Good Time to Consolidate Debt Inside Mortgage

By JOEY FITZPATRICK Personal Finance - The Chronicle Herald
Mon. Mar 9 - 6:13 AM

MORTGAGE LENDERS use formulas to determine how much of a mortgage a homebuyer can carry. A total debt-service ratio factors in housing expenses, plus all other debt obligations, such as car payments, credit cards and student loans.

Typically you can qualify for a mortgage if these debts add up to no more than 44 per cent of your gross monthly salary.

However, it may not always be a good idea to take out the maximum mortgage for which you qualify.

"Quite often, what a person qualifies for, and what they can actually afford with their lifestyle, are two different things," says Bob Goudey, a mortgage broker with Invis in Dartmouth. Goudey sees many cases of homebuyers becoming overextended as expensive cars, vacations and entertainment result in what was otherwise an affordable home becoming a budget-breaker.
"When values were going up, people were able to refinance in a year's time and get out of that debt, but that's not the case now," Goudey says. "Do a budget, and make sure you're not overextending."

With interest rates at historic lows, this is an excellent time to consolidate other debt inside a mortgage. Rates went almost as low as they can go last week, when the Bank of Canada slashed its key short-term rate to an all-time low of 0.5 per cent. Commercial banks quickly followed suit, cutting the prime rate to 2.5 per cent.

"If you're in the last year of the term, it's a good time to get in and renew early to take advantage of the low rates and combine it with some other debts," Goudey advises.
The low rates also make a variable-rate mortgage very attractive. If the prime moves up while you're in a variable rate mortgage, you have the flexibility, in almost all cases, to lock into a fixed term.

"If you're going to go for a variable rate, then get one that specifies 'best discounted rate' for conversion," Goudy said. "Some contracts may set it at a percentage of the posted rate, or with others you may have to negotiate it at the time."

Many lenders are open to negotiating longer fixed terms, up to 10 years in some cases. If you like the security of knowing what your mortgage payments will be for a set number of years, then this is an option to consider.

Longer amortization periods have put home ownership within reach of a growing number of Canadians, and an increasing number of buyers are extending their mortgages to 30 or 35 years. Longer amortization should be used as a strategy to get into the housing market, but not as a long-term approach, as it results in far more interest paid over the life of the mortgage.
An extended amortization should be combined with making maximum use of prepayment options to pay down the mortgage as early as possible.

Lenders have different rules about the type and amount of prepayment that you can make. A conventional mortgage will allow a 10 per cent lump sum payment annually, or the ability to double your payment in any given month.

There is also the interest-only mortgage. With this product you pay only interest, and the principle remains unchanged throughout the term of the mortgage. A homeowner using this type of mortgage would build equity in the home only if property values increase.

Goudey recommends buyers get a mortgage pre-approval, which will help establish a price range. Lenders will typically lock in a rate for 120 days when pre-approving potential buyers for a mortgage.

Home Buying Expected to Increase in Canada

Economy hasn't affected overall confidence: Study

By Becky Rynor, Canwest News Service - March 5, 2009

In spite of the economic downturn, most Canadians still believe it is a homebuyer's market, with more first timers planning on purchasing their own homes, according to a study released Wednesday by the Royal Bank of Canada.

"The current economic environment does not appear to have dampened Canadians' overall confidence in the housing market," said Royal Bank spokeswoman Karen Leggett. "Canadians continue to have an overwhelming belief in the long-term value of a home and we're seeing this in the buying intentions of many first time homebuyers this year."

In its 16th annual RBC home ownership survey, 65% of Canadians said they it's a buyer's market, with 27% saying they intend to buy a new home over the next two years.
RBC said that's up from 23% in 2008.

The survey, conducted by Ipsos Reid, shows that almost half of respondents, 48%, said it makes sense to buy a home now instead of waiting until next year.

Younger Canadians, those under 35 years old, are most likely to spark an upsurge in homes sales, with 48% saying they plan to buy a home. That's up sharply from 36% last year.

And renters appear to be saying they're tired of paying someone else's mortgage.
The survey shows 38% of the renters plan on becoming homeowners in the next two years.

"Low mortgage rates and favourable housing prices are influencing home purchase intentions this year and may be the reason why more Canadians are poised to purchase over the next two years," RBCsaid.

A large majority of Canadians, 83%, remain positive that home ownership is a good investment. While that is down slightly from 85% in 2008 and from the all-time high of 90% in 2006.
In a marked change from last year, 54% of Canadians said they believe housing prices will be lower in 2009, up from 31% in 2008.

The survey found that home-buying intentions in British Columbia remain unchanged from last year, with 26% of residents saying they intend to buy in the next two years. A majority, 55% think it makes more sense to wait until next year to purchase a home.

In Quebec, 22% of respondents said they are likely to purchase a home within the next two years, up from 21% in 2008 and 19% in 2007.

In Ontario, home-buying intentions have increased over last year, with 30% saying they are likely to purchase a home within the next two years. That's up from 21% in 2008.

Likewise in Alberta, where the survey found 35% of Albertans were likely to purchase a home within the next two years, well above the national average of 27% and up from 29% in 2008.

RBC is also predicting increased home-buying activity in Atlantic Canada, where 25% indicated they were likely to purchase a home within the next two years, up from 20% in 2008 and 24% in 2007.

© Copyright (c) Canwest News Service

A Woman’s Home is Her Castle

Pride of ownership.

We all have it when we own our own home, whether on our own or with our partner.
There is just something about knowing you can paint your walls bright fuscia with little green squiggles for accents on a whim and there is absolutely no one you have to ask for permission. Your friends may think you’ve lost it … but they can’t stop you.

And then there are the tools you get to play with.

Personally, I’ve always been pretty handy with the tools, too. I’m not really sure where I picked that up from (sorry dad) except I probably do have to give a few props to my grade 8 Industrial Ed. Teacher, Mr. Adams, for turning me on to power tools!

I’ve painted, I’ve tiled, I’ve hung doors, I’ve wired new fixtures, I’ve hung everything known to man and have even taken care of the odd small plumbing job … although I have to admit I draw the line if it goes anything much beyond unjamming the garburator or replacing various toilet parts. And my cordless screwdriver … well, let’s just say it’s pretty much my constant companion.

The thing is, I learned very early not to be afraid of these tasks that are often considered a man’s domain. I actually kind of enjoy it … great sense of accomplishment when you step back after grouting that tile you’ve laid or turn on that light for the first time after installing that new dimmer switch.

I can remember my own granny thinking it strange that I played soccer as a young girl … she grew up in a very different era in Brazil when such things weren’t considered ‘ladylike.’ I wonder what she’d think today if she saw me hanging new doors and balancing precariously off the ladder while I attached window boxes on second storey windows. I bet she’s smiling.

It all comes back to that pride of ownership. There’s nothing like it when you own your own home, regardless of whether it’s a bachelor pad downtown or a family compound out in the burbs, and being able to put your hallmark on it.

It’s yours … and there’s no feeling like it.

You’ve Come A Long Way, Girl

More and more women today are taking the plunge … and I’m not talking marriage. No, the plunge I’m referring to involves taking on something that even just a few short decades ago women weren’t even permitted to do on their own.

The fact is, women are getting into the real estate market in a big way and doing it as a force to be reckoned with.

It was only a few short decades ago, up until the early 1970’s, that women were not even able to obtain a mortgage on their own. Sounds ludicrous to our way of thinking today, right? But if a woman wanted a mortgage up until that time she had to have a male co-sign or be a guarantor because women’s jobs were not seen as ‘stable.’ And if married, a woman’s income wasn’t even considered when a couple was applying for a mortgage for the same reasons.

Today there is a new reality.

First let’s take the single female buyer. Today, single women account for about 20% of new mortgages here in Canada while single men account for less than half of that, at 9%. This demographic now plays a very significant role in the housing market and lenders are sitting up and taking notice. Today's woman is much more financially astute than her counterpart of a decade ago and is also well-versed in real estate as being a long-term investment strategy for her overall financial portfolio.

When it comes to married and co-habitating couples, each partner is now much more likely to take on the role of equal partnership when it comes to working on family financial planning. This includes joint efforts in obtaining a mortgage. Lenders no longer view a woman’s income or role in the partnership as financially ‘insignificant.’ In fact, especially in markets such as Vancouver, many families would find themselves unable to support a mortgage without taking dual incomes into account.

And then there are women in a different stage of their lives, who may find themselves being on their own either through divorce or death of a partner. This is one demographic that has fallen behind the surge for new ownership if they don’t yet have a home that is mortgage free or substantially paid off. Many do not feel they are capable of handling a mortgage on their own and subsequently fail to look at their options. While the vast majority of women out there who fall into this category are, in fact, fully capable of obtaining their own mortgages, many feel unsure of the mortgage process which can stop them cold from seeking advice.

The key to it all is the necessity for women to educate themselves as to what’s being made available and what the possibilities look like.

Women home buyers come in all sizes, shapes, ages and life situations. They are married, divorced, never married, separated, widowed; some have children, some don’t while others live with friends or partners and many live alone. The options available to women today, in terms of choice, are staggering as to what was available just a few short years ago. Lenders are becoming more and more aware of different variables that exist in people’s lives and are working to create products and solutions that work for everyone.

No matter where a woman’s current life path finds her, she should know that mortgage options do exist to allow her to work towards those financial goals she has set for herself and her family.