Four big banks have increased their posted rates on fixed mortgages, signaling the start of an upward move on record-low interest rates.
Royal Bank, TD Canada Trust and Laurentian all moved their posted rates on five-year fixed mortgages by 0.6 per cent yesterday, a move followed by CIBC today. Many non-banks have already followed, prompting a surge in requests from variable-rate clients to lock into fixed rates.
The interest rate increase will also mean higher qualifying criteria for new clients, who must meet the five-year posted fixed rate when the new mortgage insurance rules kick in on April 19.
CIBC economist Benjamin Tal told the Globe and Mail the rise in rates along with other factors means the booming housing market will slow down significantly after spring.
"Given where interest rates are now, I still think you'll see an extremely strong spring. However, after that I think the housing market will stagnate," Mr. Tal said. "We are in the ninth inning of this booming house market. We are not expecting a crash, but we will stagnate."
Tuesday, March 30, 2010
Monday, February 22, 2010
Second Home a goal for many Canadians
Second home a goal for many Canadians
There's an old saying: "May you live in interesting times."
"Interesting times" certainly describes Canada's recreation property market in the last 14 months. The economic crunch of late 2008, coupled by reports of high-profile developers stalling projects or going into receivership, raised the question as to whether last year would see the good times come to an end for the recreation property industry.
Many consumers had trouble differentiating between the real estate woes in the U.S. and the condition of the Canadian market, which remained considerably stronger, says Elton Ash, regional executive vice-president with Re/Max Western Canada.
Just over a year ago, "the bottom had fallen out of the economic world, starting in September (2008) with the Lehman Brothers collapse, and when it came to real estate, nationally there were zero transactions going on," he says.
"The news every day was negative, negative. I think we as a national psyche just said, 'We're not going to participate in this.'"
But unlike the States, where the real estate industry was hurt by skyrocketing mortgage defaults and bank collapses, Ash says, "Canada's banking system was the soundest in the world, and distressed mortgages weren't going up by any great extent. We like to own, we like equity, and we don't leverage ourselves a great deal. And that lends well to (buying) recreational property."
But, "the high dollar has hurt the Canadian recreation market a bit, because people are looking south rather than at home," Ash adds. "Nonetheless, the sense of legacy is still there for baby boomers, and recreation properties and second homes in Canada will remain a very sought-after goal."
Re/Max recently released its Housing Market Outlook for 2010, and while it doesn't deal specifically with recreation properties -that outlook arrives in the summer -it does paint a rosier picture for the Canadian scene than what might have been envisioned a year ago.
"The best way to define the report is that Canadians are confident, and our recovery is proving to bring about very balanced real estate market conditions nationally, and in every market," Ash says.
The era of the zero-down mortgage in Canada was ended by the federal government in 2008, says Gary Siegle, regional manager at Invis. "As of October 2008, we were no longer able to offer zero down and 40-year amortization, so now people must have five per cent down, at least," he says.
In Canada, there's a greater emphasis on credit scores for individuals looking to buy a second property, Siegle says.
"The credit requirement would have been one mitigating factor that didn't happen in the States," he says. "(Also,) lenders have become less willing to make exceptions, so we find people need to meet common-sense underwriting guidelines. People wanting a mortgage may have to show more documentation, answer more questions.
"Nonetheless, there's ample credit available, and people who are looking at buying a second property typically have a good financial situation already. We still have products where people can buy vacation and second homes with financing of up to 95 per cent."
Siegle's biggest piece of advice for those considering buying a recreation property in 2010: speak to a mortgage broker. "Get the information on what financing is available to you, so you can understand the choices," he says. For those looking to buy outside Canada, interest in Mexican properties remains high, says Martin Lautsch, Calgary based sales manager for La Bella Vita, a development in Puerto Penasco by the Sea of Cortez.
"Certainly there are people looking for value, though whether they're taking advantage of it now or waiting for when their situation improves a bit more is an unknown," he says. "We're focused 95 per cent on the Canadian market, and Western Canada specifically. There's some trepidation, I'm sure, but since late summer, inquiries have picked up and we're seeing good response to our marketing material.
"You can see things are on the upswing." Lautsch says there's a growing interest in properties in lesser-known locations. "Lots of people can't afford Acapulco and they're not interested in somewhere where there's half a million people," he says. "Puerto Penasco looks like some of those more-developed areas did 25 years ago."
Still, Lautsch is hesitant to lock into predictions for 2010.
"We certainly expect the level of sales to increase, but as to forecasting, in my opinion it's very hard to do with resort properties," he says. "We haven't been hit as hard up here, and the clientele we've dealt with are professionals and they're going into this with their eyes open."
There's an old saying: "May you live in interesting times."
"Interesting times" certainly describes Canada's recreation property market in the last 14 months. The economic crunch of late 2008, coupled by reports of high-profile developers stalling projects or going into receivership, raised the question as to whether last year would see the good times come to an end for the recreation property industry.
Many consumers had trouble differentiating between the real estate woes in the U.S. and the condition of the Canadian market, which remained considerably stronger, says Elton Ash, regional executive vice-president with Re/Max Western Canada.
Just over a year ago, "the bottom had fallen out of the economic world, starting in September (2008) with the Lehman Brothers collapse, and when it came to real estate, nationally there were zero transactions going on," he says.
"The news every day was negative, negative. I think we as a national psyche just said, 'We're not going to participate in this.'"
But unlike the States, where the real estate industry was hurt by skyrocketing mortgage defaults and bank collapses, Ash says, "Canada's banking system was the soundest in the world, and distressed mortgages weren't going up by any great extent. We like to own, we like equity, and we don't leverage ourselves a great deal. And that lends well to (buying) recreational property."
But, "the high dollar has hurt the Canadian recreation market a bit, because people are looking south rather than at home," Ash adds. "Nonetheless, the sense of legacy is still there for baby boomers, and recreation properties and second homes in Canada will remain a very sought-after goal."
Re/Max recently released its Housing Market Outlook for 2010, and while it doesn't deal specifically with recreation properties -that outlook arrives in the summer -it does paint a rosier picture for the Canadian scene than what might have been envisioned a year ago.
"The best way to define the report is that Canadians are confident, and our recovery is proving to bring about very balanced real estate market conditions nationally, and in every market," Ash says.
The era of the zero-down mortgage in Canada was ended by the federal government in 2008, says Gary Siegle, regional manager at Invis. "As of October 2008, we were no longer able to offer zero down and 40-year amortization, so now people must have five per cent down, at least," he says.
In Canada, there's a greater emphasis on credit scores for individuals looking to buy a second property, Siegle says.
"The credit requirement would have been one mitigating factor that didn't happen in the States," he says. "(Also,) lenders have become less willing to make exceptions, so we find people need to meet common-sense underwriting guidelines. People wanting a mortgage may have to show more documentation, answer more questions.
"Nonetheless, there's ample credit available, and people who are looking at buying a second property typically have a good financial situation already. We still have products where people can buy vacation and second homes with financing of up to 95 per cent."
Siegle's biggest piece of advice for those considering buying a recreation property in 2010: speak to a mortgage broker. "Get the information on what financing is available to you, so you can understand the choices," he says. For those looking to buy outside Canada, interest in Mexican properties remains high, says Martin Lautsch, Calgary based sales manager for La Bella Vita, a development in Puerto Penasco by the Sea of Cortez.
"Certainly there are people looking for value, though whether they're taking advantage of it now or waiting for when their situation improves a bit more is an unknown," he says. "We're focused 95 per cent on the Canadian market, and Western Canada specifically. There's some trepidation, I'm sure, but since late summer, inquiries have picked up and we're seeing good response to our marketing material.
"You can see things are on the upswing." Lautsch says there's a growing interest in properties in lesser-known locations. "Lots of people can't afford Acapulco and they're not interested in somewhere where there's half a million people," he says. "Puerto Penasco looks like some of those more-developed areas did 25 years ago."
Still, Lautsch is hesitant to lock into predictions for 2010.
"We certainly expect the level of sales to increase, but as to forecasting, in my opinion it's very hard to do with resort properties," he says. "We haven't been hit as hard up here, and the clientele we've dealt with are professionals and they're going into this with their eyes open."
The past has a say on your finances.
Whether a bank will approve a mortgage for you hinges on your past dealings with debt
New Year's parties and the resolutions you made may already feel like a distant memory, but if you plan on buying a home later this year, one resolution you will want to keep is to organize your finances.
Any mortgage lender you go to will want to know how much of a risk you would be as a borrower. To determine where you stand in terms of creditworthiness, you can apply to see your credit score and report through equifax.ca or transunion.ca.
The three-digit score represents your likely risk to lenders. The higher the score the lower the risk.
"The risk … is the likelihood that you're going to go 90 days, or worse, delinquent [on your loan] generally within a 12- to 24-month time frame," says Tom Reid, director of consumer solutions for TransUnion.ca.
The score is derived from your payment behavior, debt levels and credit history.
"The two worst things you can do on your credit score are be at a high utilization on all your accounts and start missing payments," says Rob Regan- Pollock, senior consultant at Invis mortgage brokerage. "The system is viewing the risk that you're starting to crack and are no longer able to meet your obligations … you're maxed and you're not making payments … that's the beginning of the end."
It may not seem terribly important when you're spending your pay cheque at restaurants and retailers, but it's when you want to buy a house that that all- important credit score is key to whether or not you will qualify for a mortgage.
A lot of lenders are credit-score driven. They'll look at the credit score as a snapshot of somebody's credit. It's not always accurate but it's very important to keep your credit good. Typically [a score of] around 620 to 650 is acceptable, anything over 700 is very good, anything over 800 is excellent.
To achieve and maintain a good score, it is crucial not to miss any payments; even if your minimum payment is only $10 a month, make it.
Not all credit is created equal. A good use of cards from reputable banks will get you a higher score than a high-interest loan that has consolidated your debts.
So why all the hard work? A good credit score can help earn lower rates when you do borrow for a house.
Lenders are relying heavily … on credit scoring as a method of determining which borrowers are entitled to which programs. It also has an impact on interest rates in certain cases, where lenders can … offer a slightly better rate on preferential terms for those with very good scores.
As a mortgage agent, I can always get the best rates for clients who have a score of between 680 and 820 as they are considered to be good credit risks.
But if someone is under 600, it's very difficult to give them credit and that's when the rates will start going up. Some lenders won't even consider an application [with a score] under 620," says Ms. Roberts.
At one time, applying to see your own credit rating would negatively affect your score, but this is no longer the case.
If you apply for a number of credit products at one time, and each business inquires after your score, that can negatively impact it, as it may seem your expenditures could get out of control. "You want to apply for credit in moderation," says Mr. Reid, while noting that "not all inquiries are indicative of somebody that may be a distressed borrower.
"[For] a mortgage … [we recognize] it makes smart sense to shop for the best rate … we take mortgage inquiries generally within a two-week time frame, and if there are multiple inquiries we consider that as a single inquiry."
Building up a decent credit score can take time.
"If [consumers] want to use their credit score to apply for a mortgage they need to [begin establishing a good rating] sooner than they think; it does sometimes take up to a year to optimize credit scores.
During that year, advisors say, the best strategy is to not miss a payment, not to apply for new credit and to stay within 50% or less of your credit limit.
New Year's parties and the resolutions you made may already feel like a distant memory, but if you plan on buying a home later this year, one resolution you will want to keep is to organize your finances.
Any mortgage lender you go to will want to know how much of a risk you would be as a borrower. To determine where you stand in terms of creditworthiness, you can apply to see your credit score and report through equifax.ca or transunion.ca.
The three-digit score represents your likely risk to lenders. The higher the score the lower the risk.
"The risk … is the likelihood that you're going to go 90 days, or worse, delinquent [on your loan] generally within a 12- to 24-month time frame," says Tom Reid, director of consumer solutions for TransUnion.ca.
The score is derived from your payment behavior, debt levels and credit history.
"The two worst things you can do on your credit score are be at a high utilization on all your accounts and start missing payments," says Rob Regan- Pollock, senior consultant at Invis mortgage brokerage. "The system is viewing the risk that you're starting to crack and are no longer able to meet your obligations … you're maxed and you're not making payments … that's the beginning of the end."
It may not seem terribly important when you're spending your pay cheque at restaurants and retailers, but it's when you want to buy a house that that all- important credit score is key to whether or not you will qualify for a mortgage.
A lot of lenders are credit-score driven. They'll look at the credit score as a snapshot of somebody's credit. It's not always accurate but it's very important to keep your credit good. Typically [a score of] around 620 to 650 is acceptable, anything over 700 is very good, anything over 800 is excellent.
To achieve and maintain a good score, it is crucial not to miss any payments; even if your minimum payment is only $10 a month, make it.
Not all credit is created equal. A good use of cards from reputable banks will get you a higher score than a high-interest loan that has consolidated your debts.
So why all the hard work? A good credit score can help earn lower rates when you do borrow for a house.
Lenders are relying heavily … on credit scoring as a method of determining which borrowers are entitled to which programs. It also has an impact on interest rates in certain cases, where lenders can … offer a slightly better rate on preferential terms for those with very good scores.
As a mortgage agent, I can always get the best rates for clients who have a score of between 680 and 820 as they are considered to be good credit risks.
But if someone is under 600, it's very difficult to give them credit and that's when the rates will start going up. Some lenders won't even consider an application [with a score] under 620," says Ms. Roberts.
At one time, applying to see your own credit rating would negatively affect your score, but this is no longer the case.
If you apply for a number of credit products at one time, and each business inquires after your score, that can negatively impact it, as it may seem your expenditures could get out of control. "You want to apply for credit in moderation," says Mr. Reid, while noting that "not all inquiries are indicative of somebody that may be a distressed borrower.
"[For] a mortgage … [we recognize] it makes smart sense to shop for the best rate … we take mortgage inquiries generally within a two-week time frame, and if there are multiple inquiries we consider that as a single inquiry."
Building up a decent credit score can take time.
"If [consumers] want to use their credit score to apply for a mortgage they need to [begin establishing a good rating] sooner than they think; it does sometimes take up to a year to optimize credit scores.
During that year, advisors say, the best strategy is to not miss a payment, not to apply for new credit and to stay within 50% or less of your credit limit.
Tuesday, February 16, 2010
Minister of Finance Jim Flaherty makes announcement
This morning the Finance Minister Jim Flaherty made the following 3 announcements to mortgage insurance rules:
1. Variable mortgages qualified at five year fixed rates.
2. Refinancing limited to 90% instead of 95%
3. Non owner occupied residences require 20% down payment;
This announcement is the result of a review process on debt levels undertaken by the federal government the CAAMP has been actively engaged.
1. Variable mortgages qualified at five year fixed rates.
2. Refinancing limited to 90% instead of 95%
3. Non owner occupied residences require 20% down payment;
This announcement is the result of a review process on debt levels undertaken by the federal government the CAAMP has been actively engaged.
Tuesday, January 5, 2010
Annual Mortgage Check Up
The Annual Mortgage Checkup
As life changes, a regular once-over helps keep finances in shape
For many Canadians, financial matters are about as enjoyable as their yearly physical exam. But the current low-rate environment may make it a good time for homeowners to become proactive about their overall financial health by taking a close look at one of their most important obligations – their mortgage.
“A mortgage isn’t something you sign once every few years and then forget about “Life can change substantially in a year, and a regular review can help ensure that your mortgage is still the right fit for your financial situation.”
A number of major life changes may call for looking over your mortgage, such as starting or growing a family, starting a business, loss or interruption of income, home renovations, purchasing investment property or other major expenditures. A mortgage professional can assess a homeowner’s current interest rate, payments and other mortgage terms, determine available home equity, and recommend options that may help them better reach their goals.
Some common reasons to revisit your mortgage:
1. Paying down your mortgage faster: If you receive extra cash like an inheritance, tax refund or a work bonus, think about putting it toward your mortgage. For example, paying an extra $3,000 once every year toward the principal on a $250,000 mortgage can result in interest savings of $42,442 over the life of the mortgage, assuming a 25-year amortization and a fixed rate of 4.19%.
2. Lowering monthly payments: Renegotiating for a lower interest rate can protect your finances from unforeseen factors like a reduced income, and allow you to save up a rainy day fund.
3. Debt consolidation: Transferring high-cost consumer debt like a credit card balance to a lower interest rate by consolidating it into your mortgage can help you boost your cash flow to build up savings or pay down your debt faster.
4. Securing a Home Equity Line of Credit (HELOC): A HELOC can help you access lower-cost funds for investing, such as topping up your RRSP or TFSA contribution for the year. It can also help you pay for home improvement projects, so you can take advantage of the federal Home Renovation Tax Credit for eligible projects done before February 1, 2010.
5. Improving credit: A mortgage professional can coach you on how to improve your credit score, which can help you work toward future goals such as buying a vacation property for your family.
In some cases, a mortgage checkup may show that refinancing could improve your mortgage strategy. However, most mortgages require the borrower to pay a penalty if they pay off their mortgage in full before the maturity date. A mortgage professional can provide advice on what penalties you may incur and if refinancing is indeed your best option.
“In the end, a yearly mortgage checkup could reveal that the best course of action is no change at all, “Mortgage professionals can be excellent resources to help homeowners better understand their financing options, whether they’re buying a new home or staying put.”
As life changes, a regular once-over helps keep finances in shape
For many Canadians, financial matters are about as enjoyable as their yearly physical exam. But the current low-rate environment may make it a good time for homeowners to become proactive about their overall financial health by taking a close look at one of their most important obligations – their mortgage.
“A mortgage isn’t something you sign once every few years and then forget about “Life can change substantially in a year, and a regular review can help ensure that your mortgage is still the right fit for your financial situation.”
A number of major life changes may call for looking over your mortgage, such as starting or growing a family, starting a business, loss or interruption of income, home renovations, purchasing investment property or other major expenditures. A mortgage professional can assess a homeowner’s current interest rate, payments and other mortgage terms, determine available home equity, and recommend options that may help them better reach their goals.
Some common reasons to revisit your mortgage:
1. Paying down your mortgage faster: If you receive extra cash like an inheritance, tax refund or a work bonus, think about putting it toward your mortgage. For example, paying an extra $3,000 once every year toward the principal on a $250,000 mortgage can result in interest savings of $42,442 over the life of the mortgage, assuming a 25-year amortization and a fixed rate of 4.19%.
2. Lowering monthly payments: Renegotiating for a lower interest rate can protect your finances from unforeseen factors like a reduced income, and allow you to save up a rainy day fund.
3. Debt consolidation: Transferring high-cost consumer debt like a credit card balance to a lower interest rate by consolidating it into your mortgage can help you boost your cash flow to build up savings or pay down your debt faster.
4. Securing a Home Equity Line of Credit (HELOC): A HELOC can help you access lower-cost funds for investing, such as topping up your RRSP or TFSA contribution for the year. It can also help you pay for home improvement projects, so you can take advantage of the federal Home Renovation Tax Credit for eligible projects done before February 1, 2010.
5. Improving credit: A mortgage professional can coach you on how to improve your credit score, which can help you work toward future goals such as buying a vacation property for your family.
In some cases, a mortgage checkup may show that refinancing could improve your mortgage strategy. However, most mortgages require the borrower to pay a penalty if they pay off their mortgage in full before the maturity date. A mortgage professional can provide advice on what penalties you may incur and if refinancing is indeed your best option.
“In the end, a yearly mortgage checkup could reveal that the best course of action is no change at all, “Mortgage professionals can be excellent resources to help homeowners better understand their financing options, whether they’re buying a new home or staying put.”
Thursday, March 19, 2009
Eco Energy Retrofit For Homes Program
Recently I was talking to my friend Peggy Raymer from Madre Bello about the environment and how we can make a difference. Peggy has a company called Madre Bello which sells organic and all natural products. She has amazing products from soaps to shampoos, to baby products. Check out her site. Anyway…I diverted a bit, but there is a point. She wanted to know how to make her house more energy efficient and how to make a difference at home.
I told her about a program called the Eco Energy Retrofit For Homes Program. This program provides home owners with grants of up to $5,000 to offset the cost of making energy improvements to their homes.
This grant is based on how effective the upgrade is in saving energy, not on the cost of the upgrade.
So how does this program work? The first step is to go to the Natural Resource Canada web-site. This web-site will direct you to an Energy Advisor by using your postal code. When I called I spoke to Wayne Rowbotham of Ener Test Corporation. He was very helpful in explaining the process. The cost of the energy advisor to go to your home depends on the square footage. The cost starts at $300.00 and goes up from there. On a 1200 square foot house it usually takes 2 hours. Once the Energy advisor does his evaluation he goes back to his office and uses the Natural Resource software and using their guidelines he receives an Ener Guide Rating. The ratings go from 0 (Barn) to 100 ( which would be a house with renewable energy). A score is usually not posted until the home owner does the work from the report. Once the work is complete the energy advisor comes back for a second visit and re-inputs the new information into the software from Natural Resources. One this information is entered the report will give an Ener Guide Rating. The home owner usually place this label on his electrical panel. The score does not affect the sale of the house in the future, it is more for the home owners information and to help the home owner be more energy efficient.
The maximum grant you can receive per home or multi–unit residential building is $5,000; whereas the total grant amount available to one individual or entity for eligible properties over the life of the programs is $500,000. The average grant is expected to be more than $1000 and will yield an average 25% reduction in energy use and cost.
Homeowners participating in the Eco Energy Retrofit-Homes program are eligible to receive the temporary Home Renovation Tax Credit (HRTC) in addition to the Eco Energy Retrofit-Homes grant for some of the improvements made.
Want more information go to the Natural Resource Canada
I told her about a program called the Eco Energy Retrofit For Homes Program. This program provides home owners with grants of up to $5,000 to offset the cost of making energy improvements to their homes.
This grant is based on how effective the upgrade is in saving energy, not on the cost of the upgrade.
So how does this program work? The first step is to go to the Natural Resource Canada web-site. This web-site will direct you to an Energy Advisor by using your postal code. When I called I spoke to Wayne Rowbotham of Ener Test Corporation. He was very helpful in explaining the process. The cost of the energy advisor to go to your home depends on the square footage. The cost starts at $300.00 and goes up from there. On a 1200 square foot house it usually takes 2 hours. Once the Energy advisor does his evaluation he goes back to his office and uses the Natural Resource software and using their guidelines he receives an Ener Guide Rating. The ratings go from 0 (Barn) to 100 ( which would be a house with renewable energy). A score is usually not posted until the home owner does the work from the report. Once the work is complete the energy advisor comes back for a second visit and re-inputs the new information into the software from Natural Resources. One this information is entered the report will give an Ener Guide Rating. The home owner usually place this label on his electrical panel. The score does not affect the sale of the house in the future, it is more for the home owners information and to help the home owner be more energy efficient.
The maximum grant you can receive per home or multi–unit residential building is $5,000; whereas the total grant amount available to one individual or entity for eligible properties over the life of the programs is $500,000. The average grant is expected to be more than $1000 and will yield an average 25% reduction in energy use and cost.
Homeowners participating in the Eco Energy Retrofit-Homes program are eligible to receive the temporary Home Renovation Tax Credit (HRTC) in addition to the Eco Energy Retrofit-Homes grant for some of the improvements made.
Want more information go to the Natural Resource Canada
Monday, February 23, 2009
Who is can apply for Ontario Affordable Housing Program?
To be eligible for the down payment assistance, the prospective purchaser must meet the following minimum criteria:
- Minimum age of 18 years with a gross household income below $62,600
- Total assets of the household can not exceed $20,000.
- Be a renter household in the County of Simcoe.
- Purchase a sole and principal residence within the County of Simcoe.
- Cannot own or have an interest in a house or land.
- Be able to secure financing on the property.
- Must not owe any social housing provider arrears.
- Complete a homeownership application and provide all necessary documentation.
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