Steve Bucher

Greetings

Mortgage rates on the fixed side appear to be headed below 3.5% on a 5 yr fixed. I have not seen this myself before, so, I am pretty sure this will be a record low. The weakness in the stock market is the primary reason so many people are investing in BONDS, increasing the money supple and as this money supply increases, it lowers the cost of money for banks who want to borrow. A rate drop was predicted last March, but I think no one predicted 3.5%~

Keep an eye on this trend if you are looking to buy or renew your mortgage!

Steve

Greetings

Hope you are having a fantastic summer. Mixed news in the mortgage rate market. With the Bank of Canada increasing prime by .25 of a percent, we saw prime to rise to 2.75% for most lenders. That meant even discounted variable rates rose above 2%. Best 3 yr variables start at 2.05% oac, o&oe rates subject to change. Still great rates, but it was sure nice when prime was 2.25% wasn't it!

Fixed rates continue to drop as competition for mortgages increases. We see fixed rates start at 3.99% for a 5 yr fixed and low option 5 yr fixed (aka no frills) start in the 3.89% range, again oac, o&oe, rates subject to change. So great 5 year rates to be had.

Thats all for now, enjoy the summer!

Steve

Greetings

Seems to be 2 types of people this year...folks with non stop vacations and those of us who will work work work through the summer. Hard to say what is motivating so many to leave home every second possible...but I can make some guesses about why folks are staying at home.

Its not really hard to find folks struggling under weight of debt or struggling to meet a financial goal nowadays. They are working to pay the man...and thats it. When will they start working to pay themselves? I have a suggestion! Don't let summer 2010 pass you by. Let me start by attacking a goal I see as primary in the minds of many:

I must pay off my mortgage to $0 as fast as possible

Ever thought that? Ever believed it to be true for yourself? Ever pushed yourself to the financial brink to make paying off your mortgage happen? We all have and i think its time to relax a little...so read on and see what I have to say.

Reasons to relax

1) Your house will probably be worth between 3 and 10 times what it is worth now in 35 years. Do the math, what was your parents home or your home worth in 1975 ($30,000)? What is that house worth today (sold for $380,000 in 2008)? In my situation, the home was worth 12.6X more over 35 years. Many people have been told that the interest they pay on their mortgage is wasted money. This is a foolish thought line. Any asset that can provide a 3X to 10X growth is worth a few dollars in interest - even if it causes you to pay double your initial purchase price.

2) If you starve your family today to payoff your mortgage, YOU WILL end up emotionally and recreationally starved. Goals are supposed to make life better not worse. Kids are only young once, vacations should be enjoyed while you can take it all in and you will actually make more per hour in the future than you make now! The "We can't, we can't we can't", but our mortgage will be paid off in 15 years so we save a few years of mortgage payments 15 years from now really makes no sense. I appreciate that family can sacrifice for the greater good...but there really isn't any! Chances are, you will make up to double your salary in 15 years! In any event, you will make more money then, than you make now, by virtue of inflation. So the payments will be less as a percent of your total income.

3) The dangers - sky rocketing interest rates and eroding home value. Yes, these are nightmare scenerios that can happen. I am not suggesting you pay nothing off on your mortgage, but I am calling for a balance. A 25 year or 35 year amortization can significatly lower your payments, so more money can go to family etc...and you wont have to rely on credit cards for unexpected expenses. If house prices erode, is it better for you to lose the equity or the bank?

To Do - I suggest finding a mortgage lender that allows up to 20% extra lump sum payments per year, but pick the lowest contract payment available. What this does is allow you to control is how much extra money goes to your mortgage. Some people use their mortgage as a forced savings plan and it works for them. At the very least, ask yourself if the approach you are using works for you and your family. I would love to help you evaluate your plan and see if your manner of borrowing is the cheapest available for you. The decision to be curious about this is up to you!

Best regards

Steve

When people come to me for mortgage advice, its sometimes because bills have become harder and harder to manage. Recent new articles show people are more likely to use coupons and discount stores during tight financial times, but is this really the best route to go?

Here are a couple steps you can do to keep the wolves from the door:

1) review all credit card and bank purchases and see what you are spending your money on. If you can, add up the purchases and divide them into categories to see what you spend your money on. You may be able to change your spending habits, by seeing the price affect on your bottom line.

2) review your monthly bills - Cell phones, cable and extras are, well extra. These are a great place to save big money fast. Switch to basic cable if you cant live without it! Switch to a pay as you go card if you cant live without your cellphone! BUT dont pay $100s of dollars you dont have on these luxuries~! AT some point you need to decide if you want your house or "desperate housewives"!

3) coupons - the danger of discounts is that you can save so much, you actually will go broke. Saving 20% on an item is not as good as saving 80% because you didnt buy the item. Discounts can make us think we are saving, when really, the store just got our money...and now its gone. I am not saying dont use coupons, but buying 10 boxes of an expensive cerial because it is on sale, may not be as good as 1 box of what you usually get.

4) Credit cards - This can be really fun. See the 1 - 800 number on the card? Call it and ask the question "Is this the right card for me?" This is a great way to get introductory rates and shift balances from expensive cards to cheaper cards. If the operator does not help you, start quoting the rates of the junk mail you recieve from another credit card company! That usually gets their attention. Beware the yearly card fees, insurance fees etc... ask them to waive them...you never know.

5) Mortgage - your house mortgage is the cheapest money you will ever borrow...but a couple things can make your house mortgage an anchor. Amortization, the number of years to bring the mortgage to $0 - banks, parents and friends may tell you that having a small amortization number is a good thing, but if you cant meet your bills if crisis hits, then your LOW amortization can lead to disaster. I suggest choosing a longer term amortization and picking a lender which allows extra payments each year - in the end, you get the same result. Payments, accelerated biweekly payments look great on paper, but again, in tight financial times, the extra cost can be a burden. If you face some financial hardship, get back to MONTHLY payments right away - dont wait till there is a problem. Refinance, rewriting your mortgage can get you a lower payment, get your amortization back to maximum and get you some extra cash. There are costs associated - legal, penalty and other...but these costs are tiny compared to losing your house.

6) Grow a garden - tomatoes are expensive to buy, but easy to grow. If you want to start small, get a cherry tomato plant and begin to enjoy fresh picked vegetables for free. Carrots, lettuce and peas are some other popular garden plants which are easy to grow. Start small and build up as you get used to how the plants grow.

Feel free to add your own money saving advice on the comment sheets.

Best regards

Steve

www.mortgagebuilder.ca

I have Tulips growing in my front garden and it is only Late February!!! Not usual at all. Fruit trees and shrubs may take the biggest hit, if a late frost occurs or a late winter blast. Sad results in that case for sure.

The housing market has been hot as well. Sunny days seem to bring out the buyers and I have seen multiple offers in many cases. Asking prices seem to be the starting point for bargaining...the days of $10,000 to $20,000 bids below asking appear to be over.

CMHC has posted predictions that there will be a shortage (read smaller than usual inventory) of housing inventory and that certainly seems to be coming true in the short term. For Buyers, being preapproved for a mortgage can be the difference between bidding with confidence or losing the house due to lack of financial preparations. As the market speeds up, buyers will not be able to visit houses 2 or 3 times before making an offer as some listings have sold in the 1st 24 hours!!!

Is it sustainable??? No one really has any experience with the market we are in, the state of our economy or the impact of an HST. If someone was to tell me that the prime rate would remain unchanged at 2.25%for 1 year, i would have called them crazy...and yet, we will soon pass the 12 month mark. Unfortunately, there are no past historical incidences like this we can review and evaluate...this is really brand new. Everybody is a rookie and new rules are being written. People taking advantage of the low interest rates are extatic with their low payments...5% used to be the rule...now we are below 4% in many cases!!! Not bad, this uncertainty thing has a few advantages ;).

So, TODAY, we find a hot market, excellent interest rates and no indications this will change. If you are considering a purchase, I am happy to assist with all your financing needs. Looking for a second opinion? I do that too. Call or email~

Steve Bucher

mortgage intelligence 250 682 6077 steve.bucher@migroup.ca