The clock is ticking for buyers and homeowners who want to grab a low mortgage rate in 2014. But if you stay on top of your game, keep your finances in order and act quickly, you can still grab attractive mortgage deals.
These 10 mortgage tips can help you with your mortgage decisions in 2014.
1. Document your finances. Lenders will be extra diligent when underwriting home loans in 2014, as new mortgage regulations went into effect in January. The rules put pressure on lenders to verify that borrowers have the ability to repay their loans.
Keep good records of your finances, including bank statements, tax returns, W-2s, investment accounts and any other assets you own. Be ready to explain any unusual deposits to your accounts. Yes, the $500 that Grandma deposited in your account for Christmas could delay your loan closing if you can't prove where the money came from.
2. Lock a rate as soon as you can. Rates will likely climb in 2014 as the Federal Reserve is expected to reduce the pace of the economic stimulus program that has long helped keep rates low. If you are planning to get a mortgage, lock in a rate as soon as you are comfortable with the numbers.
3. Refinance now - if you still can. Many homeowners lost the opportunity to refinance at a lower rate when rates jumped in 2013. But those who are still paying more than 5 percent interest on their home loans might still have an opportunity.
If you think you may be able to save with a refinance, but you are not sure, it doesn't hurt to try. Speak to a loan officer and take a look at the numbers to see if refinancing still makes financial sense for you after you consider how long it will take to break even with the closing costs.
4. Buyers, use your bargaining power. As mortgage rates climbed, lenders lost a big chunk of their refinance business. In 2014, they will turn their attention to homebuyers and will fiercely compete for their business. Buyers should take advantage of bargaining power they gain with that increased competition. Shop around for the best deal and look beyond the interest rate on the loan.
5. Learn your rights as a borrower. Mortgage borrowers will get many new rights as consumers this year when new mortgage rules created by the Consumer Financial Protection Bureau go into effect in 2014. If you run into issues with your mortgage servicer in 2014 or fall behind on your payments, make sure you are aware of your rights and put them to use.
6. Take good care of your credit. It's nearly impossible to get a mortgage without decent credit these days. That will continue to be the case in 2014. If you are planning to get a mortgage, monitor your credit history and score until your loan closes. The best mortgage rates usually go to borrowers with credit scores of 720 or higher. You may still get a mortgage with a score of 680, but lower scores will mean higher rates or higher closing costs.
7. Don't overspend. Lenders don't want to give out loans to borrowers who will have little money left each month after they pay their mortgages and other debt obligations such as credit cards and student loans. If that becomes the case, the lender will tell you that your DTI, or debt-to-income ratio, is too high and you don't qualify for a loan. Try to keep your monthly debt obligations, including your mortgage and property taxes, below 43 percent of your income.
8. Consider alternative mortgage options such as ARMs. Mortgage rates are rising, but there are alternatives to grab a lower rate, depending on your plans.
A homeowner planning to keep a house for seven to 10 years could take advantage of lower mortgage rates by choosing a seven- or 10-year ARM instead of the 30-year traditional fixed-rate mortgage. Rates on adjustable-rate mortgages can be as much as 1 percentage point lower than on fixed-rate loans.
If you are not sure for how long you plan to keep the house, a fixed-rate loan is probably the better choice.
9. Considering an FHA loan? Reconsider. FHA loans have long been popular among first-time homebuyers because they require low down payments and have somewhat less strict underwriting standards than conventional loans. But they come at a price. Mortgage insurance premiums on FHA loans are likely to continue to rise in 2014, and after recent changes, the borrower is now required to pay for mortgage insurance for the life of the loan. Try to qualify for a conventional loan before you apply for an FHA mortgage.
10. Don't panic. Yes, mortgage rates will likely climb in 2014. But don't panic, thinking you have to buy a home now to grab a low rate. If you are shopping for a home, do your best to move quickly, but remember that this is one of the biggest financial decisions of your life. Get your mortgage and buy your home when you feel ready.
Internal report says Parks Canada buildings in worse shape than claimed
OTTAWA — Parks Canada’s crumbling forts, historical houses and other heritage structures are in much poorer shape than the agency estimates.
That’s the finding of an independent consultant asked to review a comprehensive inventory created by Parks Canada to determine how much repair work is needed for its varied infrastructure across the country.
The agency’s 2012 inventory found that 47 per cent of all its assets — from dams, bridges and roads, to old stone forts — are in poor or very poor condition.
But Opus International Consultants Ltd. said its own sampling of hundreds of assets pushed that overall level to 53 per cent.
And so-called cultural assets — the historical houses, fortifications, locks and other heritage gems from Canada’s past — are in even worse shape.
Opus estimates 61 per cent of these 2,000 structures are in poor or very poor shape, compared with Parks Canada’s more rosy assessment of just 33 per cent.
“Results indicate that at the portfolio level the value of (Parks Canada) assets in poor condition has increased from condition reported in the 2012 National Asset Review,” says the Opus report, which cost taxpayers $316,000.
A copy of the Dec. 16, 2013, document was obtained by The Canadian Press under the Access to Information Act.
Parks Canada has come under fire in recent years for weak management of its real-estate portfolio, which includes historic canals and archeological sites, in addition to campgrounds, access roads and visitor centres.
An internal evaluation in 2009 slammed officials for failing to maintain a reliable inventory of hundreds of buildings and other structures, estimated to be worth some $15 billion today.
In response, Parks Canada undertook a thorough review of all its assets in 2012 to set a baseline, estimating there was $2.9 billion worth of deferred repairs.
More than half the deferred work was earmarked for waterways, highways and bridges — so-called high-risk assets — but Opus found these structures were in better condition than Parks Canada estimated.
Instead, irreplaceable cultural assets were found to be the most neglected, with almost two-thirds requiring about $230 million worth of repairs and maintenance work.
A spokeswoman for Parks Canada said the agency is still reviewing the Opus report, which she said largely backs the inventory estimates about the cost of repair work.
“Parks Canada has invested an average of $119 million annually over the last 10 years on the recapitalization of its infrastructure,” Genevieve Patenaude said in an email.
“Investments include incremental capital resources announced by the government, the most recent of which was $19 million announced in Budget 2013 to address critical improvements to national park highways and bridges.”
Parks Canada, which operates more than 200 national parks, historic sites and marine conservation areas, has been hit hard since 2012 with budget cuts. The agency lost some 587 staff in 2012-2013, for example, or about 13 per cent of its workforce.
At the same time, 20.6 million people visited its sites in 2012-2013, a three per cent increase and the first rise in visitor numbers in four years.
That’s the finding of an independent consultant asked to review a comprehensive inventory created by Parks Canada to determine how much repair work is needed for its varied infrastructure across the country.
The agency’s 2012 inventory found that 47 per cent of all its assets — from dams, bridges and roads, to old stone forts — are in poor or very poor condition.
But Opus International Consultants Ltd. said its own sampling of hundreds of assets pushed that overall level to 53 per cent.
And so-called cultural assets — the historical houses, fortifications, locks and other heritage gems from Canada’s past — are in even worse shape.
Opus estimates 61 per cent of these 2,000 structures are in poor or very poor shape, compared with Parks Canada’s more rosy assessment of just 33 per cent.
“Results indicate that at the portfolio level the value of (Parks Canada) assets in poor condition has increased from condition reported in the 2012 National Asset Review,” says the Opus report, which cost taxpayers $316,000.
A copy of the Dec. 16, 2013, document was obtained by The Canadian Press under the Access to Information Act.
Parks Canada has come under fire in recent years for weak management of its real-estate portfolio, which includes historic canals and archeological sites, in addition to campgrounds, access roads and visitor centres.
An internal evaluation in 2009 slammed officials for failing to maintain a reliable inventory of hundreds of buildings and other structures, estimated to be worth some $15 billion today.
In response, Parks Canada undertook a thorough review of all its assets in 2012 to set a baseline, estimating there was $2.9 billion worth of deferred repairs.
More than half the deferred work was earmarked for waterways, highways and bridges — so-called high-risk assets — but Opus found these structures were in better condition than Parks Canada estimated.
Instead, irreplaceable cultural assets were found to be the most neglected, with almost two-thirds requiring about $230 million worth of repairs and maintenance work.
A spokeswoman for Parks Canada said the agency is still reviewing the Opus report, which she said largely backs the inventory estimates about the cost of repair work.
“Parks Canada has invested an average of $119 million annually over the last 10 years on the recapitalization of its infrastructure,” Genevieve Patenaude said in an email.
“Investments include incremental capital resources announced by the government, the most recent of which was $19 million announced in Budget 2013 to address critical improvements to national park highways and bridges.”
Parks Canada, which operates more than 200 national parks, historic sites and marine conservation areas, has been hit hard since 2012 with budget cuts. The agency lost some 587 staff in 2012-2013, for example, or about 13 per cent of its workforce.
At the same time, 20.6 million people visited its sites in 2012-2013, a three per cent increase and the first rise in visitor numbers in four years.
UPDATE 1-Canadian Housing Starts Slow Modestly In January
TORONTO, Feb 10 (Reuters) - Canadian housing starts fell more than expected in January, data released on Monday showed, reinforcing the view that the country's housing market is stabilizing after a recent boom.
Starts slowed to 180,248 units last month at a seasonally adjusted annualized rate, a report from Canada Mortgage and Housing Corp showed, shy of the 184,000 forecast by economists.
In December, starts were a downwardly revised 187,144. They were originally reported as 189,672.
The January figure continues a trend that has seen groundbreakings slow from 187,923 units in 2013 and the breakneck pace of 214,827 starts in 2012, when the housing market was at record highs and the government intervened to tighten mortgage lending rules.
Economists are largely predicting a softer but stable Canadian market this year as mortgage rates edge higher and the economy continues to chug along slowly.
"We anticipate that construction activity will continue to edge lower over the course of the year as the forecast increase in interest rates should restrain demand," David Tulk, chief Canada macro strategist at TD Securities, wrote in a research note.
"A smaller contribution from the housing market is consistent with the macro theme of domestic fatigue that will leave headline (economic) growth at or below its trend rate until net exports are able find their footing both in response to a weaker currency and a fundamentally stronger U.S. economy," Tulk added.
Multiple urban starts - typically condos - fell 6.0 percent to 102,289 units in January, while single detached starts rose 3.4 percent to 60,869 units, a modest rebound after two months of weakness.
Starts were down in British Columbia, Quebec and the Atlantic region, but rose strongly in Ontario and the Prairies.
RBC economist Josh Nye said unusually bad weather in December and January may have weighed on activity, and that housing starts could stage a small recovery in the next few months. Nye also noted that building permits outpaced starts in the fourth quarter of 2013 - 210,200 permits versus 194,500 starts - which could mean homebuilding will strengthen in the near term.
"However, we expect modestly higher interest rates as 2014 progresses will weigh on housing affordability and lead to some moderation in residential building activity going forward," Nye wrote in a research note.
Starts slowed to 180,248 units last month at a seasonally adjusted annualized rate, a report from Canada Mortgage and Housing Corp showed, shy of the 184,000 forecast by economists.
In December, starts were a downwardly revised 187,144. They were originally reported as 189,672.
The January figure continues a trend that has seen groundbreakings slow from 187,923 units in 2013 and the breakneck pace of 214,827 starts in 2012, when the housing market was at record highs and the government intervened to tighten mortgage lending rules.
Economists are largely predicting a softer but stable Canadian market this year as mortgage rates edge higher and the economy continues to chug along slowly.
"We anticipate that construction activity will continue to edge lower over the course of the year as the forecast increase in interest rates should restrain demand," David Tulk, chief Canada macro strategist at TD Securities, wrote in a research note.
"A smaller contribution from the housing market is consistent with the macro theme of domestic fatigue that will leave headline (economic) growth at or below its trend rate until net exports are able find their footing both in response to a weaker currency and a fundamentally stronger U.S. economy," Tulk added.
Multiple urban starts - typically condos - fell 6.0 percent to 102,289 units in January, while single detached starts rose 3.4 percent to 60,869 units, a modest rebound after two months of weakness.
Starts were down in British Columbia, Quebec and the Atlantic region, but rose strongly in Ontario and the Prairies.
RBC economist Josh Nye said unusually bad weather in December and January may have weighed on activity, and that housing starts could stage a small recovery in the next few months. Nye also noted that building permits outpaced starts in the fourth quarter of 2013 - 210,200 permits versus 194,500 starts - which could mean homebuilding will strengthen in the near term.
"However, we expect modestly higher interest rates as 2014 progresses will weigh on housing affordability and lead to some moderation in residential building activity going forward," Nye wrote in a research note.
CANADA FX DEBT-C$ firms to 1-week high, helped by producer prices
The Canadian dollar strengthened to its highest level in a week against the greenback on Monday, helped by a bigger than expected rise in Canadian producer prices and as investors consolidated positions after the currency’s recent declines.
The loonie was also given a boost by U.S. data that showed a sharp drop in manufacturing in January, hinting at a slowing economy. That sparked investor speculation that the U.S. Federal Reserve may have to refrain from a further reduction of its stimulus program.
The Canadian dollar has come under pressure in recent months, with selling intensifying in January, as investorsturned increasingly bearish toward it. The U.S. dollar appreciated nearly 5 percent against the loonie in January.
“This is probably a move that had run very quickly and is looking just a bit fatigued as we take a step back and assess the landscape and try to figure out why exactly we moved so far so fast,” said David Tulk, chief Canada macro strategist at TD Securities in Toronto.
The possibility of a fast Fed wind-down of its stimulative asset purchases has typically boosted the greenback against the Canadian dollar and other currencies. But Monday’s weak U.S. manufacturing data made that possibility look more remote and the U.S. dollar took a hit,falling 0.4 percent against a basket of currencies.
“To see the Canadian dollar catch a bit of a break in that environment does make a bit of sense,” Tulk said.
Data at home showed the recent weakness in the Canadian dollar helped producer prices rise by 0.7 percent in December, with higher energy prices also contributing to the gain.Economists had forecast an increase of 0.3 percent. Rawmaterials prices also rose.
The figures were the first release in a busy data calendar this week, which will culminate with the closely watched unemployment report on Friday. Hiring in Canada is expected to have picked up in January after the economy unexpectedly shed jobs the month before.
The Canadian dollar ended the North American session at C$1.1097 to the greenback, or 90.11 U.S. cents, stronger than Friday’s close of C$1.1138, or 89.78 U.S. cents.
Data on Friday showed investors had pared back their shortpositions on the Canadian dollar.
“A lot of people have booked a lot of profits on the Canadian dollar weakness story, something that was quite compelling as a narrative to start the year, but just appreciating how far we’ve come, maybe some of the momentum has scaled back a little bit,” Tulk said.
The Canadian dollar briefly fell through the psychologically important C$1.12 area on Friday before bouncing higher. That the currency was not able to sustain the move past C$1.12 helped the loonie gain some strength on Monday, said Scott Smith, seniormarket analyst at Cambridge Mercantile Group in Calgary.
“The trade has been a little crowded for a while, we needed a little washout and reset,” Smith said. “So it’s along the lines that we expect a little bit of a consolidation here until we see the catalyst for the next move higher” for the U.S. dollar-Canadian dollar pairing.
Canadian government bond prices were higher across the maturity curve, with the two-year up 3.7 Canadian cents to yield 0.931 percent and the benchmark 10-year up 35 Canadian cents to yield 2.297 percent.
The loonie was also given a boost by U.S. data that showed a sharp drop in manufacturing in January, hinting at a slowing economy. That sparked investor speculation that the U.S. Federal Reserve may have to refrain from a further reduction of its stimulus program.
The Canadian dollar has come under pressure in recent months, with selling intensifying in January, as investorsturned increasingly bearish toward it. The U.S. dollar appreciated nearly 5 percent against the loonie in January.
“This is probably a move that had run very quickly and is looking just a bit fatigued as we take a step back and assess the landscape and try to figure out why exactly we moved so far so fast,” said David Tulk, chief Canada macro strategist at TD Securities in Toronto.
The possibility of a fast Fed wind-down of its stimulative asset purchases has typically boosted the greenback against the Canadian dollar and other currencies. But Monday’s weak U.S. manufacturing data made that possibility look more remote and the U.S. dollar took a hit,falling 0.4 percent against a basket of currencies.
“To see the Canadian dollar catch a bit of a break in that environment does make a bit of sense,” Tulk said.
Data at home showed the recent weakness in the Canadian dollar helped producer prices rise by 0.7 percent in December, with higher energy prices also contributing to the gain.Economists had forecast an increase of 0.3 percent. Rawmaterials prices also rose.
The figures were the first release in a busy data calendar this week, which will culminate with the closely watched unemployment report on Friday. Hiring in Canada is expected to have picked up in January after the economy unexpectedly shed jobs the month before.
The Canadian dollar ended the North American session at C$1.1097 to the greenback, or 90.11 U.S. cents, stronger than Friday’s close of C$1.1138, or 89.78 U.S. cents.
Data on Friday showed investors had pared back their shortpositions on the Canadian dollar.
“A lot of people have booked a lot of profits on the Canadian dollar weakness story, something that was quite compelling as a narrative to start the year, but just appreciating how far we’ve come, maybe some of the momentum has scaled back a little bit,” Tulk said.
The Canadian dollar briefly fell through the psychologically important C$1.12 area on Friday before bouncing higher. That the currency was not able to sustain the move past C$1.12 helped the loonie gain some strength on Monday, said Scott Smith, seniormarket analyst at Cambridge Mercantile Group in Calgary.
“The trade has been a little crowded for a while, we needed a little washout and reset,” Smith said. “So it’s along the lines that we expect a little bit of a consolidation here until we see the catalyst for the next move higher” for the U.S. dollar-Canadian dollar pairing.
Canadian government bond prices were higher across the maturity curve, with the two-year up 3.7 Canadian cents to yield 0.931 percent and the benchmark 10-year up 35 Canadian cents to yield 2.297 percent.
How Higher Rates Might Affect Your Mortgage
Interest rates have been so low for so long that we barely raise an eyebrow about the warnings of higher rates ahead. But long-term interest rates might tick upward this year as the U.S. Federal Reserve cuts back on its economic stimulus which has kept rates low.
For the past five years, the Fed has been buying U.S. Treasury bonds every month by creating the money. It writes a cheque to buy the bonds which has expanded consumer credit, making it cheaper to borrow money.
The impact of the Fed’s action on Canadian homeowners is a gradual increase in long-term mortgage rates. This includes the five-year fixed rate mortgage, now among the most popular. In 2013, 82 per cent of new mortgages were fixed rate terms, according to the Canadian Association of Accredited Mortgage Professionals.
“We expect long-term rates to rise later this year, which will impact five- and10-year mortgage rates in Canada,” said Benjamin Tal, deputy chief economist at CIBC.
A homeowner who chose a five-year mortgage in 2012 would have paid 2.99 per cent. In 2013, the average was 3.29 per cent. That’s why it’s a good idea to take a look at how you might be affected by higher rates, especially if your mortgage will soon come up for renewal.
The idea is to prepare for the worst, says Robert McLister, editor of Canadian Mortgage Trends.
“At the very least, folks should run a couple of rate hike scenarios through a stress test calculator,” McLister said.
The goal is to ensure you can afford payments at that higher rate come maturity time.
“If the results look ominous given your budget, the time to strategize is now, well before maturity,” he said.
Here are some examples:
If you have a $300,000 mortgage at 3.49 per cent and rates rise by two points at renewal time it will cost you $274 more a month. At $400,000 it’s $365 more per month.
Here are some options if your payments are too high for you to carry at renewal:
Refinance: If you have to, extend the amortization. If you’ve worked it down to 20 years, say, increase it. This option generally requires at least 20 per cent equity in the home and it means you’ll be increasing your interest bill over the life of the mortgage. It’s a last-ditch thing to do, McLister says, but “it’s better than defaulting on your mortgage.”
Take a payment vacation: Some mortgages have a skip-a-payment feature. This is an alternative to extending your amortization.
Go shorter: Choose a shorter term with a lower interest rate and payment. That assumes you can handle the risk of rising rates when it comes time to renew again, but if you’re having cash flow problems, there’s a good chance you can’t.
Downsize: A last resort, maybe. But consider selling or renting out a portion of your home.
McLister says that if you find yourself in this position then maybe it’s time to sell and avoid the stress.
“If your budget is stretched, something will happen to stretch it further. It’s Murphy’s Law of borrowing,” he said.
While long-term interest rates may finally head up this year, the Bank of Canada remains committed to keeping short-term rates low. As the spread between long- and short-term interest rates widens, variable rate mortgages become more attractive.
“When long-term rates rise, more and more people look at variable rate mortgages,” said Tal.
For the past five years, the Fed has been buying U.S. Treasury bonds every month by creating the money. It writes a cheque to buy the bonds which has expanded consumer credit, making it cheaper to borrow money.
The impact of the Fed’s action on Canadian homeowners is a gradual increase in long-term mortgage rates. This includes the five-year fixed rate mortgage, now among the most popular. In 2013, 82 per cent of new mortgages were fixed rate terms, according to the Canadian Association of Accredited Mortgage Professionals.
“We expect long-term rates to rise later this year, which will impact five- and10-year mortgage rates in Canada,” said Benjamin Tal, deputy chief economist at CIBC.
A homeowner who chose a five-year mortgage in 2012 would have paid 2.99 per cent. In 2013, the average was 3.29 per cent. That’s why it’s a good idea to take a look at how you might be affected by higher rates, especially if your mortgage will soon come up for renewal.
The idea is to prepare for the worst, says Robert McLister, editor of Canadian Mortgage Trends.
“At the very least, folks should run a couple of rate hike scenarios through a stress test calculator,” McLister said.
The goal is to ensure you can afford payments at that higher rate come maturity time.
“If the results look ominous given your budget, the time to strategize is now, well before maturity,” he said.
Here are some examples:
If you have a $300,000 mortgage at 3.49 per cent and rates rise by two points at renewal time it will cost you $274 more a month. At $400,000 it’s $365 more per month.
Here are some options if your payments are too high for you to carry at renewal:
Refinance: If you have to, extend the amortization. If you’ve worked it down to 20 years, say, increase it. This option generally requires at least 20 per cent equity in the home and it means you’ll be increasing your interest bill over the life of the mortgage. It’s a last-ditch thing to do, McLister says, but “it’s better than defaulting on your mortgage.”
Take a payment vacation: Some mortgages have a skip-a-payment feature. This is an alternative to extending your amortization.
Go shorter: Choose a shorter term with a lower interest rate and payment. That assumes you can handle the risk of rising rates when it comes time to renew again, but if you’re having cash flow problems, there’s a good chance you can’t.
Downsize: A last resort, maybe. But consider selling or renting out a portion of your home.
McLister says that if you find yourself in this position then maybe it’s time to sell and avoid the stress.
“If your budget is stretched, something will happen to stretch it further. It’s Murphy’s Law of borrowing,” he said.
While long-term interest rates may finally head up this year, the Bank of Canada remains committed to keeping short-term rates low. As the spread between long- and short-term interest rates widens, variable rate mortgages become more attractive.
“When long-term rates rise, more and more people look at variable rate mortgages,” said Tal.
Subscribe to:
Posts (Atom)