28 Apr

CMHC tightens mortgage insurance rules as housing market cools


Posted by: Amrit Bains

CMHC is moving yet again to tighten the home mortgage market with changes that would make it more difficult for certain Canadians to obtain government-secured financing for real estate purchases.

The Canadian Mortgage and Housing Corporation says that as of May 30 it will no longer insure purchases by self-employed workers without third party income validation, and will offer no insurance on Canadians seeking to purchase a second property.

Self-employed Canadians can still qualify for CMHC insurance, but must be able to provide proof of their income levels, the agency said.

It estimated the changes would effect less than three per cent of the units it insures. Given the limited use of these products, their discontinuation is not expected to have a material impact on the housing market, the agency added.

The changes are part of the agency’s continuing review of its products and core mandate to support stability in the housing market, CMHC said in a statement.

“As part of the review of its mortgage loan insurance business, CMHC is evaluating its products and services to ensure they are aligned with these objectives,” Steven Mennill, senior vice-president of insurance, said in a statement.

CIBC deputy chief economist Benjamin Tal said the move was not a surprise, adding that more changes are likely coming to reduce the agency’s footprint in the market.

The Finance Department has tightened mortgage rules on four separate occasions in the past several years — along with requiring stricter enforcement and management of loans — in an effort to weed out marginal buyers and excessive speculation in the housing market.

Former finance minister Jim Flaherty had also expressed concern that CMHC had become too large a player in the market, needlessly exposing Canadian taxpayers to risk should there be a housing crash. The agency currently has about $560 billion in outstanding mortgage insurance on its books.

Flaherty and the Bank of Canada have for several years expressed concerns that too many Canadians risked becoming over-extended in the mortgage markets, especially once interest rates begin to rise.

However, earlier this week, Bank of Canada governor Stephen Poloz said he believes Canada’s real estate market is heading for a soft landing.


Source: CTV News
25 Apr

Should you get pre-approved for a mortgage? Ten things to know


Posted by: Amrit Bains

Putting your full faith in a mortgage pre-approval is like betting on a heavy favorite in a horse race. You’ll probably win but there’s room for major disappointment.

Sure, pre-approvals have benefits.

  • The best ones accurately measure your qualifications and how much house you can afford.
  • Their 90- to 120-day rate guarantees protect you if rates rocket up while you’re home hunting.
  • They make you seem more serious to sellers and real estate agents. (In competitive bidding situations, they’re almost mandatory.)
  • They’re free and there’s no obligation to use the lender that pre-approved you.

But here’s the problem: pre-approvals are not full approvals. So if you’re going to rely on one, you need to understand their limitations.

Here are 10 pre-approval facts every mortgage shopper should know:

1. Pre-approvals aren’t created equal.
Many lenders don’t review your qualifications when issuing a pre-approval. They provide only a rate guarantee, subject to later approval. (Mortgage advisers should always disclose this.)

“I would caution consumers when a lender only holds a rate, versus asking for documents and confirming qualification,” says Rob Regan-Pollock, a mortgage broker with Invis. “It’s heartbreaking to be told by a lender they cannot qualify after being told they were ‘pre-approved’.”

2. Advice goes only so far.
Mortgage advisers can “pre-qualify” you to confirm that you meet general guidelines, but only a lender’s underwriter can confirm that your income, down payment, purchase agreement, property information, credit and debt ratios meet their full approval

Unless you have a 20 per cent down payment from your own resources, rock-solid employment, provable income, pristine credit, and low debt, then pick a lender that reviews your application and preferably your documentation before granting its pre-approval.

3. Appraisals are the missing link.
Appraisals aren’t done at the pre-approval stage. But they’re mandatory for getting a mortgage. The issue, of course, is that you can’t get an appraisal on a home you haven’t found yet. And that’s the big risk with pre-approvals. If the lender’s or mortgage insurer’s valuation appraisal reveals that you overpaid, or the property has defects, it can render your pre-approval worthless. That’s why you’re always wise to insert financing conditions in your purchase offer (or at least appraisal conditions) or get an appraisal before you make an offer.

Adding a financing condition is especially important if you’re putting down less than 20 per cent, which typically requires an insured mortgage. That’s because default insurers like CMHC don’t even look at pre-approvals. They can decline you or your property for any number of reasons, leaving those without financing conditions at risk of not closing, losing their deposit and being sued.

4. Don’t over-rely on appraisers.
Even if you get an appraisal before making your offer, “you can’t rely on appraisers to identify every problem with a property,” says Jason Upton, president of Aedis Appraisals. That’s especially true for condos where most appraisers (due to cost and time constraints) won’t review condo board minutes, condo finances and engineering reports. That’s where risks like special levies, reserve deficiencies, legal problems or structural issues can turn up, all of which can kill a lender’s interest and make a pre-approval worthless.

5. Your actions after pre-approval matter.
Beware that missing payments, adding debt, changing jobs, moving around your down payment money or co-signing for someone, among other things, can void your pre-approval.

6. Pre-approvals don’t come with the best rates.
Statistically, only around one in six pre-approved homeowners actually take the mortgage they got pre-approved for. But the lender still has costs (like rate hedging and application processing costs) for the five in six pre-approved mortgages that don’t close.

Given this expense, pre-approvals don’t typically come with the best pricing. They’re often 0.10 to 0.15 percentage points above market rates – which is peanuts compared to your costs if rates soar and you’re not pre-approved.

That said, the best mortgage rates are often for 30- or 45-day closings. Check rates 30 days before closing. If they’re more than 0.10 percentage points below your pre-approval rate, ask your lender to match them. If they won’t, consider re-applying elsewhere. But avoid trading a flexible mortgage for a restrictive one that’s only marginally cheaper. Homeowners routinely underestimate their need for refinancing flexibility later.

7. Sometimes waiting pays.
If you’re very well qualified, a mortgage broker can sometimes time the submission of your pre-approval to get you better rates. “If rates are flat or trending down, the discussion with the client becomes one of monitoring the market and not actually submitting the file until they are within the window of [rate] specials,” Mr. Regan-Pollock says.

8. Reset if appropriate.
If rates have stayed low and you’re still actively home hunting, reset your pre-approval every 45 to 75 days. This extends your rate hold, protecting you if rates jump before you close. If your lender restricts rate resets, you might need to look elsewhere.

9. Get a second pre-approval, if needed.
Lenders don’t issue more than one pre-approval at a time. So if 45 to 60 days have elapsed, rates have jumped, and you need more time to find a home, consider getting a second pre-approval elsewhere. On the other hand, if you know you won’t close within your original pre-approval’s time frame, save time and try to reset the rate hold period with the existing lender.

10. Features matter.
Choose the pre-approval with the longest rate hold (e.g., 120 days), the deepest discount rate, full underwriting and the best mortgage features (i.e., good prepayments, a fair penalty, good port and refinance policies, etc.). Only a minority of lenders meet this criteria.

Source: The Globe and Mail

23 Apr

Housing market ‘extremely discouraging’ for first-time buyers


Posted by: Amrit Bains

Many experts believed that the real estate market was cooling. But as the spring buying season begins, it’s clear that’s not true.

According to the Canadian Real Estate Association, the national average price for a home in March was $401,419, an increase of six per cent in year-over-year comparisons.

While the market defies predictions, one thing’s for sure: The continued rise of Canadian home prices is putting a damper on the hopes and dreams of first-time buyers.

Sarah Wiseberg, who rents a condo in Toronto’s pricey downtown core, knows this only too well.

“I’ve been searching for almost a year, and I think it’s extremely discouraging for a first-time homebuyer, particularly if they are looking for something other than a 500-square-foot condo,” Wiseberg said.

Agata Pietrzak, a real estate broker for Remax Condos Plus in Toronto, says there are many buyers entering the housing market, but not enough supply to meet that demand.

“In terms of single-family homes, there is a lack of inventory, and that usually results in a bidding war,” Pietrzak said. “It is almost unimaginable to buy a house at list price now.”

In some instances, Pietrzak says she has seen first-time homebuyers with small families resort to condos, because prices for houses were way beyond their budget.

In a recent report released by BMO Financial, the national average budget for first-time buyers has increased to $316,000, with Vancouver topping the list at $506,500. Toronto comes in at $408,300 and Calgary at $363,400.

Wiseberg, who says she is willing to spend between $500,000 and $600,000 for her first home, entered the housing market after abandoning the idea of spending hundreds of thousands on a condo. She couldn’t believe the competition in the housing market.

“Every house that I’ve gone to easily goes $100,000 over the asking price,” Wiseberg said. “I definitely do not want to enter a bidding war, because I don’t want to be cash-poor.”

The BMO Financial report found that 60 per cent of first-time buyers in Canada are delaying purchases, and 39 per cent of those cite high prices as the main reason.

But not all is doom and gloom. Several cities across the country have seen price drops, including Montreal, Winnipeg and Regina.

Broker and manager Daniel Wachniak from Royal LePage Dynamic in Winnipeg says the city’s housing market is fairly balanced, but specifies other factors are at play when it comes to pricing. He said the prolonged winter is one factor that explains the recent price decrease in Winnipeg.

“You have to look at our weather and the time of year,” Wachniak said. “The houses that probably sold [in late winter] were more open to negotiations than houses being listed right now.”

When it comes to bidding wars, Wachniak said he has seen them go as high as $80,000 over asking price.

“We had different spikes, ranging from $5,000 to $80,000, where a house in a certain area not usually seeing listings results in a bigger demand,” he said.

Given BMO’s recent decision to cut its five-year fixed mortgage rate to 2.99 per cent, Pietrzak said it’s a good time to buy, especially for first-timers.

“I’m working with several first-time buyers right now and they are becoming more confident in the market and with the rates available,” she said.

Kelvin Mangaroo, founder of Ratesupermarket.ca, which allows Canadians to compare mortgage rates, has a different take. He sees first-time buyers in cities such as Toronto getting priced out of the market.

“Many first-time homebuyers in Toronto are getting squeezed,” Mangaroo said. “A lot of the mortgage rules that have happened in the last couple years have made it harder to get a mortgage.”

In 2012, the federal government reduced the maximum amortization period for a mortgage to 30 years. It has also tightened other regulations, like putting a limit on the percentage of their gross household income a homebuyer can spend on home expenses in order to qualify for a mortgage.

These factors, along with a short supply of houses, especially in urban centres, is having a negative effect on buyers, says Mangaroo.

The disparity is evident in the numbers: The average budget for first-time buyers in Toronto stands at $408,300, but the average house price in Toronto is $546,597.

Buyers unhappy with the condo lifestyle are finding their options increasingly limited.

Preferring a house with space and character, Sarah Wiseberg has her eyes set on a home in one of Toronto’s older neighbourhoods. She found a couple of houses with potential, but they sold before she could even make an offer.

While prices may grow further out of reach, Wiseberg said she is reluctant to turn to her parents for financial assistance. She’s determined to do it on her own.

“I think whatever is meant to be will be,” she said. “If I find a place by June, amazing. If I don’t, then I’m fine with renting for another year.”


                                                                                                                            Source: CBC

22 Apr

BMO’S 2.99% Mortgage Product


Posted by: Amrit Bains

It looks like BMO is restarting some rate wars out there…however it is important to remind you that this rate offer may NOT give you all the bells and whistles of a regular mortgage product that some other mortgage lenders offer! Unfortunately for those who buy into it, BMO’s Low-Rate Mortgage is a product that comes with some major restrictions:

1. You only get 10%/10% prepayment privileges. Where many other lenders give homeowners the option to increase their monthly payments by 20% or more each year, as well as make lump-sum payments on the original mortgage in that same percentage range, BMO’s Low-Rate Mortgage restricts homeowners to 10% for both categories. This makes it extremely difficult to pay down the mortgage sooner, without facing a prepayment charge to do so.

2. You cannot skip a payment or access a mortgage cash account. BMO has a number of flexible mortgage options, none of which are available to customers who lock into the bank’s 2.99% mortgage product. Skipping a payment, should you need to, is not an option. And while other BMO mortgage customers can re-borrow prepaid funds at any time, through a Mortgage Cash Account, those with the bank’s Low-Rate Mortgage do not have the same privileges.

3. You cannot transfer your mortgage to another lender until your term is up. Throughout your 5-year term with BMO’s Low-Rate Mortgage, the only way you can refinance, transfer or payoff the balance of your mortgage, is if you stay with BMO while doing so, or if you sell your home. This restriction is especially tough, as it is not uncommon for homeowners to break their mortgages early. And don’t forget that doing any of these things would result in a mortgage prepayment charge.

I have access to 2.99% 5 Year rate with all the standard prepayment terms and no hidden fine print! Feel free to contact me to lock in your low rate TODAY!