The Canadian Mortgage Market - Banks in Canada Change Mortgage and Lending Rules and take out 40 year amortization & 0% down - Pre-Sale Condo Problems

Ottawa Backs Mortgage Market

The federal government in Canada has bought up $25 billion in residential mortgages to give Canada’s chartered banks more cash for loans, but the effort shouldn’t be considered a bailout similar to the U.S. government lifeline for Wall Street banks, the federal government and industry watchers say. “It’s a huge stretch to look at it as a bailout – it’s a helping hand,” said Brad Smith, a banking analyst at Blackmont Capital, a brokerage. Prime Minister Stephen Harper said the mortgage transfer is sensible and risk free for taxpayers since the government is buying mortgages it already insures through the Canada Mortgage and Housing Corp. “This is not a bailout of banks; this is a market transaction that will cost the government nothing,” Harper said.

First Time Home Buyers: New Mortgage and Lending Rules Spark Debate

Consumer still at risk with mortgage changes says Experts according to Brian T of the MetroNews Paper in Vancouver. The change to mortgage lending practices isn’t the crackdown it’s meant to look like experts say, and it doesn’t make Canadians any safer from large debt. In July, Ottawa announced a decision to tighten lending rules governing mortgage-lending practices to protect Canadian homebuyers. Under these rules, the amortization period for financial guarantees from the government for insured mortgages – meaning Ottawa pays off a mortgage insurer should a worst-case sceniario happen and a home buyer is unable to pay the premium – has been reduced from 40 years, to 35 years and under. Homebuyers in Canada also need a minimum down payment of 5 per cent, effectively eliminating zero down mortgages. Home buyers in Canada also now require a minimum credit score in order to get a home mortgage. The changes to the lending rules of mortgage lending in Canada have sparked nationwide debate as to whether it helps or limits options. John, president of debt elimination service Debt Freedom Canada, says this is a case of optics. He argues Ottawa is putting on the air of shielding homebuyers in Canada from 40 year amortization periods, but the difference between them and 35 year periods is marginal at best (see chart at the end of this article). “Nothing has happened to protect the consumer from debt. You might have more money in pocket with a 40 year period, but 100 per cent owing going in is 100 per cent owing coming out the back end,” he said. “The financial institutions are still making a buck, and the government gets to look like the good guy.” On Tuesday, Prime Minister Stephen Harper said in order to stimulate the economy, first time homebuyers in Canada would receive a tax credit of up to $750 should a Conservative government be elected into office. But a real estate expert estimated that its impact would be modest: Doug Porter, deputy chief economist at the Bank of Montreal, told the Canadian Press that such an incentive would be unlikely to draw in new Canadian homebuyers. A possible reason for the existing changes, speculates Jim Murphy, president and CEO of the Canadian Association of Accredited Mortgage Professionals (among the groups Ottawa consulted before making the new rules), is that more Canadian homebuyers, particularly young ones, are choosing no money down mortgages with longer term amortization periods. Amounts owing are growing as well: Murphy says Canada’s home owners collectively carry $900 billion in mortgage credit. That number grows by 10 per cent per year. “Thirty seven per cent of Canadians who have taken out a mortgage in the last year have chosen amortization periods of 30, 35 and 40 years,” Murphy said, citing a report his group published in 2007. (This year’s report is due in late October) “It will be much higher when we ask them that question this year.” What has been underreported in the media, Murphy says, is the disadvantage to changes present to immigrants looking to buy a home. “How does a new Canadian, with some income but zero credit score, get a mortgage that requires a minimum credit score of 620 to be guaranteed?” he asks. In terms of hurting the buoyancy of the Canadian housing market, Murphy thinks the new rules will have minimal effect. While in a housing slowdown, he says it still remains strong. In terms of protecting consumers and home buyers from crippling debt and a house rich cash poor sutation, Podlewski says the changes have even less effect. “You need a plan your entire future. Your house is only a part of it,” he added. “Do you want to serve coffee at 65 because you haven’t properly planned an you owe too much money? I get my Tim Hortons in the morning and it’s either a snow-top or a no-top behind the counter. It can happen to you.”

Comparing a 35 Year Amortization Period to a 40 Year Amortization Period Mortgage Payments
Here’s a hypothetical look at what you’d pay on a mortgage with both a 35 year and 40 year amortization period. Numbers have been determined using Filogix Expert, an industry standard point of sale system.

Mortgage 1 with 35 Year Amortization Period
Amount = $200,000
Interest Rate = 5.45 per cent
Amortization Period = 35 years
Term = 60 months
Disclosure Rate = 5.45 per cent
Payment Frequency = Monthly
Compounded = Semi-Annually
Monthly Payment = $1,059.55
Total Payments = $63,573
Total Interest = $52,489.77
Total Principal = $11,082.23
Balance Remaining at Maturity = $188,916.77

Mortgage 2 with 40 Year Amortization
Amount = $200,000
Interest Rate = 5.45 per cent
Amortization Period = 40 years
Term = 60 months
Disclosure Rate = 5.45 per cent
Payment Frequency = Monthly
Compounded = Semi-Annually
Monthly Payment = $1,016.50
Total Payments = $60,990
Total Interest = $52,863.77
Total Principal = $8,126.33
Balance Remaining at Maturity = $191,873.67

Source is from Debt Free Canada

Canadian Banks Shedding 40-Year Mortgage Loans

According to REW of Greater Vancouver, major banks in Canada have changed mortgage offerings to bring its lending rules in line with regulatory changes set to take affect in October. TD bank said, effectively immediately, the maximum amortization period for new mortgages will be 35 years and will require a five per cent down payment. TD bank said it would continue to process those mortgages with a longer amortization period or a lower down payment that have already been approved. TD joins Bank of Montreal in changing its Canadian bank lending rules ahead of the change in regulations. Other Canadian banks are following the lead. Starting October 15th, 2008, Canadians will no longer be able to purchase a home with a government backed mortgage with a 40 year amortization and no down payment. Instead, Canadian mortgages will be limited to 35 years and the government will only insure 95 per cent of the value of the home, meaning home buyers will need to come up with at least a five per cent down payment. As well, borrowers must demonstrate that debt servicing costs are no more than 45 per cent of gross income and have a good credit rating. Government backed insurance is currently available on mortgages where the loan to value ratio is up to 100 per cent – in other words, the home buyer has borrowed all the money to buy a home and then gets insurance coverage on the whole amount.

Door Closing Soon on Zero Downpayments for Canadian Mortgages

Home buyers, especially first time homebuyers, should take note that generous mortgage incentives in Canada bank will be ending this fall. On October 15, 2008, the federal Finance Department will cease guaranteeing 40 year amortization mortages and zero down payment mortgage loans in Canada. Some real estate markets observers expect to see a spike in home sales over the next two months as home buyers try to beat the deadline. Home buying in Canada real estate activity could rise leading up to the October 15 cut off, according to other mortgage professionals. The Canadia government made the changes to its mortgage guarantees to strengthen the real estate market in Canada, and to help guard against a US style housing bubble. Mortgage insurance was introduced in 1954 through the Canada Mortgage and Housing Corporation (CMHC) to help Canadians who hadn’t saved up enough money to quality for traditional mortgage loans from the banks. Currently, home buyers with less than 20 per cent down payment pay a premium for the insurance, which protects the bank lender in case of default. Three competitors of CMHC have now entered the Canadian mortgage insurance market, Genworth financial Canada, AIG United Guaranty Canada and the PMI Group Inc Canada. It is unclear whether the private insurers will continue to offer 40 year Canadian mortgage loans. While popular, 40 year mortgage loans are more expensive int eh long run than a conventional mortgage. However, because monthly mortgage costs are lower they do allow some home buyers to get into the real estate market for the first time.

Know the Real Estate Rules When Buying a New Home

Hire the pros, read fine print and negotiate says HouseLeague Ryan D. for the Metro Newspaper. Does buying a previously owned home appeal to you about as much as purchasing a used pair of shoes? Then buying “presale” (direct from the property developer) may be the solution. While it may seem like a simple task, the rules of buying “presale real estate” differ greatly from your standard “resale” purchase. When buying something new you are essentially engaging in a game of real estate monopoly (without the fun coloured money) – your moves are dictated to you and you must follow the present rules or purchasing a Vancouver presale property. Developers’ contracts are written in their favour, a complete turn about on the standard purchase method. They set the price, the completion dates and most of the other terms of the contract. In this topsy-turvy scenarios, here are some tips to keep you out of trouble and ahead of the Vancouver presales property game. Firstly bring your own realtor. Every real estate developer will pay your realtor’s commission for you. It is always a good idea to have someone on your side. They can navigate through the presales property contract with you tot make sure all your needs are being met. Secondly, in a buyer’s market like we have now, you can sometimes even negotiate a reduction on the purchase price. It’s true. The real estate presales developer’s pricing is usually set in stone, but when they are sitting on an abundance of inventory that needs to be moved, you have that much sought after leverage. Thirdly, GST is paid on all new construction, including presales Vancouver property, but a portion of it is rebated back to you if your new home is your primary residence. Many presales real estate Vancouver developers will pay the rebated portion for you if you sign a waiver allowing the rebate to go to them. That is a new wardrobe (and maybe a different boardgame)! Finally, during the seven-day recision period in all “presale” contracts, where you can back out of the deal if need be, consult a lawyer. Who really understands all that legal jargon better? Just because it may not sound like any language you may have heard, does not mean you are not bound by that fine print in a Vancouver presale property contract. Make sure you understand it all. So, while the game may be stacked in Vancouver presales real estate developer’s favour, these few tips will ensure that when it comes time to make your move, you ar ready and able to see it through. And who knows, when all is said and done, you may even end up with some green back in your pocket. Ryan is a realtor for Sotheby’s International Realty Canada and hosts Novus TV’s Real Estate Minute program.

Beware of Nasty Surprises When Buying a New Home

Rotten joists, missing carpets and dead soldiers buried in the backyard – buying a home can come with all kinds of nasty surprises according to Brian T. for the Metro Newspaper. The beautiful home that you’ve just purchased can house a litany of hidden horrors that you will be left to fix after you move in. A B.C. based realtor advises that there’s no way around it. You must expect – and inspect- the unexpected when you finally sign on the dotted line. “It’s a situation where the home buyer really has to be thinking caveat emptor,” says Tom, A Vancouver Island based real estate agent and co-author of True Real Estate Stories, a compendium of odd and sometimes gruesome anecdotes from the world of home buying. “An inspection should be the first thing on most people’s minds. Problems will inevitably come up and an inspection will show you what those problems will cost to fix.” A home inspector won’t catch everything wrong, Everitt notes, as they can only visually investigate the house. He knows first hand: While Everitt and his wife were resodding their backyard, they discovered the gravestone of Sgt. Joseph Morley, a World War 1 veteran. Another key is to get as specific a contract as possible. Some legal agreements concerning what will remain in the house on move-in day are detailed down to the light switches, Everitt says. Some of his clients have walked into their new home under the impression certain amenities would be there, only to find the seller took those items with them, he adds. “the more thorough the contract, the safer you are. We had home buyers moving intoa townhouse where the previous owners removed the carpet,” he said. “The owners said. “well, we took it with us because we heard they were going to install hardwood flooring,” but the contract stipulated that he carpet would be there. The buyers were furious. Besides that, carpets are specifically measured to be details of a house. What kind of person would want to take it?” If you do discover something untoward about your home purchase, you can launch a lawsuit; having a specific legal document strengthens your claim. Everitt says you must consider the costs of such a lawsuit, however, “Pick your battles,” he says. “Do you really want to take someone to court over missing light switches?” More importantly for those buying a new home is that the contract is clear on who covers the warranty, which can often be the builder themselves. These people are the ones to approach should your home become more interesting than you intended. “If the house is built as just a one-off, you better be darn sure you know what you’re buying,” adds Everitt. “You don’t want to get stuck with a lemon.”

Tips on Home Buying, Rebate Tax on Green Homes, First Canadian Title, Mortgage Options, And Other Vancouver Real Estate News

First Canadian Title

They have title insurance. They know their home is secure. Title fraud can happen. With title insurance from First Canadian Title, the risk and cost related to resolving title fraud or other home ownership problems become ours, not yours. Join thousands of homeowners who have peace of mind from Canada’s leading provider of title insurance. Visit www.ProtectYourtitle.com or call 1.877.888.1153 to order your policy now. Insurance by FCT Insurance Company Ltd. With the exception of commercial policies by First American Title Insurance Company. Services by First Canadian Title Company Limited. This material is intended to provide general information only. For specific coverage and exclusions, refer to the policy. Copies are available upon request. Some products/services may vary by province. Prices and products offered are subject to change without notice.

Take Advantage of Prepayment Mortgage Options

Seventy five per cent of recent Vancouver home buyers say they intend to pay off their home mortgage as soon as possible, but only 33 per cent even make a lump sum prepayment against their mortgage, according to a recent survey by the Canada Mortgage and Housing Corporation. Mortgage brokers offer some strategies fro mortgage holders who are thinking about making mortgage prepayments. Here’s what you could do with a $200,000 five year mortgage at a now competitive fixed rate of 5.45 per cent and a 25 year amortization: Add a bit to your monthly payment: Adding an extra $50 onto the monthly payment of $1,215 will save $14,987 in interest over the life of the mortgage, and allow the borrower to pay off the loan just under two years sooner. Make a yearly pre-payment: Paying an extra $2,000 on this same mortgage once per year on the anniversary date of the mortgage will yield a saving of $39,015 in interest over the life of the mortgage, and allow the borrower to repay the loan about five years sooner. Make a larger prepayment early in the mortgage: Making a single $5,000 lump sum prepayment three years into that mortgage on the anniversary date will save $10,882 over the life of the mortgage. However, waiting 15 years before you make the same payment will result in savings of only $3,446 over the life of the loan.

“Rebate Tax on Green Homes”

The Real Estate Board of Greater Vancouver has joined in a call for the provincial government to cut the property purchase tax (PPT) on the purchase of homes that are built or renovated to high environmental standards. In nothing that PPT revenues are forecast to reach $1 billion in 2008, Brian Naphtali, president of the Real Estate Board of Vancouver, noted tha the government is in a position to tackle climate change by providing the tax incentive. Five recommendations that were delivered to the provincial government will see both PTT and Provincial Sales Tax (PST) revenues used to fund a provincial Green Building Tax Incentive and Rebate Program. The recommendations include offering a PPT rebate on new Built Green homes and PST rebate to homeowners renovating to energy efficient standards.

Home Buyers Weigh Real Estate Needs

Commute may be a factor when looking to purchase a home or condo in Vancouver according to Metro Magazine’s Andrea. First time homebuyers looking to save money should carefully weight their needs and lifestyles against what’s being offered in various municipalities, according to local realtors. Gary Born of Prudential Sussex Realty said that the further away from downtown Vancouver a house is, the cheaper it is likely to be, but other factors such as a lengthy commute can make it impractical. “That’s why they’re less expensive – because the commute is going to be long, expensive and frustrating,” he said. Smon Myara of Sutton Group West Coast Realty said Vancouver real estate home buyers can usually get more for their money the further east they go, in areas such as Burnaby, New Westminster and Langley, for example. “You’ll see that in Vancouver’s west side, for instance, for around $300,000 you would find a dmall, one bedroom apartment,” he said. “as you go further out, you start goint to two bedrooms for $300,000, $320,000. It happens almost right away when you go past a certain boundary,” he added. Born said Abbotsford, Chilliwack and Maple Ridge are three fairly inexpensive areas, as are Pitt Meadows and Northern Langley, which are growing in population due to affordable real estate and developing transit lines. Sebastien Albrecht of Royal LePage Westside recommended areas such as Fairview, an affordable pocket close to both downtown and Granville Island, and East Vancouver real estate, which is close to the Trans Canada Highway and rapidly developing.

Looking to purchase a new home? Congratulations – you’re part of a sophisticated, savvy group. According to a recent report by Canadian Association of Accredited Mortgage Professionals (CAAMP), Canadians mortgage consumers are educated, informed, attuned to local real estate market conditions, and remain confident in our housing and mortgage markets. We’re also increasingly taking advantage of alternative mortgage products like longer amortization periods, no down-payment mortgages, and interest only mortgages. In fact, CAAMP found 37 per cent of recent home purchases in 2007 had been funded with extended amortization periods. Younger Canadians looking to become first time homebuyers are most interested in alternative mortgage products, and while cautious and conservative, they remain optimistic about the overall future of these options. And within that group, renters loking to buy remain most positive about the value of extended amortization mortgages as part of their home buying strategy. And if you’re one of the people with a new home in your future, here are a few that are making their first appearance in New Home Buyer’s Guide.

Tips on Buying a Vancouver Condo Assignment

The B.C. office of the Superintendent of Real Estate has issued an updated information bulletin for those buying assignment condominiums in Greater Vancouver for a new condo or other residential property. The alert is provided to consumers for information purposes only. It is important for purchasers to obtain appropriate real estate and legal advice prior to entering into an assignment condo Vancouver agreement. Things to consider before buying an assignment condo: Consider whether an assignment is permitted under the purchase contract. Some real estate developers in Vancouver do not permit condo assignments. Others may require the developer’s consent and a substantial assignment fee. Review the Developer’s Disclosure statement and thoroughly review all documents related to the sale. Obatin advice from a lawyer and/or real estate professional prior to entering into an assignment condo Vancouver contract. Consider all your options, such as whether the deposit and “lift” will be paid to the assignor upon signing the Vancouver condo assignment or held in trust until some later date. Generally, it is preferable from the assignee’s perspective if money is released to the assignor only after the unit is built and title is being transferred and Confirm in the Vancouver condo assignment agreement how the assignor will meet all of their agreements for a valid assignment of condominium, and set out what will happen if there is any breach of the assignment agreement or the presale contract. For further information on Vancouver real estate transactions and contact information for government offices and industry associations, visit www.fic.gov.bc.ca or the Homeowner Protection Office official website at www.hpo.bc.ca.

Real Estate Council Censures Nixon

Management infraction nets District of North Vancouver real estate councilor 28 day suspension as published in the North Shore News and written by Bethany L on July 23, 2008. District of North Vancouver councilor Alan Nixon was handed a 28 day suspension from real estate practise last month, after he was censured for professional malpractice by the Real Estate Council of B.C He and three other real estate agents were also ordered to pay a fine of $1,500 between them. “This is a little bump in the orad. It’s something that I’ve put well behind me,” Nixon said about the real estate suspension, which ended on Tuesday. Alan Nixon was disciplined for allowing two real estate agents to act as property managers without the proper licenses and for not actively managing the brockerage that employed him. At the time, Alan Nixon was the managing broker for Re/Max Crest Realty, but he left the brokerage in March and is currently unlicensed. The suspect activities began in October 2005, when Nixon said he discovered that two Realtors under his supervision were managing several condos in Vancouver without the proper accreditation. Douglas Soo and Marjan Mazaheri, with help from their assistant Coral Ashe, were managing about 60 units when Alan Nixon said he told them they must hire someone with a license. “Ironically, this is probably one fo the best documented property management relationships that exist out there in the industry,” Nixon said. “Everything was done in strict accordance with the rules of the Real Estate Services Act, except they didn’t have the necessary accreditation to do it.” Soo and Mazaheri did hire a licensed property manager soon after Nixon spoke to them, but they fired him after six onths and resumed managing the units themselves until July 2007. Mazaheri and Ashe are still listed as Crest employees, but Soo is serving a 21 day suspension that will end on July 29. As part of the disciplinary action, Alan Nixon and Soo were also orderd to attend classes entitled Professionalism – It Pays! Be Safe or Be Sued! And Legal Update. He said he plans to enroll in September. The councilor said he plans to return to the real estate industry in the very near future. He has applied for a license for a new brockerage in North Vancouver, and expects to be approved within the next two weeks. Alan Nixon said that he left Crest because of a conflict between himself and the owner over different “operating philosophies”: the owner wanted to expand the brockerage, but Nixon wanted to maintain its current number of agents. A representative for Re/Max Crest Realty confirmed that Nixon left the company for reasons unrelated to the disciplinary action against him. Nixon comfirmed that he would be running for re-election as a district councilor this fall, when he will seek his third term in office.