Youngandthrifty’s thoughts: With the economy currently in distress, gas prices looming higher and higher, and the real estate market in parts of North America in the absolute pits, buying a home or keeping up with payments on a current home loan can seem like a very daunting task.  In order to prevent something called the “F” word from happening (Foreclosure… no, not the other word- get your mind out of the gutter!).

Tips for staying ahead of home loan debt

Having trouble making regular home loans repayments? Faced with foreclosure, or looking to rebuild your bank balance after losing your home to the banks? There may be options available that could improve your financial predicament.

When a lender takes steps to sell mortgaged properties and claw back financial debt from a borrower, often it is the last resort for the lender. In many cases, there are steps that borrowers can take to keep foreclosure from becoming a reality.

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Net Worth: November 2010

$122975 (- 4.3%)

*GASP* Yes, what you see is indeed a negative month compared to last. There’s a huge reason for this…I have officially put an end to home envy (and possibly single-handedly driven myself to the other spectrum, lack-of-mortgage envy)!  BF and I bought a house in Vancouver close to good schools, in a good neighbourhood, and close to shopping.

As I have found, there are TONS of costs associated with buying a house and I will share with you every nitty gritty detail later this month.

In the  meantime, here’s how my negative net worth this month looks.

Okay, so here’s the breakdown:

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Okay so you’re lookin’ to buy a place but don’t know whether to go with a mortgage broker or with the big bankers, and you want to get the best rate and the best deal possible (of course, what fool wouldn’t?).

Let’s explain the difference first off (because I didn’t know what the difference was too!).

Mortgage Broker

A mortgage broker is a professional who is a freelancing agent.  They go between the lenders and the borrowers (that’s you) and are paid a commission from the lenders for securing a good borrower.  They don’t work for anyone, they work for themselves, and have contacts to lots of lenders (think 100′s).  Think of them as a recruiter- they seek out people interested in borrowing for a home and fix them up with a lender that will work for them.  They can even go between you and the big banks for a mortgage.  They do work by getting to know you, calculating what you could be approved of, sending your application, and discussing with you what would work for you in terms of fixed or variable mortgage. Many people say they liked their mortgage broker because they can often get a better rate than if they went to the big banks themselves.  Some people also say that the mortgage broker helped them get approved even though their credit history wasn’t so hot.

Big Banks

A loan officer at the big bank is KIND of like a mortgage broker except they just work for one bank.  A loan officer can sit down with you and talk to you just like a mortgage broker to see what your best fit is in terms of getting a mortgage.  They can negotiate with you for you to get the best deal on a mortgage (e.g. the best fixed rate they have-it is often not the posted rate…if you get the posted rate, then you are a sucker, my friend).  They get paid by the bank, either through commissions, or salary + commission, or just salary.

So who to choose?

Let’s do a pros and cons list so we can decide.

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Just a week or two ago, the big banks all raised their fixed mortgage rates- first RBC, then TD bank followed suit. People were frantically calling their mortgage brokers and mortgage specialists to lock in, or to get that five year fixed rate before it went up the next day.

Most people have heard of the Milevsky report, a York University associate professor of finance at the Schulich School of Business to decided to settle the debate once and for all.  He did extensive research and came up with this conclusion:

Based on information gathered between 1950 and 2007, if you picked a variable mortgage, you would have saved money 77-90% of the time if homeowners went with the variable mortgage instead of a fixed mortgage- AND chopped about a 1 year off their amortization schedule.

A lot of people that I know who are buying this spring are going with fixed rates instead of variable.  Their reasoning (valid reasoning) is that the interest rates are at historical lows, and there is no where to go but up.

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The stormy weather (and rain) has finally passed- this weekend is beeeeeautiful!  Hopefully planning to get a pre-approved mortgage with the boyfriend (don’t worry, we’re doing everything 50/50 to prevent any financial/property mess before marriage should we split up) this week before the looming April 19 changes occur with the mortgage rules.  We’re planning to go variable, despite the fact that most people (70%) go fixed.  We plan to pay it off like a fixed mortgage, so we can attack at the principle.  On a depressing note, another report came out showing that Vancouver’s average home price is now almost a MILLION DOLLARS! So not only is Vancouver severely unaffordable, now it is even more unaffordable lol!

Some of my fave Yakezie reads:

Deliver Away Debt strategizes on how to make Christmas Debt Free by planning early

Financial Samurai talks about prostitution and survival jobs (oh la la the controversy!)

Couple Money shares her Debt Reduction Strategy

Punch Debt In the Face lets you in on his (slight OCD-ish) Funny Money Habits

Money Funk gives you tips on how to Maximize Your Retirement Account

Little House in the Valley gives some suggestions on Paying off a High APR Loan

Bible Debt talks about how Legalising Marijuana may be the Answer to the United States Budget Problems (You can come up to Vancouver on April 20 at the Art Gallery in downtown to get a taste (or whiff) of what lax laws are like!! Promise you there will be a huge turnout of people smoking up lol)

Girl with the Red Balloon is planning planning planning her wedding- you can get in on the action here

Eliminate the Muda discusses the Closing Technique and how to spot the helpful Consultive Salesperson

Fiscal Fizzle discusses making some $$ collecting bottles and cans (and recycling too! win win situation)

Some of my fave Canadian PF blog reads:

The Financial Blogger asks if There is Anything Better Than Passive Income

Million Dollar Journey has an excellent post by a guest blogger on The Business of Owning Income Properties

Triaging My Way to Financial Success talks about Housing- An Uncorrectable Market?

Four Pillars talks about the Total Cost of Ownership – very insightful post- you’ll think twice before you buy that sweater at the mall!

Ending the Rat Race discusses the always searing hot topic: Pay Down Your Mortgage or Invest in RRSPs?

Canadian Finance Blog talks about how to Decide Which Car is Right for You

Enjoy the reads- hope everyone has a great spring weekend!

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