over the life of the mortgage by more than $44,000. She will be able to pay off her mortgage over four years sooner.
You can use the Mortgage Calculator to find out how much you can save by making prepayments.

What are prepayment charges?

If you have a closed mortgage, you may be required to pay a prepayment charge if you:

• pay more than the amount allowed by your prepayment privileges
• refinance your mortgage – for example, if you want to borrow additional funds using the equity you have built up over time
• renegotiate your mortgage – for example, if you want to break your mortgage contract to take advantage of lower interest rates
• transfer your mortgage to another lender before the end of your term.

Prepayment charges are based on factors such as:

• the amount you want to prepay (or pay off early)
• the number of months left until the end of your term
• interest rates
• the method your lender uses to calculate the prepayment charge.

Your estimated charge will change from day to day since it is based on factors that change over time, such as the amount left to pay on your mortgage.
You may also have to pay an administration fee to make a prepayment

How will my prepayment charge be calculated?
These are the two most common methods for calculating a prepayment charge:

• Three months’ interest: an amount equal to three months’ interest on your outstanding mortgage balance.
• Interest rate differential (IRD): an amount based on the difference between two interest rates. The first is the interest rate for your existing mortgage term. The second is today’s interest rate for a term that is similar in length to the time remaining on your existing term. For example, if you have three years left on a five-year term, your lender would use the interest rate it is currently offering for a three-year term to determine the second rate for comparison in the calculation.

Your mortgage contract may state that the prepayment charge will be the higher of the two amounts that result from the calculations using the different methods.

Examples: Prepayment charge calculations

Note: The calculations in the examples below are simplified for demonstration purposes. Review your mortgage agreement or contract to find out exactly how your charge will be calculated.

Jim is considering breaking his mortgage to take advantage of lower rates. He wants to estimate how much the prepayment charge would be.

• Outstanding mortgage balance: $200,000
• Annual interest rate: 6%
• Number of months left in term: 36 months (or three years) left in a five-year term
• Today’s interest rate for a term of the same length: Jim’s lender is offering a 4% interest rate for a mortgage with a 36-month term

Method I: Three months’ interest

To estimate Jim’s charge based on three months’ interest, we can use this formula:

A × B ÷ 12 months × 3 months

• A: Outstanding mortgage balance
• B: Annual interest rate

Amount of Mortgage

Step 1: Identify the outstanding balance on Jim’s mortgage (A).

$200,000

Step 2: Multiply the outstanding mortgage balance (A) by the annual interest rate (B).

Write the annual interest rate as a decimal. For example, 6% = 0.06

$200,000 x 0.06
= $12,000
Step 3: Divide the answer by 12 months to get the amount of interest payable for one month.

$12,000 ÷ 12
= $1,000

Step 4: Multiply the answer by 3 months.

$1,000 x 3
= $3,000

Prepayment charge estimate based on three months’ interest

$3,000

Method II: Interest rate differential (IRD)

To estimate Jim’s charge based on the interest rate differential (IRD), we can use this formula:

A × (B – C) ÷ 12 months × D

• A: Outstanding mortgage balance
• B: Annual interest rate
• C: Today’s interest rate for term of similar length. Note: the lender may round up or down to the nearest term.
• D: Number of months left in term

Amount

Step 1 : Identify the annual interest rate on Jim’s mortgage (B).

6%

Step 2: Identify today’s interest rate for a term that is similar in length to the time left on Jim’s term (C).

4%

Step 3: Subtract the answer from Step 2 from the answer in Step 1 to get the difference in interest rates (B – C).

Write this interest rate as a decimal. For example, 2% = 0.02

6% – 4%
= 2% or 0.02

Step 4: Multiply this answer by the outstanding mortgage balance (A) to get the interest differential for one year.

0.02
x $200,000
= $4,000

Step 5: Divide this answer by 12 months to get the interest differential for one month.

$4,000 ÷ 12
= $333.33

Step 6: Multiply this answer by the number of months left on Jim’s
term (D). $333.33 x 36
= $12,000

Prepayment charge estimate based on interest rate differential:

$12,000

How is the prepayment charge calculated if you received a discount on your interest rate?

If you negotiated a discounted interest rate, the calculation of the interest rate differential will depend on the lender and the terms of your mortgage contract.

• Some lenders may use the posted (or advertised) interest rate at the time you signed your mortgage agreement and compare this to the current posted rate for the term remaining.
• Other lenders may use your actual discounted interest rate but also apply the discount to the current rate for the comparison. In this case, the difference in rates remains the same as if posted rates were used and the results of the calculation will be very similar.
• Some lenders may use your discounted interest rate for your existing term but will not apply the discount to the posted interest rate used for comparison. This will usually result in a lower prepayment charge.

How can you find out about your prepayment charges?

If your lender is a federally regulated financial institution, such as a bank, it must outline prepayment privileges and charges, along with other key details, in an information box at the beginning of your mortgage agreement.
By law, it must tell you how the prepayment charge will be calculated. It must also provide you with a description of the components used in the calculation of the charge. This information must be presented in a manner and written in language that is clear, simple and not misleading.
If the calculation is complex, your lender may provide a simplified example, illustration or method to help you estimate the prepayment charge.
Read your mortgage contract carefully to confirm these details before you sign. Ask questions about anything you do not understand.


How can you reduce or avoid prepayment charges?

• Shop around: Before you sign, look for flexibility in a mortgage, such as prepayment privileges.
• Make full use of your prepayment privileges: This way, any prepayment charges will be based on a lower mortgage balance. If possible, make a lump-sum payment before you break your mortgage.
• Wait until the end of your term to prepay: If your prepayment charge will be a large amount, consider waiting until the maturity date, when you can make a lump-sum prepayment without triggering any charges.
• Port your mortgage: If you are buying a new home, your lender may allow you to “port” your mortgage, or take your existing interest rate and terms and conditions, with you to your new home.

Questions to ask when shopping for a mortgage

• How much can I prepay without paying a charge or a fee?
• Is there a minimum or a maximum amount for a prepayment?
• When and how often can I make prepayments?
• Are there any conditions related to prepayments?
• If there are charges or fees, how much are they, and how are they calculated?

Who Really Manages Household Debt?

Men and women have different opinions, suggests Manulife Bank survey.

According to Manulife Bank of Canada's recent debt survey, just over half of women (54 per cent) but only 39 per cent of men in two-adult households indicate that responsibility is equally shared when it comes to managing household debt.

In cases where respondents don't feel responsibility is equally shared, both men and women are far more likely to indicate that the responsibility lies with them rather than with their partner. Slightly over half (56 per cent) of men and a third of women (36 per cent) state that household debt is managed by "mostly me" or "only me." Conversely, only 10 per cent of women and four per cent of men indicate that household debt is managed by "mostly my partner" or "only my partner." Interestingly, virtually no men indicate debt is managed by "only my partner."

 

Differing perceptions about who is responsible for debt-management within the relationship could reflect a lack of communication, making it difficult for homeowners to become debt-free. "The good news is that, in general, most people feel they have some responsibility for managing household debt," shared Doug Conick, President and CEO of Manulife Bank of Canada. "However, the results seem to indicate that many couples might not be discussing debt with one another. I strongly recommend that any Canadians who don't have a plan for becoming debt-free reach out to an independent financial advisor for personalized debt management advice."

 

The survey also looked at attitudes by age group and found that respondents in their fifties are more likely to report shared responsibility for debt management (52 per cent) while those in their thirties are less likely to do so (43 per cent). Regionally, Quebec (53 per cent) and Alberta (52 per cent) homeowners were most likely to indicate shared responsibility for managing debt while Ontario (42 per cent) homeowners were least likely to do so.

 

Women are more concerned about debt, less optimistic

In general, women appear to be more concerned about debt, but at the same time they are less confident about being able to reduce or eliminate it. Slightly more women (81 per cent) than men (75 per cent) listed "being or becoming debt-free" as a top financial priority.

 

Men and women place relatively equal importance on being debt-free at retirement - with about eight in 10 indicating this is a high priority. However, more men (55 per cent) than women (49 per cent) are confident that they'll achieve that goal. This perception may be influenced by recent experience, with fewer women (47 per cent) than men (54 per cent) indicating a reduction in debt over the past 12 months.

 

Moreover, women appear to be more averse to the idea of retiring with debt outstanding - 60 per cent indicate they would find this scenario very stressful compared to just 42 per cent of men. "In many households there's a discrepancy in attitudes, perceptions and expectations between couples with regards to debt, likely because they are either managing their own personal debt separately or just aren't talking enough to one another about finances," added Mr. Conick.

 

The survey found that the desire to be debt-free at retirement is relatively consistent across Canada. However, respondents in BC and Quebec (each at 57 per cent) are most confident about achieving that goal while residents of Atlantic Canada (44 per cent) are least confident.

 

Debt-reduction is a priority and most are willing to reduce spending - just not on technology

More than three quarters (77 per cent) of Canadian homeowners indicate that it's very important for them to reduce their debt in the next 12 months, but only 56 per cent feel they're likely to achieve this goal. This relative lack of confidence may reflect experience over the past year. Nearly a quarter of respondents (24 per cent) report an increase in debt over the past 12 months and a further 15 per cent report no change in their debt over that time frame. Regionally, homeowners from BC (56 per cent) and Atlantic Canada (54 per cent) are the most likely to report a reduction in debt over the past 12 months. Homeowners in Manitoba and Saskatchewan are the most likely to report an increase in debt over the past year (30 per cent).

 

When asked what types of discretionary spending they would be willing to cut back on if it would help them become debt-free sooner, only 12 per cent of homeowners would be willing to cut back on phone/internet/cable services - reflecting the increasingly "wired in" nature of our society. At the other end of the spectrum, the discretionary spending categories people are most willing to cut back are household furnishings/appliances (42 per cent) and dining out (41 per cent).

 

"Finding and reducing non-essential expenses is a good first step in tackling debt." said Mr. Conick. "Another great strategy is to make your money work harder by organizing your finances more efficiently." The survey found that nearly a third (31 per cent) of homeowners list the interest rate on their debt as a factor making it difficult for them to become debt-free. "Given our current low interest-rate environment, an easy way for many homeowners to reduce interest costs might be to simply consolidate their debt at a lower rate."

 

While respondents in all regions indicate they are least willing to cut back on phone/internet/cable, they differ somewhat on which discretionary expenses they are most willing to reduce spending. Atlantic Canadians (50 per cent) and Ontarians (44 per cent) are most willing to cut back on dining out. In Alberta, Saskatchewan and Manitoba, 48 per cent indicated they'd be willing to cut back on household furnishings/appliances.

 

Women and men differ somewhat in this area as well. Women are more apt to reduce spending on household furnishings (45 per cent), dining out (44 per cent) and entertainment (39 per cent) than men (40 per cent, 37 per cent and 32 per cent respectively).

"Overall, this survey tells us that Canadian homeowners want to be debt-free, but that they're not necessarily talking with one another about how to get there," remarked Mr. Conick. "To avoid carrying debt into their pre-retirement and retirement years, it's important to get a debt-management plan in place."

 

About the Manulife Bank of Canada Debt Survey

The Manulife Bank of Canada poll surveyed 2,127 Canadian homeowners in all provinces between ages 30 to 59 with household income of more than $50,000. The survey was conducted online by Research House, an Environics company, between August 13-23, 2012. Full survey results, including additional regional, gender and
age-group comparisons, are available at manulifebank.ca/debtresearch.

How to buy a house when your credit rating’s been trashed

More than one in eight adult Canadians will declare bankruptcy or negotiate a debt settlement - consumer proposal - with creditors. That’s a lot of people with devastated credit.

The majority of those people will want a mortgage at some point, but they’ll find their options are limited. Following the credit crisis, funding shrank for high-risk mortgages, causing more than a dozen subprime lenders to close their doors in Canada.

Nowadays, riskier home buyers with subprime (aka. non-prime) credit make up less than 5 per cent of borrowers. And with a shaky housing landscape and nervous regulators, lenders are more careful than ever.

For credit-challenged home buyers, getting the best mortgage isn’t easy – it requires discipline and planning. If you’ve recently gone through a bankruptcy or consumer proposal, a deal with creditors to pay less than you owe, here’s what you need to know:

The Waiting Game
Mainstream lenders won’t even consider you until you’ve been discharged from bankruptcy or a consumer proposal for at least two years. With that, you’ll need stable employment and fully provable income.

If you can’t wait those two years, your options shrink considerably but you can still get a mortgage - sometimes just days after discharge. Instead of putting down only 5 per cent with a “prime” lender, however, you’ll need an uninsured lender like Equitable Trust or Home Trust, and maybe even a private lender. Most of them require ex-bankrupts to put down at least 25 per cent.

If you’re exceptionally anxious to buy and have a large down payment, some private lenders will even grant mortgage approvals without you being discharged, but you’ll pay a tidy sum .

The Rate Premium
Lenders price mortgages based on risk. Someone wanting a mortgage soon after insolvency will pay a premium, in addition to lender/broker fees of 1-2 per cent or more.

“Non-prime rates would be in the mid 4’s to high 5’s,” says Fred Testa, a 38-year industry veteran and alternative lending expert with Invis. “It depends on the stability of income, equity, property and the story behind the poor or bruised credit.”

Non-prime rates can be at least ¼-point better if there’s a reasonable explanation for your bad credit. For example, lenders have far more sympathy for a bankruptcy caused by a medical crisis, than one caused by a spendaholic who simply dodged his or her debts.

Rates and lender fees may also be lower if you show six-to-12 months of perfect repayment of your cell phone, utilities and/or rent.

Credit Purgatory
A bankruptcy or consumer proposal requires that you atone for your credit sins by earning back a lenders’ trust. One way to do that is by re-establishing your credit.

“Re-established credit means having at least two credit accounts, each with a two-year track record,” says Mr. Testa. “They can be major credit cards, instalment loans, a car payment, and so on.” The key: You need at least a $1,000 to $2,000 credit limit on each account for lenders to take them seriously.

Getting a non-prime mortgage is one way to re-establish credit but the most popular way is with a secured credit card. These cards require a security deposit and offer almost guaranteed approval. Just be sure to pick a secured card provider that gives back your deposit after you prove creditworthiness. You can do that by paying on time for 12 to 24 months, always making more than the minimum payment and not spending over 60 per cent of the limit.

A few banks, like TD, offer secured cards with no annual fees, rebate rewards and interest on your security deposit. Other providers, like Capital One, will even consider a higher credit limit than your deposit. My advice: Pick the right card the first time because cancelling a credit card can hurt your credit score.

The Term: Shorter is Better
Mortgage advisers usually recommend a one- to two-year term for non-prime borrowers. That gives people enough time to recover from credit woes and helps them avoid paying high rates longer than necessary. Experienced mortgage brokers can then coach borrowers on how to rebuild their credit and refinance sooner with a low-cost conventional lender.

Approval Constraints
If you want a subprime mortgage, the following may boost your rate or fees…or disqualify you altogether:

· Unmarketable Property: Non-prime lenders want easy-to-sell properties in case you default and they have to foreclose. It’s much tougher to get the best rates and terms when you live in a small or rural community, or have an unusual property.

· High loan-to-values: In general, the less money you put down, the higher your rate.

· High debt after insolvency: Racking up debt after a bankruptcy or consumer proposal is a waving red flag for lenders.

· Questionable employment: Income stability matters. If you just got hired three weeks ago or can’t document all your income, that’s a big strike against you.

· Lender type: If you need a private lender, prepare to pay rates that are 2-4 per cent greater than a regular subprime lender. Rates are even higher if you need a second mortgage.

· Recent insolvency: The longer it’s been since you declared bankruptcy, the more options you have as a borrower.

· Repeat bankruptcies: “Double bankruptcies will dramatically raise your required down payment and interest rate,” Mr. Testa says. It eliminates all prime lenders and most alternative lenders as options, leaving you with mostly high-cost private lenders.

· Missed payments: Even one late payment after insolvency can ruin your chances with lenders. “Don’t allow anything to go into collections that reports to the credit bureaus,” says Greg Domville, President of Plan B Mortgage Services. “That includes parking tickets, cell phone bills, gym memberships, etc.” Missing a mortgage payment after bankruptcy is the worst sin of all and gets you immediately declined if a lender finds out.

There’s No Rush
Owning a home involves greater responsibility and expense than renting. When recovering from a credit nightmare, reject the urgency to buy. Focus first on rebuilding your credit and stashing away an emergency fund.

There are exceptions, of course. One example where it makes sense to buy sooner is when you absolutely need to move, you have 25 per cent down and your new mortgage payments are affordable and comparable to your current rent.

Either way, your goal during credit rehab should be to get your credit score back to a satisfactory number (650 to 680+) and make yourself appealing to ordinary lenders. Doing that will save you thousands in interest.

Robert McListeris the editor of CanadianMortgageTrends.com and a mortgage planner at Mortgage Architects. You can follow him on twitter at@CdnMortgageNews.

What can a CHIP (Canadian Home Income Plan-reverse mortgage) do for You?

CHIP stands for Canadian Home Income Plan. What is the purpose of this plan? This plan is a tool for people 55 years or older to take out equity from their house, without having to sell their home and you get to stay in your home CHIP Eligibility Homeowners 55 and older No medical qualification No income or credit requirements How much can I get? Depending on your age, about 50% of the home's value. Money can be received as a lump sum or over time payments Funds are not taxed as income Interest expense may be used to reduce taxes on investment income Repayment? No repayment is need until the house is sold or both owners move out You have the option to repay the principal and interest in full at any time. Ownership and Title? Owner maintains Title You can move or sell at any time Amount to be repaid is guaranteed not to exceed the fair market value of the home at the time it is sold. Some scenarios in which a CHIP plan may work? -You retire your pension is not as good as you thought it would be, leaving you with very little money to enjoy your retirement. -You retire and still have a small mortgage in which you want the mortgage paid out. Giving you more monthly income -Your spouse passes away cutting your retirement income in half. -Your health needs special attention -you need to hire a nurse for in home care, special equipment -walkers , wheel chairs etc. You can pull money (equity) out of your house to pay a nurse to help you, instead of going into a expensive seniors home. -You and your spouse divorce or separate and you need to payout the spouse for the house -Repair your home with needed updates and retro fits to suit your comfort and safety in your senior years -Cannot qualify for a mortgage because retirement income is too low. - Call me to inquire if a CHIP plan may be useful for you or your senior parents. As you can see there are many reasons why a CHIP is useful. The main purpose of the CHIP plan is to keep you in your home where you want to be. Each person has unique circumstances, Call me to see if a CHIP plan will work for you. 1.250.650.4182One more reason why a CHIP plan may work better for you Seniors' homes are expensive, costing around $3000.00/ month. Many seniors want to stay in their family homes where they are most comfortable. For more information click here Rates Mortgage Tips Resources Credit Blog Categories 365 Things To Do In Campbell River 365 Things To Do In The Comox Valley Comox Valley Tidbits and Other Stuff Mortgage Market Updates and News Real Estate For Sale By Owner Recent Posts What can a CHIP (Canadian Home Income Plan-reverse mortgage) do for You? Comox Valley takes its place in the history book Harvest dinner in Cumberland Sunday Banff Mountain Films return with tale of survival CHARITY YARD HAUNT