Three ways to free up monthly cash flow

After seeing Gail Vaz Oxlade speak this weekend I've been thinking about ways I could save some money.  Let's face it - we can all use a little extra money in our pockets. While getting a raise or finding a higher-paying job may be in the cards for some of us, for the rest it's not as easy. That's why it's important to review your existing expenses every once in a while to uncover new ways to 'trim the fat'. Below are three areas you might want to target first:
1. Car Insurance.As is the case with mortgages, when it comes to renew their auto insurance policy, most car owners opt to blindly renew with their existing insurance provider, rather than shopping around. If your policy is up for renewal in the coming months, you may want to do a bit of shopping yourself, or ask your insurance broker to do the legwork for you. Some policies differ by as much as $600/year or more - and if you switch your home insurance to a packaged policy, the savings can be even greater.
2. Communications Services.Most households spend the bulk of their discretionary income on communications - such as phone, cable, Internet and cell phones. If your communications bill has ballooned to a larger number than you'd like to see, it might be time to give your communications provider a call. It seems every week they're offering a different promotion that could end up saving you significant cash. Just call their customer service line and, if you have more than one service with them, ask if they can walk you through each one to make sure you're getting the best possible deal.
Another option is to re-evaluate your services. If you haven't watched the movie channel in months, or could realistically get away with just using your cell phone instead of both a land line and a cell phone, trim away!
3. Bank charges.If you're the type of person who gravitates towards the nearest ATM - regardless of whether it's your home bank's or not - you may want to spend a bit of time tallying up your bank fees. If you're racking up ATM fee or overdraft charges, it may be time to re-evaluate the type of account you're using. For an additional monthly fee, many banks will increase the amount of times you can use Interac or external bank machines. Depending on how much you're currently spending in bank fees, the higher package may be worth the extra cost.
 

35 year amortizations are gone - but not entirely

While Canada's tighter mortgage rules - which took effect on March 18 - saw the maximum amortization drop from 35 years to 30, that rule actually only applies to insured mortgages.
Any mortgage has to be insured if it makes up more than 80% of the value of the home. So if you have a 20% down payment or above - or if you have more than 20% equity in your home upon renewal - you don't require the help of CMHC or its counterpart, Genworth Financial. Technically, that also mean you should be able to get your hands on a 35-year amortization.
The thing is, as we've seen with the tightening of previous mortgage rules, lenders seem to abide by the government's new guidelines whether they are offering insured mortgages or not. This time around, however, certain lenders are going out on a limb and continuing to offer 35-year amortizations for "conventional" (or uninsured) mortgages. One lender that comes to mind is ING Direct.
Many lenders, however, are still opting to eliminate the 35-year amortization all together. If you're up for renewal, or in the market for a new mortgage, and would like to obtain a 35-year amortization, drop me a line and I'll be sure to tell you what your options are.
 

3900 AMPS!

Yesterday I was absent from twitter and facebook but it was for a very good reason.  I went begrudgingly  to take an update course in order to maintain my AMP designation.  AMP (accredited mortgage professional) is a certification for members of CAAMP (Canadian Association of Mortgage Professionals).  There is a criteria for obtaining the designation and every year the criteria to maintain it gets a little more time consuming.  This year I almost let it go but slogged it out "one more time" and spent the day learning about fraud in the mortgage industry.

There are those that might say "I drank the kool-aid" but I came away darn proud to be an AMP.  There are 3900 AMP's in Canada.  The CAAMP organization has done a great job bringing standards to the industry.  In Ontario you must be licensed to carry on business as a mortgage originator and you are required by law to carry errors and omissions insurance.  You must have taken the course and passed.  The criteria to become a mortgage originator in the broker industry is far more regulated than mortgage specialists in any chartered bank in this country.

As an AMP my obligation is to my client (you).  After yesterday I am confident that anyone who gets a mortgage from an AMP or anyone working towards the designation is in the best possible hands.  We know so much more than you can ever imagine.  We are truly professionals and the governing organization takes the quality of material seriously. 

CAAMP also governs their membership with reverence.  The standards for membership are enforced and the organization does a very good job to setting industry standards.  The process and obligations for mortgage originators with the AMP designation ensures the client they are getting the best possible advise for their situation. 

I am proud to be an AMP and encourage you to look for the designation when looking for a mortgage.  There will always be the nay sayers that think it's a waste of time and I'm not proud to say I almost slipped into that abyss.  But yesterday I learned a lot and got to sharpen my skills.  I can assure you there are going to be few changes in our office as a result.  Not big ones but for sure changes that will make our customer experience even better.  Thank you CAAMP!!

Don't treat your mortgage like rent.

For many first-time buyers it is easy to get into a new home and a mortgage and continue to treat the same way you did when you were renting. You can make a significant impact on how quickly you payoff your mortgage by just paying a little attention to it.

While renting you get into the habit of paying your regular monthly rent bill month in and month out.  With your mortgage it is important to remember that you have the opportunity to pay extra whenever you can.  Yes, I know paying extra never sounds like a great idea.  Trust me, in the instance it is a fantastic idea!

By making additional regular payments you can significantly shorten the time it takes to pay off your mortgage and therefore save yourself thousands of dollars.  Lets consider a real life example of a first-time buyer with an aggressive mortgage pay-down strategy.  Lets call them Jane and Joe.  Jane and Joe realized that their mortgage was potentially going to be the biggest purchase they ever made (Yes, more expensive than their house if they took a full 35 years to pay it off).  They asked their mortgage broker about some strategies to reduce their mortgage faster.

 Their mortgage broker recomended bi-weekly accelerated payments to start, that is they took the regular monthly payment (amortized over 25 years) divided that by two and made that payment every two weeks.  As any of you who get paid every two weeks knows, that means that there are two months out of the year where they were making 3 payments.  The net effect of this was to reduce their amortization to about 21 and a half years.

Joe really liked the idea of getting rid of their mortgage faster and once he got into the house and established their budget he started looking for other ways to accelerate the mortgage paydown.  The couple had a water cooler that they had brought from their apartment that cost them $26/month, they also had those 'free' (for the first 3 months) movie channels that actually cost them almost $40/mo.  Joe quickly removed both of these expenses and called his bank to increase his bi-weekly payment by $50 (now they were down to about 18.x years).

The couple took their tax refunds over the next 3 years and applied them to the mortgage each year (down to under 14 years now).  They had originally taken a 3 year term at 7.15% in  2000 and when it came up for renewal they were fortunate enough to obtain an interest rate of 4.49% for a new five year term.  They kept their payments the same as the previous term so now they were paying off a substantial portion of principal each month.  This combined with the application of more tax refunds left them in a spot where today (2011) they are now mortgage free!

Now you may not want to be quite as aggressive as Joe and Jane, but the point is that with a little bit of effort and focus you can make a substantial impact on the amount of interest you pay over the life of the mortgage without significantly affecting your lifestyle.

The Best Mortgage Advise for Self Employed people.....

If you're self employed and you want a mortgage the most important thing you need is your taxes filed and up to date.  Every lender has a "self employed" program and they all have their own nuances.  Mortgage brokers understand the nuances and can help you pick the best product for your situation.  It can be confusing so I suggest you arm yourself with a bit of knowledge and terminology. 

When you apply for a mortgage take your "jacket" of your last two years tax returns and supporting schedules that detail your income.  The jacket is typically the first four pages of your return.  It clearly shows your "line 150" which is your taxable income.  Supporting schedules are your "statement of business activity" or "statement of rental income" and your details of home office and vehicle expense.  You should also bring to your appointment your "NOA's" or "Notice of Assessment"  This is the statement your received from the Government confirming your taxes were filed and the amounts are agreed upon.  If you don't have your NOA's you will need to call CRA and get copies.

If you're incorporated you should bring your last two years tax returns from your business with supporting documents indicating the expenses.  There are some expenses that lenders will allow you to add back to your income but they vary from lender to lender.  Details matter.


If you are in business less than two years you need to bring your last two years tax returns regardless and in all cases you need to bring some indication when you started your business. Typically you should have a copy of your business license and or your articles of incorporation.  From all this information you can determine which lender is best for you.  While more documentation maybe needed this is a very good start.  Remember, the mortgage broker's job is to help you organize your information before you go to the lender and take as much risk out of your request as possible.  The lower the risk the lower the rate.  It's just that simple.

If you don't qualify for the lowest possible rate for whatever reason then consider a shorter term mortgage and work towards a goal of a no risk loan for lenders.  You want to be in the drivers seat so you can choose any lender your want.  The most important thing is not to let your mortgage situation hold you back from achievement.  There are tons of mortgage solutions out there.

Calculating your debt service ratio

With all the talk about debt that’s been in the news lately, you may be tempted to see where you stand financially – especially with the looming threat of increasing interest rates.


An easy way to do this is by calculating your debt-service ratio – the same calculation that banks use to determine whether you’re a prime candidate for a mortgage. Simply calculate all your monthly debt payments – including your mortgage, minimum credit card payments, car loans, student loans, leases and any other form of loan. Next, calculate your gross monthly household income. Divide your debts by your income, multiply by 100 and that’s your debt service ratio. To be in a healthy range, that number should be under 40 – or, better yet, 35.
Some people find it more accurate to use their net income, rather than their gross income, for their personal debt service ratio calculation. Since you don’t really have access to their full gross income, net income is a little more helpful in determining what percentage of your take-home income you’re actually spending.
With interest rates expected to go up, you may want to fiddle around with the numbers – particularly higher mortgage payments. If you’re set on sticking with a variable rate mortgage, experiment with different interest rates to see how high they can climb before you start to feel uncomfortable.  While you’re at it, see what your financial state would be if you locked in to a fixed rate today.
If you’re already on the high end of the debt service ratio, you may want to consider trimming down your other debts, or uncovering ways to bring in extra income, to prepare for the upcoming increases.
 

You're Invited to have Lunch with Gail Vaz-Oxlade

Mortgages for Women is Proud to sponsor a Lunch and Book signing with Gail Vaz-Oxlade!  This event will take place on March 26th 12:00pm - 3:00pm in Cobourg at the Cobourg Lions Community Centre.

Now I know you think that's far to travel but the trip will be well worth it.  Cobourg is located one hour east of  Toronto and it's perfect for a day trip.  Also, let me remind you, Gail never gives personal events but is doing this to support a cause near and dear to her heart, Northumberland Services for Women.

Tickets are $25 for the lunch and there will be a book signing after and the opportunity to meet Gail in person.

BUT WAIT THERE'S MORE!!!

Tickets are going fast and names from every ticket we sell will be going in a draw and the two lucky winners will be sitting at Gail's table during lunch!  So get your questions ready.

Tickets will be on sale till March 14th and you can call my office at 1-888-372-7367 to purchase tickets or send me an email.

We are very flexible on payment.  You can charge to your visa or pay by cheque or, Gail's favorite, CASH at the door. 

So don't miss this opportunity to see this incredible lady live.  She is worth the drive to Cobourg. 

AND THERE'S EVEN MORE...........

Mortgages for women will be hosting an after party for all the out of town tweeters!  Details to follow.  Leave me a message on this blog and let me know if you're coming.  It's going to be totally amazing! 

Collection Agencies: Know your Rights

If you've ever had an unpaid bill go to a collections agency, you know what a hassle they can be. These companies are paid according to the bills that they collect on - and they'll often go extreme lengths to make that money.
As an example, I heard of one person who received a call from a debt collection agency who had the right name - but the client's wrong address. The client had actually never lived at the address in question, or anything even close to that address. So he told the collection agency that they had the wrong person. The individual on the other end of the phone insisted that he did, but as the disagreement progressed, ended up yelling at the client and eventually hanging up the phone (or getting cut off, or something).
The client suspected it was a fraudulent call of some sort and, since he never heard from the collections agency again, he didn't think anything of it. Until he went to apply for a mortgage - and realized that his credit score was terrible, thanks to an overdue utility bill that he had missed in his move from Vancouver to Toronto four years earlier. That must have been the charge that the debt collector was calling about - but he had never named the charge, the company or any other information aside from the debtor's incorrect address.
The debt collection agency broke a number of rules in the above scenario. While the rules governing debt collection agencies vary from province to province, these are the basics you should be aware of:
1. A debt collections agency can only contact your home between a certain set of hours - usually 7am to 9pm or, in the case of Alberta, 10pm.
2. Debt collections agencies can't make more than three unsolicited phone calls in any period of seven consecutive days.
3. A collector must give you the name of his agency, the name of the creditor who is owed the money, and the balance of the bill. They can't ask for more than what is owed, or request a form of payment that will end up costing you money.
4. In many cases, the collector must first send you a request for the funds in writing before they can initiate a telephone follow-up. If you haven't received the original written request, they must send you another one - and hold off on phone calls for another five days.
5. A debt collector can't threaten or harass you in any way.
For more information on your consumer rights when it comes to debt collecting, visit your province's local Consumer Protection Offices, or the Consumers' Association of Canada http://www.consumer.ca/1653