Variable vs Fixed Mortgages

Here is a graph from Firstline Mortgages showing the comparison between fixed and variable mortgage rates over the past 25 years - Historically variable has been the way to go.

My article in the New Condo Guide. Feb4 - Mar4, 2011

New rules to address a long-term problem.

Finance Minister Jim Flaherty introduced new changes to mortgage rules to address a long-term problem -- Canadians carrying an historically large amount of debt. The recent financial crisis may have brought more attention to this growing problem, and this is the government’s way of trying to avoid anything like what we have seen in the United States.

Mortgages are one of the largest household expenses and one of the few areas the government can still impact consumer spending. The government attributes a lot of the growing problem to high-risk mortgages, credit card debt, longer mortgage amortizations and the Home Secured Line of Credit (HELOC).

The new changes are aimed chiefly at these issues:

•  The amortization period is reduced to 30 years from 35 years

•  The loan to value available for refinancing your home is 85%

•  Secured lines of credit will no longer be insured, maximum loan to value will now be 80%.

This would not be the first time the government has taken action in the mortgage market. In 2008, the Government reduced 40-year amortizations to 35 years, eliminated the 100% financing and the interest only mortgages. So the Finance Ministry is slowly repealing some of the more ‘lenient’ lending practices from a few years ago.

  

Two of the three changes address the concern the government has with Canadians taking on too much debt, that being, the changes to refinances and HELOCs. Essentially, those are the two methods that some Canadians use to take on large amounts of 'Bad' debt, debt that is used to purchase depreciating assets or consumer goods versus 'Good' debt, debt used to purchase investments, start a business or buy appreciating assets like real estate.

Regarding the reduction in amortization to 30 years, it affects the homebuyer, but only marginally. Payments are approximately $100 more per month on a 30-year amortization versus a 35-year based on $300,000 mortgage at today’s rates.

Although these changes may restrict the number of individuals that qualify for a mortgage, it may provide the incentive to those considering a home purchase to act.  Three compelling reasons to purchase sooner, rather than later:

•  Recent correction in Home prices

•  Interest rates are still at historic lows

•  Pending mortgage rule changes

These are prudent steps the government has taken to tackle a long-term problem. Hopefully potential homebuyers not only take advantage of the current low interest rates and home prices, but also take a serious look at their finances and make a responsible decision on their next home purchase.  

Edmonton Reno Show

My colleague Stacey Petruch and I will be participating in this year's Reno Show.  Feb. 4-6, 2011

We will have information on:

• Ways to make your home more energy-efficient
• Hiring a Contractor
• Tips on renovating your Windows/Doors
• Tips on renovating your Bathroom
• Tips on renovating your Kitchen 

And obviously, we'll be there to answer your questions on how to pay for it all. Stop by our booth, say hello and enter our draw to win a new iPad. 

Future tools for future homeowners

People shopping for new homes will have more power in their pockets this spring, as banks and real estate companies unroll a host of branded mobile applications intended to help consumers find their dream house.

Mobile apps have been slow to appear in the Canadian marketplace, as the companies that hold the data have been loath to give up control of the information needed to power them. But a ruling from Canada’s Competition Bureau that encouraged the real estate industry to throw open its multiple listings service has forced the industry to adopt new methods of fostering loyalty among the clients it depends upon for commissions.

Read more: Link

Source: The Globe and Mail

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.

Read more: Link

Source: mortgagebrokernews.ca

Major changes to Mortgage Rules.

Finance Minister Jim Flaherty announced major changes to mortgage rules effective in 60 days. Amortization period reduced to 30 years from 35 years. Further, Canadians can only refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes. The other change, Flaherty has withdrawn government insurance backing on lines of credit secured by homes.

Happy New Year and all the best in 2011!

Let dawn of a new year open eyes to debt control

Anticipating a hangover Saturday morning?

Lots of Canadians will be, which really isn't so bad. If you can't let go on New Year's Eve then maybe you're a little too tightly wrapped.

And you know there will be plenty of free advice on how to deal with that deep, throbbing pain behind your eyes and the unnerving sense that your brain is operating on a three-second delay.

The hangover cure story is a media staple around New Year's Day.

But it's being rivalled by another turn-of-the-year hangover obsession. Borrow too much during a low interest rate binge and you'll be feeling a giant pain in your (empty) bank account when the party ends.

Call it the credit hangover.

Mark Carney has. The Bank of Canada governor warned last week that Canadians are having too much fun drinking from the low-interest-rate cup.

The numbers back him up.

At this time last year Canadians had set a new personal debt record, averaging more than $91,000 per household. There were warnings to reduce spending and pay down debt before rates inevitably rose ... probably before the end of the year.

Now the year is almost done and rates have barely ticked up. Prime is sitting at 3%, apparently not high enough to scare the spenders.

Read more: Link