Welcome to My Mortgage Broker
Greetings!
As an independent mortgage professional I help my clients to establish a plan of action to help achieve their financial and life goals.
In this issue - update on rates, home insurance, property disclosure and the law.
Next month - some good reading on the beach with my archives.
If you are in the market to buy or refinance and need a rate hold - through the fall - give me a call.
Feel free to email or call me with any questions and PLEASE PASS ON THIS INFORMATION to anyone you know that could benefit - sharing is a good thing.
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Property Disclosure and the Law
Courtesy of Norm Einarsson - www.laughlinlaw.ca
A recent decision of our courts sheds light on the extent to which a purchaser can reasonably rely on representations made in a property disclosure statement. The disclosure document declared that there were no leakage problems. It transpired that the drain tiles were plugged and water seeped into the basement. The Plaintiff claimed damages for misrepresentation.
The Court held that for a purchaser to succeed on a claim of negligent misrepresentation on a home purchase, it is necessary to demonstrate that the inaccurate contents of the disclosure statement induced him to enter into the contract and that he relied on the specific representation at issue in reaching the decision to do so. Additionally, the aggrieved party must demonstrate that the misrepresentation was untrue, inaccurate or misleading and that the vendor acted negligently in making it. Otherwise the old maximum of "caveat emptor" will apply subject only to fraudulent or reckless misrepresentation or a deliberate attempt to conceal a known latent defect.
Conversely, if there are latent defects in the building of which the vendor is aware, but which are not readily observable by inspection, then an action may lie. However, if the defects are readily detectable by reasonable inspection, then the doctrine of caveat emptor will certainly apply. The onus is on the purchaser to inspect for readily observable defects. Therefore, if a potential purchaser has any reasonable expectation that there may be a problem, a thorough inspection is warranted.
When retaining an inspection service, one should be cautious to review their terms of engagement which may include a clause which exonerates them from any liability for negligence. If it turns out that there is a costly defect, your stronger claim is against the inspection company, not the seller. Therefore, it is always prudent to check to ensure that the inspection company carries errors and omissions insurance so that if you establish a successful claim, there will be money available to pay the judgment.
The moral of the story.....buying a used house is a lot like buying a used car.
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How to control the cost of home insurance
Courtesy of Tracey Plevy - Columbia Insurance - tracey@columbiainsurance.ca 604 527 1377
Ø Increase your deductible. By increasing the amount you are willing to pay in the event of a claim will decrease your premium by up to 15%.
Ø Installing a monitored burglar alarm or burglar and fire alarm. Many insurance companies offer discounts for these alarms.
Ø Build a consistent claims-free track record. All insurance companies offer discounts after three years with no claims.
Ø Always ask about other discounts. For example, some insurance companies provide other discounts; for example, mature, seniors, mortgage free and loyalty to name a few.
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Fixed or Variable?
In April 2008 (only months before the credit crunch) an article written by Keith Woolhouse, Special to the Star, addressed the age old question "variable or fixed?" With major changes in the mortgage market and unsure economic times ahead, I thought it was time to address this question again, taking into consideration the current rate structure and market conditions.
Woolhouse compares the two types of borrowers; the fixed rate camp, seeking security versus the variable rate camp, who are prepared to gamble. While monthly payment plays a part in making this decision, the greatest motivator is the risk factor. It's the ultimate gamble and why an estimated 70 per cent of Canadians opt for the fixed-rate mortgage believing that not only will they sleep better but they are making the best decision. After all, this is likely the biggest investment in their life.
However, statistics show that nearly 85 to 90 per cent of the time, borrowers save money by choosing a variable rate mortgage. Lenders prefer to advance money for short periods and borrowers who accept this are rewarded with a lower interest rate. This is true even in today's low interest- rate environment since lenders are even more reluctant to make longer- term commitments.
Borrowers should not make any decision based on speculating interest rates but rather on their personal risk tolerance. One need only take a look at the past to know that the prime lending rate can and will change. In May 2006 the prime lending rate was 6%, rising to 6.25% in July 2007 before it dropped below 6% again in January 2008 and continued to drop to 4% in October 2008 the lowest since July 2005. In the past year we have seen the prime lending rate rise from 2%-3% over a short period and the Bank of Canada has indicated rates will rise again at some point.
In response to economic instability in Oct 2008, lenders changed the variable rate product from prime minus .6% to prime plus 1%. Within months the discounts returned and today (July 2011) we see variable rates at P-.8% or lower. However, some lenders have maintained P-.65% to be cautious. For some borrowers who are familiar and comfortable with a variable rate product this change in rate structure may not matter as they prefer the potential upside - as the prime rate drops they pay less interest and more principal off on their mortgage. However, for those risk-averse borrowers or first time homebuyers with little equity in their home, the potential downside could prove to be too much to handle. If you are ready to purchase or remortgage and unclear on which is the right choice for you, ask yourself a simple question. "What would happen if the prime rate rose to 6% again and my mortgage payments rose? Could I afford it?" That potential change translates to $120 per month for every $100,000 based on a 25 year amortization. If you are able to ride the wave up and down the odds are you will save money in the long-run. However, you have to be able to take the hit if rates rise. If you are unsure - then it may be best to take that fixed term rate. Either way, when your term is up you get to decide all over again.
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Pauline's Picks
www.glennduxbury-inspections.com
Who knew a home inspector could be so interesting! Check out the website for tips, scary videos on what you don't want to see when you buy a home and lots of great information.
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Bank of Canada
BOC meets and no change to overnight lending rate. Banks maintain Prime - at 3.00%.
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Bond Yields - Fixed rates may rise.
5-year fixed rates are effected in part by the bond yield. This happens because of the gap between the bond yield and fixed rates.
Canadian 5 yr bond yields markets -.02bps to 2.31. Fixed rates at 3.79% are
in the comfort zone.
Best fixed rates (below 4%) still available. Call Pauline for details.
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My Money Coach
Check out this excellent resource for money saving and budget tips.
www.
mybcmortgage.ca/
learning-centre/resources |
If you are self-employed how do you qualify for a mortgage? I recently helped a client with difficulty proving income to purchase a new home.
The client had been self-employed for a few years but did not report enough income on his tax return to qualify. In this instance we consider mortgage products that allow for 'stated income" based on a reasonable wage for the job. For example you can't say a cab driver who typically makes $70,000 a year will make $200,000. Lenders will also require proof of business - GST return, business license, bank account or even invoices. In this case, we were able to obtain a competitive fixed rate on the mortgage allowing the clients to qualify for what they wanted to buy and could afford comfortably. The clients were able to pay the same for their mortgage and taxes as they were paying rent and now they have their own home. Glad I could help!
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