Fast-tracking your mortgage

When it comes to putting your mortgage on the fast track, a little can go a long way. Here are some strategies for saving on interest costs and shaving years off your mortgage.

Increase your payment frequency. Opt for biweekly accelerated payments – take your current monthly payment and divide it in two, then set those payments for every two weeks. You'll make 26 payments a year instead of 24, and pay off your mortgage significantly faster than you would if you were making monthly payments.

Amortize frugally. While 35-year amortization periods are fairly common, don't assume that's the best option for your situation. If you can afford the higher payments, opting for a shorter amortization period will not only get you debt-free sooner, but save you thousands of dollars in the long run.

Make lump sum payments. The portion of your monthly blended mortgage payment allocated toward interest is significantly higher in the infancy of your mortgage, and decreases gradually as you pay down the principal. This means that the sooner in the life of your mortgage you make a lump sum payment – whether it's your annual bonus, your income tax refund or just savings you've socked away throughout the year – the more dramatic its long-term effect will be.

Adjust your payments. If your term is coming up for renewal, you may be able to secure a lower monthly payment by taking advantage of current interest rates, which are still relatively low. But if you can still afford the payments you're making now, keep them the same amount – you'll be paying down more towards the principal without affecting your current cash flow. Likewise, if you get a raise, consider allocating a portion of your pay raise toward increasing your monthly payment – your monthly budget will never know the difference.

Please contact us with any queries that you might have,



Rick Moran, AMP, OMB # M08001997

Turn to an Independent Mortgage Professional for Maximum Choice

For Canadians looking for a mortgage, rates continue to be low by historical standards. To get a competitive rate and the financing features that fit their needs, consumers need access to a range of mortgage options.
Canadians wanting to get a new mortgage or renew / re-finance an existing mortgage can approach:
• a financial institution and select from their particular menu of mortgage options and rates
• a mortgage representative who must sell a specific line of mortgage products
-or-
• an independent mortgage broker, who can offer a full range of mortgage types and interest rate options, and who works only on his or her client's behalf.
By approaching one or two financial institutions and choosing from their in-house mortgage products, many consumers miss out on an array of mortgage choices that could suit their needs better and save them a lot of money over the long term. Comparing different mortgage types and interest rates on your own is a time consuming and rather intimidating task. And if you deal with a financial institution directly and your application is declined, you must start over from scratch with another institution.
An Invis independent mortgage professional has access to a wide range of mortgage lenders and can guide you to a mortgage that suits your individual needs, at a very competitive rate. They can work with lenders including chartered banks, credit unions, and trust companies, as well as other sources of funds such as life insurance companies and pension funds. Best of all, this objective expertise is available to you for free in most cases, because the selected lending institution pays Invis to source the mortgage business. Please feel free to contact me with any question that you may have.

Rick Moran, AMP, OMB # M08001997

Buying a home? Here are some things you need to know (Part 2)

The spring house hunt is here in markets across Canada. For those navigating the home purchase process, this week we look at additional home buying tips:

6. Borrow up to $25,000 for your down payment from your RRSP – tax-free! If you are a first-time buyer, the Homebuyers Plan (HBP) allows you to withdraw up to $25,000 from your registered retirement savings plans (RRSPs) to buy or build your home. An Invis mortgage professional can tell you more about this program.

7. Understand closing costs. When buying a home, it pays to be informed about closing costs, which can represent up to three per cent of the purchase price, including: land transfer tax, lawyer's fees, appraisal fees, title insurance and home inspection fees.

8. Know your financing options. Many lenders offer mortgages which feature a 5% down payment, or in some cases 100% financing. If you borrow more than 80 per cent of the purchase price, your mortgage must be insured, typically by the Canadian Mortgage and Housing Corporation (CMHC), Genworth Financial or Canada Guaranty.

9. Don't do it alone – explore the benefits offered by mortgage brokers. Mortgage brokers act as a one-stop shop for planning advice and the best rates. Invis mortgage professionals work with prospective homeowners across Canada to provide valuable advice before and during the home buying process.



Rick Moran, AMP, OMB # M08001997

Controversial document infuriates brokers

Them’s fighting words: A document from an RBC employee outlining the differences between mortgage brokers and specialists is drawing the ire of brokers – charging it mischaracterizes their work, their qualifications and their motives.
“Brokers will farm out your mortgage to a number of companies and then will set you up with a financial institution based on only the lowest rate, no other factors,” reads the undated document -- “Understanding the difference between mortgage specialists and mortgage brokers.” An RBC logo and the name of one of its British Columbia mortgage specialists appear on the flyer.
There’s more.
“When selling your mortgage the broker and the financial institutions reviewing your file may pull numerous credit bureau requests depending on their software capabilities,” continues the document, which aims to provide mortgage specialists with talking points to answer client questions. “Brokers will charge set up fees and have other hidden costs you should be aware of.”
Neither the specialist nor RBC corporate communications in Vancouver returned MortgageBrokerNews.ca calls Friday.
Still, the flyer has now been posted to industry websites across the country, with more than 150 brokers venting their rage and disappointment.
“I think the relationship between mortgage brokers and mortgage specialist is akin to some of the biggest rivalries in sports,” Greg Williamson, founder of 180 Degrees Coaching, told MortgageBrokerNews.ca. “But this is misleading and for those who read it and don’t know our business, it will mislead them.”
The broker was one of the first to post it on his blog website, www.gregwilliamson.ca. One of the document’s most glaring inaccuracies, maintains Williamson, is that suggestion brokers repeatedly run reference checks on clients.
“If a mortgage broker is using Filogix, they’re generally only pulling a credit check once,” he said. His blog has now attracted more than 280 responses, mostly from brokers concerned the RBC flyer will erode consumer confidence in their industry.
Under another section marked “Training and Educational Differences,” the writer extols the financial planning and institutional knowledge of bank mortgage specialists. She then offers a much briefer synopsis of broker qualifications: “Depending on your province, mortgage brokers must be licensed through the Accredited Mortgage Professionals course. Only this course is required, no financial planning included.”
Many brokers are concerned that the document may speak to the bank’s corporate attitudes about the broker channel. It is, in fact, the only one of the Big Five that has never used external brokers.
“There were obviously inaccuracies in the report,” CAAMP President and CEO Jim Murphy told MortgageBrokerNews.ca. “I’m in discussions with senior officials from RBC that they were not aware of it and are looking into it.”

My personal comments are: these RBC Specialists deal with one institution and one set of Mortgage Products. In many cases,
I would challenge them to have 30 years of Industry experience….enough said.

Rick Moran, AMP, OMB # M08001997

Money Saving Tips on Paying Off Your Mortgage Faster – Part 2

Last week I noted that homeowners have much to gain by paying off their mortgage as quickly as possible. By paying down extra principal in the early years of a mortgage, you can dramatically lower the interest you’ll pay throughout the life of the mortgage. Here are some additional tips on how to make this happen:

5. Make use of double-up privileges wherever possible
Tell yourself that you will "skip-a-payment" whenever necessary... then skip only when you absolutely must.

6. Round your payments up
By adding even a nominal amount of say, $10 per payment, the amount of interest you are saving will be unbelievable, and the extra money is relatively painless to part with.

7. Pay a lump sum whenever possible
By decreasing the principal of the mortgage, your payments will not be allocated as much to interest, thereby accelerating the end of your mortgage.

8. Keep payments the same when mortgage rates have fallen
If the payment amount has not been a problem so far, then keep it the same, thereby paying down the principal faster.

9. Raise payments in line with increased income on an after-tax basis
If your income increases, don't keep your mortgage payments the same. Although the disposable income may be fun to spend on unnecessary luxuries in the short-term, the long-term benefits of being mortgage free faster a far outweighs the short-term sacrifice

If there are any other related issues that you would like to discuss, I would welcome a call at (416) 418-8614

Rick Moran, AMP, OMB # M08001997

SEVEN DIRECTIONS IN THE FUTURE OF THE MORTGAGE INDUSTRY

As I constantly study trends in the industry, I like to pass on the really informative ones. Following is a very recent article by Deloitte, I find it informative, but I disagree with the number of households that will be using Mortgage Brokers – I will always maintain the importance of the relationship that is developed between the consumer and the talented Mortgage Professional. For over twenty years I have insisted on providing solid advice, preparation and complete disclosure at all times, ensuring a stress free experience..

Unlike the U.S. mortgage broker market, brokers will remain a fixture in the Canadian mortgage distribution landscape, and Canadian mortgage holders will ultimately benefit as a result, says a new report by Deloitte.

“The Canadian mortgage industry is undergoing another significant paradigm shift,” says Todd Roberts, consulting partner and leader of the corporate strategy practice for Deloitte. “In the face of significant industry developments such as the recent credit crisis, industry consolidation and price competition, many banks and non-bank lenders are starting to seriously evaluate the economics involved in pursuing the mortgage brokerage channel. As more and more of these lenders enter this business, Canadian mortgage consumers will ultimately benefit in the form of increased choice of products, value-added advice and more convenient services.”

The future for the mortgage broker channel in Canada remains positive, although the scenario anticipated five years ago where mortgage brokers were expected to represent the majority of origination volume is unlikely, says Deloitte. The channel will continue to stabilize, settling at approximately one-third of mortgage origination dollar volume, it says.

In response to consumer group concerns that mortgage prepayment penalties are complicated and lack disclosure, the federal government has stated its intention to standardize its calculation and disclosure. The typical repayment penalty is either three months’ interest or the difference between the existing rate and the rate the lender could charge in the current environment – known as the interest rate differential (IRD). In a rapidly falling rate environment, the IRD method provides the lender with greater compensation for the foregone interest revenue, but it is typically more expensive for borrowers who plan to discharge their mortgages.

“If new government regulations remove the IRD penalty as a barrier to switching, more consumers will likely switch mortgages in periods of declining interest rates,” says Roberts. “In the absence of stiff payment penalties, lenders will therefore seek to minimize lost customers by building strong relationships through active cross-selling and retention strategies for at-risk groups.”

According to Deloitte, emerging trends that are expected to shape the Canadian mortgage industry and ultimately impact Canadian mortgage holders include:

1. The balance of power will shift from financial institutions to mortgage-seeking Canadians. As the mortgage lending landscape continues to shift, Canadians will have access to a wider range of options when selecting a mortgage. This has increased competition among lenders (bank branches, mobile mortgage specialists, independent mortgage brokers, and online sources) which in turn will result in more customer-friendly service, increased product offerings and convenience for Canadians seeking a mortgage.


2. Online and telephone banking will continue emerging as viable channels. Remote self-service options such as online and telephone banking are emerging as popular alternative channels for obtaining mortgages. Given the new level of sophistication telephone banking has recently achieved, Canadians no longer need to leave home to obtain a mortgage because some lenders are allowing borrowers to complete their mortgage applications using a voice signature. In addition, online features such as calculators, planning tools and live chat options with lenders are giving Canadians access to more information than ever. Although these channels are not new, they are in the early stages of adoption and signify an important trend for Canadians interested in the self-service option.

3. Mortgage brokers will evolve from “rate shoppers”’ to “advisors” in order to survive. Given that Canadians now have increased access to mortgage rate information, mortgage brokers as “rate shoppers” is quickly becoming irrelevant. As such, the “mortgage broker as advisor” value proposition will be the most successful approach for this channel. To succeed in today’s hypercompetitive marketplace, mortgage brokers will start to offer value-added advice to Canadian mortgage holders similar to the way investment brokers have evolved from transactional to advice-based roles.

4. Major banks will continue to compete for broker business. Major banks will continue to invest heavily in proprietary distribution to compete directly with the mortgage broker channel, and to a growing extent, each other. In particular, the emergence of bank mobile mortgage sales forces (MMSF) is challenging the perception of brokers as the low-rate/better customer service alternative (particularly among non-branch/monoline lenders). As a result, bank MMSF are making major inroads due to convenience and customer service. Armed with differentiated products, more than 2,800 mobile mortgage sales agents are operating in Canada today. The evolution of MMSF and the role major banks choose to play in the broker channel will have significant implications for the future of broker originated lending in Canada. If banks choose to stay in the broker channel, Canadians will have more choice and competitive pricing. Brokers will also need to raise their game and increase their level of client service sophistication. However, if banks withdraw from the channel, it will dramatically restrict the supply of mortgages in the broker channel.

5. Investments in technology will benefit consumers in terms of speed and convenience in obtaining a mortgage. As more lenders make technological advances, quick turnaround and visibility on deal status will improve, ultimately benefiting consumers. Improvements to workflow management tools streamline back-office operations, facilitate accurate and timely front-end communication with consumers, and allow lenders to proactively handle exceptions and reduce turnaround times. For example, if a borrower wants to know whether they can increase their mortgage to win a bidding war, the lender can now evaluate the risk and provide them with an answer within four to six hours – compared to the several days it used to take using a manual process.

6. The super-broker networks will continue to consolidate. In recent years, increased competition, heightened compliance requirements and rising technology costs have pushed the broker market to consolidate, with smaller shops merging into super-broker networks. In 2005, almost 70 per cent of Canadian brokers were employed by one of five broker houses. Today, this figure tops 85 per cent as new mid-tier networks have emerged. As a result, the quality of the remaining firms is much higher (for example, more consistent training for brokers, better technological enablement, greater negotiating power with large lenders on behalf of consumers for better products and rates).

7. Niche lenders with specialized product offerings will emerge via the broker channel. As the participation of new lending institutions in the mortgage broker channel continues to evolve, niche lenders with specialized products will emerge via the broker channel. In doing so, they will provide new options to groups of Canadians who previously had few mortgage options available to them due to their financial circumstances (for example, new immigrants, the self-employed and individuals with credit challenges).

Rick Moran, AMP, OMB#M08001997

WHY IT PAYS TO STAY IN TOUCH WITH YOUR MORTGAGE BROKER

When you were researching your options for your current mortgage, you probably spent a fair bit of time speaking with your mortgage broker. You may not realize that your mortgage broker can still be a valuable resource many years from now.

1. Your broker understands your needs. Whatever situation you might find yourself in as a homeowner, your broker has extensive experience providing with mortgage advice to others in similar scenarios, whether it’s buying, selling, or refinancing.

2. Your broker understands the market. You can count on an independent view of what’s happening in the markets. Your broker stays on top of the trends in real estate financing and other economic conditions and is aware of new developments and products that could be useful to you.

3. Your broker is a source of advice and knowledge about refinancing. If you’re thinking of refinancing, your mortgage broker is one of the first people you should speak to. He or she will again review your goals and outline your options, so you can make an informed decision.

4. Your broker can refer you to good people. Your mortgage broker regularly works with lenders, real estate agents, home inspectors, and lawyers who specialize in real estate. If you ever need a referral – for example, if you are looking for a real estate agent to help you find your next home – your broker can provide you with recommendations.



Rick Moran, AMP, OMB # M08001997

BANK OF CANADA KEEPS KEY RATE UNCHANGED

The Bank of Canada said today that it will leave its key interest rate unchanged. In its statement this morning the Bank pointed to risks to a rebound in Canadian exports based on “a combination of disappointing productivity performance and persistent strength in the Canadian dollar.”
The Bank stated that keeping its key rate steady “leaves considerable money stimulus in place, consistent with achieving the 2 per cent inflation target in an environment of significant excess supply in Canada,” and that any further increases “would need to be carefully considered.”

Earlier this year, the Bank had raised its key interest rate three times since June, but it also kept borrowing costs steady on October 19, noting some uncertainties in the economic outlook and continuing weakness in the U.S. economy.

Today’s Bank of Canada announcement means that Canadian lenders are expected to keep their prime lending rate steady. Products typically linked to a lender’s prime rate include variable-rate mortgages, variable-rate credit cards, and home equity lines of credit. The pricing of fixed-rate mortgages, on the other hand, is more affected by trends in the bond markets.
In the U.S. Ben Bernanke is investing $600 million in government bonds that he believes will provide an injection directly into the U.S. economy. Correct or not, this indicates to me that the U.S. prime rates are unlikely to move anywhere in the near future.


Rick Moran, AMP, OMB # M08001997

HOME OWNERSHIP AFFORDABILITY IMPROVES (PART 1: CANADA)

After four consecutive quarters of rising homeownership costs, housing affordability improved in the third quarter of 2010 thanks primarily to a drop in mortgage rates and some softening in home prices, according to the latest Housing Trends and Affordability report released today by RBC Economics Research.

"The improvement in affordability during the third quarter has relieved some of the stress that had been mounting in Canada's housing market over the past year," said Robert Hogue, senior economist, RBC. "After appreciating rapidly during the strong rebound in resale activity last year and early this year, national home prices recently came off the burner and retreated modestly as market conditions cooled considerably through the spring and summer."

RBC notes that affordability could well improve further in the near term, with additional cuts in the posted five-year fixed rate already in place in the early part of the fourth quarter and previous home price increases still being rolled back in certain markets.

However, RBC expects the Bank of Canada will resume its rate hiking campaign by the second quarter of next year, which will eventually have a more sustained upward effect on mortgage rates.

Rick Moran, AMP, OMB#M08001997

HOME OWNERSHIP AFFORDABILITY IMPROVES (PART 2: ONTARIO)

Home Ownership Affordability Improves (Part 2) Ontario
After four consecutive quarterly increases, the cost of homeownership declined in Ontario in the third quarter thanks to lower mortgage rates and some softening in property values. RBC's Measures fell between 1.3 and 2.4 percentage points, fully reversing the increase in the second quarter.
Existing home sales ended their precipitous slide confirming RBC's earlier expectation that the slowdown in activity through the spring and summer largely reflected various transitory factors - including the HST and changes in mortgage lending rules - that spurred demand at the start of this year. With the market now back in balance, the recent softness in home prices will likely prove to be a healthy recalibrating following a strong rally.
Contacting your Mortgage Professional and spending quality time planning is the most important component in your quest for a healthy financial future.
Rick Moran, AMP, OMB#M08001997

FIVE WAYS TO PAY OFF YOUR MORTGAGE FASTER

For most of us, paying off a mortgage as quickly as possible is a priority. Here are some ways to pay down extra principal early on, to shorten the life of the mortgage and the interest you'll pay over the years.

1. Round your payments up – this little extra adds up over time.

2. Pay a lump sum whenever possible. Set up a separate Bank Account earmarked for the lump sum payments only.

3. Increase payments when you get a raise.

4. Make bi-weekly payments – you’ll end up paying more toward the principal each year.

5. Keep payments the same when mortgage rates have fallen, particularly when you are in a Variable Rate Product.

Rick Moran, AMP, OMB#M08001997

WOMEN MAKING THE FINANCIAL DECISIONS IN CANADIAN HOUSEHOLDS

Over half of Canadian women say that they are responsible for most of the day-to-day finance decisions, according to MasterCard's 2010 MasterIndex of Canadian Women Consumers. More than half of those enjoy their role as the primary decision maker.

The report examined the role of women over the age of 18 in Canada as well as looking at the effects of the global recession on consumer behaviour.

"The recession was a financial marathon, but Canadian women emerged leaner, stronger and more financially satisfied," says Julie Wilson, Director, Public Affairs in a press release, "They are more confident in their financial situation. They are still spending, but they are now dollar-store chic."

Although the number of women who are responsible for the day-to-day household financial decisions was down to 51 percent from 2006's 55 per cent, more Canadian women enjoy that responsibility.

Moms are the ones most likely to have the sole responsibility of day-to-day finances in their home, the study found. More specifically they are making the principal Mortgage Decisions.

Six in ten Canadian women are satisfied with their personal financial situation with only 14 percent being very satisfied. This number is up from 54 percent in 2006.

Six in ten Canadian women are savers. What stage of life often dictated how women spend their money. Over seventy per cent of Canadian women say that a good price is the most important factor when they are shopping for themselves and their households. For 'New Earners' brand name is a bigger consideration than for moms when it comes to buying for themselves. That data reverses when it comes to buying household items.

The 2010 research was conducted by Environics Research Group from July 22 - August 4, via a national online survey of 2,000 adult Canadian women aged 18+.

Rick Moran reports that over 60% of their clients decisions are made by the lady of the house.



Rick Moran, AMP, OMB#M08001997

EXCLAIM.CA x Rick Moran Article

By Allison Outhit

Rick Moran (www.rickmoran.ca) has over 20 years experience and is part of a select group of Mortgage Professionals in Canada that hold an Accredited Mortgage Professional designation. He has worked with a number of arts and media professionals and as a regular guest on Newstalk 1010 AM radio Toronto, Rick has assisted thousands of listeners with their financial questions.

Do musicians have particular issues when it comes to getting into the real estate market?
What I have found is that anybody who’s young and/or struggling at all seem to be of the same mind, which is "I will never be able to buy a house or qualify for a mortgage.” That is in fact 90 percent of the time just not the case. I specialize in self-employed people who have had a decent past credit history and who are self-employed and that transfers instantly to the music industry and the arts.

What should young artists think abut to get on the right path?
It’s very important that they establish a credit history that’s healthy and on an ongoing basis make some sort of plan to budget to buy real estate. I am a firm believer in investing and to take it a step further, invest your money in real estate.

What are the chief obstacles for musicians who don’t think they can do it?
It’s education, it really is. To give you an example: the mortgage brokerage industry in Canada has become very much not fee-generated. We used to charge fees in order to place mortgages on people’s behalf. Today the industry has morphed greatly, and our compensation for the most part is done with AAA business being given to some 50 lenders in Canada who pay us a commission for placing a mortgage with them. In most cases if you have good credit history and you have a good go to the bank deal, there will be no charge from the mortgage broker. My best interest rate will be much better than what their bank’s rate is, and over a five-year term it’s monster money. So the message is, we are able to do much better without it costing you any money to do it. The challenge is getting this message out to the entertainment industry: we are professionals with a very good understanding of how credit works and will not hesitate to spend our time providing advice or counselling to help people get where they should be. And it’s firmly my belief that everyone should own a piece of real estate.

Why?
It would make our country much healthier and make the general population much happier. There comes with ownership of real estate a level of pride that a renter will ever have. It’s much more than just having it for your retirement. As long as it is possible to access your day-to-day world, find something in your price range that is accessible somehow. Buying properties jointly [with band members] is not a bad idea, and there’s no reason why that couldn’t be done. You have to start somewhere.