Mortgage brokers offer different options than banks

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When considering financing options for home buying, borrowers have two options: a bank or a mortgage broker.

According to the Eastern Morning Herald, Canadians are looking for the best possible mortgage rates. The statistics show that as Canada's housing market continues to recover from the global recession in 2008, mortgage brokers are favored for helping people with financing needs for their homes.

In one year, the National Bank Composite House Price Index was up 2 percent in April 2013. That's the smallest increase in 15 years. With the slow growth, tighter requirements and low interest rates, the mortgage market in Canada is becoming competitive. Continue reading

Canadians more optimistic regarding household debt

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A report from PricewaterhouseCoopers spotlights new trends in Canadian views on debt, as well as the impact of mortgage restrictions on the real estate market.

Data from The Tide Turns: Canadians, Debt and Retail Lending study shows that more Canadians are comfortable with the amount of debt they're carrying, and they're also more focused on reducing it. Of 1,228 Canadians surveyed, 57 percent felt their debt level was about right. This marks a decrease from 59 percent during the previous year.

Meanwhile, 66 percent of respondents indicated that they plan on reducing their debt this year. This represents a 3 percent increase from last year.

Additionally, Canadians remain optimistic regarding the economy and their own financial situations. More than half (55 percent) of respondents said they think the nation's economy will remain stable or grow. Nearly half (46 percent) believe their income will rise over the next five years. Continue reading

Pre-approvals and rate holds in home loans

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When it comes to getting a home mortgage approved, "pre-approval" can be one of the trickiest factors in determining mortgage rates. With the housing market always at least somewhat in flux, many people looking to buy turn to pre-approval as a way to find a preferred rate as they search for a home.

But even for mortgage professionals, the term pre-approval can take on different meanings. And to make things even trickier, it is often conflated with the term "rate hold," which to the average consumer, as well as many lenders, sounds like two different things. However, some mortgage professionals view them as the same. So, how does one make sense of this already complicated process when people inside the industry can't even seem to completely agree? Continue reading

Affordability weakens, but mortgage brokers can help offset costs

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Are homes in Canada too expensive?

According to a recent article from The Globe and Mail, the answer is: sometimes.

"…[T]here is clearly some stress on affordability, which is reported on in depth by Royal Bank of Canada's economists every three months," the article stated. "As RBC points out in each report, lenders typically qualify borrowers by checking whether mortgage payments, property taxes and heating costs account for no more than 32 per cent of gross household income. In the first quarter of 2013, this package of housing costs consumed a low of 30.4 percent of average household income in Edmonton for a detached bungalow and a high of 82.3 percent in Vancouver." Continue reading

Low mortgage rates can offset high prices

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While rising home prices are good news for sellers and buyers seeking a sound investment, they can also make it that much harder for some Canadians to enter into homeownership.

As a recent article from The Globe and Mail points out, even with mortgage tightening and a dip in sales, home prices continue to remain high throughout the country. As home sales decreased, so did the number of homeowners putting their properties up for sale, keeping the inventory of available properties fairly low, and, by extension, prices high.

"The latest data suggest that the softening in prices is likely to be milder than expected," the article stated. "In Vancouver, the city that was the frothiest in 2011 and the hardest hit by last year's correction, prices did decline. But they're already on the mend." Continue reading

Flaherty says government intervention is done, others say differently

While many industry observers feel that the mortgage restrictions put in place by Finance Minister Jim Flaherty could lead to a crash in the Canadian real estate market, Flaherty feels that current figures are a positive sign, according to Financial Post.

"I'm comfortable about where we are," he told Julian Beltrame of the Canadian Press. "I'm pleased in particular that the condo market in big cities has fallen back. I'm also pleased with some other moderation in new house construction and in demand for mortgages. I think these are healthy developments because I think we were beginning to see some indications of the beginning of a bubble."

Flaherty went on to tell Beltrame that he has no further plans to intervene in the Canadian mortgage market because he doesn't need to, indicating that the previous restrictions put in place have done a satisfactory job.

It's easy to see why this news could lead mortgage professionals to breathe a sigh of relief. The last mortgage restrictions to be put in place, which included shortening the maximum amortization length on government-backed home loans from 30 years to 25 years, seemed to have a large impact on homebuyers when they went into effect during July 2012.

This also comes on the heels of rumors that The Office of the Superintendent of Financial Institutions Canada (OSFI) was considering limiting the amortization rate on uninsured mortgages to 25 years. Continue reading

Mortgage brokers express concerns over industry

Data from a Canadian Mortgage Professional poll provides a special insight into what issues facing the current real estate market most concern mortgage brokers.

"No, the sky isn't falling, say the majority of brokers responding to CMP's fifth-annual Sentiment Poll, but their answers – recorded over a six-month period ending early March – suggest headroom is getting tight," reads the report. "Even with interest rates falling instead of rising, broker worries have grown right along with economic uncertainty and the creeping slowdown in home sales more stringent mortgage rules have ushered in."

Figures from the poll show that 66 percent of brokers are concerned with the stricter underwriting guidelines put in place by Finance Minister Jim Flaherty, an increase from 56 percent during 2012. Meanwhile, 42.33 percent of respondents said home sales were their chief worry, with another 32 percent pointing to falling home prices. Continue reading

Paying off a mortgage faster

Data from the Canadian Imperial Bank of Commerce shows that Canadian borrowers believe it will take them longer than previously thought to pay off their mortgages.

A poll from the CIBC shows that the average Canadian homeowner believes they will reach the age of 57 before they pay off their mortgage. This is up from age 55 during the previous year. The province with the longest expected repayment period was British Colombia, where the average Canadian expected to reach age 59 before paying off their mortgage.

"Being mortgage free sooner can help accelerate retirement savings, but carrying a mortgage into your late 50s can have the opposite effect and make it more challenging to reach your long term savings goals," said Colette Delaney, executive vice president of mortgage, lending, insurance and deposit products at the CIBC. "If your other debts are heading up, your chances to pay off your mortgage sooner are going down, and that's why you need a clear plan that takes into account debt management, mortgage repayment and long term savings." Continue reading

Dissecting the one-year mortgage

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Many Canadian homebuyers know of long-term mortgage offerings, but not many know that they can take advantage of a one-year mortgage.

In a recent piece for Canadian Mortgage Trends, editor Rob McLister highlighted the benefits associated with a one-year mortgage and shed light on to why it is being overlooked in today's Canadian housing market.

McLister credits the emergence in popularity for 5- and 10-year home loan terms to the extremely attractive rates that are currently being offered for them. However, a one-year fixed mortgage lets the borrower renew into a 4-year fixed any term.

"The challenge with most 1-year terms, compared to variable rates, is that you usually have to wait until three to six months before maturity to secure (hold) your renewal rate," McLister writes. "By contrast, most variable-rate mortgages let you lock in at any time. That makes them preferable to 1-years in certain situations." Continue reading

Homebuyers should invest now

Despite mortgage rates remaining near all-time lows, many Canadians are not planning on taking the plunge into homeownership any time soon.

According to a poll from Ipsos Reid, only 15 percent of Canadians surveyed said they plan to buy a house during the next two years. This marks a decrease of 27 percent from the previous year, as well as the largest decline in buying intentions in the history of the yearly poll, which the Royal Bank of Canada has been conducting for 20 years.

The poll, which included 3,000 Canadians surveyed between January 31 and February 8, shows that 75 percent of respondents attributed declines in buyer intentions to mortgage restrictions put in place by Finance Minister Jim Flaherty. Continue reading