HST and Your Mortgage

From the desk of Peter Majthenyi - Mortgage Architects

Now that all the commotion of the G20 meeting is over, and the official launch of HST is done … it is time to "pause", put everything into perspective, and consider how these recent events affect our daily lives.

The Canadian economy is performing better than most. Even though commodity prices are weak, we don't have excessive national debt relative to other major economies, and we are we still experiencing some healthy economic growth.

Under these conditions, one would think interest rates will have to increase soon, yet this is not the case because the U.S. and most European countries are attempting to cut their deficits in half over the next three years and that focus will likely not allow for any dramatic interest rate hikes soon.

So despite some burned out police cars and broken store windows, the news for the average Canadian borrower is good… Capitalism 1 Anarchy 0.

The average Toronto home price is up by $50,000 over this time last year and it appears the fury of home buying is starting to slow as we reach a more ideal and balanced market.

Our Government has been relatively successful in cooling an over-heated real estate market; their goal was to make the average consumer look at their debts carefully before they considered making any major purchases.

Both Provincial and Federal Governments have been proclaiming for months that we need to be aware of increasing interest rates, more strict criteria to qualify for a mortgage and, finally, the launch of the HST.

The combination of all these changes has definitely moderated our buying behaviours.

The HST does not affect mortgages or mortgage services. There are no taxes on financial services so your mortgage is insulated from any direct effects of the HST. There will be some increasing costs, such as legal services to set up a mortgage, which will have an applicable HST and so will your CMHC premium.

Practically speaking, these expenses are very minor and will likely not influence your decision to buy real estate or pursue a better mortgage.

There's more good news; fixed mortgage rates are dropping! Many consumers are very unhappy and are boycotting lenders like TD and RBC who were very quick to increase fixed mortgage rates when their owns costs of funds did not increase.

These lenders were taking advantage of the media hype that interest rates were going up soon and they decided to take some early profits at the borrower's expense. Not to mention, five-year fixed mortgages have not been saving homeowners money for many, many years.

We can't express enough how important it is to be financially literate so you make educated decisions on all your finances. For example; research will demonstrate that even if interest rates only climbed, the current five-year variable rate at 1.9% will still result in less interest paid compared to the current five-year fixed rate at 4.19%.

Also, it is important not to obsess with the interest rate itself but to obsess on the strategies implemented to pay less interest. There is a difference between interest rate, and how much interest you will pay. If a mortgage rate is .1% less it will save about $250 a year on a typical mortgage, and I would hope with a better "Mortgage Plan" we are saving a heck of a lot more than $250 a year!

Consider us as your mortgage educator and you will learn there is not a right or wrong mortgage choice… our common goal is to make an educated choice. Visit us 24/7 at our website or connect with us anytime at 416-236-9300.

Here's to a hot and safe summer… Peter, Andre & Team.

To talk to Peter or Andre, go to www.mymortgageplanner.ca.