So Spring is in the Air…   Already…  Or at Last after the incredible winter that we have had.  Time to clean-up and organize your home and your finances!

The government recently has made a few changes and  I wanted to make sure my valued clients are made aware of these. These changes are a Home Renovations Tax Credit; ecoEnergy Retrofit Program and changes for first homes and first time homebuyers.

Natural Resources Canada’s (NRCan’s) ecoENERGY Retrofit program provides financial support to homeowners, small and medium-sized businesses, public institutions and industrial facilities to help them implement energy saving projects that reduce energy-related greenhouse gases (GHGs) and air pollution, thereby contributing to a cleaner environment for all Canadians.

Home Renovation Credit – tax relief of up to $1350.00 is available on home improvement projects taken on between Jan 27 of this year and Feb 1, 2010.  There are specific inclusions and exclusions, so make sure that you contact me if you are interested in this program. Read more here.

ecoENERGY Retrofit Program – additional federal government funds have been allocated to this program making refunds available for a variety of energy-efficient upgrades.

First Homes - people purchasing their first homes are now able to withdraw up to $25,000.00 from their RSP’s – an increase of $5,000.00 – to put towards their new home purchase, without incurring a tax penalty.  If there are two of you, that’s an extra $10,000.00, which certainly helps!

First Time Homebuyers – there’s a new tax credit for first time buyers to help offset the legal fees and other costs of buying a new home.  Starting this year, a 15% tax credit applies on costs up to $5,000.00, which means a maximum tax savings of $750.00.

As well with theses economic conditions there are several ways that I can help you save money, improve cash flow and provide information that can help you with financial decisions. .

If you are looking to use the tax credit and require money for that Kitchen remodel or any other project you have been putting off give me a call and we can discuss how best to structure your mortgage finances to maximize your return on your equity.

With the rates being the lowest we have seen in decades it is wise to have a mortgage checkup done to ensure that all your options are reviewed. Keep in mind that you don’t have to wait for your current mortgage term to be up for renewal before you re-negotiate your financing.

Linda Renaud, B.Comm.
Verico Complete Mortgage Services
Kelowna:  (250) 878-6706

The general public Should Be Aware Of The Following Important Facts:

1.    Arrears and default rates remain low in Canada particularly when compared to the U.S. Canadian mortgage holders have on average over 50% equity in their properties. For all home owners, (those with and those without a mortgage), the equity ratio exceeds 70%;
2.    Longer amortization periods and 100% LTV mortgages do not equate to subprime or alternative mortgages which are based on a borrower’s credit worthiness. Relatively few outstanding mortgages in Canada have 40 year amortization periods ˆ only six percent or just over 300,000 mortgage holders out of 5.25 million;
3.    Mortgage products in Canada are transparent. Mortgagors with a variable rate product know their rate and most have the option to convert to a fixed rate product. In the past year, 40% of mortgage holders took out a variable rate mortgage with the expectation that declining rates will continue to drop. This is in stark contrast to the U.S. where the resetting of option ARM mortgages means millions of mortgage holders have been and will continue to face higher rates;
4.    A rise in default rates in Canada is not apparent. It’s a fact that the economy is slowing; however if borrowers find themselves with financial difficulties, it will most likely be a result of their employment situation rather than their mortgage product;
5.    Differences between the Canadian and U.S. markets remain. The option ARMs that have and continue to be reset to higher rates are not common in Canada. Those who hold variable and even fixed rate products in Canada are now doing so in a declining interest rate environment. A greater percentage of mortgages in Canada are funded by balance sheet lenders than in the U.S. Subprime or alternative lending products were never as common in Canada;
6.    Canada has a rich history of mortgage insurance. Nearly half of all mortgages obtained in any given year are insured with a second approval process for mortgage applications. Underwriting principles and guidelines in Canada, while not perfect, are more thorough than in the U.S.;
7.    Regulation for Canadian mortgage brokers and agents is more stringent than in the U.S. Several provinces have recently updated or are in the process of updating their origination legislation including Ontario, Quebec, Saskatchewan, Manitoba and Nova Scotia. There are now license requirements and in most provinces education and disclosure requirements. This will ultimately lead to enhanced professionalism in our industry and added security for Canadian borrowers.

Canadian Mortgage Market is in much better shape than the US
You have heard about the mortgage and real estate crisis in the US and you are now concerned about recent media reports in Canada.  One of the concerns is that Canadian Consumers have been “over-extending” themselves through mortgage borrowing.   And, it has recently been suggested that the Canadian housing and mortgage markets might fall into a downward spiral like the one currently underway to the US.  Most Canadian economists point to very substantial differences between the Canadian and US situations, which mean that the risks in Canada are considerably lower than they have been in the US.

Canadian Economy is Much stronger than the US
During the past decade the Canadian economy has been much stronger than the US economy.  As per Statistics Canada, US BLS - the employment rate over the past 10 years has been growing regularly and steadily in Canada.   The strong employment rate in the US prior to year 2000 was mostly due to the growth from the housing market – increased construction plus home equity take.out.  There was a self.reinforcing bubble in the housing market.  Employment rate in the US has been declining substantially from 2000 to 2004 and is currently on a declining scale as you know.

Housing Equity is Substantial in Canada
As per ScotiaBank Economics, Canada, US BEA – the average home equity in residential property in Canada today is equal to almost 70%.  In other words, total mortgage debt is only about 30% of the total value of Canadian homes.  On the other hand, the US equity position has seriously eroded over the past decade, even before the current US trouble – to well under 45% home equity.  In very simple terms – US has huge mortgage debt loads compared to Canada.

Low Debt Service Ratios in Canada
Over the past decade, ScotiaBank estimates the Canadian debt service burden in Canada (as a percentage of after-tax income) has not worsen and is still close to 8%.   On the US side, their debt service has gone up to about 14% – meaning the US has much more personal debts than the Canadians.

Very Few Canadians are in Arrears
The most recent data from the Canadian Bankers Association – which covers 7 major banks – shows that less than 0.3% of residential mortgages are in arrears as of June 2008.  The Bank of Canada estimates that only 2% of sub-prime mortgages in Canada may be in arrears or foreclosure at the same period.

Interest Rates Contribute to Sustained Affordability
Both Countries have followed similar paths during the past decade – until late 2006.   In both countries strong demand resulted in rapid growth in the property values.  In the US, however, a strong growth cycle turned into a bubble and like all bubbles, it eventually burst.

Different Lending Industry and Practices in Canada
Mostly our lending industry and practices are structured differently. In particular, most Canadian mortgages remain with the same lender and there is a strong incentive to maintain high credit standards. Only 6% of Canadian mortgages are held by special purpose corporation and non-depositary intermediaries.   In the US, widespread securitization eventually caused a breakdown in the incentive to control risk.  When it became apparent that mortgage originators would not have ultimate accountability for credit quality, credit quality was abandoned.

Thereafter, we all know the story of the sub.prime market leading to lending to very high risks clients.   Canada did not participate to these practices as our lending industry is highly regulated by government rules and regulations.

Linda Renaud, Accredited Mortgage Professional in Kelowna:  (250) 878-6706

Fortunately, we live in Canada. And Canadian real estate markets are far-better positioned than their American counterparts for a good number of reasons.
1.      Subprime mortgages represent less than five per cent of our market nationally.
2.      Foreclosures occur in about one quarter of one per cent of mortgage transactions in this country.
3.      Canadians have more equity in their homes.
4.      We have less debt than our neighbours south of the border.
5.      Speculation has played little or no role in existing home sales in Ontario.
6.      The fundamentals of our economy are relatively solid. Of the G8 countries, only Canada is expected to show growth in 2008 and 2009.
7.      The Canadian banking system is one of the best in the world, relying more on old-fashioned lending than innovative financial products geared toward profit.
8.      The Canadian job market is stronger than the US, adding more than 200,000 jobs so far this year.
9.      Interest rates remain favourable.
10.   Housing values in Ontario major centres did not experience serious, double-digit price appreciation year-after-year for an extended period. Our markets were characterized by stable, healthy growth.
11.   Immigration continues to play a key role in housing markets. Between 2001 and 2006, more than 1.1 million immigrants came to this country, with about half settling in the province of Ontario. Immigrants tend to purchase a home within the first five years of living in Canada.

Real estate is cyclical. There will be peaks and valleys. The more restrained the peak, the more modest the valley.
There is no question that market conditions have moderated from 2007s record pace. More listings, softer housing values, longer days on market but most centres are relatively solid. While some buyers and sellers will adopt a wait-and-see attitude, there are those that will continue to venture forward.

Understanding market conditions will be of paramount importance to today’s buyers and sellers, especially as conditions change in markets across the country.  Gone are the multiple offers that left both buyers and sellers dissatisfied. The increase in the number of homes listed for sale are a definite advantage for purchasers who now have the luxury of time in making one of the most important decisions of a lifetime. For sellers, the time to trade-up has never been better.

Canadians are great believers in homeownership a fact underscored by the close to 70 per cent who own homes in this country. History has proven time and time again that real estate is a solid, long-term investment that appreciates at a rate of about five per cent annually. You can’t live in your mutual fund, and after the last month in the financial markets, quite frankly, were not sure you’d want to.

Road vs. water access - Almost all cottage buyers want road access, but prices can be significantly lower for a water-access cottage. Find out if the road you need to take is public or private, and if a legal agreement exists for you to use it.
Water - The main sources of water to cottages are wells and lakes. If the water is drawn from a lake, you will need a filtration system. If it’s from a well, find out whether it sits on higher ground than the sewage system, how fast it reaches the cottage and if it has ever run dry.
Septic systems - It is vital to make sure there is a current certificate of approval, a permit to use the system, and that the system works.
Municipal regulations - Ask about local laws concerning hunters, snowmobilers and others crossing private property, motorized watercraft, water exclusivity and rights of way for utility companies and neighbours. Also, check the zoning - some cottages may not allow for year-round residency.
Municipal services - Check to see if the road to your cottage is maintained by the municipality including snow removal in the winter and if there is garbage pick-up or if you must drop it off at a designated dumpsite.

If you dream of your very own place in the country the good news is just how aggressive lenders will be to get your mortgage business.
Here are some tips on entering the vacation property market:

Explore getting a mortgage with less than the traditional 25% down.
Buy a property that can be rented out easily when you are not using it.
Become informed about possible seasonal slumps in real estate prices in recreational areas.
Buy a property with other families and share its use.
Look at more distant places. Typically, the longer the journey from a major city the lower the price.

Linda Renaud is an Accredited Mortgage Professional and can be reached in Kelowna at 878-6706.

How can you possibly know you were offered the best possible fit for you? The employee knows the services/plans/products offered by her employer, but is not expected to know nor recommend what the competition has to offer. We obviously can’t expect them to send you to their competitor for better service and/or product – it just wouldn’t make any sense, would it?

On the other hand, when you sit with a mortgage broker, you are sitting with 50 different lenders at the same time. Your broker has access to all these Lenders, and knows where to find you the best possible deal according to what you need, and not to what their employer has to offer. They can offer anything available on the market, and their role is to guide you towards the best possible lender to suit your particular situation. It’s like having your own personal negotiator looking out for you.

The beauty of it all is that it’s free in most cases. The broker gets paid by the financial institution, and not by the client. Why not work with a professional who has only your best interest in mind? Why not using their expertise and knowledge for free, and benefit from it?

Each one of us has their own expertise, and a mortgage professional knows mortgages in and out. Most people will be dealing with mortgage financing only a few times in the course of their life, while the broker is working with it on a daily basis, so let them do the research and the recommendation according to their knowledge and expertise.

There are a few ways to find a mortgage broker, and the best one is to get a warm recommendation from your friend and/or family. Mortgage brokers are regulated by Financial Institutions Commission of B.C. (www.fic.gov.bc.ca), so you can look on that internet site to verify your broker is a member, and doesn’t have any complaint filed against them. Another good resource is the Canadian Institute of Mortgage Brokers and Lenders (www.cimbl.ca), and the Mortgage Brokers Association of B.C. (www.mba.bc.ca). If your broker is listed on these three sites, it’s already a good start.

You can also look for their Accredited Mortgage Professional designation. This AMP designation is obtained from CIMBL, and this guarantees your broker adheres to a strict Code of Ethics, and is dedicated to finding the right mortgage solution for their clients. You will find the list of brokers with their AMP designation on the CIMBL site.

However, just like with any other professionals, the best way to find a good mortgage broker is to get a warm referral from a friend or family. Linda Renaud is an Accredited Mortgage Professional and can be reached in Kelowna at 878-6706

Let‚s say you have a $125,000 mortgage at six per cent interest amortized over 25 years:

1.    Increase your monthly payments. If you can afford $1,000 per month but your mortgage only demands $800 per month, make a payment of $1,000 instead. You‚ll shave 8.75 years and almost $46,000 off your total interest costs.
2.    Take advantage of lower rates. In addition to reducing the overall interest component of your mortgage, you can pay the principal down faster.
3.    Accelerate to bi-weekly payments. With more frequent payments you can fit in an extra payment each year and be mortgage free four years sooner with almost $22,000 in savings.
4.    Use any bonuses, tax refunds or „found money‰ to pay down principal. This is especially valuable in the early years of your mortgage. If you receive an annual bonus or other lump-sum compensation, see if you can put it against the principal.
5.    Consolidate your loans into a new mortgage and use the savings to boost your payments. If you‚re a homeowner with some equity, use your mortgage to consolidate your other loans. Add the money you‚ve been spending on loan payments to your mortgage payments to see big savings in overall interest.

More information on how to fast-track your mortgage is available by calling Linda Renaud in Kelowna at 878-6706.

Property assessments have arrived, and by now, we know we have more equity in our home than we had last year, and that’s a good thing.

Many now have the option of re-financing their existing mortgage – and taking a higher mortgage based on the increased value of their home. In most cases, you can borrow up to 90% of the value of your home for debt consolidation purposes*.

This can be a good strategy if you have outside debts with high interest rates. As per the Credit Counselling Society, the average Canadian family carries over $35,000 in revolving credit and the average credit card interest rate is 17%. It makes so much more sense to payoff a debt with a 17% interest rate and replace it with a mortgage at 5% - what incredible savings!

You can payoff all your debts and still have a lower payments, which would dramatically improve your cashflow position. Once you’ve paid off your debts, then you can tackle the task of paying down your mortgage with the extra cash you’ve generated.

Obviously, such a strategy does not apply to every situation and there are many factors to consider, like the terms of your existing mortgage and the fees involved. For instance, many lenders would offer you a blended rate on your re-finance and this would mean you wouldn’t have a payout penalty on your existing mortgage. However, in some cases, you may be better off to pay a payout penalty to your existing lender and get a more attractive rate with a different lender. Also, if your mortgage is high ratio (over 75% financing), in most cases you only have to pay an additional mortgage premium on the new money you are borrowing today as long as you keep your amortization as per the original application.

I would be pleased to work out some numbers for you based on your particular situation today. Together, we can establish if you would be better off with a higher mortgage and no other outside debts or if you would be better off just leaving it as is for now or getting a new line of credit instead, or possibly a second mortgage. Each situation differs according to your own individual situation.

I’m a strong believer in consolidation of debts though mortgage financing as long as you set out a plan to paydown your mortgage based on the savings from interest rates. You can still put money in your pocket and have only one monthly payment to make and tackle it as much as you can afford to without having to be miserable about it.

The key is to not go on using your credit cards (or taking out other loans) in a way that means you can’t pay them off in full on a monthly basis. If your budget is realistic, you should be able to meet your financial obligations monthly. I like to offer as long an amortization as possible to my clients and then you can exercise your pre-payment privileges. If something happens and you have a set back for whatever reason (accident, loss of job, etc.), then you can revert to your original lower payment easily until you’re back on your feet.

Linda Renaud is an Accredited Mortgage Professional with Invis and can be reached in Kelowna at 878-6706 or via e-mail at lindarenaud@invis.ca at any time to discuss your mortgage financing.

As any self-employed person will tell you, building a business can mean making some significant personal trade-offs.

A September 2007 Mortgage Intelligence survey of self-employed Canadians indicated that 49% of those interviewed have postponed real estate purchases. Another 57% have little to no retirement savings, while 51% take fewer vacations than they would like.

Even with these trade-offs, Canadians who are in business for themselves still deal with stress that is keeping them up at night. The survey revealed that 37% of the self-employed are being kept awake at night by business finance issues, followed closely by administrative matters at 32%.

The good news is that when it comes to securing a mortgage – whether to purchase a home or leverage home equity – the self-employed can now rest easy, thanks to new mortgage options that are now available to this important segment of the Canadian workforce.

Bringing it Home

When asked by Mortgage Intelligence what real estate purchases they are planning in the next three years, self-employed respondents indicated that 26% plan to buy or refinance a primary residence. Another 12% plan to purchase an income property and 10% plan to purchase a vacation property.

The good news for self-employed borrowers is that many lenders now offer a wide range of flexible mortgage solutions that don’t require detailed financial statements or income verification, instead basing approvals on personal credit history and work experience.
As well, many lenders offer a variety of flexible terms, such as longer amortization periods, accelerated payment schedules and up to 90% stated income mortgages.

While mortgage interest rates are still an important variable for the self-employed, these flexible terms are critical to reducing mortgage-related stress for entrepreneurs with an unpredictable income flow. Opting for an open mortgage with a 40-year amortization period not only lowers the amount required for monthly mortgage payments, it also enables the borrower to accelerate payments when business is strong.

As well, many self-employed people are negotiating mortgages to lower monthly payments through debt consolidation, establish a home equity line of credit for their business, renovate their home or build the ideal home office.

Work for Yourself, but Not by Yourself

If you are self-employed, you may want to consider working with a mortgage consultant to help navigate through your options and select the right mortgage for you. Today about 30 per cent of all residential mortgages are placed through mortgage brokers, up from 8 per cent in 1998, according to the Canadian Association of Accredited Mortgage Professionals (CAAMP).

As a mortgage consultant, I am your agent working for YOU, not an institution. I will alleviate the burden of many time-consuming and frustrating tasks associated with securing a mortgage, which lets you stay focused on your business.

As someone also in business for myself, I understand that your schedule can be unpredictable, so I will work with you to establish convenient times to meet. I will strive to understand your personal and professional goals and will identify competitive mortgage solutions based on your unique profile. And, in most cases, my service is provided free of charge since I am compensated by the lender you select.

Most entrepreneurs would agree that the best business decisions are made based on a solid understanding of all the available options. By working with a mortgage broker, self-employed Canadians can gain a better understanding of how these new mortgage offerings can translate into lower monthly payments, increased financial flexibility and fewer trade-offs in pursuit of your personal and professional goals.

Linda Renaud is a Mortgage Consultant with Mortgage Intelligence in Kelowna. Linda can be reached anytime for a free consultation on the phone: 250.878.6706 or via e.mail: lindarenaud@shaw.ca Also, please do not hesitate to go to our web site for more information at: www.mortgageintelligence.ca.