Getting a mortgage thru a consultant versus directly thru a bank
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Location: carl sagan's universe
Posted on: 26-12-06 22:20:06
Quote:
Originally posted by navin2004
Hi Investpro,
At the moment I have enough dough to cough up the 25% down payment, so will be doing that and saving some money on the CMHC insurance.
My theory is that I need to have atleast 1 year of living expenses (this should include the monthly mortgage payment) after I have paid the downpayment, so that I can plan for any contingencies.
With a 25% down payment you are well ahead of the pack. If on top of that you have 1 year’s living expenses then you can look for a lending institution (L.I.) that will invest that amount to reduce your mortgage payments.
Let us say that you buy a home for $200,000 and you pay $50,000 as down payment and have $25,000 extra to invest in a GIC or other investment vehicle, then the L.I. will calculate your mortgage on $125,000 and not $150,000. This $25,000 is available to you at any moment for emergency purposes. If after say 6 months you take out $5,000 and have only $20,000 left with the L.I. then your mortgage will be calculated on whatever is left at that moment minus $20,000.
Also if you have space in your RRSP contribution, and since it seems you have your own resources, do take advantage of the contribution, retract it after 90 days for buying your home, and then claim the returns from the CRA.
Please note I am here giving you a generalization w/o really knowing your personal and financial profile, but based solely only on the flimsy information you have provided. Also you must realize that while sitting with a client, the situation is interactive, with questions and answers flying back and forth in a short span. On this forum, though there is interaction, it is on a different level as when sitting with a client.
Therefore please treat everything as a source of information and perhaps some ammo to confront your advisor with, nothing else.
My two pence worth.....
Why don't you just settle for:
EITHER
A) Line of Credit for the 75% of the value of your new home at PRIME
OR
B) Fully open mortgage with Prime less .90% variable
The advantage of these is, and I am repeating what Invertpro said earlier, that in the spring or Summer when the rates are expected to be lower go shopping again for a better Fixed Rate. And shop through a Broker for Better results.
Best Wishes
Salim Kanji
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S. kanji
I may not agree with your opinions, but I will fight to death for you be able to air your views.
Location: carl sagan's universe
Posted on: 27-12-06 10:01:55
Quote:
Originally posted by kanjis
My two pence worth.....
Why don't you just settle for:
EITHER
A) Line of Credit for the 75% of the value of your new home at PRIME
OR
B) Fully open mortgage with Prime less .90% variable
The advantage of these is, and I am repeating what Invertpro said earlier, that in the spring or Summer when the rates are expected to be lower go shopping again for a better Fixed Rate. And shop through a Broker for Better results.
Best Wishes
Salim Kanji
CIBC Mortgages Inc
short and sweet.
Well put.
Further input-Graphs show that in the long run, people with variable rates pay less than those with fixed.
Ensure it is an OPEN mortgage, not a 1 year term or 3 year term or 5 year term.The term options will hit you with a penalty when you convert from variable to fixed, if you do.
I guess this must be good news for variable/open mortgage holders:
http://www.thestar.com/Business/article/165449
MONTREAL (CP) – Laurentian Bank's chief economist (TSX: LB) is predicting lower interest rates in Canada this spring to counter what he calls a "significant" economic slowdown.
In an economic outlook from Canada's sixth-largest chartered bank, Carlos Leitao said Wednesday the lowering of interest rates ``should be seen more as an insurance policy against a deeper slowdown rather than the start of a new easing cycle."
He said the Canadian economy is in the midst of "a significant slowdown that we still think should be relatively short-lived. Nevertheless, the downside risks are important and far outweigh upside risks."
Leitao said the U.S. economy "has proven to be remarkably resilient, despite the relentless focus on downside risks. The (U.S.) economic slowdown remains well-contained, with housing and automobile assembly the only main areas of weakness."
The U.S. economy posted an economic growth rate of about 3.3 per cent in 2006. For 2007, Laurentian Bank is forecasting an annual average rate of growth of 2.5 per cent.
"Nevertheless, this slowdown is more arithmetic than reflective of an underlying economic event," Leitao said in a release. "In fact, we expect economic growth to gradually accelerate throughout the year, with the (U.S.) economy returning to potential by the fourth quarter of 2007."
Sebastien Lavoie, economist of Laurentian Bank Securities, said the Canadian economy is in the middle of a "soft landing" period.
In the latest economic reports, "consumer spending and business investment continued to be pillars of strength, amid a strong performance of the labour market and a solid profitability of Canadian firms," Lavoie said.
But, "Given the weaker-than-expected real GDP growth observed in the third quarter and that a similar figure is in the cards for the fourth quarter, the performance of the Canadian economy in the second half of 2006 is somewhat weaker than we previously anticipated," he said.
"With this weak handoff, look for economic growth to moderate at 2.3 per cent in 2007, from 2.8 per cent this year."
Lavoie added: "Sub-par economic growth will translate into fewer job creation in 2007 and a modest increase in the jobless rate to 6.9 per cent, which is still low by historical standards. It also means that a bit of slack in the economy will build up, waning upward inflation pressures in the early stages of 2007 and eventually pushing the Bank of Canada to change its tune."
During the second quarter, the Bank of Canada will likely cut interest rates by about half a percentage point, Lavoie said. 07:47ET 27-12-06
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Rajeev Narula, Broker, REALTOR®
ACE TEAM REALTY INC., Brokerage
10 Kingsbridge Garden Circle, Suite 704
(Opp Square One - HWY10/403)
Mississauga, ON L5R 3K6
Bus: 1-888-355-3155 Ext. 300
Fax: 1-888-443-3155
Email:
Web: http://www.RAJEEV.ca" rel="nofollow">LINK
Quote:
Originally posted by navin2004
Hi Investpro,
At the moment I have enough dough to cough up the 25% down payment, so will be doing that and saving some money on the CMHC insurance.
My theory is that I need to have at least 1 year of living expenses (this should include the monthly mortgage payment) after I have paid the down payment, so that I can plan for any contingencies.
If a client of mine has more than 25% to put down as a down payment and also has funds available for 1 year mortgage payments and other expenses for exigencies, I would set up my client with ‘Smith Manoeuvre’ and make his mortgage ‘tax deductible’ as this would allow him to pay down the mortgage faster, have funds available for exigencies and get free refunds from Revenue Canada year after year resulting in increasing his 'financial net worth' significantly.
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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada
Location: carl sagan's universe
Posted on: 28-12-06 14:24:13
Hi Pramod,
The Smith Manoeuvre is an excellent way of making the interest on the mortgage tax deductible- not the mortgage itself. I am sure you know that, though perhaps you haven't expressed it well in your post.
For a first time home buyer, all the information regarding a smith manoeuvre is a bit too much to swallow, thus I personally shy away from getting the person involved in it until he/she has actually taken the mortgage, then down the line, say a year later drop by and get the person into the swing of things. By explaining the Smith Manoeuvre right from the get-go in my experience turns the client away.
But hey you're right, The Smith Manoeuvre is excellent, I just didn't want to bog navin2004 down with too much info as it seems he is a 1st time homebuyer and a plain vanilla mortgage is the way he should go. Get that out of the way and then go on to more creative financial techniques.
Location: carl sagan's universe
Posted on: 28-12-06 14:31:12
Hi Pramod,
I canadian desied smith manoeuvre and in your own words.
http://www.canadiandesi.com/read.php?TID=12113&page=2
You have previously not too long ago claimed this is risky and one should proceed only after thoroughly understanding the scene.
