Canadians aim to pay mortgages sooner

OTTAWA — Recent Canadian homebuyers have a “a high level of financial literacy” and many are paying off their mortgages at accelerated rates, according to a Canada Mortgage and Housing Corp. survey released Wednesday.

The latest annual survey suggests many Canadians are taking heed or were already aware of the perils of taking on too much debt in the current low interest rate environment.


The survey of 3,512 recent mortgage buyers found 75 per cent of respondents agreed that it was “very important” to pay off their mortgages as soon as possible — and 39 per cent said they had set payments higher than the required minimum.


As well, 20 per cent said they had made at least one lump sum payment since obtaining their mortgage.


“As in 2010, the 2011 survey findings indicate that Canadians feel confident in how they manage their mortgage debt,” the CMHC report said.


“Over 80 per cent of recent buyers reported doing some level of household budgeting. While establishing this budget, a majority also reported that they had assessed, to some degree, the potential impact of rising interest rates on the budget, assessed to some degree the potential impact of a loss of income on the budget, or assessed to some degree the potential impact of rising expenses on the budget.”


The report adds that recent buyers also seem to good savers, with 80 per cent indicating they had contributed to a retirement, savings or education fund.


Overall, the survey suggested that Canadians taking on mortgage obligations were entering into debt with eyes wide open.


Bank of Canada governor Mark Carney warned as recently as last week that he was concerned about rising levels of indebtedness and that many Canadians appeared not to appreciate that rates will need to rise and mortgage servicing will become more onerous.


As well, Statistics Canada reported this week that household debt to disposable income had reached a record of above 147 per cent.


But according to the CMHC survey, eight in 10 respondents said they had researched mortgage terms and conditions carefully, 88 per cent had a good understanding of how big a mortgage they could afford and 81 per cent had some form of savings.


On average, homebuyers took 11 months to plan their purchase and recent buyers took about five weeks to research the best mortgage for them.


“The investment in homeownership is not entered into quickly,” the CMHC said.


However, homebuyers were not accessing all the help that is available.


It said research showed that during their mortgage research, just 23 per cent of first-time buyers received advice on budgeting and 18 per cent on managing debt.


In addition, the survey found that one in four recent buyers were not sure of where to go to receive reliable advice in case of financial difficulty.


CMHC said areas in which mortgage and financial professionals can offer advice and guidance are long-term mortgage and financial strategies, budgeting and managing debt.


The online survey of recent mortgage consumers was conducted between Feb. 25 and March 25.

For all your mortgage needs call: Eduarda (Eddie) Pita - 416-920-9931


Article courtesy of: http://www.moneyville.ca/article/1013270--canadians-aim-to-pay-mortgages-sooner-survey

We didn’t do our first home legwork

Tina Di Vito heads the Bank of Montreal's Retirement Institute.

Supplied photo

By Tina DiVito | Mon Jun 20 2011

In my 20s, my husband and I purchased our first house in Pickering. It was an exciting time. Thinking back, housing prices were on the decline but interest rates were hovering around 10 per cent. We were young, but we really wanted to own our own home and start to build a financial foundation.

While we had saved the required 25 per cent for a down payment, the minimum mortgage payment seemed huge. But I was working as a chartered accountant and my prospects were good; my husband also had a good job. It just made sense to pay ourselves rather than a landlord.

We quickly found out that the carrying the costs of home ownership were a lot bigger than we had thought. We needed furniture and new appliances, including a stove, fridge and washer and dryer. We hadn’t factored in unexpected things like a new fence, or monthly bills like heat, electricity, water and property taxes, not to mention the extra transportation costs to take us into downtown Toronto where we both worked. When the first mortgage statement showed up in the mail, we were shocked that most of each payment was interest and just a tiny part was the principal.

We quickly realized our mistake. The only costs we’d really considered were the down payment and monthly mortgage payment. We hadn’t done the legwork to find out how much money it could take to cover all the other responsibilities of owning a home.

Over the next few years we were house poor. We didn’t have anything extra to contribute to savings like an RSP; we couldn’t afford to travel, and we had to minimize extras like restaurant meals. It was not quite the lifestyle two young professionals expected to live! The house – or in fact, paying the mortgage – became our sole focus.

In the end, it turned out to be the right decision – mostly because we maintained a strict budget. Also, interest rates began to fall, meaning we were able to renew the mortgage at a lower rate. As a result, we were able to continue investing in our home and moved up to a larger one a few years later.

But we were lucky – it might not have turned out that way. If one, or both of us, had lost our job or we’d been faced with a major repair, things could have been different.

It brings home the importance of developing a financial plan that takes into account all aspects of your finances before you take the big step of buying a home. It should include such things as:

 • Saving for as large a down payment as you can afford;

 • Keeping some money aside in an emergency fund;

 • Creating a family budget and sticking to it! Know how much you are spending and where you can reduce costs;

 • In addition to a down payment, always set aside some money for those “extras” such as buying furniture, appliances, lighting fixtures – and don’t forget the lawn mower;

 • Saving as much as possible to make extra payments to pay off your mortgage faster;

 • Making sure that your total housing costs, including mortgage payments, property taxes and heating costs do not exceed one-third of your household income.

You may well find out, in the end, that you’re not ready to buy a house. That might be depressing, especially with all the voices out there that say you should, but if you can’t really afford it, it’s the right choice.

For all your mortgage needs call: Eduarda (Eddie) Pita - 416-920-9931

Courtesy of: http://www.moneyville.ca/article/1011806--we-didn-t-do-our-first-home-legwork

Letting your savings work for you. By Eduarda Pita - Toronto Mortgage Broker

Eduarda (Eddie) Pita – www.eddiemac.ca - (416) 920-9931


Letting your savings work for you. By Eduarda Pita - Toronto Mortgage Broker

Let’s face it. You’ve worked hard and saved when and where you could. To most Canadians, this is a part of everyday life. Well now finally, let some of the money you have worked for do some work for you.
In 1992, the Canadian Customs and Revenue Agency (CCRA) introduced the Home Buyers’ Plan (HBP). The HBP plan allows for Canadian consumers to withdraw up to $20,000 from their RRSP, to use in assistance of purchasing their first home. In the case of a couple if they are both eligible, the number is doubled up to a total of $40,000.
Most people use this RRSP withdrawal to add to any down payment they have already amassed to put down against the purchase price of their home, to either lower the amount of mortgage they will require, or increase the amount of the mortgage they can carry.
Sound too good to be true? Not exactly. Any amount that you may have deducted must be repaid back into your RRSP account in annual payments. You have 15 years to repay this amount, or if you don’t it will be added to your taxable income for the year and you will be taxed accordingly.
By using these funds, if you have them invested in RRSPs, you get the money working for you in a tax free and efficient way. What happens if you don’t have any RRSPs? The following strategy may be right for you. If you have the room under your RRSP cap, you can borrow funds from your bank and purchase RRSPs to later contribute to your down payment. Not only are you helping yourself today, but building a nest egg for your future.
To find out if you have room under your RRSP cap to contribute look in your Notice Of Assessment (NOA). The government will give you a figure, which is usually a percentage of your reported income annually. If you haven’t used the RRSP for that year, either partially or in full, the balance gets carried forward and added to the next year’s total. If you don’t keep your NOA’s, you can get your latest one by calling the CCRA at 1-800-959-8281.
A couple of words of caution: plan early. If you think that this may make sense for you and your financial position, take the steps you need to commence and start today. In an interest rate environment such as the one we face today, where rates are on the rise, make your decisions early. It could save you hundreds if not thousands of dollars.
Keep in mind, an RRSP is an investment into your future, so in case you can’t afford to pay your mortgage or have no income for a while and are forced to sell your home, you may lose your down payment, along with it your future savings.
For more information contact me and I will give you guidance, and help you decide what’s right for your situation.


Have more questions?
Send it to mortgages@eddiemac.ca

Why Use Mortgage Brokers? by Eduarda Pita

Eduarda (Eddie) Pita – www.eddiemac.ca - (416) 920-9931

Why Use Mortgage Brokers? 
by Eduarda Pita

Mortgage Brokers are independent, trained professionals licensed to represent and provide you with the best advice for your mortgage needs. Mortgage Brokers primary expertise is locating funding for mortgage financing. They know where the best rates can be found. What's more, they have the knowledge required to present a proposal for financing to lenders in the best way possible to successfully obtain mortgage financing. They negotiate, place, assist in placement, find or offer to arrange mortgage loans on residential and commercial properties for you, the borrower.

Why deal with a Mortgage Broker?
Mortgage Brokers represent you, the customer, not the lender. Because they are not employees of a lending institution, Brokers are not limited in the product they can offer you. Brokers seek out the best lender package to suit your specific situation, whether it’s with a Chartered Bank, Trust or Insurance Company, or Private Funds.

Unlike the banks, Brokers don’t cross-sell their clients. They will not encourage you to bring over your savings, checking or credit cards to get their best rates. Brokers can find you the very best rates from multiple lenders nationwide…not just the rates of a single institution.

Brokers are also less concerned than banks about buyers who are self employed, recently divorced or have damaged credit histories including bankruptcies. The can easily originate loans for the self-employed and those preferring no documentation or low documentation loans. It’s also much easier to acquire financing for investment properties and vacation homes through a broker. Very importantly, Brokers are very wiling to work on YOUR TIME … not just during banking hours.

There is a wide assortment of options and features available to homebuyers today. Shopping around takes a lot of time and effort. The mortgage process within today's very competitive marketplace intimidates many Canadian homebuyers. It pays to work with a mortgage professional who will represent you and ensure the mortgage you get is the one best suited to your needs.
Since real estate tends to represent the single largest investment most of us ever make, it is vital to secure the best financing available. Every borrower has different needs, every property is unique and every lender has its own rules and programs.

Choosing the wrong mortgage can cost you thousands of extra dollars. Mortgage Brokers are trained professionals who can help you save on your mortgage dollar.

10 Reasons to use a Mortgage Broker

• Access to over 75 different lenders, banks, trust companies, investors and financial institutions.
• Fast credit and loan pre-approvals with no cost or obligation.
• Up-to-date on all the mortgage rates, terms and re-payment options available on the market.
• They only specialize in mortgages and are knowledgeable on current trends.
• They are experts at matching you with the best-suited mortgage.
• Get mortgage rates at wholesale, guaranteed up to 120 days.
• They work for YOU, not the bank.
• They increase competition in the market place, thus keeping rates low.
• They save you time and money!
• Brokers have vested interest in satisfying your needs since they rely on referrals and repeat business.

Have more questions? Send it to mortgages@eddiemac.ca

Is a 40- year Amortization Mortgage right for you? by Eduarda Pita

Eduarda (Eddie) Pita – www.eddiemac.ca - (416) 920-9931


Is a 40- year Amortization Mortgage right for you? 
by Eduarda Pita

Longer or shorter - your amortization affects how much your mortgage really costs.
Choosing the length of your amortization period, which means the number of years you will need to pay the full balance of your mortgage, is an important decision that can affect how much interest you pay over the life of your mortgage.
Historically, the banking industry’s standard amortization period has been 25 years, a standard that still applies today. It is the benchmark that is used by lenders when discussing mortgage offers, and it is usually the basis for mortgage calculators and payment tables. However, shorter or longer timeframes are available.
The main reason to opt for a shorter than standard amortization period is to become mortgage-free sooner. And since you are agreeing to pay off your mortgage in a shorter period of time, the interest you pay over the life of the mortgage is therefore greatly reduced. You also have the advantage of building home equity sooner.
Equity is the difference between any outstanding mortgage on your home and its market value. It represents the amount of money you can claim as your asset. If you choose, your equity can be used to secure lower interest cost financing for things such as home renovations, your children’s education or for second property investments, just to name a few.
While there are many good reasons to opt for a shorter amortization period, there are a couple of other factors to consider. Because you are reducing the actual number of mortgage payments you make to pay off your mortgage, your regular payments will be higher. If your income is irregular, or if you’re buying a home for the first time and will be carrying a large mortgage, a shorter amortization period that increases your regular payment amount and ties up your cash flow may not be the best option for you.
Lenders are quietly pushing 40-year amortizations as a way to help borrowers cope with the higher interest rates and with rapidly rising homes prices.
For a given amount, a 40-year amortization carries lowers monthly payments than a 25 -year. That means a 40 year amortization allows you to afford a slightly more expensive house. The longer amortization has disadvantages: You pay more interest and build equity slower. Of course, there’s no such thing as a free lunch. Any time a borrowers adds years to a mortgage term, the overall interest bill rises.
So who should do 40-year amortizations? People who have a big mortgages of $400,000 plus. People who are single moms or dads who live their children and family where they are dependent on the income of parents’ pension and children’s income. Lastly those who have substantial debt who need to refinance their debt onto their mortgage and need the longer amortization to help them get back up on their feet.
No matter how the amortization is structured, the benefit to the borrower remains the same: lower monthly payments.

Have more questions?
Send it to mortgages@eddiemac.ca

MAC Agent Vignettes - Eduarda Pita

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