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Mortgage Minute

Big Changes To Qualifying Rules

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Big Changes To Qualifying Rules

The Finance Minister Bill Moreau announced yesterday a big change to the mortgage qualifying rules, in an attempt to address concerns that Canadians are over extending themselves financially.

Here are the key points:

Old Rules:

  • If a borrower is getting a 5 year fixed rate, they can qualify using the 5 year fixed rate that they will be getting (i.e. 2.44%) in the qualifying calculation.
  • If a borrower is getting a variable rate, or term less than 5 years, they must use the “test rate” (currently set at 4.64%) to qualify.

New Rules (effective October 17th)

  • All insured mortgages (with less than 20% down payment) must use the “test rate” (currently set at 4.64%) to qualify.

New Rules (effective November 30th)

  • All portfolio insured mortgages (monoline mortgages) must use the “test rate” (currently set at 4.64%) to qualify, and limit amortization to a maximum of 25 years, no matter what the down payment is.
  • The maximum purchase price for portfolio insured mortgages (monoline mortgages) is $1 million.

Also… a change to capital tax exemption rules:

  • Families that move will not have to pay capital gains tax on one home per year.  If they move more than once in a year, they will have to pay taxes on any capital gains on the second, third, etc homes.

Who this will effect:

  • Buyers with less than 20% down payment.  – To buy a home with less than 20% down you need to buy mortgage insurance.  You will now have to qualify at 4.64%.
  • Buyers with lower declared income. – Even if you have 20% down, if your income is lower you may now only qualify with big banks (because they don’t back end insure).
  • Monoline Banks!!! – This will reduce the number of borrowers that qualify with monoline banks, since they back end insure all their mortgages.

 

Read more at globe and mail…

http://www.theglobeandmail.com/news/national/ottawa-unveils-new-housing-measures-to-slow-foreign-real-estate-investment/article32206297/

Positive 2017 New Home Builder Sentiment

By | Calgary Economy, Mortgage Minute | One Comment

More New Homes To Be Built In 2017

Members of the Canadian Home Builders Association in Alberta indicated this month that 2016 will likely be the bottom of the new home build slow down.

A members poll revealed that 2016 expects to see a total of 22,500 new builds, with 2017 improving to about 28,825.  The 2011 to 2015 five year average was 34,600.

 

Of Interest…

  • Today’s 5 Year Fixed Rates in the US are around 3.43%.
  • Canadian Inflation remains low at 1.26%.
  • Calgary Inflation is at 0.6%.

Picking A Closing Date

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How Your Closing Date Effects The Mortgage…

There are a few ways the closing date picked can effect the mortgage:

1) Quick Close Specials.  
Some banks offer quick close specials, and different rates depending on how far out the closing date is.  If the closing date is within 30 to 45 days, the client may be able to get 0.05% off their rate.  Not a huge discount, but worth knowing about!

2) Monthly Payment Date.
Most banks these days will simply set the payment date on the same day as the closing day.  So if you closed on August 9th, your first payment will come out September 9th.  You can move the date forward (i.e. to September 1st), but it will be a full payment (not an interest only payment or interest adjustment payment).

3) Enough Time To Get Everything Done.
Of course, the flip side, is that the bank needs enough time to get the mortgage properly reviewed and approved.  Home inspection, Appraisal (if needed), and legal work all needs to be done.  3 weeks is tight to get it done, but sufficient.

The sweet spot is 3 weeks to 6 weeks from the date the offer is written.

Disagree?  Leave me a comment, I’d love to hear from you.

Test Rate Increase

By | Mortgage Minute | No Comments

Test Rate Increase

The bank of Canada raised the benchmark rate (the test rate) last week from 4.64% to 4.74%.

That’s nice… what does that mean?

So… if a client wants a variable rate, Line of Credit, 1, 2, 3, or 4 year rate, they have to be able to afford a mortgage at 4.74%.  The idea is to qualify them at a higher rate, so they can still afford their mortgage if rates increase in the next 5 years.

The 5 year fixed rate mortgages can be qualified using the actual rate that the client will be getting (i.e. 2.49%).  5 years out is far enough that they assume there will be some career advancement, savings, mortgage pay down, etc to offset any rate increase.

On the typical $330,000 mortgage, the test rate increase will increase the “test” monthly mortgage payment by about $19.  The GDS and TDS will increase by less than 0.5%.

The impact on qualifying will be minimal, but it is an interesting tweak by the Bank of Canada to say that they are concerned about the markets in Vancouver and Toronto.

Affordability Index

By | Calgary Economy, Mortgage Minute | No Comments

Affordability Index…

It’s a great time to buy in Calgary!

RBC released their Q1, 2016 housing affordability report last month.  The affordability index shows average home ownership costs (mortgage payments, utilities and property taxes), compared to average pre-tax household income.

Calgary

Ownership of the average home in calgary, costs the average family 31.5% of their gross household income.  The graph below shows that Calgary is more affordable now than the historical average (the dotted line at 39.8%).  It’s a great time to buy! 

Toronto

The Toronto housing costs have risen to 60.6% of the average gross household income, surpassing their historical average of 47.8%.

 

Vancouver

The Vancouver housing costs have also risen.  They are now unto 87.6% of the average gross household income, surpassing their historical average of 59.2%.

Vancouver

 

The Financial Benefits Of Home Ownership

By | Mortgage Minute | No Comments

 

The Financial Benefit Of Home Ownership.

I’ve started to share these two graphs with clients as they give a clear snap shot of the returns that investing in home ownership provide.


Real Estate Rates Of Return Graph 1

The average home in Calgary costs almost $500,000.  The blue line in the graph below shows the home appreciation over 25 years, based on 3.5% appreciation each year.  This is an average appreciation.  Of course in the real market, house prices will go up and down, but people that hold on, will achieve an average appreciation of 3.5% per year, based on historical house prices in Calgary.

The red line represents the principal pay down of the mortgage over a 25 year amortization.

The green line represent rental income for homes that become rentals.  The principal and interest payments and taxes for this type of home are slightly less than rent for the same home.  This graph applies to personal homes as well as rental homes.

After 25 years, the $49,408 down payment will be worth $1,167,627!!!







Real Estate Rates Of Return Graph 2

The second graph shows the same real estate investment in blue again.  

The red line shows the returns if the down payment money ($49,408) was invested in stocks that provided at 10% return, year after year.

After 25 years, putting the money into real estate will provide a return that is more than double what stocks would provide!


 

The I Just Got Laid Off Mortgage

By | Alternative Mortgages, Mortgage Minute, Uncategorized | No Comments

The I Just Got Laid Off Mortgage

Alternative lenders are very useful when a client needs to fill a gap that the banks don’t want to touch.  They like clients who are new to being self employed, or have bruised credit that needs to be repaired.

One alternative lender has started to fill the gap for salaried employees that have been laid off due to the downturn in the economy.  This mortgage can be set up so the borrower doesn’t have to make any payments for a year.  The mortgage depends on reasonable equity (down payment) and reasonable grounds that full time gainful employment could be found within a year.  Each deal is assessed on it’s own merit.

This could be a deal saver for people with an accepted offer on a house, or people who need to re-finance and avoid falling behind on bills.

Unemployment May 2016

By | Calgary Economy, Life Quotes, Mortgage Minute | No Comments

Unemployment Stats…

Alberta’s unemployment rate jumped from 7.2% to 7.8% in May due to the Fort McMurray fires.  Ontario and Quebec each posted strong job gains in May (21,600), offsetting the effects of Alberta’s drop on the overall Canadian Unemployment rate.  Calgary unemployment dropped a touch from 8.3% to 8.1%.

Todd Hirsch, chief economist at ATB, is optimistic that we may have reached the bottom of the recession in Alberta, as oil prices have become more stable lately.  He recently speculated that this should contribute to improving Alberta’s unemployment rates in the coming months.

BORROWERS:

Full feature, 5 year fixed rates
~ Most Big Bank 5 year fixed rates are around 2.59%.
~ Most Monoline Lender* 5 year fixed rates are around 2.54%.

Basic Feature, 5 year fixed rates
~ Most basic feature mortgages are around 2.44%

Variable rates
~ Most Variable rates are around 2.35%.

*Monoline lenders are lenders that deal only in mortgages. They don’t sell RRSPs, or checking accounts etc.  Mono = 1.

**These rates are generally competitive rates to give you a feel for where the market is at.  Contact me for quick close deals and rate specials!

ECONOMICS:

Calgary Key Market Indicators

Business
~ WTI Crude Oil held at $49.07 this week (last week it was at $49.69).
~ Natural Gas is at $2.56 this week (last week it was at $2.47)

Money
~ Canadian dollar is at $0.78 (last week it was at $0.78)
~ 5 Year bond fell a little further to 0.563  (last week it was at 0.625)
~ Year over year (yoy) inflation in Calgary from April 2015 to April 2016 was 1.4%, March and February were also 1.4% (2.0% in January).
~ Year over year Canadian inflation in April was 1.66% March was 1.27%. February was 1.36%. In January it was 2.01%. In December it was 1.61%. The Bank of Canada preferred bandwidth is 1.0% to 3.0%.

People
~ Calgary unemployment dropped a touch further to 8.1% in May.  It was 8.3% in April.  It was 8.6% in March. It was 8.4% in February and 7.7% in January.
~ Canadian unemployment in May dropped slightly to 6.9%, from 7.1% in April.
~ Calgary’s population grew by 1800 in May.

LIFE:

“A few seeds makes a small harvest, but a lot of seeds makes a big harvest.”

– 2 Corinthians 9:6

CMHC Survey Results

By | Calgary Economy, Life, Life Quotes, Mortgage Minute | No Comments

CMHC Survey Results… and a new puppy!

So… first off, I didn’t get this out yesterday because our family was distracted by puppies!  We put a deposit down on a 3 week old miniature schnauzer, scheduled to come home with us mid July.  Our 9 year old schnauzer is going to be a step mom!

And now… back to our regularly scheduled program…

The Canadian Housing And Mortgage Corporation (CMHC) released it’s annual survey results last week.

While the broker channel lost a little market share in the first time home buyers market, it gained some ground with customers in their subsequent mortgage dealings.

Mortgage Broker Market Share

  • 51% of First Time Home Buyers used a mortgage broker (55% last year)
  • 42% of repeat buyers used a mortgage broker (42% last year)
  • 38% refinancers used a mortgage broker (33% last year)
  • 26% renewers used a mortgage broker (21% last year)

Lender loyalty has dropped for renewers (from 86% to 81%) and repeat buyers (from 77% to 73%).

Personally, I am optimistic that as the mortgage broker industry matures, we will continue to see increased market share as clients become loyal to brokers and broker brands instead of banks.

Read the full survey results here:

http://www.mortgagebrokernews.ca/files/file/mortgage-consumer-survey-2016.pdf

BORROWERS:

Full feature, 5 year fixed rates
~ Most Big Bank 5 year fixed rates are around 2.59%.
~ Most Monoline Lender* 5 year fixed rates are around 2.54%.

Basic Feature, 5 year fixed rates
~ Most basic feature mortgages are around 2.44%

Variable rates
~ Most Variable rates are around 2.35%.

*Monoline lenders are lenders that deal only in mortgages. They don’t sell RRSPs, or checking accounts etc.  Mono = 1.

**These rates are generally competitive rates to give you a feel for where the market is at.  Contact me for quick close deals and rate specials!

ECONOMICS:

Calgary Key Market Indicators

Business
~ WTI Crude Oil is at $49.69 this week (last week it was at $49.33).
~ Natural Gas is at $2.47 this week (last week it was at $2.17)

Money
~ Canadian dollar is at $0.78 (last week it was at $0.77)
~ 5 Year bond fell to 0.625  (last week it was at 0.791)
~ Year over year (yoy) inflation in Calgary from April 2015 to April 2016 was 1.4%, March and February were also 1.4% (2.0% in January).
~ Year over year Canadian inflation in April was 1.66% March was 1.27%. February was 1.36%. In January it was 2.01%. In December it was 1.61%. The Bank of Canada preferred bandwidth is 1.0% to 3.0%.

People
~ Calgary unemployment dropped for the first time in a while to 8.3% in April.  It was 8.6% in March. It was 8.4% in February and 7.7% in January.
~ Canadian unemployment in April was 7.1%.
~ Calgary’s population grew by 1900 in April.

LIFE:

“A good friend pours water on the fire of our fears, and throws gasoline on the passions of our dreams.”

– Kris Vallatton

Fort McMurray And Oil Prices

By | Calgary Economy, Life Quotes, Mortgage Minute | No Comments

Fort McMurray And Oil Prices

The Canadian economy has seen some improvements the past couple of weeks.  Oil has climbed near the $50 mark, due in part to the Fort McMurray fires, as well as terrorist attacks in Nigeria, unrest in Libya and falling US stockpiles.  Lot’s of speculation is out there predicting $50, 60, $70 + oil by summer’s end.

Alberta oil sand producers are now playing catch up after shutting down during the Alberta fires.  While the Fort McMurray fires contributed to the climb in oil prices, it is not the only factor, so Alberta will benefit from the higher oil prices.

 

BORROWERS:

Full feature, 5 year fixed rates
~ Most Big Bank 5 year fixed rates are around 2.59%.
~ Most Monoline Lender* 5 year fixed rates are around 2.54%.

Basic Feature, 5 year fixed rates
~ Most basic feature mortgages are around 2.44%

Variable rates
~ Most Variable rates are around 2.35%.

*Monoline lenders are lenders that deal only in mortgages. They don’t sell RRSPs, or checking accounts etc.  Mono = 1.

**These rates are generally competitive rates to give you a feel for where the market is at.  Contact me for quick close deals and rate specials!

ECONOMICS:

Calgary Key Market Indicators

Business
~ WTI Crude Oil is at $49.33 this week (2 weeks ago it was at $46.21).
~ Natural Gas is at $2.17 this week ($2.10 2 weeks ago).

Money
~ Canadian dollar is at $0.77 (2 weeks ago it was $0.78)
~ 5 Year bond is at 0.791  (2 weeks ago it was at 0.700).
~ Year over year (yoy) inflation in Calgary from April 2015 to April 2016 was 1.4%, March and February were also 1.4% (2.0% in January).
~ Year over year Canadian inflation in April was 1.6% March was 1.27%. February was 1.36%. In January it was 2.01%. In December it was 1.61%. The Bank of Canada preferred bandwidth is 1.0% to 3.0%.

People
~ Calgary unemployment dropped for the first time in a while to 8.3% in April.  It was 8.6% in March. It was 8.4% in February and 7.7% in January.
~ Canadian unemployment in April was 7.1%.
~ Calgary’s population grew by 1900 in April.

LIFE:

“Don’t half ass anything.  Whatever you do, always use your full ass.”

– unknown