Mortgage tricks… and treats!

halloween-moneyHappy Halloween! And before the kids knock on your door.. just thought I’d send a quick mortgage trick and trick..

TRICK..  ‘Stress Test’ for mortgage qualifying.  The Finance Minister, Bill Morneau, blindsided Canadian Banks, Financial Experts and consumers when the govt introduced mortgage rules making qualifying even tougher.  The new rules mean consumers must qualify at the posted bank 5 year fixed rate.

TREAT... The reality of the new mortgage rules is that it’s not going to affect that many.  One of Canada’s biggest mortgage lenders told me, confidentially, that over 95% of their portfolio would easily pass the new stress test.  The REAL devil here is the Canadian Press.  Unfortunately, they are making this latest change sound like a death-blow for the real estate market.  Gauging my own clients profiles, I would say that even fewer than 5% would be affected.

If you’ve followed my site, you’ll know I’m a huge Variable rate advocate.  More than 90% of my clients have been in a Variable rate product.  And guess what?  They’ve always been able to qualify using the posted 5 yr fixed rate.

The govt wants to slow the housing market and property value increases.  I agree, we don’t want to see house prices continue unsustainable increases.   Not sure this latest change is the correct move.  Perhaps, this rule could have apply for higher priced homes only..?   Exclude homes less than $600k or $700k? Just a thought..   I’m also unsure the lack consultation or input from industry experts, was a wise move.  More open discussion is needed.  Just my opinion..

Happy Halloween.

Your best interest is my only interest.   I reply to all questions and I welcome your comments.  Like this article?  Share with a friend.

Steve Garganis 416 224 0114 steve@mortgagenow.ca

Not about Mortgages… Cut the crap!

cut the crapIt’s rare that I talk about something that isn’t directly related to mortgages, real estate or finances.  Today is one of those days.  I want to share this pretty cool podcast channel I stumbled upon.  Maybe you’ll find it as useful as I did.

Cut the Crap.

Yup, that’s the name of this podcast channel.   Ok, at first, I thought, what can this be about?  Maybe it’s a spinoff from the old Penn and Teller show?? But then, I saw the headline at the bottom “Never read a book again”.   I thought, okay, let’s check this out.   And I’m glad I did. Read the rest of this entry »

Paris attacks won’t change human kindness.. Maybe this story will help to brighten your day.

car accidentLast week, I started writing this article.. but just couldn’t find time to finish.. And then, the Paris terrorist attacks happened.  How tragic and senseless.  Well, maybe this article will lift your spirits just a bit.

About a month ago, I had an interesting experience… I was parked downtown… was walking back to my truck and noticed a note on the windshield.    It read, “I hit the front corner of your truck!!  I’m so sorry. You can contact me…  416 123 4567 (I’m blocking out the true number)  Shannon”.

I had a look at the front of my truck and sure enough the bumper had been pushed in.   I’ll admit, my first reaction was anger and bit of self pity… you know, ‘why did this happen to me?’..  That sort of thing.

But then I started to wonder… was this phone number real or did someone just write a note to make it look like they were doing the right thing?    I quickly called that number …  sure enough, Shannon was real.  She answered and was so apologetic.   She felt very bad about what happened.

I quickly stopped her and said, “it’s ok.  Accidents happen all the time.  You did what many others wouldn’t do.  You stepped up and took responsibility.  I’m so thankful that you did.   Honesty and honor are just words to some people.  You are clearly a person of honor.  Thank you for being honest.”

Shannon turned a bad situation into a good experience.  As strange as this sounds, I actually felt pretty good the rest of the day.

Last week, I brought my truck in for the repair.  Shannon was true to her word and paid the autobody shop and also paid for my car rental.

Thank you Shannon…. for showing me there are still good, honest people in this world.. taking responsibility for their actions.    Thank you for making me believe in the human spirit.   I hope I can pay it forward one day.

Hope this brightens your day, just a little.

Your best interest is my only interest.   I reply to all questions and I welcome your comments.  Like this article?  Share with a friend.

Steve Garganis 416 224 0114 steve@mortgagenow.ca

Canada vs the world…debt level comparison study.

debt Hey, here’s an interesting stat that should make us Canadians feel good…. Our Federal govt keeps telling us to slow our personal debt levels… maybe they should start balancing their own books…  I remember when, in 1997, the Feds actually balanced the budget and even made a surplus.   Remember that?    In fact, from 1997 to 2008, the Feds reduced our national debt from $563billion to $458billion.  We seemed to be heading in the right direction.

Then the U.S. sub-prime mortgage crisis hit and the Feds starting spending in an attempt to avoid a major recession.   So far, it’s worked.  Our economy has performed pretty well when compared with most other countries.   But our National Debt level has now surpassed the $600billion mark for the first time ever.   How concerned should we really be?   Is our national debt level really that high?    I decided to compare out debt with a handful of other countries to see how we stacked up….

NOW FOR THE GOOD NEWS

Read the rest of this entry »

More dumb Bank ads.. but they won’t fool us.

Are you watching the Stanley Cup playoffs?  Year of the underdogs…  I’m a huge hockey fan and although my favorite teams are out of it, I’m still watching… and I’m still willing to put up with the commercials… but some of these ads are rubbing me the wrong way.

Like most TV ads, the truth can be exaggerated…  Take the Old Spice commercial…  “I will have big muscles and cool hair”…. have you seen that one?   My son loves it… makes me laugh too….

But when we’re dealing with something more important, like your money and your mortgage, the truth shouldn’t be cryptic….   The ‘BIG SIX BANK’ ads, bother me… I’ll explain. 

A few years ago, during the Olympics, RBC hit us with a commercial that showed a young couple searching for homes.. Their RBC mortgage rep recommended they split their mortgage “part variable and part fixed…  to save money.”  Remember that one?  click here to view it.   I strongly criticized this product and the so-called advice because it didn’t make sense to break up the mortgage…. Fast forward to today…. My criticism was well justified….Anyone that listened to my warnings would have saved money… Anyone that took this RBC product lost out… Clearly, that was NOT the right product to ‘save money’.

This year it’s BMO….We can’t seem to escape these ads.   How does it go again? .. A young couple are shopping for a home, walk through the bedroom and into the closet, when they magically appear in the BMO BLUE ROOM with a BMO Banker…

They want to pay their mortgage faster…   Have no fear, the BMO Banker is here to the rescue with their pearls of wisdom…  The Banker says, “we can help…by restructuring your payments and getting you into a low-rate fixed mortgage, you’ll pay your mortgage off sooner“…  Wow!  That’s GREAT!!   The young couple are excited… Cue the music!!

Now let’s decode this cryptic message…   ‘restructuring your payment’….  What could the Banker possibly mean?   No mystery folks… It means you must increase your payments.  Yes, that’s all it means…There is only one way to pay your mortgage faster…. increase your payments or make at least one lump sum payment annually… click to here to read about the bi-weekly payment myth.

The Banker continues and says ‘…..getting you into a low-rate fixed mortgage, you’ll pay your mortgage off sooner’.   This must be some magical product… it sounds great…!    Uh, no.. guess again.  Let me give you the straight goods…… BMO refers to their NO FRILLS mortgage as their ‘low-rate mortgage’.   That’s quite misleading if you ask me.   So once again I am issuing a STRONG WARNING.    For the record, this is probably the worst mortgage product you could ever take, in my opinion.  It’s just slick marketing…

You can’t pay the mortgage out for 5 years, without selling your home…..meaning you can only refinance with BMO but there is no obligation for BMO to give you the any future discount, let alone the best discount…..you have limited prepayment options…… and let’s not forget, the infamous BIG SIX Bank penalty calculation….we’ve seen how this one has cost borrowers $20k, $30k and even $40k in penalties!.. click here to read more about how BIG SIX Banks calculate penalties.

The Banks have deep pockets and spend hundreds of $$millions on ads…  It’s up to the little guys, like me, to tell it like it is…  Hey, I won’t promise you good looks and cool hair, but I can promise you to tell it like I see it… There are better mortgages available… Better terms, rates, privileges and options and ultimately, these better options will SAVE you money on your mortgage.   That’s our goal… to pay the least amount of money to own our homes.   Don’t get fooled by a flashy low rate… Rate is important but it isn’t everything.   These aren’t opinions, these are facts.  Just do some research or speak with an unbiased professional.  Speak with a Mortgage Broker.

As always, let me know if I can help… and feel free to send this article to someone you think could benefit from it…

Steve Garganis

steve@mortgagenow.ca

416 224 0114

Solar Power subsidy… update on my application

On May 25th, I submitted my own application for the Ontario Power Authority’s (OPA)Microfit program.   The program was created by the Provincial Liberal govt as a way to encourage homeowners to use alternative, clean source of energy such as sun, wind, water and bioenergy. Green energy.

Solar power is the one that interests most people, including myself.   The deal is simple.  The govt will pay me $0.802 kWh for 20 years.   Compare this with the $0.07 to $0.10 kWh that most homeowners pay for normal household electricity and you can see this can be a very lucrative incentive to ‘get off the grid’, as they say.     That could generate around $7,000 per year for me.    But then again, it’s gonna cost me around $30,000 to $40,000 to install the solar panels and hook up to local hydro company….  Still, the payback is around 8 to 10 years… after that, it’s all profit and eventually, I can make and use my own electricity.

Back to my application….. It’s being processed by the OPA and it could take upwards of 45 days to get it processed.   I have also submitted my application to my local hydro provider, Burlington Hydro.   They also must approve my home for connection and hook up.  I’m now in a race against the election clock.   Yes, another election this fall…..  This time it’s a Provincial election.  The Conservative govt has made it clear that if they win, they will probably scrap the program as it’s too expensive in their mind.   But all existing applications and contracts will have to be honored no matter which political party is in charge.

And so, I wait…   stay tuned for more details as they unfold…

Oh, and by they way, I do see why the Conservative govt would want to scrap the program…  Up until last December, there were a number of companies that popped up and offered FREE installation of the solar panels, in return for 85% of the revenue for 20 years…and then there are the bigger farm properties…  I took a drive up to Tobermory a few weeks ago.   Along the road were dozens of these strange looking barns with no walls and  just a solid frame and roof… They were huge!  The roofs were covered with solar panels…  These buildings were clearly designed for one purpose…..to attach the solar panels and  produce electricity… and to generate revenue…..

This is not what the program was intended for… The program was created for property owner to produce their energy…not over produce and sell it for an exorbitant profit…. We can probably guess that once the 20 year guaranteed govt contract is up, these huge barns will probably collapse and disappear….

It’s these sort of loopholes that infuriate most of us…  The govt seems to have closed the gaps now but not before many have taken advantage of the offer and are now generating untold $$$thousands and probably $$$millions in some cases per year….  Some forward thinking could have prevented and minimized the losses.

Govt program makes solar power a cost effective option.

We’ve heard about ‘green’ programs for some time now.  I thought we’d take a look at one of these programs… this one is of particular interest to me as I am considering participating with my house.

It’s called the Microfit program.   I’m looking specifically at the residential program…The deal is this.  You install the solar panels on your roof.  The solar panels produce electricity. The electricity is then sold back to your hydro provider…and here’s the real carrot…the Ontario Provincial govt will guarantee to buy the electricity from you for 80.2 cents Kwh for 20 years!!!...

Why is this good?  Currently, the price of electricity costs us between 6 cents and 10 cents Kwh depending on when you use your electricity…  (peak and off-peak hours…. another cash grab from our govt but that’s a discussion for another day).

So, if you haven’t figured it out yet,  you are making a profit of around 70 cents per Kwh….  They say you can produce around 10,000 Kwh per year… it depends on how much sun your roof gets.  That means you could potentially earn around $8,000 to $9,000 per year.  And the reason for the huge payout is to encourage homeowners to take part in green renewable energy.

So what’s the catch?   The panels are not cheap… look to pay around $40,000 for the panels…. And that’s why the govt is paying out 80.2 cents Kwh… to entice you..  You also have to apply to get approved for the Microfit program.  And like so many govt programs, it’s not an easy process.  An application must be completed. A sun/shade test is done to see if your roof can produce enough electricity.  If that works, then you need to apply to your local Hydro provider (Toronto Hydro, etc) and they will also need to accept your application to supply electricity to their grid.

I’ve only done some preliminary research and prices seem to be dropping as technology and more competitors get into the market.  $40,000 is not a small investment but definitely worth looking into with a 20 year guarantee from the govt at 80.2 cents Kwh.   Then there’s the environmental reasons…It’s green, renewable energy… we all want that… Eventually you could be right off the grid and supply your own energy.

Some words of advice…. with a Provincial election coming up this fall, this program could get taken off the table…Look for a reputable Solar energy company and get referrals.  If it sounds too good to be true, then it probably is.  Stay away from companies that say they will give you the panels for free and pay you 15% of the energy produced.  The govt recently stopped allowing the leasing of residential space.

By the way, the PC govt says they would scrap the Microfit program if elected…but they would have to honor existing agreements…

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