Mortgages sometimes have costly or irritating restrictions that you won’t know about unless you read the fine print or ask a mortgage professional.

Some examples:

• Restrictions on breaking your mortgage before the term is up
• Restrictions on breaking your mortgage for the first 3 years
• A penalty surcharge of 1% for mortgages broken within the first 12 or 36 months
• “Reinvestment fees” (on top of mortgage penalties)
• Interest rate differential (IRD) penalties based on an onerous bond yeild calculation
• IRD penalties on variable-rate mortgages (usually IRD penalties apply to fixed mortgages)
• IRD penalties based on a costly posted vs. discounted rate formula
• Inability to port unless the purchase and sale take place on the exact same day (which can be hard to arrange)
• A poor conversion rate guarantee
• No refinances during the first year
• No free switches (for transfer-eligible mortgages)
• Amortization limits of 25 years
• Minimum amortizations of 15-18 years
• Restrictions on converting from a variable rate to a fixed rate for the first six months
• No ability to break your “open” HELOC without a penalty (Home Equity LOC)
  
• Inability to port across provincial lines
• High administrative fees when porting
• 100% claw back of cash-back if the mortgage is broken before maturity
  
• Requirement for a full banking relationship with the lender
• No lump-sum pre-payment privileges
• No annual payment increase allowance
• Pre-payments restricted to one specific day a year (instead of any payment date)

And the list could go on…

It is more important than ever to be able to rely on the expertise of your mortgage professional. It isn't as simple as finding the best rate - contact Freedom Financial today to help you choose the mortgage that is right for YOU.

As a consumer, your credit rating is one of your most important tools. Responsible credit management is more important than ever in these uncertain economic times. Here are 10 tips you can you can use to get into tip top credit condition.

1. Get to know your credit history. Lenders use your credit history to gauge whether or not you are able or inclined to pay them back. In shorthand, it’s a financial responsibility report and it’s a key input lenders will consider to decide if you’re worth the risk. By law, Canada’s three credit reporting agencies (Equifax, Experion & TransUnion) must provide your Consumer Disclosure report, which differs from the credit report lenders use, free of charge if ordered via mail or fax.
2. If you experience cash flow problems of an economic shock don’t hide – it’s the worst thing you can do. Instead, take a deep breath and call organizations that have lent you money. Explain the situation and tell them you want to work out a repayment plan. Remember, always pay something.
3. Pay bills on time: being one day late on a bill can affect your credit rating. And never go over the limit on your credit card. In fact, experts recommend not spending more than 65 per cent of your allowable credit limit.
4. Restrict the amount and sources of your credit. Loading up on high interest credit cards isn’t a good idea even if the rewards programs are alluring. Remember, credit is about a convenient payment method so make sure it fits your needs. It should never be used as money you don’t have.
5. Applying for too much credit over a short period of time can affect your credit rating, so, limit the number of credit applications. When cancelling credit sources, it’s not a good idea to cancel a source that has been long-held since this payment history can have positive implications for your credit score.
6. Always check your statements carefully to make sure they’re accurate.
7. Never sign a contract you don’t understand. If you feel pressured take the contract away and have a good read. Most salespeople will respect your right to be an informed consumer. If they’re not willing to wait, then the great deal you were about to get likely wasn’t all that great.
8. When deciding what to pay first, use the accelerated margin formula. First, set aside 10 per cent of your income. Then line up your bills. Divide each balance by each monthly payment. Pay the monthly minimum on each bill but take the lowest division answer and apply the 10 per cent you set aside. After this bill is paid go to the next lowest division answer until you’ve paid off your debt. See Credit Basics at Trans Union.
   
9. Get connected. The web has lots of great sites that explain credit in simple terms. A good place to start is the FCAC’s website .
10. Remember, cash is king. If you don’t have any savings, work on building some. It’s the best antidote for sleepless nights.

* Taken from Mortgage Journal – January/February 2009

You’ve saved for your down payment, you’ve crunched the numbers and you’ve decided on the neighborhood where you want to live – but are you really ready to start shopping around?

“Buying your first home is one of life’s most exciting milestones, but there are lots of steps on the way to crossing the threshold as an owner for the first time,” says Lisa Brinson, mortgage expert with Freedom Financial in the Annapolis Valley. “To make sure this process goes smoothly, you’ll need to get financing advice right from the get-go and do some work in advance.”

Brinson breaks the process down with the following tips:

Get your down payment and deposit ready. A down payment must come from your own resources, and in most cases must have been held in your account for at least 90 days. Using a gift from your parents or other family member for a down payment? You’ll need a letter stating that it is actually a gift and does not need to be re-paid. These funds will likely need to be deposited in your account two weeks before your purchase closing date.

The Home Buyers’ Plan is another financing option for first-time buyers. It allows you to withdraw up to $25,000 ($50,000 per couple) from your RRSP to buy or build a home.

Keep in mind that when placing an offer, a deposit is usually required. It can be all, or part, of a down payment.

Figure out what you can afford. The best way to do this is by talking to a mortgage expert and getting pre-approved for a mortgage. A mortgage consultant can provide examples of what monthly payments and home buying costs will be, to eliminate surprises.

“A major benefit of a pre-approval is that most financial institutions will lock-in a rate for up to 120 days,” advises Brinson. “This is very helpful if you’re buying in a rising rate environment.”

Get in touch with the professionals. Think of home buying as a team sport – a mortgage consultant can help you find a good real estate agent, real estate lawyer, home inspector and home insurance agent. Be sure to get in touch with these professionals early in the buying process to avoid last-minute scrambles.

Come up with an offer strategy. In competitive real estate markets, it is common for vendors to put off accepting offers until a particular date. This means buyers may be bidding for a home along with several other parties. It’s easy to get caught up in the emotion, so it is important to decide on a maximum price before bidding and to stick to it.

Choose your mortgage strategy. Ask yourself: Do I want the stability of a fixed-rate mortgage or am I comfortable with the potential rewards and risks of a variable-rate loan? A mortgage expert can help you decide which one makes the most sense for your financial situation, as well as help you understand your payment options and the other features of various types of mortgages.

Get ready to close. When buying a home, it pays to learn about closing costs, which can represent up to 3 per cent of the purchase price, including land transfer tax, lawyer’s fees, appraisal fees, title insurance and home inspection fees. A mortgage professional can help estimate how much these will cost and offer ideas for how you can cover these costs.

”A lot of first-time buyers can’t wait to get out there and house hunt, but they need to understand that this is not a decision to enter into lightly,” says Brinson. “But with careful planning and expert advice, you can make your first home – and your first mortgage – work well for you in the long term.”

Lisa Brinson,

Manager Mortgage Division

Freedom Financial Services

115 Coldbrook Village Park Dr

Coldbrook, N.S.

B4R 1B9

1.866.496.1100

lisabrinson@invis.ca

lisabrinson@freedomatlantic.com

www.freedommortgages.blogspot.com

Congratulations! You’ve decided to begin your search for a new home, or perhaps you’ve already found the home of your dreams and are ready to make an offer. It’s now time to consider your mortgage options. But with so many different choices available, how can you select the right kind of mortgage for your needs?

To help you make an informed decision, Canada Mortgage and Housing Corporation (CMHC) offers the following answers to some of the most common questions Canadians have about choosing a mortgage:

• What is the difference between conventional and high-ratio mortgages?
  A conventional mortgage is a mortgage loan up to a maximum of 80 per cent of the lending value of the property. This means that the home buyer has made a down payment of at least 20 per cent of the purchase price or market value of the home. If your down payment is less than 20 per cent of the purchase price, however, you will typically need a high-ratio mortgage. A high-ratio mortgage is a mortgage loan which is higher than 80 per cent of the lending value of the property up to a maximum of 95 per cent. High-ratio mortgages normally have to be insured (by CMHC, for example) against payment default.
• What are fixed, variable or adjustable interest rates?
  When you choose a mortgage, you have to decide whether you want the interest rate to be fixed, variable or adjustable. A fixed rate is locked-in for the entire term of the mortgage. With a variable rate, the payments remain the same each month, but the interest rate fluctuates based on market conditions. For adjustable rate mortgages, both the interest rate and the mortgage payments vary based on market conditions. Talk to your mortgage professional to find out which option is right for you, and be sure to evaluate the impact of an increasing interest rate on your monthly payment.
• Should I choose an open or closed mortgage?
  With a closed mortgage, you pay the same amount each month for the entire term of the mortgage. Some flexibility to repay principal through lump sum payments is allowed. Closed mortgages can be a good choice if you want a fixed payment schedule, and you don’t plan on moving or refinancing before the end of the term. An open mortgage allows you to make a lump sum payment at any time. This type of mortgage can be paid off prior to maturity without penalty. An open mortgage can be a good choice if you’re planning to sell your home in the near future, or if you want the flexibility to make large lump sum payments. An open mortgage generally carries a higher interest rate than a closed one.
• What about the term, amortization and payment schedule?
  The term is the length of time (usually from six months to 10 years) that the interest rate and other conditions of your mortgage will be in effect. Amortization is the period of time (such as 25 or 30 years) over which your entire mortgage will be repaid. Lastly, the payment schedule sets out how frequently you will make payments on your mortgage — usually either monthly, biweekly or weekly. Accelerated payments are also an option. These are available for weekly and bi-weekly payment schedules and are generally equivalent to one extra monthly payment per year. With accelerated payments the home owner is able to pay off his/her mortgage faster while decreasing the overall interest cost.

For more information or a free copy of CMHC’s Homebuying Step by Step guide, or for information on any other aspect of owning, maintaining or buying a home, visit our Web site at www.cmhc.ca or call CMHC at 1-800-668-2642. As Canada’s national housing agency, Canada Mortgage and Housing Corporation (CMHC) has been a source of objective, reliable housing expertise for more than 60 years.

Interim interest rates provide time to guard against payment shock

TORONTO – Any savvy shopper knows a good deal doesn't last forever, and the modest interest rate hike announced this week presents an opportunity to guard against potential payment shock as we ease into more expensive borrowing.

“Because it's been so affordable to carry the debt for so long now, it hasn't been at the top of people's priority lists,' said Scott Ward, a financial adviser at Edward Jones.

“So now that rates are going up, it's going to become a little less comfortable to carry that line of credit, or that mortgage, or that loan around.'

The Bank of Canada's decision to raise its key rate from an emergency low 0.25 per cent largely affects variable rate mortgages and lines of credit that are closely tied to bank prime rates, which now sit a quarter point higher than last week, at 2.5 per cent.

The central bank has also warned Canadians about the perils of racking up too much debt as they became accustomed to falling rates over the past three years.

“This signal that's it's going to become a little less comfortable now, and it might become even more uncomfortable in the future, now might be the time, while it's still not unbearable, to buckle down and pay it off,' Ward said.

The quarter point hike amounts to about a $35 increase in monthly payments for a $250,000 mortgage with a 25-year amortization.

The bank's next opportunity to raise its key rate is scheduled for July 20.

As long as mortgage holders and other borrowers haven't added too much debt to their balance sheets, they should be able to withstand the modest rate hike, Ward said. But, he added, they should be proactive about paying down debts or increasing savings.

“See where you can employ some of the money to help reduce those costs...what sacrifices you can make in terms of your monthly living to help reduce those costs,' he said.

Rob Hafer, regional manager at mortgage brokerage Invis Inc., says borrowers should use this time to take precautions to guard against future payment shock if rates rise significantly, he said.

Hafer said homeowners with variable rate loans should think about putting extra cash, like an inheritance, tax refund or a work bonuses directly toward their mortgage.

Another prudent idea is to set payments at a higher rate than the current interest amount, in order to pay down some of the principal. That way, when rates go up, consumers won't have to start kicking in more of their income, instead, the amount going toward the principal will fall.

Hafer said its still a good time to consider taking a variable rate mortgage because rates are low and have a fair way to go before equalling the average five-year fixed rate.

And while borrowers might be focused on the effect of interest rate hikes on their debts, savers will benefit from increased interest rates, as returns on GICs begin to improve. Ward said now is a good time to put some money away to invest when interest rates rise further.

“We're getting to a point where eventually they should look a lot more attractive than they have in the past.'