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If You Have A Mortgage You Need To Read This

Saturday, August 28th, 2010

If You Have A Mortgage You Need to Read This

September 8, 2010 is quickly approaching and represents the next scheduled increase in the Bank of Canada Prime Rate. Currently at 2.75% can we expect an increase to 3.00%? Could it be more?

 If you have a variable rate mortgage should you be concerned?

The past several weeks have seen a gradual decrease in fixed mortgage rates. We are funding 5 year fixed terms at 3.59%. Will an increase in the prime rate (or a threat of an increase) trigger fixed rates to increase? It did several months ago and history has a way of repeating itself.

If you have a current mortgage with an interest rate over 4% you should contact us immediately at bsmith@casbmanagementgroup.com and ask for a no cost review of your situation. If you wait it might be too late, as we don’t expect these mortgage rates to last.

We welcome your comments.

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Marketing 101

Saturday, August 28th, 2010

There is one marketing truth you must understand: People buy when they are ready to buy, not when you are ready to sell. So, just because your lead is not ready to buy today, doesn’t mean they aren’t important. After all, today’s leads are tomorrow’s customers, or next month’s or next year’s. Treating your leads like existing customers ensures they will come directly to you once they are ready to buy. Since I am in the business of essentially selling “money” I figure it is a product everyone eventually will need. The trick is in “reminding” people that I am still alive, still in business, and still anxious to help them achieve their goals.

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Posted in Business Financing, CASB Management Group Inc., How I View The World, Investments, Mortgages, Real Estate | No Comments »

New Mortgage Rules – Separating the fact from the fiction

Tuesday, April 20th, 2010

I was speaking to one of our lenders last week and suggested that he send me a summary of all the changes happening in the Canadian residential mortgage market. He said he would once they figured it all out. I found that amusing given the Minister’s press conference was back on February 16, 2010. It has taken two months to sort it out, but here is a brief summary of the changes. If you would like to call me to discuss in more detail I would be happy to do so.

  • Refinances: The maximum LTV has been reduced from 95% to 90%
  • Non-owner occupied rentals: The maximum LTV has been reduced from 95% to 80%. Lenders may require these mortgages be insured if over 65% LTV
  • Qualification rate: For loans with a greater LTV than 80%, the qualifying interest rates used to calculate Gross Debt Service ratio (GDS) and Total Debt Service ratio (TDS) are:

–       On a fixed term of 5 years or more: The ‘contract rate’ (the rate offered in the contract)

–       On a fixed term of less than 5 years and on all variable rates: The greater of the contract rate, or the benchmark rate (5-year conventional rate, published by the Bank of Canada)

  • Rental income (subject property): The new formula for calculating TDS determines the borrower’s gross annual income based on 50% of gross rental income from the subject property instead of the previous 80% of gross rental income from all rental properties
  • Rental income (other properties): If the borrower has other non-owner occupied, rental-income generating residential properties, then:

–       Net rental income can be included in the borrower’s income; and,

–       PITH (principle, interest, taxes, and heating) for these properties can be excluded from the debt service costs.

 

  • Business for self: Maximum of two units where one is owner occupied. 90% LTV on purchases, 85% LTV on refinances. “Stated income” is accepted, but commission income is ineligible.

 

April 27, 2010 is the annual LSTAR Annual Trade Show at the Best Western Lamplighter Inn in London, Ontario. We hope you all drop by our booth and enter our contest. If you mention your read this article you will receive a second chance to win. It is always nice when life gives you a “do over”, and you thought this only happened on the golf course.

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All Inclusive, No Problem

Tuesday, April 6th, 2010

During our recent trip to the Dominican Republic I was impressed with the level of customer service at the resort in which we stayed. The food was spectacular and the drinks flowed freely. Meandering into one of the beachside bars at 7:00 am on a Sunday morning I found myself alone and I was curious as to what time they began serving alcohol. I suspected the party had gone into the wee hours the night before and that some down time was in order for  the staff. “At what time can I get a beer?” I asked.  To my surprise the bartender poured me a beer and uttered the phrase we Canadians had come to love, “All inclusive, No problem.” The definition of customer service was qualified in four words, “all inclusive, no problem”. He was there to look after my needs 24/7.

I have always prided myself on being there for my clients. If they asked my hours of operation I would tell them 24/7. When I would answer the phone after typical business hours I would respond to the question “What are you still doing there?’ with my favourite response, “Just waiting for your call” For years we have been taught that we must be there for our clients. I hear that all the time. “I want to be there for my clients,” we say. But what does ‘be there’ mean? Does ‘be there’ mean we are available 24 hours 7 days a week for our clients? Does it mean that we sacrifice? Does it mean missing soccer games, tee ball games, and piano recitals?

For many that is exactly what it means. Many of us equate access with service. We have been trained for years that access is the primary vehicle of customer service. We feel we need to “be there” for our clients. We grant them access to our lives whenever they want it. They can and will take over our business if we let them.

I want to share with you a new concept. Access has nothing to do with customer service.

There are many professionals we do business with on a regular basis who are less than accessible. A skilled doctor cannot be contacted via phone and will not respond within minutes. A skilled doctor is busy with other patients and will get back to the caller during the course of the day. A professional attorney may be in court or in conference or taking a deposition. We don’t expect them to return our call immediately. I would certainly question the ability of these two professional if they could get back to me right away. That would tell me they are not very busy. It would cause me to question their capabilities.

Here are a few steps to help you clearly separate access from customer service:

Step 1: Set Boundaries.

Your clients will respect you if you set specific boundaries. Set the boundaries on your time away. Take out the days off, the family activities, and the time with your spouse, the time for you. You must plan that process before the week begins. The most effective way to set boundaries is work off a set schedule. A set schedule allows you to create each week to be exactly the same as the week before. Create specific boundaries for your client by taking your home phone number off your business card. Other professionals don’t give out their home number. Turn your cell phone and pager off at specific times each evening. Set boundaries for your clients to follow regarding your time and time with your family.

Step 2: Treat everything as an appointment.

Once you have set boundaries treat everything as an appointment. Your time with your children and spouse are the most important appointments you have. Don’t infringe on your family time. Your appointments to work out, to read, to relax are your time; don’t break those appointments. You also have appointments in your workday. You have appointments to prospect and lead follow-up. These will have a tendency to get pushed out of the way by clients. If you allow that to happen you will see a drop in business in 90 days. If you miss those appointments today the effect is not felt for 90 days when you have no closings. It’s easy to let other things move into those prospecting and lead follow up appointment slots. You have to fight the urge to take care of clients in those times.

Step 3: Set specific times to return calls.

Most of the calls we get are not important. They are often from someone trying to give us what they deem as urgent. Rarely must these calls be handled immediately. Most calls can wait a few hours. Set specific times when you return calls. I would suggest once in late morning and once toward the end of the day. Tell people you are in appointments and you will be retuning calls at those specific times. You need to separate the concept of access from customer service. Customer service is about getting the job done well. The client does not really care about your access. They care about a job done well. Become respected like your doctor, dentist, or attorney. Limit the instant access you grant to people. Don’t be fooled by the old access model of customer service. Who really needs a beer at 7:00 am on a Sunday morning?

We welcome your comments.

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The Change In Mortgage Rules Not Being Talked About

Saturday, March 13th, 2010

With all the focus and media attention given recently to changes in the mortgage rules, one very important change went virtually unnoticed and this change will have a significant impact on self employed mortgage applicants. Effective April 9, 2010 the loop hole that allowed the self employed to purchase property based on “stated” income versus “proven” income is essentially closed, with limited exceptions. The “stated” income product used for qualifying purposes was widely used, given the propensity for the self employed to show minimum personal income for tax purposes. The self employed will now need traditional third party validation of income.

This change along with those previously mentioned in my blog, How Do The New Mortgage Rules Affect You? www.casbmanagementgroup.com/blog will have a substantial impact on the local real estate market. Fewer individuals eligible to qualify for mortgages will result in a softening real estate market.

We welcome your comments.

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Could You Be A Genius?

Thursday, March 4th, 2010

 

 

Genius level thinking is not reserved only for highly mentally gifted. Geniuses have a system for how to work through problems, which they may or may not be conscious of. Once you learn the system, you can use it to solve problems the way geniuses do. The difference between them and you is that they’ve simply used their system longer than you have. Once you gain some practice with it, internalize it, and begin to use it automatically, the people in your life will see you as a genius to.

Here are the 7 steps to genius level problems solving.

1. Identification

In most cases, we tend to think that the symptoms of a problem are the problem itself. We then set off to address the symptom. After our time and effort has been spent, the symptom has been temporarily eliminated. Since we did not solve the root cause of the problem, the symptoms will return again and again.

Geniuses spend a large portion of their problem solving time in identifying the true problem. They understand that a problem can be resolved once and for all if they can identify its causes. When the root causes of a problem are found, all of the symptoms of that problem also vanish. It’s the equivalent of killing 10 birds with one stone.

2. Mindset

When we have a “big” problem in our lives, we sometimes become overwhelmed by it. We see it as insurmountable. We don’t believe we can get passed it and it becomes a major source of stress and worry. Geniuses believe that all problems are temporary and solvable. Think about a major problem in your life 3 years ago. Remember your mindset at that time? You didn’t know how you would ever get passed that situation. Yet, here you are 3 years later. As you look back to 3 years ago, you realize that the problem that was gigantic then is either greatly reduced or not a problem at all today.

Geniuses start with that perspective in mind. They know that it’s usually not as bad as it seems today. Also, they don’t waste their time thinking about aspects of the problem that they cannot change. They know that a major part of any problem is their thoughts about it. So, if they can’t change a circumstance contributing to a problem, they focus on the aspects of the problem they can change.

3. Vision

We typically direct our minds toward what we should do as the first step towards solving a problem. Then, we focus on the next step, and then the next. Eventually, we may hit an obstacle that makes the solution path we were following ineffective. So, we try again with a new first step, and another, and another to see where that leads. This can often result in frustration, lack of faith in how things are going, and the creation of brand new problems while trying to solve the current one.

Geniuses make their first step visualizing the end state. They focus on a vision of the true problem and all of its components and symptoms solved. By doing this, they begin to understand how it will feel once the problems are solved, and they receive clues from that vision as to the correct solution path.

4. Brainstorm

When someone begins to think of solutions to a problem, they tend to think about problems in their past and how they solved them. Sometimes there are great clues there. Other times, the current problem is unique enough to require a fresh perspective. Also, fixing the real problem may require a multi-layered solution verses a standard one-action reaction.

Geniuses brainstorm. They will sit down and think through dozens of solutions. Even the solutions that at first glance they may think won’t work are viable solutions for them at this stage. Even when they think they’ve found solutions that are perfect, they keep going. They come up with as many solutions as they think they can, and then squeak out a few more until they have 20 – 30 possibilities. Then the magic happens. Combinations of those possibilities jump out to sometimes form brand new solutions to completely solve the problem. You switch from pulling solutions from your memory and begin creating new possibilities. This is the stuff of genius level thinking!

5. Plan

Most of us never plan our solutions out. We keep throwing stuff at our problems until something sticks, we go with it, and we hope for the best.

Geniuses plan. Armed with the vision of the end state, and a solution or a group of solutions, they create a plan to implement those solutions. They determine what they need, help they need to request from others, the timeline it needs to be done within, and they move forward.

6. Act

Procrastination, perfectionism, and denial are the enemies of action. When we know there is something major we must do, many of us all of a sudden find 10 other things that we think we need to do right now. We spend the time on things that can wait and ignore the major problem we could resolve right now. Also, we often stop our own progress because we don’t think we have everything perfect. We’d rather not act and wait until we have everything perfectly laid out than to begin making strides towards resolution.

Geniuses act. They act now, they act swiftly, and they act with confidence. It’s not that they know all of the answers. They are confident in knowing that they will make mistakes and learn from them along the way. They don’t allow the perfect to be the enemy of the good, as Barrack Obama often says. When the time comes to act, they do so.

7. Adjust

There are some folks that are going to do what they want to do, even when they know their plan has a flaw. Rather than change course along the way when necessary, they move forward as if their plan was written in concrete and they have no other options.

Geniuses monitor their progress against the end state vision they have in their mind and adjust course along the way to ensure they fulfill that vision. They understand that as they proceed along their plan, they learn more, get smarter and need to make adjustments here or there if they are going to succeed. They are committed to their end state vision. They understand that their plan is a means towards that end.

Observe the results you are getting, project your thoughts forward to see if you are on track towards your end state vision, and adjust your plan as needed. No plan is perfect, and all plans need fine tuning as you move further down the solution path. Adjusting the plan here are there doesn’t mean the plan was bad. It’s a natural part of the process that should be embraced if there is a need to succeed.

These seven simple steps will aid in solving any problem you come across. Practice using this system and you can become a genius-level thinker.

We are seeking genius-level thinkers to become part of our real estate team. We welcome your comments.

 Excerpts taken from a James LeGrand article.
 

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How Do The New Mortgage Rules Affect You?

Tuesday, February 16th, 2010

 

I am writing this just minutes after Jim Flaherty’s February 16, 2010 press conference and typically I now have more questions than answers. I makes me nervous when the government feels they need to intervene to protect citizens from themselves. Call me a cynic, but here are the three points to the plan, the intent behind it and the questions I have:

1.      All borrowers must meet the standard for a five-year fixed rate mortgage regardless of mortgage type or term. Currently the standard is the three-year rate, which is historically less than the five year term. The intent of the change is to make Canadians qualify at the higher rate so that they can actually make payments at the higher rate should interest rates rise.  In effect, they would now qualify to purchase smaller homes then they would have previously qualified for.  My question: What happens when someone needs to refinance, can afford the “actual” mortgage payments, yet cannot qualify for financing under the “theoretical” five year mortgage rate? Do they lose their home?

 

2.      The maximum Canadians can withdraw when refinancing their mortgage is 90% of the value of their home down from 95%. The intent is for Canadians to maintain some equity in their home if real estate prices drop and also to encourage Canadians to pay down their mortgages. My question: If Canadians are refinancing to consolidate debt, why would you force them to potentially carry 5% of additional credit card or other higher interest debt over what a mortgage solution would afford?

 

3.      A 20% down payment will be required for non-owner-occupied properties purchased for speculation. The intent is to make it more difficult for average Canadians to use real estate as a wealth generating strategy, in order to protect them from risky speculation and artificially driving up housing prices. My question: Does this policy apply to 2nd homes such as cottages?  My rant: How nice for our government to tilt the real estate playing field in favour of the rich.

 

These new rules are to take effect April 19, 2010 but you can bet that lenders will begin to react immediately.  Fortunately these policy changes will open the door of opportunity for some as it closes the door for others. Please take this time to review how these changes might affect you or your clients moving forward, and then call me to discuss your best strategy to take advantage of the new policies.

We welcome your comments

Posted in Mortgages, Rant, Real Estate | 2 Comments »

9 Reasons Why People Invest In Real Estate

Wednesday, January 27th, 2010

As prepared by Neil Uttamsingh, based on his experience as a real estate investor and in no particular order.
1) Status

I have seen some people invest in real estate, and continue to invest in real estate over many years, in order to ’show off’.  They invest because they feel that the more properties they have, the more other people will be impressed.

2) Fear of Poverty

People invest in real estate because they are afraid of poverty.  They might be afraid that if they do not invest in real estate, that they will end up in a difficult financial situation down the road.  As a result, because they are afraid of poverty, this gives them the motivation to pull the trigger and invest in real estate.

3) Increased Net Worth

People invest in real estate because they want to increase their net worth.  Said differently, people invest in real estate because they want to become ‘rich’.

4)  They are opposed to the financial markets

I have seen some people that hate investing in the financial markets.  As a result, investing their money in real estate is the only other option for them. It is either real estate, or stuffing their money underneath their mattress.

5) People want to buy things

Some people are motivated to invest in real estate because they want to purchase material things.  The cash flow provided through real estate investment allows people to buy the things that they want.

6)  They want to go on vacation

Some real estate investors that I know are motivated to invest in real estate, because it allows them to go on regular vacations.  They use the cash flow, or the appreciation from properties to pay for their trips and vacations.

7)  Trying to find a sense of self worth

Some people do not know what their purpose is in life.  They feel that they have no direction, or no guidance.  As a result, I have seen some people invest in real estate, and obtain direction through these actions.  They have become more focused and they feel that they have a purpose in life.

8 ) A sense of competition

Some real estate investors have a competitive nature.  They invest in real estate, and try to acquire as many properties as they can, as a personal challenge.

9) Follow the crowd

People invest in real estate because they see others doing it.  They watch from a distance and come to the conclusion that it cannot be too difficult to do.  As a result, they jump feet first into the real estate investing game by watching others and just by simply following the crowd.

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Bankruptcy Made Easy? Are you part of the problem?

Wednesday, January 27th, 2010

If I hear another cute radio commercial promoting how bankruptcy could be the solution to stopping annoying creditor calls or to consolidate debt into “one easy payment” I believe I am going to pull out what’s left of my hair.

How irresponsible – not to mention immoral – to council clients to simply shirk their responsibilities and essentially screw over the people that have provided them financing. But Bruce you might be thinking, bad things can happen to good people. Can’t we give them a fresh start? Who are they really hurting? Only the big corporations who can afford the losses?

The problem I have with these bankruptcy “professionals” is their view that a short term gain is in the best interest of their clients. (It is certainly in the trustee’s best interest). What about the long term pain? What happens when they want to purchase a home at some time in the future? It’s funny but bankruptcy with all the negative stereo types attached to it is actually not the worst option for the client.

 A bankruptcy will show on a client’s credit bureau for seven years after filing and six years after discharge, but lenders will generally give favourable consideration to clients who have spotless re-established credit for two years post bankruptcy discharge,  in effect clients are given a second change. Declare bankruptcy a second time however and it remains for 14 years on the credit bureau and lenders will have little interest in dealing with these clients. Make no mistake, bankruptcy is a poor solution and should be avoided.

So what is worse than a bankruptcy? A credit proposal. The problem with a credit proposal is that lenders treat them like a bankruptcy but there is generally no quick resolve and discharge, so the proposal remains on the credit bureau for a much longer period of time. It is in effect, a bankruptcy that never ends.

So what is worse than a credit proposal?  A power of sale judgement.  Clients that default on their mortgage payments will ultimately have power of sale procedures taken against them. This stays on the credit bureau for seven years as well. The reason this is poorest solution is that number one, lenders don’t want to lend to clients that have screwed them over personally (or another financial institution.) The second reason is that this process, in most cases, is 100% avoidable by simply listing the home for sale. Duh.

I am amazed at the number of power of sale properties that are listed every day with clients walking away from equity. Properties that cannot be listed and sold through traditional methods can be sold privately and often provide the client the possibility of remaining in the property as a tenant, with an option to repurchase the property at some point in the future. Does that not sound like the best solution for all concerned?

If you are faced with the prospect of a client approaching power of sale, a credit proposal, or bankruptcy  ask yourself this question. Are you part of the problem or part of the solution? Give us a call. We can help.

 

We welcome your comments.

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Bank of Canada backs off housing bubble talk

Monday, January 11th, 2010

 

I see that the Bank of Canada has backed off their earlier position in respect to mortgage rates as per my previous blog.

In a speech in Edmonton, bank official David Wolf ruled out increasing interest rates to discourage mortgage lending.

Wolf, an adviser to bank governor Mark Carney, said that in the central bank’s view it is premature to be talking about a housing bubble in Canada.

“We see the housing market requiring vigilance, not alarm,” he said.

He added that even if the bank was convinced housing prices were getting out of hand, raising interest rates would be too blunt an instrument, since it would mean cooling off all economic activity.

“We would, in essence, be dousing the entire Canadian economy with cold water, just as it emerges from recession,” he said in a speech delivered on behalf of deputy governor Timothy Lane, who could not travel to the Alberta capital for personal reasons.

“As a result, it would take longer for economic growth to return to potential and for inflation to get back to target,” he added.

Wolf said the bank considers the current hot market to be a phenomenon based on temporary factors, such as pent-up demand from the recession, and low mortgage rates. Moreover, he noted with starts below long-term demographic requirements, the number of houses on the market is still declining.

Better ways to cool market

Wolf, a former chief economist with Merrill Lynch Canada, said there are better ways to cool the housing market.

Finance Minister Jim Flaherty has also mused about such measures, including raising the minimum down payment requirement above five per cent, or reducing the maximum length a house can be amortized from the current 35 years.

The bank has been highlighting for months the danger of Canadians getting in over their heads in purchasing homes, warning that buyers should ensure they don’t take on too much debt.

The bank’s worry is that homeowners with large mortgages that are manageable now with interest rates at record lows won’t be able to afford their monthly payments once interest rates start rising, as is expected later this year.

On the economy as a whole, Wolf said the bank believes the economic recovery is still dependent on government support and that “growth drive by the private sector has yet to materialize.”

Notes from the speech were posted on the bank’s website.

With files from The Canadian Press

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