Oct
27
New homeowners have different options as of October 15 and the new rules put in place by the federal government. Under the new rules homeowners need 5% as a down payment. This can come in the form of their personal savings or a gift from a family member. The maximum amortization is 35 years from the 40 years previously. Most new home owners are looking at having a cosignor to help with the qualification.
Canadian mortgage rates are directly affected by the actions of the Bank of Canada. By monitoring the interest rate on bonds issued by the Bank, anyone can get an indication of interest rate directions. The bond market is essentially a reflection of investors’ interest rate expectation for the future of the Canadian economy.
Purchasers who do their homework know that bond rates have been declining. The decline in bond rates results in lower interest rates on mortgages in Canada. The Bank of Canada has backed away from increasing rates due to recent unrest in the market. However, there is speculation the Bank of Canada may slightly raise interest rates in the coming months, but time will tell.
For any of your mortgage needs please contact Michael Grabmuller at michael.grabmuller@td.com
Oct
24
What A Mortgage Really Is…
Filed Under Mortgage Minute, Mortgages | Leave a Comment
We had some questions regarding mortgages, and wanted to explain exactly what a mortgage is…
The most important thing you must realize about a mortgage is that what you believe it to be is actually wrong. Often referred to as a mortgage home loan, they are not a loan in the traditional meaning of the word. The mortgage is a legal contract between the mortgagor who is buying the property and the mortgagee, the person supplying the finance and security against the property. However, it is easier to explain it as a legally binding document where the lender is protected from loss by using the property as security for the debt.
Mortgages have in fact changed the face of house buying because they provide the facility for the purchase without the buyer paying the full cost upfront. The way this process works is presented in brief detail during the rest of this article. Being the financier, the mortgagee is the person who lends funds to the mortgagor or borrower. The document itself produces a lien on your property which is not cleared until the debt is paid.
The property you are buying does in fact become collateral for the finance that has been sought to pay for it and is the protection a mortgagee needs if he is going to continue financing house purchases. Records of this are normally kept in the public records section of the county courthouse or a similar establishment. While the property is owned now by the mortgagor, the lien cannot be reversed until the amount specified in the debt is paid off. So how this works is that the mortgagor (you) owns the property completely even though the mortgagee has possession of the mortgage but not the title.
The only right the mortgagee has over the property now is if payments are missed and the property needs to be sold so the mortgagee can recoup his funds. If in the unfortunate event this happens, the process whereby the funds are reclaimed is called foreclosure. This is done in order for it to be considered legal; this type of foreclosure is referred to as a judicial foreclosure. This is the subject in brief and while there is a great deal more to it, perhaps this will help to clear up any ambiguities you may have previously experienced.
Oct
11
CMHC is Purchasing $25 Billion in Insured Mortgages
Filed Under Canadian Economy, Finances, Mortgages | Leave a Comment
Canada Mortgage and Housing Corporation(CMHC) will purchase up to $25 billion in insured mortgage pools as part of the Government of Canada’s plan, announced today, to maintain the availability of longer-term credit in Canada.
Now this is not a bail out plan like in the US. Rather this is an attempt by the current government of Canada to keep the banks wanting to loan out to Canadians for Cars, Homes etc. By buying some of the insured mortgages, key word is insured (unlike the US), it frees up some of the banks money, and will allow to also lend to other banks and not keep such a tight guard on lending. To explain how banks and bankers work, they have suspenders, a jock strap and a hard hat… they are always protecting themselves too much, which in our case right now is good. The government is doing this, so there is less pressure by the world markets.
The first purchase of $5 billion will be made October 16, 2008 through a competitive auction process. The mortgages involved are high-quality assets that are already guaranteed through government-backed mortgage insurance. The Government will announce a schedule of future purchase dates to take place over the coming weeks.
Canada Mortgage and Housing Corporation (CMHC) has been Canada’s national housing agency for more than 60 years. CMHC is committed to helping Canadians access a wide choice of quality, affordable homes, while making vibrant, healthy communities and cities a reality across the country.
Please refer to the this link to see a detailed layout of how they choose the mortgages, and the auction works.
Jul
21
As you may or may not have heard, that the government backed Mortgages will have to be minimum 5% down and a maximum of 35 years amortization. Many purchasers are trying to scramble to get into the market with zero down or 40 year amortization before the Oct. 15, 2008 cut off date and because Albertans have taken up longer-term and zero-down mortgages with greater zeal than the rest of the country — especially in Calgary, where prices have skyrocketed in recent years — the greatest impact of the new policy, taking effect Oct. 15, will likely be felt here.
However, the changes are being made “to ensure Canada’s housing market remains strong and to reduce the risk of a U.S.-style housing bubble developing in Canada,” the government says. Personally, I don’t think we were headed towards a housing bubble. Yes, prices have increased, but the market is currently correcting itself, and there is still much growth to come, and hopefully it is at a sustainable level.
As quoted in the Calgary Herald, Todd Fralic, regional sales director for Mortgage Intelligence, estimates 35- to 40-year mortgages make up about 20 per cent of his Calgary business. Fralic said getting rid of 40-year mortgages is going to be as big of an issue as getting rid of zero-down mortgages.
“I think it hurts the new homebuyer who’s trying to get in our market quicker,” Fralic said. “Other people disagree and say, ‘You know what, there’s nothing wrong with putting five per cent down on a house. If you can’t save your five per cent, then you shouldn’t be in the market.’ ”
We will have to see what happens to prices and the inventory levels over the next couple months, but I do think that the market will get a bit tighter before Oct. 15, 2008 and then settle down afterwards into Christmas months…
Jul
17
Finance Minister Ain’t Gonna Worry
Filed Under Canadian Economy, Mortgages | 2 Comments
Federal Finance Minister Jim Flaherty shrugged off housing worries in Canada Wednesday, saying there is no bubble and that the subprime-mortgage woes crippling financial institutions in the United States are not threatening banks north of the border.
“There is no bubble in the Canadian housing sector,” he told reporters after speaking to roughly 400 people at a Calgary Chamber of Commerce event.
“That’s not been our concern. Our concern has been a tendency for longer amortization periods, like 40 years, and for purchasers putting very little money down. We’ve seen nothing in Canada like the U.S. subprime situation.”
He goes on to say that with the new tightening of the rules with down payments on mortgages and amortization periods, he is not fretting about the banks and the woes that are happening in the US. He ends the article by saying… that he acknowledged that the economy is going through “turbulent times,” it still remains healthy.
“Our economy is strong,” he told the audience.
Jul
15
Below is a news release from the Canadian Government stating that there will no longer be 40 year amortizations and no more zero-down mortgages in Canada. This will however take in effect as of October 18th, 2008, and will only effect new mortgages, while existing zero-down or 40 year mortgages will not be effected.
These changes are being made to government-backed mortgages (insured mortgages including CMHC, AIG and Genworth).
These changes include:
-Fixing the maximum amortization period to 35 years
-Requiring a minimum down payment of 5%
-Establishing a minimum credit score requirement
-Introducing new loan documentation standards
Click Here to Download government-release-40-year-zero-down.pdf
Dec
3
Home Buyers Glossary Part 3 of 3
Filed Under Buying, Glossary, Mortgages, Special Reports | Leave a Comment
The last section of our Home Buyers Glossary…
PRINCIPAL:
The amount borrowed or still owing on a mortgage loan. Interest is paid on the principal amount.
REFINANCING:
Paying off the existing mortgage and arranging a new one or re-negotiating the terms and conditions of an existing mortgage.
RENEWAL:
Re-negotiation of a mortgage loan at the end of a term for a new term.
SECOND MORTGAGE:
Additional financing. Usually has a shorter term and higher interest rate than the first mortgage.
TERM:
The length of time the interest rate is fixed. It also indicates when the principal balance becomes due and payable to the lender.
TITLE:
Legal ownership in a property.
VARIABLE-RATE MORTGAGE:
A mortgage with fixed payments, but fluctuates with interest rates. The changing interest rate determines how much of the payment goes towards the principal.
VENDOR TAKE-BACK MORTGAGE:
When the seller provides some of all of the mortgage financing in order to sell their property.
So that does it for our Home Buyers Glossary… If you have any questions, please let us know at www.JustAskJared.com
If you have and real estate needs, please give us a call today!
Regards,
Jared & Rebecca Chamberlain
www.ChamberlainGroup.ca
Email Us!
403-247-5171
Nov
28
Home Buyers Glossary Part 2 of 3
Filed Under Buying, Glossary, Mortgages, Special Reports | Leave a Comment
Here is the second part of the Glossary that you should know when purchasing a property…
HIGH-RATIO MORTGAGE:
A mortgage that exceeds 80% of the home’s appraised value. These mortgage must be insured for payment
INTEREST RATE:
The value charged by the lender for the use of the lender’s money. Expressed as a percentage.
MATURITY DATE:
The end of the term, at which time you can pay off the mortgage or renew it.
MORTGAGEE:
The person or financial institution that lends the money.
MORTGAGOR:
The borrower, or yourself.
MORTGAGE INSURANCE:
Applies to high-ratio mortgages. It protects the lender against loss if the borrower is unable to repay the mortgage.
MORTGAGE LIFE INSURANCE:
Pays off the mortgage if the borrower dies.
OPEN MORTGAGE:
Allows partial or full payment of the principal at any time, without penalty.
PORTABILITY:
A mortgage option that enables borrowers to take their current mortgage with them to another property, without penalty.
PRE-APPROVED MORTGAGE:
Qualifies you for a mortgage before you start shopping. You know exactly how much you can spend and are free to make a “firm” offer when you find the right home.
PREPAYMENT PRIVILEGES:
Voluntary payments in addition to regular mortgage payments.
If you have any Real Estate needs, please contact us directly!
Regards,
Jared & Rebecca Chamberlain
www.ChamberlainGroup.ca
Email Us!
Nov
26
Home Buyers Glossary Part 1 of 3
Filed Under Buying, Glossary, Mortgages, Real Estate General, Special Reports | Leave a Comment
The Home buying process can bring many questions. This glossary may be a great way to help outline and understand what it is those around you are talking about.
AMORTIZATION PERIOD:
The actual number of years it will take to pay back your mortgage loan
APPRAISED VALUE:
An estimate of the value of the property. Conducted for the purpose of mortgage lending by a certified appraiser. This appraisal is not to be confused with a building inspection.
ASSUMABILITY:
Allows the buyer to take over the seller’s mortgage on the property.
CLOSED MORTGAGE:
A mortgage that locks you into a specific payment schedule. A penalty usually applies if you repay the loan in full before the end of a closed term.
CONDOMINIUM:
The owner has title to a single unit, as well as a share in the common elements such as elevators
or surrounding land.
CONDOMINIUM FEE:
A common payment among owners which is allocated to pay expenses.
CONVENTIONAL MORTGAGE:
A mortgage loan issued for up to 75% of the property’s appraised value or purchase price, whichever is less.
DOWN PAYMENT:
The buyer’s cash payment toward the property. The difference between the purchase price and the amount of the mortgage loan.
EQUITY:
The difference between the home’s selling value and the debts against it.
Stay tuned for the rest of the list…
Regards,
Jared & Rebecca Chamberlain
www.ChamberlainGroup.ca
Email Us!
Nov
22
Canada’s sub-prime market will experience more blows in the coming months as a result of the US credit crunch, but the effects won’t be permanent, predicts Ben Tal, senior economist with CIBC World Markets.
In an interview with CMP, Tal admits the US market’s effect on Canada was greater than he initially predicted but, because the issues facing Canadian lenders are sparked by panic, the situation will settle down within six to eight months.
“Six months from now, the sun will rise on the US market. It’s not that the sub-prime problems will disappear, but the risk and the fear of the market will disappear and common sense will prevail,” he says. “And at this point, people will look at the fundamentals of the Canadian market and realize that it’s not even close to what we’ve seen in the US in terms of the types of mortgages issued to sub-prime borrowers in Canada.”
Tal says there is still plenty of potential for growth in Canada’s sub-prime market and, although it may stall in the coming months, the market is still on target to grow by approximately 10-15% in the coming years.
The US crisis will probably leave some permanent scars on Canada’s sub-prime arena including more expensive mortgages due to the repricing of risk but this might actually be a blessing in disguise, he says.
“We probably won’t see teaser rates,” he says. “Maybe if there wasn’t a crisis in the US, they would have caught fire here as well.”
While Tal says tying a home purchase to the state of the housing market isn’t usually a wise decision, he says borrowers looking to purchase a sub-prime mortgage will be better off seven or eight months from now.
“Sub-prime borrowers will still be able to finance their debts, but down the road the situation will be better,” he says.
So really it’s a matter of waiting out the storm, and understanding that this too shall blow over…
Regards,
Jared & Rebecca Chamberlain
www.ChamberlainGroup.ca
Article Source: November 2007 (re-printed from Canadian Mortgage Professional magazine)
The Chamberlain Group
