New Rules for Canadian Mortgages

You’ve probably read about the new regulations regarding Canadian mortgages for buyers/ investors and home owners wanting to re-finance. In case you haven’t been following, here is the scoop.

Three changes will come in effect on April 19:

1. Qualification: All borrowers will need to meet standards for five-year fixed-rate mortgages regardless of whether they’re seeking a loan with a lower rate and shorter term.
2. Refinancing: The government is lowering the maximum amount Canadians can withdraw when refinancing a home to 90% of its value, from the current 95%.
3. Speculation: It will be required a 20% down payment for government-backed mortgage insurance on “speculative” investment properties. As opposed to 5% down-payment for investments not occupied by the owner.

I’ve posted a list of articles written by the media. You can also check out The Canadian Mortgage Trends for an interesting and detailed post.

Wednesday Links: Mortgage Rules in the Media

Reckless speculators get a cold shower – The Globe and Mail
Ottawa’s decision to hike minimum down payment required to obtain insurance on investment homes likely to have immediate effect.

Don’t worry, home loan rules can still be bent - The Montreal Gazette
The good news or bad news, depending on your perspective, is you can still buy a home in Canada with almost no money…

Home buying rush expected in spring - The Globe and Mail
That may be the calm before the storm. Analysts expect a hot spring real estate market given Finance Minister Jim Flaherty’s move to tighten mortgage standards yesterday.

The trouble with bubbles: They’re elusive – The Globe and Mail
Some say government spending has overinflated global assets; but even the best minds have missed calling most collapses

Real Estate Market News: Morning Edition

Housing sales fall sharply in Canada: MLS [CBC News]
“The number of homes sold through the Multiple Listing Service dropped to 27,743 units in November — the lowest level recorded since January 2001, the Canadian Real Estate Association said Monday.”

Fed Cuts to ~0% and Prints Money [Canadian Mortgage Trends]
“Many think they’re getting ready for another rate cut on January 20. If so, that would be a boon for variable-rate mortgage holders (assuming banks pass along the cut). Canada’s key policy rate is currently at 1.50% so there is room for the BoC drop more.”

Undivided Co-ownership: Mortgage and Financing

If you are looking to buying into a Co-propriété with a 15% down payment, start looking else where. The minimum down payment is 20%, and depending on the bank financing it, could be even higher than that: 30 – 35%. These types of properties are NOT covered by the CMHC (Canadian Mortgage and Housing Corporation).

While talking about financing, it’s important to mention that many major lending institutions do not offer mortgages for undivided Co-ownership types of buildings. The reason for this? We don’t have the foggiest idea. But, we can safely assume that since this is still a fairly new way of ownership, not every bank is ready to just jump into the “undivided co-owership wagon”. The two banks we’ve noticed the most offering financing for undivisions are: TD Canada Trust and Caisse Popular Desjardins.

Shared common costs:
Unlike condo owners, the co-proprietors share the tax bills: property and school. Renovation and maintenance fees are also part of the shared costs, much like the condo fees. The most appealing part about buying into an undivided property, according to recent buyers, is that you get to split the costly annual property tax bill. But is that good enough reason to own shares into a property as opposed to buying your own? The decision is yours, dear buyer.

If you have questions regarding condo purchasing, or require assistance, contact us

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Canadian Government injects $75-Billion into the financial system. Lower interest rates ahead.

Great news for home buyers. This is a clipping from the Newsletter of the Montreal Real Estate Board. The government injecting money to maintain the market growing, although no news for the 40 year mortgage or zero percent down payment- and we all wish it remains that way. If you can’t afford to buy, then you should not get a mortgage. But for those with the means, lower interest rates are coming ahead. 

Federal Government’s $75-Billion Purchase of Insured Mortgages Should Benefit Home Buyers

As part of its efforts to address the current financial crisis, the federal government announced that it will inject $75 billion of new money* into the financial system, by buying insured mortgage pools from Canadian financial institutions.

The purpose of this measure is to add liquidity to financial institutions – money they can then lend to businesses and consumers. The main effect of such an initiative is to increase the availability of credit while, at the same time, making the cost of credit more affordable. As a result of this plan, financial institutions’ mortgage interest rates should drop, which is likely to stimulate activity on the resale market.

This announcement is good news for our financial system and for the economy in general. Ultimately, it is borrowers who will benefit from this initiative, particularly future home buyers.

This federal government intervention was made necessary by the fact that the financial crisis has led to a significant reduction in the amount of credit made available by the private sector and, as a result, higher costs. In this context, banks’ financing costs increase, which translates into higher prime rates and mortgage rates.

The purchase will be made through the Canada Mortgage and Housing Corporation (CMHC) and will focus exclusively on mortgages that are already insured under its mortgage loan insurance program.

*Minister of Finance, Jim Flaherty, made an initial announcement of $25 billion last October 10, and announced an additional $50 billion on November 12.

Should you lock in your mortgage?

Interest rates are still low, but they’ve been steadily increasing. Here are some points to help you make the right mortgage decision.

If you are buying a home, you may be wondering whether it’s better to lock in a fixed rate in case rates continue to go up, or choose a variable rate that floats with the prime rate. Similarly, if your existing mortgage is variable, you may be wondering whether now is the time to lock in.

Mortgage rates are difficult to predict. It is best to base your decision on your personal situation and comfort level, rather on economic expectations.

Going variable

Variable-rate mortgages can be attractive – the interest rate is lower than for a fixed mortgage of similar size and duration.

With some mortgages, as rates fluctuate, so does the amount of your mortgage payments. Or, with set payment amounts, the portion of the payment that covers your mortgage principal will fluctuate.

In an environment of falling rates, you’ll pay down more principal and pay less interest. But if rates go up, your principal payments will shrink and it may take you longer to fully pay for your home.

Should you choose a variable-rate mortgage? If you can tolerate the uncertainty, the variable rate could save you money over the long term.

Locking in

When you lock in to a fixed-rate mortgage, the interest rate will be higher than for comparable variable-rate products. The benefit, however, is that your rate is fixed for the term of the mortgage.

Even if rates in general rise substantially, your rate is guaranteed not to change. From the moment you lock in, you’ll know exactly what your payments will be and how much of the principal will remain at the end of the term.

Should you choose a fixed-rate mortgage? If fluctuation rates are going to keep you awake at night, then a fixed-rate mortgage may be worth the peace of mind it can give you.

Your decision

Ultimately, the decision to choose a variable or a fixed-rate mortgage is as personal as choosing the right home. It should always be made with informed advice from a professional, who can help you evaluate the options based on your unique circumstances.

For any questions about mortgage financing, programs, options, interest rates etc., feel free to contact Danuta at 1-800-605-6154

Written by Danuta Levitzki.
Conseillère en Financement Hypothécaire | Mortgage Loan Specialist
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Your Mortgage Broker: A Source for Financial Solutions

A mortgage broker can assist you in ways that go well beyond offering great rates.

Many people think of a mortgage broker as someone who can help them get a good rate on their mortgage. While this is certainly true, a mortgage broker can also help you with much more than that.

A mortgage broker is a licensed financial professional with whom you can form a long-term relationship that can extend to various types of financing. Here are some examples:

• If you have an upcoming expense, such as sending your child to college or university, your mortgage broker can help you cash out equity in your home or secure a home equity line of credit.
• If you are looking to buy a cabin or lakefront property, a mortgage broker can help you with financing for it.
• Little-known fact: If you are having problems meeting all of your financial obligations, a mortgage broker can help you consolidate your debts by securing a debt consolidation loan, so you have just a single, manageable payment every month.
• If you want to finance a renovation or other major expenditures, your broker can help arrange suitable refinancing options.
• When it’s time to renew the mortgage, your broker can find a competitive mortgage program and interest rate other than your current bank or financial institutions resulting in further savings.
• Mortgage brokers may also be able to give you information about legal services for buying a home and recommend realtors, appraisers, and home inspectors.

Written by: Danuta Levitzki.
Conseillère en Financement Hypothécaire | Mortgage Loan Specialist.
For current interest rates or to get more information on mortgage financing feel free to visit Danuta’s website at www.HYPOTHECA.net or call direct at 1-800-605-6154.

Need a mortgage?

1. Let us help you find the best mortgage rate for you.
2. Your Name(required)
3. Email(valid email required)
4. Telephone(required)
5. Best time to call Contact me during the day Contact me in the evening

 

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