Mii Mortgage Group

The Bank of Canada today released its 2011 schedule of eight dates for announcing decisions on its key policy interest rate and confirmed the announcement dates for the remainder of this year.

The announcement dates from September 2010 through December 2011 are:

Wednesday, 8 September 2010
Tuesday, 19 October 2010
Tuesday, 7 December 2010

Tuesday, 18 January 2011
Tuesday, 1 March 2011
Tuesday, 12 April 2011
Tuesday, 31 May 2011
Tuesday, 19 July 2011
Wednesday, 7 September 2011
Tuesday, 25 October 2011
Tuesday, 6 December 2011

All announcements will continue to be made at 09:00 (ET).

Over the past couple weeks we have seen interest rates start to pull back slightly. There are some great rate specials available today, take a look:

5 Year Fixed – No Frills – 3.89%

This product has reduced pre-payment privileges but offers the best rate. Great for clients who don’t expect to make any extra or lump sum payments on their mortgage.

5 Year Fixed – Quick Close – 3.99%

This product must close within 45 days of your application. It provides full pre-payment privileges.

5 Year Fixed – 4.09%

The regular 5 year fixed mortgage is available for a 120 day rate hold guarantee, great for pre-approvals!

5 Year Variable – Prime – .60% = 2.15%

The variable product floats with the prime lending rate and provides full pre-payment privileges.

Take advantage of these great low rates because as the economy in Canada starts to recover the interest rates will be rising. We have already seen the Bank of Canada move the prime lending rate from 2.25% to 2.75% in the past couple months. Fixed rates are sure to rise throughout the remainder of 2010.

Apply Online at http://miimortgagegroup.com/mortgage_application.html

Your credit score is probably the most important component of your mortgage application because it’s the primary factor that banks and lenders use to determine your creditworthiness. It tells lenders how likely you are to pay your bills on time, because it reflects every credit card, loan payment and late payment you’ve ever made – and every bankruptcy or credit problem you’ve undergone. With so much weighing on this tiny little number, it’s important to understand what it is, how it’s calculated and what you can do to manage it.

1. What is a Credit Score?

Canada’s two credit bureaus, Equifax and TransUnion, are independent companies that make their money from collecting information about your credit history.

Other businesses that utilize the services of these bureaus meaning, they report to and collect information from them include virtually every credit card company, loan entity (student or otherwise), car leasing company, utility company, collection agencies and pretty much anyone else you pay money to on a regular basis – with the exception of your mortgage. For some reason, mortgages aren’t reflected on your credit report.

The bureaus monitor the activity on a regular basis (typically monthly) and assign a credit score to you. This number ranges from 300 to 900, although anything in the 700s is considered to be good. To qualify for credit, you typically don’t want to be lower than 620, and definitely not lower than 600.

In general, the higher your score, the lower the probability that you will become delinquent on credit extended to you. And while many lenders use bureau scores to help them make lending decisions, each lender will base its decision on more than just the score.

2. What is used to calculate my Score?

While each credit bureau is different, both rely on similar algorithms to determine an individual score. Below is an approximate breakdown.

Payment History (35%): Your credit score will be higher if you pay your bills on time, as opposed to submitting late payments, or worse, not pay outstanding debts at all.

Current Debt (30%): Just because you’ve been approved for a $10,000 credit limit doesn’t mean you should use it all! The more credit you use, the lower your score will drop. TransUnion recommends keeping your credit card balance below 50% of your allotted limit, and ideally around 30%. With this in mind, if you’re someone who relies on a credit card a lot, it might be better to implement some spending discipline rather than asking your credit card company to drop that $10,000 limit to $500.

Length of Credit History (15%): The longer you’ve been proving yourself as a reliable borrower, the higher your score will be. Someone without a lengthy track record of paying back debts is likely to have a reduced credit score.

New Credit (10%): If you have a lot of companies viewing your credit report in a short period of time

Types of Credit (10%): Your credit score is partly calculated based on the types of credit and loans you have – such as credit cards, retail accounts, installment loans, mortgages, and consumer finance accounts. A healthy mix of all of these types will boost your score.

3. What can I do to improve my Credit Score?

Keeping the above information in mind, below are the most important things you can do to improve your credit score:

Pay your bills on time. If possible, set up automatic payments for all of your regular bills. Many credit card companies also have a service that allows you to automatically pay your minimum balance every month.

Don’t max out your credit cards. If you have a big purchase to make, consider applying for a lower–interest line of credit, or home equity line of credit (if you already own a home).

Choose your credit wisely. While it may be tempting to receive a new iPod – or 100,000 Air Miles – for applying for a new credit card, it’s not worth the havoc unnecessary credit can reek on your credit score. Try to limit all new credit applications to those you genuinely need.

Keep an eye on your credit profile. Make sure there are no erroneous charges – and no fraudsters taking over your identity. Both Equifax (www.equifax.ca) and TransUnion (www.TransUnion.ca) allow you to order your credit profile for free on an annual basis. It’s wise to order one from each company, since they feature different information.

Be patient. Unfortunately, it can take awhile to see the fruits of your credit–improving labors. If you follow the above steps on a consistent basis, however, you’ll be qualifying for that stellar mortgage rate in no time!

The Bank of Canada today announced that it is raising its target for the overnight rate by one-quarter of one percentage point to 3/4 per cent. The Bank Rate is correspondingly 1 per cent and the deposit rate is 1/2 per cent.

The global economic recovery is proceeding but is not yet self-sustaining. Greater emphasis on balance sheet repair by households, banks, and governments in a number of advanced economies is expected to temper the pace of global growth relative to the Bank’s outlook in its April Monetary Policy Report (MPR). While the policy response to the European sovereign debt crisis has reduced the risk of an adverse outcome and increased the prospect of sustainable long term growth, it is expected to slow the global recovery over the projection horizon. In the United States, private demand is picking up but remains uneven.

Economic activity in Canada is unfolding largely as expected, led by government and consumer spending. Housing activity is declining markedly from high levels, consistent with the Bank’s view that policy stimulus resulted in household expenditures being brought forward into late 2009 and early 2010. While employment growth has resumed, business investment appears to be held back by global uncertainties and has yet to recover from its sharp contraction during the recession.

The Bank expects the economic recovery in Canada to be more gradual than it had projected in its April MPR, with growth of 3.5 per cent in 2010, 2.9 per cent in 2011, and 2.2 per cent in 2012. This revision reflects a slightly weaker profile for global economic growth and more modest consumption growth in Canada. The Bank anticipates that business investment and net exports will make a relatively larger contribution to growth.

Inflation in Canada has been broadly in line with the Bank’s April projection. While the Bank now expects the economy to return to full capacity at the end of 2011, two quarters later than had been anticipated in April, the underlying dynamics for inflation are little changed. Both total CPI and core inflation are expected to remain near 2 per cent throughout the projection period. The Bank will look through the transitory effects on inflation of changes to provincial indirect taxes.

Reflecting all of these factors, the Bank has decided to raise the target for the overnight rate to 3/4 per cent. This decision leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in light of the significant excess supply in Canada, the strength of domestic spending, and the uneven global recovery.

Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.

The next scheduled date for announcing the overnight rate target is September 8, 2010.

Things to consider

Variable rate and fixed rate mortgages both have their advantages and disadvantages!! Historically speaking, homeowners tend to pay lower rates with variable mortgages, but these mortgages are also vulnerable to fluctuations because they’re tied to the Bank of Canada’s prime rate (which is announced eight times per year). Fixed rates, on the other hand, are typically higher than variable rates, but their rate is consistent throughout the term of the mortgage. Below are a few questions to help you determine which type of mortgage is right for you:

1. Can I afford to take a variable rate mortgage?

There is some risk associated with variable rate mortgages, so if you go this route, you must be able to mitigate the risk if rates do rise. One method of protecting yourself involves setting your payment to a fixed amount that’s higher than the minimum requirement. For example, setting your payments based on the current five year fixed rate will allow you to provide a buyer in the event that rates rise and, because you’re paying more than the minimum amount, you’ll be paying more of your principal as well. Opting for a 35-year amortization but paying the 25-year amortization-sized payment is another way to protect yourself from increasing rates. If they ever get too high for comfort, you can go down to the lower 35-year amortization payment until rates decrease again.

2. What type of variable rate mortgage should I choose?

Once you have decided you can afford a variable rate mortgage, the next thing to assess is whether a variable rate mortgage fits your personality, lifestyle and comfort zone. If you’re the type of person that can’t sleep at night knowing that your rate may change by 0.25%, then a variable rate mortgage may not be the best option for you.

3. Does a variable rate mortgage fit my risk profile?

There are three main factors to consider when choosing a variable rate mortgage:

1. Payment frequency – Make sure you are aware of the options available before deciding. Some lenders may not allow certain variations of payment frequency (i.e. accelerated biweekly or weekly payments).

2. Rate changes – Some lender change their variable rates in line with the Bank of Canada – eight times per year – while others adjust them quarterly.

3. Conversion to fixed rate – Does the lender allow the mortgage to be converted to a fixed rate mortgage at any time? If so, what rate are you guaranteed on conversion – the best-discounted rate or the posted rate?

Although there have been a lot of alarm bells going off as Canadian debt levels start to approach the pre-recession levels of their U.S. counterparts, CIBC believes the spending spree may be coming to an end.

In the bank’s recent Household Credit Analysis report, Benjamin Tal states that household credit in Canada has been softening since September 2009. Between September and March, household credit expanded at a slower pace than nominal GDP, the first time it’s done that in seven years. Below are some of the highlights of the report: – While mortgage outstanding is still rising at a rate of 8% year over year, the monthly pattern is running at the slowest pace since 2003 – Lines of credit are increasing by a monthly pace of less than 1% — the slowest pace since 2007. – Overall growth in credit card outstanding debt has stabilized at 0.6% – Housing market supply is up 3% in the second quarter of 2010, with demand falling by close to 9% Tal expects arrears to stop their upward trend as the labor market starts to improve. And while debt-to-income ratio was still on the rise in the first quarter, debt interest payment as a share of income is going downward. This isn’t much of a surprise, really. Canadians were rushing out to take advantage of bargain-basement interest rates. With nowhere for interest rates to go but up, it’s nice to see that, for the most part, consumers are paying off their remaining balances and going back to their conservative ways.

If Canada’s five chartered banks were the only institutions allowed to lend money in the form of mortgages in this country, rates would be sky-high, and the selection of mortgage products would be rather slim. Thankfully, we have non-bank lenders to keep the Big Banks on their toes.

While these lenders may not invest the same number of dollars in fancy advertising campaigns, they’re nevertheless an excellent option for savvy consumers who are looking for a good mortgage deal.

Because non-bank lenders don’t have to support the overhead costs of brick-and-mortar branches, and instead opt to go through the mortgage broker channel, they’re able to offer better rates. In addition, because they’re seeking to steal market share from the dominating big banks, they’re much more likely to offer unique mortgage features – such as better prepayment options, flexible payment frequencies, and unique products such as cash-back mortgages – while at the same time offering a little more flexibility when it comes to clients with lower credit scores, or those that are self-employed or commission-based.

While non-bank lenders aren’t considered “banks” in the traditional sense, they’re still required to follow all the same regulations and underwriting guidelines as their bank counterparts. They also have access to the same default insurance options as the big banks - whether that’s through CMHC, Genworth, or United Guaranty.

Not all non-bank lenders are “sub-prime” (in fact, there are very few of these lenders left in Canada), and while it’s true that many of them are foreign-owned, there are many homegrown institutions here as well. Their models have seen success across the globe, and continue to thrive here in Canada.

If you’re in the market for a new mortgage or a renewal, I invite you to head into your local bank branch to see what type of deal it can offer you. Then pop by my office and I’ll scour the rest of the country’s lenders - and likely save you a few percentage points off your mortgage.

Ever since the Federal government announced a new set of mortgage rules in February, misinformation has been spreading like wildfire. Don’t buy the hype - acquiring a mortgage is still possible!

Below are a few mortgage myths, debunked:

1. You can still purchase a property with 5% down.
While the government did change the rules regarding 5% down payments, the changes only affected property investors. If you’re a first-time buyer - or if you’re looking to move into another residence that you plan to occupy - you can still buy a home for 5% down. You can even buy a home with rental units in it for 5% down, as long as you plan to live there too.

2. You can still purchase a vacation or second property with 5% down.
If you have your eye on a new cottage or second home, those are also exempt from the new down payment changes. Unless you plan to rent it out when you’re not living there, you can still purchase a second home for 5% down. The only situation that falls under the new rules - where you’ll be required to put 20% down - is if you’re purchasing a property solely for investment purposes. This is to prevent real estate speculators from artificially inflating the market.

3. You can still qualify for a mortgage.
While the government did implement a rule to reign in over-zealous first-time buyers, the intention was noble. To prevent first-time buyers from getting in over their heads, the government is now making it mandatory for lenders to qualify them on the five-year fixed rate - even if they’re choosing a lower variable-rate mortgage. This is because, while variable rate mortgages may initially seem lower, they change according to the Bank of Canada’s Prime lending rate - and in the coming year or two, the government has made it quite clear that this rate is going to increase. By qualifying borrowers at the higher rate, lenders are ensuring homebuyers can withstand the increases.