Ottawa Carleton Mortgage Source

Ottawa - Carleton MLS Housing Report for October 2010

The Ottawa area Real Estate board witnessed a 12.9 % slowing in sales growth in comparison to October 2009, and that the amount of units sold saw a 2% reduction. Represented in these numbers are 221 condos 821 single detached homes sold. The Housing Board reported that the Ottawa and area market has moved towards a more balanced state. More positively, the report went on to mention that, although growth has slowed, the average sale price of Ottawa homes, including condominiums, sold in October 2010 revealed an increase of 6.8 % over October 2009 with an increase of 13.4% over October 2009 for condo units and an increase of 5% for single detached homes. Low mortgage rates, a solid economy and affordable housing in Ottawa helped contribute to this growth in year over year sales.

For excellent mortgage rates and service, check out my website at www.brentrichardson.ca or contact me today for questions! - brent@brentrichardson.ca

Ottawa and Area CMHC Spring 2010 Mortgage and Housing Report

The Spring 2010 CMHC Mortgage and Housing Report for the Ottawa area states that MLS sales are expected to grow while average prices will increase by 7% towards the latter part of 2010. Starts are expected to increase as well by 8% before moderating into 2011. Average weekly earnings will close 4% higher than in 2009. The resale market will show an all time record of existing home sales in 2010 and show gains of 6%. However there is an expected decline towards year end due to increasing Ottawa mortgage rates and the introduction of HST. Thus, there may be a dip in Multiple Listing Service (MLS) transactions next year. Although average weekly earnings will continue to support the housing market, demand for properties may lessen in the coming year. The article reports that there should be a good supply and demand balance in the market in the third and fourth quarter. The highest growth in sales will be registered in Ottawa’s downtown core. Mortgage rates in Ottawa are dependent on how Canada’s overall economic recovery fairs.

The new home market in Ottawa is expected to grow by 8% with townhomes leading the increase with a growth rate of 15%. The housing demand may slow in the second half of the year with higher mortgage interest rates along with introduction of HST. This may continue into 2011 and could alter construction plans slightly. Single family home will also notice slowing growth in 2011. With more significant increases in prices for single detached homes, townhomes and semi-detached homes may have a competitive advantage. It is expected that they will post an 8 and 15 percent growth this year. Apartments in Ottawa are expected to develop at a rate over 10 percent, thus increasing high density dwellings. The article predicts that housing prices in Ottawa will continue to increase throughout 2011, however mortgage rates in Ottawa will continue to remain relatively low.

Ottawa should record a 1.6 percent increase in employment over the next year. With the economy starting to recover part time employment will continue to regain its previous levels as well. With economic recovery, international and intra-provincial migration is set to rise. Having one of the lowest unemployment levels and the highest average salaries, Ottawa will be one of the most favorable places in Canada to live in.  At the time of writing, Bank of Canada mortgage rate is at .25 % . With the overnight rate expected to increase the Ottawa mortgage rates have also begun to rise.  A faster recovery of the economy will prompt a higher increase in rates and vice versa. Although Ottawa’s local economy is strong, if National conditions do not improve, this could lead to a reversal of the increasing mortgage rate trend.

DANGEROUS Credit Lines and Mortgage Products Offered by Banks

Over the past several years, some of the Big Banks have decided to design mortgage products that lock customers into their Bank- even when the mortgage comes up for renewal. The really unfortunate part about these Banks and products is that in most cases, the Bank will not disclose the negative information to its clients. Most in the broker industry consider these practices incredibly decietful.

With titles such as 'Step' or 'Homeline', these mortgages will offer a line of credit that is attached to the mortgage. The main issue is that when the Bank registers one of these products against your house, they register it under what is called a 'Collateral Charge Term' (not the usual 'Standard Charge Term') at 125% of the value of your home. This has the affects of:

• Disallowing any other financing to be placed against your home.
• Locking you in at mortgage term renewal. This gives Banks massive liberties to charge unfavourable rates when your term is up.  
• Charge major penalties to ever exit these products and lowers others abilities to compete for your future business.
• The ability to change their bank prime rate without your consent. For example, the Bank can decide, as they did in 2008, to move up credit lines across the board by 1% in 1 day. 

No wonder Banks call these products 'customer retention devices'. Good mortgage brokers will always fully disclose such information whereas most of the time, Banks have not been reporting this kind of information to thousands of customers. It is potentially costing customers $10,0000's each. Indeed, customers should be retained by providing excellent service, value and a good customer experience. There are many excellent mortgae products in the market that can meet your needs and goals, and give you the low rates and long term flexability that is far more desirable.

Questions? Comments? Feel free to contact me any time or leave a post below.

Best Regards,

Brent www.brentrichardson.ca - brent@brentrichardson.ca

How Credit Scores Work and How to Increase

How Credit Works and the Easiest ways to Increase Your Credit Score

            Because credit can affect many areas of our lives, especially when a loan or mortgage is needed, it is important to understand how the system works, and what kinds of things can affect your score. Indeed, for many, the credit system is somewhat of a mystery. Weather you are wondering about how the system works, or if you are looking for the easiest ways to improve your score, this article will help you.   

The following criteria lays out how the Beacon Score, or credit score is calculated. For each criteria, we look at how to increase your score. Remember, the following advice speaks of a perfect situation. Although perhaps not immediately attainable for many, the closer you can get to these ideal situations, the better your credit score will be. 

1. Payment History – 35% of Score Calculation: Factors in the number of debt payments over 30 days late, collections and any other matters resulting from late payments. A single payment currently showing over 30 days late removes 20 credit points instantly. Credit will begin to repair after only two months of on time payments, so use this rather short repair period for motivation to pay consistently.

2. Current Debts - 30% of Calculation: Looks at how much debt you have relative to your credit and debt limits. For example, a total credit limit of $10,000 which has $8,000 outstanding totals 80% of credit used. Any number above 50% of credit used will begin to diminish a credit score. If 50% can not be attained, a good goal is 70%. Your variety of debt will also affect your credit. Try to keep two credit cards and hold onebank loan to maximize your score in this area. A loan can be as simple as an RRSP loan which will build your credit, be invested to make interest for you, can be paid back quickly, and mainly, can give you a nice tax refund at the end of the year! Finally, be sure to NEVER go above your credit limit.

3.  Account Age – 15% of Calculation: How long you have held a bank account with your financial institution affects your score slightly. The optimal number of accounts held is three and the longer they have been open the better.

4. Types of Credit – 10% of Calculation: Similar to two. Focuses on the mix of debt you have (credit cards, bank loans, lines of credit). The optimal mix is one store credit card (ex. the bay, Best Buy…), one or maximum two bank credit cards, and one installment bank loan. Make sure to use your credit cards as well - even if just for gas, and to re-pay the balance every month. Again, this is an optimal position and any reasonably similar situation will not lower your credit much. 

5. Number of Credit Inquiries – 10% of Calculation: Over the past 12 months, how many times has your credit score been looked at? Having too many credit or loan applications could deem you a ‘credit seeker’, so try to keep the number less than 5 per year.  

Finally, have your credit bureau checked for mistakes. I have seen many individuals with mistakes on their credit score that resulted in higher interest payments. Check with Equifax regularly to ensure your credit score is accurate.   

Reasonable variation from this perfect situation will still give you a great credit score and obviously, the closer to it, the better it will be. Contact myself for further information on increasing your credit rating and save thousands of dollars on interest as a result.

I am always happy to help.

www.brentrichardson.ca - brent@brentrichardson.ca

Brent Richardson

Have a question or comment? Feel free to make a post.

Ottawa-Carleton Housing Market Trending Upwards, Mortgage Rates Trending Downwards

According to the Ottawa Real Estate Board, home sales increased in March when compared to the previous month. Specifically, housing and condo sales are up 7.2%. As we enter spring, it is becoming more apparent that confident buyers are taking advantage of the significant opportunity that low mortgage rates, and a good supply of housing for sale are presenting. When seen in perspective of Ottawa's long term economic growth strategy, it does indeed seem like a good time to purchase.

With mortgage rates at 3.85% or lower, refinancing a mortgage - even in light of a penalty - can make alot of good sense for many.

The average pricing of an Ottawa-Carleton home remains almost unchanged from the month before.

For further information and details on your mortgage, please contact me, Brent Richardson for the professional advice you deserve.

brent@brentrichardson.ca 519 568 3377

February 2009 Ottawa Real Estate Board Report

According to a report from the Ottawa Real Estate Board, many buyers looking to purchase homes and mortgages seem hesitant to follow through. Ottawa citizens are confused about the recent news surrounding the economy and the housing market. When seen in perspective however, although housing prices and sales have decreased in the Ottawa Carleton area (-2.9%), they are quite steady when compared to the rest of the Province and Country. February is also historically a slow month in housing. This decrease in housing prices to a more balanced market, combined with historically low mortgage rates means that this is an excellent time to buy or refinance a home.

Remember, recessions never last forever, and those who who buy low and sell high have historically been rewarded every time. This represents very unique opportunity in Ottawa to lock in to a 5 year mortgage at a rate of 3.89% or even lower!

For more details, contact me, Brent Richardson, or leave a post and I'll respond quickly!

www.brentrichardson.ca or brent@brentrichardson.ca

CMHC Ottawa Housing and Mortgage Outlook Winter 2008

The Canadian Housing and Mortgage Company (CMHC) is Canada’s leading publisher of housing market, employment and mortgage statistics. The Winter 2008 CMHC report summarized herein represents some of the most accurate predictions available on the Ottawa Carleton housing market and mortgage trends. It is divided into 4 sections respectively: New Home Sales, Resale Market, Local Economy and Mortgage Trends.

New Homes

New home sales in Ottawa will finish 2008 up 5.3%. This represents the third highest annual growth in 20 years. Much of this growth is due to the areas resilient local economy and strong net migration. This said, as we enter 2009 demographic trends point to a moderation in housing demand and should result in slightly lower housing starts in general.

Most of the new construction occurring in the Ottawa-Carleton area is occurring in Nepean, Cumberland and Kanata. In fact, of all the single detached homes started in 2008, 85% will have occurred in outer Ottawa or 'Greenbelt' area. This trend is predicted to continue into the long term. This is due in large part to preferences of settled immigrants to purchase more affordable dwellings located around the City.

High density apartments will also enjoy healthy growth into 2009. This is due in part to the rising cost of land in the Ottawa area. In general, Ottawa and Carleton's New Home market will remain at strong levels going into 2009 and this makes for a very favourable environment to attain a new mortgage.

Resale Market 

2008 began slowly, however resale activity increased significantly to the end of the year. This offers good evidence of the local economy's resilience to the widespread economic downturn. This said, as we enter 2009 resale activity is predicted to moderate by about 5%. This kind of performance is still very good by historical standards representing the second strongest market ever. 2009 should represent a calmer, more balanced resale market. Accordingly, housing resale prices will increase at about the rate of inflation.

Specifically, the average selling price of a house in the Ottawa Carleton area will be $288,500 at the end of '08 or up 5.7%. As the Cities adjust to the economic downturn, this growth in value should moderate to 3.6% in '09, approaching the $300,000 mark. As mentioned, the Downtown Core will remain particularly strong with prices increasing above average at 9%. Ottawa's outskirts will remain strong as well with above average pricing increaseses.

Economic Analysis

Due to a great deal of strength in Ottawa's Public Sector, the areas employment is forecasted to finish 2008 is good condition. In 2008, the areas employment is expected to increase by 2.3% to an employment level of 498,000. In 2009, the market is expected to strengthen by a more modest 0.8% to reach 500,000. Moreover, average weekly earnings will increase by 5% in 2008 and a more modest, yet strong 3% in 2009. So we can see that while the Ontario economy as a whole slows, the Ottawa  Carleton area remains quite resilient.

Mortgage Trends

Mortgage rates in Ottawa Carleton are forcasted to decrease into 2009 to an extent depending on several economic factors. Rates will remain low until early to mid 2010 when due to increases in 5 year bond prices, mortgage rates should begin to trend upwards. A strengthening economy towards the end of 2010 would also put upward pressure on rates. So the present time represents a perfect opportunity to lock in to a fiver year + fixed rate mortgage as rates remain at historical lows.

For questions feel free to contact me, Brent Richardson, or leave a post and I'll be sure to respond.

www.brentrichardson.cabrent@brentrichardson.ca

 

 

 

Increase Your Credit Score and Save Thousands!

Indeed for many, savings of thousands of dollars per year could be had easily by reducing interest rates on loan and mortgage payments. For others, the dream of attaining an affordable mortgage and a home becomes attainable. In knowing how the credit scoring system works and how your credit score can be raised, the money saved on interest can be used to pay off your mortgage faster, or in any other way besides making your lender richer.

 

The credit scoring system:

Your Equifax Beacon Score informs lenders about how much of a lending risk you are, and ranges between 500-850. The following chart tells us how these scores generally affect mortgage rates:

Beacon Score	Interest Rate
719-850	The best rate
700-719	+0.20%
675-699	+0.65%
620-674	+1.70%
560-619	+2.50%
500-559	+3.50%

So given that the average Canadian credit score is about 690, most people have some room left to save thousands of dollars on interest payments.

 

How to raise your score then? The following criteria lay out how the Beacon Score is calculated. For each criteria, we look at how to increase your score. Remember, the following speaks of a perfect situation. Although perhaps not immediately attainable for many, the closer you can get to these ideal situations, the better your credit score will be.

 

1. Payment History – 35% of Score Calculation: Factors in the number of debt payments over 30 days late, collections and any other matters resulting from late payments. A single payment over 30 days late removes 20 credit points instantly. Credit will begin to repair after only two months of on time payments, so use this rather short repair period for motivation to pay consistently.

2. Current Debts - 30% of Calculation: Looks at how much debt you have relative to your credit and debt limits. For example, a total credit limit of $10,000 which has $8,000 outstanding totals 80% of credit used. Any number above 30% of credit used will begin to diminish a credit score. If 30% can not be attained, a good goal is 50%. Attempting to increase your credit or a debt consolidation loan are possible ways to help lower your percentage of outstanding credit limit. Your variety of debt will also affect your credit. Try to keep two credit cards and hold one consolidated bank loan to maximize your score in this area.

3.  Account Age – 15% of Calculation: How long you have held a bank account with your financial institution affects your score slightly. The optimal number of accounts held is three and the longer they have been open the better.

4. Types of Credit – 10% of Calculation: Similar to two. Focuses on the mix of debt you have (credit cards, bank loans, lines of credit). The optimal mix is one store credit card (ex. the bay, Best Buy…), one or maximum two bank credit cards, and one installment bank loan. Again, this is an optimal position and any reasonably similar situation will not lower your credit much.

5. Number of Credit Inquiries – 10% of Calculation: Over the past 12 months, how many times has your credit score been looked at? Having too many credit or loan applications could deem you a ‘credit seeker’, so try to keep the number less than 5 per year.

 

Finally, have your credit bureau checked for mistakes. I have seen many individuals with mistakes on their credit score that resulted in higher interest payments. Check with Equifax regularly to ensure your credit score is accurate.   

 

Reasonable variation from this perfect situation will still give you a great credit score and obviously, the closer to it, the better it will be. Contact a credit professional or myself for further information on increasing your credit rating and save thousands of dollars on interest as a result.

Brent Richardson

Have a question or comment? Feel free to make a post.

Pay Off your Mortgage Faster

After attaining the lowest possible interest rate, the second most important thing to Canadians regarding their mortgage is paying it off as fast as possible. Fortunately there are numerous ways to accomplish this task, so lets take a look at some here.

 

Make bi-weekly accelerated payments: Since there are 52 weeks in a year, we can devise that by making a mortgage payment once every two weeks, we would make 26 payments in a year. On the other hand, there are 12 months in a year, so if we made two payments every month, that would only amount to 24 payments in a year. So we can see that by making bi-weekly accelerated payments instead of two payments per month, it is as if there are 13 months in a year (because of the 26 bi-weekly payments). Thus, we make an extra months payment per year. This has the effect of saving thousands in interest on a mortgage and will reduce a 40 year amortization mortgage to 35 years.

 

Make Lump Sum Payments: Most mortgage lenders will allow you to make a lump sum payment of at least 10 % of the principle amount owed, once per year. Utilize this feature, even modestly, to save thousands in interest and pay your mortgage off faster. For example: A $200,000, 25 year amortization mortgage at 5.75% with $1000 extra paid each year will save 5 years and 10 months and $63,463 interest off of the mortgage.

 

Increase mortgage payments: Even a slight increase in your monthly or bi-weekly payments can make a substantial difference in how fast your mortgage is paid down. For example: A $200,000, 25 year amortization mortgage at 5.75% with $100 additional paid on a monthly basis would save 3 years and 8 months and $30,038 in interest of the mortgage. This method is effectively the same as reducing your total mortgage amortization period if commenced at the beginning of mortgage amortization. However, by opting for a longer amortization period and the ability to increase payments, you get the option of paying less on a monthly basis should your financial situation tighten during a period.

 

Start a small business: While mortgage interest in the USA is tax deductible, it isn't in Canada. So we pay mortgage interest with after tax dollars. What we can do, however, is write off a portion of our mortgage interest if we conduct a business out of the home. Check out some small/part time business opportunity websites or franchise web sites for some ideas on what business would work best for you. Besides tax write offs, you could use any business profit to help make lump sum payments to pay your mortgage down faster and save thousands in interest.

 

Obviously the best way to pay off your mortgage in the fastest time possible would involve some combination of these strategies based on your unique situation. These techniques also help underscore the importance of proper mortgage planning, as opposed to simply finding the best interest rate. There are many more details to consider. So, whether you are looking for a new mortgage, refinancing or renewing a current one, the best thing to do is find an experienced and knowledgeable mortgage broker that will take the time to find you the right mortgage and mortgage plan, at the best possible rates. 

Fixed or Variable Rate?

One of the biggest decisions to make when purchasing a mortgage is whether to take a fixed or variable interest rate. Many articles and mortgage professionals tend to lean towards one or the other, however it could be dangerous for you to be persuaded towards fixed or variable products by someone who is trusted and biased. In my opinion, the best person to make the decision is an educated purchaser, him or her self.

 

So, the remainder of this article will objectively explain the pros and cons of variable and fixed rates, and then will provide short profiles of who generally fits which mortgage category respectively.

 

Fixed Rate Mortgage:

This refers to the fact that the interest rate is fixed and does not change for the entire mortgage term.

Pros:

• Security: The central benefit of choosing fixed is its security feature.
• The borrower knows that the payment is the same throughout the entire term of the mortgage and can budget accordingly.
• If interest rates increase, fixed interest and payments remains the same.
• Many first time home buyers are used to fixed costs every month (like rent payments) and are comforted by the continuation of this practice.
• If inflation continues to increase, perhaps even more substantially, your home value and income should rise, but your mortgage payment will remain the same.

Cons:

• The only downside to having a fixed mortgage is the potential lack of savings. I emphasize the word ‘potential’ because a variable rate mortgage could end up costing more than fixed if rates increase.

Variable Rate Mortgage:

The interest rate on variable mortgages fluctuates according to the prime rate as set by the Bank of Canada.

Pros:

• Over the last 60 years, mortgage studies show that variable rate mortgages have been less expensive, with lower overall interest rates than fixed rate mortgages. Specifically, on a $100,000 mortgage, the average savings was $22,210. On the flip side, a consumer would have lost money by borrowing at the prime rate, compared to the 5-year rate, only 11.4% of the time.
• Ability to switch to a fixed rate: Many variable rate mortgages have the option of switching to a fixed rate without penalty. This provides comfort if rates begin to rise.

Cons:

• Volatility: While the borrower can save on interest rates by going variable, rates could increase quickly and catch the borrower off guard. A close watch should be kept on interest rates to decide when to lock into a fixed term.
• Some borrowers may not be able to afford payments if interest rates rise.
• The mortgage studies mentioned above include periods of time where many individuals lost their homes during relatively brief periods of interest rate spikes.
• Professional assistance should be sought for timing a variable mortgage.

Given this information on fixed and variable rate mortgages, the following profiles may help clarify which product is right for you.

Variable mortgages are best suited for people who are:

• Higher risk takers (would invest in more risky Mutual Funds or stocks)
• Debt free or have little outside debt
• Able to afford increases to their monthly payment should the Prime Rate increase
• Budget disciplined
• Income stability is strong

Fixed rate mortgages are better suited for people who are:

• Lower risk takers (would purchase safer investments)
• In debt with high monthly payments on their credit cards monthly loan payments
• Not able to afford increases to their mortgage payments should the Prime Rate go up
• Not good budget keepers
• Income stability is not strong

So we can see that deciding whether to go fixed or variable can be tricky, but with the proper amount of consideration and a realistic analysis of your life situation and goals, securing the right type of mortgage is a very rewarding experience.

 

Have a question or comment? Feel free to post below!