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

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

Negotiating mortgage rates

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According to a survey of 300 Canadian mortgage holders by The Globe and Mail, 82 percent of respondents said they were able to obtain better mortgage rates by negotiating.

"Of the survey respondents with five-year fixed-rate mortgages, interest rates varied widely, and those who haggled for a rate lower than what their lenders advertised paid less overall," the news source reports. "Among the group that bargained with their lenders, 45 percent said their interest rates were 3 percent or less, compared to 32 percent of those who did not try to get a deal. Similarly, only 5 percent of the hagglers were paying more than 4 percent interest, compared to 16 percent of the group that didn't dicker."

While this survey features an admittedly small sample size, the picture it paints is clear: Mortgage borrowers can save money by taking the time to negotiate their home loans. The following are strategies borrowers can use to make sure they're getting an affordable deal when taking out a mortgage.

Shop around
When you're picking up groceries at the market, you may not take the time to compare prices, but when it comes to something as important as a home loan, shopping around is key. There are many different types of mortgage lenders, and each may quote a different price. 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

The ins and outs of adjustable-rate mortgages

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Historically low mortgage rates have many prospective home buyers looking for the best deals on purchasing property. However, deciding on loan terms can be a confusing ordeal, especially if you’re less than knowledgeable about your options.

One choice borrowers may not be totally familiar with is adjustable-rate mortgages. Because of the inherent risk associated with ARMs, many buyers automatically overlook them in favor of fixed-rate mortgages. However, with mortgage rates continuing to hover near ultra low levels, ARMs offer even more opportunities to save for savvy home buyers.

What is an adjustable-rate mortgage?
As its name implies, an adjustable-rate mortgage features payments that fluctuate based on the market. Whereas a fixed-rate mortgage has a mortgage rate that is locked in and will not change for the lifespan of the loan, adjustable-rate mortgages have mortgage rates that change over time.

So why would borrowers choose an adjustable-rate mortgage over a fixed-rate mortgage? Because the risk involved in an ARM also translates to increased savings at the outset of the loan. Borrowers who choose ARMs often have lower mortgage rates than those of fixed-rate mortgage holders, which means they also have lower monthly payments. Continue reading

So you want to be a landlord: What you should know before you jump in

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When you think about it, landlords have a pretty great job: They always take their time calling the washing machine repairman, they get to relax behind-the-scenes most of the time (and probably sleep in, too), and – best of all – they get checks in the mail every month for doing very little work.

All of that sounds pretty great, huh? Kind of like a gig you wouldn't mind trying out? While I'm sure some of you are rushing out to pick up some investment property or spruce up your basement for a future tenant – can you at least wait until the end of this article? – let me say that being a landlord isn't quite as easy as it might seem. Actually, it's downright complicated, even for the landlord who seems to go missing every time you need him or her, but can't leave you alone when rent is due.

Experts are saying that now is the time to buy investment property if you are ready for the commitment and have weighed the pros and cons. Banks are offering such unbelievably low mortgage rates that the Canadian housing market is in dire need of a cool-down. To do this, new qualifying rules were set, except they make it difficult for otherwise excellent potential buyer candidates to afford a mortgage while still budgeting for other daily and monthly expenses. Continue reading

What’s in a name? Variable- vs adjustable-rate mortgages

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Here in Canada, one popular option for home loans is the variable-rate mortgage, while lenders in the United States offer adjustable-rate mortgages. They sound pretty similar, don't they? Adjustable and variable are pretty close in meaning, but you'd be surprised at the differences between the two.

Recently, financial news source American Banker took a look at the American and Canadian versions of the home loans. Both products offer mortgage rates that fluctuate with national interest rates, but one of the biggest differences lies in what happens to monthly payments when those rates go up or down. Monthly payments are more consistent with a variable-rate mortgage, according to the source.

"Generally, the monthly bill stays the same," American Banker said. "If the market index and hence the loan interest rate increases, more of each payment is applied to interest and less to principal."

The source goes on to suggest that the possibility of introducing a Canadian-style variable-rate mortgage product in the United States might merit a closer look, since it would simultaneously solve problems for both lenders and consumers. Because the variable-rate mortgages are a bit more stable than adjustable-rate mortgages, Americans might find them more attractive. If more people chose this product, lenders wouldn't face quite so much risk from people choosing low-rate fixed mortgages. Continue reading