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Monday, 31 December 2012

Seller Financing, another option to gain ownership


...when the Seller provides the Buyer a mortgage—can benefit both the Home Buyers and Home Sellers.

Seller Financing can be a useful tool in this tight credit market. It allows Sellers to move a home faster, often getting a sizable return on their investment. Buyers often benefit from less stringent qualifying and down payment requirements for a property that might otherwise be out of reach.

There's a greater chance of finding Sellers willing to take on the role of financier in today’s slower market, but they still represent only a small fraction of all Sellers. This is because a Seller Financed deal is not without its legal, financial, and logistical hurdles. By taking the right precautions and getting professional help of a qualified, licensed Mortgage Broker specializing in Seller Financed Agreements For Sale, however, Buyers and Sellers can reduce the inherent risks.

The Basics of Seller Financing

In Seller Financing, the Seller takes on the role of the Lender. Similar to a Lease-to-Own, or a Rent-to-Own, but with Seller Financing, you are paying a Principle + Interest Payment instead of a rental payment with a portion going to the deposit. The Seller extends enough credit to the Buyer for the purchase price of the home, minus any down payment (cash-to-mortgage). Both the Buyer and Seller sign an Offer to Purchase, a Financing Schedule, and an Addendum indicating the terms of the loan.Typically the interest will be at higher premium than what is currently offered at the Banks or Credit Unions, but not always.
These loans are often short term—typically 1 to 3 years. The general theory is that within a few years, the property will have gained enough in value or the Buyers' financial situation will have improved by the help of the same Mortgage Broker enough that they can refinance with a traditional lender. From the Seller's standpoint, the shorter time period is also practical—Sellers don't have the life expectancy of a mortgage lending institution or the patience to wait around for 25 to 35 years until the loan is paid off. In addition, Sellers don't want to be exposed to the risks of extending credit longer than necessary.

When You need a Mortgage, You need a PRO: MortgagePRO Free Advise/Consultation

Thursday, 27 December 2012

Mortgage Refinance: What banks do not want you to know


The most common reasons to Refinance
Renewal:
Your mortgage amortization years are divided into 1-2-3-4-5 and even 10 years term at a time, enabling your lender to adjust interest rate to current market conditions and or simply reclaim the loan from you for various reasons, what they do not even have to disclose to you. Make sure you are using a mortgagebroker to shop the lenders for best rates and products along with the most suitable term custom fitted to your needs and not of the lenders.

Lower rate:
You should or have your broker time to time check the rates and refinance in case your broker can provide you a calculation you save money for the long term and or your needs have changed and need another product to reflect same. Nothing wrong with to cross the floor to another lender to save money, it is your money.

Need money;
You will never find cheaper money than mortgage money. As it is secured with the equity in your home you are able to borrow the funds needed against that equity. Your equity is the value between the appraised value and the existing mortgage amount.

You might have reasons to refinance when you need money for business, repair your credit, debt consolidation or simply you want to get your hands on some cash. Investing for a higher rate than is cost you a HELOC is the best way to go; you only pay interest on the portion of it, what you are using and as added value you make your mortgage payment interest portion tax deductible.

To ensure, you are making the right move, you to use an experienced mortgage broker services, because you can make more damage than good if you are not an expert. A good broker will provide you with a plan, help you the precise execution of that plan and will be there for support and advise all the way along.

Thursday, 6 December 2012

What about the jobless construction workers

Jim Flaherty’s reaction to a cooling real estate market:
“Less demand, lower prices, modestly, in the housing market are much better for Canadians than a boom followed by a bust,” he said early this week. “The housing market has softened somewhat in part because of steps that I’ve taken and I’m happy about that.”
The reaction is to news of a 3.5 per cent annualized drop in the housing sector. Activity across many of the country’s major markets has also seen dramatic year-over-year declines – what Flaherty sees as the kind of controlled slowing needed to overt a more-pronounced and severe correction.
The mortgage rules revamp in July is largely to blame for that housing retraction. They point to the effects a new, lower amortization ceiling for insured mortgages has had on first-time buyers.
Far from blaming those tighter rules, Flaherty is “crediting” them for reining in a sector helping drive Canadian household debt to historic highs. “I'm all for a soft landing," he said.

When you need a mortgage, you need a PRO: MortgagePRO Experienced professional mortgage brokers can save you money and aggravation. FREE CONSULTATION is just the start...

Monday, 26 November 2012

How to use RRSP for a down payment

Home Buyers' Plan (HBP) there is no secret, just knowledge! FREE CONSULTATION!
The Home Buyers' Plan (HBP) is a program that allows you to withdraw funds from your registered retirement savings plan (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability. You can withdraw up to $25,000 in a calendar year.
Your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the HBP, or they may not be deductible for any year.
Generally, you have to repay all withdrawals to your RRSPs within a period of no more than 15 years. You will have to repay an amount to your RRSPs each year until your HBP balance is zero. If you do not repay the amount due for a year, it will have to be included in your income for that year.

Most importantly, use the services of a mortgage broker, professional to help you to understand the whole process.

Tuesday, 13 November 2012

How realtors get clients pre-approved


You might have the best mortgage broker in your corner, but let me ask you this. Would a second opinion hurt when your contact turns a client down? Before you give up on a deal, please give it a second chance, you will be glad you did. We are experienced, seasoned and well connected, when others are not. We pay referral fee to our realtor friends. Remember, a pre-approved client saves you time, effort and stress. We provide pre-approvals in 24 hrs. after contacted your client. Now that is fast.

Monday, 29 October 2012

We are your best bet to get a mortgage

We are your best bet to get a mortgage custom fitted to your needs and circumstances even when you have credit, job and other disqualifying issues. We are experienced professionals serving canadians since the turn of the century, building trust coast to coast. We have created videos on most and all the issues need to be addressed with topics you have asked for, for you to understand. We believe more informed you are, the better decision you will make. Come back often to read the most recent topic.
Monica is our most trusted senior Associate, advisor and mortgage planner with over 15 years of banking and a decade of mortgage brokering experience. When you had enough dealing with the banks, please email her, she will be happy to assess your situation in a FREE Consultation session, provide you with a plan and a solution best fitted for you.

Friday, 19 October 2012

How to get 16% return on your RRSP…


You may be a successful investor, but you don’t know how to make your RRSP provide you with exceptional returns,  in a tax-free environment. We do! We have an investment strategy which is government-approved. It will provide you with an opportunity to retire early. As a smart business person, don’t miss out on having ALL your investments fire on ALL cylinders. RRSP Plan is an investment portfolio, an investment in your FUTURE and an investment in yourself. Take a few minutes out of your busy schedule and watch my video I have created it for YOU. You will be glad you did, I guarantee it.

Wednesday, 17 October 2012

How our realtor friends earn referral fees

Our realtor friend not only earn a generous realtor fee each time they send a client to get approved but also get clients referred to them by us and those clients are pre-approved clients, just need to find them a home. Email our president to discuss how can we be your best bet to get clients approved even when they have credit, age and job issues, you will be glad you did..

How to invest for 16% return with RRSP eligibility

Investing into private mortgages safe, secure and lucrative. How to get the best out of your investment dollars and or grow your RRSP so you can retire in time is in the video, do not miss to get the point....

Friday, 5 October 2012

CALGARY — Calgary’s downtown office market experienced something in the third quarter it has not seen for more than two years — softening in demand for space.
A report by Newmark Knight Frank Devencore says absorption, the change in occupied space, in the quarter was a negative 141,200 square feet, the first negative absorption quarter in more than two years.
Michael Gigliuk, the real estate company’s vice-president/associate and author of the report, said the negative absorption “signals a change in the direction in the office demand cycle in downtown Calgary.”
“The softening in demand is the result of conventional oil and gas energy firms cutting back capital expenditure budgets and drilling activity,” said Gigliuk. “As a result of the anticipated 20 per cent drop in capital expenditure spending, absorption is expected to be negative for the remainder of 2012 and into 2013.”

When you need a mortgage, need a PRO; MortgagePRO


Read more:
http://www.calgaryherald.com/business/Calgary+downtown+office+demand+changes+direction/7342802/story.html#ixzz28RDlax9l

Wednesday, 3 October 2012

Buyers back on the fence, or gone...


Now, more than ever, the saying is true: need a mortgage, need a pro: MortgagePRO We are at MortgagePRO building trust since the turn of the century... FREE CONSULTATION

This is not news, the markets are experiencing dificulties accross Canad, will it come to Calgary as well. Time will tell.

One of Canada's big business publications is out with its list of predictions for the Fall and one of them forecasts doom for the Canadian real estate market. Behind Canadian Business' blaring headline though, the analysis is pretty benign. It isn't anything we haven't heard before: Vancouver is down and the slowdown in the Toronto condo market is the leading edge of a correction in that city.

Like most of what we've already heard, the magazine points to the federal government's new mortgage rules. Because Vancouver began cooling before the new regs took effect, it speculates the country's hottest market has, basically, just peaked.

Another, more considered, source tends to agree. While the Conference Board cites all of the same information that we've been hearing, it adds that the cooling is spreading. It took a much more in-depth look at real estate sales right across the county. It notes that Vancouver's slowdown is spreading into the Fraser Valley and hot spots such as Regina and Saskatoon are cooling as well. It says sales are down in three-quarters of the markets in Canada. The Conference Board points-out that while sales are down, prices aren't moving and remained steady in 19 of the 28 markets studied.


Nicki Mass First National

Wednesday, 19 September 2012

Nothing but good news for Alberta Real Estate


While conservative housing sector watchdog, Canada Mortgage and Housing Corp. is now forecasting a "balanced" market for 2013 in Calgary, we note that current market stats indicate that Calgary's residential demand is already (and once again) leading the nation.  This confirms a rapidly tightening supply condition locally which suggests that growth in market prices for both new and existing housing in Calgary next year and beyond is now at hand.

This week the Canadian Real Estate Association reported that while annualized MLS sales have fallen by 9% over last year on a national basis, Calgary's resale activity has risen by roughly 15%.  Calgary's comparatively slow recovery from the recession, combined with a broad consensus outlook for Alberta's economic growth over the next couple of years has clearly "set the table" for Calgary to outperform the national residential market for the foreseeable future.

Coupled with the impact of the federal government's recent policy changes regarding CMHC-insured mortgages, as well as the recent surge in gas prices, our forecast for a surge in demand for new, urban multi-family housing alternatives in Calgary is clearly beginning to crystalize.

When you need a mortgage, you need a pro, MortgagePRO. Find out how can you get a mortgage by requesting a FREE CONSULTING SESSION... even when you have issues made others to turn you down.


by Urban Equities Jonathan K. Allen,

Friday, 14 September 2012

New house prices in the Calgary region are on the rise.

calgary herald

Statistics Canada reported Thursday that the New Housing Price Index rose 0.1 per cent in July from the previous month in the Calgary census metropolitan area. It also rose by the same amount at the national level.
“The metropolitan region of Calgary was the top contributor to the advance. Some builders reported that increased material and labour costs were the main reason for higher prices,” said the federal agency.
On a year-over-year basis, prices were up 2.3 per cent in both the Calgary region and across the country.
The largest monthly price advance in July occurred in the metropolitan region of St. John’s (0.6 per cent), followed by St. Catharines–Niagara and Halifax (both up 0.4 per cent).
The largest year-over-year increases in contractors’ selling prices occurred in Regina (4.7 per cent), Toronto and Oshawa (4.6 per cent), and Winnipeg (4.4 per cent).
Will van’t Veld, economist with ATB Financial, said new home and resale prices have been relatively flat in Alberta over the past couple of years, even as wages and employment increased at a healthy clip.
“The federal government has returned mortgage insurance standards to where they stood in 2004, which will force households to be more prudent,” he said. “That, in turn, will force some delays, but, clearly, the Alberta market, after an initial drop and four years of flat growth, is close to burning off most of the excess.”
 
Need a mortgage, need a PRO: MortgagePRO

Read more: http://www.calgaryherald.com/house+prices+rise+Calgary+region/7236051/story.html#ixzz26SYKjo1a

Tuesday, 28 August 2012

Calgary housing market among Canada’s most affordable: RBC

CALGARY — The Calgary-area housing market remains one of the most affordable in Canada, according to a report released today by RBC Economics Research.
The latest Housing Trends and Affordability Report said the local market has enjoyed the best of all worlds recently: stronger home resales and home building, moderately rising prices, and attractive and improving affordability.  Read more...

Thursday, 2 August 2012

Is mortgage insurance really that important?

When it comes to the long list of important things you have to think about when buying a new home, insurance for your mortgage is likely no where near the top. But an unexpected accident, illness or death can quickly change all that.

What if this happened to you?
There’s a common misconception that only middle-aged or older people need to think about insurance. Unfortunately our claims files tell some eye-opening stories about:
-a young couple, both killed in a freak accident when a bridge collapsed;
-a young mother killed by a brain aneurysm, just months after giving birth to twins;
-another mother killed, trying to protect her disabled son from being hit by a car.

Sure, once you are older it is generally true that there are more risks associated with your health. But young people also tend to have fewer assets than older ones. That means there are no extra resources to draw on if, all of a sudden, a regular source of income is gone.

Don’t save now, only to pay a lot more later
Anyone who has purchased a home has probably been there. You start out by setting a budget, but then you find the perfect house that is just a little bit beyond. You can’t say “no” to your dream for only $10,000 or $20,000.

Then, you find out that property taxes are higher than you expected, and that’s only the beginning. By the time you get to the point of finalizing your mortgage, you’re more than a little nervous about the new financial commitment you’re about to take on.

It’s only natural to want to avoid unnecessary costs at a time like this. But insurance is not “unnecessary”- especially in a situation where you feel like you’ll be financially stretched. If you’re going to have to work hard to make ends meet now, what would happen if one of the family breadwinners were to die or become disabled? How would you continue to meet the mortgage payments with only one income, or with none?

Your family’s dream home could be that again- just a dream.

About UsMortgage Protection Plan (the “Plan”) is an insurance program designed to provide life and disability protection to the clients of mortgage brokers. The Plan is underwritten by The Manufacturers Life Insurance Company (the “Insurer”) and administered and managed by Benesure Canada Inc. and its appointed agents.
Role of Your Mortgage BrokerYour Mortgage Brokers role is to give you our pre-printed information and to have you completed an application form. If you require advice or additional information about Mortgage Protection Plan, please call us.

Friday, 20 July 2012

OSFI guidelines hit Smith Manoeuvre

New OSFI guidelines offer less than good news for mortgage brokers who deal in the Smith Manoeuvre.

The tighter guidelines for federally regulated lenders will likely impact borrowers seeking to use the complex tax-saving strategy relying on a re-advanceable mortgage to make  mortgages tax-deductible.

“New rules cutting the LTV maximum from 80% to 65% will significantly reduce the benefits that borrowers expect to get through a Smith Manoeuvre,” said Brad Compton, a Toronto Invis agent.

For a Smith Manoeuvre to be really effective, borrowers must be able to draw upon as much of the value of their properties as possible, according to Compton, who spent more than a decade working as a financial analyst.

“People will still use the manoeuvre but they will not be able to get as much out of it under the new regulations,” he said.

The new rules from the Office of the Superintendent of Financial Institutions (OSFI) cut the maximum LTVs offered by banks on HELOCs from 80 per cent to 65 per cent

Last year, MortgageBrokerNews.ca reported that there was concern in the broker community that funding limits would hamper Smith Manoeuvre transactions.

The tax-saving scheme, developed more than a decade ago by financial planner Fraser Smith, relies on Revenue Canada rules allowing Canadians to deduct interest paid on loans for investment purposes.

In the case of the Smith Manoeuvre, that “loan for investment purposes” is a collateral mortgage, or HELOC, for the full value of the home. In exclusively using that line of credit for investments – preferably dividend yielding ones – the interest paid on the loan is made tax-deductible.

As the client continues to pay down the principal, that frees up more of the line of credit for additional investments. Eventually, according to Smith, not only does the homeowner end up having paid no interest on the mortgage, but has also developed a substantial investment portfolio in addition to paying off the mortgage. For the loan to be tax deductible, however, clients must restrict themselves to non-registered investments.

The system does come with a fair amount of risks, according to Compton. “As with any investment, the value of the investment instruments chosen for the Smith Manoeuvre can go up and down, putting your borrowed equity at risk.”

The Smith Manoeuvre is ideal for people seeking a long-term, buy-and-hold vehicle, which will hopefully average out over the long run, he said.

Compton said mortgage brokers will likely work to get their clients the maximum 65% through the Smith Manoeuvre and get the remaining 15% through a normal mortgage.

By Nestor Arellano | 11/07/2012 10:00:00 AM | comments

Thursday, 19 July 2012

Falling consumer debt challenges mortgage rules

 

A new Equifax report suggests Canadians began making real strides in cutting household debt before the new mortgage rules came into effect, raising concerns the government was too quick off the mark.

Growth in consumer debt fell 30 per cent in the second quarter, compared to a year earlier, reflecting the single biggest drop since before the recession.

“For the last couple of years we have seen almost double digit growth in some cases, it slowed down a bit last year, but we have never seen it slow down as much as we have (now),” said Nadim Abdo, VP of analytical services for Equifax Canada.

In real terms, consumer indebtedness – not taking into account mortgage debt -- climbed 3.1 per cent year-over-year in the second quarter. That’s down from the 4.4 per cent increase logged a year earlier, according to the Equifax quarterly trend report.

Economists are calling that improved financial footing the most conclusive indication to date that Canadians are getting the message about the dangers of household debt levels, now averaging 152 per cent of income.

The numbers also draw attention to tighter mortgage rules taking effect last week and meant to bring about the kind of consumer restraint already in the works.

There's also concerns those rules have further cooled the housing market.

“Even before the new mortgage rules kicked in, all signs suggest that the Canadian housing market was already cooling," BMO economist Douglas Porter told reporters. "The new rules will simply pull hard on a closing door.”

June CREA numbers suggest that door has already been pulled tight.

In total, there were some 4.4 per cent fewer homes sold last month compared to the year-ago period, according to the Canadian Real Estate Association’s latest numbers.

In terms of prices, the average seller of a home in June 2012 received $369,339, down 0.8 per cent from the same month in 2011.

The double whammy marks an about-face for a national housing market that the federal government, among other key stakeholders, viewed as primed for a major correction if intervention wasn't initiated.

The June numbers do not reflect that intervention, and the slide raises questions about whether the changes were in fact necessary.

"Homebuyers didn’t rush their purchases before the most recently announced changes to mortgage regulations came into effect," CREA's chief economist Gregory Klump said.



By Vernon Clement Jones | 18/07/2012 7:00:00 PM | comments




Wednesday, 18 July 2012

Rate hikes will not help the economy

As expected the Bank of Canada is holding its benchmark, overnight rate at 1% for the 15th consecutive setting. In the accompanying policy statement the bank said the decision was made in light of the current global economic situation. It also downgraded this year’s economic growth projection from 2.4% to 2.1%. The bank releases its Monetary Policy Report tomorrow. Yields continue to drift down.

A growing number of analysts have been backing up the time line for an interest rate hike by the Bank of Canada. Through the last quarter of 2011 and the first quarter of this year the call was for a 25 to 50 basis point hike by late 2012 or early next year. Now that’s being rolled back to the middle of 2013.

Slowing economic growth in Canada, the U.S. and China, and the unrelenting economic problems in Europe have handcuffed our central bank. It has been looking to raise rates in an effort to slowdown the growth of household debt in Canada. But the BoC did get some relief with Ottawa’s imposition of new lending rules for high-ratio mortgages and new mortgage qualification limits. The regulatory moves amount to a de facto interest rate increase in the housing sector and, anecdotally at least, appear to be having the desired, cooling effect.

MortgagePRO will provide FREE PLAN, SOLUTION AND MORTGAGE ADVICE ask for a session now! 

Comments

Friday, 13 July 2012

HELOC to 80% still alive

Brokers are on the hunt and credit unions are already welcoming a wave interest as new federal guidelines limit HELOCs at the banks and make their own higher LTVs more enticing.
Good news from MortgagePRO!
The OSFI move to cut the maximum LTV to 65 per cent from 80 per cent for HELOCs offered by federally-regulated lenders is expected to result in a mini boom for provincially regulated CUs in Ontario and other provinces. There regulators are refusing to impose those new rules on credit unions.
Those cooperative institutions are already reporting a spike of broker queries.
“We’ve seen a bit of increase in calls from the broker channel asking about whether we are following the OSFI guideline or sticking with our current LTVs,” said Rita Epp, director of retail and special credit at Meridian Credit Union Ltd. “Our policy is business as usual.
“We review each application on a case-by-case basis. If we find it is best for the member and the credit union, we will provide our maximum 80 per cent LTV on the line of credit.”
While it may be “too early,” she said, to determine how much business that new interest will generate, “it could be a definite advantage over the banks for us.”
The altered HELOC guidelines came into effect Monday, coinciding with Finance Minister Jim Flaherty’s activation of rule changes for government-backed mortgages.
Brokers have largely panned the changes as unnecessary given the slowing market and the OSFI action.
“Taken together, the Minister’s announcement and the OSFI final guidelines may have an effect of precipitating the housing downturn that the government wants to avoid,” Jim Murphy, CAAMP CEO, told MortgageBrokerNews.ca.
Credit unions are not bound by federal regulations, although many are sticking with their current LTV caps, now lower than the old 80 per cent cut-off.
The OSFI ruling could be welcome news for credit unions, said Phil Fiuza, manager of mortgage services and broker organization centre, with IC Savings. It’s sticking with a maximum 75 per cent LTV on HELOCs.
“We believe our current practices as very prudent so we will continue to offer up to 75 per cent,” Fiuza said. “The ruling will most likely benefit credit union whose main product offering are line of credits. We focus more on fixed term loans.”
Not all credit unions are rejecting the OSFI ruling. Some have embraced them.
“We will be complying with the OSFI guideline,” said Andre Chapleau, media relations director of Desjardins Credit Union, “It’s a good move in the sense that homes are not supposed to be treated as an ATM (automated teller machine.”


By Nestor Arellano | 12/07/2012 8:00:00 PM | comments

Monday, 25 June 2012

Affordability attractive in Alberta

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Need a mortgage, need a PRO; MortgagePRO

This is time to buy. Prices are down and the rates are never get this low.
How to secure yourself the best rate and product custom fitted to your needs is just a FREE CONSULTATION away with a MortgagePRO.      Do not miss out like the last boom.
According to RBC's Housing Trends and Affordability report for May, housing affordability continued to be attractive in Alberta for the first quarter of 2012.
"The levels of Alberta's measures remained among the lower, if not, the lowest, among the provinces," stated the report. "With such attractive affordability and a provincial economy that is ramping up considerably, it is not surprising to see home re-sale activity taking off recently."












                     
 Re-sales in Alberta were up 11.5 per cent year-over-year.
"As Alberta continues to lead the country in economic growth this year, we expect brisk housing activity to persist," stated the report.
Alberta's neighbouring prairie market Saskatchewan saw home re-sales surging to record high levels in the first quarter of 2012 while there was little change in Manitoba's numbers.
According to CREB, the average price of a home in Calgary for the month of May (from the first to press time) was $445.120, an increase of 3.03 per cent compared to the same time last year.
At a national leve, according to the RBC report, Vancouver continues to rank as one of the most unaffordable markets in Canada while Alberta and Atlantic Canada ranking at the more affordable end.

Thursday, 21 June 2012

New Mortgage Rules put simple


The Government of Canada has announced changes to government backed insured mortgages, effective July 9th 2012.

The New Rules are as follows:

  1. Amortization period is REDUCED to 25 years for high ratio applications. Banks can continue to offer 30 year amortization on LTV’s 80% or less.
  2. Refinancing is REDUCED from 85% LTV to 80%.
  3. Limit GDS to 39% and TDS to 44%.
  4. Maximum purchase price for government backed mortgage insurance is $1 million. Homes above $1 million must have 20% down payment.

Although these adjustments are in force July 9th, exceptions have been allowed on binding Purchase & Sale financing & refinancing agreements where the application is made prior to July 9th.

Any mortgage insurance application received after June 21st and before July 9th, that does NOT conform to the new guidelines must fund by December 31st, 2012.

To review this morning's Globe and Mail article click here.
To review the government press release and backgrounders click here.
To contact Minister Flaherty or your local MP CLICK HERE.
If you would like to talk to a mortgage PROFFESSIONAL click here.

Government new mortgage restrictions


AKA we tell you what is good for you, got it?
Today there was an announcement by the federal government to change the mortgage rules that can affect you if  you are planning on buying and have been holding off. If you want to know more information on this contact Zoltan at MortgagePRO  by email or phone to get more details on what you must do to get the 30 yr term. 
OTTAWA — The federal government is moving once again to tighten mortgage-lending rules amid lingering concerns about an overheated housing market and household debt levels.
In a move called for by some of the big banks, Finance Minister Jim Flaherty announced Thursday the federal government is reducing the maximum amortization period for a government-insured mortgage to 25 years from 30 years.
Zoltan M. Padar
president
MortgagePRO Ltd.
It's the third time the government has reduced the maximum amortization period in the last four years, ratcheting it back from 40 years to 35 in 2008, and then further reduced to 30 years in 2011. Banks will still be allowed to offer 30-year amortization periods on low-ratio mortgages that include a downpayment of 20 per cent or more.
The changes will also see the government lower the maximum Canadians can borrow against their home to 80 per cent of its value, from 85 per cent, in an effort to encourage them to keep more equity in their homes.
As well, under the new rules, to qualify for a mortgage loan Canadians can spend a maximum of 39 per cent of their household income on home expenses such as mortgage, property taxes and heating.
Flaherty said Ottawa will limit government-backed insured mortgages to home purchases of less than $1 million. A downpayment of at least 20 per cent will be required on mortgage loans for homes priced at or above $1 million.
Reducing the amortization period will increase monthly payments, but reduce the amount of total interest paid on a mortgage. Ottawa expects the change from a 30-year to 25-year amortization will, on a $350,000 mortgage loan at four per cent, increase the monthly payment $177 but reduce total interest costs by nearly $47,000.
The government believes less than five per cent of home buyers will be affected by the clampdown.
The new rules take effect July 9, 2012.
"We watch carefully, we monitor the market carefully. I remain concerned about parts of the Canadian residential real estate market, particularly in Toronto, but not only in Toronto, so that is why we are intervening once again," Flaherty told reporters in Ottawa.
"It's our job to try to be ahead of things and act in a measured way, listening to the market. And I have been listening to the market, and quite frankly, I don't like what I hear, particularly in the condo market."
Flaherty said the government's moves are part of an effort to "moderate behaviour" among Canadian homeowners and make them reflect before jumping into the housing market at the high end.
Canada's largest city is seeing continuous home building because of persistent demand, he noted, which is accelerating prices and eroding affordability.
"This concerns me because it's distorting the market, quite frankly," the minister added. "My judgment is that we need to calm particularly the condo market in a few Canadian cities."
Flaherty and some of the country's leading economists have for months been warning they remain worried about Canada's housing market and rising household debt.
In March, prior to delivering the federal budget, Flaherty met with 13 private-sector economists for his traditional pre-budget consultation to get their assessment of the Canadian economy.
Some of the big banks suggested at the time that the federal government consider implementing "measured actions," such as reducing the maximum amortization period for government-insured mortgages back to the traditional 25 years.

On Thursday, the banks largely welcomed the measures.
"Overall we see (Thursday's) announcement as a much better substitute to interest rate hikes since the moves are aimed with almost surgical precision at the margins of the mortgage market," Benjamin Tal with CIBC World Markets said in a research note.
"The combined impact of the four changes will not be large enough to derail the housing market, but are clearly significant enough to soften activity, and at the margin will act as a negative for house prices —mainly at the mid-range segment of the market."
Frank Techar, president of personal and commercial banking at BMO Financial Group, called the changes "prudent, measured, responsible, timely."
"Minister Flaherty has tapped the brakes at precisely the right time and his actions should help ensure Canada's housing market experiences a soft landing," Techar said in a statement.

Read more....

Thursday, 7 June 2012

Good news; start spending again


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It appears Canadians are more responsible borrowers than some at the federal level would have us believe. A couple of recent reports indicate the stereo-type of the fiscally conservative and responsible Canuck still has legs. One of our big banks sponsored a survey that suggests debt management is a top-of-mind issue for Canadians. It went beyond mortgages to report that 72% of respondents have debt and nearly half of them, 49%, have made an extra, lump sum payment in an effort to knock down their principal.

The spring report from the Canadian Association of Accredited Mortgage Professionals backs up the bank survey and indicates it’s nothing new. CAAMP shows that, since 1990, between 10% and 20% of mortgage holders have made lump sum payments while 20% to 25% have voluntarily increased the amount of their monthly payment. Thirty percent of those who have renewed their mortgages in the past 18 months have opted for higher payments. Minorities, yes, but certainly statistically significant minorities.

Tuesday, 5 June 2012

Brokers: BoC decision may embolden OSFI

By Vernon Clement Jones | 04/06/2012 8:00:00 PM  comments
The Bank of Canada left the overnight rate unchanged at 1 per cent Tuesday, in the process suggesting a hike may not come anytime soon – something that could strengthen OSFI’s hand.
With specific reference to a weakened global economy, the bank review argues "risks remain skewed to the downside,” although the national outlook remains largely unchanged from earlier largely positive projections.
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It also stepped back from its warnings about household debt levels and the urgent need to bring that under control.
That move in particular lends weight to the idea that the bank will hold off on any rise in its key overnight rate, say analysts, suggesting the central bank may delay until sometime next year.
Still, some brokers are concerned the absence of any rate tightening will strengthen OSFI’s demands for substantive changes to lender underwriting guidelines.
Those exhaustive changes promise to hold lenders more accountable for their lending decisions, but also threaten, charge some brokers, to compromise homeownership for many current borrowers.
Those changes are expected to be released later this month, with CAAMP and other broker players already having submitted analysis on the proposed guideline changes.

Friday, 1 June 2012

Debt poll challenges OSFI proposals

By Vernon Clement Jones | 27/05/2012 7:00:00 PM | comments
Canadians are using their extra cash to more quickly chip away at credit card and lines of credit debt, according to a new bank survey, backing up broker concerns about the dangers of unsecured credit.
“Among Canadians with debt, 49 per cent have made at least one lump sum payment to their debt sometime in the last year,” according to CIBC’s latest consumer debt poll, released Monday.

And while 62 per cent of those making extra payments directed those funds to credit card balances, followed by 46 per cent for line of credit, only 22 per cent of respondents used that extra money to speed up the pace of mortgage repayment.

That kind of priority list backs up broker concerns about credit card debt and the challenge it poses Canadian households. They worry the federal banking regulator has erred in focusing on mortgage lending rules instead of tightening up underwriting standards for credit card lending.

Last week the Official Opposition joined mortgage broker associations in voicing concerns around key aspects of OSFI’s proposed guideline, specifically re-qualifying requirements for renewing mortgagors.
"We just need to make sure that people are protected in some of these temporary situations (where they may have lost a job),” said Peggy Nash, the federal NDP’s finance critic, “if they have a good credit record and have never had a problem making their payment."
OSFI has floated the idea of forcing mortgage-holders to re-qualify at renewal, although exactly what that involves remains unclear.
Broker, and their professional associations,were among the first to balk at the suggestion, arguing it could create the kind of market crisis the proposals aim to overt.
Nash appears to agree, with her party most worried Canadians temporarily out of work could possibly lose their homes. She’s asking the Harper government to back off.
OSFI has suggested it has little intention of backing down, Its manager of policy developing expressing concern about the country’s ability to meet a significant housing correction head on.
“Are the banks equipped to handle a 40 percent drop (in property values)?” writes Vlasios Melessanakis, the manager of policy development for the Office of the Superintendent of Financial Institutions, in an internal document responding to broker Rob McLister and an article posted to his website in March.
"Canada is not immune. Just because nothing happened in Canada in 2008 (a U.S.-centered crisis), does not mean that Canada is not vulnerable to a housing correction now.”

Thursday, 31 May 2012

OSFI has the wrong end of the stick

By Vernon Clement Jones | 30/05/2012 1:00:00 AM | comments
A new report is backing up broker concerns OSFI is about to fix what ain’t broke – this new research identifying already-reduced amortizations, low arrears and high levels of homeowner equity.
“Mortgage borrowers are making significant efforts to accelerate repayment, such as voluntarily increasing their regular payments (23 per cent) and making lump sum payments (19 per cent), with some borrowers (10 per cent) doing both,” finds CAAMP's spring consumers' report, released Wednesday. "And approximately 50 per cent of borrowers pay $100 per month (or more) above their required payments.”
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The report relies on an online survey of 2,000 Canadians, including 800 homeowners with mortgages. It was conducted by Maritz Research and adds weight to the findings of a CMHC report issued last week.

It also suggests that recent buyers expect amortization periods will be about 20 per cent shorter than their contracted length, mirroring the current reality for many Canadian homeowners.

To boot, the report also suggests 83 per cent of Canadians have at least 25 per cent equity in their homes. Separately and collectively, those findings point to a mortgage market well positioned to handle the challenges of a correction in the housing market and to protect the investment of the vast majority of homeowners.

Brokers are also hoping the findings will encourage OSFI to reconsider some of the underwriting
guidelines it will likely bring into force next month.

Those measures – from re-qualification at renewal to slashing the maximum loan-to-value on HELOCs – are meant to throw up a firewall around Canada’s housing market.
Brokers haven’t been convinced of the need for it.

The position is garnering support outside of the CAAMP research, with the official opposition in Otttawa registering the same concerns as brokers.

"We just need to make sure that people are protected in some of these temporary situations (where they may have lost a job),” said Peggy Nash, the federal NDP’s finance critic, “if they have a good credit record and have never had a problem making their payment."
OSFI has floated the idea of forcing mortgage-holders to re-qualify at renewal, although exactly what that involves remains unclear.
Brokers, and their professional associations, were among the first to balk at the suggestion, arguing it could create the kind of market crisis the proposals aim to overt.
Nash appears to agree, with her party most worried Canadians temporarily out of work could possibly lose their homes. She’s asking the Harper government to back off.
But OSFI has suggested it has little intention of backing down, Its manager of policy developing expressing concern about the country’s ability to meet a significant housing correction head on.

Wednesday, 30 May 2012

Home prices continue to rise in most cities

By Mortgage Broker News  | 29/05/2012 5:00:00 PM | 0 comments
Canadian home prices rose in April from March for the second consecutive month, with prices up in nine of 11 metropolitan markets, led by western centres Edmonton, Calgary and Winnipeg.

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According to the Tera net-National Bank Composite House Price Index, which measures price changes for repeat sales of single-family homes, overall prices climbed 0.8 percent in April from a month earlier, after a 0.5 percent gain in March. The index was up 5.9 percent in April from a year earlier. It was the fifth month in a row of deceleration in 12-month inflation. Vancouver is the only market that has followed the national composite in decelerating for five straight months. Toronto continues to accelerate, with prices up 10.1 per cent year-over-year.
The two consecutive monthly rises follow a period of three declines in four months.
April gains included Halifax (1.6 per cent), Edmonton (1.5 per cent), Winnipeg and Calgary (1.4 per cent). For Halifax it was the sixth consecutive monthly gain, the longest such run in the markets tracked. Toronto and Montreal matched the national average gain of 0.8 per cent, while smaller increases were recorded in Vancouver and Ottawa-Gatineau (0.6 per cent). Prices declined in Victoria (0.4 per cent) and Quebec City (0.6 per cent).
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Tuesday, 29 May 2012

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Housing affordability slips

By Mortgage Broker News
The costs of owning a home increased in most major cities across Canada after two consecutive quarters of improvement.
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According to the RBC Housing Trends and Affordability Report, Canada’s housing affordability deteriorated slightly as homebuyer demand pushed home prices higher in the first quarter, driving the cost of owning a home modestly upwards.
The RBC housing affordability measure captures the proportion of pre-tax household income that would be needed to service the costs of owning a specified category of home at going market values. A rise in the measure represents deterioration in affordability.
RBC's housing affordability measure for the benchmark detached bungalow was up 3.1 percentage points in Vancouver to 88.9 per cent, up 1.2 percentage points in Toronto to 53.4 per, up 0.9 percentage points in Ottawa to 41.8 per cent and up 1.2 percentage points in Montreal to 41.4 per cent. Calgary (36.7 per cent) remained unchanged, while Edmonton saw a drop of 0.4 percentage points to 32.4 per cent
"It became a little tougher on household budgets to carry the costs of owning a home at market prices at the start of this year," said Craig Wright, senior vice-president and chief economist, RBC. "Strong buyer demand was a principal driver of the modest rise in homeownership costs. While the deterioration in affordability was felt to varying degrees across the country, it was mild in most cases."
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Looking ahead, the banks said it expects further challenges on the affordability front across Canada once the Bank of Canada begins raising interest rates in the fourth quarter of 2012 and assuming the European economy stays on the rails.
"Exceptionally low interest rates have been the key force in keeping affordability from hitting dangerous levels in Canada in recent years," added Wright. "Affordability headwinds are likely to increase next year, as interest rates make their way towards more normal levels. We anticipate that the central bank will begin hiking rates gradually, however, which should help mitigate any widespread negative impact on the housing market. A gradual pace of increases will allow income growth to provide some offset."
Stark regional divergences in affordability witnessed last year carried through to the first quarter of 2012. British Columbia's housing and, more expressly, the Vancouver-area market are situated at the weaker end of the affordability spectrum, while housing markets in Alberta and Atlantic Canada remain at the more affordable end. Local housing markets in Ontario had slightly less attractive affordability in comparison to the national average, while markets in Saskatchewan, Manitoba and Quebec were slightly more attractive.

Monday, 28 May 2012

Why is the government decides for you

Debt poll challenges OSFI proposals                                  
By Vernon Clement Jones | 27/05/2012 7:00:00 PM | 0 comments
Click here to read more!
Canadians are using their extra cash to more quickly chip away at credit card and lines of credit debt, according to a new bank survey, backing up broker concerns about the dangers of unsecured credit.
“Among Canadians with debt, 49 per cent have made at least one lump sum payment to their debt sometime in the last year,” according to CIBC’s latest consumer debt poll, released Monday.

And while 62 per cent of those making extra payments directed those funds to credit card balances, followed by 46 per cent for line of credit, only 22 per cent of respondents used that extra money to speed up the pace of mortgage repayment.

That kind of priority list backs up broker concerns about credit card debt and the challenge it poses Canadian households. They worry the federal banking regulator has erred in focusing on mortgage lending rules instead of tightening up underwriting standards for credit card lending.

Last week the Official Opposition joined mortgage broker associations in voicing concerns around key aspects of OSFI’s proposed guideline, specifically re-qualifying requirements for renewing mortgagors.
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"We just need to make sure that people are protected in some of these temporary situations (where they may have lost a job),” said Peggy Nash, the federal NDP’s finance critic, “if they have a good credit record and have never had a problem making their payment."
OSFI has floated the idea of forcing mortgage-holders to re-qualify at renewal, although exactly what that involves remains unclear.
Broker, and their professional associations,were among the first to balk at the suggestion, arguing it could create the kind of market crisis the proposals aim to overt.
Nash appears to agree, with her party most worried Canadians temporarily out of work could possibly lose their homes. She’s asking the Harper government to back off.
OSFI has suggested it has little intention of backing down, Its manager of policy developing expressing concern about the country’s ability to meet a significant housing correction head on.
“Are the banks equipped to handle a 40 percent drop (in property values)?” writes Vlasios Melessanakis, the manager of policy development for the Office of the Superintendent of Financial Institutions, in an internal document responding to broker Rob McLister and an article posted to his website in March.
"Canada is not immune. Just because nothing happened in Canada in 2008 (a U.S.-centered crisis), does not mean that Canada is not vulnerable to a housing correction now.”