Fixed rates are steadily lowering. Hopefully this will breathe some life into our soft market...
Residential rates:
1 yr fixed – 4.00%
4 yr fixed - 4.89
5 yr fixed - 4.99
5 year variable – 4.1% (Prime +.6%)
• Prime is currently 3.5%
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Need a quote on your mortgage? Call me at 416 876 2031.
Tuesday, December 16, 2008
Friday, December 12, 2008
Stuck with two properties: Investor mortgage may be the solution to your problem
It’s a fairly common scenario nowadays. You bought a new property and arranged financing that was conditional on the sale of your old property. And now with the market having fallen off, you’re under pressure to reduce the price of your original property but you hesitate to do so because you don’t want to realize a major loss.
Enter the investor mortgage, available with as little as 5% down. What is an investor mortgage? It’s a mortgage that allows you to offset the rental income you will receive from either one of the properties against the carrying cost the property. With a lender that allows rental offset, the total amount of mortgage (or mortgages) you are allowed to carry will be significantly higher than they would be with a mortgage on an owner occupied property. In other words, if you prefer not to realize the loss on your original property, it may be possible for you to keep both properties. The insurance premium on the investor mortgage is higher than the premium on a regular mortgage – insurance premiums apply when your down payment is less than 20% -- but this may be the solution for you if you want to hang on to the original property and wait for a better market to sell.
Call me direct at 416 876 2031 if you would like more information about the investor mortgage.
Enter the investor mortgage, available with as little as 5% down. What is an investor mortgage? It’s a mortgage that allows you to offset the rental income you will receive from either one of the properties against the carrying cost the property. With a lender that allows rental offset, the total amount of mortgage (or mortgages) you are allowed to carry will be significantly higher than they would be with a mortgage on an owner occupied property. In other words, if you prefer not to realize the loss on your original property, it may be possible for you to keep both properties. The insurance premium on the investor mortgage is higher than the premium on a regular mortgage – insurance premiums apply when your down payment is less than 20% -- but this may be the solution for you if you want to hang on to the original property and wait for a better market to sell.
Call me direct at 416 876 2031 if you would like more information about the investor mortgage.
Q&A: Improving Your Credit Profile
I just received the following e-mail from an interested real estate investor about credit. I thought others might find the information useful so I am posting the Q&A...
Question: "As a mortgage broker are you looking at credit cards and there balance? The reason I'm asking is that I have 7 credit cards. Over the years company's just give them to me..I don't have a balance on any of them. And I only use 3. I have a high credit limit on them.
I"m just wondering when I go to apply for a mortgage are those card going to look bad and I might not get approved because I have them?
I'm try to get my application together so when I find my investment property I will not have a problem getting a mortgage.
Do you think it's a good idea to close those accounts? and will closing those accounts has an effect on my credit report?
Answer: "I would definately NOT close the accounts. Closing accounts will probably reduce your credit score. Do you know what your credit score is? I would recommend going to www.equifax.ca and checking your score on line for around $25. If your score is 680+ then you are fine. Keep the balances on your cards as low as you can and don't apply for any more cards unnecessarily. If you have no balance on your cards then it won't affect the debt service ratios with any of my lenders"
Do you have a mortgage question. Feel free to contact me by email or by phone.
Question: "As a mortgage broker are you looking at credit cards and there balance? The reason I'm asking is that I have 7 credit cards. Over the years company's just give them to me..I don't have a balance on any of them. And I only use 3. I have a high credit limit on them.
I"m just wondering when I go to apply for a mortgage are those card going to look bad and I might not get approved because I have them?
I'm try to get my application together so when I find my investment property I will not have a problem getting a mortgage.
Do you think it's a good idea to close those accounts? and will closing those accounts has an effect on my credit report?
Answer: "I would definately NOT close the accounts. Closing accounts will probably reduce your credit score. Do you know what your credit score is? I would recommend going to www.equifax.ca and checking your score on line for around $25. If your score is 680+ then you are fine. Keep the balances on your cards as low as you can and don't apply for any more cards unnecessarily. If you have no balance on your cards then it won't affect the debt service ratios with any of my lenders"
Do you have a mortgage question. Feel free to contact me by email or by phone.
Tuesday, December 9, 2008
Is now a good time to lock in your mortgage?
I just received an e-mail from a client asking the following question... "Given today's large Bank of Canada interest rate cut of .75%,should we be thinking about locking in our mortgage?"
I think a lot of people might be wondering the same thing so I thought I'd share my answer.
"Long term fixed rate mortgages ie. 3-5 year terms, are currently around the 5% mark. Fixed rates do not move exactly in tandem with the Bank of Canada overnight rate. When the Bank of Canada reduces the overnight rate as they did today, the banks normally follow by reducing their prime lending rate. After the Bank of Canada annoucement today, the banks dropped their prime lending rate almost immediately by .50% from 4% to 3.5%.
Variable rate mortgages are tied to the prime lending rate so if you have a variable rate mortgage you benefit directly the rate cuts. For example, if your rate is based on the prime rate less .60% (in the last few years many people took out mortgages rates below prime)then your current rate would be 2.9% which is a great rate. The premium you would have to pay to lock into a long term fixed rate of around 5% is pretty steep, therefore I would recommend you enjoy the current low rate for while".
Do you need help with your mortgage? Give me a call 416 876 2031.
I think a lot of people might be wondering the same thing so I thought I'd share my answer.
"Long term fixed rate mortgages ie. 3-5 year terms, are currently around the 5% mark. Fixed rates do not move exactly in tandem with the Bank of Canada overnight rate. When the Bank of Canada reduces the overnight rate as they did today, the banks normally follow by reducing their prime lending rate. After the Bank of Canada annoucement today, the banks dropped their prime lending rate almost immediately by .50% from 4% to 3.5%.
Variable rate mortgages are tied to the prime lending rate so if you have a variable rate mortgage you benefit directly the rate cuts. For example, if your rate is based on the prime rate less .60% (in the last few years many people took out mortgages rates below prime)then your current rate would be 2.9% which is a great rate. The premium you would have to pay to lock into a long term fixed rate of around 5% is pretty steep, therefore I would recommend you enjoy the current low rate for while".
Do you need help with your mortgage? Give me a call 416 876 2031.
Sunday, December 7, 2008
Investment Tip: You Can Buy a 5 unit apartment building w/as little as 15% down
With stock markets down, investors are looking for solutions to make up for steep losses.
Here’s a tip for people open to looking at a real estate investment as a way repair their badly bruised stock portfolios.
With a 5 + unit rental property, you can reduce your investment risk in comparison to a 1 or 2 unit rental property... in the event that you have a vacancy, you can count on the other tenants to ensure you have a steady income stream.
Real estate is a great investment.
With real estate, at least you can see your investment, so you know it’s not going to disappear on you (as long as you pay the mortgage that is !...)
Did you know that CMHC will insure a 5 + unit residential property with just 15% down, or up to 4 units with 5% down?
Sound interesting? Call me for more information.
Here’s a tip for people open to looking at a real estate investment as a way repair their badly bruised stock portfolios.
With a 5 + unit rental property, you can reduce your investment risk in comparison to a 1 or 2 unit rental property... in the event that you have a vacancy, you can count on the other tenants to ensure you have a steady income stream.
Real estate is a great investment.
With real estate, at least you can see your investment, so you know it’s not going to disappear on you (as long as you pay the mortgage that is !...)
Did you know that CMHC will insure a 5 + unit residential property with just 15% down, or up to 4 units with 5% down?
Sound interesting? Call me for more information.
Tuesday, November 25, 2008
Mortgage Investing Attractive Option to Stock Market Investing
Given the recent upheaval in the global stock market, many of us who thought their investments were safe because they own balanced mutual funds and blue chip stocks have of late, found that a substantial amount of their life savings has eroded. If you’re one of these people, what should you do? Should you cash in your mutual funds, sell your stocks and instead buy bonds and GICs? Selling low and locking in your losses is never a good strategy, but if you’re someone who has been losing a lot of sleep at night, and if you find you’re a bit frantic about checking out the daily financial reports, you may want to consider balancing out your portfolio with good quality, income producing mortgages.
One of the purported benefits of the mutual funds that many of us currently hold in our investment portfolios is that investment professionals take care of the stock picking for you. The average person doesn’t have the time to analyze individual companies and then figure out if the stock is underpriced or overpriced. An investment professional will take care of balancing your portfolio too, making sure that you have a balance of stocks and bonds, to level out the performance of the portfolio. Your mutual fund is probably also diversified by industry. The theory is that when one sector goes through a slump, better performance in another will keep your portfolio from bottoming out. Recently I have spoken with a lot of people at a loss, who have seen the value of their balanced, diversified portfolios shrink 30, 40 and in some cases as much as 50% since their peak.
Let me explain how mortgage investing works, what kind of returns you are likely to achieve and what the risks are. With mortgage investing you can see and touch the underlying asset that your loan is secured by, and without a lot of training and expertise, you can make a reasonable assessment about the value of the property. Where is the property located and what is its’ use? What condition is the property in and how much income can the property generate? You will also want to know something about the borrower and his or her ability to repay.
Private 1st mortgages will usually generate a return of around 8-9% while higher risk, second mortgages will give you a return of 10-12%.
There are risks associated with mortgage investing that you should know about. If the borrower stops making his mortgage payments and if in an economic downturn the value of the property drops below the sum of the mortgage(s) on the property, you could lose part or all of your investment. Second mortgages are a higher risk than 1st mortgages because the 1st mortgagee has the 1st claim to the property. As a rule of thumb, you should not lend more than 75% of the value of the property. That way, even if the property drops in value by 20%, your investment is safe, allowing an additional 5% margin for legal and selling costs.
It is important to note that if the property owner stops paying the mortgage, the mortgagee (the investor) has a right to foreclose on the property. In the late 80’s when interest rates were as high as 18-20% and a lot of people could not afford to pay their mortgages, a number of mortgage investors acquired substantial real estate holdings. When real estate values eventually started to go up, they made a nice profit on their holdings.
Although from a tax perspective mortgages are the least desirable because the income is 100% taxable in comparison to stock dividends and capital gains, you can defer the taxes by putting your mortgage investment into your RRSP. Jason Heath from E.E.S. Financial in Markham says that as a rule of thumb, given the costs involved in setting up a mortgage in your RRSP, the investment should be at least $75,000 for it to be worthwhile. The downside of putting the mortgage in the RRSP is that if you lose on the investment, you won’t get that RRSP room back.
If you would like to learn more about mortgage investing, call me at 416 876 2031, or send an e-mail to david@mortgagemensch.ca, and I'll keep you up to date with investment opportunities as they arise.
One of the purported benefits of the mutual funds that many of us currently hold in our investment portfolios is that investment professionals take care of the stock picking for you. The average person doesn’t have the time to analyze individual companies and then figure out if the stock is underpriced or overpriced. An investment professional will take care of balancing your portfolio too, making sure that you have a balance of stocks and bonds, to level out the performance of the portfolio. Your mutual fund is probably also diversified by industry. The theory is that when one sector goes through a slump, better performance in another will keep your portfolio from bottoming out. Recently I have spoken with a lot of people at a loss, who have seen the value of their balanced, diversified portfolios shrink 30, 40 and in some cases as much as 50% since their peak.
Let me explain how mortgage investing works, what kind of returns you are likely to achieve and what the risks are. With mortgage investing you can see and touch the underlying asset that your loan is secured by, and without a lot of training and expertise, you can make a reasonable assessment about the value of the property. Where is the property located and what is its’ use? What condition is the property in and how much income can the property generate? You will also want to know something about the borrower and his or her ability to repay.
Private 1st mortgages will usually generate a return of around 8-9% while higher risk, second mortgages will give you a return of 10-12%.
There are risks associated with mortgage investing that you should know about. If the borrower stops making his mortgage payments and if in an economic downturn the value of the property drops below the sum of the mortgage(s) on the property, you could lose part or all of your investment. Second mortgages are a higher risk than 1st mortgages because the 1st mortgagee has the 1st claim to the property. As a rule of thumb, you should not lend more than 75% of the value of the property. That way, even if the property drops in value by 20%, your investment is safe, allowing an additional 5% margin for legal and selling costs.
It is important to note that if the property owner stops paying the mortgage, the mortgagee (the investor) has a right to foreclose on the property. In the late 80’s when interest rates were as high as 18-20% and a lot of people could not afford to pay their mortgages, a number of mortgage investors acquired substantial real estate holdings. When real estate values eventually started to go up, they made a nice profit on their holdings.
Although from a tax perspective mortgages are the least desirable because the income is 100% taxable in comparison to stock dividends and capital gains, you can defer the taxes by putting your mortgage investment into your RRSP. Jason Heath from E.E.S. Financial in Markham says that as a rule of thumb, given the costs involved in setting up a mortgage in your RRSP, the investment should be at least $75,000 for it to be worthwhile. The downside of putting the mortgage in the RRSP is that if you lose on the investment, you won’t get that RRSP room back.
If you would like to learn more about mortgage investing, call me at 416 876 2031, or send an e-mail to david@mortgagemensch.ca, and I'll keep you up to date with investment opportunities as they arise.
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