By Mark Weisleder Moneyville Fri May 27 2011
Buying a house in the city or suburbs can be complicated enough, but buying a cottage or vacation property outside of town requires even more due diligence.
In town, you probably wouldn’t ask if the water coming out of the tap is drinkable. Nor would you wonder if the plumbing was hooked up to the sanitary sewer. But these are exactly the sorts of questions you should ask when buying a cottage, plus a few more.
1. Get an inspection: Cottages are usually occasional residences and so may not be as properly maintained as they should be. This is why every purchase should be conditional a satisfactory professional home inspection. If the cottage has a wood-burning stove or fireplace, then a certificate must be requested from a Wood Energy Technical Transfer specialist, to confirm that the system was installed and is operating correctly.
2. Is the water drinkable? There are two areas of potential concern when it comes to water – the quantity and quality. Is there enough to satisfy family needs and is it good enough to pass the local health department requirements.
Ask the sellers for these things:
• A potability certificate from the local health authority, confirming the water is safe to drink;
• Confirmation that the well, the pump and related equipment have performed adequately during the Seller’s occupancy;
• Confirmation that there is an adequate rate of flow for normal household use;
• Provision of a well driller’s certificate, if available; and
• The location of the well.
A separate inspection may be needed by a well specialist. If nothing else it gives you an idea of what it would cost to replace the well if it fails.
3. How’s the septic system? Septic systems present their own difficulties because it is usually difficult to tell during an inspection how long the system may last. The replacement cost can be up to $20,000, especially if there are stringent environmental regulations in effect in your area.
Buyers should ask for confirmation that:
• The system was installed with all necessary permits;
• The system has been adequately maintained;
• The seller is not aware of any malfunctions;
• The seller will provide copies of any inspection or approval reports in their possession;
• The seller agrees to pump out the tank at their expense prior to closing; and
• There are no work orders on file with the Ministry of the Environment or the local municipality.
The buyer should arrange for their own separate inspection of the system itself.
4. What’s the road allowance? Even if your cottage fronts on water, this does not give you ownership of the land up to the lake. The first 66 feet fronting onto the lake is typically owned by the local municipality and is referred to as the shore road allowance.
Although you have access to the water, you can’t stop others from using it. Nor can you build anything on that 66-foot piece of land. Many cottagers have found out afterwards that either all or part of their cottage was built on land that they do not own.
You may be able to buy the land from the municipality, but it is a process. If you can get an up to date survey from the seller, this should answer your questions. Also inquire to make sure that any required permits were obtained to build a dock or boathouse, as there is no automatic right to do this. In all cases, make sure you have title insurance, which should assist with most of these types of issues.
5. Access to the cottage: If you do not have year round access by a city road, then you must ask how you get from the road to your property. If it is a private right of way over a neighbour’s land, you must understand the terms of this agreement to ensure it is year round access and it is clear who is responsible for maintaining the road.
If there is no registered right of way, it can be a nightmare, with owners fighting over who has the right of way and who owns it.
For all of these reasons, it is recommended that buyers work with a local real estate agent who should be familiar not only with each of these issues, but more importantly, will be able to recommend the professional inspectors and town officials who can satisfy a buyer’s concerns.
By being properly prepared before buying a cottage, you will avoid unwelcome surprises after closing
Tuesday, May 31, 2011
Thursday, May 26, 2011
You — through the eyes of a mortgage lender Golden Girl Finance, On Tuesday May 24
This is a great learning article for ALL buyers. It is a good startiung ace when you are looking at the pros and cons of buying and need a game plan to prpare your self for the future.
Neil "Mortgage Man" McJannet
2011, 11:36 am EDT
If you're a newcomer to Canada, self-employed, work on commission or have a poor credit history, you may think your chances of qualifying for a mortgage or refinancing are slim to none. Think again. It is often possible to find a way - the trick is seeing yourself through the eyes of a mortgage lender.
The 5 C's of borrowing:
Mortgage lenders look for certain characteristics in potential borrowers. Generally, they're attracted by five key criteria:
Capacity — whether your income is sufficient to repay the mortgage once all your other debts are factored in.
Capital — whether the size of your down payment indicates a serious commitment to the property on your part, and sufficient minimization of risk on the part of the lender.
Collateral — whether the property is of sufficient value and marketability to cover the amount borrowed.
Character — your reputation and reliability, usually based on factors such as your education, employment history and residence.
Credit — your history of meeting credit obligations, which is based on credit-bureau records for the past six years.
If your qualifications are less than stellar in any of these areas, a traditional lender may not accept you. But that doesn't necessarily mean you can't get a mortgage. Like we said before, it is possible! You just need to find the right match.
Bringing your best qualities to light
Many lenders may be perfectly willing to accept you as long as they view you as a reasonable credit risk overall. For example, if you are new to Canada, lenders may consider you based on the steady nature of your employment or the size of your down payment.
Likewise, if you are newly self-employed and can't prove a regular income, the lender may instead look at your debt load, credit history and business plan. If these are all very positive, the fact that you don't have an earnings history may not be so important.
And if your financial reputation is marred by a poor credit history, but you've have taken discernable steps to improve your rating and your debts are under control, your current income and down payment may be enough compensation.
Finding your perfect mortgage match
Each mortgage lender has its own particular requirements. Professional advice can go a long way in helping you find the right one. The right lender will be a good match for your situation, so that the mortgage you get meets your needs.
A financial professional can also help you put the steps in place so that you can make the most out of your best qualities and help you overcome mortgage hurdles — whether they're real or perceived. Remember that you are most often your own worst critic. Let others see the good.
Neil "Mortgage Man" McJannet
2011, 11:36 am EDT
If you're a newcomer to Canada, self-employed, work on commission or have a poor credit history, you may think your chances of qualifying for a mortgage or refinancing are slim to none. Think again. It is often possible to find a way - the trick is seeing yourself through the eyes of a mortgage lender.
The 5 C's of borrowing:
Mortgage lenders look for certain characteristics in potential borrowers. Generally, they're attracted by five key criteria:
Capacity — whether your income is sufficient to repay the mortgage once all your other debts are factored in.
Capital — whether the size of your down payment indicates a serious commitment to the property on your part, and sufficient minimization of risk on the part of the lender.
Collateral — whether the property is of sufficient value and marketability to cover the amount borrowed.
Character — your reputation and reliability, usually based on factors such as your education, employment history and residence.
Credit — your history of meeting credit obligations, which is based on credit-bureau records for the past six years.
If your qualifications are less than stellar in any of these areas, a traditional lender may not accept you. But that doesn't necessarily mean you can't get a mortgage. Like we said before, it is possible! You just need to find the right match.
Bringing your best qualities to light
Many lenders may be perfectly willing to accept you as long as they view you as a reasonable credit risk overall. For example, if you are new to Canada, lenders may consider you based on the steady nature of your employment or the size of your down payment.
Likewise, if you are newly self-employed and can't prove a regular income, the lender may instead look at your debt load, credit history and business plan. If these are all very positive, the fact that you don't have an earnings history may not be so important.
And if your financial reputation is marred by a poor credit history, but you've have taken discernable steps to improve your rating and your debts are under control, your current income and down payment may be enough compensation.
Finding your perfect mortgage match
Each mortgage lender has its own particular requirements. Professional advice can go a long way in helping you find the right one. The right lender will be a good match for your situation, so that the mortgage you get meets your needs.
A financial professional can also help you put the steps in place so that you can make the most out of your best qualities and help you overcome mortgage hurdles — whether they're real or perceived. Remember that you are most often your own worst critic. Let others see the good.
Wednesday, May 25, 2011
BoC rate hike on hold until September: RBC
Eric Lam Financial Post May 24, 2011
The Bank of Canada’s plan to raise interest rates and exit its stimulus program has been delayed to September due to renewed uncertainty about the fiscal crunch in Europe and its potential spillover effects into Canada, the team at RBC Economics said Tuesday.
Dawn Desjardins, assistant chief economist with RBC, expects the BoC to maintain its 1.00% rate until September, and has cut the forecast rate to 1.75% by the end of 2011 from 2.00%. RBC maintains expectations for the overnight rate to hit 2.5% in mid-2012, and forecast GDP growth of 3.2% in 2011 and 3.1% in 2012.
RBC had originally forecasted rate hikes in July, September, October and December this year. The bank now only expects hikes in September, October and December, Ms. Desjardins said in an e-mail.
“Combined with already-present downside risks to domestic growth in the second quarter, the Bank of Canada is likely to remain on the sidelines longer than we previously thought,” she said in a note to clients. “Complicating the outlook are global developments with the European sovereign debt crisis bringing fiscal and debt rating concerns to the forefront for investors. In the United States, economic surprises have been to the downside.”
So far, the Canadian economy looks to be holding steady with data suggesting 0.3% growth in March after a dip in February. Monthly growth figures put the economy on pace for 3.7% growth with risks on the upside.
Persistent strength in housing and growth in household credit, however, means the BoC cannot wait too long before taking action to avoid inflationary pressure.
“On balance we remain comfortable with our forecast of real GDP growth of 2.8% annualized in the second quarter although unlike in the first quarter where the risks are to the upside, the risks to our Q2 forecast are to the downside,” she said.
The Bank of Canada’s plan to raise interest rates and exit its stimulus program has been delayed to September due to renewed uncertainty about the fiscal crunch in Europe and its potential spillover effects into Canada, the team at RBC Economics said Tuesday.
Dawn Desjardins, assistant chief economist with RBC, expects the BoC to maintain its 1.00% rate until September, and has cut the forecast rate to 1.75% by the end of 2011 from 2.00%. RBC maintains expectations for the overnight rate to hit 2.5% in mid-2012, and forecast GDP growth of 3.2% in 2011 and 3.1% in 2012.
RBC had originally forecasted rate hikes in July, September, October and December this year. The bank now only expects hikes in September, October and December, Ms. Desjardins said in an e-mail.
“Combined with already-present downside risks to domestic growth in the second quarter, the Bank of Canada is likely to remain on the sidelines longer than we previously thought,” she said in a note to clients. “Complicating the outlook are global developments with the European sovereign debt crisis bringing fiscal and debt rating concerns to the forefront for investors. In the United States, economic surprises have been to the downside.”
So far, the Canadian economy looks to be holding steady with data suggesting 0.3% growth in March after a dip in February. Monthly growth figures put the economy on pace for 3.7% growth with risks on the upside.
Persistent strength in housing and growth in household credit, however, means the BoC cannot wait too long before taking action to avoid inflationary pressure.
“On balance we remain comfortable with our forecast of real GDP growth of 2.8% annualized in the second quarter although unlike in the first quarter where the risks are to the upside, the risks to our Q2 forecast are to the downside,” she said.
Tuesday, May 24, 2011
Low interest rates seen sticking around
MARTIN MITTELSTAEDT
Tuesday's Globe and Mail
Interest rates have recently being going somewhere unexpected: down.
At their trough last week, the yields on 10-year U.S. Treasuries, the benchmark North American rate, touched 3.11 per cent, the lowest level in six months and more than half a percentage point below their February peak.
Yields on 10-year Government of Canada bonds have fallen, too, and are now virtually identical to their U.S. counterparts.
The sliding rates have surprised many market watchers. With the United States government bumping up against its debt ceiling, inflation ticking upward, and a growing debt crisis in Europe, most expected interest rates to be increasing.
While predicting the future for rates is notoriously difficult, some observers believe that the current low-rate environment may continue for a while. If so, it will mean pain for savers, but good news for borrowers.
A drop in interest rates is equivalent to a sale on the price of money, and corporations are already rushing to take advantage of the easy lending conditions, even if they’re in no immediate need of funds. A case in point is Google Inc., which has $37-billion (U.S.) in cash and marketable securities on its balance sheet, but raised $3-billion from a bond issue last week anyway. Mortgage rates have fallen, too – good news for homeowners looking to refinance.
But lower rates have not turned out so well for some of the market’s savviest players, including Bill Gross, the founder of Pimco, the world’s biggest bond fund. Earlier this year, he sold his U.S. Treasuries, because he thought interest rates were poised to rocket higher, which would drive down prices of bonds.
It’s difficult to fault his logic: only a few months ago, the case for higher interest rates seemed so compelling.
Governments around the world are carrying bloated deficits and massive borrowing needs. In the United States, politicians have yet to agree on any clear path to deficit reduction, despite more than $1-trillion in annual red ink. Meanwhile, oil has been trading consistently around the $100-a-barrel level, thereby lifting inflation, another bond-market negative.
And the U.S. Federal Reserve is no longer putting its thumb on the scale. In less than six weeks, it is going to end its program of quantitative easing, under which it is buying $600-billion in Treasuries to goose the economy. Many bond-market followers believe the Fed’s massive buying binge has been propping up Treasury prices and keeping yields artificially low.
So what has been pushing rates lower in recent months?
A weaker-than-expected recovery is the major culprit. “The global economy, and the U.S. economy in particular, is not on quite as solid a recovery track as people were imagining in the very optimistic days of six months or so ago,” observes Peter Buchanan, senior economist at CIBC World Markets.
A slew of recent statistics underlines that weakness, ranging from the poor state of U.S. home sales to the slowing pace of U.S. manufacturing growth. Meanwhile, the Japanese economy, the world’s third-largest, is shrinking and creating a further drag on global commerce, although few foresee a double-dip recession.
“We’re looking ahead toward a bit of a cooling in economic growth,” said Paul Dales, senior U.S. economist at Capital Economics, who foresees output in the U.S. rising about 2 per cent this year.
That level of growth won’t be “anything to celebrate but it’s nothing like the recession we saw previously,” he said.
Another factor driving rates lower has been the early May rout in commodities, which dampened some of the worry on the inflation front. In addition, the recent sluggish performance of the stock market suggests that investors are getting nervous and growing more willing to buy super-safe government bonds.
Mr. Dales believes the current trends have room to run, and that rates will surprise to the downside.
He predicts U.S. 10-year Treasury yields could slip to 2.5 per cent in the low-growth, less inflation-spooked environment he foresees ahead.
If growth continues to be slow, lower rates might be staying around for a while.
Mr. Buchanan says the most likely scenario, given the poorer economic outlook, is for the Fed to hold off on raising rates until 2013. He believes the yield on Treasuries will rise gradually, instead of falling further, getting back to 3.4 per cent by the end of this year and to 4 per cent by the end of 2012.
Tuesday's Globe and Mail
Interest rates have recently being going somewhere unexpected: down.
At their trough last week, the yields on 10-year U.S. Treasuries, the benchmark North American rate, touched 3.11 per cent, the lowest level in six months and more than half a percentage point below their February peak.
Yields on 10-year Government of Canada bonds have fallen, too, and are now virtually identical to their U.S. counterparts.
The sliding rates have surprised many market watchers. With the United States government bumping up against its debt ceiling, inflation ticking upward, and a growing debt crisis in Europe, most expected interest rates to be increasing.
While predicting the future for rates is notoriously difficult, some observers believe that the current low-rate environment may continue for a while. If so, it will mean pain for savers, but good news for borrowers.
A drop in interest rates is equivalent to a sale on the price of money, and corporations are already rushing to take advantage of the easy lending conditions, even if they’re in no immediate need of funds. A case in point is Google Inc., which has $37-billion (U.S.) in cash and marketable securities on its balance sheet, but raised $3-billion from a bond issue last week anyway. Mortgage rates have fallen, too – good news for homeowners looking to refinance.
But lower rates have not turned out so well for some of the market’s savviest players, including Bill Gross, the founder of Pimco, the world’s biggest bond fund. Earlier this year, he sold his U.S. Treasuries, because he thought interest rates were poised to rocket higher, which would drive down prices of bonds.
It’s difficult to fault his logic: only a few months ago, the case for higher interest rates seemed so compelling.
Governments around the world are carrying bloated deficits and massive borrowing needs. In the United States, politicians have yet to agree on any clear path to deficit reduction, despite more than $1-trillion in annual red ink. Meanwhile, oil has been trading consistently around the $100-a-barrel level, thereby lifting inflation, another bond-market negative.
And the U.S. Federal Reserve is no longer putting its thumb on the scale. In less than six weeks, it is going to end its program of quantitative easing, under which it is buying $600-billion in Treasuries to goose the economy. Many bond-market followers believe the Fed’s massive buying binge has been propping up Treasury prices and keeping yields artificially low.
So what has been pushing rates lower in recent months?
A weaker-than-expected recovery is the major culprit. “The global economy, and the U.S. economy in particular, is not on quite as solid a recovery track as people were imagining in the very optimistic days of six months or so ago,” observes Peter Buchanan, senior economist at CIBC World Markets.
A slew of recent statistics underlines that weakness, ranging from the poor state of U.S. home sales to the slowing pace of U.S. manufacturing growth. Meanwhile, the Japanese economy, the world’s third-largest, is shrinking and creating a further drag on global commerce, although few foresee a double-dip recession.
“We’re looking ahead toward a bit of a cooling in economic growth,” said Paul Dales, senior U.S. economist at Capital Economics, who foresees output in the U.S. rising about 2 per cent this year.
That level of growth won’t be “anything to celebrate but it’s nothing like the recession we saw previously,” he said.
Another factor driving rates lower has been the early May rout in commodities, which dampened some of the worry on the inflation front. In addition, the recent sluggish performance of the stock market suggests that investors are getting nervous and growing more willing to buy super-safe government bonds.
Mr. Dales believes the current trends have room to run, and that rates will surprise to the downside.
He predicts U.S. 10-year Treasury yields could slip to 2.5 per cent in the low-growth, less inflation-spooked environment he foresees ahead.
If growth continues to be slow, lower rates might be staying around for a while.
Mr. Buchanan says the most likely scenario, given the poorer economic outlook, is for the Fed to hold off on raising rates until 2013. He believes the yield on Treasuries will rise gradually, instead of falling further, getting back to 3.4 per cent by the end of this year and to 4 per cent by the end of 2012.
Monday, May 16, 2011
Refinancing And Debt Consolidation
Refinancing and consolidating debt can be one of the smartest financial moves you can make for a number of reasons. Managing cash flow is the single most important aspect in relation to protecting your personal credit. I see many couples with substantial equity in their home fall behind on credit card payments. Refinancing at this point may be impossible due to a bad credit report. Debt consolidation the best solution is no longer an option. Proper cash flow management should include adjusting quickly to any anticipated change in cash flow requirements before your credit is affected and your ability to borrow restricted or possibly eliminated.
Let us assume you have $10,000 in credit card debt at 18%. That is costing you $1800 per year in interest charges. Rolled into your mortgage at our current 3.79% rate that would cost you $379 in interest. With your credit card your minimum monthly payment might be $200. Rolled into your mortgage it would be approx $50. These are approx amounts but you can see the advantages to consolidating your debt by refinancing your mortgage.
The purpose of this article is to tell you to not wait until it is too late and your credit has been affected. Many of us struggle with not enough month at the end of the money. Tapping the tax free equity in your home can be key to smoothing out those fluctuations in cash flow that many of us experience.
Money in the bank can mean peace of mind when unexpected cash flow problems arrive. Remember this old saying " Never go the the bank on a rainy day for money for an umbrella" . The best way to get money from a lender is to convince them you don't need money. Refinance your mortgage when times are good and before cash flow problems arise. Take charge of your financial affairs. Don't let your financial affairs take charge of you. For more information on mortgage financing feel free to contact me.
Larry Matthews
Let us assume you have $10,000 in credit card debt at 18%. That is costing you $1800 per year in interest charges. Rolled into your mortgage at our current 3.79% rate that would cost you $379 in interest. With your credit card your minimum monthly payment might be $200. Rolled into your mortgage it would be approx $50. These are approx amounts but you can see the advantages to consolidating your debt by refinancing your mortgage.
The purpose of this article is to tell you to not wait until it is too late and your credit has been affected. Many of us struggle with not enough month at the end of the money. Tapping the tax free equity in your home can be key to smoothing out those fluctuations in cash flow that many of us experience.
Money in the bank can mean peace of mind when unexpected cash flow problems arrive. Remember this old saying " Never go the the bank on a rainy day for money for an umbrella" . The best way to get money from a lender is to convince them you don't need money. Refinance your mortgage when times are good and before cash flow problems arise. Take charge of your financial affairs. Don't let your financial affairs take charge of you. For more information on mortgage financing feel free to contact me.
Larry Matthews
Finance Minister Flaherty Loosens Grip.
Earlier this week there was a welcomed announcement from Finance Minister Jim Flaherty.
After two consecutive years of tightening mortgage rules, Minister Flaherty has announced that he won’t be making any more changes in the near future, stating that his priority right now is the federal budget, after the Conservatives came away with a majority government.
The Minister said that he’s had to step in three times and there’s no need for any more involvement because the market appears to be moving in the right direction. He also noted that he doesn’t believe there were any unintended consequences to the housing market or economy from the measures taken during the crisis to keep the country afloat.
He said that he kept a close eye on the housing market and decided to step in when he felt like it was required and concerns of risk were high.
Flaherty said his government will present a slightly revamped budget in June. It will be changed to reflect an economic update and may include some items from the election platform, but will be largely the same budget he presented in March, he said.
Flaherty voiced his concerns over the raging conflicts in the Middle East and Northern Africa, sovereign debt issues, as well as the natural disaster in Japan which has caused blips in the economy.
It is evident in both the local and national markets that the market has been softening as of late, hopefully heading off a housing bubble, and also in which the dramatic increase in prices have pushed many marginal buyers out of the picture.
After two consecutive years of tightening mortgage rules, Minister Flaherty has announced that he won’t be making any more changes in the near future, stating that his priority right now is the federal budget, after the Conservatives came away with a majority government.
The Minister said that he’s had to step in three times and there’s no need for any more involvement because the market appears to be moving in the right direction. He also noted that he doesn’t believe there were any unintended consequences to the housing market or economy from the measures taken during the crisis to keep the country afloat.
He said that he kept a close eye on the housing market and decided to step in when he felt like it was required and concerns of risk were high.
Flaherty said his government will present a slightly revamped budget in June. It will be changed to reflect an economic update and may include some items from the election platform, but will be largely the same budget he presented in March, he said.
Flaherty voiced his concerns over the raging conflicts in the Middle East and Northern Africa, sovereign debt issues, as well as the natural disaster in Japan which has caused blips in the economy.
It is evident in both the local and national markets that the market has been softening as of late, hopefully heading off a housing bubble, and also in which the dramatic increase in prices have pushed many marginal buyers out of the picture.
Friday, May 13, 2011
Money-saving tips on driving “fuel- efficiently”
And use those savings towards a down payment on a home.
Neil "Mortgage Man" McJannet
The Canadian Automobile Association offers these tips for drivers on how to use less fuel and save money:
Avoid jackrabbit starts and hard braking: it can burn as much as 39 per cent more fuel.
Slow down — even a little. Tests have shown that most cars use about 20 per cent less fuel driving at 90 km/h than at 110 km/h.
Avoid idling. Remember, the worst fuel economy rating is zero, and that’s what your fuel economy is while you’re idling.
Consider a smaller engine. In a mid-sized car, a six-cylinder engine can burn up to 400 litres more fuel a year than a four-cylinder engine.
Avoid using roof racks when not required. They have a major impact on fuel consumption due to the air resistance they add to your vehicle
Avoid excessive weight in your vehicle. Every 45 kilograms of extra weight can increase your fuel consumption two per cent. If you have unneeded cargo in your trunk, remove it.
Neil "Mortgage Man" McJannet
The Canadian Automobile Association offers these tips for drivers on how to use less fuel and save money:
Avoid jackrabbit starts and hard braking: it can burn as much as 39 per cent more fuel.
Slow down — even a little. Tests have shown that most cars use about 20 per cent less fuel driving at 90 km/h than at 110 km/h.
Avoid idling. Remember, the worst fuel economy rating is zero, and that’s what your fuel economy is while you’re idling.
Consider a smaller engine. In a mid-sized car, a six-cylinder engine can burn up to 400 litres more fuel a year than a four-cylinder engine.
Avoid using roof racks when not required. They have a major impact on fuel consumption due to the air resistance they add to your vehicle
Avoid excessive weight in your vehicle. Every 45 kilograms of extra weight can increase your fuel consumption two per cent. If you have unneeded cargo in your trunk, remove it.
Five steps to scoring a mortgage
Amy Fontinelle Investopedia.com
A variety of factors can keep you from qualifying for a mortgage. The big ones include a low credit score, insufficient income for the size of the loan you want, insufficient down payment and excessive debt. All of these factors are within your control, however. Let's take a look at your options for overcoming any liabilities you may have as a borrower
1. Repair Your Credit and Increase Your Score
To lenders, your credit score represents the likelihood that you will make your mortgage payments in full and on time every month. Therefore, with most loans, the lower your credit score, the higher your interest rate will be to compensate for the increased risk of lending you money. If your credit score is below 620, you will be considered subprime and will have difficulty getting a loan at all, let alone one with favourable terms. On the other hand, if you have a credit score above 800, you'll easily be able to get the best interest rate available (also known as the par rate). (Find out how your borrowing activities affect your credit rating in The Importance Of Your Credit Rating.)
Measures you can take to improve your credit score relatively quickly include paying down revolving consumer debts, such as credit cards or auto loans, using your debit card instead of your credit cards for future purchases, paying your bills on time every month and correcting any errors on your credit report. However, some flaws, like seriously late payments, collections, charge-offs, bankruptcy and foreclosure, will only be healed with time. (Read How To Dispute Errors On Your Credit Report to find out how to address reporting mistakes.)
In addition to managing your existing credit responsibly, don't open any new credit accounts. Applying for new credit temporarily lowers your credit score, and having too much available credit is also considered a warning sign. Lenders may be afraid that if you have a lot of available credit, you'll take advantage of it one day and adversely affect your ability to make your mortgage payments. (For more tips and techniques to help you rebuild your ruined credit rating, read Five Keys To Unlocking A Better Credit Score.)
2. Get a Higher-Paying Job
If lenders say your income isn't high enough, ask them (or your mortgage broker) how much more you need to earn to qualify for the loan amount you want. Then try to find a new job in your existing line of work where you'll be able to earn that much money.
Because lenders like to see a steady employment history, you'll have to stay in the same line of work for this strategy to be successful. This can be disappointing news for borrowers, as switching professions entirely might offer the best chances for a salary increase. However, switching companies can also be a good way to get a significant boost in income. Significant raises from existing employers aren't that common, but a new employer knows he'll have to offer something special to get you to make the switch. (Read Negotiating For Employment Perks for tips on reaching an agreement with your boss.)
If switching companies right now won't be enough to get the raise you need, think about things you can do relatively quickly to make yourself more valuable to employers. Is there a continuing education program that you could complete? If you're a legal secretary, could you become a paralegal? If you're a receptionist, could you become a secretary? A career counselor or headhunter might be able to give you some guidance specific to your situation about how to improve your marketability and how to reach your income goals. (Read Six Steps To Successfully Switching Financial Careers to learn how to make adjustments without starting over.)
Unfortunately, getting a part-time job on top of your full-time job may not provide what lenders consider qualifying income. The part-time job may be viewed as temporary, and since it will probably take you at least 15 years to pay off your mortgage, lenders are looking for you to have long-term income stability. (Increase Your Disposable Income gives you ideas on how to make more money now, which can make a big difference down the line.)
3. Save Like Crazy
The larger your down payment, the smaller the loan you'll need. In addition, the lower your loan-to-value ratio (LTV ratio), the less risky lenders will consider you. Both of these factors will make you more likely to qualify for a loan. Be aware that you may have to reach a certain down payment threshold, like 10 per cent or 20 per cent (with 20 per cent being the most conventional), before a larger down payment will help you qualify for a loan. (Learn more in Mortgages: How Much Can You Afford?)
4. Don't Pay More Than the Bank's Appraised Value
The bank will not want to lend more than the house is worth because they could be on the losing end of the deal, should you foreclose and owe more than the bank could get for it. A 20 per cent down payment also becomes much less valuable if the house is worth 20 per cent less than the purchase price. Collateral value is important to lenders, so it should be kept in mind when making an offer to purchase a property. (Read 10 Tips For Getting A Fair Price On A Home and learn how to make sure your house is worth the price you pay.)
5. Reduce Your Debt
To a lender, what constitutes excessive debt is not a set number - it's a total monthly debt payment that is too high for you to be able to afford the monthly mortgage payment you're asking for. When deciding how much loan you qualify for, lenders will look at what's called the front-end ratio, or the percentage of your gross monthly income that will be taken up by your house payment (principal, interest, property tax and homeowners insurance), and the back-end ratio, or the percentage of your gross monthly income that will be taken up by the house payment plus your other monthly obligations, such as student loans, credit cards and car payments.
The more debt you're required to pay off each month, whether it's “good debt” like a student loan or “bad debt” like a high-interest credit card, the lower the monthly housing payment lenders will decide you can afford, and the lower the purchase price you'll be able to afford. Decreasing your debt is one of the fastest and most effective ways to increase the size of loan you're eligible for. (Learn what to watch for before you find yourself drowning in debt in Five Signs That You're Living Beyond Your Means.)
Playing to Win
Qualifying for a mortgage isn't always easy. Lenders require all applicants to meet certain financial tests and guidelines and allow a limited amount of flexibility within those rules. If you want to score a mortgage, you'll have to learn how to play the game, and you're likely to win if you take the steps outlined here
A variety of factors can keep you from qualifying for a mortgage. The big ones include a low credit score, insufficient income for the size of the loan you want, insufficient down payment and excessive debt. All of these factors are within your control, however. Let's take a look at your options for overcoming any liabilities you may have as a borrower
1. Repair Your Credit and Increase Your Score
To lenders, your credit score represents the likelihood that you will make your mortgage payments in full and on time every month. Therefore, with most loans, the lower your credit score, the higher your interest rate will be to compensate for the increased risk of lending you money. If your credit score is below 620, you will be considered subprime and will have difficulty getting a loan at all, let alone one with favourable terms. On the other hand, if you have a credit score above 800, you'll easily be able to get the best interest rate available (also known as the par rate). (Find out how your borrowing activities affect your credit rating in The Importance Of Your Credit Rating.)
Measures you can take to improve your credit score relatively quickly include paying down revolving consumer debts, such as credit cards or auto loans, using your debit card instead of your credit cards for future purchases, paying your bills on time every month and correcting any errors on your credit report. However, some flaws, like seriously late payments, collections, charge-offs, bankruptcy and foreclosure, will only be healed with time. (Read How To Dispute Errors On Your Credit Report to find out how to address reporting mistakes.)
In addition to managing your existing credit responsibly, don't open any new credit accounts. Applying for new credit temporarily lowers your credit score, and having too much available credit is also considered a warning sign. Lenders may be afraid that if you have a lot of available credit, you'll take advantage of it one day and adversely affect your ability to make your mortgage payments. (For more tips and techniques to help you rebuild your ruined credit rating, read Five Keys To Unlocking A Better Credit Score.)
2. Get a Higher-Paying Job
If lenders say your income isn't high enough, ask them (or your mortgage broker) how much more you need to earn to qualify for the loan amount you want. Then try to find a new job in your existing line of work where you'll be able to earn that much money.
Because lenders like to see a steady employment history, you'll have to stay in the same line of work for this strategy to be successful. This can be disappointing news for borrowers, as switching professions entirely might offer the best chances for a salary increase. However, switching companies can also be a good way to get a significant boost in income. Significant raises from existing employers aren't that common, but a new employer knows he'll have to offer something special to get you to make the switch. (Read Negotiating For Employment Perks for tips on reaching an agreement with your boss.)
If switching companies right now won't be enough to get the raise you need, think about things you can do relatively quickly to make yourself more valuable to employers. Is there a continuing education program that you could complete? If you're a legal secretary, could you become a paralegal? If you're a receptionist, could you become a secretary? A career counselor or headhunter might be able to give you some guidance specific to your situation about how to improve your marketability and how to reach your income goals. (Read Six Steps To Successfully Switching Financial Careers to learn how to make adjustments without starting over.)
Unfortunately, getting a part-time job on top of your full-time job may not provide what lenders consider qualifying income. The part-time job may be viewed as temporary, and since it will probably take you at least 15 years to pay off your mortgage, lenders are looking for you to have long-term income stability. (Increase Your Disposable Income gives you ideas on how to make more money now, which can make a big difference down the line.)
3. Save Like Crazy
The larger your down payment, the smaller the loan you'll need. In addition, the lower your loan-to-value ratio (LTV ratio), the less risky lenders will consider you. Both of these factors will make you more likely to qualify for a loan. Be aware that you may have to reach a certain down payment threshold, like 10 per cent or 20 per cent (with 20 per cent being the most conventional), before a larger down payment will help you qualify for a loan. (Learn more in Mortgages: How Much Can You Afford?)
4. Don't Pay More Than the Bank's Appraised Value
The bank will not want to lend more than the house is worth because they could be on the losing end of the deal, should you foreclose and owe more than the bank could get for it. A 20 per cent down payment also becomes much less valuable if the house is worth 20 per cent less than the purchase price. Collateral value is important to lenders, so it should be kept in mind when making an offer to purchase a property. (Read 10 Tips For Getting A Fair Price On A Home and learn how to make sure your house is worth the price you pay.)
5. Reduce Your Debt
To a lender, what constitutes excessive debt is not a set number - it's a total monthly debt payment that is too high for you to be able to afford the monthly mortgage payment you're asking for. When deciding how much loan you qualify for, lenders will look at what's called the front-end ratio, or the percentage of your gross monthly income that will be taken up by your house payment (principal, interest, property tax and homeowners insurance), and the back-end ratio, or the percentage of your gross monthly income that will be taken up by the house payment plus your other monthly obligations, such as student loans, credit cards and car payments.
The more debt you're required to pay off each month, whether it's “good debt” like a student loan or “bad debt” like a high-interest credit card, the lower the monthly housing payment lenders will decide you can afford, and the lower the purchase price you'll be able to afford. Decreasing your debt is one of the fastest and most effective ways to increase the size of loan you're eligible for. (Learn what to watch for before you find yourself drowning in debt in Five Signs That You're Living Beyond Your Means.)
Playing to Win
Qualifying for a mortgage isn't always easy. Lenders require all applicants to meet certain financial tests and guidelines and allow a limited amount of flexibility within those rules. If you want to score a mortgage, you'll have to learn how to play the game, and you're likely to win if you take the steps outlined here
Wednesday, May 11, 2011
Canada's economy creating more full-time, and better paying jobs
By Julian Beltrame, The Canadian Press
OTTAWA - The Canadian economy is not only creating more jobs, it's creating better jobs according to one of the country's major banks.
CIBC's latest employment quality index shows that 60 per cent of new jobs created over the past year would qualify as high-paying, quality jobs.
The bank says there's been an increase in full-time and paid employment, as opposed to self-employment, over the past 12 months — helping push the employment quality index up 2.7 per cent.
The sharp improvement has come about because many of the 283,000 jobs created in the past year have been in relatively high-paying sectors, including manufacturing, finance, construction and the public service.
Previously, the new jobs created since the end of the recession in the summer of 2009 have tended to be part-time and in lower-paying service industries.
"This (quality) measure is roughly back to the pre-recession levels," said economist Benjamin Tal. "This is a much better performance than a similar measure in the U.S., where the quality of employment index continues to soften despite some improvement in the pace of job creation."
Canada's employment record since the end of the recession has been among the strongest in the industrialized world with over 500,000 new jobs added since July 2009. That's about 80,000 more than was lost during the 2008-2009 recession.
By contrast, the United States remains about six million jobs shy of its pre-crisis levels.
But despite the full rebound in the jobs market, the complaint had been that many of those new jobs were not of the same quality as the jobs that vanished. Some economists derided them as service industry McJobs, or part-time, or "forced self-employment" by those who create their own form of employment — usually lower paying — because they can't find regular work.
Over the past 12 months, that trend has started to reverse. Almost all the new jobs have been in paid employment, not self-employment.
As well, growth in full-time jobs has outnumbered part-time by more than two-to-one, and well-paying jobs in manufacturing, construction, the financial sector and government have outnumbered low-paying jobs three-to-one.
The question is whether the new and better composition of job creation will continue. There is some evidence it might not, says Tal, noting of the 58,000 new jobs added last month, two-thirds were part-time.
"It's clear that governments will not be hiring in the future and the housing market will not be as strong," undercutting two of the sectors that have been producing high quality jobs, Tal explained.
However, the export sector, which tends to generate higher-paying jobs, is expected to be a leading engine of growth going forward and may be sufficiently robust to take up the slack.
The improvement in the quality of jobs has been good for the economy, the report states, since higher pay puts more money in the pockets of homeowners to spend on consumer goods.
"The impact of job creation on income growth and thus spending is currently more notable than it was in early 2010," Tal said, which will put pressure on the Bank of Canada to hike interest rates in the second half of the year.
Canada's economy also got a thumbs up Monday from the Organization for Economic Co-operation and Development, which forecast Canada would continue to be at the forefront of the global economic recovery.
In its May report on composite leading indicators, the OECD put Canada alongside China as countries with a "regained momentum in economic activity."
Economies in the U.S., Germany and Russia are improving. Overall, the international think-tank says most European countries will experience a slower or stable expansion. Some, like Italy, Brazil and India are pointing to slower growth relative to their trends
OTTAWA - The Canadian economy is not only creating more jobs, it's creating better jobs according to one of the country's major banks.
CIBC's latest employment quality index shows that 60 per cent of new jobs created over the past year would qualify as high-paying, quality jobs.
The bank says there's been an increase in full-time and paid employment, as opposed to self-employment, over the past 12 months — helping push the employment quality index up 2.7 per cent.
The sharp improvement has come about because many of the 283,000 jobs created in the past year have been in relatively high-paying sectors, including manufacturing, finance, construction and the public service.
Previously, the new jobs created since the end of the recession in the summer of 2009 have tended to be part-time and in lower-paying service industries.
"This (quality) measure is roughly back to the pre-recession levels," said economist Benjamin Tal. "This is a much better performance than a similar measure in the U.S., where the quality of employment index continues to soften despite some improvement in the pace of job creation."
Canada's employment record since the end of the recession has been among the strongest in the industrialized world with over 500,000 new jobs added since July 2009. That's about 80,000 more than was lost during the 2008-2009 recession.
By contrast, the United States remains about six million jobs shy of its pre-crisis levels.
But despite the full rebound in the jobs market, the complaint had been that many of those new jobs were not of the same quality as the jobs that vanished. Some economists derided them as service industry McJobs, or part-time, or "forced self-employment" by those who create their own form of employment — usually lower paying — because they can't find regular work.
Over the past 12 months, that trend has started to reverse. Almost all the new jobs have been in paid employment, not self-employment.
As well, growth in full-time jobs has outnumbered part-time by more than two-to-one, and well-paying jobs in manufacturing, construction, the financial sector and government have outnumbered low-paying jobs three-to-one.
The question is whether the new and better composition of job creation will continue. There is some evidence it might not, says Tal, noting of the 58,000 new jobs added last month, two-thirds were part-time.
"It's clear that governments will not be hiring in the future and the housing market will not be as strong," undercutting two of the sectors that have been producing high quality jobs, Tal explained.
However, the export sector, which tends to generate higher-paying jobs, is expected to be a leading engine of growth going forward and may be sufficiently robust to take up the slack.
The improvement in the quality of jobs has been good for the economy, the report states, since higher pay puts more money in the pockets of homeowners to spend on consumer goods.
"The impact of job creation on income growth and thus spending is currently more notable than it was in early 2010," Tal said, which will put pressure on the Bank of Canada to hike interest rates in the second half of the year.
Canada's economy also got a thumbs up Monday from the Organization for Economic Co-operation and Development, which forecast Canada would continue to be at the forefront of the global economic recovery.
In its May report on composite leading indicators, the OECD put Canada alongside China as countries with a "regained momentum in economic activity."
Economies in the U.S., Germany and Russia are improving. Overall, the international think-tank says most European countries will experience a slower or stable expansion. Some, like Italy, Brazil and India are pointing to slower growth relative to their trends
Tuesday, May 3, 2011
Nine signs you can't afford a mortgage
Michele Lerner Investopedia.com
While plenty of individuals live from paycheque to paycheque, most consumers know they should be saving money and reducing debt. The recession has drummed that concept into everyone's head as people have watched their neighbours and friends lose jobs and sometimes their home.
Many people say that money worries keep them awake at night, but that doesn't necessarily translate to imminent bankruptcy. How do you know when you are truly teetering on the edge of a financial disaster versus simply needing to do a little belt-tightening?
Here are nine signs that indicate you are heading for trouble and may be unable to pay your mortgage in upcoming months:
1. Late Fees
If you missed a payment or let your bill go past due because you didn't have the money to pay your mortgage or another bill on time, you need to re-evaluate your budget. Not only does this indicate an imbalance between your income and expenditures, but it will also ruin your credit score, potentially causing your creditors to increase your interest rate.
2. You Can't Pay All of Your Bills
Every month, you are forced to decide which bills to pay and which bills to ignore. A lot of people opt to pay their credit card bill to stop harassment from the credit card company and to make sure they have available credit. But it is far more important to pay the bills that protect your home first. Always pay your mortgage first so that you will have a place to live. Next, pay for your car so that you can get to work and keep your job.
3. Making Minimum Payments on Credit Cards
In your mind, paying the minimum due on each bill may mean you are keeping up with your financial commitments, but financial experts know that minimum-only payments are a key indicator of financial distress. While this may mean that you carry too much debt, this also means that all your income is barely covering your spending. Take a careful look at your mortgage payment, other debts and your income to get back on track. Paying only the minimum on credit cards will extend your debt for years and amass expensive interest payments.
4. No Emergency Savings
While amassing six to 12 months of funds to cover you expenses, as many financial planners now recommend, may be a monumental task, every homeowner should have at least one month's worth of expenses in the bank. At the very least, you need to have enough money in a savings account or a money market fund to pay your mortgage for one month if your income drops or disappears. If you cannot save that much money you need to seriously evaluate your overall household budget.
5. You Can't Afford Maintenance
Your home needs to be painted and your dishwasher broke two months ago. If you are ignoring basic maintenance because you cannot afford to buy paint or call a repairman, this is a significant indication that you are in financial trouble. Not only does this show that you don't have any emergency savings or a home maintenance budget, but this will also reduce the value of your home.
6. Reduced Income
Money is already tight and now your work hours have been reduced or you have been laid off. If meeting your monthly budget depends on every dime you earn, then even a small reduction in income can be a disaster. Search for a new job or a second job and, at the same time, start slashing your budget as much as you can.
7. Using Credit or Cash Advances to Pay Bills
You are using your credit cards or, even worse, cash advances on credit cards to pay other bills such as a utility bill or to buy groceries or just to have cash in your pocket. This is a strong indication that your spending is outpacing your income and it is extremely expensive. You need to put yourself on a debt management program or perhaps meet with a credit counselor to straighten out your finances.
8. Using Your Retirement Fund
You have borrowed money from your retirement account for your mortgage payment or other debt. This could seriously jeopardize your future financial security.
9. You're Maxed Out
One or more of your credit card balances has reached or, worse, gone over the limit. If you are transferring your balances to new accounts in order to avoid paying the debt, this is a sign of a financial imbalance. If you are applying for new credit cards because your other cards have reached their limit, you are in serious danger of a financial meltdown. While you may be making your mortgage payments just fine, if you cannot control your use of credit cards it can be an indication that housing payments are too high.
While these financial woes can mean that you cannot afford your home, they may also be a sign that your spending is out of control. For most people, the mortgage payment is the largest monthly bill, so they often assume that the size of their mortgage is the problem. If your housing payment fits into that budget but you are having difficulty making your payment, then the issue may be that you have taken on too much other debt. Whether the problem is your mortgage or your other debt, you need to find a way to reduce your spending and/or boost your income before the situation gets worse.
The Bottom Line
Handling financial problems is never easy, but the first step is always to know what you owe. Solutions can only become clear once you have every bill written down with the amount owed, the monthly payment and the interest rate you are being charged. Pencil and paper work just fine, or you can create a spreadsheet or invest in some personal finance software. The important thing is to know where you stand so you can create a plan that will get your money under control.
While plenty of individuals live from paycheque to paycheque, most consumers know they should be saving money and reducing debt. The recession has drummed that concept into everyone's head as people have watched their neighbours and friends lose jobs and sometimes their home.
Many people say that money worries keep them awake at night, but that doesn't necessarily translate to imminent bankruptcy. How do you know when you are truly teetering on the edge of a financial disaster versus simply needing to do a little belt-tightening?
Here are nine signs that indicate you are heading for trouble and may be unable to pay your mortgage in upcoming months:
1. Late Fees
If you missed a payment or let your bill go past due because you didn't have the money to pay your mortgage or another bill on time, you need to re-evaluate your budget. Not only does this indicate an imbalance between your income and expenditures, but it will also ruin your credit score, potentially causing your creditors to increase your interest rate.
2. You Can't Pay All of Your Bills
Every month, you are forced to decide which bills to pay and which bills to ignore. A lot of people opt to pay their credit card bill to stop harassment from the credit card company and to make sure they have available credit. But it is far more important to pay the bills that protect your home first. Always pay your mortgage first so that you will have a place to live. Next, pay for your car so that you can get to work and keep your job.
3. Making Minimum Payments on Credit Cards
In your mind, paying the minimum due on each bill may mean you are keeping up with your financial commitments, but financial experts know that minimum-only payments are a key indicator of financial distress. While this may mean that you carry too much debt, this also means that all your income is barely covering your spending. Take a careful look at your mortgage payment, other debts and your income to get back on track. Paying only the minimum on credit cards will extend your debt for years and amass expensive interest payments.
4. No Emergency Savings
While amassing six to 12 months of funds to cover you expenses, as many financial planners now recommend, may be a monumental task, every homeowner should have at least one month's worth of expenses in the bank. At the very least, you need to have enough money in a savings account or a money market fund to pay your mortgage for one month if your income drops or disappears. If you cannot save that much money you need to seriously evaluate your overall household budget.
5. You Can't Afford Maintenance
Your home needs to be painted and your dishwasher broke two months ago. If you are ignoring basic maintenance because you cannot afford to buy paint or call a repairman, this is a significant indication that you are in financial trouble. Not only does this show that you don't have any emergency savings or a home maintenance budget, but this will also reduce the value of your home.
6. Reduced Income
Money is already tight and now your work hours have been reduced or you have been laid off. If meeting your monthly budget depends on every dime you earn, then even a small reduction in income can be a disaster. Search for a new job or a second job and, at the same time, start slashing your budget as much as you can.
7. Using Credit or Cash Advances to Pay Bills
You are using your credit cards or, even worse, cash advances on credit cards to pay other bills such as a utility bill or to buy groceries or just to have cash in your pocket. This is a strong indication that your spending is outpacing your income and it is extremely expensive. You need to put yourself on a debt management program or perhaps meet with a credit counselor to straighten out your finances.
8. Using Your Retirement Fund
You have borrowed money from your retirement account for your mortgage payment or other debt. This could seriously jeopardize your future financial security.
9. You're Maxed Out
One or more of your credit card balances has reached or, worse, gone over the limit. If you are transferring your balances to new accounts in order to avoid paying the debt, this is a sign of a financial imbalance. If you are applying for new credit cards because your other cards have reached their limit, you are in serious danger of a financial meltdown. While you may be making your mortgage payments just fine, if you cannot control your use of credit cards it can be an indication that housing payments are too high.
While these financial woes can mean that you cannot afford your home, they may also be a sign that your spending is out of control. For most people, the mortgage payment is the largest monthly bill, so they often assume that the size of their mortgage is the problem. If your housing payment fits into that budget but you are having difficulty making your payment, then the issue may be that you have taken on too much other debt. Whether the problem is your mortgage or your other debt, you need to find a way to reduce your spending and/or boost your income before the situation gets worse.
The Bottom Line
Handling financial problems is never easy, but the first step is always to know what you owe. Solutions can only become clear once you have every bill written down with the amount owed, the monthly payment and the interest rate you are being charged. Pencil and paper work just fine, or you can create a spreadsheet or invest in some personal finance software. The important thing is to know where you stand so you can create a plan that will get your money under control.
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