It’s Friday….Go skiing or something!!!

Hope you all had a good week, I know I did. Busy busy busy. More of the same for next week too! Check out the video below. It’s called ski-base. Base jumping meets skiing….well skiing off of stuff, that is.

What to know about credit and why it’s king these days

There’s a mortgage broker up in Prince George, BC  who’s blog we’re going to visit today. The link is posted below.  Bob has put together a great article called “Back to the Basics: The 5 C’s of Borrowing”.  The main thrust of the article is to explain how today’s credit climate is much different than it was even 6 months ago. This is not to say it’s impossible to get credit, it just takes a stronger deal to make banks happy. One of the most important things you can do to ensure your credit is good is to review your credit report often. You can get a copy of your credit bureau by clicking here. I recommend looking in the upper right hand corner of that page to get a FREE copy mailed to you. If you get your report and have no idea how to read it, drop me a line and I’ll help you decipher it.

And now, without further ado:  “Back to the Basics: The 5 C’s of Borrowing”

What does a mortgage broker do?

Mortgage brokers are like mechanics; The best ones are typically the ones that your friends and family members introduce you to. You need to know you’re dealing with someone honest, reliable and with your best interests at heart. Here’s a list of some things that I  strive to do for my clients. The theme here is VALUE.

-Analyze their financial situation and put them with the best lender for their needs. Remember, mortgage brokers have access to dozens of mortgage products, not just the ones at your bank or credit union.

-take steps to build a long-term relationship. I intend on being your friend in the industry!

-Speak to them in plain English rather than banker’s jargon to ensure we are on the same page every step of the way.

-listen carefully to what they want, what they need, and then help them find the middle point.

-explain with clear examples why the “lowest rate” isn’t always the best solution.

-help them understand the power of investment and be able to introduce them to licensed professionals who can then assist them in increasing their net worth.

-help them select a qualified, reputable real estate agent.

-visit them before, during or after business hours at their convenience.

-explain all of the costs they will need to consider when taking a mortgage.

Best of all, in almost all cases, I will not charge you a fee for my services. Nor will I cross-sell you on a bunch of  products like your bank will if you go to them for a mortgage. (Banks are good, don’t get me wrong….without them I’d be out of a job- but they’re after your money.)

sweet jumps

Now that’s a nice kitchen….

I don’t know about you, but I love a nice kitchen. Aside from the fact that I really enjoy cooking, kitchens are always a social hub. How many times have you been invited to a friend’s house and it’s turned into a “Kitchen Party”? Exactly.

Last Friday I met a new friend who has the skills to transform your hum drum kitchen into a mecca of culinary delight. Go Woodworks is located in Vancouver and as you can tell by the pictures, their work is second to none. With the renovation tax credit in full effect right now, maybe it’s time to give the boys at Go a call.  It’s not just kitchens they do either, so if your new or existing abode needs a facelift, keep these guys in mind.

Does your bank really care?

I get a lot of mortgage shoppers telling me “how good of a relationship” they have with their bank, and “how they’ve been a client since they deposited their first roll of pennies back in 1982″.  Although these relationships surely do exist, savvy mortgage shoppers might be wise to test their bank’s loyalty with this simple test.

Here’s what you do:

1) Arrange a meeting with me where we can take a look at your total financial picture. I’ll be able to show you at least half a dozen different products that might appeal to you for different reasons.

2) Arrange a meeting with your bank. Put on your Sunday Best and your Poker Face, and go to the meeting.

3) DO NOT TELL THE BANK YOU’VE SPOKEN TO A BROKER.

4) DO emphasize that you’re not there to barter, and that you want the absolute best mortgage plan they have for your needs. You may even want to throw in that you’re happy with your relationship with them.

5) See what you get.

See how this works? If the bank truly respects you and your business, they will give you a rate (and maybe a product) that I can’t compete with. Banks have a mandate to retain a client at any cost since it’s much more expensive to go out and find a new customer than retain an existing one.

If the bank come back with a product that isn’t as good an what I can offer, I would strongly recommend walking away and calling me immediately so that we can take care of your best interests together.

It’s your money, your time, and you deserve the the best of both. If you want to take charge of your finances, this is a good way to see who’s really got your back.

Happy Friday!:)

Mortgage insurance…get the right kind

A little while ago a friend of mine who’s a financial planner forwarded this video to me about mortgage insurance. The video touches on the differences between pre-and post claim underwriting, and why one is a FAR safer investment than another. When dealing with insurance, always make sure you are dealing with a licensed insurance broker working with a reputable company. Pre-claim underwriting makes sure that when you need the insurance, you get it; it leaves no “wiggle room” for the insurer to avoid paying you out.

I have to pay closing costs?

Closing costs can be a nasty surprise if you’re not properly informed. No one wants to be confronted with an unexpected bill, especially one that can be in the thousands of dollars. Read the list below and make sure you have the funds available before settling on a down payment amount.

What are they? Well, in a nutshell, they are all of the loose ends that need to be tied up at your lawyer or notary’s office on Closing Day. The following list is some (maybe not all) of the items you’ll be expected to pay for:

-property tax: You will most likely be required to pay the seller back for a portion of the taxes they pre-paid for. For example, let’s say the seller pre-paid their property tax from Feb. 5th 2008 – Feb. 4th 2009. Y0u come in and purchase the property on June 15th 2008.  You would then need to re-imburse the seller the amount that they’re not responsible for, which in this case would be from June 15th 2008 – Feb.4th 2009.  The same principle will be applied to monthly strata fees as well.

-Property Transfer Tax (PTT): This little jem is 1% of the first $200,000.00 and 2% of the remainder. If your property is purchased at $425,000.00 or less AND you’re a first time buyer, you’ve dodged a bullet and get 100% exemption. If you’re spending between $425,000 -$450,000, you get a partial exemption.  $450,000.00 and up, I guess the powers that be figure you have the dough, so you’re on the hook for at least $7000.00. Here’s how to calculate what the partial exemption will be. Let’s use $435,000.00 as an example purchase price:

Formula: Amount of Full PTT x ($450,000 – Purchase Price)) / $25,000

$6700.00 x (450,000 -435,000)/25,000

=$6700.00 x 0.6 = $4020.00

$6700.00 – $4020.00 = $2680.00

$2680.00 is the amount owing.

Lawyer/Notary Fees: This amount seems to vary, but I would recommend budgeting at least $900.00.

Appraisals/surveys: Surveys do not apply to condos or apartments, but you can expect another $250-400 for these categories.

Out with the old, in with the new…

Interest rates on mortgages are low…really low right now. On March 3rd, the Bank Of Canada will most likely drop prime again. (although my crystal ball is in the shop since it broke after the SuperBowl). That could take fixed rate mortgage amounts down to record-breaking lows, making it worthwhile financially to get out of your current mortgage and into a new one.

But how do you know if it will be worth your while?

Luckily for us, a little bit of high-school level math will show us the way. You will need to know your current mortgage balance, your mortgage rate, and the number of months left in your mortgage term. You also need to know exactly what the penalty is for breaking your mortgage. Call your current lender and ask, or better yet, read the terms and conditions of your mortgage agreement.

Step 1:

Current balance x (contract rate/12) x months remaining = total carrying costs

Step 2:

Same calculation except use the new rate rather than current rate + penalty

If Step 2 results in a lower number than step 1, it is worth breaking the mortgage.

Probably the most important step is to have a full understanding of your current bank’s penalty for breaking the mortgage. Don’t be afraid to call and ask a bank representative for further clarification, but be careful not to get sucked into a retention dialogue with them. Like a bad girlfriend, they don’t have your best interests at heart until they think you might leave.

Leave me a message if you need further clarification!

Cheers,

Andrew

Taking money to save money?

I was introduced to a new mortgage product the other day that really stood out to me. I’ll explain how it works, and you tell me if it sounds good. This is especially good if you’re locked in to a mortgage right now and are frustrated that you aren’t able to capitalize on today’s exceptionally low interest rates.

With this product, you can get 4.89% on a 5 year fixed mortgage. That’s a good rate, even though 4.39% is one out there right now that seems better at first glance. But here’s the clincher: With this new 4.89% product, you get $3600.00 cash back at funding.

Here’s a scenario: Let’s say you have a 5 year mortgage at 5.09%. You have 3 years left in the term and $278,000.00 is the balance.  To get out of that mortgage, you are going to have to pay the greater of 3 months’ interest or I.R.D. (Interest Rate Differential – This is the difference between what your current rate is and what the current posted rate for the remaining  of your term would be, less your most recent discount. )

Without boring you with lengthy calculations, you’re paying about $3500.00 to get out of the old mortgage, and taking $100.00 to get into a better one. You may need to pay for an appraisal, and there will be legal fees, but when you look at the long term savings, a lot of times it’s worth making the switch. It’s a clear cut case of “spend a little to save a lot”.

If you’d like me to run your numbers, let me know!

Also, check out this interesting article from my place of birth, the Okanagan Valley.