Barrie Orillia Mortgage Source

Barrie and Orillia MLS Sales Report for October, 2010

Residential property sales in the Barrie & District Association of REALTORS Inc. came in under last year’s levels, however saw an increase of 1% on a month-over-month basis. This trend follows gains of 10 % in August and September. More specifically, the report mensions that housing sales growth in Barrie was down 29 % from October last year, although, as mentioned, continued to climb for the third consecutive month. So there is growth in Barrie, in part due to low mortgage rates, but the growth is slower than last year at this time. Catherine Garbe, President of this Association of REALTORS in Barrie and Orillia reported  that demand is stabilizing overall. Moreover, the average price for homes sold through the so far this year of has increased 7% from the same time last year. For many this housing value growth number is more important than sales activity numbers.

The Barrie and Orillia market continues to stabilize with 6.5 months of inventory at the end of October 2010. This represents an increase from 4.1 months in 2009. Good mortgage rates, location, and the general desirability of Barrie and Orillia make it an attractive candidate for continued long term growth.

For mortgage questions, great rates and excellent mortgage service, visit my web site or contact me today! www,brentrichardson.ca - brent@brentrichardson.ca

CMHC Spring 2010 Barrie and Orillia Housing and Mortgage Report

According to the CMHC report, the housing market in Barrie and Orillia over the first half 2010 reveals an improving economy with an increase in existing home sales and new listings, as well as sustained low mortgage rates. With sales in Barrie and the area reaching 4600 units, the market will favour sellers in  2010 and should eventually move towards a buyers market in early 2011. The average price of a new single detached home will go up over 2010. The detailed report of the resale homes market shows that with the sturdy recovery in employment, combined with low Barrie and Orillia mortgage rates, existing home sales will grow by over six percent in 2010. This growth has been spurred by home buyers both new as well as second time buyers. This said, the high level of sales should slow in the second half of 2010 due to of higher mortgage rates, new mortgage rules and the introduction of the HST. With high demand in the resale markets this year, home prices have increased which is encouraging more listings. This increased demand in Barrie and Orillia may cause current home owners to believe they can sell at a better price. As sales are made to repeat buyers, they will list their home reaching a high of a 12% increase in new listings over last year. In 2011 home prices in Barrie and low mortgage rates will cause modest growth and the market will return to a more balanced state.                                

The Barrie and Orillia new homes market will double in growth compared to 2009. A scarce resale market has forced many buyers to turn to the new home market for their purchase. As a result, the inventories of new homes will decline causing an increase in new construction to meet the increase in demand. The Barrie and area market may witness a slight dip in 2011 in new home sales because many buyers will bring their purchases forward into early 2010 to avoid the HST. The HST will affect homes above $400,000 and thus 2011 will less new construction. This said, over the long term the starts in Barrie and Orillia will once again begin to move upwards as new land is transferred from the town of Innisfil to the City of Barrie, and will be made available for residential building. Thus, over the long term, lots will be made available to sustain the housing expansion.

A more detailed analysis reveals that starts of single detached homes in Barrie and Orillia will increase in 2010. These homes backed by low Barrie mortgage pricing will consist of about two thirds of all new construction in 2010. These houses will become more affordable in 2011 with further increases in their share of new construction. Row homes and apartments will also be sought by some because of their affordable prices. Lower density apartments with lower costs will be a favored option in the City Center of Barrie. Employment in 2010 will move higher and will continue to increase into 2011. This said, much of this growth represents a recovery in the job losses sustained in late 2009 and early 2010. The City of Barrie, and to a lesser extent Orillia should witness growth in the labour force, which is largely due to migration as the economy in the Barrie continues to grow. At the time of writing, the short term mortgage interest rate should begin to rise in late 2010. It is thought as well that posted mortgage rates will slowly increase through 2011. The rise in Barrie and Orillia mortgage rates could be steeper if the economy recovers. Conversely the rate of increase could slow or be stunted if the recovery is modest.

DANGEROUS Credit Lines and Mortgage Products Offered by Banks

Over the past several years, some of the Big Banks have decided to design mortgage products that lock customers into their Bank- even when the mortgage comes up for renewal. The really unfortunate part about these Banks and products is that in most cases, the Bank will not disclose the negative information to its clients. Most in the broker industry consider these practices incredibly decietful.

With titles such as 'Step' or 'Homeline', these mortgages will offer a line of credit that is attached to the mortgage. The main issue is that when the Bank registers one of these products against your house, they register it under what is called a 'Collateral Charge Term' (not the usual 'Standard Charge Term') at 125% of the value of your home. This has the affects of:

• Disallowing any other financing to be placed against your home.
• Locking you in at mortgage term renewal. This gives Banks massive liberties to charge unfavourable rates when your term is up.  
• Charge major penalties to ever exit these products and lowers others abilities to compete for your future business.
• The ability to change their bank prime rate without your consent. For example, the Bank can decide, as they did in 2008, to move up credit lines across the board by 1% in 1 day. 

No wonder Banks call these products 'customer retention devices'. Good mortgage brokers will always fully disclose such information whereas most of the time, Banks have not been reporting this kind of information to thousands of customers. It is potentially costing customers $10,0000's each. Indeed, customers should be retained by providing excellent service, value and a good customer experience. There are many excellent mortgae products in the market that can meet your needs and goals, and give you the low rates and long term flexability that is far more desirable.

Questions? Comments? Feel free to contact me any time or leave a post below.

Best Regards,

Brent www.brentrichardson.ca - brent@brentrichardson.ca

How Credit Scores Work and How to Increase

How Credit Works and the Easiest ways to Increase Your Credit Score

            Because credit can affect many areas of our lives, especially when a loan or mortgage is needed, it is important to understand how the system works, and what kinds of things can affect your score. Indeed, for many, the credit system is somewhat of a mystery. Weather you are wondering about how the system works, or if you are looking for the easiest ways to improve your score, this article will help you.   

The following criteria lays out how the Beacon Score, or credit score is calculated. For each criteria, we look at how to increase your score. Remember, the following advice speaks of a perfect situation. Although perhaps not immediately attainable for many, the closer you can get to these ideal situations, the better your credit score will be. 

1. Payment History – 35% of Score Calculation: Factors in the number of debt payments over 30 days late, collections and any other matters resulting from late payments. A single payment currently showing over 30 days late removes 20 credit points instantly. Credit will begin to repair after only two months of on time payments, so use this rather short repair period for motivation to pay consistently.

2. Current Debts - 30% of Calculation: Looks at how much debt you have relative to your credit and debt limits. For example, a total credit limit of $10,000 which has $8,000 outstanding totals 80% of credit used. Any number above 50% of credit used will begin to diminish a credit score. If 50% can not be attained, a good goal is 70%. Your variety of debt will also affect your credit. Try to keep two credit cards and hold onebank loan to maximize your score in this area. A loan can be as simple as an RRSP loan which will build your credit, be invested to make interest for you, can be paid back quickly, and mainly, can give you a nice tax refund at the end of the year! Finally, be sure to NEVER go above your credit limit.

3.  Account Age – 15% of Calculation: How long you have held a bank account with your financial institution affects your score slightly. The optimal number of accounts held is three and the longer they have been open the better.

4. Types of Credit – 10% of Calculation: Similar to two. Focuses on the mix of debt you have (credit cards, bank loans, lines of credit). The optimal mix is one store credit card (ex. the bay, Best Buy…), one or maximum two bank credit cards, and one installment bank loan. Make sure to use your credit cards as well - even if just for gas, and to re-pay the balance every month. Again, this is an optimal position and any reasonably similar situation will not lower your credit much. 

5. Number of Credit Inquiries – 10% of Calculation: Over the past 12 months, how many times has your credit score been looked at? Having too many credit or loan applications could deem you a ‘credit seeker’, so try to keep the number less than 5 per year.  

Finally, have your credit bureau checked for mistakes. I have seen many individuals with mistakes on their credit score that resulted in higher interest payments. Check with Equifax regularly to ensure your credit score is accurate.   

Reasonable variation from this perfect situation will still give you a great credit score and obviously, the closer to it, the better it will be. Contact myself for further information on increasing your credit rating and save thousands of dollars on interest as a result.

I am always happy to help.

www.brentrichardson.ca - brent@brentrichardson.ca

Brent Richardson

Have a question or comment? Feel free to make a post.

Barrie and Area CMHC Fall/ Winter 2008 Update

The Canadian Housing and Mortgage Company is a leading provider of mortgage and housing statistics and trends in the Barrie and Orillia area. The Fall/ Winter report summarized here is divided into the areas of New Home Construction, Existing Home Market, Local Economy and Employment Forecasts, and Mortgage Trends.

New Home Construction

After a record year of growth in 2008 (60% increase in new home growth), it is forcasted that growth will slow through '09 and 2010 before picking up again in 2012. New home prices will also continue to grow in 2008 and throughout 2009. One major reason for this growth is that housing prices in Innisfil and Springwater Town are expected to be in the upper end range. In 2008, the average new home price in the Barrie Area will reach $353,000, and will increase by 2% in 2009 to an  average price of $361,000.

Existing Homes Market

Sales of existing homes will moderate in 2008 from their 2007 levels. Specifically, sales of existing home in Barrie and Orillia should lower by 14%. This lowering of existing home sales can be explained by a weakening job market and higher existing home prices. Like sales of new homes, housing prices of existing homes will increase by 2% in 2009 and reach an average value of $274,000.

Barrie and Orillia Economy and Labour Market

According to the report, employment will ease in 2008, and begin to rise in '09. The unemployment rate will increase slightly both years, but this is due to many newcomers to the area who don't have work. It is also due to layoffs in Toronto that affect unemployment rates in Barrie and Orillia. Most of the decrease in employment is due to weakness in the trade, construction, insurance, finance and real estate. This said, in 2009, total employment is expected in increase 1%. 

Barrie and Orillia Mortgage Rates

Mortgage rates are expected to remain low for much of 2009 as the Bank of Canada and Federal Reserve in the States lower their prime rates. This said, mortgages in Barrie and Orillia should begin to move upwards as 2009 progresses since prices of 5 year government bonds will rise. The rise in government bonds is due to a massive surplus of government debt. Mortgage rates and bond prices are very closely linked. So now is a great time to invest in a five year fixed term mortgage in Barrie and Orillia since mortgage rates are at all time lows housing prices continue to look attractive.

Have a question? Feel free to contact me any time at brent@brentrichardson.ca, or leave a post!

Barrie and Area Real Estate Board Update - Jan/Feb 2009

The Barrie and Discrict Real Estate Board gathers local statistics on mortgage, housing and employment trends. Their results are summarized below with some additional commentary from myself.

In January and February of '09, the Board reported a declining trend in the area's resale housing market. Specifically, sales are down 22.8% from the previous time last year. The result is a very balanced market between buyers and sellers right now which has stunted year over year price gains. Housing value are up .8%. So, this shows us that even in the toughest of economic environments, the Barrie and Orillia housing markets are very resilient. While housing prices are sinking across the country due to the moderating economy and the weakest housing season (the winter months), we still see growth in prices in Barrie and Orillia. Given that mortgage rates are at all time lows - with rates at 3.75% for 5 years (or lower!), it certainly looks like a very enticing market to buy in. Over the long term, the area should continue to fare extremely well as Barrie and Orillia and the region is consistently ranked as the hottest housing market in Ontario.

Employment in Barrie was down almost 1% over the winter, mainly due to layoffs in manufacturing. This said, the area is faring well in contrast to markets such as Windsor and other cities in Ontario where employment is down 8-10%. As the economy recovers, jobs in the areas of retail trade, transportation and warehousing and finance industries should continue to flourish.

Given low mortgage rates and one of the strongest housing and economic environments in Canada, Barrie and Orillia are well positioned for strength as we move into the Spring and Summer housing season and as the economy begins to stabalize.

Increase Your Credit Score and Save Thousands!

Indeed for many, savings of thousands of dollars per year could be had easily by reducing interest rates on loan and mortgage payments. For others, the dream of attaining an affordable mortgage and a home becomes attainable. In knowing how the credit scoring system works and how your credit score can be raised, the money saved on interest can be used to pay off your mortgage faster, or in any other way besides making your lender richer.

 

The credit scoring system:

Your Equifax Beacon Score informs lenders about how much of a lending risk you are, and ranges between 500-850. The following chart tells us how these scores generally affect mortgage rates:

Beacon Score	Interest Rate
719-850	The best rate
700-719	+0.20%
675-699	+0.65%
620-674	+1.70%
560-619	+2.50%
500-559	+3.50%

So given that the average Canadian credit score is about 690, most people have some room left to save thousands of dollars on interest payments.

 

How to raise your score then? The following criteria lay out how the Beacon Score is calculated. For each criteria, we look at how to increase your score. Remember, the following speaks of a perfect situation. Although perhaps not immediately attainable for many, the closer you can get to these ideal situations, the better your credit score will be.

 

1. Payment History – 35% of Score Calculation: Factors in the number of debt payments over 30 days late, collections and any other matters resulting from late payments. A single payment over 30 days late removes 20 credit points instantly. Credit will begin to repair after only two months of on time payments, so use this rather short repair period for motivation to pay consistently.

2. Current Debts - 30% of Calculation: Looks at how much debt you have relative to your credit and debt limits. For example, a total credit limit of $10,000 which has $8,000 outstanding totals 80% of credit used. Any number above 30% of credit used will begin to diminish a credit score. If 30% can not be attained, a good goal is 50%. Attempting to increase your credit or a debt consolidation loan are possible ways to help lower your percentage of outstanding credit limit. Your variety of debt will also affect your credit. Try to keep two credit cards and hold one consolidated bank loan to maximize your score in this area.

3.  Account Age – 15% of Calculation: How long you have held a bank account with your financial institution affects your score slightly. The optimal number of accounts held is three and the longer they have been open the better.

4. Types of Credit – 10% of Calculation: Similar to two. Focuses on the mix of debt you have (credit cards, bank loans, lines of credit). The optimal mix is one store credit card (ex. the bay, Best Buy…), one or maximum two bank credit cards, and one installment bank loan. Again, this is an optimal position and any reasonably similar situation will not lower your credit much.

5. Number of Credit Inquiries – 10% of Calculation: Over the past 12 months, how many times has your credit score been looked at? Having too many credit or loan applications could deem you a ‘credit seeker’, so try to keep the number less than 5 per year.

 

Finally, have your credit bureau checked for mistakes. I have seen many individuals with mistakes on their credit score that resulted in higher interest payments. Check with Equifax regularly to ensure your credit score is accurate.   

 

Reasonable variation from this perfect situation will still give you a great credit score and obviously, the closer to it, the better it will be. Contact a credit professional or myself for further information on increasing your credit rating and save thousands of dollars on interest as a result.

Brent Richardson

Have a question or comment? Feel free to make a post.

Pay Off your Mortgage Faster

After attaining the lowest possible interest rate, the second most important thing to Canadians regarding their mortgage is paying it off as fast as possible. Fortunately there are numerous ways to accomplish this task, so lets take a look at some here.

 

Make bi-weekly accelerated payments: Since there are 52 weeks in a year, we can devise that by making a mortgage payment once every two weeks, we would make 26 payments in a year. On the other hand, there are 12 months in a year, so if we made two payments every month, that would only amount to 24 payments in a year. So we can see that by making bi-weekly accelerated payments instead of two payments per month, it is as if there are 13 months in a year (because of the 26 bi-weekly payments). Thus, we make an extra months payment per year. This has the effect of saving thousands in interest on a mortgage and will reduce a 40 year amortization mortgage to 35 years.

 

Make Lump Sum Payments: Most mortgage lenders will allow you to make a lump sum payment of at least 10 % of the principle amount owed, once per year. Utilize this feature, even modestly, to save thousands in interest and pay your mortgage off faster. For example: A $200,000, 25 year amortization mortgage at 5.75% with $1000 extra paid each year will save 5 years and 10 months and $63,463 interest off of the mortgage.

 

Increase mortgage payments: Even a slight increase in your monthly or bi-weekly payments can make a substantial difference in how fast your mortgage is paid down. For example: A $200,000, 25 year amortization mortgage at 5.75% with $100 additional paid on a monthly basis would save 3 years and 8 months and $30,038 in interest of the mortgage. This method is effectively the same as reducing your total mortgage amortization period if commenced at the beginning of mortgage amortization. However, by opting for a longer amortization period and the ability to increase payments, you get the option of paying less on a monthly basis should your financial situation tighten during a period.

 

Start a small business: While mortgage interest in the USA is tax deductible, it isn't in Canada. So we pay mortgage interest with after tax dollars. What we can do, however, is write off a portion of our mortgage interest if we conduct a business out of the home. Check out some small/part time business opportunity websites or franchise web sites for some ideas on what business would work best for you. Besides tax write offs, you could use any business profit to help make lump sum payments to pay your mortgage down faster and save thousands in interest.

 

Obviously the best way to pay off your mortgage in the fastest time possible would involve some combination of these strategies based on your unique situation. These techniques also help underscore the importance of proper mortgage planning, as opposed to simply finding the best interest rate. There are many more details to consider. So, whether you are looking for a new mortgage, refinancing or renewing a current one, the best thing to do is find an experienced and knowledgeable mortgage broker that will take the time to find you the right mortgage and mortgage plan, at the best possible rates. 

Fixed or Variable Rate?

One of the biggest decisions to make when purchasing a mortgage is whether to take a fixed or variable interest rate. Many articles and mortgage professionals tend to lean towards one or the other, however it could be dangerous for you to be persuaded towards fixed or variable products by someone who is trusted and biased. In my opinion, the best person to make the decision is an educated purchaser, him or her self.

 

So, the remainder of this article will objectively explain the pros and cons of variable and fixed rates, and then will provide short profiles of who generally fits which mortgage category respectively.

 

Fixed Rate Mortgage:

This refers to the fact that the interest rate is fixed and does not change for the entire mortgage term.

Pros:

• Security: The central benefit of choosing fixed is its security feature.
• The borrower knows that the payment is the same throughout the entire term of the mortgage and can budget accordingly.
• If interest rates increase, fixed interest and payments remains the same.
• Many first time home buyers are used to fixed costs every month (like rent payments) and are comforted by the continuation of this practice.
• If inflation continues to increase, perhaps even more substantially, your home value and income should rise, but your mortgage payment will remain the same.

Cons:

• The only downside to having a fixed mortgage is the potential lack of savings. I emphasize the word ‘potential’ because a variable rate mortgage could end up costing more than fixed if rates increase.

Variable Rate Mortgage:

The interest rate on variable mortgages fluctuates according to the prime rate as set by the Bank of Canada.

Pros:

• Over the last 60 years, mortgage studies show that variable rate mortgages have been less expensive, with lower overall interest rates than fixed rate mortgages. Specifically, on a $100,000 mortgage, the average savings was $22,210. On the flip side, a consumer would have lost money by borrowing at the prime rate, compared to the 5-year rate, only 11.4% of the time.
• Ability to switch to a fixed rate: Many variable rate mortgages have the option of switching to a fixed rate without penalty. This provides comfort if rates begin to rise.

Cons:

• Volatility: While the borrower can save on interest rates by going variable, rates could increase quickly and catch the borrower off guard. A close watch should be kept on interest rates to decide when to lock into a fixed term.
• Some borrowers may not be able to afford payments if interest rates rise.
• The mortgage studies mentioned above include periods of time where many individuals lost their homes during relatively brief periods of interest rate spikes.
• Professional assistance should be sought for timing a variable mortgage.

Given this information on fixed and variable rate mortgages, the following profiles may help clarify which product is right for you.

Variable mortgages are best suited for people who are:

• Higher risk takers (would invest in more risky Mutual Funds or stocks)
• Debt free or have little outside debt
• Able to afford increases to their monthly payment should the Prime Rate increase
• Budget disciplined
• Income stability is strong

Fixed rate mortgages are better suited for people who are:

• Lower risk takers (would purchase safer investments)
• In debt with high monthly payments on their credit cards monthly loan payments
• Not able to afford increases to their mortgage payments should the Prime Rate go up
• Not good budget keepers
• Income stability is not strong

So we can see that deciding whether to go fixed or variable can be tricky, but with the proper amount of consideration and a realistic analysis of your life situation and goals, securing the right type of mortgage is a very rewarding experience.

 

Have a question or comment? Feel free to post below!

CDN Government Homebuyers Plan

Saving for the down payment towards a mortgage can be a major process. This said, by utilizing the Canadian Home Buyers Plan, most first time (in some cases second time) home buyers can benefit by saving thousands in tax dollars.

 

Set up by the Government of Canada, the plan allows an individual to take up to $20,000 out of their RRSP to finance the purchase of their first home. The benefit is that YOU NEVER HAVE TO PAY TAX ON THAT MONEY. Traditionally, taxes must be paid when money is withdrawn from an RRSP (perhaps in retirement), but under the Homebuyers plan, this issue is completely avoided. If you are purchasing the home with a spouse, you can withdraw up to $20,000 each from your accounts tax free. In terms of repayment, you have up to 15 years to pay back your RRSP starting the second year after the year of withdrawal. At this time at least 1/15 of your borrowed amount must be paid back per year. There are a few more rules that must be considered:

• In terms of penalties, if you don’t repay at least 1/15 of the borrowed amount per year, you’ll have to add the amount as income and pay tax on it.
• You MUST purchase or build your home before Oct 1 after the year of withdrawal.
• RRSP contributions must be made 90 days before the withdrawal using the Home Buyers Plan.

Visit the Government of Canada Website for more information on the Home Buyers Plan: http://www.cra-arc.gc.ca/E/pub/tg/rc4135/rc4135-e.html

 

Some may argue that you’re missing out on growth of your RRSP if this plan is utilized. This said, I think that if you get a good price for your first home relative to others in the neighborhood, the appreciation of the home will hopefully make up for this. Also consider that you pay mortgage interest with after tax income. So if you pay 5.5% in mortgage interest per year and you are in a 40% tax bracket, you are effectively paying over 7.5% due to the effects of taxes.

 

Determining the right mortgage strategy that is custom to your situation is critical. The Home Buyers Plan is just one part of that strategy. Contact a knowledgeable and experienced mortgage professional to help you create a good mortgage plan, and then reap the rewards in thousands of dollars in savings over the years to come.

 

Have questions? Ask below and Ill answer it ASAP.