Zero down mortgages still exist!

Although zero-down mortgages - or those that don't require a down payment - technically went by the wayside when the Federal government tightened mortgage rules back in 2008, lenders and homebuyers have found ways around the rule with "cash back mortgages".
These products are reserved for those homebuyers who have great credit and income, but have found it difficult to save the $15,000 to $20,000 required for a minimum 5% down payment. In these situations, the lender will give the client 5% cash back on closing. When the down payment is requested by the real estate lawyer, the lender will provide the funds which will then be given to the vendor.
Of course, the cash back doesn't have to be used towards the down payment of a home. It can be returned to the buyer, provided they already have a down payment, to put into savings, towards new furniture, or any renovation projects they may need to tackle.
There is a catch for the convenience, however. These mortgages come with a higher interest rate than a typical five-year mortgage - but given today's low interest rates, they're still low compared to historical averages. Right now, you could probably get a cash back mortgage for around 5.29%. To qualify for these mortgages, you also have to have decent credit - sometimes as high as a 680 Beacon score. And, of course, with no down payment, your monthly mortgage payments will likely be a little higher than if you had saved the 5% down yourself.
Despite the drawbacks, this is still a great tool for someone who is looking to get into the real estate market, can afford the costs of homeownership, but was just having a bit of trouble saving for a down payment. If this sounds like you, contact me for more details!

A Break from Mortgages Thanks to General Motors

Lately I’ve been hanging out on Twitter and meeting some amazing ladies in some very amazing jobs.  So when the delightful @AdriaMacKenzie from General Motors announced the Cruze City Challenge, the words, “I’m in” were out of my mouth before a thought went through my head. 

With the forms filled out, the date assigned and the co-driver chosen I finally hit the panic button.  I thought I should at least know something about this car.  I looked it up on the website.  I liked the price, $15,000, and suited my budget.  Good gas mileage, 10 air bags, and it comes in red.  I was good to go. 

I arrived at the Challenge very nervous about the next few hours.  I knew I would have an iPad with my instruction (no clue how that worked) and all I had to do was pick the challenges I thought I could finish in my allotted time.  The first thing I heard when I arrived was “wow, someone close to my age” from the clearly middle age guy in charge of the cars.  Okay, this was going to be trouble.  I went inside and got my very cool jacket, instructions on the iPad and the key to my.... yes...wait for it.... RED CAR!!!

I headed out with my driving partner, a friend who knew the city well and we started knocking off the challenges.  We tweeted the challenges and people helped us out.  We need to wash a window, we tweeted, and someone tweeted back where they saw a window washer.  We rushed over and helped them out.  We need a postal code, we tweeted, and we got it.  We needed a newspaper, we tweeted, and we got it.  We needed to answer a trivia question, we googled, we tweeted and we got it.  All the time I had my head buried in the technology Mr. Helper played with the Stereo, the buttons, revved the engine, all the things you would expect an engineer to do.  (Do you know you can’t open the trunk when the car is moving?  Just Sayin)

The one challenge I had written off was the lurking request to go into a coffee shop and convince the staff to let me make a cappuccino for a stranger. Oh and the Chevrolet Logo had to be in the foam.  Yea right!  With nothing left on the list and ½ hour to spare I decided to tackle the video challenge.  Of course I picked the coolest coffee place in the heart of Scott Pilgrim territory, The Aroma Cafe, at Bathurst and Bloor.  The delightful staff was so much fun.  They let me make a cappuccino and even came up with some inventive methods for putting the logo in the foam.

So here’s to all the fab tweets, @LoireTaylor, @mcpolitics, @those2girls, @RobynConnolly, @jcmortgages and all the rest that stuck with me for 2 hours last night.  Thank you @AdriaMcKenzie and @GMCanda for all the fun.  The tasks were managable, we won, and the car was red!!

TD's Collateral Charge

This week TD is changing the way they register their mortgage charge. As of October 18, 2010 mortgages will now be registered as a collateral charge. TD believes that this will be a positive change for their consumers. I am not certain that I agree. Lets take a quick look at the facts and the pros and cons. Facts: Mortgage will be registered as a collateral charge. Mortgage can be registered in an amount equal to 125% of the value of the property. Pros According to TD's information releases: The flexibility to register the collateral charge for a higher amount than the current loan agreement so that if a customer wants to increase their mortgage in the future they can reuse the existing collateral charge and not incur any new registration fees The flexibility to switch to another lending product by using the existing collateral charge without incurring registration fees. Cons: Well, come maturity a borrower will no longer have the option to "switch" their mortgage to another lender. The charge will have to be discharged in full and a new mortgage placed. This means it makes it much more difficult and costly to move a mortgage at renewal. Depending on the wording of the collateral agreement, all of a customer's credit facilities at TD may be covered by the charge. This could mean that if a borrower wanted to discharge the mortgage they may also have to pay out other TD credit items such as Visas etc. Talk to your TD rep to get their take on what this means to you and your clients.

A handy financial resource

If you'd like to "know your stuff" before heading into a mortgage broker or financial planner's office, you may want to check out the Financial Consumer Agency of Canada's consumer publications. The government body has done a great job of outlining basic financial topics - from how to borrow on home equity to how to develop a household budget. It also offers a six-part section on credit cards - that addresses how to save with credit cards as well as how to shop around for a credit card - runs down the various mortgage products on the market place and tackles saving and investing topics. While meeting a mortgage broker in person is probably the best way to find the financial products that best suit your particular needs, it never hurts to head into a meeting with a basic understanding of your options. The FCAC's publications will provide you with the background you need to navigate the discussion in the direction you'd like it to go.

A life preserver for debt drownings

When it comes to financial priorities, most Canadians say that becoming 'debt-free' is at the top of their list - but in the last year, almost half believe they didn't come any closer to achieving that goal. According to a poll of 1,000 Canadians by Manulife Bank of Canada, most Canadians didn't take advantage of low interest rates and make an extra mortgage payment. About 29% said their debt increased in the past year, and another 17% saw no change in their debt levels. If you fall into the above group, here are some tips for devising a debt management plan: 1. Figure out how much debt you have. While it may be painful, the only way to lower your debt level is to know where it stands. Make a list of all the debt you owe - including credit cards, car loans, lines of credit, mortgage debt and student loans. 2. Track and analyze your spending. For some people, it's easy to pinpoint how they got into debt. For others, it's not as clear. Either way, it's important to spend to track your spending. Bring a notebook out with you for a week and jot down everything you buy - from coffees to clothing purchases. If you're more of a virtual banker, comb through your bank and credit card statements from the past month or two to see where your money is going. Experts say most households waste up to 15% of their take-home income. Find out where that waste is, and determine ways to put it towards your debt. 3. Come up with a plan. Keeping your current habits in mind, set an achievable spending and debt reduction plan. Prioritize your debt, with credit card debt as the most urgent to pay off, and car loans, mortgage debt and student loans rounding out the bottom of the priority list. The first credit cards you pay off should be the ones with the lowest balance. If possible, see if consolidating your debt - either to one low-interest credit card, or a home equity line of credit - is an option. 4. Focus on one debt at a time. If possible, see if consolidating your debt - either to one low-interest credit card, or a home equity line of credit - is an option. If it isn't, start making extra payments on the credit card with the lowest balance, while meeting the minimum payments on your other cards. Once the first debt is paid off, take the full amount you were spending on it, and put it towards the next lowest card. 5. Create debt-free habits. Once your debt is paid off, it's important to start saving. A credit card should not be used if you don't have the money to pay it off at the end of the month. Instead, you should aim to have a significant "cash cushion" to pull from when unforeseen expenses arise. If your debt is more than you can manage on your own, please feel free to give me a call - and I will refer you to a professional who can help.

The fixed/variable debate goes on...

A recent article in the Financial Post has stirred up the fixed vs. variable rate once again – hinting that the variable rate's reign may soon be coming to an end. Historically, variable rate mortgages have saved homeowners money, averaging a lower rate than the typical five-year fixed-rate mortgage. With the Bank of Canada's widely-known decision to raise the Prime rate over the next few years, and the bond market bringing fixed rates back to record lows, the tides may be turning. When it comes to deciding which product is right for you, it's best to ignore historic trends and focus on your particular situation. If you're on a tight budget with no room to move, a variable rate isn't right for you because it has the potential to increase up to ten times per year. If you find the qualifying rate uncomfortable – the current posted five-year fixed rate – then again, it's likely not right for you. If you've determined that you can handle the fluctuations of a variable rate, it might be in your best interest to choose that route but pay it at the current posted five-year fixed rate. The extra payments will allow you to drastically cut into your principle, and your budget won't be affected for quite some time – at least until variable rates hit the 5% mark. Another option is the hybrid mortgage – which allows you to split your mortgage into a variable and fixed component, thus taking advantage of the best of both worlds. To truly determine the option that's best for you, however, why not give me a call? There's no obligation to sign on the dotted line, and I'd be happy to uncover the best mortgage for your needs.

Another argument for paying down that mortgage...

While mortgage brokers have long advocated the notion of paying off one's mortgage, this age of low interest rates has created yet another advantage to the concept. In a recent article in the Toronto Star, Moshe Milevsky, a professor at York University's Schulich School of Business, argues that in today's volatile stock market, money is only earning around 3% - if individuals are willing to lock in for a few years. Money in demand deposits and savings accounts are earning even less - somewhere around 1%. At that rate, Milevsky argues, it will take a retirement nest egg 72 years to double - not a great rate of return to say the least. So even though mortgage rates are incredibly low, they're still higher than what people are earning on their savings. So if your clients come across some extra cash, wouldn't it make more sense to pay down their mortgage than invest it in an investment vehicle that's earning peanuts?