In the new era of Canadian government trying harder than ever to control Canada’s debt load, I thought a short blurb on credit reports would be appropriate.

As credit has become more and more abundant in our society, your credit report, and thus your credit rating, has become more important in your daily life. Your credit rating affects all aspects of your financial activities when it comes to borrowing money. Your credit rating also has the ability to affect the job you get, the apartment you rent, and even the ability to open a bank account. Your credit report itself is simply a listing of all of your mortgage and consumer debt. Here in Canada, the two main credit reporting agencies are Trans Union and Equifax. Both agencies have a credit history file on anyone who has ever borrowed money. Every time you borrow money, or make a payment on a loan or credit card, the lender then reports the information about the transaction to these two agencies. In addition to credit information, you will also find liens and judgments on your credit report as well as your address and possibly your work history. The accumulation of all of this information is called your credit report.

The information on your credit report varies based on your creditors and what they have reported about you. Potential lenders and others, such as employers, view your credit history as a reflection of your character. Whether we like it or not, our financial habits have a lot to say about the way in which we choose to live our lives. The credit score, or beacon score, is a number which gives mortgage lenders an idea of your lending risk. Credit scores range from 300 to 900, the higher your credit score the less risk one has associated with themselves. The mortgage products and interest rate that you will qualify for are often determined by your credit score.

One thing that many people do not know is that you have the legal right to obtain a copy of your credit report. A mortgage professional can help you obtain a copy of this report and go through it with you to verify that all of the information is true and correct. The good news is that your credit report is a working document. This means that you have the ability over time, to repair any damaged credit and increase your credit score.

I recommend that you keep this bit of information in the back of your mind whenever you purchase something on credit. The Canadian government may be taking additional steps to help to reduce lender risk. Last year they changed the law on the duration of amortization. It was changed from a 40 year to a maximum of 35 year amortization. This reduced the debt load of the borrower by paying more principal than interest, which took more burden off the system of lender funds. The next two steps the government is considering is increasing the down payment requirements and lower the amortization from 35 to 25 years.

Soon it will not be as ease to obtain a mortgage as in the past. Keep your credit score in check!

Sorry to all my faithful readers for the late daily blog, but I was finalizing a clients mortgage…now we wait!

At some point in their lives, most Canadians have probably asked themselves whether it is better to buy or rent a home. And purchasing a home is one of the biggest decisions most people ever make.Ultimately, the decision is a personal choice, but it helps to look at the pros and cons of buying to determine whether home ownership is right for you.

Some advantages of buying a home

Owning a home is generally considered to be a sound, long-term investment that can provide satisfaction and security for you and your family. Each month when you make your mortgage payment, you are building equity in your home. Equity is the portion of the property that you actually build through your monthly payment versus the portion that you still owe the lender. At the beginning of your mortgage, more of your payments go toward paying off the interest and less toward paying off the principal. But the longer you stay in your home and the more mortgage payments you make, the more principal you pay off and the more equity you accumulate. Most mortgages also offer you the option of making additional monthly or annual payments to reduce your principal faster. Some prepayment privileges, for instance, enable you to pay up to 20% of the principal per calendar year. This will also help reduce your amortization period (the length of your mortgage), which, in turn, saves you money. There is also a tax advantage. If your home is your principal residence, any profit you make when you sell it is tax-free. A home can appreciate – or increase in value – as time passes, building more equity. As you build up equity, it’s usually easier to upgrade to a more expensive home in the future thanks to the profit you’ll make when selling your current home. As an owner, you can also decorate and improve your home any way you like. Ownership tends to give you a sense of pride and can offer you and your family stronger ties to the community. If you do decide that home ownership is right for you, it’s important to choose a home you can afford. If you can’t afford to buy your dream home, purchasing a more modest home can be a great place to start building equity that one day may allow you to buy the home of your dreams. Since we’re currently in a buyer’s real estate market and interest rates have been dropping, now may be an ideal time to enter into home ownership for the first time.

Some disadvantages of buying a home

Since it’s easy to get caught up in the excitement of buying a home, it’s important to remember that home ownership has some additional responsibilities as well. For one thing, a home can be expensive. Chances are, your monthly payments will be more than what you are currently paying in rent when you factor in such things as your mortgage, property taxes, repairs and general maintenance. Owning a home ties up some of your cash flow and is likely to reduce your flexibility to move to a new location or change jobs. While your home might increase in value as time goes by, don’t expect to get a big return quickly. There are no guarantees that your home will increase in value, particularly during the first few years. In the beginning, you could actually lose money if you sell because your home may not have appreciated enough to cover the real estate fees, and moving, renovation and other selling costs. Real estate is, however, usually considered a good investment over the long term. When making the decision about whether to buy or rent, it’s important to carefully choose a home you can afford, and then weigh the pros and cons. Millions of people enjoy the rewards of home ownership but, ultimately, it’s a personal decision based on your own priorities. If you’re thinking of buying your first home, Dominion Lending Centres mortgage professionals can answer all of your mortgage-related questions.

I posted this article for education purposes only, it was not posted to scare you. When you are considering acquiring new debt, make sure you and your family will be able to sustain your lifestyle if and when inflation comes around.

By Mark Bourrie

OTTAWA, Dec. 28 (Xinhua) — Canada’s economic leaders are worried that low interest rates are luring consumers into amassing huge amounts of debt that they may not be able to pay back when interest rates rise from their historic low levels. Canada’s central bank lending rate is 0.25 percent. Mortgage rates are about 4.5 percent, while five-year consumer loan rates for items such as automobiles are about 8 percent.

Recently, Canada’s Finance Minister Jim Flaherty and the governor of the country’s central bank, Mark Carney, have sent warning signals that the days of low-interest borrowing may soon end. Their statements show that the Canadian government is afraid that Canadians will default on the loans that are used to buy homes. About 70 percent of Canadian families own their houses, and real estate makes up the bulk of the assets of typical Canadian families.

Besides, Canadians, especially those who have not saved for their retirement or do not have a workplace pension, see home ownership as a way of locking away money until their retirement, using the money from their house sales to top up their small government pensions. Still, most Canadians must borrow the bulk of the money they use for home purchases. Most are content to assume this large debt if the cost of the monthly payments is comparable to rent charges, and if house prices continue to rise.

In the past decade, the government has allowed the term of mortgages to be extended from a maximum of 25 years to 35 years, and has permitted its home loan insurance agency, Canada Mortgage and Housing Corporation, to sell insurance on loans with a down payment of only a 5-percent. The system has worked to stimulate house construction, but analysts worry that it has created a speculative bubble that may burst, allowing house prices to settle back to a level that will leave many families owing more than their homes are worth. If that happens, the national government, already running a massive annual deficit, would be stuck with the loans of Canadians who defaulted.

Last year, Canadian resale house prices rose by more than six times the rate of inflation. Interest rates have also been kept low to stimulate borrowing for capital investment. However, the rates will probably have to rise if Canada’s national government, its provinces and cities hope to sell bonds in a market already flooded with U.S. government debt.

In an interview broadcast this week on the country’s largest private television network, Finance Minister Jim Flaherty warned Canadian families that the days of easy home ownership debt may becoming to an end.

“If we see further evidence that there is excessive demand in the housing market or that there’s an indication that people are taking on obligations that they will not be able to handle in the future when interest rates rise, then we will take some action,” Flaherty said on CTV television. “The likely action we will take is to increase the size of the down payment from 5 percent to a higher number, reduce the amortization — bring it down from 35 years to something less,” he said.

Canadian families traditionally saw home ownership as a sign of financial security. Prices have rarely fallen in the past century. When they have, the values quickly recovered. Last year, house prices rose an average of about 20 percent, while the official inflation rate is less than 3 percent. The average Canadians have increased their personal debt by more than 1,000 Canadian dollars in the first half of 2009, driving up the nation’s personal debt by 44 billion Canadian dollars.However, Canadians gamble on interest rates. In the early 1960s,a time of low inflation, interest rates were comparable to today’s. In the fall of 1981, with inflation near 15 percent, mortgage rates reached 20 percent.

 On a 300,000 Canadian dollars debt, which is not unusual in a major urban market, a 20 percent interest payment would amount to more than a typical Canadian family earns, after taxes, in a year. Even a 12 percent rate, which was typical of the 1980s, would generate a monthly payment of more than 3,000 Canadian dollars.

On top of those charges, Canadians must pay property taxes and most mortgage companies require the house to be insured for its full value. Flaherty said recent price increases for homes in Canada are due to a “confluence” of factors including low interest rates, an improving economic outlook and a stabilizing job market.

On Dec. 10, Mark Carney, the governor of Canada’s central bank, warned that Canadian families were becoming more vulnerable to interest rate fluctuations because they have added debt this year while other countries such as the United States and Britain have seen reductions in personal debt-to-income ratios. The bank echoed the warnings of several non-government economists who warn that the Canadian rush to indebtedness is unsustainable.

In the Bank of Canada’s semi-annual report, Carney wrote: “Households need to assess their ability to service these debt obligations over their entire maturity, taking into account likely changes in both income and interest rates.

“Financial institutions need to carefully consider the aggregate risk to their entire portfolio of household exposures when evaluating even an insured mortgage, since a household defaulting on an insured mortgage would likely be unable to meet its other debt obligations.” Carney warned that the risk to Canadian banks is relatively low, but up to 10 percent of households would face serious problems meeting their house payments if interest rates rise.

However, Benjamin Tal, an economist with the Canadian Imperial Bank of Commerce, a major mortgage lender, said Canadians find ways of hanging onto their houses when interest rates fluctuate, and tend to default only when they have lost their jobs. Still, Tal said, “It is time for both borrowers and lenders to exercise prudence in continuing to build up household debt loads to the point where they are overly reliant on today’s low rates.”

There is an endless supply of different types of homes available for purchase – ranging from condos to townhouses to fully-detached homes. The key is to decide what you can afford and which amenities you prefer before heading out shopping for a new home.

Your best first step is to get pre-approved on a mortgage. That way, you already know what your price range is – and, therefore, which type of home you’re in the market for – before you begin shopping.

Budgeting is also an important part of preparing yourself for the purchase of a home. If you save for a down payment and up-front costs, such as closing costs and emergency reserves, much sooner, you’ll be sure to save enough to cover the many expenses facing a new homeowner, including moving, utility hook-ups, tools, maintenance supplies, window coverings, etc…

Once you have the money available to make your home purchase a reality, you should weigh the following options to help decide what type of home is right for you:

Condo

A condo makes a great first home because it typically costs less than a townhouse or a detached home, which translates into a smaller down payment. But there are, however, monthly maintenance fees you must take into consideration when budgeting for a condo.

Condos are also ideal for those who do not want to maintain a lawn or worry about clearing snow away from walkways and driveways.

Townhouse

If the condo life is not your forte and you’re not looking for a big yard to maintain, a townhouse may be your best home purchase option.

A townhouse costs less than a fully-detached home and results in cheaper property taxes as well.

Many townhouses also come with monthly maintenance fees unless they are freehold townhouses. In situations where you pay a monthly fee, however, you won’t have to worry about outdoor maintenance or snow removal.

Detached Home

If it’s privacy you’re seeking as well as a larger yard, a detached home is your ideal choice. Still, prices can vary drastically based on such variables as whether you’re seeking a spot in the city, a place in the suburbs or a more rural location.

Other Considerations

The size of the home and property (if you decide not to opt for a condo) are also important things to consider before you head out shopping. While everyone has their dream home in mind, this is not always a practical purchase choice, especially if this is your first home purchase.

When it comes to location, think about in which area or neighbourhood you’d like to make your purchase, and which home features are absolutely essential – including what you can live without and what aspects are entirely out of the question.

Take a look at real estate ads for the area(s) you’re interested in to see what’s on the market and the price ranges. Also drive around a few neighbourhoods and see what’s for sale or visit Open Houses. This can help crystallize what you want or don’t want in a home.

By making your first purchase a modest and affordable ‘starter’ home, you will be putting money towards a mortgage that will build equity in that home. And once you’ve paid down a significant portion of that first home’s mortgage, you will then have more money to put towards an upgrade into your dream home.

Great opportunity for first-time homebuyers! If you’ve been thinking about purchasing your first home, but haven’t yet made up your mind, now is an ideal time to think about taking the plunge into homeownership. Since Canada’s currently in a buyers’ real estate market and interest rates have been dropping to historic lows as of late, now is the perfect time to consider your mortgage options.

Your first step in the home-buying process should be to talk to a licensed mortgage professional, ME! I have access to a vast array of lenders – up to 90+ institutions, including big banks, credit unions and trust companies – which enables me to negotiate the best possible mortgage products and rates on your behalf. In comparison, if you approach your bank with a mortgage request, they can only offer you a narrow choice – namely, their own products. can get you pre-approved for a mortgage so that you know how much you can afford to spend on a home before you start shopping.

And thanks to the latest federal budget, there are a couple more reasons why now is the optimal time to purchase your first home. First, the budget proposes a $5,000 increase to the RRSP Home Buyers’ Plan, meaning first-time homebuyers can now withdraw up to $25,000 from their RRSPs for a down payment – tax- and interest-free.

The budget also proposes a $750 tax credit for first-time homebuyers to help with closing costs, such as legal fees, disbursements and land transfer taxes.

The tax credit is based on an amount of $5,000 for first-time homebuyers who acquire a qualifying home after January 27, 2009 (ie, the closing is after that date).

An individual will be considered a first-time homebuyer if neither the individual nor the individual’s spouse or common-law partner owned and lived in another home in the calendar year of the home purchase or in any of the four preceding calendar years.

It’s easy to get caught up in the idea that comparing mortgage rates will guarantee you get the best bang for your mortgage buck. While this may be true for particular situations, there are many scenarios where this strategy is not effective. Following are three reasons why it doesn’t always pay to make a decision based solely on rates.

Reason #1

Your long-term plan and risk tolerance should determine which mortgage product is right for you. This product may or may not have the lowest rate.

For instance, there are cases where lenders will offer lower rates for insured mortgages. With insured mortgages, however, you’re charged an insurance premium, which is usually added to the mortgage amount. But if you’re not planning on keeping the property for a long enough time to offset that cost, it may be better to take an uninsured mortgage with a slightly higher rate. The cost difference you will pay with the higher interest rate may still be less than what you may pay in insurance premiums.

As another example, if you prefer to budget for a consistent payment and can’t handle rate fluctuations, it may be better to go with a higher fixed-rate mortgage. If you think current rates are low enough and you will be living in your property for at least five years, it may be wise to also opt for a mortgage with a longer term.

Reason #2

One of the biggest mistakes people make when merely comparing mortgage rates is failing to consider important factors such as prepayment options to help pay off the mortgage faster, whether secondary financing options are allowed, early payout penalties, or what fees are involved.

It’s not enough to simply compare mortgage rates because you have to know what “clauses” are contained within the mortgage deal. There may be cases where you will find a lender with the lowest rate and willing to pay for your closing costs, or even provide you with cash-backs after closing.

Reason #3

Lenders can change their rates at any time. As such, if you’re shopping for rates with one lender and then approach another that gives you a lower rate, it’s quite possible that the first lender has also dropped its rates. This is why it’s important to get pre-approved with a lender once you a mortgage that fits your needs. In some cases, you can secure your rate and conditions for up to 120 days.

Mortgages in Canada are generally amortized between 25 and 35 year terms. While this seems a long time, it does not have to take anyone that long to pay off their mortgage if they choose to do so in a shorter period of time.

With a little bit of thinking ahead, and a small bit of sacrifice, most people can manage to pay off their mortgage in a much shorter period of time by taking positive steps such as:

1. Making mortgage payments each week, or even every other week. Both options lower your interest paid over the term of your mortgage and can result in the equivalent of an extra month’s mortgage payment each year. Paying your mortgage in this way can take your mortgage from 25 years down to 21.

2. When your income increases, increase the amount of your mortgage payments. Let’s say you get a 5% raise each year at work. If you put that extra 5% of your income into your mortgage, your mortgage balance will drop much faster without feeling like you are changing your spending habits.

3. Mortgage lenders will also allow you to make extra payments on your mortgage balance each year. Just about everyone finds themselves with money they were not expecting at some point or another. Maybe you inherited some money from a distant relative or you received a nice holiday bonus at work. Apply this money to your mortgage lender as a lump-sum payment towards your mortgage and watch the results.

By applying these strategies consistently over time, you will save money, pay less interest and pay off your mortgage years earlier!

The purchase of a home is likely the largest financial expenditure you’ll ever make. And getting your home inspected is an essential step in the home-buying process. No one wants to buy a money pit – and once you have signed on the dotted line, there is no turning back.

The best way to ensure you use a professional home inspector is to seek referrals from your mortgage professional, real estate agent or friends. Since you want to be able to trust your home inspector’s judgement, you have to ensure they’re not part-time home inspectors just trying to make some extra cash on the side, or they aren’t only home inspecting so they can also offer to complete any work for you that you need done on the home. To ensure the job’s done right, after all, the home inspection must not be biased.

The purpose of a home inspection is for the inspector to be able to tell you everything you need to know about the home you’re going to purchase so that you can make an informed decision.

Following are 10 key questions you can ask your home inspector before they’re hired to ensure the inspection will be completed professionally and thoroughly:

1. Can I see your licence/professional credentials and proof of insurance?
2. How many years’ experience do you have as a home inspector? (Make sure they’re talking specifically about home inspection and not just how much experience they have in a single trade.)
3. How many inspections have you personally completed?
4. What qualifications and training do you have? Are you a member of a professional organization? What’s your background – construction, engineering, plumbing, etc?
5. Can I see some references? (Make sure you also check the references.)
6. What kind of report do you provide? Do you take pictures of the house and add them to your report?
7. What kind of tools do you use during your inspection?
8. Can you give me an idea of what kind of repairs the house may need? (Be wary if they offer to fix the issues themselves or can recommend someone else to complete the job cheap.)
9. When do you do the inspection? (Let’s hope they don’t have a day job, and can only do them at night when it’s too dark to see the roof. It’s best to stay away from part-time inspectors.)

10.  How long do your inspections usually take?

Home values continued to edge upward in November as demand in the Greater Vancouver housing market remains well above seasonal norms.

Over the last 12 months, the MLSLink® Housing Price Index (HPI) benchmark price for all residential properties in Greater Vancouver increased 12.4 per cent to $557,384 from $495,704 in November 2008. This price, however, remains down 1.9 per cent from the most recent high point in the market in May 2008 when the residential benchmark price sat at $568,411.

“This unseasonably high level of demand can be attributed in large part to low interest rates, but it also speaks to the diverse range of housing options available in Greater Vancouver,” Scott Russell, Real Estate Board of Greater Vancouver (REBGV) president said. “Prospective homebuyers today have more options at different price levels than ever before.”

The REBGV reports that residential property sales in November were the third highest volume ever recorded in Greater Vancouver for that month. Sales in the region totalled 3,083 in November 2009, an increase of 252.7 per cent compared to November 2008 when 874 sales were recorded and a 16.8 per cent decrease compared to the 3,704 sales recorded in October 2009.

“We are experiencing a brisker than normal market for this time of year, although we have begun to see a reduction in the number of homes listed for sale, which is normal as we head into the holiday season,” Russell said.

New listings for detached, attached and apartment properties in Greater Vancouver totalled 3,653 in November 2009. This represents a 21.3 per cent increase compared to November 2008 when 3,012 new units were listed, and a 26.6 per cent decline compared to October 2009 when 4,977 properties were listed on the Multiple Listing Service® (MLS®) in Greater Vancouver.

At 11,039, the total number of property listings on the MLS® decreased 8.6 per cent in November compared to last month and declined 39 per cent from this time last year.

In contrast to this year, note that November 2008 was the lowest selling November in Greater Vancouver in 27 years.

Sales of detached properties increased 261.5 per cent to 1,164 from the 322 detached sales recorded during the same period in 2008. The benchmark price, as calculated by the MLSLink Housing Price Index®, for detached properties increased 13.6 per cent from November 2008 to $757,209.

Sales of apartment properties in November 2009 increased 240.5 per cent to 1,396 compared to 410 sales in November 2008. The benchmark price of an apartment property increased 11.6 per cent from November 2008 to $381,945.

Attached property sales in November 2009 are up 268.3 per cent to 523, compared with the 142 sales in November 2008. The benchmark price of an attached unit increased 10.2 per cent between Novembers 2008 and 2009 to $469,686.

1. Switch to online billing services from your utility service providers. The reduction in paper usage will protect natural woodland and save energy used. Create new habits to help the world we live in.

2. Clothes dryers operate most efficiently on full loads that are sorted and run on the appropriate settings. Separate all light and heavy clothes and ensure all heavy clothes have been previously spun or wrung out. To save even more energy always clean lint filters, keep air vents clear of any debris or hang dry clothes.

3. Pay your bills online, if every house in Canada did this then we would save 1.8 million trees every year.