For your information - November 2008
Bigger news than Obama!
Now that Obama and the Democrats have secured their place in history, all eyes are on the global economy — the number one priority around the world.
Economic downturns are inevitable, yet these setbacks typically present many opportunities - down are house prices, car prices, stock prices, etc. so there are lots of deals to be had! Mortgage rates are expected to remain low, which will make purchasing very affordable in 2009. History has shown us that, in troubled times like this, those that are "financially literate" often find ways to prosper by positioning themselves for the eventual turnaround.
It's always important to keep numbers in perspective. The media has reported that Toronto house prices are down 13% over last October, yet they fail to mention that in October 2007 Toronto had an unprecedented spike in sales because of the incoming new Metro land transfer tax. Visit www.CMHC.ca and get the facts... Toronto prices are expected to increase 1.6% with condos leading the way.
So how does one position their mortgage in the current economic conditions? Do your homework and don't necessarily listen to your banker! If you had the time or inclination to spend weeks researching, here's what I believe you'd come up with:
- For those who have less then 20% down payment (or in other words a high-ratio mortgage), I believe you'd conclude that the five-year rates for fixed and variable mortgages are over priced because of the current liquidity crisis. A great alternative is to choose a one-year mortgage at about 4.4% and monitor the situation for the next year (with our help of course) and then choose a longer-term strategy upon renewal. One can also early renew a mortgage before its maturity date if some better mortgage opportunities arise.
- If you are fortunate enough to have a 20% down payment (or in other words a conventional mortgage), there is absolutely no doubt in my mind that taking a completely open, secured line of credit (Home Equity Line of Credit or HELOC) at 4% provides not only the best rate, but also the best financial security. Like a variable rate mortgage, this product is based on Bank Prime, which is expected to be reduced on December 9th by another .25%. The HELOC is a credit facility with very low required monthly payments, tax-deductibility advantages, and can be paid back anytime for free. You can also draw down on the line whenever there is need for immediate cheap financing... it's really a no brainer! We're here to see if you qualify and explain the long-term benefits of this manoeuvre, while bankers tend not to be too thrilled if you choose this particular product. If done properly, this can be the last home financing product you'll ever need!
Our goal is to ensure borrowers are being treated fairly and have all of the unbiased information they need to make a financially sound decision... money never comes easily so let's save as much of it as we can. We always remind borrowers that the focus is how much interest we can save, not what the interest rate is, and that the overall "Mortgage Plan" is where all the benefit is!
As certified Mortgage Planners, we're here to answer all of your questions and protect you, the consumer. Regardless if we arrange your financing or not, please feel free to use us as a resource. Contact us whenever you, or someone you know, are ready to learn more.
Click here to read a recent press release by CAAMP (Canadian Association of Accredited Mortgage Professionals). Based on national survey results, CAAMP notes that borrowers remain confident in a stable Canadian mortgage system, and that there are a number of factors contributing to a solid real estate market, one that will not experience the same drop off we see south of the border.
Want to learn more about HELOCs, the fastest growing mortgage category? Click here to read How to build wealth using a re-advanceable mortgage.
