London Ontario Mortgage Source

London Ontario MLS Housing Report for October 2010

According to the London and St. Thomas Association of Realtors, the area witnessed sales volumes that came in 1.1% higher, when compared to October 2009 and that the average housing price continues to increase. Specifically, the average selling price of a home when compared to this time last year is up 6.8%.  The sustained monthly gains points to the fact that the London Ontario market is well along in its recovery. Contributing to this recovery are low mortgage rates in London, affordable mortgage payments and a strengthening local economy.

For mortgage questions, great rates and excellent mortgage service, feel free to visit my website at www.brentrichardson.ca or contact me at your convenience - brent@brentrichardson.ca

CMHC Spring 2010 London Ontario Housing and Mortgage Report

The Canadian Mortgage and Housing Company report for London Ontario indicates that the resale and new construction market will demonstrate improvement over 2010. Mortgage rates in London will remain low, but increase more quickly if there is a stronger economic upturn. Specifically, housing starts will total 2,370 while total MLS sales will hit 8,700. This solid activity, however, may come at the cost of a volume slowdown in 2011 for both sectors in the London Ontario market. The report indicates modest price growth in 2010 and 2011 supported by a balanced resale market. Employment improvement should be steady at 1.5 % in 2010-2011 however unemployment rate will remain below typical London area highs. MLS sales in the London market will increase by 5% in 2010 thanks to first time buyers. However this activity will ease later in the year due to HST on new home purchases, rising prices and possible higher mortgage rates in London. Moreover, the ‘borrowing’ of future demand may limit the number of potential buyers in 2011 in the London market. Overall, there will solid demand of resale homes as homeownership will continue to be accessible in London.

 New listings will rise in 2010, however the slower housing price growth in 2011 may result in a decline of new listings. Strong first time buyer activity will keep sales of properties in the lower price ranges strong.  As a result of this trend, the average resale price will increase just over 2% in 2010-2011. New home construction in London Ontario will rise by 9% in 2010. Demand for single detached homes will be strong with the improvements in the labour market. Over the medium term, an abundance of land in London will keep the new home price growth balanced and stable over next 2 years. Rental apartments may sustain have higher vacancy rates. Thus rental apartment construction should decrease sharply. With rising London mortgage rates, buyers may search out less costly options, such as townhouses, which will increase construction over 2010-2011. With respect to unemployment, the rate is still quite high in 2010-2011. This said, the manufacturing and automotive sector should begin to recover steadily. Wages for the healthcare sector have also shown recovery after lowering over the past year. Importantly, full time employment in the 45-64 year age group is well on the rise which is a good indication of strong repeat buying in all London Ontario housing markets. If mortgage rates remain low, this will also help provide impetus for second or third time home buyers in London.

At the time of writing, the overnight Bank of Canada mortgage rate is at 0.25%. It is expected that mortgage rates will increase in late 2010. With expected rise in the overnight rates, the mortgage rates have begun to rise. Rates could increase faster if the economy recovers more quickly. However a modest economic recovery will stunt the mortgage rate increase in London.

DANGEROUS Credit Lines and Mortgage Products Offered by Big Banks

Over the past several years, some of the Big Banks have decided to design mortgage products that lock customers into their Bank- even when the mortgage comes up for renewal. The really unfortunate part about these Banks and products is that in most cases, the Bank will not disclose the negative information to its clients. Most in the broker industry consider these practices incredibly decietful.

With titles such as 'Step' or 'Homeline', these mortgages will offer a line of credit that is attached to the mortgage. The main issue is that when the Bank registers one of these products against your house, they register it under what is called a 'Collateral Charge Term' (not the usual 'Standard Charge Term') at 125% of the value of your home. This has the affects of:

• Disallowing any other financing to be placed against your home.
• Locking you in at mortgage term renewal. This gives Banks massive liberties to charge unfavourable rates when your term is up.  
• Charge major penalties to ever exit these products and lowers others abilities to compete for your future business.
• The ability to change their bank prime rate without your consent. For example, the Bank can decide, as they did in 2008, to move up credit lines across the board by 1% in 1 day. 

No wonder Banks call these products 'customer retention devices'. Good mortgage brokers will always fully disclose such information whereas most of the time, Banks have not been reporting this kind of information to thousands of customers. It is potentially costing customers $10,0000's each. Indeed, customers should be retained by providing excellent service, value and a good customer experience. There are many excellent mortgae products in the market that can meet your needs and goals, and give you the low rates and long term flexability that is far more desirable.

Questions? Comments? Feel free to contact me any time or leave a post below.

Best Regards,

Brent www.brentrichardson.ca - brent@brentrichardson.ca

How Credit Scores Work and How to Increase

How Credit Works and the Easiest ways to Increase Your Credit Score

            Because credit can affect many areas of our lives, especially when a loan or mortgage is needed, it is important to understand how the system works, and what kinds of things can affect your score. Indeed, for many, the credit system is somewhat of a mystery. Weather you are wondering about how the system works, or if you are looking for the easiest ways to improve your score, this article will help you.   

The following criteria lays out how the Beacon Score, or credit score is calculated. For each criteria, we look at how to increase your score. Remember, the following advice speaks of a perfect situation. Although perhaps not immediately attainable for many, the closer you can get to these ideal situations, the better your credit score will be. 

1. Payment History – 35% of Score Calculation: Factors in the number of debt payments over 30 days late, collections and any other matters resulting from late payments. A single payment currently showing over 30 days late removes 20 credit points instantly. Credit will begin to repair after only two months of on time payments, so use this rather short repair period for motivation to pay consistently.

2. Current Debts - 30% of Calculation: Looks at how much debt you have relative to your credit and debt limits. For example, a total credit limit of $10,000 which has $8,000 outstanding totals 80% of credit used. Any number above 50% of credit used will begin to diminish a credit score. If 50% can not be attained, a good goal is 70%. Your variety of debt will also affect your credit. Try to keep two credit cards and hold onebank loan to maximize your score in this area. A loan can be as simple as an RRSP loan which will build your credit, be invested to make interest for you, can be paid back quickly, and mainly, can give you a nice tax refund at the end of the year! Finally, be sure to NEVER go above your credit limit.

3.  Account Age – 15% of Calculation: How long you have held a bank account with your financial institution affects your score slightly. The optimal number of accounts held is three and the longer they have been open the better.

4. Types of Credit – 10% of Calculation: Similar to two. Focuses on the mix of debt you have (credit cards, bank loans, lines of credit). The optimal mix is one store credit card (ex. the bay, Best Buy…), one or maximum two bank credit cards, and one installment bank loan. Make sure to use your credit cards as well - even if just for gas, and to re-pay the balance every month. Again, this is an optimal position and any reasonably similar situation will not lower your credit much. 

5. Number of Credit Inquiries – 10% of Calculation: Over the past 12 months, how many times has your credit score been looked at? Having too many credit or loan applications could deem you a ‘credit seeker’, so try to keep the number less than 5 per year.  

Finally, have your credit bureau checked for mistakes. I have seen many individuals with mistakes on their credit score that resulted in higher interest payments. Check with Equifax regularly to ensure your credit score is accurate.   

Reasonable variation from this perfect situation will still give you a great credit score and obviously, the closer to it, the better it will be. Contact myself for further information on increasing your credit rating and save thousands of dollars on interest as a result.

I am always happy to help.

www.brentrichardson.ca - brent@brentrichardson.ca

Brent Richardson

Have a question or comment? Feel free to make a post.

London Ontario March Home Sales Stabilizing, Mortgage Rates at Record Lows

According to a report by the London and St.Thomas Association of Realtors, as we move into the spring housing market, home prices are stabilizing. In January 2009 we saw home sales lower by 35% when compared to the year before, in February sales were down 30% when compared to the year before, and in March we saw that home sales are down just 7.2% when compared to the year before. This is a very encouraging sign and attests to London's relative strength in this global economic slowdown that has yet to form a clear bottom. When lower housing prices in London Ontario are combined with the lowest mortgage rates ever seen (5 year rates at 3.85% or lower), this makes for an excellent opportunity to purchase a home.

Mortgage refinancing is also very attractive to Londoners as thousands are switching to new, lower rate mortgages before rates begin to rise and this opportunity is lost. 

For details and for more information, call or email me, Brent Richardson, at your convenience.

519 568 3377 - brent@brentrichardson.ca 

Building Construction a Major Strength for London

Just as new home construction starts is a good leading indicator of where home prices and home sales are headed, so too are the starts and building permits for major construction in London, a good economic indicator of where the city will be in the next 5 to 10 years. The reason for this is that when developers and corporations spend $10s of millions of dollars or more on a building, they are planning very long term - both in terms of employment, and in what confidence they have in the local government and economy. Indeed, when facing difficult economic times, it is good to remember that recessions have always fixed themselves and that conditions in London will not only return to growth as seen in the past, but may perhaps exceed these levels.

Despite the global economic decline, London is had its best year for new construction permits and building ever. The value of building and permits for large construction in 2008 topped $800 million, versus $722 million in '07. A major portion of this money is the $100 million investment at the London Health Sciences Center. Moreover, between 2009-1013, it is decided that another $300 million will be spent on this project.  

Although Health Care and Biotechnology is, and will continue to be a major force in London's economy, an important point to realize is that much of this spending is on very diversified industry groups. For example, in 2008, $18.5 Million was spent on Fanshawe College, $18.3 million on a seniors care facility, and $16.5 million on the Hanwha, Building Supply Corporation project. During this time of economic adversity, we can see how London's corporate diversity is supporting local employment as its numbers continue to fare better than the provincial averages. As the construction of new properties continues to be diversified, it looks very good for strong, sustainable future growth in London.

Truly, London is the kind of enviroment to apply for a mortgage and purchase a house or condo because of excellent economic and employment prospects and forecasts.

If you have any questions or comments, please leave a post. Or, contact me, Brent Richardson, at your convenience. brent@brentrichardson.ca

London Mortgage Source Home Sales Update: Feb. 2009

The London St. Thomas Association of Realtors reported that February 2009 home sales eased when compared to the same period a year earlier. Specifically, home sales were down 30% when compared to Feb. '08 and the average residential price is down 2.4%. This said, given a 23% increase of listings in London (a ton of choice on the market for Buyers), all time low mortgage rates (5 year fixed mortgage rates at 4.19% or lower), and the certain historical fact that no recession lasts forever, this adds up for an excellent purchasing environment.

Indeed, according to the London Association of Realtors, housing prices are stable and this is the third best year ever for sales in the London and St. Thomas area. Given the lack of consumer confidence in the market, housing sales have returned to more normal levels. Londoners who take advantage of this naturally occuring recession should definitely be rewarded well in years to come. 

For questions or comments regarding this article or others, don't hesitate to leave a post or contact me, Brent Richardson, at your convenience.

London Ontario CMHC Housing Market and Mortgage Outlook Fall 2008

The Canadian Housing and Mortgage Corporation (CMHC) conducts detailed studies twice a year on the London housing and mortgage market. The studies are usually quite accurate and compliment other local housing and mortgage reports quite nicely. The article, which is summarized here, is broken down in to London's housing trends, economic trends, and mortgage trends.

Housing Trends

According to the report, new home construction will moderate throughout the end of 2008, and into 2009. Specifically, 2000 homes will begin construction versus 2600 a year earlier. Housing starts are a sound leading indicator for future demand.

As such, demand for NEW home purchases is indeed moderating as sales are off by 29% for the first half of 2008 when compared to the year before. This slowing of new home demand can be attributed to two factors: First, there are more listings in the resale market than there were in preceeding years, which means that buyers are increasingly finding what they want in the resale market, thus creating less demand for new home sales. Second, the average price of a new single detached home is expected to reach $306,000 in London versus an average selling price of $230,000 for an existing single detached home in London.

This said, the resale market too will moderate in 2008 by 10% and by another 6% in 2009. The study goes on to explain though that the resale market will remain healthy in 2009. Home ownership remains an attractive and accessible option in London which will help hold demand for resale. Low mortgage pricing will also certainly create an environment for purchasing in London and St. Thomas.

Importantly, home values are expected to continue to increase, but will moderate to the rate of inflation growth. Accordingly, housing values on average are forcasted to increase by 2.5% in 2009.

Economic Trends

Employment will lower by 1% in London before stabilizing in 2009. The contraction is due to continued moderation in the manufacturing sector, which is offset by London's service sector which continues to expand. Full time positions continue to increase in London which is an important indicator for attaining a mortgage and purchasing a home.

Net in migration is increasingly a factor in the growth of London's population. New Canadians account for much of this net migration, followed by inter provincial migrants. Combined with low mortgage rates, this will help to sustain housing prices over the long term.

Mortgage Trends

Mortgage rates are expected to remain at all time lows for the end of 2008 and for most of 2009. This said, eventual increases in bond prices will have the affect of pushing up fixed rate mortgages. Thus we should see increasing fixed mortgage going into 2010.

For any questions for further details on this report, leave a post or contact me at brent@brentrichardson.ca.

Increase Your Credit Score and Save Thousands

Indeed for many, savings of thousands of dollars per year could be had easily by reducing interest rates on loan and mortgage payments. For others, the dream of attaining an affordable mortgage and a home becomes attainable. In knowing how the credit scoring system works and how your credit score can be raised, the money saved on interest can be used to pay off your mortgage faster, or in any other way besides making your lender richer.

 

The credit scoring system:

Your Equifax Beacon Score informs lenders about how much of a lending risk you are, and ranges between 500-850. The following chart tells us how these scores generally affect mortgage rates:

Beacon Score	Interest Rate
719-850	The best rate
700-719	+0.20%
675-699	+0.65%
620-674	+1.70%
560-619	+2.50%
500-559	+3.50%

So given that the average Canadian credit score is about 690, most people have some room left to save thousands of dollars on interest payments.

 

How to raise your score then? The following criteria lay out how the Beacon Score is calculated. For each criteria, we look at how to increase your score. Remember, the following speaks of a perfect situation. Although perhaps not immediately attainable for many, the closer you can get to these ideal situations, the better your credit score will be.

 

1. Payment History – 35% of Score Calculation: Factors in the number of debt payments over 30 days late, collections and any other matters resulting from late payments. A single payment over 30 days late removes 20 credit points instantly. Credit will begin to repair after only two months of on time payments, so use this rather short repair period for motivation to pay consistently.

2. Current Debts - 30% of Calculation: Looks at how much debt you have relative to your credit and debt limits. For example, a total credit limit of $10,000 which has $8,000 outstanding totals 80% of credit used. Any number above 30% of credit used will begin to diminish a credit score. If 30% can not be attained, a good goal is 50%. Attempting to increase your credit or a debt consolidation loan are possible ways to help lower your percentage of outstanding credit limit. Your variety of debt will also affect your credit. Try to keep two credit cards and hold one consolidated bank loan to maximize your score in this area.

3.  Account Age – 15% of Calculation: How long you have held a bank account with your financial institution affects your score slightly. The optimal number of accounts held is three and the longer they have been open the better.

4. Types of Credit – 10% of Calculation: Similar to two. Focuses on the mix of debt you have (credit cards, bank loans, lines of credit). The optimal mix is one store credit card (ex. the bay, Best Buy…), one or maximum two bank credit cards, and one installment bank loan. Again, this is an optimal position and any reasonably similar situation will not lower your credit much.

5. Number of Credit Inquiries – 10% of Calculation: Over the past 12 months, how many times has your credit score been looked at? Having too many credit or loan applications could deem you a ‘credit seeker’, so try to keep the number less than 5 per year.

 

Finally, have your credit bureau checked for mistakes. I have seen many individuals with mistakes on their credit score that resulted in higher interest payments. Check with Equifax regularly to ensure your credit score is accurate.   

 

Reasonable variation from this perfect situation will still give you a great credit score and obviously, the closer to it, the better it will be. Contact a credit professional or myself for further information on increasing your credit rating and save thousands of dollars on interest as a result.

Brent Richardson

Have a question or comment? Feel free to make a post.

Pay Off your Mortgage Faster

After attaining the lowest possible interest rate, the second most important thing to Canadians regarding their mortgage is paying it off as fast as possible. Fortunately there are numerous ways to accomplish this task, so lets take a look at some here.

 

Make bi-weekly accelerated payments: Since there are 52 weeks in a year, we can devise that by making a mortgage payment once every two weeks, we would make 26 payments in a year. On the other hand, there are 12 months in a year, so if we made two payments every month, that would only amount to 24 payments in a year. So we can see that by making bi-weekly accelerated payments instead of two payments per month, it is as if there are 13 months in a year (because of the 26 bi-weekly payments). Thus, we make an extra months payment per year. This has the effect of saving thousands in interest on a mortgage and will reduce a 40 year amortization mortgage to 35 years.

 

Make Lump Sum Payments: Most mortgage lenders will allow you to make a lump sum payment of at least 10 % of the principle amount owed, once per year. Utilize this feature, even modestly, to save thousands in interest and pay your mortgage off faster. For example: A $200,000, 25 year amortization mortgage at 5.75% with $1000 extra paid each year will save 5 years and 10 months and $63,463 interest off of the mortgage.

 

Increase mortgage payments: Even a slight increase in your monthly or bi-weekly payments can make a substantial difference in how fast your mortgage is paid down. For example: A $200,000, 25 year amortization mortgage at 5.75% with $100 additional paid on a monthly basis would save 3 years and 8 months and $30,038 in interest of the mortgage. This method is effectively the same as reducing your total mortgage amortization period if commenced at the beginning of mortgage amortization. However, by opting for a longer amortization period and the ability to increase payments, you get the option of paying less on a monthly basis should your financial situation tighten during a period.

 

Start a small business: While mortgage interest in the USA is tax deductible, it isn't in Canada. So we pay mortgage interest with after tax dollars. What we can do, however, is write off a portion of our mortgage interest if we conduct a business out of the home. Check out some small/part time business opportunity websites or franchise web sites for some ideas on what business would work best for you. Besides tax write offs, you could use any business profit to help make lump sum payments to pay your mortgage down faster and save thousands in interest.

 

Obviously the best way to pay off your mortgage in the fastest time possible would involve some combination of these strategies based on your unique situation. These techniques also help underscore the importance of proper mortgage planning, as opposed to simply finding the best interest rate. There are many more details to consider. So, whether you are looking for a new mortgage, refinancing or renewing a current one, the best thing to do is find an experienced and knowledgeable mortgage broker that will take the time to find you the right mortgage and mortgage plan, at the best possible rates.