Optimistic signs of an economy gaining momentum

SIMON AVERY

This is a light week for economic data in the lead up to the holidays. But even as activity slows down after a dramatic year in the markets, optimism is unquestionably on the rise.
Expectations have brightened over the last few weeks, getting a boost from the U.S. Federal Reserve’s second round of quantitative easing, Congress’s $858-billion (U.S.) package of tax cuts, and improving economic numbers.
Markets are close to locking in double-digit gains for 2010: 12 per cent for the S&P 500, 10 per cent on the Dow Jones industrial average, and 12 per cent for Toronto’s S&P/TSX. Stocks haven’t enjoyed these heights since before the collapse of Lehman Brothers in September 2008.
A dozen brokerage strategists surveyed by Bloomberg are anticipating further gains for the broad S&P 500 next year. Their median estimate is for an increase of 6.7 per cent in 2011.
Yields on U.S. Treasuries are at their highest level since May, with the 10-year bond settling in at 3.34 per cent on Friday. The rise, in part, reflects a more upbeat economic outlook, as well as the realization that expanding U.S. debt will have to be funded and that inflation may reappear.
The Chicago Board Options Exchange Volatility Index, also known as the VIX, sank 10 per cent Friday to 16, its lowest point since April. The VIX became part of main street’s vernacular this summer. As the barometer of market anxiety surged past 30 this spring, and then closed in on 50 in June, it seemed to be charting civilization’s course to financial ruin. These days, the VIX is barely mentioned, even in detailed reports from economists and equity strategists.
The U.S. Conference Board on Friday said its index of leading economic indicators increased in November by the most in eight months. The rise is “an early sign that the expansion is gaining momentum and spreading,” said Conference Board officials, but they remain cautious. “Looking further out, possible clouds on the medium-term horizon include weaknesses in housing and employment,” said economist Ken Goldstein.
Most market watchers now think that the U.S. economy will manage to grow 3 per cent next year, nearly half as much more as they were forecasting a few months earlier.
On Thursday, U.S. durable goods orders are expected to show a decline for the second consecutive month, weighed down by weak orders for aircraft. But when the transportation sector is removed from the results, orders could show a 2 per cent rise, a positive signal in terms of capital spending by businesses. Consumer spending, meanwhile, is expected to have risen 0.5 per cent and income 0.3 per cent.
In Canada on Thursday, the latest GDP figures are expected to show a rebound for October, following September’s dip.
Despite the cavalcade of good news, stubbornly high jobless rates, sovereign debt loads and the troubled U.S. housing sector remain concerns. James Marple, senior economist with Toronto-Dominion Bank, warns that there could be as much as 21 months supply of housing in the U.S. market when homes in foreclosure are included. The housing industry is a key driver of the economy, and real estate accounts for roughly one-quarter of household wealth in the U.S. That means the U.S. consumer is not about to carry this recovery.
It will take another two or three years for the economy to grow sufficiently to bring some relief to housing and unemployment, he says.
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Banks hike mortgage rates across the board

By Michael Lewis 
Mortgage rates are moving higher thanks to the rising cost of borrowing in the bond market.
RBC Royal Bank was the first of the big banks to announce increases this week, with the Toronto Dominion Bank following suit Tuesday.
Dan Eisner, chief executive of Calgary-based True North Mortgage, said the Bank of Nova Scotia has “warned” of a pending hike, adding that he expects all of the big banks, along with other lenders, will have pegged their so-called special fixed rates higher by the end of the week.
TD Canada Trust hikes effective Dec. 15 range from of a 10th of a percentage point to nearly a third. The highest increase affects one-year closed mortgages, which are now at 2.94 per cent, an increase of 0.29 per cent.
TD’s five-year closed rate is up 0.20 per cent to 4.24 per cent, while its seven-year closed is at 4.94 per cent, an increase of 19 basis points.
RBC on Monday hiked its six-month convertible rate by 0.10 per cent to 4.05 per cent and raised its five-year closed by 0.20 per cent to 4.24 per cent, among other special fixed rate offer increases.
The changes follow cost hikes in the North American bond market, where banks raise money to finance mortgage loans to consumers — and come as investors dump North American bonds and rotate cash into rising stock markets. That has forced the banks and other borrowers to pay higher interest rates on bonds to win investors.
Concerns about global economic woes and market volatility had spurred many investors to move their money out of stocks and into bonds this year. But the Treasury bill buying spree culminated in the U.S. Federal Reserve’s announcement early last month that it would buy U.S. bonds in an effort to add liquidity to the American economy.
While mortgage rates remain low, the increases occur at a time when the Bank of Canada is warning consumers to reduce liabilities and control spending due to record levels of household debt.
Check out our rates http://www.tmdc.ca/index.php/rates

Amount Canadians owe continues to rise

CRAIG WONG

Canadians continue to rack up more debt but the speed at which they are piling it on is beginning to slow, the TransUnion credit agency reported Tuesday.
The average debt for about 24.8 million Canadians tracked by the report, which excludes mortgages, rose to $25,163 — up 4.3 per cent in the third quarter compared with a year ago.
The main source of non-mortgage debt for Canadians was vehicles, with credit card purchases a distant second.
However, despite the increase is the amount of debt, TransUnion said Canadians seem to be managing their debts better than they were, with delinquency rates and past-due balances dropping across the country.
The national credit card delinquency rate was down nearly 10 per cent in the third quarter of this year compared with a year ago when the Canadian economy was just beginning to recover from a major recession.
"There continue to be positive signs in the credit market as Canadians slowly manage out of the recession," said Thomas Higgins, TransUnion’s vice-president of analytics.
"The most positive sign has been the significant decrease in past due balances (outstanding debt that is at least 30 days past due), which has dropped 15 per cent since last year after three years of increases."
Jeffrey Schwartz, executive director of Consolidated Credit Counselling Services of Canada, said the report was good news in that fewer Canadians have been missing payments, but bad news because overall borrowing continues to grow.
"We are still at extremely high levels on a debt-to-income ratio and that's a little scary and that's still going up, so that is a concern," he said.
Bank of Canada governor Mark Carney has voiced concern about consumer debt and the ability of borrowers to meet their payments once interest rates begin rising again.
However, Mr. Schwartz noted that borrowers are becoming more conscientious of their debt loads and he is seeing less panic among borrowers than at this time last year.
"They are looking for opportunities to get out of debt and even try it on their own so they can maintain their credit standing as best they possibly can," he said.
Quebec posted the largest increase in debt at 6.6 per cent, while Manitoba had the lowest increase at 2.6 per cent compared with the national average of 4.3 per cent.
However, TransUnion says that is still an improvement over the double-digit increases that had been going on since before the recession.
Canadian average credit card debt increased to $3,709 from the previous quarter’s $3,614, but fell 1.7 per cent compared with a year ago.
Average auto loan debt increased to $16,183 from the previous quarter’s $15,135, and up 9.8 per cent from a year ago.
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Four easy steps to a wealthier new year

ANGELA SELF

A fresh start is only a few weeks away and I’m looking forward to it. This year, instead of all of us making a laundry list of things we’ll likely lose interest in come Valentine’s, let’s come up with just a few thoughtful resolutions - and nail them. Putting away more money but in fewer pots, and being more efficient with managing money are at the top of my list. Here are a few other ideas to take you into a happier, wealthier and financially healthier new year.
Manage your money easier
I put a few nerd-alert gadgets on my holiday list, including a shredder and a receipt scanner. Seriously. You can see the full list here (in case you’re feeling generous). Simple tools to help me stay organized and spend less time inputting, filing and searching is what 2011 is all about. Online tools like Money Strands will also help you streamline your finances and simplify. Next year, we should also follow the example of New York Time’s columnist Ron Lieber and take a fiscal health day. You can see more of what this day entails here to get the idea. I’m going to schedule mine in February. I’ll let you know how it goes.
Focus your financial goals
This year my financial goal was to max out my TFSA. I stopped funding my retirement account and other secondary savings accounts to achieve this goal. What should your top goal be this year? That depends on your life stage and your values. We all want to build wealth, but what we need or want, in what time frame, and for what reason, is different for all of us.
You might value a conservative savings account over travel, or travel over early retirement, or a home over something else. Taking on too many goals at once decreases focus, so focus on the most important. Trying to do too much can also be discouraging if your progress inches slowly rather than in leaps and bounds.
Stick to your 'Rather Factor'
What would you rather spend your money on? Your response will likely relate to your values and to what you care about most. Determine your rather factor and keep it top of mind and on the tip of your tongue, because this allows you to spend money on the things you love and dramatically cut costs on the things you don’t. Sticking to your rather factor means attaching a "why" to your values.
You value being debt-free. Why? Because you’ll have freedom, the chance to explore other opportunities when debt-repayment is off the table, the ability to finally save for financial security or a kitchen renovation or a vacation. When you attach an emotion to the reasoning, you’re better be equipped to see the resolution through.
Automate some fun
While it's a great idea to automate your savings, don’t forget to include a fun-money account just for you. Set one up for yourself in the New Year to cover unexpected splurges, the good stuff. It will take you less than 10 minutes to link your chequing and savings accounts online and have a certain amount automatically sent to your various saving pots each month. It's easy to do this on your banking institution’s website or by calling your bank directly.
This year, I’m opening a sub-account entitled “Love,” which will house money to spend on the things and the people I love. You don’t have to put a lot away, but if you’re saving a little bit each month toward something that’s important to you, you’ll be motivated to fund the account and watch it grow.
These are simple resolutions. They don’t take much time to set up or maintain and they'll be easier than trying to tackle a lengthy list of goals. Focus your energy and resources on a few resolutions, see them through, and you’ll be ahead of most other people before the snow’s even melted.

4 mistakes to avoid for a more profitable 2011

Here are four mistakes to avoid if you want to make 2011 more profitable.

1. Don’t sell your top-quality stocks just because they’ve gone up.
Selling your best stocks too soon is a particularly big risk for 2011. When the market recovers from a black hole like the one it fell into in 2008 and 2009, somebody always says it has gone up “too far and too fast.” Applying this pseudo-conservative advice gives you an excuse to take profits, which appeals to us all. But it hurts your results in the long run.
In the course of an investing career, some of your stocks will go up way more than you’d ever guess, some do about as well as you’d expect, and some stagnate or fall. The top performers contribute an over-sized part of your lifetime profit.
You need a few “five baggers” (stocks that go up, say, 500 per cent) to make up for the inevitable losses of 20 per cent to 40 per cent or more that strike every portfolio. If you’re too quick to sell stocks that seem to have gone up “too far and too fast,” you’ll never have any five-baggers.
2. Don’t be afraid to sell speculative stocks.
My advice in point one above applies mainly to well-established companies. In contrast, you should be ready to take at least partial profits in any low-quality stocks you own that go up substantially.
Of course, it takes judgment to spot low-quality stocks. But some of their chief earmarks are a lack of earnings history, a dependence on projects that are still under development, and investor relations material (press releases, websites, emails and so on) that seems promotional rather than informative.
You may want to apply the “sell-half rule”: sell half of any speculative stock you own that doubles, so you get back what you initially invested.
3. Don’t settle for profitless security.
The marketing directors at financial institutions are just like their counterparts at soap companies. They don’t want to create products that are bad for you or will hurt you. They just want to create products that you’ll buy.
Today, investors are huddled on the “fear” end of the fear-greed spectrum. One way to appeal to them is to come up with innovative financial offerings that provide a no-loss guarantee.
The problem is that guarantees cost money, and buyers pay for them. That’s one reason why “guaranteed” investment innovations generate far less profit than stocks, plain-vanilla mutual funds, or other forms of ‘un-guaranteed’ investment. For that matter, the guarantee may be far flimsier and loophole-riddled than you’d guess from reading the sales brochure.
You only learn about these limitations by reading and understanding the prospectus or offering memo. In general, the closer you look at the fine print, the less likely you are to buy.
4. Don’t close your mind to new information.
When shopping for a new car, you may at first feel equally drawn to a Ford and a Toyota. If you buy the Ford, an all-too-human mental process takes hold. You begin to ignore faults that occur in Fords, and disregard anything good about Toyotas.
This is your mind’s way of making peace with your decision. In today’s world, it’s a good thing. Most of today’s cars can do what most consumers expect. Besides, replacing a new car soon after you buy is expensive and wasteful, and we all have better things to worry about.
Unfortunately, the same process takes hold when you buy a stock, or begin dealing with a new broker. But investments and brokers vary more widely in quality than do cars.
You aren’t (or shouldn’t feel) stuck with those that turn out to be bad choices. That’s why you should keep an open mind about your investments. That’s good advice this year and every year.

Inflation hits two year high

Canadians shelled out more for gas and energy October, pushing the annual inflation rate to a two year high with Ontario reporting the highest boost in prices for all the provinces.

Consumer prices rose 2.4 per cent in the 12 months leading up to October, the largest increase since October 2008, Statistics Canada reported on Tuesday.
October’s boost followed a 1.9 per cent increase in September. “About half of the 0.5 percentage point increase can be attributed to higher gasoline prices,” the report showed. In October gas cost 8.8 per cent more than it did the same time the previous year. Energy prices advanced 9.1 per cent and transportation costs and insurance premiums rose 4.6 per cent and shelter costs rose 2.8 per cent.
In Ontario, prices rose 3.4 per cent in the 12 months leading up to October after a 2.9 per cent increase in September. Gas prices were up 11 per cent, and significant increases were recorded in electricity and the purchase of passenger vehicles.
Underlying core inflation for the country, which excludes energy, rose three-tenths of a point to 1.8 per cent, nearing the Bank of Canada’s target two-per-cent range.
The sharp run-up in core and overall inflation took markets by surprise.
Consensus among economists was inflation would increase to about 2.2 per cent, based on a recent pick-up in oil prices and the continuing impact of the new harmonized sales tax in Ontario and British Columbia.
Craig Alexander, senior vice president and chief economist with TD Bank Financial Group said in a note while core inflation came in above consensus “the result does not indicate that an inflation problem is in the cards.”
The report “also does not alter our perspective that the Bank of Canada is on hold until next July,” he said. Alexander said “the uptick of inflation is likely an aberration and will not last.”
“In truth, the outcome in October is a bit of a head scratcher. The acceleration of inflation is at odds with the underlying economic environment and the strength in the Canadian dollar this year,” he said.
Not all prices were higher in October. Prices for clothing and footwear edged down 0.1 per cent, although the drop was less than the 2.2 per cent reported in September.
Mortgage interest costs retreated by three per cent, the price of computer equipment and supplies dropped 12.5 per cent and air transportation and furniture were lower than the previous year.
Doug Porter, deputy chief economist with BMO Financial Group said after “a steady stream of mild inflation readings, it’s a bit of a jolt to get a true high-side surprise,” in a note.
“The underlying firmness in domestic spending has clearly put a floor under inflation, with rising energy prices adding a lift,” he said.
Porter noted that core inflation remains below the central bank’s 2 per cent target “as does headline inflation after accounting for the impact” of Harmonized Sales Tax.
“However, if we see anything close to a repeat performance in the next few months, there will be some serious misgivings at the Bank about keeping rates at 1 per cent for much longer,” he said.

Canada's inflation rate jumps half-point to 2.4 per cent, highest in two years

By Julian Beltrame, The Canadian Press

OTTAWA - Canada's annual inflation rate jumped to 2.4 per cent in October, its highest level in two years, as Canadians were hit with price hikes for most things from gasoline to cars, shelter and food.
The half-percentage-point increase in the annualized consumer price index was well above what analysts had forecast, and is likely to raise some alarms with the Bank of Canada.
Statistics Canada blamed higher energy costs for most of the increase, particularly an 8.8 per cent hike in gasoline prices, but most things were noticeably higher in October.
Transportation costs rose 4.6 per cent, while shelter costs increased 2.8 per cent.
Other higher costs included food which was up 2.2 per cent, electricity 8.1 per cent, cars 4.9 per cent, car insurance 4.6 per cent, and property taxes by 3.5 per cent.
On a month-to-month basis, Canadians paid 0.4 per cent more in October for a basket of items than in September.
Economists had expected an increase to about 2.2 per cent from a recent pick-up in oil prices and the continuing impact of the new harmonized sales tax in Ontario and British Columbia — two populous provinces that can move the national needle — but the higher number suggests that inflation may be more sticky than previously thought.
Even the underlying core inflation, which excludes volatile items like gasoline, rose three-tenths of a point to 1.8 per cent, edging nearer to the Bank of Canada's two-per-cent target.
Central bank governor Mark Carney, whose prime mandate is to guard against price spikes, is still expected to hold steady on interest rates at the next scheduled decision date next month, however.
Not all prices were higher last month. Clothing and footwear continued to be bargains as prices edged down 0.1 per cent, although the drop was less than the 2.2 per cent seen in September.
As well, mortgage interest costs retreated by three per cent, the price of computer equipment and supplies dropped 12.5 per cent and air transportation and furniture were lower than last year as well.
Regionally, the two HST provinces continued to have among the highest inflation rates in the country, with Ontario leading the way at 3.4 per cent, half-a-point higher than in September, and British Columbia at 2.9 per cent. Newfoundland's inflation also remained elevated at three per cent.
Alberta and Manitoba had the lowest inflation among provinces at 1.2 per cent.

Inflation at highest rate in two years

The Canadian Press

OTTAWA—Statistics Canada says Canada’s annual inflation jumped half a point to 2.4 per cent last month, as the cost of gasoline, cars, shelter and food all rose.
The rate follows a 0.2 per cent rise the previous month and brings the country’s annual inflation rate to the highest it’s been in two years.
On a monthly basis, overall prices increased by 0.4 per cent in real terms from September.
Prices rose in every province, but no more so than in Ontario, where the inflation rate reached 3.4 per cent.
The bigger-than-expected increase was partly attributed to the introduction of the harmonized sales tax in the big provinces of Ontario and British Columbia, but even underlying core inflation saw a hefty lift, to 1.8 per cent from 1.5 per cent in September.

Is retirement chained to your home?

Garry Marr, Financial Post

Canadians plan to take longer to pay off their mortgages, maybe even 35 years, but they don't expect it to affect their retirement plans. Something in that plan just doesn't add up.
A new study from the Canadian Association of Accredited Mortgage Professionals (CAAMP) shows consumers are taking advantage of longer amortization lengths at previously unheard of levels. Statistics released this week show 42% of mortgages originating in the last year went for an amortization period of more than 25 years.
It's a huge jump when you consider that just five years ago, you couldn't even get an insured mortgage backed by the government that was amortized above that period. Now the government limits insured mortgages to 35 years.
The reason for the longer amortization periods is simple: you can qualify for more mortgage when your monthly payment is lower because it is spread out over 35 years rather than 25.
Within the same survey by CAAMP, consumers were asked about their retirement expectations. Those with extended amortizations plan to retire on average at 61.9 years old. Those amortizing their mortgage for less than 25 years plan to retire on average at a surprisingly similar 61.5 years old.
"This data on expectations does not prove that actual retirement will be unaffected by recent trends in housing and mortgage markets," CAAMP says in its study. No kidding. "But it does suggest that consumer's evaluations of their life-cycle options have not been materially altered."
Are consumers being entirely realistic about their future?
Will Dunning, chief economist with CAAMP, says the percentage of Canadians retiring with a mortgage is small — small enough that it is difficult to track.
"We find a lot of people taking [longer amortizations] are making additional payments," Mr. Dunning says, adding previous studies have shown people try "aggressively" to repay their mortgages.
Victor Fiume, president of the Canadian Home Builder's Association, says Canada is just catching up to a trend that has taken place in other jurisdictions.
"In many, many countries across the world, paying off a home is a multi-generational kind of thing. It doesn't happen in this generation. Lots of the stuff going on in England is multi-generational because the houses are so expensive," Mr. Fiume says.
There is no arguing the increased flexibility a longer amortization mortgage gives, but increasingly some consumers find themselves getting into financial trouble because they have bitten off too much, says Patricia White, executive director of Credit Counselling Canada.
"People will always decide what is easiest for them," she says. "But you have to plan in advance to make accelerated payments. You need to make some conscious decisions about how to get rid of that mortgage debt faster."
Canadians always do better when they have direct withdrawals from their bank accounts and less discretionary power about paying down debt, Ms. White adds.
Vince Gaetano, a principal broker and owner at Monster Mortgage, agrees people who choose the longer amortization and the lower payment rarely take advantage of that extra cash flow to make additional payments later on. "It's a very small group of people who do that," he says.
He thinks consumers going for the longer amortization are banking on the fact their homes are going to rise in value faster than any gains they get paying their mortgage off earlier.
"Real estate over time will appreciate at more than 2% to 4% per year," Mr. Gaetano says. "People are saying, 'It won't affect my retirement because I plan to retire with a home that will appreciate in value [in addition to the principal you are paying down].' It's not a bad strategy if you are in a market that gives you consistent appreciation, but you are not going to get that in every market in Canada."
There is no getting around the fact the people who take a longer amortization will take longer to repay their loan. The CAAMP study found consumers going longer than 25 years, were done with their mortgage at age 53 on average, compared with an average of 47 years for those going for the less than 25 years.
If you are going for a longer amortization, you better hope your home goes up in value because you are going to have fewer mortgage-free years in which to save. It's hard to believe that won't affect retirement plans.

What's in your TFSA?

NOREEN RASBACH

Just over two years ago, I wrote a column for The Globe’s investing section about Tax-Free Savings Accounts. It was a few months before TFSAs were widely available (on Jan. 1, 2009) and financial experts, who enthusiastically hailed them as “revolutionary,” predicted an onslaught of publicity about how best to use the accounts. TFSAs, they said, were going to be as well known as RRSPs in no time.
Well, the second anniversary is coming up, and there seems to be a lot of confusion amongst Canadians about TFSAs. In a poll released by the Bank of Montreal this week, 36 per cent of respondents say they have a TFSA -- but many are unclear about what you can use them for.
The survey of 1,513 Canadians found 20 per cent did not know that mutual funds are eligible with a TFSA (they are), 26 per cent were unaware that GICs are eligible (they are, too) and 37 per cent had no idea what investments were eligible (cash, mutual funds, exchange-traded funds, stocks, GICs and bonds – if you can put it in a RRSP, you can put it in a TFSA).
The difference between RRSPs and TFSAs is that for RRSPs, you get a tax break when you invest but must pay taxes when you withdraw. With TFSAs, you get no tax break when you invest but you don’t have to pay taxes when you withdraw. So if I invested $5,000 in stocks through the account and they doubled in value (hey, I can dream), I could take the $10,000 out of the account and pay no taxes on the $5,000 profit.
There’s a limit of $5,000 a year that you can put into the account, but Janet Pettigrew, district vice-president with the Bank of Montreal, said that limit may be confusing consumers who believe they need $5,000 just to open one. In the poll, 40 per cent of respondents who didn’t have a TFSA said it was because they didn’t have enough money to invest in one.
“People think they have to have extra money for a TFSA,” she said. “They don’t realize they can start by putting, say, $500 or $1,000 in. No matter how small the amount is, it’s still good to start your savings within a TFSA.”
Ms. Pettigrew also worries that consumers are using TFSAs like traditional saving accounts – that is, they’re just storing cash in them rather than taking that money and putting it into other investment options, like GICs or mutual funds, and earning higher interest. She suggests that these people go to see a financial planner at their bank and get some free advice about some alternative ways to save and invest.
The question for me has always been whether it is better to put money in an RRSP or a TFSA? Ms. Pettigrew suggests that for a long-term investment – like retirement funds -- use the RRSP; if you want to save for something shorter term – like a vacation, a home renovation or a new car -- use a TFSA, which is more flexible.
If you’ve used up all your eligibility room in your RRSPs, taking full advantage of a TFSA makes sense, she said.
Canadians may not be fully aware of all of the specific options available in TFSAs, but they have come around to them in general. The new investments accounts have a high approval rating – nearly 70 per cent surveyed agreed the TFSA is a good investment and savings tool. That’s a good start.

More homeowners opting for long amortization

Canadians are taking longer to pay off their mortgages but don’t expect it to affect their retirement plans.

A new study from the Canadian Association of Accredited Mortgage Professionals (CAAMP) showed 42 per cent of new mortgages in the last year went for an amortization period of more than 25 years. Five years ago, you couldn’t even qualify for an insured mortgage backed by the government that was amortized for more than 25 years.
In the same survey, CAAMP found those with extended amortization plan to retire on average at 61.9 years, while those with less than 25 years amortization plan to retire on average at 61.5 years.
“This data on expectations does not prove that actual retirement will be unaffected by recent trends in housing and mortgage markets,” the CAAMP report noted. “But it does suggest that consumers’ evaluations of their life-cycle options have not been materially altered.”
Homeowners opt for longer amortization periods because the monthly payment is lower when spread over 35 years instead of 25.

Canadians comfortable with their mortgage debt levels; One third have made additional payments in the last 12 months

Canadian Association of Accredited Mortgage Professionals releases

Annual State of the Residential Mortgage Market in Canada report

TORONTO, Nov. 8 /CNW/ - Canadian homeowners are comfortable with their mortgage debt, have significant home equity and could withstand an increase in their mortgage interest rate, according to the sixth Annual State of the Residential Mortgage Market report from the Canadian Association of Accredited Mortgage Professionals (CAAMP), released today.
Highlights:
The vast majority of Canadians with mortgages are able to afford at least a $300 increase in their monthly mortgage payments.
One in three (35 per cent) mortgage holders have either increased their payments or made a lump sum payment on their mortgage in the last year.
89 per cent of Canadian homeowners have at least 10 per cent equity in their homes and 80 per cent have more than 20 per cent equity.
Overall home equity is at 72 per cent of the total value of housing in Canada; for homeowners who have mortgages, equity level averages 50 per cent.
As of August 2010, there was $1.01 trillion in outstanding residential mortgage credit in Canada, an increase of 7.6 per cent from last year.
"Canadians are being smart and responsible with their mortgages," said Jim Murphy, AMP, President and CEO of CAAMP. "They are building equity in their homes and making informed, long-term mortgage decisions. The survey results speak to the strength of our mortgage market, especially when compared to the United States."
Homeownership is a good long-term investment
Most Canadians agree that buying a home is a good long-term investment and are focused on their mortgages to support that investment.
Many mortgage holders are making voluntary additional payments: 16 per cent have increased monthly payments during the past year, 12 per cent have made lump sum payments, and 7 per cent did both.
Canadians are exercising caution when taking out their mortgages, with a majority choosing a fixed-rate (66 per cent). A five-year fixed-rate mortgage remains the most popular option in Canada. Despite the fact that variable rate mortgages have become much less expensive compared to fixed rates, the majority choice is still fixed rates: this decision is based on people's individual assessments of risk, not just the cost difference.
Potential rate increases won't be a problem
The CAAMP study found that a vast majority of Canadians have significant capabilities to afford higher payments if and when mortgage interest rates rise. 84 per cent report that they could weather an increase of $300 or more on their monthly payments.
Most of the people who have low tolerances for increased payments have fixed rate mortgages, by the time their mortgages are due for renewal, their financial capacity will have expanded and their mortgage principal will have been reduced.
Also, Canadians have been able to negotiate better than posted mortgage interest rates. For five year fixed rate mortgages arranged in the past year, the average rate is 4.23%, which is 1.42 points lower than typical, advertised rates.
Of the 1.4 million Canadians who renewed their mortgage in the past year, 72 per cent were able to renegotiate a decreased rate: on average, rates are 1.09 percentage points less than the rates prior to renegotiating.
Canadians have significant equity in their homes, strengthening the housing market
Canadians' home equity is impressively high. Among homeowners who have mortgages, the average amount of equity is about $146,000, or 50 per cent of the average value of their homes.
The amount of equity take-out in the past year is unchanged from last year with around one in five homeowners, or 18 per cent, taking equity out of their home, at an average of $46,000. The most common purpose for equity take-out is debt consolidation and repayment (45 per cent) followed by home renovations (43 per cent), purchases and education (19 per cent) and then investments (16 per cent).
The report is authored by CAAMP Chief Economist Will Dunning and based on information gathered by Maritz Research Canada in a survey of Canadian consumers conducted in October 2010.
Need advice? Want the latest rates? Check out http://www.tmdc.ca/

Deloitte Report: Mortgage brokers making inroads with first-time buyers. http://ping.fm/CPx7G

Deloitte Report: Mortgage brokers making inroads with first-time buyers. Mortgage Brokers http://ping.fm/8xn93

Deloitte Report: Mortgage brokers making inroads with first-time buyers

Mario Toneguzzi, Postmedia News
The percentage of Canadians using mortgage brokers to buy their homes has increased significantly, according to a Deloitte report. In the 1990s, mortgage brokers numbered in the hundreds and were "lenders of last resort" for borrowers unable to obtain a mortgage directly from a bank or credit union. "Over the last decade, an increasing number of viable options for borrowers have surfaced," the report says. "In addition to branch-based lenders, borrowers can consult with the banks' own mobile mortgage specialists as well as independent brokers--while also conducting their own research online. "In this changing and information-abundant environment, the mortgage brokerage channel has emerged as a legitimate competitor." The report said share of origination transactions increased from 26% in 2003 to 38% in 2009 as mortgage brokers made particular inroads with first-time homebuyers and young Canadians. Feel free to call or email me for your free, no hassle consultation on what mortgage is right for you

Credit Card Debt Tips - How To Eliminate Bills And Avoid Credit Card Debt Bankruptcy

To eliminate bills and avoid credit card debt bankruptcy there are few facts people should pay attention to. It is noted that recently many people are searching ways to get out of debts. However it is possible only when one acts prudently.

If you think of spending all of your savings to come out of impending debts it is not wise at all. After paying debts nothing would be left to manage household chores with. Nowadays many people do not have an economic security. It is advisable to spare your savings if you have any. Obtaining help from outside is more prudent than that.

If a settlement company is used it would be very easy to get relieved from debts. These companies have existed since nineteen eighties making many lives safe. They can negotiate with banks and obtain a reduction of the due amount. Then clients can pay the lowered amount to the company instead of the bank.

When choosing a company it is wise to choose a registered company. It should also hold veritable client records and recommendation. A company registered under the Better Business Bureau will probably fulfill all qualities of an authentic company.

According to the new laws these companies cannot charge an upfront fee from the clients. The customer should only pay money after accepting at least a percentage of the reduction. Therefore if a company asks for payment in advance it is illegal.

Moreover these companies should reveal all positive and negative outcomes of accepting their service. For an instance they should tell the client that if he ignores paying the company a late fee would be added to his reduced amount. The new laws have altered the settlement field very much. It is better to be knowledgeable about these regulations before accepting service. Settlement ways are a very good solution to come out of debt.
Debt settlement is a legitimate way to avoid bankruptcy.

Boomers still have mortgages, delaying retirement

By Tony Wong - Thu Oct 28 2010

Ontario baby boomers are looking to move to smaller homes in retirement. But first they have to pay off the mortgage.
A poll by TD Canada Trust released Thursday says 86 per cent of boomers want a smaller home when they retire. However, even though they say it is important to pay off the mortgage before they retire, it turns out less than half, or 43 per cent have actually done so.
One quarter of those boomers have paid off less than 40 per cent of their mortgage, meaning they have a ways to go before thinking about retirement.
About half says moving to a smaller home will help them save money, while more than a third says the new home, although smaller, will have more luxurious features.
“Moving to a smaller home can allow you to free up assets to put towards your retirement savings or enjoy in other ways,” said Farhaneh Haque, regional sales manager for TD Canada Trust.
Baby boomers are the post war generation born between 1946 to 1964, with the first wave approaching their retirement years. But an uncertain economy and falling stock markets over the last several years have meant that some boomers have had to hold back retirement or refinance their homes to stay afloat.
For their next property, boomers aren’t all rushing to the condo market either.
More than half, or 61 per cent say they plan to buy detached. Condos came in second at 24 per cent.
Top reasons for a detached house is that boomers still want a back yard and garden and really hate paying condo fees.
Condos are popular because they require less maintenance and offer better security, and have amenities such as a gym or pool.
Meanwhile, another third of boomers are planning to buy a retirement property south of the border.
A quarter say “opportunities created by the depressed real estate market have sparked their interest,” according to the poll.
About ten per cent already own a vacation property, but another 12 per cent plan to buy on retirement.

HOME RENOVATION INTENTIONS HIGH IN ONTARIO: RBC POLL

However vast majority anxious about managing household finances

TORONTO, Oct. 27 /CNW/
A majority of Ontarians (61 per cent) intend to undertake home renovations within the next two years, a slight drop from 2009 (down six per cent) but consistent with the national average (62 per cent), according to the 2010 RBC Home Renovation Survey.
While renovation planning remains popular in the province, balancing the household budget is a significant concern for Ontario homeowners with 80 per cent noting they are experiencing anxiety over their financial situation.
"Our research consistently indicates that Canadians are focusing on managing their finances and paying down debt, but they are clearly still intent on investing in their homes," said Doug Crowe, vice-president, Mortgages, Greater Toronto Area, RBC. "Renovations don't have to break the household budget if you get the right advice before diving into home improvement projects. A financial advisor can help you successfully balance your finances while also investing in what is often your largest asset - your home."
Many Ontarians believe that staying within a set budget is easier said than done according to the RBC survey. While 68 per cent of homeowners had budgets in mind when completing renovations over the past two years, 51 per cent overspent and of those who exceeded their budgets, one-third (35 per cent) did so by between 11 and 20 per cent. The biggest renovation mistake identified by Ontario homeowners is "going over budget" (29 per cent), followed by "using the wrong contractor or tradespeople" (18 percent) and "doing the job myself" (13 per cent).
Nevertheless, the majority of Ontario homeowners are now "reno debt" free with 60 per cent saying that they have already paid off the costs associated with renovations completed in the past two years.
Ontarians also indicate they are settled in their homes with almost half (44 per cent) saying they have lived in the same home for more than 10 years and 40 per cent expect to remain in their current homes for more than the next 10 years. Of all the province's homeowners, a solid majority (60 per cent) responded that they would rather renovate rather than sell and move if their home required major renovations and they had a choice.
2010 RBC Home Renovation Survey - Regional comparisons at-a-glance
Regional Reno.  Intentions next 2 yrs.    Completed since 2008
BC                    55%                             59%
Alberta              58%                             61%
Sask. / Man.       67%                             75%
Ontario              61%                             68%
Quebec              65%                             66%
Atlantic Canada   63%                             72%
National            62%                             66%

Biggest mistake     BC    AB   SK/MB  ON   QB   AC  National
Going over budget  31%   25%  25%      29%  28%  24%  28%
Using the wrong     
Contractor etc.       17%   16%  17%      18%  11%  14%  15%
Doing job myself     14%   12%  15%      13%  10%  16%  10%

Overspend  BC   AB   SK/MB  ON   QB     AC    National
1-10%         30%  23%   28%     22%   23%   28%    24%
11-20%        28%  37%  39%     35%   36%   38%    35%
21-30%       16%   16%  16%     21%   21%   20%    19%

Current home                   BC   AB   SK/MB  ON  QB   AC   National
Lived in more than 10 yrs   42%  41%   45%     44%  50%  50%  45%
Expecting to remain in 
more than 10 years            36%  37%   51%     40%  58%  58%  46%
Home over 25 years old      49%  48%  70%     56%  63%  68%  58%
Reno if needed major
renovations, rather than sell 
and move, if had a choice  57%   51%   64%   60%  73%  68%  63%

These are some of the findings of an RBC poll conducted by Ipsos Reid between September 17 -22, 2010. The online survey is based on a randomly selected representative sample of 3,565 adult Canadian homeowners including 1,365 Ontario residents. The results are based on a sample where quota sampling and weighting are employed to balance demographics and ensure that the sample's composition reflects that of the actual population according to Census data. Quota samples with weighting from the Ipsos online panel provide results that are intended to approximate a probability sample. An unweighted probability sample of 1,365 Ontario respondents, with 100 per cent response rate, would have an estimated margin of error of ±5 per cent, 19 times out of 20.

Inflation rate rises to 1.9 per cent in September

CTV.ca News Staff - Date: Fri. Oct. 22 2010 7:52 AM ET
Canada's annual inflation rate rose two-tenths of a point to 1.9 per cent last month, driven largely by the cost of energy and new cars.
The rate increase follows an inflation drop in August and had been generally expected, because of the recent run-up in oil prices.
Statistics Canada said much of the gain came from energy prices, which were 5.6 per cent higher than a year earlier. Gasoline was 3.1 per cent more expensive, and electricity was up 7.7 per cent from a year earlier.
The agency said it also noticed a big pick-up in the price of passenger vehicles during the month -- 5.0 per cent -- as manufacturers shaved the level of incentives they were offering consumers.
The core inflation rate, which excludes eight volatile items, actually slowed to 1.5 per cent from 1.6 per cent. The core inflation is what the Bank of Canada closely monitors to spot underlying trends.
On an annual basis, prices rose in seven of the eight component groups that Statistics Canada measures.
Homeowner replacement costs rose 5.6 per cent; transportation was up 3.1 per cent; shelter costs advanced 2.5 per cent; and food costs rose 2.1 per cent.
Prices also rose on cigarettes 4.6 per cent, alcoholic beverage prices rose 2.4 per cent and tuition rose 3.8 per cent.

Canada had a miserable quarter, Bank of Canada says

Julian Beltrame, The Canadian Press
OTTAWA—The Canadian economy likely suffered the worst quarter since the recession during the summer months, and still faces risks ranging from a global currency war to a collapse in the housing market, the Bank of Canada said Wednesday.
The bank’s latest quarterly outlook estimates the Canadian economy advanced a snails-pace 1.6 per cent during the third quarter, following gains of two per cent in the second quarter and 5.8 per cent in the first quarter.
That’s even slower than the troubled United States, which likely advanced by 2.3 per cent in the July-September months.
On Tuesday, the bank downgraded growth expectations for Canada and the U.S. for this year and next, while freezing short-term interest rates.
But the latest monetary policy review shows the diminishing of expectations are more dramatic for Canada, partly because the bank once held a more rosy view of how the country’s economy was performing.
Growth in Canada is now estimated at three per cent this year as a whole, thanks to the fast start in the first half, and a tepid 2.3 per cent next year.
The reasons, says the bank, are both external and internal. The global recovery has not gone as smoothly as expected, the U.S. housing sector has yet to recover, and Canada’s domestic demand has slowed faster than thought.
As well, the bank said it misjudged how quickly the country’s output gap — the slack in the economy — was closing. The gap is believed to be 1.75 per cent, not 1.5 per cent, as estimated in the previous review in July.
But that is all in the past. It’s the risks for the recovery going forward that is most alarming in the bank’s new outlook.
The latest outlook appears to take a dimmer view of the growing friction between advanced nations and key emerging economies, particularly China, over what some have dubbed a currency war.
“Sustaining the global recovery will require a greater rotation of demand, supported by increased flexibility in exchange rates,” it says. “At present, these adjustments are coming through divergent inflation pressures rather than currency movements, which could result in a more protracted and difficult recovery.”
Reading between the lines, the bank is warning that for the global recovery to become sustained, China and other fast-growing Asian economies need to allow their currencies to appreciate sharply. That will increase consumption inside those nations, and decrease the dumping of cheap goods into advanced economies like the United States.
Although China has made some moves in this direction, advanced economies believe those actions have not gone far enough, and some have taken measures to deflate their currencies so as to protect their export sector.
The issue is expected to come to a head at this week’s G20 meeting of finance ministers in Korea.
Analysts say the expectation that the U.S. is about to join the game of undercutting its currency has contributed to the loonie’s recent run at parity, which manufacturers say is damaging sales both at home and abroad.
The bank also sees dangerous distortions building in the Canadian economy, particularly as a result of the strong housing market that has contributed to the highest domestic debt burdens in history. Latest data shows debt-to-disposable income among households has reached 147 per cent.
Home prices have been stable or increased in most markets but sales activity has come off its peak, and a sudden deterioration in the price of homes could deliver a blow to household wealth and confidence.
“If there were a sudden weakening in the Canadian housing sector, it could have sizable spillover effects on other areas of the economy, such as consumption, given the high debt loads of some Canadian households,” the bank states.
But the bank points that it does not believe these risks will occur with sufficient ferocity to derail the recovery.
It notes that interest rates remain at historically low levels, backstopping housing, and the business investment is picking up, which should lead to productivity improvements going forward.
Its best guess now, is that the economy in Canada will eventually right itself, but it will be a protracted process that will take another two years.

Economy too fragile for rate hike, bank says

By Madhavi Acharya-Tom Yew, Tue Oct 19 2010
The Bank of Canada sees slower growth on the horizon and has no plans to raise interest rates in the short term.
The central bank left its trend-setting policy rate at one per cent today, which means that consumers will not be paying more for car loans and credit.
Canada’s economy will likely grow by only 3 per cent this year, the bank said, mostly due to a strong start in the first three months of 2010. That’s down from the 3.5 per cent projection it made in July.
It forecast growth of 2.3 per cent for 2011, down from 2.9 per cent.
“This more modest growth profile reflects a more gradual global recovery and a more subdued profile for household spending,” the bank said.
Bank of Canada governor Mark Carney has the difficult task of balancing a fragile economic recovery with mounting household consumer debt. Economists worry that prolonging lower interest rates could prompt even more borrowing.
The recovery in the U.S. will also be weaker than initially projected, while growth in emerging market economies will also slow to a more sustainable pace.
“Heightened tensions in currency markets and related risks associated with global imbalances could result in a more protracted and difficult global recovery,” the bank said.
Inflation in Canada has been slightly below the Bank’s July projection.
The bank also revised its language about when to expect future rate hikes, a signal it may stay put for some time.
“The message is in line with our thinking that the Bank of Canada is now on pause until the middle of next year,” CIBC World Markets economist Krishen Rangasamy wrote in a research note.

Bank of Canada holds interest rate at 1 per cent

As expected, the Bank of Canada has held its key interest rate at one per cent, after three straight hikes.

The central bank, led by governor Mark Carney, said the economy has weakened since the bank's last forecast in July.
"The economic outlook for Canada has changed," the bank's senior officials wrote in a statement.
"At this time of transition in the global recovery, with a weaker U.S. outlook, constraints beginning to moderate growth in emerging-market economies and domestic considerations that are expected to slow consumption and housing activity in Canada, any further reduction in monetary policy stimulus would need to be carefully considered."
The economic recovery has not been as strong as thought, with next year's growth estimated to be at 2.3 per cent, down from its earlier estimate of 2.9 per cent.
"This more modest growth profile reflects a more gradual global recovery and a more subdued profile for household spending," the bank said.
Canada's economy will likely grow by three per cent this year, mostly due to a hot start.
The policy rate, which influences short-term interest rates offered by banks and other lending institutions, has been raised three times since June to the current level.
With the Canadian dollar surging, the domestic economy slowing and global uncertainty still lingering, most economists expect Carney to keep the interest rate as is for the rest of the year.
BNN's Michael Kane said economists are concerned that lost in all the dour news is the fact that the economy is growing.
"We have been out of a recession for well over a year but a lot of bad news . . . frightens people," Kane told CTV News Channel. "And when people see (the bad news) they think the economy might go into recession again.
"A three per cent growth rate, after what we've been through, is not bad for 2010."
The central bank said it will be a year longer than it previously estimated for the Canadian economy to return to full capacity. That won't until the end of 2012, the bank says.

Mark Carney's rate-hike quandary: To pause or not to pause

Jeremy Torobin, Ottawa — From Monday's Globe and Mail, Last updated Monday, Oct. 18, 2010 8:10AM EDT
Mark Carney must feel like a parent trying to instill wise spending habits in a carefree kid heading off to university: all he can do is give his best advice and hope it sinks in.
That’s a rough approximation of the tricky position the Bank of Canada governor finds himself in as he prepares to release his latest interest-rate decision on Tuesday.
The central banker is widely expected to suspend his tightening campaign after three straight increases, holding the benchmark overnight rate at a still-very low 1 per cent. On Wednesday, he’ll follow that up by producing a revised outlook for the Canadian economy, spelling out his analysis of why he (in all likelihood) believes there are too many unknowns right now to make a move.
The new figures, some of which will be in his Tuesday statement on rates, will include Mr. Carney’s latest thinking on when the recession-era slack in the economy will finally be gone. If the governor says that excess capacity is going to linger into 2012, that would confirm what financial markets are already predicting: that the cost of borrowing could stay put for several months.
But a prolonged period without rate hikes also creates a problem: it could lure households that shouldn’t borrow more into going deeper into debt.
Mr. Carney last month sharpened his warnings against using supercheap credit to pile up debt that won’t be affordable as rates return to more normal levels, using a speech and press conference in Windsor, Ont., to highlight that debt in Canada is at a record 146 per cent of disposable income and households, on average, have spent more than they’re worth for the past nine years.
He also lamented that an already slower economy could stay weak as some borrowers pull back. That would make it that much harder to raise rates, even as policy makers fret that as long as rates are low, the most overstretched Canadians may not get that they should scale back too.
"He’s making a valiant effort at conveying a very complex message,’’ said Chris Ragan, a McGill University professor who is leading the C.D. Howe Institute's research on monetary policy. ``He’s right to be giving both sides of the story: There are people out there for whom interest-rate increases will be a problem because they’ve got too much debt; at the same time there are others who are being excessively prudent, shall we say, and what they’d like is for them to go out and borrow more to keep the economy going.’’
Mr. Ragan, in fact, was in the hike camp late last week when C.D. Howe’s Monetary Policy Council voted 5-4 in favour of recommending a fourth straight increase, arguing there is still too much stimulus in the economy, regardless of the sharp slowdown of the past few months and the sputtering recovery in Canada’s main export market.
But most analysts say a pause, and possibly a long one, is in the cards.
After all, the economy shrank in July for the first time in almost a year and had a net job loss in September, and the most recent inflation readings came in well back of the central bank’s 2-per-cent target.
Perhaps the biggest driver of a pause is the mounting evidence that the U.S. Federal Reserve will act to boost the flagging U.S. economy, taking steps that would keep the American dollar down and send investors who want higher yields to currencies like the loonie.
A stronger Canadian currency brings advantages, like helping companies buy state-of-the-art foreign machinery that will boost their productivity. Still, should the loonie gain too much against the greenback too quickly, it could pour more cold water on the economy, especially the manufacturing sector. Already, Mr. Carney has said his new growth outlook for the second half of 2010 will be lower than his July forecast.
Overseas investors are attracted to the loonie in part because Canadian rates are higher than in the U.S., where the Fed’s main rate is still close to zero. As Mr. Carney said last month, there are limits to how much the two rates can diverge. So until the Fed’s ``quantitative easing’’ plans and their effects become clearer, the prospect of them constitutes another big question mark in what Mr. Carney has repeatedly called an unusually uncertain environment.
``When you don’t know, you don’t take chances,’’ said Benjamin Tal, deputy chief economist at CIBC World Markets. ``Given the uncertainty, they could give us a very good hint that they’re not going to move for a while.’’
However, should the central bank give such a signal, `Mark Carney: Financial Adviser’ will likely make another appearance this week too, reinforcing that as soon as conditions warrant, he will start hiking interest rates again.

Preparing for mortgage rates to change

By James Daw, Personal Finance Columnist, Toronto Star
 Mortgage interest rates are still low, but they could edge higher over the next year. Here are key things you should know to save money and avoid disappointment.
1. Variable rates beat fixed rates. The cheapest choice for a mortgage will usually have a variable interest rate. You can sleep easily when rates are stable or falling. We found a 2.15 per cent variable rate with a five-year contract at ResMor Trust last week. Meanwhile, Meridian Credit Union was charging 3.58 per cent for a five-year term. Mortgage broker Invis advertised 5.19 per cent for a 10-year term. The monthly payments for a $200,000 loan spread over 25 years would range from $861 a month to $1,007 at those rates. If you were charged the lowest rate but paid the higher monthly amount, you could be debt-free in 17 years, assuming rates would never change. You could be debt-free sooner if you increased payments when you got a raise.
2. Be ready for rates to rise. Things do not look promising for the world economy just yet. So wages and prices are expected to rise gradually for months, maybe even years. That could keep rates relatively low in Canada, but maybe not as so low as today. If economists at the Toronto Dominion Bank are right about the general direction of rates, variable mortgage rates could be 3.15 per cent or higher by late 2011. Five-year rates could be 4.38 per cent or higher, with more increases to follow. Soon, today’s five-year rates could be cheaper than variable rates. 
3. Variable may not feel cheaper. To qualify for a variable rate mortgage, you will have to demonstrate that you can afford a five-year rate. That protects the lender and you. By paying a low rate and higher monthly amount, you will reduce your debt quicker and increase your flexibility if rates do rise.
4. Choose your mortgage carefully. Let’s say you want to ride the variable rate for awhile, and lock in later. Make sure you know the terms of your mortgage. Not all of them have the same privileges to make extra payments, switch from a variable rate to a fixed rate, from a fixed rate to variable rate or to a cheaper fixed rate. Any mortgage that’s completely flexible or open will likely to have a higher interest rate from the start. Otherwise the extra cost will be charged when you make a change, either through a one-time fee or over time through a higher interest rate. Contracts are not all the same. Mortgage broker Byron Dailey of MortgageTech Corp. in Orillia notes that National Bank of Canada now has a variable-rate mortgage that’s convertible to a five-year term at a lower rate than the bank now charges for a five-year term. “You should understand completely what priviledges and penalties you will have,” he says. “Get it in writing how each will be calculated. If the lender won’t tell your, go somewhere else.”
5. The cost of switching lenders. There will be legal costs to register a new mortgage and possibly the costs of an appraisal for a new home. But many lenders may absorb those costs to get your business, so ask. Tell your lender you are thinking of moving to get a lower interest rate. You may be offered a matching deal.
6. The cost of being unconventional. If you cannot pay at least a fifth of the cost of a home from your own (or family) resources, you’re normal. But you’re mortgage will be high-ratio, not conventional, and you will need loan default insurance. Premiums will vary by the size of downpayment, proof of income and your credit score. Gary Siegle of mortgage broker Invis in Calgary says additional premiums will not be charged if you merely switch lenders to get a better interest rate. But check on the potential extra cost if you buy a different home, or negotiate a new mortgage with a longer payment period (or amortization) to reduce your payments.
7. Will your other insurance come with you? Insurance to pay your mortgage on death can also have different rules. A creditor policy from a bank is owned by the bank, and not portable to another lender. But Siegle says many brokers have group policies that are portable. An individual policy from a life insurer will be portable. You can name your spouse or estate as the beneficiary and the death benefit will not decline and disappear as you repay the mortgage, Dailey notes.
8. A mortgage broker can help. Moneyville.ca and other websites have rate comparisons and mortgage calculators. But a knowledgeable broker can help you find the combination of rate and flexibility you want. The new lender will pay him or her. Most provinces require mortgage brokers or agents to be licensed. To check someone in Ontario, call or visit the website of the Financial Services Commission of Ontario.