Mortgage insurance rule changes…how will they affect you?

New mortgage insurance rules.

In October and November this year the Government of Canada made changes to mortgage insurance requirements. Mortgage insurance is provided by three companies in Canada. The biggest provider of mortgage insurance is CMHC a crown corporation. This insurance is paid for by the borrower and protects the lender in case of default. It reduces the lenders risk therefore enabling consumers to purchase homes with as little as 5% down.
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Mortgage calculators can help homeowners pay off mortgages before the average age

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A poll found that the average age a Canadian person will be before paying off their full mortgage is 57, according to St. Lawrence EMC. This is up a few years compared to age 55 a similar poll conducted in 2012 found. Canadians are making positive changes to speed up mortgage payments, but it may actually be their non-mortgage debt that determines how quickly they can become mortgage free.

St. Lawrence EMC said that the poll found that residents in British Columbia had the longest repayment expectation at 59 years, and 50 percent of Canadians that own homes said since they first took out their mortgage, their non-mortgage debt has increased. Canadian homeowners also said that lack of funds keeps them from making lump sum payments. Continue reading

Canadians saving more, paying off mortgages faster

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Who says Canadians can't save?

According to an article from The Globe and Mail, the Canadian personal savings rate is twice that of our neighbors to the south, and nearly six times higher than it was 10 years ago.

"All the talk about the Canadian household being tapped out or out of shape is a bit overdone," Doug Porter, chief economist at BMO Nesbitt Burns, told the news source.

Data from Statistics Canada shows that the savings rate during the first quarter of 2013 was 5.5 percent, up from 5.4 percent during the final three months of 2012. That may not seem like a large improvement, but it's important to keep in mind that the original forecast for the savings rate during the fourth quarter of last year was 3.8 percent, according to Statscan. Continue reading

Canadian homebuyers’ mortgage expectations surveyed

The results of a new survey from CIBC reveal that Canadian homeowners aren't expecting to be mortgage-free until they're 57 years old. This is a two-year increase when compared to the same survey results last year.

"Our view would be that Canadians are taking a look at their broader finances and are working to pay down other debts first to reduce their interest costs," Colette Delaney, executive vice president of mortgage, lending, insurance and deposit products at CIBC, told The Canadian Press. "Those with a growing amount of non-mortgage debt are less likely to be taking extra steps to pay down their mortgage, and this can lead to a longer payback period."

Not all the negative sentiment is related to mortgages costs, however, as half of those surveyed said that other debt, including credit cards, could impact their ability to pay of their mortgages quicker. 

Canadian mortgages are constantly shifting, but generally speaking, the more you can allocate toward a down payment, the less you will have to pay in monthly installments. Speak with a mortgage adviser today to learn more about your options within the Canadian housing market.

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

Canadians confident in low mortgage rates

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A new poll from the Canadian Imperial Bank of Commerce sheds some light on Canadians' feelings regarding the current housing market.

Data from the poll shows that 46 percent of Canadians believe that current low mortgage rates will remain the same for at least the next year. This marks a significant increase from the same poll two years ago, when the number came in at 24 percent.

"Our poll suggests that some Canadians are growing accustomed to the low rates we are experiencing, however it's important to take a long term view when deciding which mortgage is right for you," said Colette Delaney, executive vice president of mortgage, lending, insurance and deposit products at the CIBC. "You need to plan ahead for your next mortgage term and consider the impact to your budget if you renew at higher rates a few years down the road."

Meanwhile, 45 percent of Canadians said they would opt for a fixed-rate mortgage if they had to decide today. This number was even higher among 25- to 30-year-olds, with 54 percent saying they would select a fixed-rate mortgage. However, 26 percent of Canadians said they would choose a variable-rate mortgage. Continue reading

Saving on home loans

While household debt in Canada is at an all-time high, economists are saying progress is being made.

A report from Statistics Canada shows that the average Canadian household owed $164.97 in market debt for every $100 of disposable, after-tax income earned during the fourth quarter of 2012. This marks a new high for household debt, up slightly from $164.07 during the previous quarter.

However, Julian Beltrame, writing for The Canadian Press, reports that analysts are saying figures show improvements when it comes to debt, particularly related to housing.

"But the latest data represent progress in the effort to rein in risky levels of household debt in Canada … ," Beltrame writes. "The fourth-quarter increase in the debt ratio was the smallest in a year, while household net worth actually increased by 1.4 per cent, thanks to gains in the value of stock holdings and pensions. House debt to total assets and debt to net worth have come down over the past year. As well, household equity as a proportion of real estate they owned remained at about 69 per cent." Continue reading

Understanding interest-only loans

With mortgage rates still hovering near historic lows, many prospective homebuyers will be looking to take advantage of the current market and save money on their home loans. While there are plenty of opportunities to make buying a home more affordable, it’s important to understand the pros and cons of all your options.

One alternative that buyers may be unfamiliar with are interest-only loans. These types of mortgages are very rare in Canada, but it is possible for prospective homeowners to use them.

What is an interest-only loan?
Interest-only mortgage loans require buyers to only pay off the interest that builds from the principal amount they borrow. Since borrowers are only paying off the interest on their loan, payments tend to be consistently low throughout the process.

Interest-only loans appeal to first-time homebuyers and other borrowers looking to defer large mortgage payments until they have more income. However, it’s important to remember that the entire mortgage will need to be paid off eventually. Making interest-only payments is a temporary arrangement, and at the end of the mortgage term, borrowers will have to decide how to pay off the remainder of their loan. Continue reading

Comparing mortgage rates saves time, big money

As many find out, applying for and obtaining a mortgage may seem like a big step in being a homeowner, but the work doesn't end there. In fact, as the economy changes and financial insecurities come into play, one of the most difficult aspects of owning a home may actually be making the payments in full and on time.

With so many Canadians increasing their debt and loan levels with a through-the-roof reliance on credit – yes, household debt continues to climb with each passing month – cash always seems to find a way to get, well, strapped. As the bills pile up and loans accumulate, a mortgage that once was affordable can become difficult to pay every month.

This issue may be handled with the assistance of a financial professional who can help manage payments and try to downsize when possible and/or necessary, but it may also serve as a warning to first-time homebuyers. Although many people can find themselves in mortgage distress or financial turmoil when it's already too late, there are some steps new buyers can take before applying for and obtaining a mortgage. Continue reading

Pay now, save later

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Whether it’s a new outfit, tickets to a sporting event or a family vacation, it’s safe to assume that most people would rather be spending their hard-earned cash on anything but bills. 

Thanks to dramatic decreases in mortgage interest rates, many Canadians are doing just that. Mortgage rates are currently half of what they were in 2007, and according to The Globe and Mail, if today’s rates were applied to a 25-year mortgage of $200,000 from 2007, homeowners would save $101,700.

As interest rates tumbled and monthly payments dropped, most Canadians took the extra money they would have been spending on their mortgage and applied it somewhere else. And who can blame them? It seems as if there’s always an unexpected expense popping up in our daily lives. Medical bills, school supplies, car trouble – the list goes on and on. Besides, even if the money was going somewhere less serious, who wouldn’t rather drop a large sum on a gourmet meal than send in extra money on a mortgage?

According to the Canadian Association of Accredited Mortgage Professionals (CAAMP), nearly 60 percent of Canadians only pay the monthly minimum on their mortgages. While this means small savings in the short term, the truth is these homeowners are costing themselves much more money down the line. Continue reading