TORONTO - Fixed mortgage rates may help you feel secure in your budgeting, but the Bank of Montreal (TSX: BMO.TO) says the more volatile variable rate mortgages will save you money in the long run.

The bank put out a report Friday showing that, over the past 30 years, variable-rate mortgages have been more cost-effective about 82 per cent of the time.

That may come as a surprise to some after studies have shown many Canadians prefer a fixed-rate mortgage.

A fixed rate locks the borrower into a set interest rate for a certain period of time.

That gives many borrowers peace of mind knowing how much money to set aside each month for their mortgage payment.

Variable rates change along with interest-rate moves.

BMO said the Bank of Canada’s overnight lending rate is at its lowest possible point now, which could mean there are fewer benefits to a variable rate in the foreseeable future.

BMO highlighted two historical periods when fixed rates were considered beneficial - in the late 1970s and late 1980s - and both were just before interest rates started rising again.

The bank added that the current interest environment is similar to both of these periods.

“Short-term rates are at extreme lows and pressure is likely to build for higher rates in the year ahead,” said deputy chief economist Doug Porter in the report.

“The question of whether to lock in to a longer-term fixed mortgage rate or stay in a variable rate has become an increasingly complex and important issue.”

Canada has been in a long-term declining rate environment since the early 1980s, the bank suggested.

As a result, the spread between five-year fixed mortgages and variable mortgages has been pushed wider in recent years, and is now near an all-time high.

Core inflation won’t affect the 0.25 per cent interest rate the Bank of Canada said it would keep until June 2010, a new report by CIBC World Markets forecasts.

“Look for headline and core prices to cross paths in the second quarter of 2010 at a level well under the Bank of Canada’s two per cent target,” wrote CIBC economists Avery Shenfeld and Krishen Rangasamy in the report. “As a result, Canada’s inflation rate will be no threat to the Bank easily fulfilling its pledge to keep interest rates at a slim quarter point through mid-2010.”

Shenfeld and Rangasamy disagreed with the Central Bank’s expectation of growth “above the non-inflationary potential” next year, stating that the recession’s effects are likely to linger for some time, even as the U.S. stimulus spending kicks in. Along with slow growth, the report also pointed to a negative consumer price index and a stronger Canadian dollar as contributors to keeping core inflation low.

“Indeed, if as we expect, sluggish final demand keeps the economy on a tamer trajectory than the Bank hopes, it will be able to defer the first hike until early 2011,” the report said.

From MortgageBrokerNews.ca

Rates have dropped just slightly again this week.  The summer slow down is in effect; however, we expect September to be very busy again.  Low mortgage interest rates should help people who are considering purchasing or refinancing property.  Please call us for any mortgage questions or for some sound advice at 780-474-7900.

In terms of qualifying for mortgage financing, our clients generally fall into two main categories:

1.            “Borrowers that could walk into any bank and get a mortgage” - Clients have the necessary time and credentials and use our services to obtain lowest possible interest rates.    

2.            “Difficulty getting an approval that meets their specific needs”  -  Clients do not have necessary time or qualifications for traditional bank financing.    Client use our services to deliver mortgage options that best meet their objectives.

Many of our clients have very damaged credit or find themselves in a poor financial situation.  We specialize in helping people obtain financing for their current needs, but we also believe in helping them down a financial path that will work for their future. 

The chart below uses an example of a client that requires immediate financing and and equity take out.  He owes over $100,000 on the property already, and requires additional financing of $150,000. 

As you can see, the costs for private lending are much higher; however, for clients that have immediate needs, and cannot qualify at a traditional lender, this option often comes into play.  For these clients, we always come up with a long term plan and consider the private mortgage only a temporary solution.  We have many clients who are following a financial plan we have provided them that will ultimately repair their credit and move them into a less expensive mortgage within a year. 

Please call us at 780-474-7900 or email cvalerio@mortgageinnovations.ca, for more information.

If we use a five-year, fixed rate term with a 35-year amortization as an example, then during that period you can:

During the first five-years:

·         Exercise your annual prepayment privilege - typically 10-25% of the original mortgage amount borrowed

·         Exercise your annual payment increase privilege -  typically 10-25% of your current payment amount

·         Choose an accelerated weekly or bi-weekly payment option

When the five-year term expires, your overall repayment period is now 30-years (assuming you have paid monthly).  Now you can:

·         Repay your balance owing in part or in full without any applicable penalties

·         Renew the balance owing and reduce (not request) the remaining amortization,  from the remaining 30 years to WHATEVER time period you desire!   No need to worry about qualifying, remember their qualifying criteria can only be imposed at the time of purchase and mortgage approval.

These incredibly low interest rates mean that there has never been a better time to get into owning a property. Here are some examples of payments if you are thinking about buying your first home:

This is what a $1,500 monthly rent payment can buy:

This is what a $1,200 monthly rent payment can buy:

This is what a $1,000 monthly rent payment can buy:

*property taxes are estimated

Please call or email Mel Valerio for more information at 780-474-7900.
Mortgage Innovations Inc.
www.mortgageinnovations.ca

Many homebuyers just accept that they will have to make mortgage payments for 25-35 years before they can be mortgage free. So many people don’t realize that this is not necessarily true. There are ways to pay off your mortgage faster. We’re going to show you how:

1. Round up your mortgage payments. With any fixed rate mortgage, you can pay 10-25% (depending upon lender) extra per year on your principal balance on the anniversary of your mortgage, or when the mortgage is up for renewal. You can also add extra dollars to your monthly payment. Even $30 extra per month can add up to big reductions on the principal of your mortgage balance.

2. Change your payment structure to “accelerated”. Probably the most popular way to pay off your mortgage faster is to pay for it on an accelerated bi-weekly plan. This means that you make two extra payments per year. This can knock years off the time it takes to pay off your property. On the accelerated plan, you make 26/bi-weekly payments per year, as opposed to 12 monthly payments or 24 semi-monthly payments (eg. 15th and 30th of the month).

3. Go variable. A variable rate mortgage means that the interest rate fluxuates and is not fixed for the term of the mortgage. When rates are low, this is great as more of your payment goes toward the principal of your mortgage, and less toward interest. If you are on a strict budget, however, this may not be an option for you as rates can change and so can your payment.

4. Buy RRSP’s and use your tax refund to pay it down. Each tax year, if you take out the maximum RRSP’s allowed and use the refund the government gives you to pay down your mortgage this will make a big difference over time. And, you get the benefit of saving for retirement.

For additional information, please contact Mortgage Innovations at 780-474-7900 or via email to cvalerio@mortgageinnovations.ca

The Canadian Real Estate Association is forecasting MLS residential sales will fall by 19 per cent this year in Alberta compared with 2008,while the average sale price will drop by nine per cent in the province.

CREA said Monday it expects MLS sales in the province to decline to 45,650 units this year, but increase by 15.2 per cent in 2010 to 52,600 units. It also said the MLS average sale price in Alberta will fall to $321,500 in 2009 and drop another 1.1 per cent in 2010 to $318,000.

“There’s caution among prospective buyers,” said Richard Corriveau, regional economist for the Prairies and Territories for Canada Mortgage and Housing Corp. “They have a number of factors working in their favour that one would assume would result in additional demand.Those being low mortgage rates. We’ve already seen some price reductions and there’s also a heightened amount of active listings. So the selection is fantastic for prospective buyers.”

But Corriveau said the concern and caution people have is the overall economic uncertainty” that’s hanging over their heads.”

“We saw tremendous job losses nationally. Many within the province as well. If people are concerned about their job security, naturally that will hinder the decision to conduct the most major purchase in their lives,” he added.

Corriveau said the CMHC believes the bottom of the market will be in 2009 with the second half of the year stronger than the first half as people start to understand economic conditions are improving. He said prices should eventually stabilize.

“Currently, the expectation is prices will likely moderate somewhat over the first half of the year as well, but we think once demand starts to pick up and the level of active listings do moderate we’ll return to a more positive price path and once that occurs that should knock some prospective buyers off the shelf,” said Corriveau.

Nationally, CREA said MLS sales will decline by 16.9 per cent this year to 360,900 units, but rise by 9.9 per cent in 2010 to 396,600 units. The 2009 figure would be the lowest level for national sales activity since the year 2000.

Across the country, CREA said the average MLS sale price will fall by eight per cent in 2009 to $279,400, but increase by 1.1 per cent in 2010 to $282,400.

“Increasingly cautious homebuyers and mortgage lenders means that active listings will take longer to sell in 2009 compared to previous years,”said CREA’s chief economist Gregory Klump, who developed the forecast. “The national housing market is recalibrating due to weak sales activity. Supply will take time to adjust to lower demand, but sellers unwilling to accept offers below their expectations will remove their home from the market.Fewer active listings reduces buyer choice and in time puts a floor under prices.”

In 2008, the association said there were 434,477 MLS sales in Canada, a decline of 17.1 per cent from the previous year while in Alberta there were 56,399 sales, dropping by 21 per cent on an annual basis. Last year, the average MLS sale price dropped by 0.7 per cent nationally from 2007 to $303,594. In Alberta, that price decline was 0.9 per cent to $352,857.

© The Calgary Herald 2009

EDMONTON - As The Bank of Canada cuts its key interest rate to a record low, Canadian mortgage lenders have followed suit by slicing their prime lending rates half a percentage point to 3 per cent. Both the Canadian government and major banks are hoping that this drop in rates will help push real estate buyers, who are now on the fence, into purchasing.

This is great news for buyers who in previous years could not hope to buy into the housing market due to ridiculously inflated real estate prices, particularly in Alberta. Lower prices have helped propel new buyers into the market, but this drastic drop in interest rates, especially in the four and five year fixed rates, will help buyers be able to finally purchase their own homes instead of paying exorbitant rents.

Lenders’ underwriting guidelines have become more strict in the past several months; however. Banks are no longer handing out mortgage dollars as easily as a few years ago. Mel Valerio, Broker and Owner of Mortgage Innovations Inc. in Edmonton, answers the question of approval this way, “how a mortgage file is presented to a lender is key in getting clients approved. An experienced mortgage broker knows what the banks are looking for and how to package a mortgage file correctly. Brokers can also offer lower rates than clients can obtain on their own; this also helps the approval process as payments are lower”.

For more information about how to qualify for a mortgage, you can reach Mel at Mortgage Innovations at 780-474-7900.

Why not just get your mortgage from your usual bank?  They know you, have probably already given you credit.  Maybe your mortgage is up for renewal.  Why not just renew it with the current lender?  They should give you the lowest interest rate, right?

Nope.  Banks rarely offer up their best rates - even to long term, existing clients.  Their mandate is to make money - the higher the rate, the more they make.  Our mandate is to save you money - the complete opposite.  Here’s how we do it:

1. We receive the best, and preferred interest rates from over 40 Canadian lenders.  We pull your credit once only (which is important as pulls on your bureau affect your credit (or Beacon) score.
2. Each lender has only its particular set of programs to offer.  We know which lenders offer which programs, and where a clients fits.  We can offer you the best mortgage that is tailor made for you.
3. There are a lot of mortgage brokers, just like there are a lot of people that work at banks.  Like we say in our website and mean it:  experience counts.  A good broker is one who has been working as a professional lender for a long time and knows who is offering the best programs that will fit a client’s personal situation.  More importantly, and this is where experience comes in the most, is knowing how to package and sell a client to get the best rates and programs.
4. Banks have their best interests in mind – all the time.  Our broker, Mel, is a former bank manager of 25 years, so he certainly knows how they think.  They are generally unable, at a branch level, to make any discretionary decisions for a situation that doesn’t fit within the perfect little box.  We usually tell clients to go to their bank and see what rate they are offered; we almost always beat it.
5. Mortgage brokers do not work for any banks or lenders; we represent you, the client.  We are paid by the lenders for bringing them the business, and they love having us – we do not cost any overhead, pensions, salaries, space, etc., but we consistently bring them business.

If you want to save money on your mortgage, pay it off sooner, find a way to pay off debt, or even buy your first house, please call us at 780-474-7900.  We can save you money.