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Posts tagged ‘Bank of Canda’

16
Jun

How to Prepare For Mortgage Rate Increases

Can your budget handle a rate increase?

Rate Increase

Rate Increase

There is a bunch of talk about Canadian mortgage rate increases. The single biggest investment most Canadians make is their home; this represents almost 40 % of the average family’s total assets. The big problem at the moment is that many Canadians are living in homes they won’t be able to afford once interest rates start to rise. Right now The Bank of Canada‘s overnight rate is 1 % – this prime rate went above 20 % in 1981! What would happen to your home and mortgage if rates were to go up tomorrow?

Tip # 1: Pay Down Your Principal

If rates are increasing, the best plan is to lower your principle. The two most common ways to tackle this is by:

Switching from Monthly to Rapid Bi-Weekly

Switching from monthly mortgage payments to bi-weekly payments could help you save thousands of dollars in interest.

Making Lump Sum Prepayments

Try making lump sum prepayments or doubling up your payments whenever possible. This will help you tackle your debt quickly and efficiently.

Tip # 2: Plan for it Now

Open a savings account that you are able to pull from to pay for increases in your mortgage interest rate and payments down the road.

Tip # 3: Get Some Professional Advice

Speak with a mortgage professional about your options. You may be able to refinance now and lock in a low mortgage rate.

Tip # 4: Get Real About Your Debt

If you need to, downsize your home or consolidate your loans to protect yourself from rising interest rates. Most importantly, if you are shopping for a new home, calculate your affordability at a much higher interest rate – it’s the only way you can determine your chances of affording your home for the long term.

7
Apr

Why do Mortgage Rates Change?

Understand why rates change and how you can adapt to increases.

There are many factors that influence the health of the economy: unemployment, inflation, consumer confidence, and the housing market are just a few. Let’s take a look at the ways these factors are able to impact your mortgage rate.

Factors Affecting: Fixed Mortgage Rates

A fixed best mortgage rate usually moves in alignment with government bond yields of the same term.

GrowthBond Prices and Bond Yields (Negative Relationship)

When bond prices increase, bond yields decrease, and when bond prices decrease, bond yields increase. Bonds are typically considered safer investments than stocks.

Bond Yield: the return an investor will receive by holding a bond to maturity.

Bond Yields and Fixed Rates (Positive Relationship)

Typically fixed rates have a positive relationship with bond yields. They increase and decrease together with bond yields.

Stock Market is Booming– Bond Prices Decrease, Bond Yields Increase, Fixed Rates Increase

Whenever the stock market is booming, investors are far more likely to make a higher return on investing in equities (i.e. the stock market) than investing in bonds. Thus the demand for bonds decreases, meaning that the price of bonds decreases, and the bond yield increases. Therefore, fixed rates will likely increase.

Stock Market is Dipping– Bond Prices Increase, Bond Yields Decrease, Fixed Rates Decrease

When the Canadian economy becomes less stable, investors generally have the tendency to invest in safer financial commitments such as bonds.

Factors Affecting: Variable Mortgage Rates

The overnight rate changes the cost of lending/borrowing short-term funds and therefore affects the Prime Canadian mortgage rate. The Bank of Canada regularly updates this rate based on economic conditions.

20
Mar

How to Prepare For Mortgage Rate Increases

Can your budget handle a rate increase?

There is a bunch of talk about Canadian mortgage rate increases. The single biggest investment most Canadians make is their home; this represents almost 40% of the average family’s total assets. The big problem at the moment is that many Canadians are living in homes they won’t be able to afford once interest rates start to rise. Right now The Bank of Canada’s overnight rate is 1% – this prime rate went above 20% in 1981! What would happen to your home and mortgage if rates were to go up tomorrow?

Tip # 1: Pay Down Your Principal

If rates are increasing, the best plan is to lower your principle. The two most common ways to tackle this is by:

Switching from Monthly to Rapid Bi-Weekly

Switching from monthly mortgage payments to bi-weekly payments could help you save thousands of dollars in interest.

Making Lump Sum Prepayments

Try making lump sum prepayments or doubling up your payments whenever possible. This will help you tackle your debt quickly and efficiently.

Tip # 2: Plan for it Now

Open a savings account that you are able to pull from to pay for increases in your mortgage interest rate and payments down the road.

Tip # 3: Get Some Professional Advice

Speak with a mortgage professional about your options. You may be able to refinance now and lock in a low mortgage rate.

Tip # 4: Get Real About Your Debt

If you need to, downsize your home or consolidate your loans to protect yourself from rising interest rates. Most importantly, if you are shopping for a new home, calculate your affordability at a much higher interest rate – it’s the only way you can determine your chances of affording your home for the long term.

 

17
Mar

Ways to Obtain a Mortgage When You’re Self-Employed

Own your own company? Find out how you could have a house too!

Data shows that almost 20% of all income earners in Canada are now self-employed. Today, lenders desire evidence of a steady income. Here are a couple of ways to ease the process and raise your possibilities of obtaining a low mortgage rate.

Document Every Penny

You’ll be required to record your income when preparing for a self-employed mortgage pre-approval. Stated Income/Stated Possession (SISA) mortgages are made without any sort of documents or bank records to verify income levels.

Keep Your Credit in Check

When it involves securing the very best mortgage rate, a good credit history and solid credit history rating will always work in your favour.

Bump Up Your Bank Account

A large down payment and hefty savings account can help encourage a lender that you’re much less of a liability when it comes to credit.

Consider a Joint Mortgage

The best way to enhance your opportunities of scoring the best mortgage rate is to take out a joint mortgage with a person who has a full-time job.

Talk to a Broker

Having a certified Canadian mortgage rate broker on your side could make a substantial difference for self-employed individuals.

Merely due to the fact that you’re self-employed does not mean you have to surrender your dream of being a homeowner. Contact FamilyLending.ca today to learn just how you could start climbing up the real estate ladder.