The amortization of a mortgage is divided up into smaller time periods called “terms”. Mortgage terms usually range from six months to five years, but some institutions will offer seven- or 10-year terms. The term is the period of time during which, with fixed-rate mortgages, the interest rate and payment amount are fixed. With variable-rate mortgages, the payment amount may, or may not, change; you should review your agreement to check when the payment amount may change. At the end of the term, you can renew your mortgage for a new term, at prevailing interest rates.

Generally, the longer the term, the higher the interest rate. Because it is not possible to know what the interest rates will be over any given period of time, many consumers seeking certainty choose a longer term with a fixed interest rate so that they know in advance, at least for a specified period, how much they will have to pay for their mortgage. This helps them to plan their finances better and enhances their feeling of security. However, during periods when interest rates are expected to fall, many consumers choose variable-rate mortgages so they can take advantage of lower rates without renegotiating their mortgage.

Amortization period compared to the term of a mortgage

The amortization period on a mortgage is the total length of time it will take you to pay off your mortgage. A typical amortization period is 25 years, but it can be longer or shorter.

In comparison, the term of a mortgage (which ranges from six months to 10 years) represents the length of time for which your mortgage agreement with a lender is valid.

Benefits and costs of a longer amortization period

Some people choose a longer amortization period because it lowers their mortgage payments: the longer the amortization, the lower the mortgage payments. This can mean, for some, the difference between buying and not buying a home.

However, the longer it takes you to pay back the mortgage principal to the lender, the more interest you will pay — which can affect your ability to save for other important things, such as retirement.

Call me to discuss 604-273-2002

Mark Fidgett | 604-273-2002

“Your Personal Mortgage Consultant….For Life!”

PS – Please Don’t Keep Me a Secret

A REFERRAL is when you INTRODUCE someone you care about to someone you TRUST!

T 604.273.2002 | F 604.522.2072

W http://www.notapennydown.com

An independent Mortgage Specialist associated with the Verico Mortgage Network.

Bank of Canada says household debt and European crisis present the biggest risks to country’s financial stability.

Risks to Canada’s financial stability have gone up over the past six months because of the possibility that the European debt crisis and “severe tensions” in global markets could threaten the worldwide recovery, the Bank of Canada said Monday.

In their semi-annual review of Canada’s financial system, policy makers said it continues to function well and has actually strengthened since their last assessment in late 2009. However, they reiterated concerns about the amount of household debt that Canadians have built up amid historically low borrowing costs, and outlined how Canada’s strong economy could fall victim to fiscal troubles across the Atlantic Ocean if they fuel stricter lending standards among banks and a drop in demand.

“Many aspects of the Canadian macrofinancial environment have improved since last December, with the economic recovery proceeding as expected and conditions in Canada’s financial system generally strengthening,” the central bank’s governing council said in its latest risk assessment. Still, policy makers said, “near-term risks” to Canada have increased because of “heightened concerns that worldwide fiscal strains have the potential to cause tensions in interbank funding markets, to derail the global economic recovery, or to trigger a disorderly resolution of global imbalances.”

Policy makers said the level of risk has increased in three of five categories that they look at for their review, namely: funding and liquidity; the so-called imbalances in the global economy that exacerbated the financial crisis of 2008; and the current economic outlook.

Canadian banks’ capital levels, and the quality of what they possess, has improved since December, the central bank said, while the risks posed by household balance sheets remain “roughly unchanged” even as households’ financial vulnerability to economic shocks is growing. The rising debt-to-income ratio among Canadians, which policy makers such as Bank of Canada Governor Mark Carney have been warning about for several months, also could pose a risk to banks and the economy as a whole, should borrowers default on their loans and force banks to hold back on extending credit.

“In the event of a significant economic downturn, the credit quality of household loan portfolios could be undermined, prompting banks to tighten credit conditions and some households to reduce spending,” the central bank said. “Ultimately, this could result in mutually reinforcing declines in real economic activity and in the health of the financial sector.”

Measures being taken by European governments to get their fiscal houses in order need to be sufficient to keep investors satisfied that the problems are being addressed, the central bank said, while warning that “economic and political constraints” could complicate those efforts and lead to another period of “severe stress” in markets.

“Concerns over fiscal imbalances could also result in an abrupt increase in risk premiums and volatility for a wide range of assets and currencies,” the central bank said. “While Canada’s position is relatively strong, our financial system could be adversely affected by growing fiscal strains elsewhere.”

Also, sweeping new rules that Group of 20 policy makers are crafting for the financial sector could have “unintended consequences”’ or cause challenges for banks as they transition to whatever regime is approved, the central banks said.

“Given its unprecedented scope, pace, and complexity, there is a risk that regulatory reform could have unintended consequences,’’ the bank said. Nonetheless, policy makers said, “at least equally important is the risk that key elements of the reform agenda will be diluted, either because of complacency as economic and financial conditions improve or because of fears that reforms could harm a still-fragile recovery.”

Bank of Canada says economy is ‘vulnerable’

Call me to discuss 604-273-2002

Mark Fidgett | 604-273-2002

“Your Personal Mortgage Consultant….For Life!”

PS – Please Don’t Keep Me a Secret

A REFERRAL is when you INTRODUCE someone you care about to someone you TRUST!

T 604.273.2002 | F 604.522.2072

W http://www.notapennydown.com

An independent Mortgage Specialist associated with the Verico Mortgage Network.

If you buy a condo, purchase in a good location in the building – such as a corner lot – and buy one with a balcony. Make sure you get a good mortgage broker and get your pre-approval in writing.

VANCOUVER – by Ozzie Jurock – Here in Lotusland, more is rising out of the ground than the flowers that lushly pop out of the soil months before snow-weary Albertans ever see them.

There’s also “For Sale” signs in front of recreation properties.

If you’re thinking about buying a new or resale condo in B.C. – we call them strata units here – as a second or vacation home, here are some words to the wise:

- Buy a good location in the building. Choose your suite wisely: Not over a garage door! Not over the entrance! Not near a garbage can! Buy corner units, particularly in townhouse complexes. Buy on the top floor in a three-storey building. Buy balconies. Buy for the view.

- Purchase a unit in a building where you can rent out the suite. In B.C., strata councils can vote tenants out. In many parts of Canada, condo councils have that power, too. Find out about things like pets, age, or children restrictions.

- Read the minutes of the strata for two years. If you can’t, get someone who can. Watch for “lawsuit pending,” “Building envelope study commissioned,” etc. — anything to do with the word “legal” in it. Leaking by itself is not the problem, but you need to know what they did about it.

- Buy cubic volume — not only square feet: i.e., lofts. Buy height in expensive suites. If it’s priced at more than $1 million, get nine-foot ceilings.

- Really watch conversions from rental apartments. Who did them? What precisely has been done?

- If you buy out of town for investment, make sure that heat is not included in rent. Go talk to the local notary for bird dog info.

- Have good property management. It will make or break you.

- Get a tenant package insurance. Understand all strata, heating, water and garbage fees. Check the insurance claim record of the building.

- Talk to a member of the strata council and/or the property manager and ask him about what kind of people live in the building.

Here are some things to do before buying a pre-sale unit:

- Buy for the builder/developer’s reputation. Ask for references from buyers in previous projects. What is your builder’s rating for after-sales service? How solid is the developer? What recourse do you have if developer does not complete? Call the Better Business Bureau.

- Get on the pre-sellers list — Rennie Realty, Mac Realty, etc. Get invited to pre-sale launches. Learn prices … or at least get the free shrimp.

Ask these questions:

- What amenities? What warranties? Who guarantees quality? Materials, flooring? What will the monthly maintenance/common area fees be? Will this amount change after the last unit is sold? How much are taxes?

- What is included? Do I own my parking spot, or is it leased? Is balcony square footage included in my apartment measurements? Where is the suite located, exactly? Will the suite be beside an outdoor vent? Exhaust! Over entrance? Noise! Over garage? Ditto! Arcade? Restaurant?

- Note that many developers no longer let you assign the presale before closing. If they do, find out the conditions. Have your lawyer read over any presale agreement.

- Has the developer filed a rental disclosure statement? What are the terms? How many years can you rent it?

- Use Craigslist.com or Kijiji.ca for any “resale-presales.” Again, have your lawyer read over the assignment. If you buy an assignment, never pay any profits until the day after you close with the developer.

Things to do to buy a ski resort property for investment:

- Buy money invested. Buy where there is ambience. If there is just a lift and a parking lot, values rise very slowly.

- Buy on the news. Money invested or proposed to be invested in high speed quad chairs, new hotels all helps a sleepy resort … long before it happens. What are the plans, track record and nearby major population centres?

- Buy old units in the old town, versus the new ones on the ski hill. In other words, you can still buy an $80,000 older suite in Kimberley, B.C., when units on the mountain are over $300,000.

- Buy “unlimited personal use.” Sometimes called Phase I units (at Whistler), they allow you to use it yourself or rent it 24/7 when you want to. Phase II, or “limited personal use” units, force you into a pool – only 28 days personal use. Most of the money goes to management. The resale value is poor.

- Watch out for hotel units and all fractional ownership (quarter share or more). Some never make any money. Most are taxed commercially now.

- Buy two legs … winter and summer, golf and ski.

- Look for deals. There are many resorts hurting and have discounted units by 40 per cent and more (in 2009/2010). Check the furniture package – make sure it is included. Also include it in your insurance.

- If a new project, look at builder reputation, guaranties and warranties. Also make sure the GST has been paid. In a resort type deal, developers sell without the GST. You are liable, eventually.

Things to do for your financing:

- Get a good mortgage broker. Not all brokers are the same. Only a few now have access to all the financing institutions.

- Talk to your broker and get your pre-approval in writing. Rates will likely be moving up later this year. Your pre-approval will hold rates for you and also give you an idea of what you qualify for.

- Gather up your support documents for financing. Your mortgage broker can advise you of what documents are required for this package. Be ready – do it now.

- Re-evaluate your portfolio. Financing for portfolios has become much more difficult and you want to know how set up financing for each and every mortgage. There may be some changes that can be made to your portfolio that can help you qualify for new mortgages or even cash flow better on your existing properties. More often now than before, refinancing existing properties to show better cash flow is necessary to help qualify for the next purchase.

- Sometimes, you can take out down payment for the next property and still have lower payments. If you are planning on buying something this year, it might be better to borrow the funds at today’s rates than to wait until you need it (when rates could be one per cent higher).

- Understand that a credit line is reported to your credit bureau and sits on your credit. Most mortgages do not.

- Ask your mortgage broker to help you analyze deals. Does he have a spreadsheet that analyzes cash flow, ROI (return on invested capital), total profit and amortization table — and even tells you if it “80 per cent offsets” and what the DCR (debt coverage ratio) is on the deal.

You need the Right Advice at the Right Time!

Why pay the banks, call me 604-273-2002

Mark Fidgett | 604-273-2002

“Your Personal Mortgage Consultant….For Life!”

PS – Please Don’t Keep Me a Secret

A REFERRAL is when you INTRODUCE someone you care about to someone you TRUST!

T 604.273.2002 | F 604.522.2072

W http://www.notapennydown.com

An independent Mortgage Specialist associated with the Verico Mortgage Network.

What most DON’T know about High Ratio Insurance

Vancouver Mortgage Broker Mark Fidgett explains High Ratio Mortgages

Banks and financial institutions are not allowed to lend against real estate mortgages unless the down payment is at least 20% of the value of the property.  In order to achieve a higher level of financing, lenders need to obtain mortgage default insurance from one of three institutions in Canada – the Canadian Mortgage and Housing Corporation (CMHC),  Genworth Financial (formerly GE Mortgage) and AIG United Guaranty.   In the event the borrower is unable to pay the mortgage, the lender will be paid by these institutions.

AIG is not widely used due to the financial difficulties experienced by their parent company in the US.

It is the lender’s choice as to which mortgage insurance company to use.   Many lenders have a preference as to which mortgage insurance company to use.

There may be cases where one mortgage insurance company is more suited to the transaction.  For example, Genworth has a more flexible policies for rental suites. Genworth will accept non-conforming basement suites while CMHC will not.

The insurance premiums is computed based on the level of financing, as shown below

Note: premiums are for fixed rate or capped variable single advance mortgages.  Please contact www.notapennydown.com for other types of mortgages..

The cost of mortgage default insurance is paid by the borrower and can be added on to the mortgage amount.    Note that with high-ratio mortgages, CMHC,  Genworth or AIG will do the appraisal so there is no appraisal fees in a high-ratio transaction.

Mark Fidgett | 604-273-2002

“Your Personal Mortgage Consultant….For Life!”

PS – Please Don’t Keep Me a Secret
A REFERRAL is when you INTRODUCE someone you care about to someone you TRUST!

T 604.273.2002 | F 604.522.2072
W http://www.notapennydown.com

An independent Mortgage Specialist associated with the Verico Mortgage Network.