Found 6 posts tagged as "Mortgage"
When it comes to mortgages and debt, the average Canadian’s wants seems to be incongruent with the average Canadian reality. People would like to be mortgage free by the time they reach 55 or 65. But many Canadians will carry a debt well into their late sixties – and beyond.
The Royal Bank of Canada’s newest Housing Snapshot poll shows that an alarming number of Canadian citizens expect to be in debt as seniors. Nearly one third of the 2,282 respondents said that they expect to carry a mortgage after age 65. When the age is dropped to 55, a whopping 57 per cent of people said that they still expect to hold mortgage debt. So much for retiring, spending time with family, or traveling the world in one’s golden years.
Francois asks: "We purchased our home last year and just received a call from a competing bank offering us a reduced interest rate as well as a cash back offer if we switch our mortgage over to them. Our payment would stay the same and we could really use the money for other things. Should we make the switch?"
Look at ALL the numbers before you make any decisions to accept up front and possible “token” cash back offers. Lenders everywhere understand the customer appeal of instant cash and won’t likely be as forthcoming when it comes to the other “details” of their offer (i.e. “the small print”).
Here are three questions to ask your current and or potential new lender:
When my husband and I started shopping for our first home, we were quickly disheartened. At the time we lived in Vancouver, British Columbia, and knew we'd have to pay dearly to settle down in Canada's most expensive city. With average home prices in Vancouver ringing in at over $700,000 and the national average hitting $344,500 last year, many first time home buyers are challenged in finding a way to afford a new home. Follow these five smart rules for home ownership, and you may just find a place you can comfortably afford.
1. Have very little, or no debt.
If you're still paying off your student loan, buried in credit card debt, or are wheeling around town in a leased car, it makes good financial sense to deal with your current debt load before signing up for a mortgage. Houses have costs that go beyond monthly mortgage payments, such as utilities, insurance, maintenance, and repairs. Dealing with old debt while jugging a myriad of housing costs could be a stretch to any budget.
2. Have a decent down payment.
Scraping together a sizable down payment is a challenge for many prospective homeowners, and an especially daunting task for those living in pricey cities like Vancouver, Toronto, and Calgary. But the advantages to saving more are you'll have to borrow less, and you'll also cut your interest and mortgage loan insurance costs. Moving into your new home with more than 20 per cent down saves you from having a high-ratio mortgage -- greater equity in your home may also help you sleep better at night.
See 5 Ways to get mortgage-free faster and New Mortgage Rules: Can you still afford a house? for more housing tips and tricks.
3. Don't fall in love. Stick to your numbers.
The cute condo with an ocean view was a stunning sight to see, and I couldn't help but love the amenities that came with the half-million dollar Vancouver property. Walking into that open house was a rookie mistake, especially since I knew the place was way out of my budget. It's a good thing I crunched the numbers and knew what I could afford before falling head-over-heels for that pricey place.
Every first time buyer or seasoned house hunter should do the math before getting carried away with costs. A too-high mortgage can leave you resorting to credit cards and lines of credit to pay everyday expenses — a downward spiral that could cost you thousands in interest. Try the CMHC's Household Questionnaire to see if you're financially ready.
4. The Home Buyers' Plan may help.
Under the Home Buyers' Plan (HBP), a first-time home buyer can withdraw up to $25,000 tax-free from their RRSP to buy or build a home. If you are purchasing the home with a spouse, you can both withdraw up to $25,000 from each of your RRSP accounts. See Should you use your RRSP to buy a home? for the rules.
5. Move to a less expensive city, or province.
The truth is a harsh reality, but some cities may be too pricey for many prospective first time house hunters to afford. If you're up for a job change and a little adventure, moving from Toronto to Hamilton could save you $109,000 on the average cost of a house. Relocating from Vancouver B.C. to Fredericton N.B. saves you a whopping $558,130 since the average home costs a more manageable $142,640 in the frugal maritime province.
Your Turn: Is home ownership out of reach for today's first time buyers?
Kerry K. Taylor writes at Squawkfox.com, a blog where frugal living is fun. Kerry is the author of 397 Ways To Save Money: Spend Smarter & Live Well on Less.
In a bid to curb rising household debt levels across Canada, Federal Finance Minister Jim Flaherty announced a series of new mortgage rules to protect home buyers from financial difficulty when interest rates rise.
"In 2008 and again in 2010, our government acted to protect and strengthen the Canadian housing market," Flaherty said in a news conference on Monday. "We continue to do so today."
Unlike Ottawa's previous mortgage changes announced in 2010, the new rules may impact affordability for new home buyers. Here are the three big mortgage changes:
1. Government-backed 35-year mortgages are done.
If you don't have a 20 per cent down payment for your new home, forget stretching your payments with a 35-year mortgage. The new rules reduce the maximum amortization period from 35 to 30 years for government-insured mortgages, basically eliminating 35-year mortgages for home buyers who need mortgage insurance.
This new rule may make homeownership a challenge for some, but it will reduce the interest paid to lenders. For example, under the current rules, a five per cent, $250,000 mortgage with a 35-year amortization would have a $1,253 per month payment. The total interest paid on this 35-year mortgage would be a staggering $276,491.
When the new rules take effect on March 18, a similar 30-year mortgage would slightly increase your monthly payment by $80, but also drastically decrease the total interest paid by $46,170.
2. Borrow less from your home equity.
Have you been tapping your home equity to pay off consumer debt? Well, Ottawa doesn't like it. The second new rule lowers the maximum amount you can borrow when refinancing your mortgage from 90 per cent to 85 per cent.
3. Say goodbye to government insured HELOCs.
The final new mortgage rule removes government insurance on home equity lines of credit, or HELOCs. At the time of writing, TD Canada Trust still touts their Home Equity Line of Credit as a way to:
"Renovate, take a vacation, purchase a vehicle or recreational property, take advantage of investment opportunities" -- possibly the types of debt that Ottawa hopes to curb by removing CMHC insurance from these HELOCs.
Your Turn: Can you still afford your home when the new mortgage rules kick in March 18?
Kerry K. Taylor writes at Squawkfox.com, a blog where frugal living is fun. Kerry is the author of 397 Ways To Save Money: Spend Smarter & Live Well on Less.
Is that mortgaged roof over your head weighing heavy on your shoulders? Then maybe it's time to get serious about your mortgage and try to pay it off sooner. A mortgage-free home not only saves you money today, but could save you a quarter million dollars over a 25 or 35 year amortization.
Don't believe me? The Canada Mortgage and Housing Corporation (CMHC) has a handy Mortgage Payment Calculator that crunches the numbers and does the math, and it shows that a $250,000 mortgage on a 30 year amortization (at 5.50 per cent) costs you around $257,500 in interest alone.
If you have no desire to pay for your home twice (and who does?), then reduce your interest payments and trim your mortgage costs with these five tips, and get mortgage-free faster.
1. Know what you can really afford.
Before buying that lavish estate, take a look at your paycheque and figure out how much of a mortgage you can comfortably carry. A good way to see how a mortgage feels is to practice paying it before you buy. Try this tactic:
- 1. Pay your landlord your monthly rent. Tally the difference between your rent and your anticipated mortgage cost.
- 2. Put this additional money into a Tax-free Savings Account or a high interest account and use it later for your home down payment.
- 3. If you can’t come up with this additional money every month, then your anticipated mortgage price is too high. Continue saving for a bigger down payment or look at lower priced homes.
The Investor's Education Fund offers a series of home buying articles for would-be home buyers looking to scrape together a down payment.
2. Use your prepayment privileges.
If your mortgage has prepayment privileges -- lump sum payments you make outside of your regular mortgage payment schedule, where 100 per cent of the payment goes against the principal -- then you should use them to pay off your mortgage faster.
On a $250,000 mortgage at 6 per cent over 25 years, one prepayment of $1,000 each year could save you around $26,000 in interest and pay off your mortgage two and a half years sooner.
3. Get on an accelerated bi-weekly payment plan.
Want to really end your mortgage faster? Consider paying your mortgage every two weeks, for a total of twenty-six payments per year, using an accelerated bi-weekly payment plan. Your mortgage payments will fall on different calendar days each month, but this minor inconvenience could save you a stunning $50,000 in interest over monthly payments, assuming that same $250,000 mortgage with a 30 year amortization at 5.50 per cent.
4. Round up your payments.
If your regular mortgage payment is an odd number like $14,04.88, then round up to a more memorable $1410 and save some interest over the life of your mortgage. The extra $5.12 should be painless to part with, and even a little top-up can make you a homeowner sooner.
5. Pay a lump sum when possible.
Did you get a bonus, a tax refund, or come into an inheritance? Rather than squander this cash on consumer goods, add this after-tax cash to your mortgage principal and discover the freedom of being mortgage-free faster.
Your Turn: What tricks do you use to pay down your mortgage faster?
Kerry K. Taylor writes at Squawkfox.com, a blog where frugal living is fun. Kerry is the author of 397 Ways To Save Money: Spend Smarter & Live Well on Less.
The rules for buying a home and refinancing a mortgage have changed. On Tuesday, Finance Minister Jim Flaherty announced tightened measures to prevent homebuyers from getting into financial trouble when interest rates rise.
Those most affected by the new rules are maxed-out homeowners looking to roll consumer debt into their mortgages, and real estate speculators flipping numerous properties. Flaherty's three new mortgage rules take effect on April 19, 2010. Here is what they mean for you.
Rule 1: New five-year fixed rate mortgage standards
Under the new rules, borrowers must meet the standards for a five-year fixed rate mortgage, even if they choose a mortgage with a variable rate or a shorter term. This change is meant to protect prospective homeowners from rising interest rates in the future, but it could make qualifying for a mortgage more challenging.
For example, even if you opt for a variable-rate mortgage with today's interest rate of around 2%, then you're still required to afford today's five-year fixed rate of 3.89-5.39%.
You are more likely to get a preferred mortgage rate if you have good credit. Be sure to check your credit report and raise your credit score before meeting with lenders.
Rule 2: New refinancing limits
The second rule lowers the maximum amount homeowners can borrow when refinancing their mortgages to 90% of the value of their home, from 95%.
"We want to discourage the tendency some people have to use a home as an ATM," said Flaherty.
Rule 3: Bigger down payment required for speculators
The third rule requires a minimum down payment of 20%, raised from 5%, to qualify for government-backed mortgage insurance on non-owner-occupied properties. This final change is aimed to "discourage reckless real estate speculation," said Flaherty.
Regular homebuyers are not affected by this rule.
Minimum down payment and 35-year mortgages unchanged
Canadians scrimping to save the minimum 5% down payment and looking to stretch the amortization period to the maximum of 35 years to decrease monthly payments can breathe a sigh of relief. These limits remain unchanged under the new rules.
Your Turn: Do the new mortgage rules go too far to protect Canadians, or not far enough?
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