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Mortgages

Five Proven Money Saving Tips To Cut Mortgage Costs

If you want to cut your mortgage bills down to size, then consider these surefire saving tips to help you reduce your mortgage costs. These five instant money saving tips will work great for first time homeowners and as well as experienced people looking to get best deal and interest rate from their mortgage lender on home loan, home finance, mortgage and re-mortgage.

It’s quite normal that the most of the homeowners dream as being able to pay off their home loan as soon as possible and live a life free from the burden of interest rates, home loan and worries about meeting the monthly mortgage payments because the largest expense the majority of borrowers take on in a lifetime is our home finance and each month our home mortgage payments take a substantial chunk out of our take home salary.

Just imagine what as a borrower you could do with all the extra money you would have save if you didn’t have to meet your mortgage each month! Looking interested? Well, here are five proven money saving tips that you could take today to substantially reduce your mortgage repayments and the overall cost of your home finance and even speed up your rate of repayment so that the day when you’ve paid off your home loan and are free to live the life you want comes that much sooner.

Tip 1 – Demand Better Service!

As a loyal customer of your mortgage lender isn’t it about time you were rewarded for your financial commitment, for making your regular payments and for being a good, long term customer?

Well, you can rest assured your mortgage lender will not reward you unless you ask for a better deal on your mortgage!

So get on the phone, call up your lender, ask to speak to someone in customer services or the customer retention department and explain that you’re looking around for a better mortgage deal. Ask them for an evaluation of how much you have left to pay so that you can give it to any one of the hundreds of other mortgage lenders out there all willing to give you a better deal.

If you are indeed a valued customer you should receive favorable feedback to your demands and receive details of better offers currently available to you from your current lender.

Remember, if you don’t ask you don’t get and be adamant about what you want!

Tip 2 – Shop Around

If step one doesn’t get you the deal you deserve, shop around. There really are well in excess of a hundred lenders out there all seeking new customers who will offer you incentives to take up their mortgage product.

Use the internet to get an idea of rates being offered and special deals available to you. Do remember that lenders will do everything they can to make their deal seem like the most attractive one available and do everything within their power to attract new customers so you need to be shrewd.

Look for any hidden charges or tie in clauses and make sure you evaluate products offered on a like for like basis taking into account all the features of the mortgage offers available.

Tip 3 – Call in The Cavalry

Well, not the cavalry exactly but expert assistance in the form of a licensed and regulated fee free independent mortgage broker. In the UK these guys are now regulated by the Financial Services Authority and in the US and Canada they should come under the scope of The Responsible Lending Act.

As independent brokers they have access to and understanding of every single mortgage product available and they should be best placed to assist you find a better deal than the one you have now where your repayments will be less, your interest rate will be lower and the amount you repay over the entire duration of your loan is reduced.

Make sure your broker is fee free and remunerated by any company you decide to take a mortgage out with. More importantly than this, make sure they are regulated and licensed correctly and if possible ask for professional references or testimonials.

Tip 4 – Cut Out All Extras

Mortgage lenders are notorious for selling overpriced add-on such as life insurance, home insurance, contents insurance, income protection cover…all these insurances have their value of course – but you can bet your bottom dollar that you can every last one of them for a fraction of the price by going directly to an independent insurance house or even seeking the services of an independent financial adviser to find you the best deal available.

You could literally save yourself thousands each year in insurance premiums!

Tip 5 – Throw Some Money at It

So, you’ve cut your interest rate down to size, reduced your monthly repayments, maybe received a cash lump sum from a new lender and saved yourself thousands on insurance products – now turn all those savings back into your mortgage and repay early.

You should make it sure that you have negotiated it into your new mortgage contract that you can make early repayment or lump sum annual top ups and get rid of the millstone around your neck, get financial freedom, free yourself from your biggest financial commitment as early as possible and cut down thousands in interest payments; you can enjoy better life once again with these five instant money saving tips!


How Is It Beneficial For You To Become A Landlord?

Your children leave the nest to go to university all of a sudden, you have to rent a room or space in the basement. This seems to be an easy way to make money, but consider the following factors before making a decision.

Find tenants

Your rooms are cleaned and the time has come to find tenants. If you rent a space in the basement, consider placing ads in neighborhood grocery stores or on campus. Ad sites like Craigslist or online online forums are places increasingly popular view rental ads. Do not forget to indicate if you agree or if the animals are allowed to smoke.

When you have requests, take the time to identify suitable candidates. As an owner, you can ask questions on income and employment, but you can not ask about ethnicity, religion or sexual orientation, or whether potential tenant is unmarried, divorced or married. Ask for references to learn more about their personalities and habits.

What are the landlord’s responsibilities?

The owner must ensure that space does not pose a danger to the tenant, whether to make emergency repairs or take the time to do normal repairs.

The bad tenants are part of the risk of being a landlord. When problems are related to rent, the landlord can evict the tenant with the help of the Committee on provincial or territorial housing. The owner must follow the procedure in place before evicting a tenant.

How rental income affect your tax

Depending on your situation, you may need to include your rental income when you file your income tax return.

If you rent a room to someone and share the cost of living expenses and that you do not intend to make a profit, you do not need to report this income when you file your returns. However, if you intend to use this space in order to make a profit, you will need to include this information on your tax returns. If the rented space requires a loss or expenses, you will find a list of eligible expenses according to the Canada Revenue Agency you must also include this information when preparing your return.

Identify whether the benefit is a rental income or business income. If you provide basic services such as lighting, electricity and water, it is a rental income. If you provide meals, cleaning and ensure the safety of your tenants, it could be business income.

“Is It Beneficial For You To Become A Landlord?” is an English translation of a French article as bellow:



Est-il avantageux pour vous de devenir locateur? (via ImpotRapide)

Vos enfants quittent le nid pour aller étudier à l’université tout d’un coup, vous avez une chambre à louer ou de l’espace au sous-sol. Cela semble être un moyen facile de faire de l’argent, mais tenez compte des facteurs suivants avant de prendre une décision. Trouver des locataires…

(continue reading…)


Mortgage Basics For First Time Home Buyer

Owning a home is an important task of every individual. This use to start as a dream but accomplishing it into reality bring great pride. Being a big and a life time investment that come once in a life of most of the individuals that can make confusion in undertaking the home buying process as a first time home buyer. There is no doubt about the mortgage process is a lengthy financial transaction that often confuse first time home buyers. Its a fact of majority that most of the individuals don’t have money to just purchase a home outright, that’s the reason home buyers turn toward the mortgage lenders to ask for home financing of their dreams.

There are various important things to look after for the first time borrowers but first thing that should understand is the role credit plays in the mortgage process. Prepare yourself to ask a lender to make a sizeable loan to you for an extended period of time – often 25 and 30 years. For the lenders to take on this risk, they require to evaluate your creditability and your ability to pay back the loan. Home lenders typically look at your credit report which highlights how you have dealt with other creditors in the past, your net household income, location and the value of the home you are willing to purchase. Based on such information home lender then decide on whether to extend you the credit and at how much interest rate.

Interest rate is a vital concept to understand as over the lifetime of the loan you can expect to pay back double the amount of the loan value based on the interest rate – that C$150,000 house can cost you C$300,000. What your goal being as a first time home buyer in the mortgage process is to get the lowest possible interest rate you can.

You also need to access your affordability, as most of the mortgage lenders typically consider to spend maximum 30% of your monthly income on house payments. In fact, longer mortgage term with the low interest rate can make your dream house afford to buy. It is important to buy something you can easily pay back and comfortable affording because you don’t want to see yourself in a crisis situation like unable to pay your monthly mortgage payment.

Next, you should have saved up a reasonable cash reserve before going into the home buying process. You are going to ask to pay things like closing costs and down payments; try to pay good amount of a down payment as you can to reduce your credit amount as much as possible. You then will want to have a small reserve left over to furnish your new house and take care of any required repairs – remember, you own your home now and it is up to you to spend money on it to furnish or repair it if something happens!

Mortgage basics for first time home buyer can bring confidence but if you are still confused about the mortgage process and home buying, don’t panic because you are not alone. There are many first time home borrowers who share the same kind of concerns and fears. Search and find in your community offline and online for the local first time home buyer groups that meet with experts from the banking and real estate industry there to answer your questions. You may also contact mortgage lenders or brokers and realtor about your finding. Look around you, you will find lot of people having successful home buying experience, and if you come prepared you can go through with the big and successful financial endeavor by getting the best possible deal on your mortgage while getting your own house.


How To Compare Mortgage Rates? Bank Of Canada Report Discounting In Mortgage Markets

Mortgage rate comparison seems to be a hectic job although there are various places online where you can get all the current mortgage offers to compare Canadian mortgage rates from best mortgage companies, banks, credit unions and brokers on a single place. To make sure you are getting the best mortgage rates, you should research lot of such places to reconfirm and compare mortgage rate along with the features and benefits of some of the great companies of your choice.

Why should I compare mortgage rates?

Homebuyers who compare mortgage rates and interact with the loan officer while explaining their financial situation to find out the best option accordingly during the pre-approval process are more likely to secure an affordable and competitive financing option. Usually all the mortgage seekers get the different rate on their mortgages. As mortgage interest rate can be affected by individual’s personal situation and particular needs, and if you are looking to get best mortgage for you, you should compare all of your options. According to The Bank of Canada: “those who compare mortgage rates do get better deals on their mortgages”, that’s why always shop around to get savings on your mortgages.

How can I get best mortgage rates?

Compare Mortgage Rates CanadaBank of Canada has already laid down its findings for the general public, according to its report Discounting in Mortgage Markets in which it examined insured Canadian mortgages from the 1990 to 2004 and concluded the difference between the discount rates consumers received was always increasing. Here’s the study that shows how homebuyers and refinancers can improve their chances of securing a low mortgage rate:

  • Customers got the best rates by working with a qualified mortgage broker.
  • Asking mortgage lenders about preferential rates based on loyalty, age and finances.
  • Purchasing a home in a neighbouring community (those who live outside cities usually get better deals).

When you’re looking to buy or refinance home, you should always spend some time to research, Discounting in Mortgage Markets study clearly states; posted bank mortgage rates are best options as these offers mostly same rates but it’s the negotiating that enables mortgage brokers to provide their customers lower rates on their mortgages.

How to compare mortgage rates online is just a click away, give some time to the online environment to get the power to make an educated decision. After rate comparison, you may select some of the mortgage brokers to contact them personally. It will help you in getting best mortgage deal while negotiating the deal, talk to a mortgage expert to improve your chances of getting an affordable mortgage loan product.


Federal Budget Canada 2013 Highlights

Federal Budget 2013 CanadaCanadian ruling Conservative government tabled its new federal budget for 2013 on Thursday, March 21, 2013. According to the Finance Minister Jim Flaherty latest budget will boost Canada’s economy. Flaherty says he is emphasising on top three main pillars that are skills training, manufacturing and infrastructure.

Here are some of the highlights from the federal budget Canada 2013:

  • 2013-14 forecast; revenues at $263.9 billion, spending at $282.6 billion and deficit at $18.7 billion, where deficit is projected to drop to $6.6 billion in 2014-15 and become $800-million surplus in 2015-16.
  • Development of a new Canada Job Grant program next year to train workers, it will be negotiated with provinces by next year to replace existing $500-million labour market agreements. $241 million over five years for First Nations skills training. New programs will promote apprenticeship and also measures will be introduced to improve skills training for the disabled.
  • $900 million in new spending, no new taxes or tax cuts.
  • $400 million in revenue from closed tax loopholes and enforcement.
  • An improved and expanded tax break on expenses for families adopting children.
  • Special tax break for first-time charitable donations to encourage young people to come up.
  • Super tax credit to encourage young Canadians to donate.
  • Snitch line and rewards to catch international tax cheats.
  • Gas tax fund for cities to increase two per cent each year.
  • 2 year extension of an accelerated capital cost allowance to help manufacturers.
  • New 10-year, $14.4 billion infrastructure fund starting in 2014.
  • $1 billion over 5 years for aerospace industry and research.
  • Infrastructure spending of $47 billion over 10 years, starting next year (2014).
  • Refund for veterans’ funerals and burials doubled to $7,376.
  • For small business, extension of EI credit for new hires.
  • $119 million over five years to transition homeless off the streets.
  • $100 million over two years to support housing construction in Nunavut.
  • Tariffs eliminated on baby clothes and sports gear, including skates, hockey sticks, skis and golf clubs.

Flaherty says it’s not a budget but an economic action plan on what he was optimistic about achieving the government’s economic agenda. As most of my blog readers wants to know about its impact over mortgage market, here’s an interesting article from FinancialPost that may help them in finding out their concern on major financial product mortgage loan; the federal government is once again cracking down on Canada Mortgage and Housing Corporation (CMHC) and the mortgage insurance sector.


Bank of Canada Rate Hold Continues (2013)

According to the Bank of Canada’s 23rd January, 2013 Monetary Policy announcement; BOC lowered its economic growth forecast to 2% for 2013 besides keeping lending interest rate unchanged at 1%. Bank of Canada rate hold has been followed same from last 27 months and it is not expected to rise until third quarter this year. Further to the recent announcement which the Bank published this morning, The Central bank says our economy has not performed according to our expectation that has been forecasted in the second half of 2012. The next rate decision is scheduled by the Bank is March 6, 2013.

The Bank of Canada is once again keeping its benchmark interest rate unchanged surprisingly indicates about future rate hikes that are less imminent than previously anticipated. According to the statement noted by the Bank of Canada that “in Canada, the slowdown in the second half of 2012 was more pronounced than the Bank had anticipated, owing to weaker business investment and exports,” that “caution about high debt levels has begun to restrain household spending,” and that “core inflation has softened by more than the Bank had expected, with more muted price pressures across a wide range of goods and services, consistent with the unexpected increase in excess capacity.”

The Bank of Canada expects economic growth to pick up through 2013, where “the 3 main upside risks to inflation in Canada relate to the possibility of stronger-than-expected growth in the U.S. economy, higher Canadian exports and renewed momentum in Canadian residential investment” and “the 3 main downside risks to inflation in Canada relate to the European crisis, more protracted weakness in business investment and exports in Canada, and the possibility that growth in Canadian household spending could be weaker.” For more information about release of the January Monetary Policy Report and the opening statement by Mark Carney, Governor of the Bank of Canada, you are advised to follow the link to get complete overview of this discussion.

Financial concern:

Everyone having a financial concern is surprised on the frozen low rates that is being forwarding from a long time and still continues to be same for the first quarter of 2013, low rates may be bad for an economy; “Prime Minister Stephen Harper has expressed his concerns as slow growth will deliver a negative impact on employment in the long term”, where low rates environment favours homeowners to enjoy this extended lower interest rate opportunity to pay off their mortgage and other debts faster beside buying a new house on 10-year fixed rate may be a good option to enjoy today’s low rates for the long term. There is no rate change expected for the first quarter of the 2013, as the prime rate for most of the lenders should stay at 3%, exactly where it has been in September 2010. Moreover, as for the fixed rates, keep on enjoying historical low rates for all those who are looking to purchase or refinance.


Canadian New Mortgage Amortization and Refinance Rules Effective July 9, 2012

New Changes to Canadian Mortgage Rules Effective July 9, 2012In reference to the increased debt burden of Canadian family, Canadian government has been taking various measures to stop further increase and reduce the recent debt load as it was experienced high as 152 per cent debt-to-income ratio in February, 2012. Real estate is one of the major areas where it should require a great concern of a government to take efforts to safeguard home financing and interests of home buyers / owners. The federal government is once again going to tighten mortgage-lending rules to soften down the overheated housing market and increased household debt crisis. Mr Jim Flaherty, Minister of Finance, announced new mortgage amortization and refinance rules, according to him these further adjustments to the rules for government-backed insured mortgages will bring down the overextended pressure of households and will help in making the housing market strong in Canada.

Here are the new changes which were announced by the Federal Government for insured mortgages type. These new rules will be effective from July 9th, 2012 are:

  1. The maximum amortization is reduced from 30 years to 25 years. This amortization period reduction will help Canadian families in reducing their total interest payments towards their mortgages, which also means faster build up equity on homes and paying off mortgages. It’s the third time the Harper government has reduced the maximum amortization period in the last four years to make it easier for Canadians to buy homes.
  2. Availability of government-backed insured mortgages to homes is limited by its price; properties purchased for over $1 million are not eligible for mortgage insurance.
  3. Reduce the maximum loan to value ratio on refinances to 80 per cent from 85 per cent. It means now the maximum equity homeowners can take out of their existing home when refinancing is 80% of the value. It’ll promote saving via home ownership and also encourage homeowners to manage borrowings through their homes.
  4. Maximum gross debt service ratio has been fixed at 39 per cent and total debt service ratio at 44 per cent. This will result in better protection to Canadian households in case of an increase in interest rates or sudden economic problem.

In the words of Minister Flaherty, “Our Government stands behind the efforts of hard-working Canadian families to save by investing in their homes and their future”. These adjustments will help Canadian people in realizing their goals, making it easy to purchase homes beside will help in reducing the threat of debt to personal disposable income ratios reaching up to the toxic 160 mark, the rate that caused a major downturn in economies of America and Great Britain. For more detailed information on the update, please visit www.fin.gc.ca


Annual State Of The Residential Mortgage Market In Canada 2011 Brief Introduction

7th Annual State of the Residential Mortgage Market in Canada (ACCHA) November 2011 Prepared for Canadian Association of Accredited Mortgage Professionals (CAAMP) By Will Dunning CAAMP Chief EconomistThe Canadian Association of Accredited Mortgage Professionals released their “Annual State of the Residential Mortgage Market in Canada – November 2011”. According to the report the average mortgage growth is expected to be 7.3 per cent in 2012, beside, it is increasingly expected about mortgage interest rates that will remain low for a prolonged period, so Canadian consumer can get best mortgage rates in coming future. Here is the brief overlook of this report.

Introduction and Summary

This is the seventh annual report on the State of the Residential Mortgage Market in Canada. It has been prepared for the Canadian Association of Accredited Mortgage Professionals (“CAAMP”) by Will Dunning, Chief Economist of CAAMP. It provides an overview of the evolving state of the residential mortgage market in Canada. Major sections of this report are:

  • Introduction and Summary
  • Consumer Responses to Topical Questions
  • Consumer Choices and Satisfaction
  • Outlook for Residential Mortgage Lending

Data used in this report was obtained from various sources, including an online survey of 2,000 Canadians. More than one-half of the sample (1,031 Canadians) were home owners who have mortgages and/or other debt on their property. The remainder included renters, home owners without debts on their properties, or others who live with their families and are not responsible for mortgage payments or rents. The survey was conducted for CAAMP by Maritz (a national public opinion and market research firm) from October 20 to 25, 2011.

Consumer Responses to Topical Questions

In the Fall 2010 and 2011 editions of the CAAMP survey, consumers’ opinions were sought on several issues, related to housing and mortgages, that have taken on high profiles in the media. The consumers were asked to what extent they agree with various statements, on a 10-point scale: a response of 10 indicates that they agree completely with the statement and a response of 1 indicates they disagree completely. Average scores of 5.5 would indicate neutral opinions.

The table below summarizes the responses. Results are presented in substantially more detail in the body of the report (starting at Page 9).

For all of the questions, responses varied widely, and it is challenging to generalize about consumers’ attitudes. Highlights include:

  • The statement that found the highest degree of agreement (an average rating of 7.98 out of 10) is that “as a whole, Canadians have too much debt”. Almost one-half (46%) gave ratings of 9 or 10, showing very strong agreement with this statement. This, coincidentally or not, has been asserted repeatedly by senior government officials and other voices in the news media.
  • There is also agreement (average rating of 7.11 out of 10) that “low interest rates have meant that a lot of Canadians became homeowners over the past few years who should probably not be homeowners”.
  • However, different perspectives were found with several other questions.
  • There is a widespread opinion that “real estate in Canada is a good long-term investment”, which received the second highest rating, an average of 7.27 out of 10.
  • Furthermore, there was a high degree of agreement that mortgage debt is “good debt (7.07 out of 10).
  • In addition, in a statement that was asked for mortgage holders only, few agreed that “I regret taking on the size of mortgage I did”. The average score of 4.04 was well below neutral. Just 7% agreed strongly with the statement; 37% strongly disagreed.
  • Many Canadians believe that other people have taken on too much debt or have bought homes for which they are unprepared. But, when responses about their own situations are aggregated, most believe that they have been responsible. The contrast between these sets of responses is interesting. Actual behavior by people and their beliefs about their own behavior tells us more than does their beliefs about the behavior of other people: overall these responses suggest that prudence rules the land.
  • Meanwhile, data on mortgage arrears indicates that there are very few Canadians who are not meeting their mortgage obligations, and estimates developed in this report indicate that a vast majority of Canadian mortgage borrowers are well positioned to deal with potential increases of mortgage rates. Moreover, they are acting aggressively to pay off their mortgages, considerably more rapidly than they are required to.

Consumer Responses to Topical Questions
Average Responses (10 = Completely Agree)

Topic Fall 2011
Canada’s housing market is in a “bubble” 6.07
I am concerned about a downturn in Canada’s housing market in the next year 5.84
Canada’s superior banking system will shelter us from significant downturns like the one experienced by the United States 6.11
As a whole, Canadians have too much debt 7.98
House prices in my community are at a reasonable level 5.62
Low interest rates have meant that a lot of Canadians became home owners over the past few years who should probably not be home owners 7.01
I/My family would be well-positioned to weather a potential downturn in home prices 6.72
Real estate in Canada is a good long-term investment 7.27
I am optimistic about the economy in the coming 12 months 6.02
I regret taking on the size of mortgage I did 4.04
I am delaying my retirement until my mortgage is paid off 5.38
I would classify mortgages as “good debt” 7.07

Source: Maritz survey for CAAMP, Fall 2011.

Consumer Choices and Satisfaction

The survey found that Canadians remain highly satisfied with the terms of their mortgages, and their experiences in obtaining their mortgages:

  • 13% indicate they are completely satisfied with the terms of their mortgages (giving a rating of 10 out of 10) and a further 58% are satisfied (ratings of 7 to 9 out of 10). Combining these results, 71% are satisfied to some degree.
  • 21% give a neutral satisfaction rate (5 or 6 out of 10).
  • Just 8% are dissatisfied to some degree (1 to 4 out of 10).
  • On average, the satisfaction rate is 7.4 out of 10.

Satisfaction with mortgage experiences was very similar, and the average rating was fractionally higher, at 7.6 out of 10. Older age groups are more satisfied with their mortgages and their mortgage experiences than are younger age groups. There are some variations across different groups.

About one-third (32%) of home owners with mortgages had some form of mortgaging activity during the past 12 months: taking out a new mortgage (9%), or renewing or refinancing an existing mortgage (23%). The remainder (68%) did not have any mortgaging activity during the year.

Among those who renewed or refinanced an existing mortgage during the past 12 months, 21% changed lenders and 79% remained with the same lender. The rate of switching has edged upwards – two years ago it was 12%.

Concerning types of mortgages, fixed rate mortgages remain most popular (60%). A significant minority (31%) are variable and adjustable rate mortgages. For mortgages originated or renewed during the past year, an increased share (37%) has variable or adjustable rates. This shift may be due to the large spread between rates for fixed rate and variable rate mortgages (close to 2% during the past year). As well, it is increasingly expected that mortgage interest rates will remain low for a prolonged period. Both of these factors are encouraging borrowers to accept the risk that the payments will increase for variable rate mortgages.

With regard to mortgage amortization periods, 22% of mortgages in Canada have amortization periods of more than 25 years. The share is higher (38%) among home owners who, during 2011, took out a new mortgage on a newly-purchased home or condominium.

Looking at interest rates, the CAAMP/Maritz data indicates that:

  • The average mortgage interest rate for home owners’ mortgages is 3.92%, a drop from 4.22% a year earlier.
  • For borrowers who have renewed or refinanced a mortgage during the past year, their current average interest rate is lower (by 1.24 percentage points) than the rates prior to renewal. Among borrowers who renewed, a large majority (78%) saw reductions, a smaller proportion (13%) saw their rates rise, and 9% had no change. Based on the survey data, it is estimated that among 1.35 million mortgage borrowers who renewed or refinanced in the past year, the combined saving was $2.7 billion per year.

Mortgage rate discounting remains widespread in Canada. During the past year, the average “posted” rate for 5-year fixed rate mortgages was 5.38%. Discounted rates are estimated at an average of 3.92%, implying an average discount of 1.46 points.

Given concerns that have been expressed about consumers’ abilities to cope with potential rises in interest rates, this issue of CAAMP’s “Annual State of the Residential Mortgage Market” asked mortgage holders to indicate “the amount at which, if your monthly mortgage payment increased this much, you would be concerned with your ability to make your payments”. The average amount of room is $750 per month on top of their current costs. A vast majority of mortgage holders has considerable capacity to afford rises in mortgage interest rates. There is a sizable minority (12%, or about 650,000 out of 5.80 million) who would be challenged by rate rises of less than 1%. However, most of these have fixed rate mortgages: by the time their mortgages are due for renewal, their financial capacity will have increased and the amount of mortgage debt will be reduced. Moreover, most of these borrowers (88%) have 10% (or more equity) in their homes. There are about 75,000 borrowers who are susceptible to short term moves of interest rates and have limited home equity – less than 2% of the 5.8 million mortgage holders in Canada.

This study asked questions that generated estimates of home owners’ equity.

  • The total value of owner-occupied housing in Canada is estimated at $3.017 trillion. Mortgages and lines of credit on these homes total $982 billion, leaving $2.035 trillion in home owners’ equity. The equity is equal to 68% of the total value of the housing.
  • Among home owners who have mortgages and/or lines of credit on their homes, 2% might have negative equity, and a further 4% have estimated equity of less than 10%. More than three-quarters (78%) have 25% or more equity.

The survey data indicates that 10% of mortgage borrowers took equity out of their home in the past year. The average amount is estimated at $49,000. These results imply that the total amount of equity take-out during the past year has been $28.5 billion. The most common use for the funds from equity take-out is debt consolidation and repayment, which accounted for $11 billion. This part of the total equity take-out would result in corresponding reductions for other forms of consumer debt. Home renovations accounted for about $5 billion of the equity take-out, with $6 billion for education and other spending, $3.5 billion for investments, and $3 billion for “other” purposes.

Among borrowers who have taken out a new mortgage during the past year, 52% obtained the mortgage from a bank, 32% from a mortgage broker, and 16% from other sources.

Outlook for Residential Mortgage Lending

Gradual recovery from the recession of 2008/09 has brought stabilization of housing activity, but at lower levels than pre-recession. The consensus of forecasts is for a continued moderate rate of job creation, which is expected to result in housing activity similar to recent levels, for both resales and new homes. These levels of activity are strong enough to support stable or slowly rising housing values: the average of forecasts is for house price growth of about 1% in 2012, a slowdown from the very strong growth of 7.7% expected for 2011.

As of this August, there is $1.079 trillion of residential mortgage credit outstanding in Canada. This includes both owner-occupied and investor-owned residential properties.

Based on the housing market forecasts, the volume of residential mortgage credit outstanding is forecast to continue expanding. Growth is forecast at about 7.7% during 2011 ($80 billion) and 7.3% in 2012 ($81 billion). A preliminary look at 2013 suggests growth of 7.0% ($83 billion).

While the forecasts for the economy, housing market, and mortgage market are encouraging, there is, as always, uncertainty about the outlook. In Canada, the largest risk factor for the mortgage market is “loss of ability to pay” (that is, job loss or a reduction of wages).

Data published by the Canadian Bankers Association shows that the gradual recovery from the recession is resulting in a gradually falling rate of mortgage arrears.

An increasing level of uncertainty about economic prospects is creating uncertainty about the outlook for the housing and mortgage markets.

The risk factor that gets the greatest amount of attention in Canada might be characterized as “an unaffordable rise in mortgage costs”. CAAMP’s research has repeatedly found that this is a negligible risk factor for Canada at present.

Thus, there are risks of outcomes worse than these forecasts. If that occurs, the cause will have been events in the broader economy. The US’s enormous economic difficulties started in the housing and mortgage markets. That will not be the case in Canada.

Looking for the full report, click here to download it from its official location (Canadian Association of Accredited Mortgage Professionals), its 34 pages PDF ebook that requires an Adobe Acrobat Reader to open the report. Source: Annual State of the Residential Mortgage Market in Canada, Nov 2011, CAAMP.

Disclaimer! This report has been compiled using data and sources that are believed to be reliable. CAAMP, Maritz, Will Dunning, and Will Dunning Inc. accept no responsibility for any data or conclusions contained herein. The opinions and conclusions in this report are those of the author and do not necessarily reflect those of CAAMP or Maritz.

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How To Protect Your Investment Against Mortgage Fraud

Do not spoil your realestate investment by mortgage fraudReal estate is the largest lifetime investment and for a great number of people, purchasing a home is an expensive investment in relation to their income. Having the enormous price tag that required decades to be paid off that automatically buildup an emotional relationship, being an honor and financial security that these people don’t want to loose. Despite the fact of being having big asset there is also a threat that can lead to a number of dangerous outcomes. Every new homebuyer should take great care when entering into mortgage transaction to avoid and protect its investment against mortgage fraud. There are many types of mortgage fraud today, three of which are common among the general public that may happened as a principally fraud are being greatly observed and happened are; the title fraud, mortgage fraud and the value fraud.

These are some of the mortgage loan fraud news happened in Canada:

A North York woman lost the 100-year-old home valued $300,000 in which she had lived in for 30 years, became a victim of identity theft. She lost her mortgage secretly placed on her home by thieves, a mortgage that a judge ruled valid, even though obtained fraudulently.

In the province of Alberta last year, the Bank of Montreal alleged a $120 million mortgage fraud scheme, the largest in Canadian history. It involved, according to the suit, bankers, lawyers, private citizens and possibly elected officials. Their scheme was one of the simplest: over-inflating mortgage values and using “straw buyers,” i.e., people willing to pose as mortgage seekers and sign up for the loans.

Many homebuyers in Canada are unaware of the dangers posed by identity thieves when it comes to their real estate investment. Unfortunately, one of the three main forms of mortgage fraud, the real estate title fraud is on the rise. According to the Canadian Association of Accredited Mortgage Professionals (CAAMP), real estate industry insiders now peg the average case of real estate fraud at $300,000. In comparison with the other big threat, the RCMP estimates the average credit card fraud case in Canada to be $1,200.

These are few tips that will help you to avoid fraud and protect your investment against mortgage fraud:

  1. You are strongly advised to check your credit reports through Canadian credit reporting agencies like www.equifax.ca and www.transunion.ca beside all the financial and bank statements regularly for all the inconsistencies, unknown charges and unauthorized credit inquiries.
  2. Try to avoid disclosing out your private and confidential stuff. Don’t give out personal information in person, over the phone line and or on the Internet unless you don’t feel confidence and know who you are dealing with, how it will be used and shared.
  3. Protect your mails, be alert to billing cycles and when bills or mails haven’t arrived.
  4. Don’t throw your important papers as these are; always shred any documents or materials with personal or financial information prior to discarding them.
  5. Always seek advice from a real estate expert who is licensed in your area when shopping for a home.
  6. Ask your mortgage professional, broker or consultant about how title insurance could help protect your real estate investment.

How to protect your investment against mortgage fraud, is a very simple question but its answer is complex as it greatly involves human intention, I’m not saying that all the sellers out there are suspicious or fraudulent but every buyer should need to do some due diligence on your own. There is a thin line in between good and bad and you should always avoid and get more cautious on those mortgage deals that sound “Too Good To Be True”, always prefer best mortgage rates instead of those lenders who offer cheapest one. If you don’t know the real estate market and how this mortgage works then your foremost move should be to leave that offer at once. And when you get involved in a transaction, you should go out to discuss about your deal with those people in the market that don’t have any relation with the said transaction to inquire about not even your mortgage transaction but the people you are dealing with.


Canadian Government Announced New Mortgage Rules For 2011

Finance Minister Jim Flaherty Announced New Mortgage Rules For 2011Federal government tightens mortgage rules 2011 are seem to be like it been cracking down on Canadians’ ability to qualify for a mortgage, although on one side these changes will help hard-working Canadian families to save by investing in their homes and future but on the other hand Canadian government is shifting its insuring behavior entirely on lenders because risk of these loans will now be on the financial institutions that lend the money. Will these recent changes will slow down Canadian housing market 2011 while making it harder to buy a new home or consolidate debt into your mortgage?

On Monday, January 17th 2011, Finance Minister Jim Flaherty along with Natural Resources Minister Christian Paradis announced new mortgage rules while implementing 3 main changes with an intention to alleviate concerns over consumer debt, to help combat increasing household debt and to add further stability to the Canadian housing market.

According to Mr. Flaherty’s recorded announcement that you can also watch his live speech at a “live televised announcement”, here’s are some words specially elaborated for my blog readers, he said: “Canada’s well-regulated housing sector has been an important strength that allowed us to avoid the mistakes of other countries and help protect us from the worst of the global recession. Canada has a prudent mortgage market and responsible lending practices…, our governments ongoing monitoring and sound supervisory regime along with the traditionally cautiously prudent approach taken by Canadian financial institutions to mortgage lending has allowed Canada to maintain strong and secure housing and mortgage markets. This has also allowed Canada to avoid housing bubbles witnessed elsewhere.

The following additional measures were highlighted as the new Canadian mortgage rules specially amended for Canadian families to safeguard their future investment and household debt.

New Canadian Mortgage Rules Announced For 2011:

  1. The maximum amortization period for less than 20 percent down payments is reduced to 30 years from previously it was 35 years for government-backed insured mortgages. Adjustments on the new amortization limit will come into force on March 18, 2011.
  2. The maximum amount that can be borrowed when refinancing a mortgage is reduced to 85 percent from current 90 percent value of the home. This new refinancing limit will come into force on March 18, 2011.
  3. The federal government will withdraw its insurance backing for home equity lines of credit secured on homes (HELOCs). Government backing for home equity lines of credit, rules regarding the borrowing of funds that are secured by homes will end on April 18, 2011.

Canadian 2011 Mortgage Changes:

Change in Maximum Amortization Period! The purpose reduction in maximum amortization periods for mortgages is to allow mortgagors and borrowers to pay off their debt quickly as possible and thereby reducing the total interest payment they will pay on their loan, but on the other hand as their mortgages will be amortized over a shorter time period, it will result in increase of their monthly payments.

Change in Lower Maximum Refinancing To Loan to Value Ratio! The reduction of 5% on maximum amount that a Canadian can borrow to refinance their mortgages will definitely limit the debt amount a family can incur. On the other hand it is also expected to allow and encourage savings like families will only be able to borrow less, resulting as being a greater equity in their homes.

Change in Withdrawal of Government Insurance on Non Amortizing Lines of Credit Secured by Homes! The Canadian federal government will cease to insure home equity lines of credit where money is borrowed against a home for use other than to purchase or refinancing. According to the Finance Department in relation to rules regarding the borrowing of funds that are secured by homes have been shifted their responsibility on financial institutions to deal such loans and the government will not manage them because these home equity loans have risen in recent years resulting in more consumer debt and definitely more loan defaults. Where the federal government thinks its the best measure to further stabilize Canadian housing market. It is also expected these financial institutions and lenders will make it more efficient and productive while making their strict criteria for the grant of such loans.

Some Professional Voices About New Mortgage Rules

In the words of Mr. Avery Shenfeld, an Economist; likens the new rules to the government putting Canadians on “a debt diet” that would further protect against a U.S. style mortgage crisis. The finance minister’s announcement indicates an increasing concern in the federal government about the impact of consumer debt on the Canadian economy.

Frank Techar, president of personal and commercial banking at Bank of Montreal said, “The actions announced are prudent, measured, responsible and timely”.

Analysts from Scotia Capital suggested government regulation was the way to go in terms of curbing household appetite for credit as opposed to the Bank of Canada raising interest rates, which they said would be “imprudent” at this time.

Exceptions will be allowed after these new Canadian mortgage rules changes come into force, if necessary, to satisfy a home purchase or a sale and home financing agreement arranged before the above mentioned dates of March and April.

If you have remembered, back in 1999 when the CMHC would only insure mortgages for a maximum of 25 years federal government decided the Canadian housing market would be a great way to goose up the economy since it was working great in USA at that time. In 2005 the maximum amortization went to 30 years, in 2006 went to 35 years, in 2007 it went to 40 year terms with zero down with an intention to compete with private companies in the market. Today’s government worries about the debt load of the Canadian consumer that has shown up in most recent changes seems to be started in year 2008 when the maximum amortization went again back to where it was in year 2006 as 35 years. Does it mean government is trying to slowly taking away moisture without causing it prominent dry look?

You are welcome to share your own experience and opinion regarding mortgage new policy “The Canadian Government Announced New Mortgage Rules For 2011”. For the previous major mortgage rule changes and announcements you may check out here: Canadian Mortgage Rules October 2008 and Canadian Mortgage Rules April 2010.


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