Monday, January 31, 2011

Confused about the new mortgage changes? Join AMBA for their webinar: Understanding the Changes to Mortgage Lending Rules!

On February 9, 2011, at 7 p.m. AMBA will host a webinar to address concerns and bring clarity regarding the new mortgage rules which will be in place March 18th 2011.

Your credit score: Decoded

While credit scores seem to be arbitrary, they're actually determined according to a rigid mathematical formula. Every debt, credit card and late payment is weighed differently -- and these weights differ between TransUnion and Equifax. In general, Equifax Canada weighs its components something like this:

Payment History -- 35%
This typically involves recent payments that are more than 30 days late, as well as any collections, judgements or bankruptcies

Outstanding Debt -- 35%
This includes the number of creditors owed, credit card balances and allocated limits. A maxed out credit card will have a deeper impact on your credit score than a card with a $200 balance

Credit Account History -- 15%
This refers to the length of time your accounts have been open. If you've been using a credit card for ten years and have been paying it off on a regular basis, this actually has a positive effect on your overall credit rating

Recent Inquiries -- 10%
Every time you apply for a loan or credit card, lenders have to access your credit report to see your score and assess your credit worthiness. Too many of these in a 12 month period -- say, if you were shopping around for a mortgage -- can reduce your rating.

Types of Credit -- 10%
If you have a mix of different types of credit -- including revolving credit, such as credit cards and lines of credit, and installment loans that you pay monthly, such as student loans -- the better your credit picture will be.

Curious about your credit score? Order a copy HERE!

-courtesy of Axiom Mortgage Partners

Friday, January 28, 2011

Are U.S. brokers giving Canadian brokers a bad name?

Canada’s mortgage brokers are voicing concerns that negative press in the United States is hurting their business, and their reputations.

The findings are a result of a survey of over 500 Canadian mortgage brokers conducted by the Real Estate and Mortgage Institute of Canada (REMIC), which found that 72 per cent feel that they are being inaccurately tarnished by their American counterparts. Broken down by province the numbers varied however, with 80 per cent in Ontario, 78 per cent in BC and 56 per cent in Alberta agreeing with the statement.

“Canadians have been inundated with stories of how mortgage brokers in the United States, due to questionable business practices, contributed to the American mortgage meltdown,” said REMIC President Joseph White. ”Canadian mortgage brokers typically employ sound business practices, are highly regulated and ongoing surveys show that their customers exhibit high levels of customer satisfaction, a far different experience than what has been reported in the United States.

“The survey further indicates that Canadian brokers want to see a more accurate reflection in Canadian media of the uniquely Canadian experience, a reflection that has been overshadowed by the negative reports about their American counterparts.”

Dave Larock a mortgage planner with TMG The Mortgage Group said that while he personally hasn’t encountered this reaction, he knows it’s unfair for Canadian brokers to be tarred with the same brush as U.S. brokers. “It`s every Canadian broker`s job to ensure that customers understand that just because we share the same job description it doesn`t mean that we have anything more in common with U.S. brokers.”

For Vince Gaetano, vice president and principal broker at, the issue is ensuring clients are informed. “The two styles of business are completely different. As an industry participant, every mortgage agent in Canada needs to be able to explain the differences to any client that has a concern about the negative press south of the border and I don’t think there are many clients that have this negative impression.”

He also thinks some in the industry are using the bad press as an excuse. “I believe that the majority of our industry [doesn’t educate the customer] and as a result, they simply blame the negative press from the US for our shrinking market share.”

Martin Marshall, the chair of IMBA’s communication committee, doesn’t believe brokers have anything to worry about. “While IMBA is somewhat concerned that the negative press that U.S. Mortgage Brokers are continuing to receive may have a negative effect on our members’ businesses in the short term, we are confident that Canadians will continue to use the services of licensed mortgage professionals, who follow a strict code of conduct.”

Wednesday, January 26, 2011

TD's new flexible payment features

Today TD Canada Trust is introducing additional flexible payment features that will give customers more choice and control over their lives when they really need it.

■Pay down your mortgage ahead of schedule and you may have the ability to reduce your payments later for up to 4 months

New and renewing customers who pay down their mortgage ahead of schedule may qualify to later take advantage of a temporary reduction in their regular mortgage payment amount, an option that may be helpful in the event of short-term income reduction
■Pay down your mortgage ahead of schedule and you may have the ability to take a break later for up to 4 months

By paying ahead, not only do you get the benefit of paying off your mortgage faster, you also have more flexibility and control and may qualify to take a temporary break later when you really need it. This added flexibility can make things easier in many situations such as a maternity leave, caring for a loved one or temporary job loss.
■Pay down your mortgage on schedule and you may have the ability to defer or reduce a payment later

A major event can throw anyone off track. If you’ve been paying your mortgage on schedule and are unexpectedly facing a major expense or an unanticipated reduction of income, at TD Canada Trust you may be able to defer or reduce one monthly mortgage payment a year up to four times during the life of their mortgage.

Interest continues to accrue during each of these events and is added to the outstanding balance at the time of each regular payment date.

If you are interesting in obtaining a TD mortgage, please contact me!

Tuesday, January 25, 2011

And the winner is...

Genworth has announced the winner in their 4th annual “Meaning of Home” national writing contest.
The winning entry was selected from 2,400 submissions with the prize being a $60,000 donation to help build a Habitat for Humanity home in the region of the winners’ choice.
Congratulations to Karson Simpson, a grade 6 student in Guelph, Ontario, on her winning entry!

White hot housing...

I saw this news story on Friday night and was absolutely shocked! I completely forgot to blog it. One thing is for sure, I’ll never complain again about the house prices in Edmonton!!!

White Hot Housing Market: A record is set after a dilapidated Vancouver home sells for over $1-million, the CBC’s Chris Brown reports

I was chatting with Lisa Brown, a REALTOR® with RE/MAX Real Estate, about this story and she looked up the 10 most most expensive properties in Edmonton. Check them out here!

Wednesday, January 19, 2011

Forgetful me...

The Bank of Canada made a scheduled rate announcement yesterday and announced- nothing! No changes to the key interest rate for now. Guess I forgot to blog about as nothing changed!
For all the borrowers out there on variable rate, open or HELOC mortgages you can breathe a sigh of relief!
The next scheduled interest rate announcement is set for March 1.

Tuesday, January 18, 2011

What do the CMHC changes really mean to you?

So, by now you’ve all heard that CMHC has changed things up a bit, mainly by removing 35 year amortizations. But what do the recent changes actually mean to you?

Using a purchase price of $350,000 let’s compare the monthly mortgage payment on 30 versus 35 year amortizations using today’s five year rate of 3.89% and assuming a minimum 5% down payment.

Purchase price: $350,000
Less 5% down payment: -$17,500
Amount ot be mortgaged: $332,500

Scenario 1: 35 year amortization
CMHC premium: $10,473.75
Total mortgage: $342,973.75
Monthly mortgage payment: $1,489.70

Scenario 2: 30 year amortization
CMHC premium: $9,808.75
Total mortgage: $342,308.75
Monthly Mortgage payment: $1,606.50

That works out to an extra $116.50 a month. Keep in mind, you will be saving significant interest costs over the life of your mortgage by choosing a shorter amortization.

If you have any questions regarding the recent changes to CMHC insured mortgages feel free to drop me a line anytime!

Monday, January 17, 2011

What are you thinking Mr. Flaherty?

I just received this from my friends over at Axiom and wanted to share it with all of my followers:

Todays announced changes to the rules governing mortgage lending are just another indication of how out of touch our politicians are with reality. While I applaud any effort to create economic stability, it should be well thought out and actually have a positive impact.
Todays announcements include:
Reducing maximum amortization to 30 years
Reducing LTV of refinances from 90% to 85%
Removing the ability to insure high ratio HELOCS

The most significant of which is reducing the available amortization period. The 35 year (and even 40 year) amortization is not the cause of household financial woes in Canada. Reducing the amortization does little to nothing to reduce Canadian debt loads. The impact of reducing the amortization period will be to simply reduce the amount of mortgage a home-owner or prospective home-owner can qualify for. This means a trickle down which will take some first time buyers out of the market and put additional downward pressure on house prices. This measure effectively penalizes those who purchased with a 35 or 40 year amortization in previous years, and therefore were willing to pay a higher amount for a home because of the reduced carrying cost of an extended amortization.
If a household is prepared to spend $1000/month on housing then that number is not going to change because of a reduced amortization. It simply means they can buy less house leaving a smaller market for those trying to sell their home, who perhaps purchased with a higher amortization. The only real impact this change has is to increase the likelihood that those that purchased at the peak with minimal equity will end up with negative equity. This does not alleviate problems but in fact causes more problems. People are more likely to ‘walk away' from an asset with negative equity in tough times rather than fight through to protect an asset with real or perceived long term value. Mr. Flaherty you are effectively jeopardizing the equity that you purport to be protecting.

-Courtesy of Axiom Mortgage Partners

They're at it again!

Jim Flaherty, the Federal Finance Minister, cited several changes to CMHC insured mortgages in an announcement earlier today.

The changes are:
-the maximum amortization on CMHC insured mortgages will be 30 years, as opposed to 35 year amortizations
- the maximum loan-to-value on CMHC insured refinance transactions will be reduced to 85% from 90%
- CMHC will no longer insure home equity line of credit’s (HELOC’s)
Flaherty cited several reasons for imposing the new changes:
-the maximum allowable amortization was changed to significantly reduce the interest costs to homeowners (we all know that your interest costs are lowered significantly when you choose a shorter amortization)
-the refinance rules were changed to prevent homeowners from refinancing their homes irresponsibly and to promote savings through home ownership
-CMHC has pulled away from insuring HELOC’s as they found that some financial institutions were allowing borrowers to roll too many consumer purchases into CMHC insured mortgages.
Flaherty stated that the purpose of CMHC is not to finance consumer purchases. This new rules does NOT mean that an individual can no longer obtain a HELOC, it just means that they cannot get CMHC insurance on that loan. HELOC’s are currently available at 80% loan to values on purchases and refinances.

My two cents:
Hindsight is 20/20 and the government is clearly trying to make up for irresponsible decisions on their part during the boom between 2005-2007. I have to argue that 0% down, 40 year mortgages should NEVER have been available and that these irresponsible lending policies on behalf of CMHC contributed to the mess we are now in (record levels of consumer debt). I also have to wonder if the government is making the same mistake it did during the boom, not having the foresight to see where these new lending policies will take us.
Flaherty has called these new changes “moderate” and I tend to agree. However, combined with the other moderate changes in the last few years, I think they all add up to be major changes to the mortgage/real estate industry.

CMHC changes in the last 3 years:
-removal of 0% down mortgages, reduced to 95% loan to value mortgages
-removal of 40 year amortizations, reduced to 35 years
-revenue property loan to values reduced to 80% from the previous 95%
-Minimum beacon score requirements of 600 imposed
-HELOC mortgage loan-to-values decreased from 95% to 80%
-Refinance loan-to-values reduced from 95% to 90%

Yes, I do agree that there is irresponsible lending and borrowing going on but I have to argue that the behaviour would not have been possible had CMHC not had the lending policies that allowed this behaviour to happen in the first place! The government is trying to put a break on this and reverse the problem but I think they are going a little too far in the other direction!

In my opinion, the government shouldn’t have been so liberal during the boom, and shouldn’t backtrack by being overly restrictive now. How can an economy get it’s mojo back with so many restrictions?

It will certainly be interesting to see where these latest changes take us. The Bank of Canada has a scheduled interest rate announcement tomorrow so stay tuned!

Wednesday, January 12, 2011

2011 Housing Forecast Seminar

This morning I had the pleasure of attending the 2011 Housing Forecast Seminar at the Shaw Conference centre. I always look forward to this annual event as it helps to give me some sort of idea as to how the year ahead will unfold. Here is the Coles’ Notes overview of this morning’s presentation:

The Economy, Rates and Housing: In 20 Minutes or Less
Presented by: Ian Glassford, CFO of Servus Credit Union

The Global Economy- will show a continued recovery in 2011 and a weak recovery for developed economies. This sector is volatile but overall positive. There is some concern about dependence on a few economies including China, India and Germany.

The Canadian Economy- the economy can perform better than forecasted if commodities hold on, rates stay low and the dollar doesn’t get too strong. However, the economy can only go so far until the US rebounds.

Interest rates in the short term (next year or so)- will show modest upward pressure. Expecting modest interest rate hikes to start late spring/early summer. In Ian’s opinion, rates that are too low for too long create irresponsible behaviour from borrowers. If the rates increase too much, this could stall the economy so the Government of Canada has to find a healthy balance.

Interest rates in the medium term (1 to 2 years out)- the rates are likely moving up. The Bank of Canada sees “considerable monetary stimulus in place” meaning they have their foot on the gas and are warning that eventually they must put the brakes on.

Housing- the year will likely be very “ho-hum”. I personally think this is great news as the last 5 years have been extremely volatile and that is not good for the housing market in the long term.

Edmonton Economics & Housing Market Outlook
Presented by
Richard Goatcher, Senior Market Analyst, CMHC Edmonton

Richard gave an overview of the overall economy as well as the Edmonton housing market. He concluded that the job losses experienced during the recession have reversed in recent months, full-time job gains are slowly returning and that we will really see this significantly in 2012, he also stated that employment growth will return in 2011.

Richard’s graph on interest rates showed annual average interest rates slightly lower in 2011 than they were in 2009 & 2010. Still significantly less than they were during the boom years.

Edmonton residential MLS sales have cooled since the beginning of 2010 (no surprise here) and that many experts believe we’ll have an opposite kind of year with modest sales to start and stronger sales as the year progresses (I tend to agree with Richard on this). Richard also added that we are currently in a buyers market with only 1 in 5 listings sell in a given month.

MLS System Market Forecast
Presented by Chris Mooney, REALTORS® Association of Edmonton

Rural Recreational Forecast- lots of choice with long days on market. Gasoline prices will have an influence on the value of rural properties.
Forecast: slow & no change.

Commercial Forecast- the 2010 sales were up and could be up even higher if all REALTOR® sales were reported. Commercial clients generally seem optimistic. Forecast: trend upwards with values over $300 million.

Multi-Family Forecast- the condo conversion trend is over (yay for that!), most multi-family sales will remain as rentals (I kind of disagree with this as lots of singles and child-free couples still choose condos), rents should creep upwards with little incentives for renters.
Forecast: low volume but steady

Residential Single Family Dwelling Forecast- the market will remain stable as long as external forces don’t intrude, steady as we go! Prices should rise 3% overall with seasonal fluctuations. Inventory up to 7,000 units in the spring and then normal thereafter.

Residential Condo Forecast- condo purchase are a lifestyle decision for singles (especially women), young couples and empty nesters. Most condos do not appeal to families. Newly completed condos will create pressure on re-sales.
Forecast: sales and prices to remain static

My two cents:

Overall this was a great forecast and there was a definite improvement in the attendee sentiment when compared with the forecast last January. This time last year I observed a lot of worried faces in the crowd and presenters that were trying their best to put a positive spin on a very uncertain market. This year was marked with a very calm, steady-as-she-goes energy. I don’t think anyone in the industry expects a repeat of the boom-times of 2007 and nor do we want it. I think we all realize that a balanced, healthy market is best for everyone.
A home is where you hang your hat and at some point you must make the choice between renting and buying. At the end of the day, you need a roof over your head. You can spend a great deal of time fretting over the “investment” and whether prices are going up, down, sideways or you can get on with your life in your new place.

Given this, I have to wonder what any first time buyer is waiting for! The interest rates are still at historical lows (and we aren’t sure how long this will be the case), there is lots of inventory to choose from and prices are down. If you’re a first time buyer there really isn’t much to dislike about the current market situation!

Thursday, January 6, 2011

What's your home worth? It depends who you're asking!

Here's a new story that was on Global last night about the current market value of real estate in Edmonton. The story features a Realtor I work with often, Lisa Brown of ReMax Real Estate!

Tuesday, January 4, 2011

Some money saving reading...

Well, it's a new year - which translates into a new opportunity to analyze your finances and seek out some savvy cost-cutting measures. Here are a few interesting articles that will help you cut costs across your household budget:

Reduce your bills
This article in the Globe addresses five simple ways to reduce your household bills - from insurance to mortgage interest. While some of the suggestions are pretty straight forward, it reminds us that one of the best ways to save money is to avoid complacency - shop around for better mortgage, insurance and cell phone deals rather than simply automatically renewing with your existing provider.

Get a deal on your next car
This Yahoo! article discusses the best time of year to buy a car. While it argues that you can get the best deals if you go vehicle shopping on New Year's Eve, hitting the dealerships at the end of the month, or before next year's models are released, will also win you some good bargains.

Collect what's coming to you
This article by REIN is less about saving money and more about collecting the rent that's owed to you. If you're new to the role of landlord, it's worth a read as it offers some tips to ensure your tenants pay up every time.

-Article provided courtesy of Axiom Mortgage Partners