Lump Sum Payment Strategy / Use your RRSP refund pay down your mortgage

Here is a great way to use your tax refund to repay / pay down your mortgage. It does make a difference.

But you still have to live. I recommend using 1/2 of it for this and the other 1/2 for something you NEED, not want.

Lump Sum Payment Strategy

Tax Season is fast approaching and the average Canadian tax refund is approximately $1600. An excellent use of these funds would be a lump sum mortgage payment. If a client was to do so they could save thousands of dollars in interest over the life of their mortgage. For example:

Mortgage Amount                                                    $300,000

Mortgage Interest Rate                                            3.25%

Pre-Payment                                                          $1,600

Approx. Interest Savings Over 25 years                    $1,600 x 3  = $4,800

The above savings might seem trivial if looked at as a one-time event, however if you continue this strategy on a yearly basis they could save over $17,000 in interest over the life of their mortgage. Additionally, this would help you become mortgage free almost 5 years faster.

***note the above calculations are based off a 25 year amortization, a higher interest rates would increase the savings***

What does Calgary housing have left for price increases in 2014?

This is part of Garry Marr’s article where he looks at what prices may do in 2014.

Mark Herman

Investors in Toronto continue to bet on price appreciation in the face of negative cash flow, leaving them vulnerable to a market shift.

 “If prices start to fall, we could see investors getting antsy and start to sell their units which could aggravate the market,” said Mr. Guatieri who nevertheless says the risk is low because  a spike in rates seems unlikely.

If there is a market that can support further price gains it is Calgary which has been a major benefactor of net-immigration growth. BMO noted Alberta attracted 53,000 more people in the last year than it lost.

“It’s not not just the rapid population growth but a young population and those are your first-time buyers,” said Mr. Guatieri, noting Calgary had a correction back in 2008-2009 when average prices fell 16%.

But the idea of a crash in 2014? He just doesn’t see it happening.

“I see [price growth ] still and that’s definitely true in Calgary. …

here is a link to the rest of it: Republish Reprint: Garry Marr | December 17, 2013 | Last Updated: Dec 27 5:14 PM ET

Glut of job vacancies in Alberta; 52,800 vacancies – supports home prices

Alberta continued to be the best place in the country for job-seekers in the fall of 2013.

Businesses in the province reported 52,800 vacant jobs in the month of September. Statistics Canada says that is fewer than the previous year, but still the highest number in the country.

Bruce Graham, the CEO of Calgary Economic Development, said the city is experiencing its lowest unemployment rate since the recession of 2008.

“We’re still considered very much a bright spot in the economic landscape of North America.”

Graham said employers are having difficulty recruiting workers.

For the full article see: http://www.cbc.ca/news/canada/calgary/job-vacancies-in-alberta-outstrip-available-labour-1.2477566

Renewing your mortgage early? It may cost you

We get this question all the time – should I renew early. Do early mortgage renewals save or cost you money? Below Rob does a great job summarizing the situation.

ROBERT MCLISTER

Special to The Globe and Mail

 A rate in the hand is worth two in the bush.

Many mortgage lenders want you to believe that rate certainty is worth paying a premium for. It is the justification, they say, for staying with them and renewing your mortgage early.

 Early renewal features typically let you lock in a new rate two to four months ahead of when your mortgage is due to mature. Some lenders, like Bank of Nova Scotia, even let you renew up to six months in advance.

 “Unless the consumer believes that interest rates are going to move up significantly prior to their ability to lock in, I fail to see a reason to do an early renewal with their existing lender,” says mortgage broker Calum Ross.

 By locking in earlier, you minimize risk of adverse rate movements. But in return, you pay a premium to the best available rates, and you’ll lose all benefit if rates drop before your term is up.

Not surprisingly, Canada’s big lenders are advocates of renewing your mortgage in advance. “We think it’s a good idea to have some room to manoeuvre [when locking in a renewal rate],” says David Stafford, Scotiabank’s managing director of real estate secured lending. Having more time to make a decision is especially important if you plan to renew with your current lender, as more than 90 per cent of customers do at Scotiabank…

… On the other hand, if your lender were pitching a “one-time-only” opportunity to renew early at 3.59 per cent or more, that warrants more skepticism. A 0.30-percentage-point rate difference would tack on $3,500 of extra interest on a $250,000 five-year term. (Note: This 3.59-per-cent rate is an actual early renewal “special” currently being offered by at least one major bank.)

I use 0.30 of a percentage point in my example on purpose: That’s roughly how high today’s best fixed rates can increase until they’re equal to a good early renewal rate.

But it’s not that often that rates jump 0.30 of a percentage point in 90 days. Since the 1950s, fixed rates have risen 0.30 of a percentage point over a three-month span only 21 per cent of the time. Mind you, we experienced one such case last May to July when rates soared three-quarters of a percentage point.

Either way, if lenders can get you to commit early, they will. By law, banks have to send you a renewal notice at least 21 days before the end of your existing term. But they’ll often contact you well in advance of that, which reduces the odds of you shopping around.

Positioning early renewals as a “convenience” or risk mitigator is a strategy that frequently pays off for lenders. According to the Canadian Association of Accredited Mortgage Professionals, almost four out of 10 people who renew with the same lender do so at the original rate proposed by that lender. In other words, they don’t negotiate…

… “It is clear to me that consumers don’t do a good job at managing this part of their personal finances,” Mr. Ross adds, and that’s certainly true. If you want a great deal on your next mortgage renewal, one that could potentially save you thousands, remember that your lender’s first offer is seldom the best offer.

Robert McLister is the editor of CanadianMortgageTrends.com and a mortgage planner at VERICO intelliMortgage, a mortgage brokerage. You can also follow him on Twitter at @CdnMortgageNews.

Alberta still the fastest growing economy in Canada

CALGARY – Alberta has been the largest contributor to economic growth in the country for three consecutive years, outpacing the much larger economies of Central Canada, says a new report released Monday by the Conference Board of Canada.

And the board’s Provincial Outlook: Autumn 2013 report said Alberta will have the fastest growing provincial economy in 2014 with 3.4 per cent year-over-year growth.

Alberta will have the fastest growing provincial economy in 2014.

“Alberta’s outlook is so exceedingly bright right now in the context of all the risks that we’re seeing going on in the world. We’re seeing Alberta coming off two years of exceedingly strong growth,” said Todd Crawford, senior economist with the board. “And 2013, 2014, we’re going to see GDP growth of 3.2 per cent, 3.4 per cent over the next two years.

“It’s exceedingly strong and of course that’s all being driven in large part by the strength of the energy sector in the province. That’s not something that’s going to, or has changed, for much of the past decade.”

…

“Alberta’s economy is definitely the most resilient in Canada,” said Ben Brunnen, an economic consultant in Calgary. “No other province has grown by above 3.5 per cent each year since 2010. Strong resource demand will continue to drive Alberta’s economy into 2014, fuelling population and job growth, construction activity, and increased household spending.

Prime could double by end fo 2015.

All the more reason to take the 5 year fixed rate. Here is some fuel for the fire of fixed rates- which have never been this low! Below you can read the boring data we digest daily to give you the best un-biased opinion on your mortgage.

Does your banker do this for you – no way!

Mark Herman, Calgary Alberta Mortgage Broker.

—

OECD calls for Bank of Canada rate to more than double to 2.25% by end of 2015

 

Canadian Press: Most economists believe the Bank of Canada Governor Stephen Poloz and the central bank won’t budge off 1% until the first quarter of 2015, and perhaps even later.

OTTAWA — Just last month, the Bank of Canada dropped a mini-bombshell by adopting a neutral position on interest rates, after long insisting that any eventual move would be up.

That left open the real possibility the central bank may, instead, lower borrowing costs — at least until the struggling economy regains its momentum.

Now, the global think-tank that helps guide countries along a growth path says Canada’s central bank may actually resume its course for higher rates — beginning as early as next year — as that economic momentum returns and inflation starts to pick up speed.

“With spare capacity narrowing by the end of 2015, monetary policy tightening may need to begin by late 2014 to avoid a build-up of inflationary pressures,” the Organization for Economic Cooperation and Development said Tuesday.

The first move above the bank’s current 1% lending level — where it has been since September 2010 — will likely come in the fourth quarter of 2014, the Paris-based organization said in the report, and continue rising to 2.25% by the end of 2015.

Many economists have been expecting the first move, if it is up, to come in the first quarter of 2015.

“The pause in the economic recovery since early 2012 has continued this year,” the OECD said its economic outlook for Canada, part of a larger global report.

“Exports have been weaker than expected, possibly reflecting shifts in trade linkages and on-going competitiveness challenges. This, together with declining corporate profits, has depressed business investment.”

 

The OECD said this “suggests that investment growth will remain low in the near term, with firms using existing capacity more intensively.”

But exports and business investment should begin turning around through 2014 and 2015, leading to growth of 2.3% next year and 2.6% a year later, it said. In 2012, the Canadian economy edged ahead by 1.7% and the organization is forecasting the same pace this year.

“Projected growth should be enough to absorb the small degree of remaining excess capacity by end-2015, and the inflation rate should increase to near the [Bank of Canada’s] 2% target rate.”

The OECD, which has 34 member nations with both advanced and emerging economies, is predicting the world economy will expand by 2.7% this year, followed by 3.6% growth in2014.

The United States, which will remain Canada’s biggest trading partner for the foreseeable future despite free-trade deals in other regions, should grow by 1.7% this year and ramp up 2.9% in 2014.

The eurozone has managed two quarters of modest growth so far this year, after emerging from a long recession. But the OECD predicts another contraction — of 0.4% — this year, before returning to growth of 1% in 2014.

“The main risks to the projections are ongoing uncertainty about the U.S. economy and the potential for renewed tensions in sovereign-debt markets and the financial sector in the euro area,” the OECD said.

“Both factors could reduce exports and tighten financial conditions, reducing economic growth.”

The report also warned that a “disorderly correction” in Canada’s real estate market and the impact on highly indebted households “would depress consumption and residential construction and, in an extreme case, could threaten financial stability.”

That is a concern shared by the Finance Department and Bank of Canada. Both have cautioned consumers not to binge on the current cheap-credit environment. The concern is that households could be caught in a spiral of rising interest payments and shrinking equity in their homes if the market turns cold.

Last week, Finance Minister Jim Flaherty said he was prepared to tighten lending rules on home purchases — as he has four times in four years — if too many Canadian are seen getting in over their heads with mortgage debt.

Meanwhile, on the same day the central bank surprised analysts by dropping its rate-increase bias, governor Stephen Poloz and his policy team downgraded their outlook for the economy.

In its quarterly Monetary Policy Report, released on Oct. 23, the bank said Canada’s economy will likely grow by 1.6% this year, down from its July outlook of 1.8%. For 2014, the estimate was cut to 2.3% from 2.7%, while the forecast for 2015 is now 2.6%, down from 2.7%