To Rent Or To Buy? 8 Questions Canadians Should Ask Before Taking The Plunge

TORONTO – Should you rent or buy?

Conventional wisdom suggests it’s a no-brainer – buying real estate is a worthwhile investment with a high return.

Despite record low interest rates, the sky high prices and carrying costs are causing many to rethink the allure of home ownership.

When you factor in the costs of repair, maintenance and other expenses associated with owning a home, Toronto-based financial planner Shannon Simmons argues that renting and putting saved money into another investment – such as a stock portfolio – could earn more in the long run.

Simmons gives new clients a questionnaire asking where they see themselves in 10 years. Many answer “buying a house.”

“Then we meet in person, and they say, ‘Oh I don’t really care if I buy a house, but shouldn’t I want to?’”

Based on advice from financial planners—both independent and those employed by banks—Global News has compiled a list of questions (and some context) to help you decide whether buying or renting is the right move for you.

1) Do you have 10-20 per cent of the home’s purchase price saved for the down payment?

While it’s possible to purchase a home with as little as five per cent down in Canada, big banks prefer first-time home buyers to have an average of 10 per cent.

“If this is the property of your dreams and it’s a really good buy, and you don’t have the full 20 per cent down,” says Royal Bank of Canada’s Rachel Wihby, it may make sense to pay the mortgage loan insurance charged to anyone who doesn’t put 20 per cent or more down on the home.

But “the less you put down, the higher the amount that you’re actually being charged,” Simmons said. That could mean you end up paying an additional $10,000 or more.

2) Do you have another 1.5-5 per cent saved for closing costs?

First-time home buyers don’t have to pay realtor fees, but there’s a number of other closing costs that need to be taken into account.

Depending where you live, land transfer taxes can carry a “significant” price tag, said Farhaneh Haque, director of mortgage advice for TD Canada Trust.

“Lawyer fees, seller/buyer property tax adjustment, appraisal fees, home inspection fees, even just your moving costs,” Haque said.

David Stafford, Scotiabank’s managing director of real estate secured lending, added fire and loss insurance to the list, suggesting $50-$100 per month as a ballpark figure.

Stafford also stressed the value of a building inspection, particularly for first-time home buyers, who may be easily impressed by granite countertops and hardwood floors but miss such other details as an old furnace, a leaky roof, or electrical wiring that’s in need of repair.

“Given you’re contemplating a multi-hundred thousand dollar purchase, a building inspection for a couple hundred dollars isn’t a bad idea.”

3) Can you keep debt servicing below 40 per cent of your income?

Your total debt service ratio measures the percentage of your gross annual income needed to cover housing payments (principal, interest, property taxes and heat, known as “PITH”) plus registered debts like car loans, personal loans and credit cards if applicable. Simmons says this 40 per cent rule is “specifically to please the bank” and is the general eligibility criteria when applying for your mortgage at most financial institutions.

So if you add it all up, housing payments and other debts should be between 35 and 40 per cent of your gross annual income.

4) Are your monthly fixed costs at 50-60 per cent of your after-tax income?

These “fixed costs” include housing and transportation, groceries, toiletries, and “everything you have to pay every month whether you like it or not,” Simmons said.

“When the money hits your bank account, if more than 60 per cent is tied up in things that you can’t get out of every single month, then you have no room after that for spending money which is not a fixed cost – things like going out for dinner, going out with friends, weddings, anything else that’s not just a bill.”

Keeping this ratio under control ensures you have enough money left over to keep saving, and avoid becoming “house poor.”

“Once you buy a house, it’s not like retirement’s done; you still have to save for other things,” Simmons added. “You also want to make sure that you have enough cash flow every single month that you don’t have to go into credit card debt – and that’s what I see: house broke, all the time.”

5) Can you save 1-2 per cent of your income in a “housing maintenance fee” each year?

The top mistake Canadian homebuyers make? Underestimating “significant renovations needed to the property,” according to a recent RBC poll.

Stafford suggests asking your realtor, and getting a home inspection.

“Even if it’s in pretty good shape, most homes of any age, there’s something you’ve got to do every year…and you need to factor that into your cash flows,” he said.

Simmons advises setting aside 1-2 per cent of your after-tax income each year to what she calls a “house maintenance fund” to avoid going into debt.

“When there’s not that extra cash sitting in an emergency fund, if there’s a $10,000 renovation or if you get cockroaches … It has to go on debt, because you’re not going to live in a place with cockroaches,” she said. “That can take a long time to pay off if you don’t have flexibility with your cash flow.”

6) Do you plan to stay in your home for at least three years?

Haque said TD advises clients to think about their life in three- to five-year chunks when considering purchasing a home.

A young couple buying a condo, for example, should consider how soon they’ll need a bigger space if they want children in the near future.

Wihby suggests regarding a home as a long-term investment – it might not be worth it if you buy a home and sell it a year later.

7) Is your job stable?

Are you planning to stay in your field? What would happen if your income decreased?

These are some of the questions RBC planners ask clients to determine how monthly payments and lifestyle would change as a result of job fluctuations.

“So you need to think of things like, will you be on a single income household instead of two?” Wihby said. “Maybe that means you won’t be taking those trips you thought you’d be taking or maybe you won’t be going to the gym as often.”

8) Are you emotionally ready to own a home?

It may sound hokey. But this is a big lifestyle leap to take.

“A lot of people heard that it was almost a no-brainer to go into property, especially when we saw property prices rising like we did in the past,” Wihby said. “But I think a lot of people got into purchasing a home before they were ready emotionally.”

The impact of what Stafford calls the “single biggest financial commitment for most people” includes the mental shock of going from a tenant to a homeowner.

“When you’re a tenant, the month that cheque goes out, it clears your account, and then you don’t think about it for the next 30 days,” Haque explained. “But when you’re a homeowner, you have those multiple payments like home insurance, maintenance fee, utilities, property taxes, that you have to account for on an ongoing basis. And sometimes it’s very much a shock to your system.”

Simmons emphasizes that homeownership is a personal choice, and isn’t the imperative it was 30 or 40 years ago.

“I know a lot of professionals who just don’t want to be bothered cutting the grass on Saturday, and doing the gardening. … They would much prefer to rent and save a bunch of money, so they can travel every weekend,” she said. “If you’re not actually going to enjoy the house, what’s the point in buying it?”

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

To Rent Or To Buy? 8 Questions Canadians Should Ask Before Taking The Plunge

TORONTO – Should you rent or buy?

Conventional wisdom suggests it’s a no-brainer – buying real estate is a worthwhile investment with a high return.

Despite record low interest rates, the sky high prices and carrying costs are causing many to rethink the allure of home ownership.

When you factor in the costs of repair, maintenance and other expenses associated with owning a home, Toronto-based financial planner Shannon Simmons argues that renting and putting saved money into another investment – such as a stock portfolio – could earn more in the long run.

Simmons gives new clients a questionnaire asking where they see themselves in 10 years. Many answer “buying a house.”

“Then we meet in person, and they say, ‘Oh I don’t really care if I buy a house, but shouldn’t I want to?’”

Based on advice from financial planners—both independent and those employed by banks—Global News has compiled a list of questions (and some context) to help you decide whether buying or renting is the right move for you.

1) Do you have 10-20 per cent of the home’s purchase price saved for the down payment?

While it’s possible to purchase a home with as little as five per cent down in Canada, big banks prefer first-time home buyers to have an average of 10 per cent.

“If this is the property of your dreams and it’s a really good buy, and you don’t have the full 20 per cent down,” says Royal Bank of Canada’s Rachel Wihby, it may make sense to pay the mortgage loan insurance charged to anyone who doesn’t put 20 per cent or more down on the home.

But “the less you put down, the higher the amount that you’re actually being charged,” Simmons said. That could mean you end up paying an additional $10,000 or more.

2) Do you have another 1.5-5 per cent saved for closing costs?

First-time home buyers don’t have to pay realtor fees, but there’s a number of other closing costs that need to be taken into account.

Depending where you live, land transfer taxes can carry a “significant” price tag, said Farhaneh Haque, director of mortgage advice for TD Canada Trust.

“Lawyer fees, seller/buyer property tax adjustment, appraisal fees, home inspection fees, even just your moving costs,” Haque said.

David Stafford, Scotiabank’s managing director of real estate secured lending, added fire and loss insurance to the list, suggesting $50-$100 per month as a ballpark figure.

Stafford also stressed the value of a building inspection, particularly for first-time home buyers, who may be easily impressed by granite countertops and hardwood floors but miss such other details as an old furnace, a leaky roof, or electrical wiring that’s in need of repair.

“Given you’re contemplating a multi-hundred thousand dollar purchase, a building inspection for a couple hundred dollars isn’t a bad idea.”

3) Can you keep debt servicing below 40 per cent of your income?

Your total debt service ratio measures the percentage of your gross annual income needed to cover housing payments (principal, interest, property taxes and heat, known as “PITH”) plus registered debts like car loans, personal loans and credit cards if applicable. Simmons says this 40 per cent rule is “specifically to please the bank” and is the general eligibility criteria when applying for your mortgage at most financial institutions.

So if you add it all up, housing payments and other debts should be between 35 and 40 per cent of your gross annual income.

4) Are your monthly fixed costs at 50-60 per cent of your after-tax income?

These “fixed costs” include housing and transportation, groceries, toiletries, and “everything you have to pay every month whether you like it or not,” Simmons said.

“When the money hits your bank account, if more than 60 per cent is tied up in things that you can’t get out of every single month, then you have no room after that for spending money which is not a fixed cost – things like going out for dinner, going out with friends, weddings, anything else that’s not just a bill.”

Keeping this ratio under control ensures you have enough money left over to keep saving, and avoid becoming “house poor.”

“Once you buy a house, it’s not like retirement’s done; you still have to save for other things,” Simmons added. “You also want to make sure that you have enough cash flow every single month that you don’t have to go into credit card debt – and that’s what I see: house broke, all the time.”

5) Can you save 1-2 per cent of your income in a “housing maintenance fee” each year?

The top mistake Canadian homebuyers make? Underestimating “significant renovations needed to the property,” according to a recent RBC poll.

Stafford suggests asking your realtor, and getting a home inspection.

“Even if it’s in pretty good shape, most homes of any age, there’s something you’ve got to do every year…and you need to factor that into your cash flows,” he said.

Simmons advises setting aside 1-2 per cent of your after-tax income each year to what she calls a “house maintenance fund” to avoid going into debt.

“When there’s not that extra cash sitting in an emergency fund, if there’s a $10,000 renovation or if you get cockroaches … It has to go on debt, because you’re not going to live in a place with cockroaches,” she said. “That can take a long time to pay off if you don’t have flexibility with your cash flow.”

6) Do you plan to stay in your home for at least three years?

Haque said TD advises clients to think about their life in three- to five-year chunks when considering purchasing a home.

A young couple buying a condo, for example, should consider how soon they’ll need a bigger space if they want children in the near future.

Wihby suggests regarding a home as a long-term investment – it might not be worth it if you buy a home and sell it a year later.

7) Is your job stable?

Are you planning to stay in your field? What would happen if your income decreased?

These are some of the questions RBC planners ask clients to determine how monthly payments and lifestyle would change as a result of job fluctuations.

“So you need to think of things like, will you be on a single income household instead of two?” Wihby said. “Maybe that means you won’t be taking those trips you thought you’d be taking or maybe you won’t be going to the gym as often.”

8) Are you emotionally ready to own a home?

It may sound hokey. But this is a big lifestyle leap to take.

“A lot of people heard that it was almost a no-brainer to go into property, especially when we saw property prices rising like we did in the past,” Wihby said. “But I think a lot of people got into purchasing a home before they were ready emotionally.”

The impact of what Stafford calls the “single biggest financial commitment for most people” includes the mental shock of going from a tenant to a homeowner.

“When you’re a tenant, the month that cheque goes out, it clears your account, and then you don’t think about it for the next 30 days,” Haque explained. “But when you’re a homeowner, you have those multiple payments like home insurance, maintenance fee, utilities, property taxes, that you have to account for on an ongoing basis. And sometimes it’s very much a shock to your system.”

Simmons emphasizes that homeownership is a personal choice, and isn’t the imperative it was 30 or 40 years ago.

“I know a lot of professionals who just don’t want to be bothered cutting the grass on Saturday, and doing the gardening. … They would much prefer to rent and save a bunch of money, so they can travel every weekend,” she said. “If you’re not actually going to enjoy the house, what’s the point in buying it?”

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

Getting Debt Help: Five Steps Toward Debt Consolidation

Debt stress can negatively impact every aspect of your life. The only way to cure debt stress is to get rid of it by consolidating and managing debt with a goal of eliminating it. Here are five tips for starting a debt consolidation plan:

• Understand How Credit Card Debt Consolidation Works: Debt consolidation involves rolling several debt accounts into one. You can accomplish this by borrowing enough to pay off all of your credit card accounts, but tightening credit restrictions are making this increasingly difficult. You may qualify for enough to pay off your debts by putting up your car or home as collateral, keeping in mind that debt consolidation lenders can repossess your car or foreclose on your home if you don’t repay them. A safer way to consolidate debts is getting debt help from a professional credit counseling service. Before seeking debt help, you’ll need to gather some information.
• Know What You Owe (and to Whom, and What It’s Costing): This step may temporarily increase debt stress, but it’s worth for achieving credit card debt consolidation. You’ll need to review all of your credit card accounts and list how much you owe, who you owe, and the annual percentage rates (APRs) and minimum payments for each account. The APR for each account appears on each billing statement.
• Choosing a Credit Card Debt Consolidation Option: You’ll need to decide if you can develop and commit to your own debt consolidation plan, or if you need help. Seeking professional debt help can help you stay on track, and provides an interface between you and your creditors.
• Cooperation and Cutting Up Cards: If you seek help from a professional debt consolidation program, your counselor will review your income and debts and negotiate a repayment plan with creditors. You make payments to your debt consolidation agency, and they disburse funds to creditors. The downside is that your plan can be voided if you fail to meet written terms, and you may be required to close your credit card accounts.
• DIY Credit Card Debt Consolidation Methods: If you’re making your own debt consolidation plan, you can approach it in a way that works best for you. Sometimes it’s easiest (and psychologically satisfying) to pay off any small debts first for reducing the number of bills you have and streamlining debt management. Financial advisers often recommend paying your bills in the order of highest APR to lowest. You would pay more toward the highest APR debt until it’s paid off. Then you would pay that amount plus your minimum payment on the next highest APR debt and so on. This method is sometimes called the avalanche method, as it gains momentum as debts are paid off and more is paid toward each remaining debt.

Get started today toward regaining financial security. The one debt management plan you cannot afford to use is the ostrich method, which requires burying your head in the sand and doing nothing.

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

How Our Financial Calculators Can Help You in Creating a Budget

The main purpose of a budget is to determine where your money is coming from and where you want it to go. For a budget to show the picture clearly, you need to gather financial statements, record your income sources, list your monthly expenses, categorize your expenditures and make necessary calculations to suit your goal. Creating a budget can be boring and tedious if you don’t enjoy collecting data and crunching numbers. Since the process requires a lot of calculations, you can make the task easier, faster and more accurate by using our financial calculators.

We have five different financial calculators to help you perform all your finance related calculations fast, easy and accurate. Each of these calculators is designed for a specific purpose. However, you can use all of them to assist you in creating a budget. Here is how each can help you create a budget.

Student Budget Calculator:

This calculator is designed to assist students to create their budget when attending a college or university. It allows you to input your income and expenses in categories such as school expenses, professional fees, food and groceries and living expenses. The budget automatically assumes the school year to be of eight months starting from September and ending in April.

How much do you owe?

When creating a budget, it is very important to take into account every penny you owe the bank or any other lender. This calculator lets you enter all your credit cards, loans, other existing installment loans (such as car loan), interest rates and payments. It helps you get a clear picture how much you owe and how long it will take to be free of debts.

Mortgage Loan Calculator:

If you have an existing mortgage or planning to take out one, then this calculator will come in very handy. Once you enter the mortgage amount, interest rate, amortization period and other relevant data, it generates an amortization schedule for your mortgage. It lets you see at a glance your principal balance and how much interest you will have to pay. If you are planning to make any prepayment, it even shows you its impact on your mortgage, including the total saving you will be able to make on the interest. It helps you state your mortgage loan clearly in your budget.

Savings Goal Calculator:

One of the main purposes of creating a budget is to save money by prioritizing the important expenses. This calculator helps you do just that. Once you enter the number of years to save, your savings goal, the amount you have in current savings, savings per period, expected rate of return and the expected rate of inflation, it shows you graphically the current status of your saving and how far from your goal you are.

Line of Credit and Loan Payments Calculator:

Loans and repayments play a big part in every budget. This calculator lets you enter the loan amount, annual interest rate, term in months and other relevant data and gives you a clear picture of your loan or line of credit payment.

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

Watch Your Wallet With These Personal Finance Tips

Does facing your personal finances leave you a bit bewildered? There are others out there that feel the same way you do. A lot of people find finances to be overwhelming since they were never shown how to manage them. The piece that follows offers some tremendously useful advice on the subject of personal finance.

Steer clear of products or schemes that promise you overnight success. Many people have fallen into the get rich quick schemes located on the Internet. You should certainly learn; however, carefully watch how much time and energy you put into learning. You do not want to spend so much time learning that you are unable to work and earn a living.

Develop a better plan for the future by keeping a journal of all of your expenditures. However, if you put this into a notebook that you can just shut and put away until you deal with it later, you may find it just gets ignored. Try to put up a whiteboard in the office or bedroom that you can list your expenses on. By doing this, you’ll probably see the board much more often, which will ensure it remains on your mind all day.

It may be helpful to keep a small envelope in your purse or bag whenever you go shopping. This way, you have a place to store all receipts that you receive. Keep this information available as a record that you might need at a later date. It will be good to have them on hand, so that you can verify all the charges on your credit card statement and contest any that are incorrect.

Don’t fall for the scam that an organization can guarantee you a clean credit report. A lot of companies out there make vague statements about how they will repair your credit history. But what worked for someone else may have no bearing on your credit issues. There is no way to guarantee success in credit repair and if anyone says otherwise, they are being dishonest.

If you bought a defective item, chances are you will notice it within a few weeks only. Businesses make a lot of money off of extended warranties but they are not always useful for the end user.

Avoid large fees when investing. Most brokers have hefty fees for the services that they render. These fees can really take a chunk out of the money you make. Do not use brokers who take big commissions, and stay away from funds with high management costs.

Purchase your lean meats and other protein sources in bulk. This will provide you with both a cost and time savings. If you use everything you purchase, buying in bulk can be much cheaper. If you cook meals for the rest of the week, it can save you a lot of time.

Your car and house are very likely going to be your biggest expenses. Paying the interest on these things often eats up a lot of money each month. Try to pay them off quickly by making extra payments or applying your tax refund toward the principal.

Sometimes your score will actually drop for no good reason. This can happen without any errors on your part. If you keep up on your credit report your score will go up!

Credit Card

Use compact florescent bulbs in place of incandescent bulbs where you can. Your new CFL bulbs will significantly reduce both your carbon footprint and your energy bill. As an added bonus, your CFL bulbs will last longer than the average incandescent bulb. Buying bulbs less frequently can help you save money.

Stop buying things with your credit card if you cannot pay it off. Go over your expenses and eliminate things that are not vital to your survival. Try to find another form of payment for the things that you really cannot live without. Finish paying off your balance before using the card again, and then try to pay your credit card balance in full every month to avoid future troubles.

Make a few extra bucks by having a garage sale and clear out some space at the same time. Let all of the neighbors know about the upcoming garage sale – one might even offer to sell items for them in exchange for a small commission. Garage sales offer a lot of latitude when it comes to making money.

Do not take out more student loans than you need this will cause a huge problem down the line. Private schools can be very costly to pay off.

Student loan debt has fewer consumer protections than other kinds of debt, so make absolutely sure that you can repay any student loan debt you accrue. Getting into that private school and being unsure of your future will more than likely put you into debt for a very long time, so be very careful about this.

Flexible spending accounts can be used for a variety of expenses. Flexible spending accounts can help reduce your medical or childcare expenses. These accounts let you set aside a specific amount of pretax dollars for these expenses. There are conditions involved though, so speak to a tax professional.

Your FICO score is effected largely by credit cards. When you maintain a large balance from month to month, your score will be lower than it should. Fortunately, you can start increasing your score rapidly by paying off your cards. Always try your best to keep your balance below 20% of the credit card’s maximum credit limit.

Personal Finances

Don’t waste money on lottery tickets. Put the money in your savings account instead. This is a better option because it will grow over time versus being wasted on a gamble.

As you know, many people are insecure with their personal finances, leading to eventual money problems. Reading this article should have shown you ways to prevent this from happening to you. Utilize the tips above to better your personal finances.

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

5 Tips for Shopping for a Mortgage

1. Know what you can afford.

Review your monthly spending plan to estimate what you can afford to pay for a home, including the mortgage, property taxes, insurance, and monthly maintenance and utilities. Make sure you save for emergencies. Plan ahead to be sure you will be able to afford your monthly payments for several years. Check your credit report to make sure that the information in it is accurate. A higher credit score may help you get a lower interest rate on your mortgage.

2. Shop around—compare loans from lenders and brokers.

Shopping takes time and energy, but not shopping around can cost you thousands of dollars. You can get a mortgage loan from mortgage lenders or mortgage 

brokers. Brokers arrange mortgage loans with a lender rather than lend money directly; in other words, brokers sell you a loan from a lender. Neither lenders nor brokers have to find the best loan for you—to find the best loan, you have to do the shopping

3. Understand loan prices and fees.

Many consumers accept the first loan offered and don’t realize that they may be able to get a better loan. On any given day, lenders and brokers may offer different interest rates and fees to different consumers for the same loan, even when those consumers have the same loan qualifications. Keep in mind that lenders and brokers also consider the profit they receive if you agree to the terms of a loan with higher fees, higher points, or a higher interest rate. Shopping around is your best way to avoid more expensive loans.

4. Know the risks and benefits of loan options.

Mortgages have many features—some have fixed interest rates and some have adjustable rates; some have payment adjustments; on some you pay only the interest on the loan for a while and then you pay down the principal (the loan amount); some charge you a penalty for paying the loan off early; and some have a large payment due at the end of the loan (a balloon payment). Consider all mortgage features, the APR (annual percentage rate), and the settlement costs. Ask your lender to calculate how much your monthly payments could be a year from now, and 5 or 10 years from now. A mortgage shopping worksheet can help you identify the features of different loans.Mortgage calculators can help you compare 

payments and the equity you could build with different 

mortgage loans.

5. Get advice from trusted sources.

A mortgage loan is one of the most complex, most expensive financial commitments you will ever assume—it’s okay to ask for help. Talk with a trusted housing counselor or a real estate attorney that you hire to review your documents before you sign them.

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

What is the “Best Mortgage Rate” ?

It’s not synonymous with the “lowest mortgage rate.”

The best mortgage rate corresponds to the mortgage and advice that saves (and in some cases makes) you the most amount of money long-term.

Mortgage professionals routinely advise, “It’s not all about the rate.” To some, that sounds like evil sales-speak meant to boost commissions. The reality is that mortgage flexibility, contract restrictions and advice all have a definitive impact on borrowing costs. And most people don’t discover how much impact until after their mortgage closes.

That said, consumers are obliged to negotiate the very best deal they can. Three years ago, we asked ourselves, what kind of mortgage comparison website would we want if we were shopping for a mortgage ourselves? We thought up RateSpy.com.

RateSpy’s edge is data, lots and lots of rate data — more so than most other Canadian rate comparison sites combined.

Now, why on earth would someone need access to 3,000 mortgage rates and 300+ lenders, you ask? It boils down to probability.

At any given time, different mortgage providers are motivated to offer more heavily discounted rates. They may have:

Surplus liquidity (e.g., a credit union with excess deposits),
A need to replace assets in securitization programs (which is why we see big discounts on mortgages with odd terms, like 3.4 years), or
Internal volume targets that haven’t been met, thus encouraging more competitive pricing.
By definition, the more lenders and brokers one has to compare, the higher the probability of finding a lender motivated to discount below the market.

Of course, once you find a low-rate provider, that doesn’t mean its rate entails the lowest borrowing costs. Asking the right questions is mandatory to ensure the mortgage balances renewal risk with interest savings, and lets you make changes down the road—penalty free. This mortgage rate & features checklist can serve as a guide in that respect.

For these reasons, the interest rate alone can be a misleading number. If your lender or mortgage broker is quoting you a rate 10-15 basis points higher than what you’ve found online, it means nothing until you compare the features, restrictions and speed/quality of service from both providers

Our responsibility
Mortgage shoppers are, and will continue, flocking to rate comparison websites. But the information on these sites is vastly inadequate at the moment. Why, for example, don’t rate comparison sites speak to the penalty facing consumers if they break the mortgage early? Variations in penalty calculations can, and do, cost borrowers thousands more than small rate differences.

We have a responsibility to help consumers find the best overall deal, not just the best rate. The best deal factors in things like term selection, penalty cost, refinance restrictions, porting flexibility, advice on properly structuring an application, advice on building equity and so on.

Every Canadian rate comparison site I’ve seen underperforms in these areas. Even ours…for now. Our mission is to address these information deficiencies so consumers can identify the right combination of rate savings, flexibility and advice in an objective forum with no sales pressure.

Thereafter, we have to make it easier for folks to find competent mortgage professionals for a second opinion. Think about it. If you don’t have a trusted referral, where do you look to find a great broker or banker? How do you know the person you’re calling has the tenure, experience, qualifications and competitiveness to serve you best? Most existing advisor directories help you screen by little more than company, province or city.

Expect mortgage comparison sites to significantly evolve along these lines in 2014.

Sidebar: Rate comparison sites, in their present form, cater only to AAA fully-qualifying clients. Subprime,business-for-self and investor clients are a whole different conversation. There is currently no good mortgage comparison site for these customers, making knowledgeable mortgage advisors even more essential.

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

3 Ways To Use A Mortgage Calculator

1. Planning to pay off your mortgage early.

By the time a 30-year fixed-rate mortgage is paid off, the typical mortgage holder will have made total interest payments significantly larger than the original principal on the loan.

Use the “Extra payments” functionality of Bankrate’s mortgage calculator to find out how you can shorten your term and net big savings by paying extra money toward your loan’s principal each month, every year or even just one time.

To calculate the savings, enter a hypothetical amount into one of the payment categories (monthly, yearly or one-time) and then click “Show/Recalculate Amortization Table” to see how much interest you’ll end up paying and your new payoff date.

2. Decide if an ARM is worth the risk.

The lower initial interest rate of an adjustable-rate mortgage, or ARM, can be tempting. But while an ARM may be appropriate for some borrowers, others may find that the lower initial interest rate won’t cut their monthly payments as much as they think.

To get an idea of how much you’ll really save initially, try entering the ARM interest rate into the mortgage calculator, leaving the term as 30 years. Then, compare those payments to the payments you get when you enter the rate for a conventional 30-year fixed mortgage. Doing so may confirm your initial hopes about the benefits of an ARM — or give you a reality check about whether the potential plusses of an ARM really outweigh the risks.

3. Find out when to get rid of private mortgage insurance.

You can use the mortgage calculator to determine when you’ll have 20 percent equity in your home. This percentage is the magic number for requesting that a lender wave private mortgage insurance requirement.

Simply enter in the original amount of your mortgage and the date you closed, and click “Show/Recalculate Amortization Table.” Then, multiply your original mortgage amount by 0.8 and match the result to the closest number on the far-right column of the amortization table to find out when you’ll reach 20 percent equity.

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

Apply With More Than One Mortgage Lender?

Unlike applying for a credit card or auto loan, there is little benefit in applying to more than one lender for a mortgage loan. You might believe you are increasing your chances of getting the best available deal or giving yourself “insurance” that you will receive an approval. But, there are reasons that it is usually not in your best interest to do this.

• In addition to filling out lots of paperwork, it will cost you money to apply (credit report, property appraisal, and, possibly, an application fee).
• A full credit report, usually a “tri-merge” (reports from all three major credit reporting agencies) is required. This will cost you money (around $15) and also bring down your credit score, as each inquiry takes some points off.
• You will end up paying for more than one property appraisal (from $200 to $450).
• You may be required to pay one or more application fees (around $200 each).
• If you want to lock (guarantee) a rate at application and a fee is involved, more than one application will involve multiple fees, only one of which will benefit you.

If you locate an experienced, honest mortgage professional and provide him/her with the correct information, he/she will advise you of the best available terms for which you qualify. Therefore it is usually unnecessary and always costly to make more than one application with multiple mortgage lenders.

Information You Need to Apply for a Mortgage
Since the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) purchase the majority of home loans in the U.S., their standards are followed by most mortgage loan buyers. 

This means most lenders will require the same information from you. The differences relate to either the type of property being financed or the specific type of loan being used. The most common information all lenders require:

• Credit report : The mortgage source will get your report, but you should get one of your own BEFORE you apply so you know your current status in advance.
• Income verification : Keep your pay stubs for at least two months prior to making application. Also have copies of your last two years’ personal income tax returns in the event you need them, including W-2’s. If you earn overtime or other additional compensation, be prepared to prove that it is regular and consistent over time. To verify this, you will need more pay stubs, as many as you can collect. The same rules apply if you earn a significant portion of your income from commissions and fees. You must justify the level of income you wish to get credit for.
• Liquidity (Cash) : Regardless of the type of mortgage you receive or the property you’re financing, there will be costs to close your new loan. In all cases, you will need third party verification of the cash you claim to have. Have your bank or credit union statements for the past twelve months handy. Also gather up all information on investments, mutual funds, and other “cash equivalents”. If some of your cash is coming in the form of a gift, have the giver sign a “gift letter”. You can find appropriate wording from the Internet or you can probably get a demo letter from your mortgage source. Be aware that most lenders will allow a gift letter ONLY from an immediate family member (mother, father, sister, brother, son, or daughter).
• If you’re buying a property, you will need a Purchase & Sale Agreement : Once you make an offer that is accepted, your real estate broker will prepare a formal agreement to purchase the property. Most lenders will require this agreement before they will accept a formal application, since there is no deal without it.
• If you’re refinancing a property, have your current tax bill, hazard insurance information or policy, a copy of your deed and/or legal description of your home: This will greatly facilitate the processing of your application and result in a faster approval.
• If you’re purchasing or refinancing a condominium : Have your condominium documents (e.g., bylaws, budget, master insurance policy declaration page, homeowner’s dues information, etc.) ready.

There may be some other information you need to provide for different lenders but your mortgage source will make you aware of anything further they want.

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

10 Tips About Mortgages And Refinancing In 2013

If you’ve been sitting on the sidelines, waiting for the best time to refinance or get a mortgage to buy a home, think of 2013 as your last chance to act.

With good credit, persistence and some shopping skills, you can still snag phenomenal deals this year — even if you are underwater on your loan.

Here are 10 mortgage tips to help you with your mortgage decisions in 2013.

Tip 1: Stop procrastinating and refinance

If you haven’t refinanced recently, you’re probably paying a higher interest rate on your mortgage than you should. Take advantage of today’s record-low mortgage rates while they last. Rates are expected to remain low during the first few months of the year, but they should gradually increase. When they do, many borrowers will regret having missed the opportunity to grab the lowest mortgage rate in history.

Tip 2: Buyers, get moving

With rates near the bottom and home prices on the rise, it’s still a perfect time to buy a house. If you can afford a home and qualify for a mortgage, this may be your last chance to take advantage of the market and own a home for less. To speed up the homebuying process, get a mortgage preapproval before you start shopping.

Tip 3: Compare FHA vs. conventional loans

Many homebuyers opt for a Federal Housing Administration mortgage because it allows them to buy a home with as little as 3.5 percent down. But the already costly FHA fees that are added to your loan will increase again in 2013. As the costs of FHA mortgages rise, some buyers may consider saving a little extra for a conventional loan. Buyers need at least 5 percent down to get a conventional mortgage, depending on their credit. If you can afford the slightly higher down payment, get quotes for FHA and conventional loans, and compare the costs.

Tip 4: Ensure that your credit is golden

Credit standards remain tight. As new mortgage rules are unveiled in 2013, the standards are not expected to loosen. If you plan to get a mortgage anytime soon, you must treat your credit as one of your most valuable assets. Most lenders want to see a spotless credit history of at least a year on your credit report. You’ll need a credit score of at least 720 to get the best rate. Borrowers with a credit score of 680 or more can still get a good deal, but the lower your score, the harder it will be to get approved.

Review your credit report before you apply for a mortgage. Sometimes, paying part of your credit card balances can boost your credit score quickly. Generally, if you are using more than 30 percent of the available credit on your cards, you may be hurting your score. Also, check for credit errors and have them corrected before you apply for a loan.

Tip 5: Want to pay off your mortgage earlier?

If you are one of those homeowners who dream about being mortgage-free, the low-rate environment may be a good opportunity to refinance your 30-year mortgage into a 15- or 20-year loan. But make sure you can really afford the slightly higher payments on the shorter loan and that you have some money saved for emergencies.

Tip 6: Underwater refinancers: Don’t take ‘no’ for an answer

If you owe more than your home is worth and have tried and failed to refinance, why not give it another shot in 2013? The Home Affordable Refinance Program, or HARP 2.0, was revamped to allow homeowners to refinance regardless of how deeply underwater they are.

Even after revisions to the program, many borrowers still found obstacles when refinancing. But the situation is improving. Lenders are much more open to HARP 2.0 refinances these days than they were a few months ago. If one lender says you don’t qualify for a HARP refi, don’t take “no” for an answer, and try to find a lender willing to do it.

Tip 7: Give your lender a chance

If you have trouble paying your mortgage, don’t ignore your mortgage servicer. There are new programs available for borrowers who struggle to keep up with their mortgage payments, including forbearance for those with FHA mortgages. Lenders have been more willing to work out delinquent loans through loan modifications and even short sales for homeowners who can’t afford to stay in their homes. It can be a frustrating process to deal with your lender, but communication is still your best tool.

Tip 8: Shop for a low rate and good service

Even with rates hovering near record lows, you should still shop for the best mortgage deal. Get quotes from at least three lenders and compare not just the interest rate but closing costs and the quality of their service. Favor lenders that have a reputation of closing on time. Start with referrals from friends and relatives when shopping for a lender and read online reviews from other borrowers about the particular lender or mortgage broker you are considering.

Tip 9: Approved for a mortgage? Leave your credit alone

Most lenders order a second credit report for the borrower a few days before closing. Don’t open new accounts or charge up your credit cards at the furniture store while you wait for closing day. New credit lines and maxed-out cards may hurt your score. If you were on the edge when you qualified, your mortgage loan could be rejected at the last minute.

Tip 10: It’s not over until the loan closes

You’ve submitted your mortgage application and locked a rate. The race has just begun. Submit any documents requested by your loan officer or mortgage broker within 24 hours, if possible. Any delays in responding to the lender or in letting the appraiser into your house are wastes of valuable time. Lenders will remain overwhelmed with the large volume of refinance applications at least through the first few months of 2013. It doesn’t take much more than lost paperwork or last-minute requests from your lender to delay your closing. If that happens, you risk losing the locked rate. Follow up with your lender or mortgage broker at least once a week to ensure the process goes smoothly.

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

Seven Reasons Credit Applications Are Rejected

A credit file profile is not the only reason for having a credit application refused. There may be other less obvious causes for a rejection.

Not on the electoral roll
The electoral roll is something to which lenders turn for confirmation that the applicant is who they say they are. Not being registered on it can lead to a refusal for credit.

Make sure there is uniformity in your address details
Check the address is formatted consistently. There could be problems if Royal Mail’s postcode address file and the electoral roll don’t match. Disparities in address details can mean a lender turns you away.

Social media
Would-be lenders might check you out on social media and if the vibe from you or even your friends seems irresponsible, this might reflect on their readiness to lend to you. [Read more: How your Facebook friends could damage your credit rating]

A lender’s interpretation of earnings
One reader’s bank statement showed a regular payment coming from an employer, so the bank presumed it was a wage. When the bank found out that in fact it was from a scholarship and was not technically earnings it would not then lend to her.

Another reader’s bank couldn’t understand how his earnings, which were largely paid as dividends, were worked out and so reduced the amount it was prepared to lend for his mortgage.

Not being able to produce the right paperwork to establish identity
Problems can arise in meeting identity requirements. For example bank statements and utility bills downloaded from online may well not be acceptable when it comes to proving who you are. A utility bill needs to be recent so some bills, such as a water bill which does not come as frequently as bills for some other utilities, may not be suitable if it is dated some months before.

One person in a couple may receive the utility bills, so the other will not have those in their name.

Not everyone has a passport or a driving licence and few have, say, a police warrant card and gun licence which may be on the list of acceptable documents. Other identity proofs needed may include an assortment of items that also may not apply to the individual at issue, including evidence of state benefits.

Being too old
As you get older borrowing becomes more difficult.

No track record of past borrowing
Not only should a potential borrower be capable of fulfilling the demands of a regular contract responsibly, they need to be able to demonstrate this with some track record. This could be by managing a credit card or a mobile phone contract. Avoid borrowing more than you can repay. Consider closing down any credit facilities that are not needed as they could give a misleading impression about your borrowing intentions.

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

Flaherty: House Prices A Worry, But No Mortgage Crackdown For Now

OTTAWA - Finance Minister Jim Flaherty is taking on the responsibility of averting a housing bubble in Canada that could destabilize the economy, adding he will speak to those in the business to try and keep a lid on rising home prices.

With the Bank of Canada essentially taking itself out of the game by signalling interest rates won’t be raised for some time, Flaherty said Monday after meeting with about a dozen economists that it falls on his department to ensure the market is stabilized.

"It does fall to the Department of Finance to do anything if we’re going to do anything because there’s basically no room for the Bank of Canada to move," he said.

"Some of the economists suggested I have some conversations with people in the building industry because what we’re seeing in certain parts of the country (is) a re-acceleration of housing prices. I do speak regularly to people in the business and I’m going to do more of it now."

Flaherty said he has no intention of acting at the moment, but said he was keeping an eye on the market to see if the current uptick in sales and prices is temporary or the beginning of another hot run.

Most economists see the market slowing after the recent resurgence, including the Bank of Canada. But the central bank also cited the “renewed momentum” as one of three domestic risks to the economy in its October monetary policy report.

"This (the resurgence) would provide a temporary boost to economic activity, but could exacerbate existing imbalances and therefore increase the probability of a correction later on," the bank said. "Such a correction could have sizable spillover effects to other parts of the economy and to inflation."

The minister has been active in the housing market throughout his tenure, at first easing rules but more recently clamping down as Canadians took on ever-increasing debt levels to buy real estate.

The latest measure, which came in July 2012, was followed by a slump in sales and a slowdown in price gains. But the market began picking up again during the summer, particularly in Toronto and Vancouver, with the average home price hitting a new record high of almost $386,000.

Home prices are not Flaherty’s only worry.

The minister told reporters he remains focused on trying to eliminate as much as possible the price gap between the United States and Canada that one recent report pegged at about 10 per cent.

Flaherty said he has been meeting with CEOs of the country’s major retailers to ask for explanations as to why prices for the same items remain elevated in Canada, adding that he is not altogether persuaded by the answers he has been given.

"There are some companies that look at Canada as a relatively small market that is relative well off, (with a) large middle class, and, ‘Let them pay a little more, and they’ll pay it.’," he said of merchant attitudes.

However, Flaherty said he will wait until the results of a study being conducted by the market research firm Nielsen before deciding if anything needs to be done.

"It becomes an interesting question of what the government can do about that … there are always persuasive techniques that can be used to nudge people in the right direction," he said.

The minister has deployed the approach before.

Earlier this year he personally phoned the Bank of Montreal to “persuade” it to raise its five-year fixed mortgage rate after BMO cut it to 2.99 per cent. Flaherty said he was concerned about a race to the bottom on rates that would trigger unsustainable borrowing.

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

Coping Debt

Having trouble paying your bills? Getting dunning notices from creditors? Are your accounts being turned over to debt collectors? Are you worried about losing your home or your car? You’re not alone. Many people face a financial crisis at some point in their lives. Whether the crisis is caused by personal or family illness, the loss of a job, or overspending, it can seem overwhelming. But often, it can be overcome. Your financial situation doesn’t have to go from bad to worse.

If you or someone you know is in financial hot water, consider these options: self-help using realistic budgeting and other techniques; debt relief services, like credit counseling or debt settlement from a reputable organization; debt consolidation; or bankruptcy. How do you know which will work best for you? It depends on your level of debt, your level of discipline, and your prospects for the future.

Self-Help

Developing a Budget
The first step toward taking control of your financial situation is to do a realistic assessment of how much money you take in and how much money you spend. Start by listing your income from all sources. Then, list your "fixed" expenses — those that are the same each month — like mortgage payments or rent, car payments, and insurance premiums. Next, list the expenses that vary — like groceries, entertainment, and clothing. Writing down all your expenses, even those that seem insignificant, is a helpful way to track your spending patterns, identify necessary expenses, and prioritize the rest. The goal is to make sure you can make ends meet on the basics: housing, food, health care, insurance, and education. You can find information about budgeting and money management techniques online, at your public library, and in bookstores. Computer software programs can be useful tools for developing and maintaining a budget, balancing your checkbook, and creating plans to save money and pay down your debt.

Contacting Your Creditors
Contact your creditors immediately if you’re having trouble making ends meet. Tell them why it’s difficult for you, and try to work out a modified payment plan that reduces your payments to a more manageable level. Don’t wait until your accounts have been turned over to a debt collector. At that point, your creditors have given up on you.

Dealing with Debt Collectors
Federal law dictates how and when a debt collector may contact you: not before 8 a.m., after 9 p.m., or while you’re at work if the collector knows that your employer doesn't approve of the calls. Collectors may not harass you, lie, or use unfair practices when they try to collect a debt. And they must honor a written request from you to stop further contact.

Managing Your Auto and Home Loans
Your debts can be unsecured or secured. Secured debts usually are tied to an asset, like your car for a car loan, or your house for a mortgage. If you stop making payments, lenders can repossess your car or foreclose on your house. Unsecured debts are not tied to any particular asset, and include most credit card debt, bills for medical care, and signature loans.

Most automobile financing agreements allow a creditor to repossess your car any time you’re in default. No notice is required. If your car is repossessed, you may have to pay the balance due on the loan, as well as towing and storage costs, to get it back. If you can't do this, the creditor may sell the car. If you see default approaching, you may be better off selling the car yourself and paying off the debt: You'll avoid the added costs of repossession and a negative entry on your credit report.

If you fall behind on your mortgage, contact your lender immediately to avoid foreclosure. Most lenders are willing to work with you if they believe you're acting in good faith and the situation is temporary. Some lenders may reduce or suspend your payments for a short time. When you resume regular payments, though, you may have to pay an additional amount toward the past due total. Other lenders may agree to change the terms of the mortgage by extending the repayment period to reduce the monthly debt. Ask whether additional fees would be assessed for these changes, and calculate how much they total in the long term.

If you and your lender can’t work out a plan, contact a housing counseling agency. Some agencies limit their counseling services to homeowners with FHA mortgages, but many offer free help to any homeowner who’s having trouble making mortgage payments. Call the local office of the Department of Housing and Urban Development or the housing authority in your state, city, or county for help in finding a legitimate housing counseling agency near you.

Debt Relief Services
If you’re struggling with significant credit card debt, and can’t work out a repayment plan with your creditors on your own, consider contacting a debt relief service like credit counseling or debt settlement. Depending on the type of service, you might get advice on how to deal with your mounting bills or create a plan for repaying your creditors.

Before you do business with any debt relief service, check it out with your state Attorney General and local consumer protection agency. They can tell you if any consumer complaints are on file about the firm you're considering doing business with. Ask your state Attorney General if the company is required to be licensed to work in your state and, if so, whether it is.
If you’re thinking about getting help to stabilize your financial situation, do some homework first. Find out what services a business provides, how much it costs, and how long it may take to get the results they promised. Don’t rely on verbal promises. Get everything in writing, and read your contracts carefully.

Credit Counseling
Reputable credit counseling organizations can advise you on managing your money and debts, help you develop a budget, and offer free educational materials and workshops. Their counselors are certified and trained in consumer credit, money and debt management, and budgeting. Counselors discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems. An initial counseling session typically lasts an hour, with an offer of follow-up sessions.

Most reputable credit counselors are non-profits and offer services through local offices, online, or on the phone. If possible, find an organization that offers in-person counseling. Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate non-profit credit counseling programs. Your financial institution, local consumer protection agency, and friends and family also may be good sources of information and referrals.

But be aware that “non-profit” status doesn't guarantee that services are free, affordable, or even legitimate. In fact, some credit counseling organizations charge high fees, which they may hide, or urge their clients to make "voluntary" contributions that can cause more debt.

Debt Management Plans
If your financial problems stem from too much debt or your inability to repay your debts, a credit counseling agency may recommend that you enroll in a debt management plan (DMP). A DMP alone is not credit counseling, and DMPs are not for everyone. Don’t sign up for one of these plans unless and until a certified credit counselor has spent time thoroughly reviewing your financial situation, and has offered you customized advice on managing your money. Even if a DMP is appropriate for you, a reputable credit counseling organization still can help you create a budget and teach you money management skills.

In a DMP, you deposit money each month with the credit counseling organization. It uses your deposits to pay your unsecured debts, like your credit card bills, student loans, and medical bills, according to a payment schedule the counselor develops with you and your creditors. Your creditors may agree to lower your interest rates or waive certain fees. But it’s a good idea to check with all your creditors to be sure they offer the concessions that a credit counseling organization describes to you. A successful DMP requires you to make regular, timely payments; it could take 48 months or more to complete your DMP. Ask the credit counselor to estimate how long it will take for you to complete the plan. You may have to agree not to apply for — or use — any additional credit while you’re participating in the plan.

Debt Settlement Programs
Debt settlement programs typically are offered by for-profit companies, and involve them negotiating with your creditors to allow you to pay a “settlement” to resolve your debt — a lump sum that is less than the full amount that you owe. To make that lump sum payment, the program asks that you set aside a specific amount of money every month in savings. Debt settlement companies usually ask that you transfer this amount every month into an escrow-like account to accumulate enough savings to pay off any settlement that is eventually reached. Further, these programs often encourage or instruct their clients to stop making any monthly payments to their creditors.

Debt Settlement Has Risks
Although a debt settlement company may be able to settle one or more of your debts, there are risks associated with these programs to consider before enrolling:

1. These programs often require that you deposit money in a special savings account for 36 months or more before all your debts will be settled. Many people have trouble making these payments long enough to get all (or even some) of their debts settled, and end up dropping out the programs as a result. Before you sign up for a debt settlement program, review your budget carefully to make sure you are financially capable of setting aside the required monthly amounts for the full length of the program.

2. Your creditors have no obligation to agree to negotiate a settlement of the amount you owe. So there is a possibility that your debt settlement company will not be able to settle some of your debts — even if you set aside the monthly amounts required by the program. Also, debt settlement companies often try to negotiate smaller debts first, leaving interest and fees on large debts to continue to mount.

3. Because debt settlement programs often ask or encourage you to stop sending payments directly to your creditors, they may have a negative impact on your credit report and other serious consequences. For example, your debts may continue to accrue late fees and penalties that can put you further in the hole. You also may get calls from your creditors or debt collectors requesting repayment. You could even be sued for repayment. In some instances, when creditors win a lawsuit, they have the right to garnish your wages or put a lien on your home.

Debt Settlement and Debt Elimination Scams
Some companies offering debt settlement programs may not deliver on their promises, like their “guarantees” to settle all your credit card debts for 30 to 60 percent of the amount you owe. Other companies may try to collect their fees from you before they settle any of your debts. The FTC’s Telemarketing Sales Rule prohibits companies that sell debt settlement and other debt relief services on the phone from charging a fee before they settle or reduce your debt. Some companies may not explain the risks associated with their programs, including that many (or most) of their clients drop out without settling their debts, that their clients’ credit reports may suffer, or that debt collectors may continue to call them.

Before you enroll in a debt settlement program, do your homework. You’re making a big decision that involves spending a lot of your money that could go toward paying down your debt. Enter the name of the company name with the word "complaints" into a search engine. Read what others have said about the companies you’re considering, including whether they are involved in a lawsuit with any state or federal regulators for engaging in deceptive or unfair practices.

Fees
If you do business with a debt settlement company, you may have to put money in a dedicated bank account, which will be administered by an independent third party. The funds are yours and you are entitled to the interest that accrues. The account administrator may charge you a reasonable fee for account maintenance, and is responsible for transferring funds from your account to pay your creditors and the debt settlement company when settlements occur.

Disclosure Requirements
Before you sign up for the service, the debt relief company must give you information about the program:
Price and terms. The company must explain its fees and any conditions on its services.
Results. The company must tell you how long it will take to get results — how many months or years before it will make an offer to each creditor for a settlement.
Offers. The company must tell you how much money or what percentage of each outstanding debt you must save before it will make an offer to each creditor on your behalf.
Non-payment. If the company asks you to stop making payments to your creditors — or if the program relies on your not making payments — it must tell you about the possible negative consequences of your action.

The debt relief company also must tell you: 

that the funds are yours and you are entitled to the interest earned;
the account administrator is not affiliated with the debt relief provider and doesn’t get referral fees; and
that you may withdraw your money at any time without penalty. 

Tax Consequences
Depending on your financial condition, any savings you get from debt relief services can be considered income and taxable. Credit card companies and others may report settled debt to the IRS, which the IRS considers income, unless you are "insolvent." Insolvency is when your total debts are more than the fair market value of your total assets. Insolvency can be complex to determine. Talk to a tax professional if are not sure whether you qualify for this exception.

Use Caution When Shopping for Debt Relief ServicesAvoid any debt relief organization — whether it’s credit counseling, debt settlement, or any other service — that: 

charges any fees before it settles your debts or enters you into a DMP plan
pressures you to make "voluntary contributions," which is really another name for fees
touts a "new government program" to bail out personal credit card debt
guarantees it can make your unsecured debt go away
tells you to stop communicating with your creditors, but doesn’t explain the serious consequences
tells you it can stop all debt collection calls and lawsuits
guarantees that your unsecured debts can be paid off for pennies on the dollar
won’t send you free information about the services it provides without requiring you to provide personal financial information, like your credit card account numbers, and balances
tries to enroll you in a debt relief program without reviewing your financial situation with you
offers to enroll you in a DMP without teaching you budgeting and money management skills
demands that you make payments into a DMP before your creditors have accepted you into the program 

Debt Consolidation
You may be able to lower your cost of credit by consolidating your debt through a second mortgage or a home equity line of credit. But these loans require you to put up your home as collateral. If you can’t make the payments — or if your payments are late — you could lose your home.
What’s more, consolidation loans have costs. In addition to interest, you may have to pay "points," with one point equal to one percent of the amount you borrow. Still, these loans may provide certain tax advantages that are not available with other kinds of credit.

Bankruptcy
Personal bankruptcy also may be an option, although its consequences are long-lasting and far-reaching. People who follow the bankruptcy rules receive a discharge — a court order that says they don’t have to repay certain debts. However, bankruptcy information (both the date of the filing and the later date of discharge) stay on a credit report for 10 years and can make it difficult to get credit, buy a home, get life insurance, or sometimes get a job. Still, bankruptcy is a legal procedure that offers a fresh start for people who have gotten into financial difficulty and can't satisfy their debts.

There are two main types of personal bankruptcy: Chapter 13 and Chapter 7. Each must be filed in federal bankruptcy court. Filing fees are several hundred dollars. For more information visit the United States Courts. Attorney fees are extra and vary.

Chapter 13 allows people with a steady income to keep property, like a mortgaged house or a car, that they might otherwise lose through the bankruptcy process. In Chapter 13, the court approves a repayment plan that allows you to use your future income to pay off your debts during three to five years, rather than surrender any property. After you make all the payments under the plan, you receive a discharge of your debts.

Chapter 7 is known as straight bankruptcy; it involves liquidating all assets that are not exempt. Exempt property may include automobiles, work-related tools, and basic household furnishings. Some of your property may be sold by a court-appointed official, called a trustee, or turned over to your creditors.

Both types of bankruptcy may get rid of unsecured debts and stop foreclosures, repossessions, garnishments and utility shut-offs, as well as debt collection activities. Both also provide exemptions that let you keep certain assets, although exemption amounts vary by state. Personal bankruptcy usually does not erase child support, alimony, fines, taxes, and some student loan obligations. And, unless you have an acceptable plan to catch up on your debt under Chapter 13, bankruptcy usually does not allow you to keep property when your creditor has an unpaid mortgage or security lien on it.

You must get credit counseling from a government-approved organization within six months before you file for any bankruptcy relief. You can find a state-by-state list of government-approved organizations at the U.S. Trustee Program, the organization within the U.S. Department of Justice that supervises bankruptcy cases and trustees. Also, before you file a Chapter 7 bankruptcy case, you must satisfy a "means test." This test requires you to confirm that your income does not exceed a certain amount. The amount varies by state and is publicized by the U.S. Trustee Program.

Debt Scams
Advance Fee Loans: Some companies guarantee you a loan if you pay them a fee in advance. The fee may range from $100 to several hundred dollars. Resist the temptation to follow up on these advance-fee loan guarantees. They may be illegal. It’s true that many legitimate creditors offer extensions of credit through telemarketing and require an application or appraisal fee in advance. But legitimate creditors never guarantee that you will get the loan – or even represent that a loan is likely. Under the FTC’s Telemarketing Sales Rule, a seller or telemarketer who guarantees or represents a high likelihood of your getting a loan or some other extension of credit may not ask for — or accept — payment until you get the loan.

Credit Repair: Be suspicious of claims from so-called credit repair clinics. Many companies appeal to people with poor credit histories, promising to clean up their credit reports for a fee. But anything these companies can do for you for a fee, you can do yourself — for free. You have the right to correct inaccurate information in your file, but no one — regardless of their claims — can remove accurate negative information from your credit report. Only time and a conscientious effort to repay your debts will improve your credit report. Federal — and some state — laws ban these companies from charging you a fee until the services are fully performed.

Visit Dominion Lending Centres Mortgage Village to consult a mortgage professional.

Should brokers in these markets be worried?

Desjardins Group Economic Studies released a statement on Tuesday declaring the Canadian housing market is less affordable than the average affordability of the last 25 years, citing the average home prices across the country are eclipsing household income – due, in part, by a rush to buy prior to interest rate hikes.

Mortgage rates during the summer hurried buyers; many took action out of fear that mortgage rates would climb even higher,” the statement said. “Even if the coming months bring more increases; they won't be enough to trigger a significant dip in affordability.”

Most markets, however, are still affordable… outside Quebec and the Toronto, that is.
“Despite a decline in nearly all Ontario CMAs, most markets are still affordable. Toronto is an exception, where the average home price is $527,821, well above that observed in other agglomerations in the province,” the report stated. “The Desjardins Affordability Index is only slightly under the historical average in Calgary, despite relatively high home prices ($438,793 in the third quarter).”

And although housing prices may be lower in hot Quebec markets, they are still considered less affordable than their more expensive counterparts in BC; due to the average income disparity.

“Sherbrooke and Quebec City rank alongside Vancouver as some of the least affordable agglomerations in the country,” the report said. “Even though housing prices are much lower than on the west coast, incomes in these two CMAs are considerably lower, making home purchases more difficult.”

However, the Quebec-based financial services conglomerate reports its home province is experiencing a teeter-totter of sorts; with a lowering in prices in some markets being cancelled out by rising prices in others.

“Rising prices are losing steam in the Quebec City market while prices in Montreal are starting to edge down,” according to the report. “Prices continue to rise, however, for single-family homes, whose market is balanced, overall. Housing prices continued to climb in Gatineau, Sherbrooke, Saguenay and Trois-Rivières, affordability thus deteriorated in the third quarter.”

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Discount Mortgages Dry Up As Canadian Borrowers Face Tough Test

The discount mortgages that stoked the Canadian housing boom are disappearing, increasing the likelihood of a correction in home values.

On Thursday, Royal Bank of Canada will hike its five-year fixed-rate mortgage to 3.89 per cent, one day after the Bank of Montreal raised its rate to 3.79 per cent. The other major lenders are all moving in the same direction.

The increases mean the cost of a new fixed-rate mortgage has climbed by more than a third in five months, signalling what could be the beginning of the end of ultra-cheap credit in Canada – and the start of fiscal pain for consumers who have overburdened themselves with debt.

“I think this is the real thing,” said Benjamin Tal, deputy chief economist at CIBC World Markets. “This is the end of extremely low interest rates. They’re simply unsustainable.”

So far, interest rates on other kinds of consumer debt are not on the rise, since they are often tied to the Bank of Canada’s benchmark rate, still sitting near a record low. Even so, the rise in mortgage rates will strain the ability of borrowers to juggle their debts.

“This is the beginning of a test for the mortgage market,” Mr. Tal said. “It’s a test of how Canadians are able to tolerate higher interest rates.”

And it is a test that came on swiftly and unexpectedly. Just five months ago, Finance Minister Jim Flaherty publicly scolded both BMO and Manulife Financial for offering mortgages he deemed irresponsibly cheap, advising against a “race to the bottom,” as mortgage rates sank as low as 2.89 per cent.

While the inevitable climb of mortgage rates has had false starts over the past couple of years, the recent hikes could be the first phase of a long-term trend.

“They’re going up every time we turn around,” said Paula Roberts, a Toronto mortgage broker. “It’s a shock to clients. Everybody just thinks they’re always going to stay low.”

As developing economies such as China falter, the United States has re-emerged as the likely engine of global economic growth. The improving U.S. outlook is already pushing up some lending rates, and should eventually reduce the need for central banks in the United States and Canada to hold down short-term interest rates to spur the economy. As long as the United States is making progress, mortgages here will probably continue to get more expensive.

The Canadian housing market is also still recoiling from regulatory changes Mr. Flaherty imposed in recent years in a deliberate attempt to engineer a “soft landing” for overpriced residential real estate. Last year, he reduced the maximum amortization period for a government-insured mortgage to 25 years from 30 years.

Speaking with reporters Wednesday outside a policy retreat in Wakefield, Que., Mr. Flaherty indicated that he sees no need at the moment for further intervention. “There are some bumps along the road in Toronto and Vancouver, in particular in the condo markets, but overall, I’m satisfied that the measures we’ve taken over the last several years have adequately calmed the markets.”

With multiple forces colluding on raising Canadian mortgage rates, the stubbornly strong housing market could finally relent. “Buying the same house will be more expensive this fall than this spring,” said Peter Routledge, an analyst at National Bank Financial.

An expected rise in rates could spur some to buy homes immediately to avoid the increased costs. Other prospective buyers will find they can no longer afford home ownership. “It’s going to limit the people that can buy,” Ms. Roberts said. “And it’s going to take longer for people to get into the market.”

Demand for homes could fall as a result. After that, the magnitude of the market’s reaction is difficult to anticipate. “Housing markets are prone to overreaction in both ways, the upside and the downside,” Mr. Routledge said. “The possibility that you get a vicious cycle goes up as rates go up.”

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3 Helpful Tips On Debt Consolidation

If your debts have become uncontrollable and you are serious to get out of this financial instability, you must go for debt consolidation. With the help of debt consolidation all your multiple unmanageable debts will be consolidated into a single debt. After consolidating your debts, you also do not need to face the hassle of paying off your creditors separately. All your various creditors are paid off with a single monthly payment that you make to your consolidation company. Thus, there are various benefits of consolidating your debts. However, you must be aware that in order to have a successful debt consolidation, you need to know certain tactics. This article provides you with some tips on debt consolidation that may help you out.

Debt Consolidation Tips

Here are some tips on debt consolidation you need to know before you go for consolidating your debts with the help of a debt consolidation company.

• Reputable company - Before you choose a debt consolidation company, make sure to have a thorough research on the debt consolidation company that you want to go for. Research well online about the company and find out if it is a reputable one. All debt consolidation programs are not equal. Shop thoroughly and this in turn will help you get the best deal that suits your needs. Investigate not only whether they are offering you a low fees or not but also how long the company has been in the business, their experience and reputation.

• Non-profit companies - Non-profit organization may offer you much lower fees but you must keep in mind that non-profit doesn't mean that they are eager to help you out with your financial situation. Some also make fake claims to be a non-profit company in order to attract you. Thus, you need to be cautious about them.

• All debts do not need consolidation - All debts are not similar and may not even need consolidation. Thus, do not unnecessarily consolidate them. Analyze each debt separately. You must read the terms and conditions for each of your debt carefully. Estimate the APR and total cost of loan with help of an online loan amortization calculator. If you find out that your existing unsecured debt is cheaper than the consolidation loan that is being provided to you, it is better to avoid consolidating it.

Apart from these tips mentioned above, you must also figure out the total cost of your debt consolidation loan. Securing a low interest rate provides you with the main benefit of consolidating. Thus, make sure to utilize these tips on debt consolidation if you want to secure a successful consolidation.

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Bank of Canada Rate Stance Could Have Adverse Effect On Housing Market

The Bank of Canada is worried about the risk of a hot housing market. Ironically, it’s a risk the central bank is likely to make worse by changing its stance on rate hikes.

The central bank is keeping its key interest rate at 1 per cent, but decided to remove language in its policy statement that had previously implied it was leaning toward a rate hike down the road. Its decision comes as it weighs, among other things, the prospect of weak exports against the risks posed by overvalued real estate.

It warned of both possibilities on Wednesday, and noted that the latest data suggest the housing market is gaining traction again. While that would give the economy a temporary boost, it could increase the probability of a market correction later on. “Such a correction could have sizable spillover effects to other parts of the economy and to inflation,” the Bank of Canada said.

But by insinuating that interest rates will remain low for longer, and might even sink further, the bank could be fuelling the very problem it is warning about.

“At the margin, it will ease consumers’ nervousness about rising interest rates and therefore can add to the overall increase in credit,” Canadian Imperial Bank of Commerce economist Benjamin Tal said in an interview. He noted that the Bank of Canada’s statement led to a reduction in bond rates Wednesday, which could potentially lead to a very slight decrease in mortgage rates. The yield on the five-year government of Canada bond dropped to 1.737 per cent from 1.795 per cent.

But the key issue is how the bank’s decision influences consumer psychology, said Toronto-Dominion Bank chief economist Craig Alexander. Low interest rates have spurred consumers to rack up record debt levels in recent years. The rise in credit has fuelled a rise in house prices.

In an effort to counteract this, former central bank governor Mark Carney and Finance Minister Jim Flaherty have spent much time warning consumers about the risks of high debt loads.

“The Bank, in the past, has used verbal intervention to try to convince Canadians to be more cautious about their finances,” Mr. Alexander said. “By removing the bias, it reduces the voice the Bank has in terms of warning people that rates will rise at some point in the future.”

In a press conference Wednesday, central bank Governor Stephen Poloz said that he thinks the imbalances with respect to housing and household debt “if left on their own, will gradually unwind.

“We see lots of very positive behaviour at the ground level, people doing their arithmetic, self-policing, strong, strong underwriting in banks and other mortgage institutions, so a very positive thing,” he said. The bank noted that the rate at which households are piling on new debt has continued to slow and is below its historical average.

But Mr. Poloz also noted that it was consumers that did the heavy lifting to pull the economy through the crisis without a major downturn, enabling “extra growth in the housing market.”

“So part of that is a bit of a risk that it gets overdone, or that prices get a little higher than fundamentals would suggest,” he told reporters. “In that environment you have to admit that the risk as we outlined there, if it is worsened, that makes you worry about in some sense having a correction.”

His opinion is that, at the moment, it would take a negative shock from outside to spark such a correction.

Canada’s housing market has defied economists’ expectations in recent months, proving to be stronger than they thought possible in the wake of the sales slump that began in the summer of 2012 after Mr. Flaherty tightened mortgage insurance rules to cool the market off.

But many experts don’t think the strength will last. “We don’t expect the recent upward momentum to carry forward into 2014,” TD economists wrote in a recent note. “Some of the strength reflects buyers rushing into the market to beat out recent interest rate increases, which will result in a payback later this year.”

Indeed, the Bank of Canada said Wednesday that “the recent vigour in residential investment may partly reflect activity that has been pulled forward in anticipation of higher interest rates on mortgages.”

Policy makers will be keeping a close eye on the market. Canada’s banking regulator has spent months now considering potential changes to mortgage underwriting rules.

Mr. Poloz declined to weigh in on specific regional markets, suggesting that it’s not clear just how problematic they are.

“It’s true that we have, across the country, pockets of unusual strength in the housing market, unusual in the sense it’s different from the average, but there may be very good fundamental reasons for it,” he told reporters. As examples, he said it’s possible that a sizable portion of net migration is going to Toronto and creating a solid market for condos there, and strong income growth stemming from oil prices will cause strong housing markets in energy-producing areas of the country.

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