http://jacksonville.com/business/2011-04-10/story/bank-gives-man-foreclosed-jacksonville-house-free#ixzz1J85Sn5WG

Here’s a quicky update:

Rate Uncertainty & Ben Tal’s Call

Choosing between a fixed or variable mortgage can seem like throwing darts with your eyes closed.

Borrowers today are seeing headlines like this:

Economists want BoC to keep raising interest rates

Then they turn the page and see this:

Could the Bank of Canada be forced to cut rates again?

Even the Bank of Canada’s Mark Carney isn’t too sure of the future.

On CBC yesterday Carney said, “Upside risks are balanced by downside risks…The upside is as likely as the downside.”

At a FirstLine Mortgages event yesterday, CIBC economist Benjamin Tal translated that. “What Carney is telling us,” Tal said, “is (the Bank of Canada) has no clue what is going to happen.”

Tal added:

“The bond market is pricing in inflation below 1.50% for the next ten years.” (But he believes “the bond market is mispricing inflation.”)
The Bank of Canada now predicts the economy won’t reach its full potential until year-end 2012, one year later than previously expected.
The BoC doesn’t need to raise rates to slow consumer credit because “it’s already happening.”
Consumers’ spending capability is at a “30-year low.” It won’t take many rate hikes to slow the economy from here.
As a result, Tal asserted: “I don’t expect (variable or fixed) mortgage rates to rise in any significant way in the next 12 months.” There is “no rush to make a mortgage decision.”

When someone in the audience asked him which mortgage he’d take today (fixed or variable), Tal replied:

“I’m almost convinced that over the next 2-3 years variable will be better. In the last two years fixed will be better. But, the gap (between fixed and variable) will not be significant over five years.”

That said, if he had to choose today, he feels that “mathematically speaking,” variable-rate mortgages will “probably” outperform fixed rates.

If you take a $1400.00 tax refund and apply it to a typical mortgage at 6% amortized over 25 years you have just saved $38,000. In interest. Nothing wrong with that.

|However, with interest rates at 4.25% to 5.5% whether your variable rate or fixed term you might want to consider some other options.  Do you have any other forms of debt out there at higher rates of interest, credit card debt, car loans etc?  With credit card rates at 18-30% it makes sense to pay off all credit card debt first. \

Have you made any purchases on the don’t pay until plan… such as a plasma TV. with no payments until 2010.  Did you know that if you don’t pay off the loan before the due date that you will be hit with a 30% interest rate?

Depending on your tax rate it may be smarter to put the money into your RRSP.  If your earn over $75,000 per year up to and including $123,000. Per year your tax rate would be 43%. If you put the extra cash into your RRSP you will get back almost .50cents on the dollar.

Funding a child’s RESP might be a good idea. The gov’t. matches 20% up to your first $2500.00 contribution per year … a nice big  rate of return.

Another little trick you can use if you have a line of credit mortgage.  As you pay down the mortgage a line of credit becomes available.  If you apply your tax refund to your mortgage and re-borrow from your credit line and invest in mutual funds or stocks outside of an RRSP then your can deduct the interest cost of that loan because you are using it to create investment income.

This helps you to build wealth for the future plus you have converted that debt from non-tax deductible to tax deductible.

Your credit score and report is one of the most important things you have going for you.

If your hoping to buy the new iphone, a new home theatre system using credit your in store credit will be checked as you stand in line. You won’t walk out with the goods unless you check out .

Banks, employers, car dealers, insurance companies, retail credit lenders want to know what type of borrower you are before they will give you credit.

There are easy and free ways to keep up to date on your credit file.

There are two things two be aware of. One is your credit report the other is your credit score. Your credit report is a record of all your credit transactions including the past 60 days. It shows your outstanding loans, lines of credit, credit cards, credit limits and your payment history.

Your credit score is a number and it is determined by feeding all of the data from your credit report through a complex algorithm,

Your credit score immediately tells a lender what type of borrower you are and determines if you will get a loan or not and what type of loan. If you have poor credit you may still get a loan with a large deposit or down payment but you will have to pay a substantially higher rate than someone with good credit.

Credit Bureaus do occasionally make mistakes so It’s important to check on your credit score once a year. Both Trans Union and Equifax prepare credit reports in Canada. You may want to get one from each and make sure that they both have basically the same information.,

Your credit score is called your FICO or Beacon Score. If you have an R1 rating it means you pay your bills every 30 days as agreed. An R2 means you are a 60 day payer. You pay but you are often late. An R9 means a bad debt which the credit grantor wrote off because you defaulted on your commitment. R9 can also indicate a bankruptcy.

You are entitled to a Free copy of your credit report by mail each year.

To improve and build your score just create a history of paying your bills on time. Also have your credit limits raised on your cards if you can. Never borrow to your cards credit limit. Only ever borrow up to 80% of whats available on your card. When you go to or over your credit card limit this reduces your credit score. When you used just a small amount of your available credit this boosts your score.

Closing inactive cards will damage your credit and so will applying for too many cards at once. Never apply for more than 3 cards in one year.

If you want to buy a car or a home within a years time start working on your credit now. With one year of regular payments you can vastly improve a weak credit score and get in onto more solid ground. This will allow you to get a loan and pay less interest on it.