Remember bankers work for banks, I WORK FOR YOU! 

  

Cheryl Hutton and Aaron Coates always thought getting a mortgage would be a challenge. But within 18 days of visiting a mortgage broker, they were able to close a deal on a new townhouse in Calgary without a hitch.

Now in their early 30s, both have careers in the theatre, something Hutton says has been a bit of a sticking point with banks.

"In our industry, we never fit the paperwork guidelines for the banks. For some reason people don't think we pay our bills."

Although it was their first home purchase, Hutton says it was surprising how easy the whole process was once they had someone who could walk them through it. "He sat us down, told us what our options were, showed us that it was possible, and explained all the steps we needed to take. If it wasn't for him, we may not have made the leap."

Sorting through a mortgage process and negotiating rates can be overwhelming for first-time and seasoned home buyers alike. That's why people such as Hutton and Coates turn to brokers to do the legwork for them.

Yet mortgage brokers will tell you that a good number of home buyers out there don't really understand that they do. "Part of the challenge we have in our world is that people aren't really sure what a mortgage broker is," says Gary Siegle, regional manager for Invis Inc., a mortgage brokerage firm in Calgary.

Brokers should not be confused with "rovers", mortgage specialists attached to a specific financial institution who visit customers outside of banking hours, he explains. "They only deal with that bank's product. A broker, however, is an intermediary whose job is to make a match between a lender and a borrower. We represent the individual, not the bank."

About 30 per cent of mortgages in Canada are done through a broker, according to Perry Quinton, vice president, marketing for Investor Education Fund, a Toronto-based, non-profit financial information service.

"The reason more people don't know about them is because the banks are so visible. It's easy to gravitate to them when you have your savings accounts, credit cards and investments there already."

Going for the comfort factor could cost you, however, she adds. "A broker has access to different lenders, including banks, and can shop rates and features. A half-percent may not sound like much but that could make a difference of about $20,000 for a $250,000 mortgage amortized over 25 years. Any little bit helps."

Siegle says shopping around can deliver significant savings.

"Let's say today's average posted rate is 5.44 per cent and you get a point off that at your bank. So you think you just got a really great deal. But the vast majority of rates we deal with as brokers would be another 30 basis points lower -around 4.14 per cent.

"And if you look at preferred deals that don't offer features such as prepayment privileges, it can get as low as 3.89 per cent. That's another 25 basis points below what's generally available."

The reason for that is simple, he says. "We offer wholesale rates; banks offer retail."

For anyone considering a broker, Quinton advises people to do a bit of groundwork first.

"It helps to educate yourself about options and what you can afford. Look at all your living expenses, including student loans and credit card debt. Chances are you are understating those."

Another thing to look into is the different types of available mortgages and features, including interest rates, payment frequency, amortization, cashback programs, and the ability to make lump sum payments. "Knowing these things before you go in can save you a lot of money," she adds.

Any mortgage broker you choose should always meet the right licens-ing and education requirements, so be sure to check their registration.

If you're not completely prepared, however, that shouldn't be a concern when working with a good mortgage broker, Siegle says.

"After all, mortgages are pretty much all we do. So even if you come in cold, good brokers will walk you through the process and ask all sorts of questions. You just need to be prepared to answer them openly and honestly so they can get you the best deal possible."

 

Why you shouldn’t buy mortgage insurance

There are many excellent articles about the pros and cons of mortgage insurance vs. term life insurance. But every spring a new crop of first-time buyers begins their search for a perfect new home, so it seems like a subject worth revisiting.

The purpose of mortgage insurance (also known as mortgage life insurance or creditor insurance) is to pay off the mortgage when you die so your spouse and dependents are mortgage-free and have one less major expense to worry about. If both you and your spouse are working and want to protect each other, both of you need to be insured.

The first major advantage of term life insurance is that it is much less expensive than mortgage insurance.

Using a calculator on the Cowan Financial Solutions web site, I got standard non-smoker term life insurance quotes for both a man and a woman aged 36 for $400,000 of life insurance for a term of 25 years. The lowest annual quotes were $604 per month for the man (Assumption Life) and $440 for the woman (Unity Life), or $1,044 in total for both. Of course, if you plan to pay your mortgage off more quickly, you can request quotes for a shorter term.

I compared this quote to mortgage insurance rates from the Canada Life Assurance Company in a brochure published by Scotiabank. Mortgage insurance premiums are calculated based on your age and the value of your mortgage. There is no discount for non-smokers or women. With a premium of  20 cents per $1,000 for each borrower 36-40 years old, the annual bill for both spouses would be $1,600.

But the cost differential is only the tip of the iceberg. After viewing a YouTube video in which Cowan Financial Solutions advisor Rita Harris explains some of the other reasons why term life insurance is a better deal than mortgage protection offered by the banks, I gave her a call to get some additional details.  

Here’s what she said:

Protection: When you die, your mortgage insurance is payable directly to the bank. Term life insurance protects more than just your mortgage. Your spouse (or other beneficiary) can use the money as is most appropriate in the circumstances.

Premium Guarantee: The term life insurance premiums and benefits are guaranteed for the life of the policy. Your coverage amount is constant but can be reduced at your request. Premium levels for mortgage insurance can be unilaterally changed by carrier. As your mortgage reduces your coverage goes down but your premiums do not.

Portability: If you take your mortgage to another company, you may lose your existing mortgage insurance and have to re-qualify for new mortgage insurance coverage. In contrast, individual term life insurance is fully portable even if you move your mortgage.

Repayment: You lose all your mortgage insurance coverage when your mortgage is re-paid, assumed or in default. As long as your term life insurance premiums are paid, you can convert your insurance to a permanent plan.

Underwriting: If you buy term life insurance, the insurance company will assess the risk and establish the premiums based on your health at the time the policy is purchased. In the absence of any fraudulent activity, you know your claim will be paid out when needed in accordance with the terms of your contract. Mortgage insurance is subject to post-claim underwriting, which means technically you could be declared uninsurable when you submit a claim.

Moneyville blogger Ellen Roseman’s story about the Feldmans is only one example of a case where a bank initially denied coverage after the fact for medical reasons. CBC marketplace also did a brilliant report about two families who bought mortgage insurance coverage and thought they were protected, only to have their claims denied when a homeowner became sick or died.

So caveat emptor!

Mortgage insurance is sold by bank employees who may not be trained to explain the legal intricacies of those insurance products. You could pay premiums and think you are covered, only to realize later you are not.

For a different perspective for buyers who do not have a 20 per cent down payment, see How mortgage insurance can help buy a house by Moneyville blogger Krystal yee.

 

 

Recently, TD bank has made changes to the registering of their mortgages. Effective October 18th, all new TD mortgages will be registered as collateral mortgages instead of as conventional mortgages.
These changes got me thinking so I thought I would share the following information with the network.

Firstly, the definition of a collateral mortgage:
It’s a loan attached to a promissory note and backed up by the collateral security of a mortgage on a property.

Normally collateral mortgages have been used exclusively for secured lines of credits
Some collateral mortgages are registered for the full value of the property.
The lender then allows, say, 80% of the value of the property to be advanced. As the value of the property increases over time, the borrower(s) can takeout funds up to 80% of the value of the new appraised value. All this for only the cost of an appraisal. ScotiaBank, National Bank & others have such secured lines of credit products.
Major chartered banks will accept “transfers� of conventional mortgages from one to the other at little or no cost.

So my Pros & Cons of collateral mortgages:

Pros: I’ll discuss later

Cons:
i) Most chartered banks will not accept “transfers� of collateral mortgages from other chartered banks. If the consumer wishes to switch their collateral mortgage to another lender upon maturity, there will be legal & appraisal costs. Approx $750-$1000
ii) Upon maturity, would the lender offer only a posted fixed rate or just a slightly lower rate knowing the costs associated with transferring to another lender has legal & appraisal costs.
iii) Collateral charges allow lenders to change the interest rate and/or loan more money to qualified borrowers after closing. On secured lines of credit, the interest rate registered at Prime + upwards of 10%.
iv) Collateral loan involves the other debts you may have. Under Canadian law, a lender may seize equity to cover other debt you have with the same lender. So, in essence, you’re possibly securing all your loans that you have with that financial institution; be it credit cards, unsecured lines of credit, car loans, or overdraft etc.

Now the Pros:
I can’t think of any!

 

The Devil In The Fine Print

Mortgages sometimes have costly or irritating restrictions that you won’t know about unless you read the fine print or ask a mortgage professional.

Some examples:

·       Restrictions on breaking your mortgage before the term is up

·       Restrictions on breaking your mortgage for the first 3 years

·       A penalty surcharge of 1% for mortgages broken within the first 12 or 36 months

·       “Reinvestment feesâ€� (on top of mortgage penalties)

·       Interest rate differential (IRD) penalties based on an onerous bond yield calculation

·       IRD penalties on variable-rate mortgages (usually IRD penalties apply to fixed mortgages)

·       IRD penalties based on a costly posted vs. discounted rate formula

·       Inability to port unless the purchase and sale take place on the exact same day (which can be hard to arrange)

·       A poor conversion rate guarantee

·       No refinances during the first year

·       No free switches (for transfer-eligible mortgages)

·       Amortization limits of 25 years

·       Minimum amortizations of 15-18 years

·       Restrictions on converting from a variable rate to a fixed rate for the first six months

·       No ability to break your “openâ€� HELOC without a penalty

·       Inability to port across provincial lines

·       High administrative fees when porting

·       100% clawback of cash-back if the mortgage is broken before maturity

·       Requirement for a full banking relationship with the lender

·       No lump-sum pre-payment privileges

·       No annual payment increase allowance

·       Pre-payments restricted to one specific day a year (instead of any payment date)

And the list could go on…

Keep a lookout for restrictions like this when comparing different mortgages.

It’s even more important when sizing up cut-rate mortgages because the lower the rate, the greater the likelihood that a mortgage will be somehow restricted.

 

 

Five Expenses That Will Consume 50 Percent of Your Lifetime Earnings

In these recessionary times, financial tips are flowing fast and furious about how to save money and stick to a budget. Facing a sea of information many people are asking, "Where do I start?"  For most of us, five areas of spending will consume over 50% of the money we earn during our lifetime, so that's the best place to begin.

The five areas are: Home, car, children, education and retirement.

 

Here's what you need to know about each:

 

• Don't bite off more HOME than you can chew . How much house can you comfortably afford? For most people the answer is a house with a purchase price of no more than 3x their annual household income. Rationale: the cost of a home includes much more than the monthly mortgage payment. It's also property tax, insurance, upkeep, etc. Typically these costs run 2%-3% of the price of your home each year. Assuming a 20% down payment, a 5-year fixed rate mortgage, and interests rates in the 5%-6% rate, the 3x your income rule of thumb will translate into total housing costs of roughly 30% of your gross income.

 

 

 

  Step up for a financial makeover

Wondering where your money went? There's a way to stop those gaps and plot a better future

Brett Popplewell
BUSINESS REPORTER

Having trouble keeping enough money in your pocket to pay your monthly bills?

Wondering where all your money is going?

You're not alone.

Every month countless Canadians lose track of their expenses or spend more money than they take in, leaving them with little savings or burdened with debt.

"A lot of people think it takes time out of their day that they don't have. But, really, to go through an actual budget doesn't take too much time at all," says Justin Ladrillo of InCharge Debt Solutions Canada, a not-for-profit credit counselling service.

"With the economy as it is, it's important to try to get a plan set up as soon as possible before you hit the trouble spots."

Such advice would have helped 26-year-old Rachel Ramnarain before the recession hit and left her without work.

Ramnarain's credit-card debts crept up on her when she was living modestly, working as an office clerk by day and a bartender by night while bringing in $2,500 a month.

The problem: Between car payments, insurance, nights out on the town, clothing, food, rent and everything in between, she had no idea how much she was spending in an average month.

All she knows is her expenses clearly outweighed her income and, by the time she was 23, she had racked up about $10,000 in debts on her credit cards.

"It was stupidity," she says. "I tried for an overdraft loan when my bills got too high and was denied. That's when I realized how bad it was."

She knows now that had she been budgeting every month she would have been aware of how many dollars were bleeding out of her bank account, destroying her credit and leaving her over-leveraged with little to show for it.

Ramnarain is representative of a growing number of Canadians living beyond their means. Some are forced into bankruptcy. Others start getting calls from collection agencies and see their credit ratings plummet. The rest simply bob along, their accounts barely above the red line between a surplus and a deficit.

A simple budget can go a long way to avoiding such woes. Ramnarain's story is a perfect example. Credit counsellors straightened out her finances a year ago. Now an unemployed college student, she's in better financial shape than when she was working. She credits that success to keeping tabs on her daily expenses, which allows her to save for the future while paying off her debts.

"There's no way I could have lived like I was before at this stage," she says. "I would have been in big trouble."

If you're having problems saving money each month or if you're constantly wondering where all your money has gone, don't fret. Making a budget isn't complicated.

A monthly budget is just a list of your monthly income minus your monthly expenses. Plugging such figures into a spreadsheet or recording them on paper is Step 1 (you can also use the handy budget-maker included on this page).

Step 2: assess your budget to sort out your bottom line (literally, it's that last line that says it all.)

Unfortunately, those wishing to better their bottom line only have two realistic options:

1.    Increase their monthly income by taking on more work.

2.    Decrease monthly expenses.

In most cases, the second option will prove the most viable, since there are a number of ways to cut back.

But writing up a budget is only the beginning. Sticking to it is entirely different.

"It's not just making a budget that's important, it's revising it and making sure your numbers are accurate," says Ladrillo.

It's also important to set goals for your excess money; otherwise, it's too easy to blow that cash. You want to be debt free in five years' time? Make that your goal and budget accordingly. If you want to pay for a car outright in a year, then make that your goal and budget accordingly.

"When you're doing your budget, try to think of every single expense as a variable expense," adds Ladrillo. "Not every item should be viewed as fixed, or that can be a barrier to improving your situation or reaching any goals.

"Even things that are most fixed, like a mortgage payment, can be adjusted."

Among things that may be easier to cut back on are groceries. For many families, that's one of the biggest monthly expenses. With some small changes, you can save quite a bit of money (see our top five tips, right).

Experts also suggest carrying a daily money tracker to make sure you're sticking to your budget on a day-to-day basis.

"Actually tracking where you spend your money, that's hard work," says Andy Fisher, a bankruptcy trustee with A. Farber & Partners.

"Most people can write up a budget," he says.

"The really hard part is trying to track your spending so that you stay within your budget."

Thankfully, there are resources online that can help you do this.

OUR TOP FIVE TIPS FOR SAVING CASH

If after filling out the budget form you find you've got a personal deficit – that is, you're spending more than you earn – or if you're not satisfied with your monthly surplus, you might want to try revising your personal finances.

There are only two ways to change your bottom line: Make more, money or spend less.

If you can't make more money – with overtime, a second job, or a pay raise – your only other real option is to spend less by cutting back on expenses.

The credit counsellors call this "making your budget work for you." Here are five tips to get you started:

1.
If your bottom line is in the red by a large amount, you're probably going to have to tackle some of your biggest expenses, such as housing costs. Try taking on a boarder or a roommate, or even moving to a cheaper location. You could also start up a home-based business to take advantage of tax writeoffs .

2.
If you're carrying a balance on your credit cards, high interest rates – as much as 18.9 per cent annually – could be bleeding you of money. If you qualify for a personal line of credit, which typically carries a much lower interest rate, you could transfer credit-card debts onto that line of credit and save on interest payments.

3.
Check your budget carefully for non-essential expenditures. Cigarettes and alcohol might help keep the demons away, but they are costly vices. Butting out and cutting back on the booze will save more than just your health in the long run.

4.
Shopping for food is another area where you can save. Simple things such as checking t, he flyers at your local grocer for sales can help. Switching from national brand names to no-name store brands will also a, dd up over time. You can also reduce your day-to-day expenses by packing a lunch and bringing a coffee maker to work, or a travel mug filled with your home brew.

5.
You can cut back on gasoline, parking and other car-related expenses by carpooling to work, using public transit or walking. It's also wise to plan ahead so you can consolidate short trips and keep last-minute errands to a minimum. – Brett Popplewell

HOW TO FILL OUT YOUR MONTHLY BUDGET FORM

Budgets might sound complicated, but they're just documents that allow you to list your monthly income and expenses in order to arrive at a true measure of your financial health.

To complete your budget, write in the numbers that apply to your financial situation beside the appropriate items. When you've listed all your income items, add them to calculate your total monthly income. Do the same for expenditures to calculate total monthly expenses.

Then, to figure out your "bottom line," subtract your total monthly expenses from your total monthly income.

It's that simple.

In the shadow of debt Brett Popplewell business reporter

It has been described as the bane of the middle class. It leaves many Canadians living beyond their means, causes thousands to go bankrupt every month and fills millions of others with anxiety.

In its simplest form, it's called debt and, for average Canadians, it casts a long shadow over their lives.

The numbers are bleak. According to the Canadian Bankers Association, there are twice as many credit cards circulating in Canada as there are Canadians. More than half a million of those cards haven't been paid in months. There are more people walking away from their mortgages than there have been in years and, according to Industry Canada, there are more people declaring personal bankruptcy in Canada than ever before.

Meanwhile, the Vanier , Institute of the Family says the average level of household debt in Canada has risen to $90,000 – $24,800 more than the average annual household income.

Among the biggest contributors to personal debt? Credit cards.

"It's amazing how debt sneaks up on people, specifically credit-card debt," says Laurie Campbell, executive director of Credit Canada, a not-for-profit credit counselling service.

Of all the things that can bleed your pocketbook dry, compounded credit-card interest is among the worst.

"People think that just because they are paying their minimum payment, they're okay. They're not. They're in trouble."

Jeffrey Marshall, a 23-year-old former mechanic, was one of those people, thanks to five years of accumulated credit-card debts.

Marshall was handed his first credit card when he was 18. Now he's $4,500 in debt on his cards, with a $6,000 unsecured loan left over from the purchase of tools he needed to work as a mechanic.

"The recession (played) a bit of a part with me," he says. "The main shop I was working for hit tough times. Paycheques started bouncing, but I didn't change my lifestyle. I kept living as if I were still raking in $1,400 every two weeks."

When his employer went under, Marshall couldn't find work for several months, but he continued to spend. He had good credit and was able to put expenses – a trip to Cuba here, a lunch with the guys there and a few nights on the town in between – on his credit cards.

Eventually, the cards were maxed out and he became lax in making even the minimum payments. That's when the phone calls started.

"The collection agencies were calling, harassing my parents," he says.

To keep the collectors off his back, he started to pay the minimum on his monthly credit card bills, unaware that, at that rate, it would take several decades to pay off the cards.

"It was ridiculous," he says.

Marshall sought help from a credit counsellor who drew up an affordable budget for him. Restaurants, bars, trips and toys were all removed from his monthly expenses. He cut up his credit cards and is now on a repayment plan that should relieve him of his current debts in four years.

But life still isn't easy.

"If I want to get a car loan I'm going to have to pay a ridiculous interest rate," he says. "If I want a cell phone I have to get someone to co-sign with me. It's been tough, but my goal is just to basically get my credit back and get out of debt."

He's not alone.

Donna Borden realized she had a problem when the collection agencies started hounding her work colleagues.

"They were calling me at home ... at work," Borden, 46, an office administrator at the Toronto Grace Health Centre, recalls. "It got so bad my colleagues got used to telling them I'd already left. I wouldn't pick up the phone at home."

Part of Borden's debt problem was inherited from her mother, who had purchased furniture from a store on credit under Borden's name. Then she became ill and died, passing on $5,000 worth of high-interest debt to Borden, who was already $29,000 in the red. She tried to pay down the debt with a loan from City Financial but, before she knew it, she was caught with $10,000 in interest on that lo, an while still carrying balances on her credit and retail cards.

"I was shocked at how much I owed. My annual income was $4,000 less than my debt load. I didn't own a house. I didn't go on trips. I didn't live expensively. It just snuck up on me."

With zero savings and no mortgage, she turned for help to a credit counsellor, who got the collection agencies off her back and set up a repayment program that allows her to save every month while reducing her debt.

"I only live on cash now and I'm just fine with that," she says.

Although mortgages make up the majority of Canadians' debt, personal debt woes are often the result of unpaid credit-card bills.

There are more than 68 million credit cards in circulation in Canada – more than two for every Canadian. According to the Canadian Bankers Association, 27.4 per cent of Canadians carry a balance on their cards month over month.

There's more: The average interest rate on a credit card is 18.9 per cent, while the average minimum payment per month is 3 per cent of the total balance. Paying off a $5,000 credit card debt by making the minimum payment (but no less than $10) every month would take 19.75 years and cost $10,300.

There are several debt calculators online (www.creditcanada.com/debtCalc.asp, for one) that allow you to punch in your current credit card balance and average monthly payment to determine how much interest you're paying and how many months it will take for you to pay off the debt.

"If you're living with credit-card debt, the bottom line is you're bleeding big time with the interest rates," says Campbell, the credit counsellor.

"When someone comes to us in this state, we look at their full financial situation. We look at their income, their assets, expenses and their debt. We do up a monthly and daily budget.

"We almost have to re-educate them."

All too often, people ignore their debts until it's too late.

With $25,000 spread over multiple cards, Gary Baker, 65, can't even remember the last time he paid off his credit cards in full.

"Some of the debts on my cards have been around for upward of 10 years," he says.

"Part of the problem was that we were stealing from Peter to pay Paul," he says, explaining how, for years, he and his wife paid one credit card with another without ever paying any of them off.

They had planned to use a small RRSP to pay off the debts, but discovered it was locked in and couldn't be collapsed.

"We're really trying to fix this, we've been working on this for a number of years now," Baker says.

Yet he insists he doesn't have a debt problem. After all, he says, "It's been this way for so long but nobody's coming after us."

Despi, te his credit-card woes, Baker has a line of credit and a mortgage on his house."I probably would be in better health if the stress from the credit cards weren't on me," he reckons. "But there's not much I can do at this stage."

Baker and his wife continue to work for modest wages as a night stocker at a big box store and a lunchtime supervisor at a local school, respectively. He doubts he will ever retire.

Andy Fisher, a bankruptcy trustee with A. Farber & Partners Inc., says "people often wait too long" be, fore seeking help because of the stigma attached to visiting a bankruptcy trustee or credit counsellor.

"People don't want to go bankrupt, and rightfully so. But some people are just hoping it's something they can avoid when quite often they can't," he says. "Only about 15 per cent of the people who walk in our door are able to avoid bankruptcy in the long run. Often it's the ones who come in too late that are only left with, bankruptcy or a bankruptcy proposal as options."

So how do you know when it's time to seek help?

Fisher's advice: "As soon as you start feeling pressure, as soon as you're using one credit card to pay another credit card, or if you're struggling to pay your minimum balance, or if you are seeing a large cut in your pay and you're in trouble – it might be time to talk to us.

"When you're starting to get calls from collection agencies and creditors, it's time to seek out , some help. The worst thing you can do is let it get worse."

JUST THE FACTS

68.2 M
<, /SPAN>Number of credit cards (Visa and Mastercard) in circulation in Canada in 2008 – slightly more than two cards per person.

35.3 M
Number of credit cards in circulation in Canada in 1998 – roughly one card per person.

27.4%
Percentage of credit card holders who don't pay off their monthly credit card bill in full.

682,000
Number of cards considered delinquent (no payments for 90 days or more).

18.9%
Standard credit card interest rate, on average.

Source: The Vanier Institute of the Family, Statistics Canada and the Canadian Bankers Association

Financial Planning

Helen Morris, Financial Post  As mortgage rates remain low, homeowners looking to renew their mortgages can get some great deals. However, those people who are hoping to secure a good rate are also likely to be assessing their own wider financial well-being, what with increasing job losses, stock-market routs and the recession.

"If you [are] in a market sector that may be subject to layoffs or you believe that your employer may have issues and may not be there for you tomorrow," says Peter Veselinovich, vice-president, banking and mortgage operations at Investors Group, "you may want to adjust the amount of your payments to reflect what a reduced cash flow or revenue flow into your home might look like."

This could mean looking at a longer amortization period.

Mr. Veselinovich says it is crucial not to look at your mortgage in isolation but as part of your overall financial plan. Mortgage professionals suggest shopping for rates well before your renewal date.

"I would consult with a mortgage broker 120 days prior to your renewal date because we can hold a rate for you," says a mortgage specialist in Toronto, an independent mortgage brokerage. "If rates go down, we can get you a lower rate; if rates go up, then we've got you protected at today's rate."

The sub-prime fiasco aside, there are many products and lenders operating in what's known as the conventional mortgage market in Canada. These are the lenders who provide mortgages for individuals with regular jobs and decent credit ratings.

"The overall mortgage rate environment in Canada is exceedingly good. You can get a five-year fixed mortgage for less than 5% ... there have been increases in the variable rate product -- it used to be there was a discount up to 1%," says Jim Murphy, president and CEO of the Canadian Association of Accredited Mortgage Professionals (CAAMP). "Today the best you can do is probably prime plus 0.6%."

This means that as the prime rate has fallen, variable customers could be looking at a rate as low as 3.6%.

"The difference in those rates is really the insurance premium for peace of mind you're going to get by locking in your rate," Mr. Veselinovich says. "I like to call it the insomnia factor ... if you're going to be concerned that ... any material movement in interest rates could reflect a payment that you could no longer afford ... then you should be looking at a fixed-rate mortgage."

Many economists expect rates to continue to decline.

"Going into the second half of this y, ear, we will start to see, a lower mortgage rate," says James Marple, economist in economic forecasting at TD Economics. "Going into 2010, we're starting to see signs of an economic recovery ... We start to see inflation picking up and we will see short-term interest rates rise."

Mr. Murphy says it is crucial to ask lots of questions and not only about the rate. If you are thinking of moving h, ouse in the near future, check whether your mortgage is portable without penalty if, for example, you move to another province. Most national lenders will be happy to do this but some smaller regional institutions may not be able to. Each mortgage deal has many varied aspects, so analyzing it in detail is crucial. For example, many have penalties associated with early repayment or early exit from the deal.

"If you're not satisfied with the answers you're getting, go to somebody else," Mr. Murphy says. "The rate environment itself is low and going lower. I think the lenders are trying to provide the best products they can in uncertain times."

 

 

 

 

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