Tag Archives: Questions

Rolling the Dice, Fixed vs. ARM ( Adjustable Rate Mortgage)

Rolling the dice is perfectly acceptable when you’re in a casino in Las Vegas. I know from first-hand experience that playing “craps” in Vegas can be a rush. For those of you who may not be familiar with the rules or finer points of “craps”, and would like to give it a try next time you’re in Vegas, DO NOT ATTEMPT TO PLAY UNLESS YOU UNDERSTAND ALL RULES!  Now that you’ve rolled your eyes and are thinking thanks for enlightening me Bozic, the fact is many do play without understanding all the rules. Why? Because that’s where the action is and where all the noise is coming from. The noise draws you to the table, and when you get there you think I want some of this. You find yourself placing bets, not even understanding what your odd’s are. You might even start mimicking the bets being placed by other gamblers at the “craps” table. You look down at the table and you’ve got all your bets covered. Come on shooter, make this a magical role. Then you hear the most dreaded words at a “craps” table, seven out…seven out. For those uninitiated that means all your chips are gone! That’s when you start thinking if you only had played blackjack instead you could have played for much longer. But that’s gambling and it’s a part of the experience. That’s okay for Vegas but maybe not so much so when choosing between a fixed rate mortgage and an ARM.

 

The reality is that many borrowers are rolling the dice today. I’m setting aside those borrowers that can withstand the rate variances, and have the stomach to ride out an ARM for 60 months. I just wonder about borrowers who truly don’t understand the rules of the game. I wonder if some borrowers are placing mortgage bets based on what their neighbor or co-worker did with respect to their mortgages. Maybe borrowers are being influenced today by advertising. The 50/50 mortgage is getting a lot of airplay today, and that product was designed for those that wanted to play it safe or safer. Maybe it’s all about today and they’ll worry about tomorrow, whenever tomorrow comes. Maybe all of the above plays a part in the decision-making process but the biggest influence is the brokers personal bias.

 

All I know is that at some point in the not too distant future rates are going up. The warnings and predictions have been there for all to see for some time now. For example, Bank of Canada Governor Mark Carney recently said the following, “Low interest rates today do not necessarily mean low rates tomorrow,” warned Carney. “Risk reversals, when they happen, can be fierce; the greater the complacency, the more brutal the reckoning.” There’s no ambiguity there, and I’m thinking he might be one of those people “in the know”. The way I look at it any five year mortgage, under 4%, is free money. It’s also 60 months of peace of mind for the borrower. I can’t help but think if borrower’s get squeezed by a rate hike, and then they ask you how did this happen, irrespective of the facts all they will hear is, seven out…seven out.

Until next time

Cheers

Boris Bozic.
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Steps For Home Buyers to Consider …

 

 

Step 1: Get Preapproved!

The first step in the home buying process is to take a moment to get the preapproval from a lender of your choice. This can save you hours of searching for properties that do not suit your budget, or what are even more painful, purchasing a home then discovering you are not eligible for financing.  Getting preapproved provides you with peace of mind, aids in limiting the search criteria and most importantly, gives your lender a fighting advantage by being able to alleviate a merchants worry about funding.  Latter is especially important should a competing deal surface.

Step 2: Seek Out Loan Conditions!

Prices will be flexible. Banks will gladly open their doors to get your business especially if you have a good credit rating and are interested in any other services they provide. 
Released rates would be the best starting point.  It is wise to know what the best rate is and this is completed by obtaining quotes of lenders posted rates from competitive companies. As well, asking if the financial institution covers evaluation charges, buy-out fees, penalties, payment options, portability etc.  can save you a great deal of money over the life of the mortgage.

Step 3: Make Sure You Receive Professional Inspection!

Nobody wants to purchase a home only to come to the realization that there are defects, concealed or not. Be sure to obtain assessments of the places necessary. If you get the results back and there are in fact inadequacies, the purchase cost may be discussed to deal with the crucial maintenance. The agent you’re working with can advise which assessments to consider.

Step 4: Utilize An Expert Broker!

The broker of your choice can help you make a purchase with the smallest number of difficulties. Your broker is able to ensure the cost will be marketplace cost. The lender can offer expert guidance regarding everything from incorporated factors, settlement techniques and so on. All things considered, it is their job to do what you want.

Step 5: Sell 1st Then Buy

In the event pricing will be significant, you should always sell your current house previous to purchasing another.  The best thing about this is it lets you know exactly what cash you’ll have available for your next investment. Getting rid of your home first allows one to put less restriction towards the investment, making the proposal very appealing. Sometimes, additional funds can be required by the home vendor which goes towards removing the property from the listings. An additional benefit will be when you find a property that you really love, chances are others will also find it attractive therefore; one could be put into a position that their proposal may be overlooked, but if you have sold your house already, this is not a problem.

Step 6: Understand Your Purchasing Expenses as a Whole

Know all the costs linked to the purchase. Consider the following fees: lawful charges, exchange taxes, building fees, remodelling and any other housing costs that are applicable. 
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Fixed Rate Mortgage or Variable Rate Mortgage?

 

Before we answer that question, it’s important to understand the difference between a fixed rate mortgage and a variable rate mortgage.


Fixed rate mortgage – A fixed rate mortgage is a mortgage where the rate of interest is fixed for a specific period of time. Generally known as the mortgage term, it usually ranges from between 6 months and 25 years. As time goes on, more of the mortgage payment goes towards the principal and less of the payment goes to the interest.


Variable rate mortgage – A variable rate mortgage is a mortgage that has fixed payments, but the interest rate fluctuates with any changes in interest rates. If interest rates go down, more of the payment goes to principal and if interest rates go up, more of the payment goes towards the interest.

So, which one is better?

Determining which one is better is as simple as looking at your ability to handle risk…


Here’s an easy test…

If you lose sleep worrying about the possibility of a .25% increase in the interest rate or get stressed thinking about the impact on your monthly budget if your monthly mortgage payment changes, then a fixed rate mortgage is for you.

You should also take the same test when choosing the length of the fixed rate mortgage term. If you breathe easier knowing that your mortgage payment is fixed for the next 5 years then a 5 year term is right for you.

It’s pretty simple, if you don’t like risk, then a fixed rate mortgage term is right for you.

Now if risk is not as much of an issue, then a variable rate mortgage is the way to go. Here’s why…

Based on a detail study completed by Moshe AryeMilevsky of interest rates from 1950 to 2000, consumers are better off, on average, financing a mortgage with a short term floating (prime) interest rate, compared to a long term fixed rate mortgage. A consumer with a $100,000 mortgage and an amortization period of 15 years would have paid $22,000 more in interest payments by borrowing and then renewing at the 5 year rate as opposed to borrowing at prime and renewing annually.

The bottom line:

Long term stability has a price, but if you can’t sleep, what good’s the money?

Don’t forget if you, a friend or family member have any questions about mortgage financing we are here to answer those questions and to work with you to arrange the best product to fit your specific needs and comfort levels.
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21 Questions to Ask your Realtor

 

21 Questions to Ask your Realtor

If you discuss these questions first, before you sign a listing agreement – you will get a feeling for the quality of an agent.  Bring them up and discuss the answers.

1.  Does the house or any part of the house need painting?

2.  Should I re-seed the lawn and get my landscaping in top shape?

3.  What about the screens?  What about the windows?

4.  Does the carpet need cleaning? How about replacing?

5.  Should the pets be under control at all times?

6.  Are the appliances something that we should include?

7.  Should I stay out of a prospective buyer’s way?

8.  What is the buyer’s first impression of the exterior of our house?  What can I do to improve it?

9.  What is the buyer’s first impression as they step inside my house?  What can I do to improve it?

10.  Since the buyer will be looking in the closets, should I take some of the clothes out to make them look roomier?

11.  Should I take items from the kitchen cabinets to make them more spacious?

12.  Is there any furniture that I could store or dispose of to make the rooms appear larger?

13.  Do any cabinets need to be touched up or refinished?

14.  Should I give you a list of things that my family likes about the house and the neighborhood?

15.  What about door mats?  Should I replace them with new ones that are neutral and omit our family name?

16.  Should I remove an ornate item that a buyer may want as a part of the house? For example, a special chandelier or a wall system?

17.  Should I ask you for a list of recommendations prepared specifically for helping market my home?

18.  Is the price and terms offered going to appeal to most of the buying public in my price range?

19.  Do I need to be aware of other houses similar to mine also being offered for sale?

20.  Are the garage and storage areas as clean and neat as they should be?

21.  Before spending needless time and money, could I have a list of items to fix in priority of importance?

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