30 Aug

Buy a home in Vancouver and the case for optimism.

General

Posted by: Jonathan Barlow

loans

In the month or so that I’ve been licensed as a broker in BC, I’ve already had many moments of self doubt. During those times, I’ve read and reread bits of my colleague, Dustan Woodhouse’s book; Be the Better Broker.

Chapter two, Overcoming Objections, which has the subheading Optimism Matters, is the chapter I’ve re read most often.

Optimism really does matter, especially in a market where much of the media “hype” is not so much hype as doom and gloom. I am excited and optimistic about the prospects for you owning your own home or buying your next home – you should be too.

Here’s some of the reasons why I am optimistic;

Interest rates are lower than they have been in 30 years or more.
Borrowing mortgage funds has never been cheaper. At today’s rates, borrowing $350,000  at 2.35% will cost you about $112,000 in interest over the lifetime of the mortgage. My first job was processing mortgage renewals for a Trust Company in Toronto in the early 1980s. The renewals offered were at 21% or more ( that’s not a typo ).

This is one of the most liveable cities in the world.
You know that I am not just talking about Vancouver but rather the whole Lower Mainland. Soon after we moved here, I skied, biked and fished in the same weekend. I knew I had moved to heaven. You have similar stories you tell your friends back east, don’t you?

Innovation in design.
If you think about it, there are hundreds maybe thousands of innovative home designs available to us. This home in Fairview Slopes, shares a similar flipped design to ours. As I was explaining to colleague Nomi Malik, having the bedrooms on the ground floor actually reduces street noise.
Design choices include designs to maximize the utility of the space available as well as staggering views of mountains and water. You have choices from float homes to eco housing, perhaps with walls built from straw bales and all manner of dwelling in between.

More choice than ever.
In 60 years, Canada has gone from an environment where the Banks were just starting to lend money for mortgages to an environment where through a Mortgage Professional, you have access to more than 250 lenders. You can now get the financing that’s best suited to you, not the boilerplate financing that was available back when Colleen and I lived in a shoebox on the M1. (You’ll have to be a Monty Python fan to get that one…)

Those are just four pretty basic reasons to be optimistic about your situation but I bet you can think of plenty more.

As always, if you have any questions, need help or would like to run through some scenarios, please call or email.

Regards,

JB

Jonathan Barlow
778-230-2572
jbarlow@dominionlending.ca

23 Aug

Saving for the future using your mortgage.

General

Posted by: Jonathan Barlow

 

I’ve previously written about interest rate being just one of several important factors in choosing mortgage financing. In a previous article I wrote about managing early payment penalties as being just as important – so you don’t end up losing all the interest savings if you need to payout early.

One of the most important factors, one that I did not touch on, is how you pay the mortgage – it’s even more important than what you have to pay.

How’s that? Well simply put, increasing the payment frequency is going to save you money, no matter what.

Often when Mortgage Professionals talk about the benefits of accelerated payments on a mortgage, the benefit they key on is a shortened amortization, on how it will knock three years off the time to pay a mortgage to a zero balance.

That’s not the biggest benefit though. The biggest benefit of being strategic about paying down your mortgage is that you’ll have more money to spend in your 60’s, 70’s, 80’s and even in to your 90’s. The whole purpose to avoiding interest and accelerating payment should be so that you can end up saving that money for retirement. That’s the most powerful, undisclosed truth of mortgage financing.

Lets use the example of Paul Jr.’s mortgage to illustrate what I mean;

Paul Jr. is a 30 year old video journalist who ‘s had some fairly significant early career success. He has recently purchased a condo on the West Side. He’s gotten mortgage financing in the amount of $350,000 for 25 years. He chose 25 years rather than 30 after some discussion with his father on it. He’s off to a good start with that decision but now he’s pondering what payment stream to choose. Like most of us, he’s paid every second week and always enjoys that “extra bit of cash” that he gets in those months with three pay days. He’s choosing between a regular bi-weekly payment and an accelerated one and though he knows the accelerated will have a shorter amortization, he’s struggling to see any other benefit.

Let’s look at the numbers he’s reviewing to see what he should decide. For the purposes of this discussion we’ll use the same rate of 2.35% for a 25 amortization.

Mortgage Balance      Amortization    Payment type    Interest Paid      Potential Savings

$350000                      25                     Bi-Weekly         $112315
$350000                      22.5                  Acc Bi-Weekly  $ 99972             $ 12343
$350000                      19.9                  ABW +10%       $- 11736            $ 24079  

By way of explanation, the third line shows the savings to Paul Jr.,  if he increases the payment by 10% (about $80 per payment) at the end of the first year. If you combine the savings from accelerated bi weekly payments and increase the payment by 10% in the first year, your savings are $24,000 plus, you potentially pay off the mortgage in less than 20 years.

“So big deal,” you say, “$24,000 is not that earth shattering!” Well it isn’t $24,000, its actually $124,000, because you retire your mortgage 5 years early. Five years of payments is approximately $100,000.

Imagine if our videographer wizard Paul were to retire his mortgage at 50 instead of 55, then turn the extra funds into retirement savings. If, by the age of 55, he’s amassed another $100,000 in retirement investments and that were even to provide him a conservative annual return of 4%, thats nearly $150,000 extra funds at retirement.

In this scenario, I increased the payment by ten percent only once, the assumption being that you would carry that increased payment forward but that it wouldn’t change. But what if you were to increase the payment 2, 3 or even 5% every year and ensure that at every renewal, increase your payment rather than allowing it to reduce? How much could you potentially save then? How many years could you really shave off, allowing you to invest in having a comfortable future.

As always, if you have any questions, need help or would like to run through some scenarios, please call or email.

Regards,

JB

Jonathan Barlow
778-230-2572
jbarlow@dominionlending.ca

14 Aug

Love & Mortgages; there is someone for everyone.

General

Posted by: Jonathan Barlow

 

A popular saying in the world of romance is that there is someone for everyone. The same can be said of the world of mortgage finance.

The role of a Mortgage Professional like myself is essentially that of a matchmaker. Like a romantic matchmaker, I will spend time talking to you and to lenders and try to fit your characteristics with those of a lender with similar characteristics.
Think about it for a second, if I do my job right, you’re starting a relationship that might potentially last 25 years, if neither of you changes too much.
Just like finding a perfect romantic match, its important to start off right when looking for mortgage financing. Here are some hints to get your started. (The headings actually apply to both romance and mortgages);

Be Honest- Integrity is the key.
The most important part of our conversation will be when it comes to completing the application. Its important to be ultra honest about what you have, what you owe and well, everything. If you’re not, it will limit your options (and may increase your rate) later on.

Don’t be too demanding.
Everyone wants the new lowest rate and I’ll do my best to get that for you, but there may be other options that may make more sense. Don’t worry, I will explain why but don’t be fixated on one feature over benefits from others.

Don’t be too yielding.
Remember I work for you and you alone. Its my responsibility to explain everything clearly. If you’re not clear on something even though I’ve explained it, just ask me to explain again or clarify.

Be happy and try not to be stressed.
Remember to tell yourself this is a good thing. Picture yourself in your new or next home. Don’t fret about the process, that’s for me to look after.

Don’t date on the side.
One the the most important things you can do to ensure the purchase and mortgage placement goes smoothly is to not complete any other financing until you’ve closed the purchase and the mortgage is in place. I know its tempting to celebrate the new home with say, a new car , but when I send your application to a lender, its a snapshot of your financial picture – other financing may change your debt servicing ratios enough that the mortgage won’t fund! You can date again, just after you’ve moved to your new place, not during the move.

Make sense?

As always, if you have any questions or need help, please call  or email.

JB

Jonathan Barlow
778-230-2572
jbarlow@dominionlending.ca