A blog cannot deal with all aspects of a subject and is not intended to replace professional advice. It's purpose is to highlight information and identify areas of possible interest. Anyone wishing to discuss this blog or to make any comments or suggestions about this blog is invited to do so by either posting comments or emailing me directly.
Many Canadians are under the assumption their mortgage is as good as done once they have a mortgage pre-approval.
But the truth is a buyer cannot expect a mortgage pre-approval will automatically translate into a mortgage. The lender now needs to consider the property itself, approve all the terms and review the documentation before you transition from pre-approved to approved.
Buyers often do not appreciate there is still some uncertainty when it comes to their mortgage. Unfortunately, once in a while this uncertainty bites back – with calamitous consequences.
Going in Without Conditions in a Hot Market
Not that long ago, when housing supply equalled or exceeded demand, the buyer would insert a clause requesting five business days (usually) to arrange mortgage financing – this is called a “condition of financing.” Even one or two days can make a world of difference.
These days across much of Canada, residential real estate is such a hot commodity it’s more...
Backup offers are becoming more common and are often successful. In the last downturn of the market, buyers were having a difficult time in qualifying for mortgage loans. While not a huge number of deals fall apart, in difficult times they seem to double in quantity. In a short 3-month period that year, we completed 3 successful deals for our clients by making backup offers on homes that were conditionally sold.
In October of 2016, lending criteria for high-ratio mortgages substantially changed. As a result, consumers who would previously had no problem in qualifying for a mortgage loans are more frequently being turned down by lenders. As a result of this, their conditional purchases are collapsing. In March 2017, the mortgage insurance premium increased – again! The qualification rules will probably only get more difficult.
If you had an accepted offer that was a backup to the first offer and the first offer collapses for any reason, your already accepted...
Federal Finance Minister Bill Moreau announced in early December the government is increasing the down payment requirements for homebuyers seeking to purchase properties over $500,000. The move is designed to cool down the smoking-hot housing market in some of Canada’s biggest cities (namely, Vancouver and Toronto).
Homebuyers will have to put 10 percent down on the portion of the price over $500,000.
Anything under $500,000 will still only require a five percent down payment.
"This will impact one percent or less of the market,” Morneau told a news conference.
Morneau says the new measure is aimed at expensive homes while still encouraging first-time homebuyers to get into the market.
Those selling their homes in order to size up, especially in cities with hot housing markets, likely won’t feel the pain since they’ve built up equity in those properties.
Price impact: The influence over prices should be small given the narrow reach of the new rules, analysts say....
Today, the federal Finance Minister announced changes to the rules for government-backed mortgage insurance to contain risks in the housing market, reduce taxpayer exposure and support long-term stability.
Effective February 15, 2016, the minimum down payment for new insured mortgages will increase from 5% to 10% for the portion of the house price above $500,000. The 5% minimum down payment for properties up to $500,000 remains unchanged.
For example, a home costing $700,000 would require a $45,000 down payment – a 5% down payment on the first $500,000, added to a 10% down payment on the remaining $200,000.
Buyers shopping for homes below the $500,000 mark will be unaffected by the new rules.
The move is expected to take pressure off the Canada Mortgage and Housing Corporation (CMHC), which offers mortgage loan insurance for properties valued below $1 million.
Since the 2008 recession, the federal government has made it more challenging for Canadians to...
Effective June 1st, 2015, the mortgage loan insurance premium for homebuyers with less than a 10% down payment will increase by approximately 15%.
The premium is charged to the bank by CMHC, but banks almost always pass the premium on to the consumer.
For the average Canadian homebuyer who has less than a 10% down payment, the higher premium will result in an increase of approximately $5 to their monthly mortgage payment. This is not expected to have a material impact on housing markets.
Premiums for homebuyers with a down payment of 10% or more and for CMHC’s portfolio insurance and multi-unit insurance products remain unchanged. The changes do not apply to mortgages currently insured by CMHC.
This means that if you are buying a home and putting a down payment less than 10%, the premium to insure the mortgage increases from 3.15% of the total amount borrowed to 3.60%. This new increase comes into effect June 1, 2015. For a mortgage of $350,000 it is an...
In the slowly evolving world of real estate, many REALTOR® members are now using email, text messaging and telephone calls to help speed up negotiations and email to exchange documents with their clients and with other REALTOR® members. Electronic signatures, while not yet universally accepted, are becoming more common for real estate contracts.
A “wet” signature is a signature written in ink. These are the in-person signatures that are commonly used to indicate that a person agrees to the contents of a document.
A "digitized," wet signature is a graphic representation of a wet ink signature. A person signing a document using a stylus on a tablet is creating a digitized signature. A digitized signature can also be created by simply faxing a document with a wet signature.
An "electronic" signature is one where the user’s identity is confirmed by a service provider and a password protected signature representation is applied to an electronic document....
Canada Mortgage and Housing Corp. says it will no longer offer mortgage insurance for homes that cost $1 million or more, starting July 31, even if the buyer has made a deposit of 20 per cent or more.
“CMHC helps Canadians meet their housing needs and contributes to the stability of the housing market and finance system,” said Steven Mennill, senior vice-president of insurance, said in a statement. “The changes announced as part of the review ensure that CMHC’s products and services are aligned with these objectives.”
On Thursday, April 24, CMHC announced that they were taking steps that could dramatically affect the ability of Canadians to purchase a new home in Canada. They did this by announcing that they are discontinuing the CMHC second home mortgage program effective May 30, 2014.
The fine print of this change is that CMHC is not just removing the second home mortgage program, they are only allowing Canadians to have one CMHC insured mortgage at any given time. This change affects all Canadians in several areas:
If you want to rent your current home and buy another property for yourself:
Let’s say you purchased your first home a few years ago and are looking to rent it out and then buy another home for yourself. By renting the home this property can become a long term investment where the current mortgage is being repaid by the tenant and if the market increases then they gain appreciation as well. By CMHC making their change, if you require a new CMHC insured mortgage, then you are...
If you're buying a home and have less than 20% down payment, your CMHC mortgage insurance is going up effective May 1st 2014. Overall, not a huge increase. Remember that insurance premiums are added to your total amount borrowed. More info: CMHC
For the fifth time in five years, Federal Finance Minister Jim Flaherty announced additional rules for Mortgage Lenders, designed to calm what he sees as a "hot" housing market. This round, the government is, in effect, implementing a cap on the amount of loan guarantees the CMHC provides to Lenders.
Market effects? Short-term, there will likely be upward pressure on interest rates by 20 to 60 basis points, despite the Bank of Canada's signal of interest rate stability.
For home buying and home selling strategies that work to a plan, please call.
Are you considering buying a second home in Calgary? Perhaps you're considering making a purchase of a house or condominium so your child can have a place to live while they are attending university. Or perhaps, you are providing a home for your parents. Or perhaps, you're considering buying a cottage or cabin on the lake?
The minimum down payment for a second home purchase in Canada is 5%. CMHC allows Canadians to own up to two high ratio insured properties. To be eligible for a second home property purchase with a 5% down payment borrowers must intend to occupy the property either themselves or have it occupied by an immediate family member. No rentals are allowed under this program. Also, you cannot make this purchase in a corporate name.
With today's Bank of Canada rate announcement, there was also an indication our economy is stronger than the Bank projected. But weak inflation continues to signify that rates aren't ready to move. Yet.
In contrast, last week the U.S. Federal Reserve announced the U.S economy was stronger than projected, which has them considering a policy shift to end stimulus spending. And that's a signal that interest rates south of the border may go up sooner than expected.
Trial balloon or early warning? It's too early to tell. But given that the new Bank of Canada Governor Stephen Poloz begins his term on June 3rd, a Bank of Canada policy shift may be on the horizon as well. Once again, it's time to be a rate-watcher.
Wow, my blog and Twitter posts on the forecasted effects of the new mortgage rules created the highest amount of feedback yet - albeit quite negative from other agents who felt I was forecasting "doom and gloom" that would drastically reduce sales for the next several months. One stated, "How dare I cause fear?" I countered, that I did no such thing. I merely posted the fact-based research and forecast that the City of Calgary had completed in regards to the impact of the new mortgage rules on a LOCAL housing basis. In fact, it is quite the opposite. Read on...
On a national basis, almost every economist is forecasting a ten to 15 percent price correction (price drop) - on average - over the next two years. That isn't particularly rosy, but based on the over-inflated prices in Vancouver and the super-hot condo market in Toronto, this makes total sense. Those two cities, alone, make up a significant number of the total sales in the country.
It has now been a week since the mortgage insurance rules changed. There has been lots of speculation from a number of banks and other economists over the last several days as to the impact that is forecast. For example, the TD Bank economists forecast that average home prices in Canada will likely contract 10 to 15 per cent over the next two years.
Incredibly, we still see articles quoted from a week prior to this with extremely optimistic numbers based on the conditions prior to the mortgage insurance rules change. These folks are either extreme optimists or they have their heads in the sand.
What Will the Local Effect Be?
The Corporate Economics department at the City of Calgary has now come out with a report with a significantly more local focus. As a result of their prior research and adjustments, their forecast is:
The Calgary housing market has two active sectors, entry-level and move-up level.
Low priced entry-level housing will be affected most by this...
On June 21, 2012, Ottawa tightened rules on mortgage lending in the country, reducing the maximum amortization period to 25 years, down from 30 years.
Here's a visual look at how these changes (which take effect July 9) would affect one homeowner's mortgage payments using a five per cent sample interest rate (which is above today's rate but well below the average interest rate over the last 25 years) and assuming the homebuyer were to take advantage of the maximum length of time for the mortgage without annual prepayments or accerated payments:
Sources: Canada Mortgage and Housing Corporation mortgage calculator, Canadian Real Estate Association, CBCNews.ca
The federal government has moved once again to tighten mortgage-lending rules amid lingering concerns about overheated housing markets in some major cities and rising household debt levels.
In a completely expected decision called for by some of the big banks — and one that's expected to soften...
Last month, the federal government published a Mortgage Prepayment Code to ensure borrowers are better informed by lenders (federally regulated institutions) when it comes to situations where mortgage prepayment penalties may be charged – namely, for the purpose of clarifying interest rate differential (IRD).
This is a positive step, because IRD calculations and penalties have traditionally been very confusing to borrowers.
IRD is a charge many borrowers face when paying off a mortgage prior to its maturity date, or by paying the mortgage principal down beyond the amount of annual allowable prepayment privilege limits. And IRD penalties can prove quite costly depending on the remaining mortgage term.
IRD is based on:
The amount that is being prepaid; and,
An interest rate that equals the difference between the original mortgage interest rate and the interest rate that the lender can charge today when re-lending the funds for the remaining term of your mortgage....
Source: RECA - used under standard YouTube license terms.
When you buy or sell property or need to secure a mortgage, using a licensed real estate industry professional gives you certain protections you would otherwise lack. RECA licences all industry professionals in Alberta. Check if the person you are dealing with is licensed at www.reca.ca
About RECA: The Real Estate Council of Alberta (RECA) is an independent, non-government agency responsible for governing the real estate brokerage, mortgage brokerage and real estate appraisal industries under the Real Estate Act of Alberta.
Which is better: A home equity line of credit or reverse mortgage? Let’s compare and see what’s best for you.
If you want to access the equity in your home without selling your house, most people think of a "home equity line of credit" first. But, if you’re over 55 and own your own home, there may be a better option: a reverse mortgage.
Which is better: a home equity line of credit or reverse mortgage? Let’s compare and see...
We're asked this question quite often, so you're not alone.
"Closing costs" is a term that you will likely hear often in your real estate transaction, whether you are buying or selling a home. The "closing costs" are the costs paid for at the end of the transaction at your lawyer's office. Many of them are directly related to the legal fees, property tax adjustments, land transfer fees, mortgage fees, etc. and generally add up to between $800 and $2,000 for the Buyer and $600 to $1,500 for the Seller - depending upon the transaction and the legal firm selected.
Other jurisdictions may have additional costs or may not involve lawyers in the real estate transaction (they use "Title Companies" and refer to a concept of "Escrow"). As always, you should verify this discussion within the context or your own jurisdiction.
A much better discussion involves the total costs included in buying or selling real estate. These costs are many and which is why it is not advisable to be "flipping"...
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