Posts Tagged ‘Borrowers’

New Government Backed Insured Mortgage Rules to Take Effect April 19

Monday, March 1st, 2010

The Minister of Finance Jim Flaherty, on February 16th, announced new mortgage rules designed to ensure buyers can manage their debt of rising rates of interest, and to slow the speculation in real estate property.

Minister Flaherty commented on the mortgage issue:

“There is no clear evidence of a housing bubble, but we are taking proactive, prudent and cautious steps today to help prevent one. Our government is acting to help prevent Canadian households from getting overextended, and acting to help prevent some lenders from facilitating it.”

The new rules will come into force, on 19 April 2010; here is a brief overview changes apply to the government-backed insured mortgages:

  1. Borrowers should now be available at a fixed rate of five years even if they choose a mortgage loan with a lower interest rate and the short term. Rationale for the Government for this change is that it will help borrowers to prepare for a higher rate even if it can tighten home buyers purchasing power.  It remains unclear if borrowers must benefit rate posted five years or reduced the rate of five years.
  2. The maximum amount that Canadians can withdraw in their mortgage loans refinancing will be reduced to 90 per cent of the value of their homes instead of 95 per cent. Justification of the Government for this change is that it will help to ensure that accession to the property is a more efficient way to register.  The impact of this change is expected to be minimal as owners relatively little withdraw equity their houses to this extent.
  3. A minimum down payment deposit of 20 per cent will be required for Government backed mortgage insurance on properties that are non-owner occupied “purchased for speculation,” which means rental realistic.   While this measure is intended to hinder the speculative purchase of properties by reducing the buyers leverage effect, it will have an impact also on those buying real estate in general investment purposes.

Don’t forget to talk to your mortgage professional for the advice on the mortgage strategy that meets your needs and how these changes might affect you.

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Tips For Boosting Affordability! How Much Mortgage Can I Afford?

Monday, June 1st, 2009

Getting lower mortgage rates mean great saving but increased affordability is what attracts more homebuyers. Anyhow, there are few more ways available to first-time homebuyers that offer affordable housing along with financial tactics that increases our savings to the point where we feel comfortable. Here are some time-tested strategies to consider in the light of our updated present economical situation to further increase mortgage affordability:

Pre-Qualification! Know What You Can Afford

The first thing I recommend to all homebuyers to find a mortgage broker and get pre-qualified or pre-approved for a mortgage. A mortgage pre-approval helps you establish a price range and the maximum mortgage you can reasonably afford. There are many lenders who offer pre-approving facility to their potential borrowers for a mortgage to lock-in a rate for up to 120 days.

Fixed-Rate Mortgages! Fix The Rate For A Longer Term You Afford

Consider locking in your rate for a longer period of time! If you’re uneasy about fluctuating interest rates and your ability to meet any increases, then a fixed-rate mortgage could be an ideal fit. Many lenders are open to longer fixed terms that may be up to 10 years in some cases.

Down Payment! Pay Maximum You Can Afford

Increased affordability comes from increasing the size of your down payment that results a lower monthly payment. A common way for first time buyers to come up with more cash for a down payment is to make use of the federal Home Buyers’ Plan. With this Plan, you can now withdraw more than before which is up to $25,000 each from a RRSP (registered retirement savings plan) without tax penalty to buy or build a qualifying home. Also, many lenders allow the down payment to come from a properly documented gift, and a borrowed down payment may be possible for some borrowers.

Debt Restructuring! Revisiting Your Current Debts

Your total debt service ratio (TDS) is what your lender will look at while considering your mortgage application to see how much of your total income is going towards various types of consumer loans, including your personal loans, credit cards, charge cards, child support, car loans and other. To increase your affordability and success that your TDS ratio is acceptable to prospective lenders, your mortgage broker can advise on restructuring your current debt (by increasing the amortization and lowering payments on your consumer loans like car loan, etc.,).

You could get more valuable advice and practical tips to boost affordability specific to your own situation by your mortgage professional. However, first-time homebuyers need to be very careful when finding a mortgage that is several times their income. If you lose your job or get into financial difficulty, you could easily miss mortgage payments and lose your home. It is vital you are borrowing no more than you can afford to spend each month. Although present real estate market and its soft home prices along with the low interest rates have been making affordable house plans to further enhance mortgage loan market about which economists believe interest rates will stay at its lowest position for the next two years or so but you should not treat this as a guarantee.

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Bank of Canada’s Lowest Ever Interest-Rate Relief According To Canadian Consumer View Point

Sunday, February 1st, 2009

Lending rates hit record low when Bank of Canada announced last month, on January 20th that it would cut its key policy rate by half a percentage point. Instant market reaction was detected when BOC chopped its main interest to historical lowest rate ever.

Banking sector depresses Stocks and Loonie down after Bank of Canada cuts interest rate by half a point! The Toronto stock market was down over 100 points in early trading that took composite index tumbled latter at 177.7 points to 8,663.8 while Canadian dollar was down half a cent US after the Bank of Canada cut its key interest rate to one per cent.

On the other hand Canadian senior citizens don’t seem to be happy with the interest cut down because their interest returns on their investment and saving with the bank will affect their already fixed and limited means to squeeze more.

What Does It Affect You As A Debtor On Having Various Forms Of Debt?

  • Canadian Consumer Having A Mortgage Loan!

Fixed-rate pricing on downward trend! If your interest rate is fixed, pricing for fixed rate mortgages is higher than it normally would be, as lenders are accounting for higher perceived risk in the financial services industry.  The spread between a five-year Government of Canada Bond (1.58 per cent) and a competitive fixed rate mortgage rate (4.79 per cent) is now 3.21 per cent – which is much higher than what we have seen over the last few years.

Variable mortgages offer savings! If you have a variable rate mortgage, your payment level in most cases will remain the unchanged, but more of your payment will go towards the principal and less to interest. So you will be paying off your home more quickly. Moreover, whether the lower policy rate from the Bank of Canada will translate to lower interest rates for some borrowers remains to be seen, but variable-rate mortgages are still a cheaper option than they were a year ago.

  • Canadian Consumer Having A Credit Card!

Credit cards will likely remain where they are, at least for the time being. Given the state of the economy, credit-card companies are concerned about potentially higher delinquency rates. Their write-offs tend to be higher in tough economic times.

  • Canadian Consumer Having A Car Loan!

Car industry is going through a hard economic situation globally and so does here in Canada, although sluggish export results low production, high prices and cut jobs but government has taken timely steps to improve its efficiency in a way domestic sales on car prices will stay at moderate level. So, car loans seem to have remained fairly steady.

  • Canadian Consumer Having A Lines Of Credit!

Reduction in the prime rate leads to immediate savings for those who have variable rate mortgages, lines of credit and other floating interest rate loans. If your line of credit is tied to the prime rate and you are paying interest only, your payment will decrease. If you have a set payment, more of it will be applied to the principal and less to the interest.

  • Is It A Best Time For The Investors!

In trading business, your success depends on your purchase, that’s why big companies have more margins in their sales than the smaller companies because they cant get the benefits associated with the bulk purchases. Anyhow, it’s a best time especially for those who are having a right investment plan or opportunity where they can reinvest their borrowed money on such low interest rate. Although, most of the people will also planning to take advantage of more low interest rate by a half-percentage point which is expected to fall in June 10, 2009. But remember this next interest rate fall is not confirmed because it will only implemented if economy required to keep moving. But if you have a right investment today, tomorrow you may not, so don’t pass it away I guess I can see it being somewhat attractive.

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