Rate Hikes: Not If, But When...(but also if)

One headline suggests interest rates are bound to rise soon, the next suggests they may drop to new lows, and a third suggests no changes anytime soon. This has been the case since rates dropped to 50-year record lows in 2009.

Many were adamant that rates could go no lower at that point, and yet they have, with a few short-lived blips upward, in defiance of all who are calling for a return to normal... whatever normal is now.

Keep in mind that a key driver of interest rates is the economy in general. What drives interest rates down? Economic bad news. What will drive rates up? Economic good news.

Economic good news seems in short supply since 2008.

Interest rates are a very large economic lever, far too large to be used simply to cool the arguably overheated real estate markets of two particular cities (Vancouver and Toronto). Cooling of real estate is addressed not through interest rate hikes, but through policy changes. Most commentators forget that only a few short years ago there existed a 40-year amortization, 100% financing not just for owner-occupied but for investment properties, and variable-rate mortgage qualification based on the three-year fixed discounted rate.

All of those things are gone or changed radically, and reality is that borrowers in 2008 – at nearly double the current interest rates – qualified for larger, and arguably riskier, mortgages than borrowers do today.

Interest rates will not be adjusted based on the detached home frenzy of Toronto and Vancouver. Lending guidelines have already been adjusted accordingly.

Nor is it valid to argue that rates have been so low for so long. How long they remain low is a function of inflationary and deflationary forces in the general economy.

The sign on the streets? Watch for a bunch of our peers spending money like those proverbial sailors on shore leave that we mentioned last month. A brand-new truck in each of your neighbours' driveways, each unloading brand new 80" flatscreeen TV’s... that is what will give the economy a strong boost and shift inflationary numbers into the 'exceeding expectations' category.

Until that time the steady stream of lackluster economic news is likely to serve mortgage holders well. The big beneficiaries will be those in fixed rates approaching renewal dates over the next 12 - 18 months, and those enjoying the ride in their variable rate mortgages.

Be sure to start the renewal conversation with me six months out from the mortgage renewal date. Your current lender may suggest that rates are about to move and locking into something early is the right move, but always consult with me first to determine if the move being suggested is right for the lender, or right for you.

Happy summer!

Liz 

(604) 290-4835

Liz@LizReid-Mortgages.ca

Pre-Approvals...More Important & Less Concrete than Ever!

Going through the pre-approval process is more important than ever to both you and your Realtor, but the actual term 'pre-approval' is potentially misleading.

You may be pre-approved for a certain mortgage amount, however there are still a number of variables that can enter the picture once an offer is accepted.  That's why it is imperative that one always include a clause in the offer along the lines of 'subject to receiving and approving financing'.  (There are variations to be discussed around the specific wording.)

Often clients are reluctant to write the initial offer on a property without feeling like they are 100% pre-approved.

An understandable desire.  The risk, though, is that some may falsely believe that they have a guarantee of financing.  They don't.

A lender must review all related documents - not just those of the clients. but also those from the appraiser and the Realtor - as the property itself must meet certain standards and guidelines.

The pre-approval process should be considered a pre-screening - a first step only.

It does involve an analysis of the client's current credit report; it should also include a list for the client of all documents that will be required in the event that an offer is accepted.  Clients should also come away from this initial process with a  clear understanding of the maximum mortgage amount they qualify for, along with various related costs involved in their specific real estate transaction.  Equally important; with the completed application your Broker is able to lock in rates for up to 120 days,

Why won't a lender fully review and underwrite a pre-approval?

• Lenders do not have the staff resources to review 'maybe' applications - they have a hard enough time keeping up with 'live' transactions.
• The job you have today may well not be the job you have by the time you write an offer.
• If more than for weeks pass, all of the documents are out of date - by lender standards - and a fresh batch needs to be ordered and reviewed.
• The conversion rate of pre-approvals to 'live transactions' is less than 10%.

It is this last point that makes it so difficult to get an underwriter to completely review a pre-approval application as a special exception.

The bottom line is that a client's best bet for confidence is the educated and experienced opinion of the front-line individual with whom they are directly speaking - and that's their Mortgage Broker. This individual will not be the same person who underwrites and formally approves the live transaction when the time comes.

This disconnect between intake of application and actual underwriting of a live file makes having a ‘subject to receiving and approving financing’ clause in the purchase sale agreement so very important.

Perhaps the most significant factor in undermining the solidity of a client's pre-approval is the relentless pace of change of lending guidelines and policies – changes implemented not only by the Federal Government but also by the lenders themselves. It is very easy to have a pre-approval for a certain mortgage amount rendered meaningless just a few days later through changes to internal underwriting guidelines. Often these changes arrive with no warning and existing pre-approvals are not grandfathered.

It is absolutely worthwhile going through the pre-approval process before writing offers, and in particular before listing your current property for sale or accepting offers. This will give you a good idea of your maximum mortgage amount as well as securing a rate for you. It is a worthwhile endeavor.

Just be aware that aside from the key advantage of catching small issues early and securing rates, a pre-approval is not a 100% guarantee of financing.

But the good thing is, I can help you with this process!

Give me a call and we can discuss options (604) 290-4835 or lizreid362@gmail.com

2015 Canadian Federal Budget Includes Families, Savers & Seniors

As a Blogger that loves to follow and decipher Canadian financial news, I received the following press release today from the newest addition to the Dominion Lending Centres Team, Dr. Sherry Cooper.  

It is safe to say that am I excited Dr. Cooper has joined us as she is one well educated, accurate and highly respected lady!  

Being that I could not have written this better myself, I decided to share.  Enjoy!

Vancouver, BC - Responding to today’s federal budget announcement, Dr. Sherry Cooper applauds the deficit reducing components of the 2015 Budget, stating that Ottawa’s plan offers a balance between fiscal restraint and targeted spending in key areas.

The budget forecasts a surplus of $1.4 billion this fiscal year, the first surplus in seven years. At the height of the global economic and financial crisis, the deficit was as high as $55.6 billion.

“This is a play-it-safe budget- no big new ideas, but great success in deficit reduction, tax cuts and smaller government,” says Dr. Cooper, Chief Economist for Dominion Lending Centres. “The measures to help families, savers and seniors are worthwhile and affordable.” Budget 2015 continues to shrink the role of government in the Canadian economy, continuing to cut taxes, a trend since the Conservatives took power in 2006. The Harper government is enshrining into law this government shrinkage with balanced budget legislation, allowing no more deficits unless the economy moves into recession, or in the case of extraordinary circumstances. Dr. Cooper stated that the government must be careful around balanced budget legislation. “Balanced budget legislation reduces the flexibility of government to conduct proactive counter-cyclical fiscal policy in a timely manner.” This is particularly relevant in a world where central banks have little room to counteract tight fiscal austerity. Hamstringing government policy in this environment seems untimely, at best. In addition, boomers will benefit from the doubling of the maximum contribution to Tax Free Savings Accounts (TFSAs) to $10,000. According to Dr. Cooper, this is a very good idea given that most boomers haven’t saved enough for retirement and younger people would benefit from the huge compounding effects of tax-free returns. Dr. Cooper added: The measures introduced to enhance personal savings through the TFSAs and RRIFs will help, but the current low interest rates force savers to take more risk to enhance returns.

About Dr. Sherry Cooper: Dr. Sherry Cooper took the position of Chief Economist, for Dominion Lending Centres in early 2015. Prior to joining DLC, Dr. Cooper was the Chief Economist with one of Canada’s largest financial institutions and is well versed in the mortgage sector. Dr. Cooper has an M.A. and Ph.D. in Economics from the University of Pittsburgh. She began her career at the United States Federal Reserve Board in Washington, D.C. where she worked very closely with then-Chairman, Paul Volcker, a relationship she maintains today. After five years at the Federal Reserve, she joined the Federal National Mortgage Association as Director of Financial Economics.

Prime Rate Reduction...What Does This All Mean?

Shock & Awe! 

Yesterday turned out to be a pretty spectacular day for many reasons in the financial world for Canada! I hope you enjoy the read – I've tried to ensure that it is not too technical, but if you have any questions on what is outlined below, I’ll be happy to break it down further!

In a stunning announcement yesterday, the Bank of Canada (BOC) issued a statement that they were cutting their Key Interest rate by 1/4 point - down from 1.00% to 0.75%. This is the first change to the overnight rate since Sept 2010, and a decision that none of the 22 economists in a Bloomberg News survey predicted. 

Note: I was planning on sending this update out immediately after the announcement yesterday, but I wanted to wait to hear if the chartered banks (RBC, BMO, TD, etc) would be following suit in cutting their consumer Prime Rate down accordingly by 1/4 point, to 2.75% (from it’s current level of 3.00%); however there has been very little in the way of updates that this will happen. In fact, there is speculation in the opposite direction that banks may not pass along the rate cut to consumers, thus pocketing the difference for themselves. A tweet from Rate Spy suggested: “Just got official word (direct from TD) that it is not changing it’s prime rate 'at this time’.” -https://twitter.com/RateSpy/status/558298960629366784 

Obviously there are a lot of factors that would go into a decision like that from the banks, but as is the nature of a free market all we would need is one lender to make the call to adjust their consumer Prime Rate downwards, and it’s likely that the rest would follow suit - and thus mortgage rate wars could ensue. 

An interesting point to note for those of you that remember, is that if the banks choose not to pass on this rate cut to consumers, it wouldn't be the first time. The spread between consumer prime rate and the overnight rate was 175 bps (1.75%) back in November 2008, but then grew to 200 bps in December 2008 when banks chose not to pass on a rate cut then. So if they do it again this time, the spread would grow to 225 bps. 

If the banks do choose to pass the rate cut on to consumers, then that would be good news for those of you holding a variable rate mortgage or LOC product as you will see your rate drop - and thus your payment to follow suit as well. Less interest costs would mean it continues to be a great time to pay down your mortgage faster! I would suggest you keep your payments at the same level and enjoy the additional benefits of becoming mortgage free faster! 

It’s tough to predict what the future may bring, because as you all know from reading my updates in the past – 2015 was supposed to be a year that the BOC started to increase the overnight rate, not cut it. But interestingly now, Bloomberg financial markets are now pricing in a 100% change of another rate cut by April. "Source: https://twitter.com/RateSpy/status/557929467151400962 "

There could be a downside to all of this of course. It’s very likely that banks would reduce the spread on their variable rate mortgage discounts. That means that we could potentially see variable rate mortgages reduce from their current level of Prime -.60% (the current average variable mortgage discount). The last time we had a big drop in prime rate, we did see the spreads on mortgage rates change from as low as Prime -.90%, to Prime +.60% within a few short months. It’s all very early on at this point, but there is a very real possibility of this as it would be harder for banks to hit their profit margins. So if you have any interest in securing a variable rate mortgage, it would be a good time to discuss this.

Lastly - one of the most interesting things to happen yesterday, is that it was completely overshadowed by the news of the BOC rate cut, but the Canada 5-year government bond yield dropped below 1.00% for the first time ever in history. At it’s lowest point during the day, it hit 0.799%! Bonds are what our fixed rate mortgages are priced off of, and if these continue to drop (or even stay at the deflated levels they are at) then we can expect further rate drops on the 5-year fixed mortgage rates. Currently the lowest unencumbered 5-year fixed is 2.89%, but it’s worth watching what the next few weeks bring - as I could see this dropping lower should things continue on the path we are on. 

So is it time to start talking about locking in, or is it time to start looking at going variable? I would love the opportunity to discuss this further with any of you!

Some great articles to read on what happened yesterday, and what to expect moving forward:

#1)  Canadian Mortgage Trends 

#2) Rate Spy

As always, I am available at anytime to discuss, plan, help, and listen to your questions, concerns, and feedback. And please forward any of my blogs to anyone who you know would be interested in receiving it, because your referrals of friends, family, and co-workers are the life blood of my business!  

To Gift or Not to Gift, that is the question?

Well, here we are again at that time of year...the holiday season.  Whether you celebrate Hanukkah, Kwanzaa, Christmas or something else, you will find yourself in the mall buying for others.

OR will you?

Many people are opting for the "gift lottery" option, whereby everyone in a family or group puts their name in a hat and you pull out a name for someone you have to buy for...keeping it under a certain $$ amount.

I personally think this is smart.  Not just because it is a time-saver, but also because you can feasibly up the maximum $$ value of the gift you buy, therefore buying something that is useful or wanted  by the recipient.

Obviously everything is not about the money spent...sometimes the best gifts are inexpensive or even FREE, but not always, and to get creative is really the name of the game.

My best gift I ever gave was to my Grandpa when I was 17.  I found an old black and white negative of him in his band uniform (he played in the Vancouver Firefighters Band in the 1930's), and I printed it on large 11" X 17" photo-paper, then hand colored it (I found out all the particulars from Grandma).  It was the first time I really saw him well up...he was so touched and I was too.  Best part was, it cost me next to nothing, but my time and energy!  So simple.

But if you have to buy, I always ask myself the following questions before putting down the cash:

• What has this person been talking about lately that they may like?
• What is something they need?
• What is helpful? (ie. gift certificate for a house cleaning company, spring gardening)
• Is it appropriate? (ie. they may want a video game, but they really need new clothes, etc)
• Do they just want to support charities?  (ie, some people prefer to give to a charity then to get something themselves)

The biggest thing to remember is that it is not for you, that you are buying for.  The holidays are for others and appreciating them and their personal choices.

My main point to this whole blog is consider the reason for the holidays in the first place.

Is it not to celebrate a family/group coming together, to appreciate  the people in your life, and to make note of a special religious or cultural time of the year?

Maybe gifts are overrated, and really we need to just appreciate the little things in life, like who you surround yourself with and making the time to visit each other.

Whatever your reason for celebrating this season, give the gift of you and your time and attention.  This is more valuable than anything!

Happy holidays!

Liz

Please let me know what you are doing for the holidays and do you do gift-exchanges or other forms of gift giving?

Affordable Housing?

Recently I was reading a blog posting on "Comparing Home Costs by City" from one of my favorite Canadian women bloggers Fabulously Broke in the City and it occurred to me that one of the common mistakes that people make is getting in over their heads with a large mortgage, because they may perceive the home purchase cost as cheaper in comparison to others in their city. 

DO NOT get caught up in the real estate web if you haven't done your homework first!  The biggest mistake that most home buyers make, is basing a purchase decision on the market conditions and not on their own personal situation.

By your personal situation I mean that if you are making $30,000/year and are expecting a raise soon, don't count on the raise until you see it.  Also, consider any updates or immediate repairs you may want/need to do on the property you are buying...where will that $$ come from?  Another thought is kids...are you wanting to have them in the next 5 years OR are they teens headed for university soon and are you thinking about helping out with tuition?

As a Mortgage Broker, I generally always ask the client if the rent or mortgage payments that they make monthly are working for them, or could they foreseeably budget more without it turning into a large sacrifice.  You see, you may be "pre-approved" for a certain $$ figure mortgage based on your annual income, but if you don't check the monthly mortgage payment cost, you may setting yourself up for disaster!  ALWAYS check to see what mortgage payments are on a pre-approval BEFORE going house hunting and committing to a purchase on a property, only to find out that the payment may be more than double what your current rent payment is now.  YIKES!

There is nothing worse than the reality that you are house poor, and strapped into a mortgage that is for a 3 or 5 year term (so there is usually a penalty involved to get out of it before the term expires).

Think about what your lifestyle right now is like...consider where you spend most of your $$, and then ponder the thought of if things were to change with your income or spending habits, could you still manage?  Only you know the answer to this question.

 Liz

Should You Skip A Mortgage Payment?

Lenders are advertising the option of skipping a mortgage payment more often these days – with one major bank even creating a TV ad!

But unless this is your only option, it’s not recommended that you skip a payment because, like most ads that sounds too good to be true, this option is as well.

The banks want you to think they’re advertising the option to skip a payment to do you a favour. But it’s important to realize that lenders are in the business of making money. They’re not going to create an ad that doesn’t benefit them in the long run.

And it’s not like you can simply choose to skip any payment at will when you need it most. You actually have to prepay your mortgage in order to take advantage of this mortgage vacation option.

You can miss a regular mortgage payment as long as you have already prepaid that amount by doubling up any mortgage payment, increasing your mortgage payments or making lump sum payments. It’s important to know how much you can prepay each year before making extra payments – this varies from lender to lender.

And if you’re going through the trouble of prepaying your mortgage, you want to make the savings work to your advantage by actually paying your mortgage off quicker – not diminishing those savings by taking a mortgage vacation.

The number of eligible payments covered by your payment vacation will be based on a combination of your prepaid amount and your current regular monthly mortgage payment. There is also typically a maximum payment vacation permitted per mortgage term, regardless of how much you have prepaid your mortgage.

Other considerations to think about when looking at the mortgage vacation option include:

·  Interest is capitalized (ie, interest is added to your outstanding principal balance)
 

·  Borrowers lose the benefit and interest cost savings of prepaying their mortgage once they use the mortgage vacation option

If you happen to already be in arrears on your mortgage, you can’t take advantage of this option.

It’s always important to read the fine print and ask questions when using a tool advertised by your lender. Better yet, speak to your mortgage professional – we know the ins and outs of all the bank offerings and can help advise you on your best options.

As independent, unbiased mortgage professionals, it’s our job to show transparency to ensure you have the right security, product, term and rate for your mortgage needs at the lowest overall cost, and with the most control in homeownership for the security you deserve.

As always, if you have any questions about the information above or your mortgage in general, I’m here to help!

~ Liz  604-290-4835 ~

Focusing on being thankful...

Yesterday was Thanksgiving here in Canada.  As families and friends gathered to share food and conversation I ventured into the realm of what it is that I am truly thankful for this year.

Outside of the regular answers I normally give, great husband, good kids, my health and the health of our parents, etc, I thought about the other things that I take for granted.

Friends - One of the reasons that I think I am such a happy person is that I know I have great friends that love me!  They are the kind of people that you don't have to call every day or week, but when you do see them it is like old times all over again. We just pick up where we left off...I love this.  

Great neighbors - we really do have fabulous people that live around us.  Sharing their birthdays with us, bringing over Christmas baking and just general friendly waves to each other from the driveway.  I think it should be criteria when buying a house to ask the current owners "How are the neighbors?"  Truly they can make or break a great home.

Weather - yes, I do live in Vancouver or as some people refer to our region as "Raincouver", however it has been an amazingly wonderful August, September and start of October.  We even had all our doors open cooking our turkey yesterday and it was 18 degrees Celsius!  In Vancouver we rarely get snow, and mostly live in a climate that if it gets below -5 Celsius that is cold!  Our trees and grass is green most of the year and my husband has actually boasted that he has gone sailing, golfed and skied (in the mountains) all in the same day.  I love this city.

My home - I live in a single detached house in the Lower Mainland (just outside of Vancouver) and it is just the perfect size for our family of four with a dog.  We are always under a renovation of some sort (being married to a Contractor has it's pluses and minuses),  but really the house is ideal.  With comfortable interior, a park across the street and great access to walking trails, we have it all here.

I guess my thought behind this blog post was to reflect on what it is that we do and see each day.  Don't wait until something is gone to appreciate it.

"Be grateful for all that is in your life, for we only have but one!"

What are you grateful for?

Divorce...Through the Looking Glass

So your relationship is over?

For how long have you known this...5 minutes, 5 hours, 5 days/months/years?

The reality of divorce is that it is just that...a "reality check". 

I speak from experience as 10 + years ago I went through a divorce.  I was the instigator and the "bad guy", but I also think that I was the realist.  We had grown up and apart and I was done.

My kids were 4 and 2 years old and I was 30.  It was hard, stressful, scary and sickening, but in the end it was a HUGE character mirror for me.  I really saw what I had done up until that point as a blur, and I was moving forward for the first time with a sense of clarity that I hadn't ever felt I had experienced.  It was enlightening.

Since my experience I have talked to many other women and families about relationship breakdowns and I have found a common thread...Many of us plod through life, on the daily grind, forgetting to really stop and think.

As Melissa Carr of the Thirties Grind blog puts it..."Get up, go to work, raise kids, pay bills, sleep. Repeat".

This process can work for some people that have a solid relationship with a person who is like minded and can share in the daily duties, but if you live in a one-sided world, you may have considered, or are currently thinking about, the idea of getting out.

In the end, here is the reality check that I talked about.

Your life will change in the following ways:

1. Friends will disappear.
2. Money will become tighter more than ever before.
3. Kids will go through a multitude of emotions.
4. Parents will either help or hinder you (but there will be a strong reaction from your family one way or another).
5. You will see less of your kids (this may mean every other weekend or every other week).
6. You will have to share in the raising of your kids (new girlfriends or boyfriends will enter the picture)
7. You will have to deal with people who look at you differently because you are divorced (some bad reactions and some sympathetic)
8. You will have to advocate for yourself
9. You will have to learn how to: clear a plugged toilet, re-light the furnace, deal with auto mechanics and pay household bills.
10. You will have to put lots of "work" into things that may have been neglected (ie. your appearance, your job, moving out of your comfort zone)

In the end, the BIG lesson that I came away with is that life is really a wall of mirrors that you are forced to look at from time to time.  The good, the bad and the ugly are shown and your perception of who you are is everything.  Forget about what other people say and get to know yourself!

One final word of advice for parents going through a divorce: It is over for you, but your kids will live it forever, so don't talk badly of your ex-partner and learn how to get along.

Healthy kids are possible, but it is the early on lessons of who their parents are and how they treat each other that is everything!

Do you know of a positive divorce experience?  Please share...

Takes a Village...

We all come from somewhere and today my Dad has taken my two kids (12 and 14 year old) to his hometown of Trail, BC.  He goes back every year (sometimes twice a year), to see his old friends and their senior parents to "chew the fat".

I used to think it was strange to do this, but as I get older I think it is nice, kind and downright respectful to consider the people who helped raise you.  Really...let's face it, it does "take a village to raise a child".

As a kid I was raised in East Vancouver and boy was it a melting pot of people.  In my neighborhood there were 8 different nationalities on one block!  I used to joke that it was like eating at the food fair at the mall everyday going to a friend's house, but really it was.

As kids, we all got along and played together daily, and we spent time at each others homes, listening to different languages and participating in various customs.  It was needless to say, educational and amazing.  I know the person I am today is a direct result of the people that I was raised around, and I really am glad they were all there.

You see, in my world in the  70's and 80's you would have smelled Indian food, heard Chinese music, saw Greek flags and spoke English.  I believe that because of this I am tolerant, interested, and worldly because of my childhood surroundings...and I have many people to thank for this.

So now, as an adult, living with my own family and friends, I would encourage anyone to re-visit what made you into the human being you are.  I bet it was not just your parents, but your neighbors, teachers and friends parent's too!

Thank you to the following families (in no particular order): Wada's, Duncan/Wersta's, Chu's, Kardakaris', Sahota', Bauer's, Naidu's, Nixon's, McRae's, Tomei's, De'Arlieaveria's, Dosanj's...the list is endless.

Because of all of you I can cook a mean curry dish, say "poli-kala" sing a Chinese counting song, bowl, play softball, celebrate Christmas, Dhawali, Easter, etc., and show my kids the beauty of all of it in our Canadian house.   

Liz XO

Job vs. Personality...Are You In Your Dream Job?

Do you ever wonder if what you are doing for $$ is really your ideal job?

For many years I have worked, making good $$ along the way, and I have been fairly lucky with having jobs that I loved.  When I stopped liking what I did, I changed it. 


Musicians and artists often struggle with this as most of the time, what they love doesn't pay well, or is spurratic.  This is not good and should be re-worked to make it a lucrative job.

Many people have re-worked a job idea to include $$ making ideas to change up the way they are paid (think music or book downloads vs vinyl/disc or paper versions).  This is not only brilliant, but it will pay off in more ways than one. 

An ideal job should not feel like work, but rather a welcome challenge on a task/hobby you like to do, that someone pays you for.  

I urge everyone that reads this blog to assess your job:

1. Do you enjoy going to work most days?
2. Are you making enough money to warrant your working pay vs. daycare, transportation, clothing costs?
3. Do you go the "extra" mile if need be at work, or  do you require being asked/ordered?
4. Are you able to express your views in the workplace?
5. Are you able to be creative if necessary?

There are many questionnaires on the internet that you can take to find out your best job/field for you, but it is always best to find out what type of personality you are first to determine your ideal employment.  The Meyers-Briggs Test is an excellent test to take that gives you an accurate understanding of what you are good at, and where you would be best suited to work. 

I recently took it myself and found that it was correct for what I enjoy to do.  Now, I am considering adding to my $$ making endeavors to enhance my job and personal "loves".  Always changing, guess that is the Gemini in me :-).  

Keep in mind that kids born today will working in a job in 20 years that has not even been invented yet!  Use your imagination, ask your friends...

I recommend that you consider at least taking the assessment.  It may be a good place to start.

Get back to me with your experiences and/or thoughts.  I would love to hear what ideas and employment you have chosen to spend your precious time on. 

Vancouver goes Pop?

So here we are again discussing the real estate market and the common question that I am often asked..."what do you think the market will do over the next year?"

My answer most of the time is "I really don't have a clue" and the reason for this is that I am realistic and don't think that anyone really knows.

The strangest things have been happening to the market in the past 5 years and I think anyone who says they have it figured out is crazy.  No one can really be certain of anything today, least of all in real estate!

To list off some of the events that have affected the real estate market and for that matter, mortgage rates here are the following:

• Fall 2008 - American sub-prime mortgage crisis hits with eventual US government bail out
• 2009 - Worldwide banks affected by US economy
• March 13, 2011 - Tsunami in Japan that put a country to it's knees and eventually brought a major immediate need for lumber (hello, British Columbia?) - our natural resources in need = job stability and therefore people start buying houses.
• 2011 - Asian buyers love Vancouver and send the house prices in certain neighborhoods upward.
• 2012 - Announcement that CMHC was getting close to hitting their cap for spending allowed by the Canadian Government, therefore seriously affecting their offerings to the banks.

One of my favorite local bloggers here in Vancouver "The Thirties Grind" recently was interviewed on CBC regarding her thoughts on the market here in Vancouver as she often does blogs on the absurdity of the prices here.  We definitely agree on the idea that the market is really an abnormality here in Rain City. 

Anyway, my thoughts are if you need a place to live, and you can afford the payments with a half decent lifestyle, then why not.

The one solid piece of advice that I do have is DO NOT over extend yourself just to get into a house.  It is NOT worth your mental and physical health breakdown if things start to go sideways with real estate.

What are your thoughts on the Vancouver market?  Do you think we are in a bubble or not?

Pre-Approval or Rate Hold...what is the difference?

Due to the sheer size of content in this blog I have also created a vlog that you can watch on my channel on YouTube.

Everyday I speak to people about a mortgage and usually many are confused as to the different financial terms used within the banking industry.  A perfect example of this confusion is prior to purchasing a new property, the difference between getting a "pre-approval vs a rate hold".  Everyone tells new home buyers that they should "get pre-approved", but what does that mean, and how are you really to do this?

The difference in terms is vast and hence why I feel it an important topic to discuss.

Here is what typically happens...you wander into your bank to do some banking activities and you remember about that "pre-approval thingy" your friends/family have told you to get.  You ask the bank teller non-nonchalantly "what are your mortgage rates right now"?  Immediately you are told that it would be best to speak to a bank Mortgage Specialist and well, look at that, they can see you in the next few minutes!  You are escorted into an office and asked a series of questions about your income and debts (which many times most people cannot pull exact #'s from memory, or for that matter, remember their spouse's income & debts?)   From the information provided, they do up a quick "rate-hold" for you so that you don't miss out on that special deal they are offering.

You think you are "pre-approved" and this is where I say to you...Uh Uh Uh, MISTAKE, you only have a rate hold!

Rate hold's essentially are a guaranteed interest rate, for a typical owner-occupied property, that the bank is willing to hold for you for anywhere between 90 and 120 days.  The lender usually bases the rate hold on your total income, less your basic debts you have disclosed to the bank.  Problem is, there really has been no due diligence done to ensure that you actually qualify for this rate, or that it is for applicable the type of the property you are wanting to buy.  This could potentially be a real eye opener at crunch time, when you have an offer on a property and the bank is telling you, sorry, you actually you don't qualify for this low rate.   WHAT? 

There are many things that can cause a bank to deny your maximum mortgage amount that you thought you qualified for with a "rate hold".  Some examples are:

1. Your debt load has increased since you last spoke to someone regarding financing
2.  The property you want to buy does not qualify for the rate they held for you (i.e. rental property, mobile home, condo that has building envelope "issues", etc.)
3. The bank's lending criteria has changed and they no longer provide the type of mortgage you need (i.e. low down/0% down financing, self-employed stated income mortgages, etc.)

This is where people are shocked by the process and sometimes feel trapped into just taking whatever will work in order to not lose the house they have fallen in love with.

Now a true "pre-approval" is one where you sit down with a Mortgage Broker or bank Mortgage Specialist, with all your income paperwork proof (i.e. 2 year's recent tax returns or notice of assessment summaries, all your current debt information - car payments, credit card bills, etc) and you sign a consent form allowing the Broker to pull your credit report.

From this total package that is made up for you, the Broker can determine your credit worthiness.  This is so much more advanced for serious buyers, so that if you are actively looking to buy in the next 3 to 6 months, you know where you stand with your financing.

Many Brokers will also provide you with a written letter for your Realtor to see so that they know exactly what you can afford.  These pre-approval letters are time-sensitive (rates change all the time so the letter will typically have an expiration date on it).

Now some people ask, "why should I allow the Broker to pull your credit now"?   Well this is simple, really you don't want any surprises when it comes time to having the financing go through and it also offers you the ability to know if you need to clean up some of your debts before purchasing. 

I have many times pulled people's credit reports to find that there are things on there that they were not aware of on their credit report (i.e. outstanding child support payments, utility bills from 4 years prior, etc).  I have found that if you face things head on as soon as you are aware of them, you have a far better chance of improving your credit score to qualify for the best rate possible.

A BIG side note I would like to offer you regarding credit...if you go to the bank and have them pull your credit report it is called a "hard pull" or, in effect, will lower your credit score by as much as 5 points for up to 6 months.  If you go to multiple banks yourself to shop rates, and give each bank the permission to pull your credit score, you can substantially reduce your credit score and therefore mess up your good credit.  Many people do not realize this.  

If you go to a Mortgage Broker we do what is called a "soft pull" or a basic credit check that does not affect your score.  We can then use this credit score to share with multiple lenders OR to coach you on the best way to improve your rating.  In effect, a Mortgage Broker does offer you a far better way to shop for the best rates, without ruining your score and potentially your interest rate savings.

There are so many things to think about when buying, but having the proper information from the start with little to no surprises during the purchase process, can make everyone's life so much easier.

Let's face it, no one wants to have a last minute fiasco happen on one of the largest purchases you will ever make.  Spend the time to make sure you are prepared when the time comes and you find the perfect home!

Happy house hunting!

Liz
    

Rentals...mortgage helper or headache?

Everyone loves to make $$ or save $$ and recently I had an interesting conversation with a lady in regards to putting in a rental suite in her basement.

She retired last year and now is down to her pension and investment dividends as her income and quite frankly is worried if that is enough income.  She has been kicking around the "income suite" idea for a few years now, but has thought it not the best idea having a "stranger" living under her.

Problem is, her basement is HUGE and totally unfinished.  It is 1,500 sq/ft of prime real estate and if she doesn't put in a suite, she figures she should at least finish it to increase her property value.   

Big issue is the $$ needed to finish this area and hence her phone call to me.

She currently does not have a mortgage and dreads the idea of getting one.  This is where I came in with some financial tax facts that she never was aware of that may make this idea far more appealing than initially thought.

• Mortgage interest is not tax deductible on a principal residence property in Canada, however if you have a rental unit within your principal residence, you can claim the expenses related to the rental part of the building.   Canada Revenue Agency has a Rental Income Guide that explains the formula used under "Personal Portion".  

• Canada Revenue Agency will also allow you to write off 100% of the repairs and maintenance of the rental, so this is excellent in her case as she can update the suite and write off the entire renovation costs (check with your Accountant for more specifics).

For her taxes next year her Accountant will calculate her rental income collected together with her total income claimed, BUT they will now be able to offset her income with allowable rental expenses (i.e. a portion of property taxes, any maintenance costs, portion of property insurance, etc.).

This makes the rental suite option far more appealing as it offers a way of reducing her income tax payable with the expenses she can claim.

Also, rental suites:

1. Increase property value as a "mortgage helper" as most buyers are savvy to the idea of offsetting their housing costs with a renter.
2. Create a source of income from your home.
3. Help to offset your monthly housing costs.

Really this is an excellent way to use the extra space you have in your home that you would otherwise just have to pay for entirely out of your after tax dollars!

Trick is to get a good solid renter who is respectful and trustworthy.  That is totally another blog on how to screen potential renters, but you get the idea.

As I always say, when needing to increase your income, look around first and think about what you already have.  You never know, it may be something as simple as renting a room to a student.

Until next blog...

Liz
 

Another Day, Another Dollar!

Yesterday I started cleaning around my house and I kept finding change...dime, here, quarter there...you get the picture.

I kept putting it in my pocket with the intention of placing it in our change sorter after I was done.  Now you did read this right that we have a change sorter...you know, one of those machines that when switched on magically takes a pile of money and places it into individual paper tubes to create a $$ stack (MY FAVORITE)!

First and foremost, if you have someone in your family, specifically a male, who is almost impossible to buy gifts for, this is an excellent one!  Thanks Mom again for this useful gadget.

My husband comes home each and every day, and dumps his pockets out on the bedside table, and it accumulates fast!  The little cup that he puts it all in, overflows within a week and then the mess starts.  Unless it is placed in the sorter, it ends up on the floor and in slippers, etc.  You get the picture!

Anyway, I took all the change I found (including the $$ from the laundry area which is another place that seems to make $$) and placed it in the sorter.  After 15 minutes I had stacks of neatly bound cylinders that when counted totaled over $225!

Now at first I thought this could not be right and I re-counted it, but the reality is that in Canada, with our loonies and twonies...the change adds up, and fast!

I bet you that if you went around your home and checked pockets, drawers, piggy banks, etc, you could easily have a paid for night out and then some with just the found $$ that you didn't know you had!  Gotta love that.

So my suggestion to you is to do a spring clean, and invest in a money sorter that pays for it self in time saved by you not having to hand sort your change.  In the end, you will be pleasantly surprised at the fun you have and the extra moola you have "found".


Happy hunting!

Liz 

P.S. As a side, get your kids involved in the $$ hunt...makes it fun for them and also teaches the value of a nickel!

Making $$ With Nontraditional Methods

With my Brokering Career, I often have to go over people's financials with them and oftentimes, the problem is there is more month than $$ left in the end.

Unless you are independently wealthy, or have married someone who is, you probably have at one time or another run into $$ issues.  All kidding aside (I couldn't resist the pic above), this is a serious and sometimes marriage ending BIG problem.

I myself have experienced this same problem and it is daunting to think of options that work:

• Get a part-time job
• Ask for a raise at your existing job
• Sell items from your home

One option that is always a thought is to start a business based on your "hobby".

But what if you don't have a "hobby" that is profitable?

What if you can't think of a way to add income, because you already have too much on your plate (kids, job, husband/wife, ailing parent, etc.)?

I suggest that you look to what you do everyday.

I recently was shown a business by my girlfriend that I thought was genius!    The business model is based on a the simple strategy of referral advertising.  For me this was perfect as I am time strapped and frankly out of ideas.  With my new P/T business all I do is switch some of my grocery budget to a different store online.  Then, if I like the products, (which I do), I just refer others to the store too and I am given a profit share from the company!

I wish Tide, Colgate and Kellogg's had given me this option years ago...I would be a millionaire!

Anyway, in the end it works for me, and my family loves the products!  Best part is that most of the products are less than what I pay for them in the local grocery store AND they have better ingredients...BONUS!

If you are interested in learning what I do P/T, send me an email and we can chat.  No pressure, just friendly conversation about alternatives for $$.  lizreid362@gmail.com


If you are reading this and needing some extra income remember..."Coincidence is God's way of remaining anonymous"
 
Until next blog...

Liz ;-)

The Rate Roller Coaster...Do You Care?

Do you ever really care about the mortgage rates dropping and climbing as they do?

Should you really pay attention or is there too much in a day to really notice?

Recently BMO blazed a path that has never been seen before...a 4 year fixed interest rate that was below prime!  2.99%

OMG, this was BIG as there has not been this type of fixed rate discount in recent memory.  Other banks followed with rate discounts and there was a flurry of activity.  Busy, busy.


Having said this, it didn't last very long...2 weeks to be exact!  Like a puff of smoke it was over and now we are headed back to rates above prime.

Now first and foremost, it was hard to qualify for the 2.99%, because in order to get the lower rate, you needed to qualify at the higher floor rate (this is a whole other blog).  Let this be a lesson in keeping your credit clean and your down payment as large as you can possibly afford....but I digress.

What I am getting at is for the people that did qualify, this meant HUGE savings in 4 years.

One example I personally saw was a client that I have who saved a whopping $9,996.41 just by locking in at the 2.99% vs 3.29% (the new "low" rate)!  Not to mention that in doing this, they are able to pay down their mortgage faster with the $$ that they would have otherwise put away to interest.  At the end of the day, they were ahead way more than $9,996...but almost $33,000!  Crazy what a day makes..and for that matter how amortizations and interest works.

What is the moral of this story, if you are planning on renewing your mortgage in the near future, or have thought of refinancing, it is best to call your local Mortgage Broker a.s.a.p. and have them do the legwork for you to find you the best deal available.  (I am always available for a phone call...OK, this is a shameless plug.)  

Remember, the Broker is FREE to you and only gets paid when you fund your mortgage with the bank, and not before.  They have a real reason for doing what makes you happy and that is many times, saving you $$!

Until next blog...

Liz

Refinancing or Renewing? What is the difference?

The other day I had a client call me looking to renew his existing mortgage that was coming up to it's expiry date.  We started talking about the particulars of his mortgage and the question came up...do you need any extra $$ for debt consolidation?

I explained that now really is the time to do this if he wanted to he would not incur a penalty because the mortgage was already expiring.  He thought for a moment and then said "no" but was curious about the process if he did need cash.

This is when I realized that many people do not think of their mortgage as something they can adjust in the event they need $$. 

Here is the lowdown in Canada right now.  Say you have an existing mortgage that is coming up for renewal.

To be clear, a renewal is when your existing mortgage term is expiring with your bank and you need to do one of three things:

1. Renew with the bank you have your mortgage at by calling and having them roll you over into another term & rate.  
2. Call your local Mortgage Broker to inquire about rates available at other lending institutions.
3. Pay off your mortgage all together

Now of the above three options, most people select option #1 because it is convenient and easy at the time. BUT many times it can cost you BIG $$ in the long term.

Why?

Because banks do not always offer you the best renewal rate when you are rolling over from one term to the next.

If you are not paying attention, they can put you into a term that is too long, or worse, give you a rate that is way higher than what is currently available from other banks.

They know and hope that you DO NOT do your homework to see if they are being competitive. 

This is more common than you know and a serious argument for people to really do their due diligence!

Now with Option #2, this is usually the best way to ensure that you are receiving the best rate and time of term for you.

I know I am biased when it comes to Mortgage Brokers, but really Independent Brokers spend the time to ensure that you don't get into a long mortgage term that requires a penalty to break...AND they ensure that you are getting the best rate available for your specific circumstance.

ALSO, the best part is that the Broker is FREE to you as the new bank pays them when the mortgage funds!  Really a win win situation!

Now with Option #3, unless you have recently won the lottery or have come into some major $$ through an inheritance or other windfall, most people do not have this as an option at all.  But in fairness, it is an option so I had to include it.

Now once you have selected your option of what you would want to do, you need to consider if you need more $$.

This could be for a variety of reasons:

• Pay off debt
• Renovations
• Tuition for school
• Investments in a business or the stock market
• Buy another property

If you choose to refinance (add more to your mortgage) there are a few things that you will have to do regardless of whether you change banks or not.

1. You will need an appraisal to determine the current value of your property (unfortunately, most times the property assessment is not good enough)
2. Lawyer or Notary to re-register the new $$ amount on your property title

Both of the above do cost you a bit of $$, of which you can guesstimate the costs and add it into the refinance amount if necessary (your mortgage Broker can help you with this too).

In the end, a renewal is a simple switch into a new property and is worth the effort to investigate your options.

Don't go to all the trouble of getting the best deal on purchasing a property, finding the best rate once purchased, and then drop the ball 5 years later because it was easy.

Really, if you don't fight for the best use of your money, who will?

Until next blog...

Liz

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Enjoying the Moment

This morning I spoke to my Mom on my drive back home from dropping the kids off at school.  This is something I do most weekday mornings for the 25 minute drive as I enjoy speaking to people on my hands free phone while driving.  To me this is better than listening to the news or flipping radio stations and it keeps me connected to the ones I love.

Today the converstation was about family and the trip to our house for the holidays that she will make.  We laughed about stupid things that have happened in the last 24 hours and I also filled her in about the various bad drivers cutting in and around me!  Argh!  Another blog altogether.

What got me thinking about blogging about my daily phone conversation was I realized how much I enjoy the banter back and forth every A.M.  Funny how when my Mom was away on holidays and I couldn't call her as frequently I missed that.  I think that in our world today we tend to rush around so much in a fog that we forget to pay attention to the little things until they are gone...then we notice.

We hop in the car and drive kids to school then off to work we go.  Busy, busy...then later in the day we rush to the store,  rush around shopping, drive home, pick up kids, drive them to soccer or dance or whatever.  All the while we are thinking about dinner, birthday gifts, laundry...you get the picture.  It is a crazy gerbil wheel that  keeps us running all day, everyday.

Women are amazing multi-taskers but do we really enjoy it?

Is there any satisfaction experienced from doing so many things in one day?

My personal answer is NO!

Many times I ask myself at the end of the day...where did the time go?

What did I do again today?

It is all a fog and yet it all seems so important to do fast and efficiently...is that even possible?

I find the most satisfaction I seem to get is the simple stuff...like finding a great book and having the time to read it without interruptions...OR having a delicious coffee and being able to sit and savour it...OR talking with my Mom on the phone about nothing.

These are my little things that make my day better.  I think we all worry about so many little things that the BIG ones are lost in the "things to do" list.

So to my Mom, thanks for being a good start to my morning...even if the conversation is all over the map.  It helps me clear my head and get caught up all at the same time.  God knows I need a little clarity sometimes in this crazy world we live in.

I think we all need to remember that we can only do so much...now where is my list again?...;-)

Liz