1 Determine how much you can afford.
2 Team up with a real estate agent.
3 Make an offer.
4 Retain a lawyer.
5 Arrange the home inspection.
6 Get the mortgage approved.
7 Get property insurance.
9 Complete the paperwork.
10 Pick up the keys.
Monday, December 8, 2008
Wednesday, September 24, 2008
Mortgage reforms on the horizon
September 24, 2008
Ellen Roseman
Last week, Prime Minister Stephen Harper announced a tax break for the closing costs paid by homebuyers.
But he's not promoting a more important federal initiative that takes effect Oct. 15 (one day after the election).
Major changes are in store for people buying homes who can't make a down payment of 20 per cent or more.
Their mortgages must be insured by the lender – and the premium is often added to the borrower's debt.
Here are the new rules, announced July 9 for house deals entered into after Oct. 15.
They apply to residential properties with up to four units.
No more 40-year amortizations for insured mortgages. The maximum amortization is 35 years.
Say goodbye to "no money down" mortgages. A down payment of at least 5 per cent is required.
No government guarantees for high-ratio mortgages that begin with interest-only payments.
Lenders must document the borrower's income and the property value to meet a certain standard.
A previous plan to limit the borrower's total debt service ratio to 45 per cent has been scrapped.
A minimum credit score of 600 is required. That has been reduced from the 620 minimum credit score originally announced.
A credit score is a numerical value that measures a borrower's risk, based on a statistical evaluation of information in his or her credit bureau record.
A lower minimum credit score was needed to accommodate credit-challenged buyers – such as new Canadians and self-employed business owners.
"That's one of the few changes the government made," says Jim Murphy, president of the Canadian Association of Accredited Mortgage Professionals.
Lenders will still be allowed to make exceptions up to a certain limit, recognizing that some borrowers with scores below the minimum are otherwise good credit risks.
And buyers can still borrow the down payment from financial institutions that offer cash-back incentives on mortgages.
They can also borrow from registered retirement savings plan.
Here's a question for Harper: When will he update the tax-free withdrawal limits on RRSPs, unchanged since the early 1990s?
You can borrow $20,000 from your RRSP for a house purchase (or $40,000 for couples who both have RRSPs).
But that may not cover the $30,000 down payment on a typical $600,000 property in greater Toronto.
"That 5 per cent is a lot of money," says Dawn Devcic-Erceg, director of marketing at ResMor Trust Co., a Toronto-based lender that deals with mortgage brokers.
ResMor did a survey showing that fewer than half of Canadians (45 per cent) agreed with the tighter mortgage rules and the statement "the federal government needs to protect homeowners."
That statement is wrong, of course.
The government wanted to protect the providers of mortgage insurance – including the government-owned Canada Mortgage and Housing Corp. – whose potential losses were backstopped by a federal guarantee.
Ellen Roseman
Last week, Prime Minister Stephen Harper announced a tax break for the closing costs paid by homebuyers.
But he's not promoting a more important federal initiative that takes effect Oct. 15 (one day after the election).
Major changes are in store for people buying homes who can't make a down payment of 20 per cent or more.
Their mortgages must be insured by the lender – and the premium is often added to the borrower's debt.
Here are the new rules, announced July 9 for house deals entered into after Oct. 15.
They apply to residential properties with up to four units.
No more 40-year amortizations for insured mortgages. The maximum amortization is 35 years.
Say goodbye to "no money down" mortgages. A down payment of at least 5 per cent is required.
No government guarantees for high-ratio mortgages that begin with interest-only payments.
Lenders must document the borrower's income and the property value to meet a certain standard.
A previous plan to limit the borrower's total debt service ratio to 45 per cent has been scrapped.
A minimum credit score of 600 is required. That has been reduced from the 620 minimum credit score originally announced.
A credit score is a numerical value that measures a borrower's risk, based on a statistical evaluation of information in his or her credit bureau record.
A lower minimum credit score was needed to accommodate credit-challenged buyers – such as new Canadians and self-employed business owners.
"That's one of the few changes the government made," says Jim Murphy, president of the Canadian Association of Accredited Mortgage Professionals.
Lenders will still be allowed to make exceptions up to a certain limit, recognizing that some borrowers with scores below the minimum are otherwise good credit risks.
And buyers can still borrow the down payment from financial institutions that offer cash-back incentives on mortgages.
They can also borrow from registered retirement savings plan.
Here's a question for Harper: When will he update the tax-free withdrawal limits on RRSPs, unchanged since the early 1990s?
You can borrow $20,000 from your RRSP for a house purchase (or $40,000 for couples who both have RRSPs).
But that may not cover the $30,000 down payment on a typical $600,000 property in greater Toronto.
"That 5 per cent is a lot of money," says Dawn Devcic-Erceg, director of marketing at ResMor Trust Co., a Toronto-based lender that deals with mortgage brokers.
ResMor did a survey showing that fewer than half of Canadians (45 per cent) agreed with the tighter mortgage rules and the statement "the federal government needs to protect homeowners."
That statement is wrong, of course.
The government wanted to protect the providers of mortgage insurance – including the government-owned Canada Mortgage and Housing Corp. – whose potential losses were backstopped by a federal guarantee.
Tuesday, September 9, 2008
Bank of Canada holds the line on rates
HEATHER SCOFFIELD
Globe and Mail September 3, 2008
The Bank of Canada is keeping its key interest rate on hold,even though inflationary pressure has abated in Canada, and growth has slowed to a stop.
The central bank announced Wednesday that the overnight rate will remain at three per cent, and gave few hints about which direction its next move might be.
"The bank judges that the current level of the target for the overnight rate remains appropriately accommodative," the bank said.
Economists had widely expected the bank to keep rates unchanged, although some had also expected the bank to suggest that its next move would be a rate cut in order to stimulate Canada's flagging economy.
The bank omitted its traditional assessment of the risks facing the bank's forecast - an assessment that is usually closely watched to determine whether the bank is leaning in the direction of future rate cuts or hikes.
Instead, the bank's one-page statement focused on the reversal in commodity prices since the beginning of July. Then, oil was trading above $140 (U.S.) a barrel, and has since declined steeply to close on Tuesday at $109.71 - driven lower by sagging global demand, the bank said.
The slide has meant that the central bank's earlier expectations that the inflation rate would soar to above four per cent by the end of this year will not pan out, the statement said, although the bank said it expects commodity prices to remain volatile because of tight inventories.
At the same time, lower oil prices have also meant that the Canadian dollar is much weaker than a couple of months ago. Normally, a weaker Canadian dollar would boost Canadian exports, but this time, it comes just as the world economy is losing steam, the bank noted.
"The weaker global growth and the decline of the Canadian dollar will have opposing effects on the demand for Canadian goods and services,"the bank stated.
The Canadian dollar closed at 93.58 cents (U.S.) on Tuesday, after trading just below parity for months.
The bank did not express any concern for Canada's stagnant economy,which contracted in the first quarter and barely expanded in the second quarter. Domestic demand has softened, but remains fairly strong, the bank said.
"Overall, the level of economic activity is slightly lower than expected in July but still close to the economy's production capacity."Total inflation, which has surged above three per cent recently, has been affected by temporary factors and should move back to the bank's two per cent target by this time next year, the bank said. Still, the bank warned that the heightened inflation risk that gripped central bankers a couple of months ago and prompted the Bank of Canada to suddenly stop its aggressive rate cuts this summer still exists.
"Global inflationary pressures remain elevated, with potential implications for import prices and the dynamics of inflation in Canada,"the bank said.
Around the world, rising food and commodity prices have driven up inflation over the past few months, especially in emerging markets, but also in developed economies, albeit to a lesser extent.
In the United States, economic growth and the turbulence in global financial markets are unfolding as the bank expected, the statement said. The bank has projected 1.6 per cent growth in the United States this year, despite continuing turmoil in the financial sector and a collapse of the housing market.
Still, there's a risk that the negative feedback loop between the U.S.economy and tighter credit conditions will worsen, and hamper the expected revival of the U.S. economy in 2009, the bank suggested.
The Bank of Canada's next rate announcement is on Oct. 21 - a week after the widely-anticipated date of the federal election. With interest rates on hold, and the bank giving no obvious indication about its next move, Governor Mark Carney has likely removed himself as a factor in an election campaign that will no doubt be dominated by debate on how to manage the flagging economy.
Globe and Mail September 3, 2008
The Bank of Canada is keeping its key interest rate on hold,even though inflationary pressure has abated in Canada, and growth has slowed to a stop.
The central bank announced Wednesday that the overnight rate will remain at three per cent, and gave few hints about which direction its next move might be.
"The bank judges that the current level of the target for the overnight rate remains appropriately accommodative," the bank said.
Economists had widely expected the bank to keep rates unchanged, although some had also expected the bank to suggest that its next move would be a rate cut in order to stimulate Canada's flagging economy.
The bank omitted its traditional assessment of the risks facing the bank's forecast - an assessment that is usually closely watched to determine whether the bank is leaning in the direction of future rate cuts or hikes.
Instead, the bank's one-page statement focused on the reversal in commodity prices since the beginning of July. Then, oil was trading above $140 (U.S.) a barrel, and has since declined steeply to close on Tuesday at $109.71 - driven lower by sagging global demand, the bank said.
The slide has meant that the central bank's earlier expectations that the inflation rate would soar to above four per cent by the end of this year will not pan out, the statement said, although the bank said it expects commodity prices to remain volatile because of tight inventories.
At the same time, lower oil prices have also meant that the Canadian dollar is much weaker than a couple of months ago. Normally, a weaker Canadian dollar would boost Canadian exports, but this time, it comes just as the world economy is losing steam, the bank noted.
"The weaker global growth and the decline of the Canadian dollar will have opposing effects on the demand for Canadian goods and services,"the bank stated.
The Canadian dollar closed at 93.58 cents (U.S.) on Tuesday, after trading just below parity for months.
The bank did not express any concern for Canada's stagnant economy,which contracted in the first quarter and barely expanded in the second quarter. Domestic demand has softened, but remains fairly strong, the bank said.
"Overall, the level of economic activity is slightly lower than expected in July but still close to the economy's production capacity."Total inflation, which has surged above three per cent recently, has been affected by temporary factors and should move back to the bank's two per cent target by this time next year, the bank said. Still, the bank warned that the heightened inflation risk that gripped central bankers a couple of months ago and prompted the Bank of Canada to suddenly stop its aggressive rate cuts this summer still exists.
"Global inflationary pressures remain elevated, with potential implications for import prices and the dynamics of inflation in Canada,"the bank said.
Around the world, rising food and commodity prices have driven up inflation over the past few months, especially in emerging markets, but also in developed economies, albeit to a lesser extent.
In the United States, economic growth and the turbulence in global financial markets are unfolding as the bank expected, the statement said. The bank has projected 1.6 per cent growth in the United States this year, despite continuing turmoil in the financial sector and a collapse of the housing market.
Still, there's a risk that the negative feedback loop between the U.S.economy and tighter credit conditions will worsen, and hamper the expected revival of the U.S. economy in 2009, the bank suggested.
The Bank of Canada's next rate announcement is on Oct. 21 - a week after the widely-anticipated date of the federal election. With interest rates on hold, and the bank giving no obvious indication about its next move, Governor Mark Carney has likely removed himself as a factor in an election campaign that will no doubt be dominated by debate on how to manage the flagging economy.
Tuesday, August 5, 2008
Government of Canada Takes Further Steps to Strengthen Housing Market
Source: Government of Canada
Published Monday, 4 August, 2008 - 18:24
--------------------------------------------------------------------------------
The Government of Canada today announced additional measures to protect the long-term stability of Canada’s housing market. These measures will increase the amount of money available to Canadians for mortgages and make mortgage insurance more transparent, understandable and affordable.
These measures, and the limits recently announced for government guaranteed mortgages, will protect the Canadian housing market from a US-style housing bubble and encourage individuals and families to save through home ownership.
Increased sources of funding: The Government of Canada is taking steps to benefit consumers by increasing the volume of funding for mortgages available to Canadian banks and other mortgage lenders. As Canada Mortgage and Housing Corporation (CMHC) recently announced, the Canada Mortgage Bond (CMB) program will be expanded to include a CMB with a 10-year maturity to interest new investors who are seeking assets beyond the current five-year term.
The planned CMB program expansion is in addition to the record $12.5 billion CMB issue in June, which funded an estimated 64,000 mortgages and brought the total outstanding amount for the CMB program to roughly $136 billion.
The Government of Canada is also proposing changes to clarify the tax treatment of existing innovative capital structures used by Canadian financial institutions to raise funds. Changes announced today will make Canadian regulations more consistent with rules in other jurisdictions that operate under the guidance of the Basel Committee on Banking Supervision. Further details are contained in the attached backgrounder.
Consumer measures: The Government also intends to introduce two new consumer measures around mortgage insurance. The first measure will enhance disclosure to consumers about the characteristics of mortgage insurance. While lenders are already required to itemize the cost of mortgage insurance as part of their disclosure to borrowers, the new measure will set out additional, mandated disclosures to help consumers better understand the mortgage insurance transaction.
The second measure will ensure that Canadian consumers are charged no more for an insured mortgage than the true cost of obtaining that mortgage. This new measure will guard against practices alleged to occur in other jurisdictions whereby insurance premiums charged to borrowers could be artificially inflated.
Source: Government of Canada
Published Monday, 4 August, 2008 - 18:24
--------------------------------------------------------------------------------
The Government of Canada today announced additional measures to protect the long-term stability of Canada’s housing market. These measures will increase the amount of money available to Canadians for mortgages and make mortgage insurance more transparent, understandable and affordable.
These measures, and the limits recently announced for government guaranteed mortgages, will protect the Canadian housing market from a US-style housing bubble and encourage individuals and families to save through home ownership.
Increased sources of funding: The Government of Canada is taking steps to benefit consumers by increasing the volume of funding for mortgages available to Canadian banks and other mortgage lenders. As Canada Mortgage and Housing Corporation (CMHC) recently announced, the Canada Mortgage Bond (CMB) program will be expanded to include a CMB with a 10-year maturity to interest new investors who are seeking assets beyond the current five-year term.
The planned CMB program expansion is in addition to the record $12.5 billion CMB issue in June, which funded an estimated 64,000 mortgages and brought the total outstanding amount for the CMB program to roughly $136 billion.
The Government of Canada is also proposing changes to clarify the tax treatment of existing innovative capital structures used by Canadian financial institutions to raise funds. Changes announced today will make Canadian regulations more consistent with rules in other jurisdictions that operate under the guidance of the Basel Committee on Banking Supervision. Further details are contained in the attached backgrounder.
Consumer measures: The Government also intends to introduce two new consumer measures around mortgage insurance. The first measure will enhance disclosure to consumers about the characteristics of mortgage insurance. While lenders are already required to itemize the cost of mortgage insurance as part of their disclosure to borrowers, the new measure will set out additional, mandated disclosures to help consumers better understand the mortgage insurance transaction.
The second measure will ensure that Canadian consumers are charged no more for an insured mortgage than the true cost of obtaining that mortgage. This new measure will guard against practices alleged to occur in other jurisdictions whereby insurance premiums charged to borrowers could be artificially inflated.
Sunday, July 27, 2008
Sell Faster When You Understand The Buyers Mindset
When most sellers list their home for sale the first thing they think about is how much will I get and that is usually followed by how soon will I get the money. It's certainly understandable that those two concerns are, most often, top of mind. After all, you're likely selling your home to buy another one or invest the money in something else.
But, if as a seller, you can get into the buyer's mindset, the sale of your home can come faster and for more money.
Understanding the way buyers think involves seeing things not from your perspective but from your potential buyer's mindset. It can sound easy but actually it's often harder to do than most sellers think. The psychology of buying is driven by emotional experiences, money, and timing. With that in mind, sellers can help create optimal circumstances that literally help walk the buyer through the process and completion of the sale of your home.
It starts with a feeling. When you meet someone for the first time, you form a first impression based on a feeling. That's exactly what happens when buyers set foot into your home. Work with an experienced agent to learn exactly what kind of impression your home is giving off. If it's a small home, make sure it's not overfilled and cluttered.
Pick up all the loose clutter that's floating around. Throw out old magazines. People like to see things that are streamlined or clean or fresh looking. There's nothing worse than walking into a place and seeing a stack of magazines all over the place or an unmade bed.
Go the extra step and take care of items that might have been overlooked for quite some time. Steam clean the carpets, the upholstery, the furniture, if that's what's needed. Have the windows cleaned, light fixtures cleaned. Make it feel clean when you walk in.
Go back to basics. You may love your turquoise carpet but do you really think buyers will? Getting inside the buyers mind will help you answer these questions. You can also pick up home décor magazines and see what appeals to the masses. You don't have to change everything in your home, but going back to basics in a few areas will help buyers see how your home can become their home.
As soon as buyers see a really loud red, orange or lemon-green color they automatically think about re-doing. That, of course, means the buyers are already beginning to calculate the amount of money they need to take off of the sale price in order to get the home in the condition they would like it.
If instead you stick with neutral colors such as painting the walls off-white, light beige or Navajo white, you have a better chance in preserving the sale price.
Repair anything that looks torn, worn or broken If you walked into a retail store and saw a garment that you liked but it was torn or missing buttons, chances are you'd search for another one or ask for a discount if that were the only one of its kind.
That's what buyers will do with your home when they spot torn screens, garage doors that don't open, or broken light fixtures that are hanging out of the wall. Buyers, if at first they don't get completely turned off and walk away from the sale, will first begin to think that there is more damage to the home than what they're able to see and then they start to calculate the cost of repairing those damages. But buyers often exaggerate the amount of money needed to fix the repairs.
In today's market people are looking desperately to find out what's wrong with a home so that they can lower the price.
In the buyers' minds, they come up with some kind of incredible price to fix repairs. In their mind, they go way overboard and eventually it affects the bottom line price for the seller.
Don't miss an opportunity to get the word out about your home being listed for sale. It only makes sense to let your neighbors know. By doing this your neighbors can sometimes become great facilitators and supporters of the sale.
Most people are visual buyers. If the home doesn't look clean, spotless, and repaired then the buyer thinks what's behind the walls, how much more money do I have to put into this home.
Remember understanding the psychology of the buyer's mindset can help you sell faster and for the price you really want.
Written by Phoebe Chongchua
But, if as a seller, you can get into the buyer's mindset, the sale of your home can come faster and for more money.
Understanding the way buyers think involves seeing things not from your perspective but from your potential buyer's mindset. It can sound easy but actually it's often harder to do than most sellers think. The psychology of buying is driven by emotional experiences, money, and timing. With that in mind, sellers can help create optimal circumstances that literally help walk the buyer through the process and completion of the sale of your home.
It starts with a feeling. When you meet someone for the first time, you form a first impression based on a feeling. That's exactly what happens when buyers set foot into your home. Work with an experienced agent to learn exactly what kind of impression your home is giving off. If it's a small home, make sure it's not overfilled and cluttered.
Pick up all the loose clutter that's floating around. Throw out old magazines. People like to see things that are streamlined or clean or fresh looking. There's nothing worse than walking into a place and seeing a stack of magazines all over the place or an unmade bed.
Go the extra step and take care of items that might have been overlooked for quite some time. Steam clean the carpets, the upholstery, the furniture, if that's what's needed. Have the windows cleaned, light fixtures cleaned. Make it feel clean when you walk in.
Go back to basics. You may love your turquoise carpet but do you really think buyers will? Getting inside the buyers mind will help you answer these questions. You can also pick up home décor magazines and see what appeals to the masses. You don't have to change everything in your home, but going back to basics in a few areas will help buyers see how your home can become their home.
As soon as buyers see a really loud red, orange or lemon-green color they automatically think about re-doing. That, of course, means the buyers are already beginning to calculate the amount of money they need to take off of the sale price in order to get the home in the condition they would like it.
If instead you stick with neutral colors such as painting the walls off-white, light beige or Navajo white, you have a better chance in preserving the sale price.
Repair anything that looks torn, worn or broken If you walked into a retail store and saw a garment that you liked but it was torn or missing buttons, chances are you'd search for another one or ask for a discount if that were the only one of its kind.
That's what buyers will do with your home when they spot torn screens, garage doors that don't open, or broken light fixtures that are hanging out of the wall. Buyers, if at first they don't get completely turned off and walk away from the sale, will first begin to think that there is more damage to the home than what they're able to see and then they start to calculate the cost of repairing those damages. But buyers often exaggerate the amount of money needed to fix the repairs.
In today's market people are looking desperately to find out what's wrong with a home so that they can lower the price.
In the buyers' minds, they come up with some kind of incredible price to fix repairs. In their mind, they go way overboard and eventually it affects the bottom line price for the seller.
Don't miss an opportunity to get the word out about your home being listed for sale. It only makes sense to let your neighbors know. By doing this your neighbors can sometimes become great facilitators and supporters of the sale.
Most people are visual buyers. If the home doesn't look clean, spotless, and repaired then the buyer thinks what's behind the walls, how much more money do I have to put into this home.
Remember understanding the psychology of the buyer's mindset can help you sell faster and for the price you really want.
Written by Phoebe Chongchua
Thursday, July 24, 2008
Monday, July 14, 2008
Toronto: Hot or Not?
July 12, 2008
Catherine Farley
GRAPHICS REPORTER
Ever wondered how houses have stood up as an investment? We decided to take a look. Graphics reporter Catherine Farley – working with Star data analysts Damian Listar, Hidy Ng and business researcher Peter Smith – crunched 40 years of numbers and unearthed a few surprises:
1,250%
Average resale house prices have increased a whopping 1,250 per cent since 1969 – about the same performance as the stock market, where the TSX composite index rose 1,244 per cent.
2.5x
Both house prices and the TSX outstripped inflation – which stands at 484 per cent over the last 40 years – by 2.5 times.
Drop
Since the last price peak of $280,676 in 1989, the average price across Toronto fell 31 per cent, to a low of $192,406 in February 1996.
Lag
Since that peak, some areas have enjoyed gains of more than 100 per cent, but in 40 of 85 areas tracked by the Toronto Real Estate Board, prices have not kept pace with inflation.
Buy
Smart buyers head out in January when prices are usually lower, and have been consistently the lowest for the year in the last decade. Often, they're rewarded with prices lower than the previous December.
Sell
May is the highest month for house prices, followed by December. One notable exception was 1989; prices peaked in October.
Hot
Top 40-year gains: Bridle Path, Forest Hill, Annex/Yorkville
Top 20-year gains: Clarkson (Mississauga), the Beach, Riverdale
Top 10-year gains: South Riverdale, East York, the Beach
Toronto Star
July 12, 2008
Catherine Farley
GRAPHICS REPORTER
Ever wondered how houses have stood up as an investment? We decided to take a look. Graphics reporter Catherine Farley – working with Star data analysts Damian Listar, Hidy Ng and business researcher Peter Smith – crunched 40 years of numbers and unearthed a few surprises:
1,250%
Average resale house prices have increased a whopping 1,250 per cent since 1969 – about the same performance as the stock market, where the TSX composite index rose 1,244 per cent.
2.5x
Both house prices and the TSX outstripped inflation – which stands at 484 per cent over the last 40 years – by 2.5 times.
Drop
Since the last price peak of $280,676 in 1989, the average price across Toronto fell 31 per cent, to a low of $192,406 in February 1996.
Lag
Since that peak, some areas have enjoyed gains of more than 100 per cent, but in 40 of 85 areas tracked by the Toronto Real Estate Board, prices have not kept pace with inflation.
Buy
Smart buyers head out in January when prices are usually lower, and have been consistently the lowest for the year in the last decade. Often, they're rewarded with prices lower than the previous December.
Sell
May is the highest month for house prices, followed by December. One notable exception was 1989; prices peaked in October.
Hot
Top 40-year gains: Bridle Path, Forest Hill, Annex/Yorkville
Top 20-year gains: Clarkson (Mississauga), the Beach, Riverdale
Top 10-year gains: South Riverdale, East York, the Beach
Toronto Star
Thursday, July 10, 2008
Ottawa tightens mortgage rules to avoid "bubble"
Globe and Mail
LORI McLEOD & KEVIN CARMICHAEL
The federal government is cracking down on the mortgage industry in a move that could help protect against a U.S.-style housing bubble, but will also make it tougher to borrow money to buy a home.
The Finance Department said Wednesday it will stop backing mortgages with amortization periods longer than 35 years as of Oct. 15.
It will also start demanding a down payment equal to at least 5 per cent of the home's value, rather than guaranteeing mortgages where they buyer has borrowed the total amount.
“Today's announcement marks a responsible and measured approach by the government to ensure Canada's housing market remains strong, and to reduce the risk of a U.S.-style housing bubble developing in Canada,” the Finance Department said in a statement.
Existing 40-year mortgages will be grandfathered, a Finance Department spokesman said.
In 2006, the maximum amortization period was extended to 40 years from 25, and longer-term mortgage products have become increasingly popular with buyers looking for lower monthly payments as the price of Canadian homes soared.
Last year, 37 per cent of new mortgages were for terms of longer than 25 years, according to the Canadian Association of Accredited Mortgage Professionals (CAAMP).
But while longer amortizations stretch out monthly payments, they also greatly increase the cost of a mortgage over its lifetime.For example, the total interest on a $300,000 mortgage can soar from $286,161 over the life of a 25-year mortgage to $498,416 over a 40-year amortization period – adding more than $200,000 to the cost of the home.This, combined with the fact that these mortgages are often combined with little or no equity, raised alarm bells with policy makers looking at the turmoil that took place in the U.S. when house prices started to fall.
“We've seen an inclination now, a trend, toward longer-term amortizations and smaller down payments, and that is a matter of some concern,” Finance Minister Jim Flaherty said in a speech in May. Mr. Flaherty was not available for comment Wednesday.
Jim Murphy, president and chief executive of CAAMP, said in talks with him the government expressed concern about the risky lending products that collapsed the U.S. housing market.
The Finance Department was also worried about the future impact of competition between mortgage insurers, which led to the introduction of 40-year mortgage in 2006, Mr. Murphy said.
“I think you have a clear case of the government sitting down and looking at its risk exposure and wanting to review that. They have financial guarantees in place for the CMHC and private insurers, and they were saying, ‘What is our risk, and what is the risk to the Canadian taxpayer?' ” he said.
Reaction from the industry was mixed.“CMHC supports the new parameters … . We also support their efforts to maintain the strong Canadian housing market,” said spokesperson Stephanie Rubec, adding CMHC will stop insuring 40-year and zero down payment mortgages in October.
“It's the right move,” said Nick Kyprianou, president of Home Capital Group Inc., whose principal subsidiary, Home Trust Co., provides alternative mortgages. “Why get people overextended? Nobody wins by getting people right to the end of the cliff.”
Others, however, say home buyers and banks have been prudent with their finances, and are being punished for the more lax approach south of the border.
“Things here are not like they are in the U.S. where they had those NINJA loans, no income, no job, no assets. … It's only going to hurt the consumer,” said John Panagakos, owner of Toronto brokerage Mortgage Centre.
The move actually comes at a time when the housing market has moved on to other concerns, the most pressing of which is chilling consumer sentiment due to high fuel prices, said Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc.
“It's a bit like closing the barn door after the horse has already run down the road.”
LORI McLEOD & KEVIN CARMICHAEL
The federal government is cracking down on the mortgage industry in a move that could help protect against a U.S.-style housing bubble, but will also make it tougher to borrow money to buy a home.
The Finance Department said Wednesday it will stop backing mortgages with amortization periods longer than 35 years as of Oct. 15.
It will also start demanding a down payment equal to at least 5 per cent of the home's value, rather than guaranteeing mortgages where they buyer has borrowed the total amount.
“Today's announcement marks a responsible and measured approach by the government to ensure Canada's housing market remains strong, and to reduce the risk of a U.S.-style housing bubble developing in Canada,” the Finance Department said in a statement.
Existing 40-year mortgages will be grandfathered, a Finance Department spokesman said.
In 2006, the maximum amortization period was extended to 40 years from 25, and longer-term mortgage products have become increasingly popular with buyers looking for lower monthly payments as the price of Canadian homes soared.
Last year, 37 per cent of new mortgages were for terms of longer than 25 years, according to the Canadian Association of Accredited Mortgage Professionals (CAAMP).
But while longer amortizations stretch out monthly payments, they also greatly increase the cost of a mortgage over its lifetime.For example, the total interest on a $300,000 mortgage can soar from $286,161 over the life of a 25-year mortgage to $498,416 over a 40-year amortization period – adding more than $200,000 to the cost of the home.This, combined with the fact that these mortgages are often combined with little or no equity, raised alarm bells with policy makers looking at the turmoil that took place in the U.S. when house prices started to fall.
“We've seen an inclination now, a trend, toward longer-term amortizations and smaller down payments, and that is a matter of some concern,” Finance Minister Jim Flaherty said in a speech in May. Mr. Flaherty was not available for comment Wednesday.
Jim Murphy, president and chief executive of CAAMP, said in talks with him the government expressed concern about the risky lending products that collapsed the U.S. housing market.
The Finance Department was also worried about the future impact of competition between mortgage insurers, which led to the introduction of 40-year mortgage in 2006, Mr. Murphy said.
“I think you have a clear case of the government sitting down and looking at its risk exposure and wanting to review that. They have financial guarantees in place for the CMHC and private insurers, and they were saying, ‘What is our risk, and what is the risk to the Canadian taxpayer?' ” he said.
Reaction from the industry was mixed.“CMHC supports the new parameters … . We also support their efforts to maintain the strong Canadian housing market,” said spokesperson Stephanie Rubec, adding CMHC will stop insuring 40-year and zero down payment mortgages in October.
“It's the right move,” said Nick Kyprianou, president of Home Capital Group Inc., whose principal subsidiary, Home Trust Co., provides alternative mortgages. “Why get people overextended? Nobody wins by getting people right to the end of the cliff.”
Others, however, say home buyers and banks have been prudent with their finances, and are being punished for the more lax approach south of the border.
“Things here are not like they are in the U.S. where they had those NINJA loans, no income, no job, no assets. … It's only going to hurt the consumer,” said John Panagakos, owner of Toronto brokerage Mortgage Centre.
The move actually comes at a time when the housing market has moved on to other concerns, the most pressing of which is chilling consumer sentiment due to high fuel prices, said Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc.
“It's a bit like closing the barn door after the horse has already run down the road.”
Friday, June 27, 2008
Wednesday, June 18, 2008
Food for thought
came across this video at the Angry black mans guide to success blog, http://www.abmgts.blogspot.com/. Its 22 minutes but worth the watch.
Tuesday, June 17, 2008
A Behind-the-Scenes Guide to the Things We Buy
Have you ever wondered where
chocolate comes from, if antibacterial
soap is good for your family, or
how to recycle an old computer? If
you’ve had these or other questions
about the environmental and social
impacts of the products you buy
and use, Good Stuff is for you. It
contains many of the tips, facts,
and links you’ll need to start making
more informed purchases that benefit
your health and the environment.
http://www.worldwatch.org/system/files/GS0000.pdf
email me @ winston@winstonhemmings.com for a copy of the PDF if the link does not work.
chocolate comes from, if antibacterial
soap is good for your family, or
how to recycle an old computer? If
you’ve had these or other questions
about the environmental and social
impacts of the products you buy
and use, Good Stuff is for you. It
contains many of the tips, facts,
and links you’ll need to start making
more informed purchases that benefit
your health and the environment.
http://www.worldwatch.org/system/files/GS0000.pdf
email me @ winston@winstonhemmings.com for a copy of the PDF if the link does not work.
Wednesday, June 11, 2008
Things to do around Toronto
I was thinking about creating a list of (mostly free) things I like to do in and around Toronto and I came across this interactive guide in the Toronto Star.
http://www.zegapi.com/view/?book_name=doitjun08
Here are a few things I like to do in Toronto:
Visit harbourfront; http://media.harbourfrontcentre.com/
Beaches jazz festival; http://www.beachesjazz.com/
Fireworks at Ontario Place; http://www.istc.org/sisp/?event_id=47979&fx=event
Day trip to Niagara Falls; http://www.niagarafalls.ca/index.asp
International cuisine, good food cheap!
Young and Dundas and the Eatons Center
Caribana http://www.caribanatoronto.com/
A patio in the summer
Golf Don Valley
What are some of the things that you like to do in and around Toronto?
http://www.zegapi.com/view/?book_name=doitjun08
Here are a few things I like to do in Toronto:
Visit harbourfront; http://media.harbourfrontcentre.com/
Beaches jazz festival; http://www.beachesjazz.com/
Fireworks at Ontario Place; http://www.istc.org/sisp/?event_id=47979&fx=event
Day trip to Niagara Falls; http://www.niagarafalls.ca/index.asp
International cuisine, good food cheap!
Young and Dundas and the Eatons Center
Caribana http://www.caribanatoronto.com/
A patio in the summer
Golf Don Valley
What are some of the things that you like to do in and around Toronto?
Wednesday, June 4, 2008
Truth & Honesty
How come truth and honesty are not as relevant today? If I start with the premise that the truth is what it is. In other words a thing is or is not. Some people believe that if it does not violate their own principles lying is acceptable.
So, is it human nature to lie? Clearly if we can gain an advantage by lying we tend to lie. Most likely, its human to both lie and be honest when it suits us.
We try to encourage honesty naturally, however due to lies, fraud, cheating, crime etc... we’ve developed systems to ensure honesty. I’m thinking code of ethics, morality, contracts, laws and so forth.
I'm also curious why dishonest people and liars are not frowned upon more. It seems to me that honesty is looked upon as a sign of weakness while dishonesty can be seen as creative, clever, political etc. Are there more dishonest people so we’ve come to accept that as the norm?
We live in a society which is by nature competitive so I can see why one would do or say anything to gain. Some people can manipulate what is, or is not, by miss-speaking, or by outright lying in order to make a favourable judgement for themselves or their point of view.
The truth is, we as a society are where we are today because of the truth and lies we’ve lived. I wonder why truth does not play as a better alternative to lies and liars.
Winston
So, is it human nature to lie? Clearly if we can gain an advantage by lying we tend to lie. Most likely, its human to both lie and be honest when it suits us.
We try to encourage honesty naturally, however due to lies, fraud, cheating, crime etc... we’ve developed systems to ensure honesty. I’m thinking code of ethics, morality, contracts, laws and so forth.
I'm also curious why dishonest people and liars are not frowned upon more. It seems to me that honesty is looked upon as a sign of weakness while dishonesty can be seen as creative, clever, political etc. Are there more dishonest people so we’ve come to accept that as the norm?
We live in a society which is by nature competitive so I can see why one would do or say anything to gain. Some people can manipulate what is, or is not, by miss-speaking, or by outright lying in order to make a favourable judgement for themselves or their point of view.
The truth is, we as a society are where we are today because of the truth and lies we’ve lived. I wonder why truth does not play as a better alternative to lies and liars.
Winston
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