Major banks like RBC have finally lowered interest rates on home loans in tandem with the Bank of Canada’s rate cut made last week.

 

Big lenders have begun offering fixed-rate mortgages at rock-bottom rates of as little as 2.84 per cent, while smaller lenders can be found providing fixed-rate loans at as low as 2.69 per cent.

 

Meanwhile home loans with variable rates – i.e. with an interest rate that’s not set but instead floats up and down – have edged below 2 per cent.

 

The renewed mortgage rate wars sparked by the Bank of Canada’s surprise cut are sure to draw out house hunters in the weeks and months ahead. But can you afford that mortgage, even at the current ultra-low levels of interest?


Rule of thumb


The historical rule of thumb among mortgage experts is that no more than about 32 percent of household pre-tax income should be spent on housing costs, like your mortgage, utilities, condo fees and property taxes.

A record boom in housing prices however has thrown that threshold out the window for more than a few Canadian households. Royal Bank of Canada suggests the average family who owns a home dedicates 42.6 per cent of their income to covering the mortgage, utilities, property taxes as well as fees for condominium owners.

 

In some centres – notably Vancouver (83.6 per cent) and Toronto (56.3 per cent) – the percentage is far higher.

 

How much house can you handle? Use this calculator to find out.


For condo owners, simply lump monthly fees into property taxes. (And to determine your potential monthly payment, use this calculator to find out.


Affordability Calculator

Mortgage experts suggest no more than 32% of household income be spent on housing costs. Whether you're looking for a home or already have one, use this calculator to determine your affordability reading.

 

Original Article by Global News

Read full post

by Chris O' Sullivan - cosullivan@mortgagwriters.ca

The answer to this question depends on one two things: One’s current financial situation and do you want to save on paying the interest part of the mortgage.

I will go over the different payment options available and provide a chart on how much a mortgage will cost you depending on the payment option you decide on.

The Monthly Mortgage Payment:

This is the most standard payment. You pay your mortgage once a month. This is the most expensive option, since you don’t save anything on interest fees. You will have 12 payments for the entire year.

Semi-Monthly Mortgage Payment:

This option requires two equal payments ( 50% on the monthly payment), which makes 24 payments for the entire year. This is a better option than the monthly payment. It will save you more on the interest payments.

Bi-Weekly Mortgage Payment:

This option requires the borrower to make mortgage payments every two weeks on the same day. You will pay a total of 26 payments for the year.  You make half the monthly payment every two weeks. So you will make 13 full payments for the entire year. This will save you a bit more on the interest then the semi-monthly option.

Accelerated Weekly Mortgage Payment:

This will give you slightly better interest rate savings then the accelerated bi-weekly payment option. You will make 52 payments per year. This results in an additional monthly payment for the year.

This chart will assume a mortgage of $200,000, for a 5 year fixed term at 3.39%, with amortization of 25 years.  Below are the different payment options and the savings associated with each from a monthly payment option.

 

Total Payments

Total Interest Paid

Time To Payoff Mortgage

Savings 

Monthly Mortgage Payment

$296,088

$96,088

300 months

(25 yrs.)

N/A

Semi-Monthly Mortgage Payment

$295,765

$95,765

300 Months (25 yrs.)

$323.00

Bi-Weekly Mortgage Payment

$283,606.59

$83,606.59

266 months

(22 yrs. and 2 months)   

$12,483.21

Weekly Mortgage Payment

$283,470.10

$83,470.10

266 months

(22yrs. And 2 months)

$12,619.71

 

This chart will assume a mortgage of $450,000, for a 5 year fixed term at 3.39%, with amortization of 25 years.  Below are the different payment options and the savings associated with each from a monthly payment option.

 

Total Payments

Total Interest Paid

Time To Payoff Mortgage

Savings 

Monthly Mortgage Payment

$666,200.36

$216,200.36

300 months

(25 yrs.)

N/A

Semi-Monthly Mortgage Payment

$665,471.25

$215,471.25

300 Months (25 yrs.)

$729.10

Bi-Weekly Mortgage Payment

$638,114.83

$188,114.83

266 months

(22 yrs. and 2 months)   

$28,065.52

Weekly Mortgage Payment

$637,804.92

$187,804.92

266 months

(22yrs. And 2 months)

$28,395.44

 

If you can, it is well worth to use a bi-weekly or weekly payment structure to pay down your mortgage.
Chris O'Sullivan
 
Chris O'Sullivan is a mortgage agent for The Mortgage Writers and can be reached at cosullivan@mortgagewriters.ca
 
 
 
  
Read full post

This is the question that I get most asked: Should I go with a fixed or variable mortgage?

In the past, when the spread between the variable and fixed rates were way farther apart, it was an easy answer, as long as the client didn’t mind their monthly payments fluctuating. I would always answer: Go with the variable.

This was because, historically, the variable has saved homeowners money more than 85% of the time. However, times have changed and the spread between the variable and fixed rates has become a lot closer, since banks are not discounting the variable rates as much,  the best variable now is prime – 0.35%, that equates to 2.65%. The best fixed rate right now for a five year term is 3.29%. The spreads have come closer primarily because banks are losing money on the variable side and are trying to direct borrowers to the fixed side with lower spreads.

So back to the question: Should I go with the variable or fixed mortgage?

With the fixed rate mortgage, homeowners lock in their mortgage for a period of time, the most popular being the five year fixed-rate mortgage. Since rates can arguably only go up from the rates we are at, it seems like a logical decision to go with a fixed mortgage.

The difference between today’s variable rate, which is 2.65% and the four year fixed, 2.99%, is a difference of 34 basis points or just over one rate hike.

This is a small difference to have the security knowing that you won’t have to pay more if rates were to rise.

Moshe Milevsky, professor at York University and an author of mortgage studies says that the savings that one may get from variable rates in the future will be a lot lower then what was once enjoyed.

However, a person’s circumstances should dictate if they should go with a fixed or variable mortgage. If a person can take on the fluctuation of monthly payments, then the variable is ok for them.

One must remember that a mortgage is only one piece of a person’s total financial plan.

However, if you are still struggling to decide which mortgage is right for you, these are the top considerations to think about:

1.     Your Financials

Since variable – rate mortgages take on more risk, a person needs to know whether they are able to take on a fluctuating variable – rate mortgage. A person’s income should be stable, their debt should be low, a person’s sensitivity to risk should be low, and any assets a person has, are able to be turned into cash if cash flow tightens.

2.     Spreads

This is the difference between the variable – rate mortgage and the fixed rate mortgage. When this difference tightens, the variable losses some advantage. When the spread is less than one percentage point and the economy is at the bottom of an economic cycle, like we are now, the fixed has a higher probability of outperforming. Today’s spread between a five year fixed and a variable mortgage is half a percentage point. Based on this, a fixed is likely to outperform.

3.     Breaking Your Mortgage Early

One bank study pegged the duration of a five year mortgage is 3.3 years. This is because people break their five year mortgage early to refinance, sell, divorce, or just change to a mortgage with a better rate. Penalties on variables tend to be less, only three months interest, compared to breaking a fixed rate mortgage. Penalties for breaking the fixed rate can be a lot more expensive because of lenders interest rate differential penalties. If there is a chance you will break your mortgage, a variable may cost you less.

4.     Flexibility

Variables give you the option of changing your mind and locking into a fixed rate option. However, a lender’s rate to convert is about a fifth to a half a percentage point above its best fixed rate.

5.     Alternatives

The five year fixed and the variable mortgages are not the only options; look at shorter fixed terms. Today, you can find a two year fixed rate at 2.49%, where most variables are at 2.7% - 2.90%. You can diversify risk by using a hybrid mortgage. This is part fixed and part variable.

6.     Knowing Your Rate

There is comfort to know what your monthly payments will be from month to month. Variable rate borrowers don’t have this comfort and may have to tolerate some anxiety if rates start to rise.

Read full post

Well, we finally have some details and insight for the 2011 housing market, and it's about to get tougher for new home owners, and even those currently in the market.

There have been significant announcements this week for everyone interesting in buying or selling a home.  Timing is everything, and it appears that once again, there will be some significant changes that you need to be aware of. 

Considering the forecast for the Calgary Housing market to start increasing in pricing, and the tighter mortgage rules that will be coming into force in 60 days, now might be a vital window for home owners that are currently considering a move.

It is especially urgent for homeowners who are currently wishing to sell their current homes and lock in a new mortgage rate on a newly purchased home.  With only 60 days to finalize before the new rates come into effect, it will be a challenge to get a home on the market and sold in time to take advantage of the current status.  The up side is that over the next two months, the market may get very fluid with those who need to take advantage of the current mortgage rules.

I received the following details from one of my mortgage specialists advising that there will be some major changes in how mortgages are approved. This is a significant tightening for those of you who are currently considering purchasing a new home.

1.       No more 35 year amortizations

 

As of March 18, 2011 all insured deals will be allowed a 30 year amortization. Any fully signed contracts whether it be a purchase or refinance committed to by CMHC on or before March 18 will be honoured over 35 years.  You cannot have an increase in price after this date - if you do, you will be subject to the 30 year amortization.

2.       Refinancing has been scaled back to 85%.

 

As of March 18th,  home owners will have access to 85% of the value of a home instead of the current 90%. This will affect  you as a  home buyer when you take equity out of your home for a down payment.  In this case, you won’t be able to get as much funding up front and your monthly  payments will be higher.

Current and potential buyers please note that the magic date is March 18th, 2011.

On a $450,000 purchase with 5% down, this would save you $200.00 per month in mortgage payments and your affordability increases by 3%.

For those who are considering a home purchase requiring an insured mortgage (less than 20% down payment), you will want to complete pre-approval and possession of home prior to March 18 2011.

If you are currently sitting on the fence as to whether or not to make your move it is important to understand that buying today will save you money in the long run. After March 18th, this window will be closed.

If you are currently considering a home purchase and would like to speak to a mortgage specialist, I have excellent resources who are very talented in obtaining financing.  Please feel free to call me at 403-399-0809 and I will put you in touch with someone who can assist you according to your current circumstances.

For further information on these changes, and the background associated, here are a few links you can visit:

The Harper Government Takes Prudent Action to Support the Long-Term Stability of Canada’s Housing Market

Backgrounder: Supporting the long-term stability of Canada’s housing market

CALGARY HERALD ARTICLE: FeDERAL GOVERNMENT TIGHTENS MORTGAGE RULES AGAIN

Read full post

Now might just be the best time to lock into a fixed-rate mortgage, especially for those homeowners on a tight budget, according to an expert broker.
 
The Bank of Canada hiked its overnight lending rate by 25 basis points Wednesday, and variable mortgage rate products offered through major lenders are expected to rise in step.
 
Despite Wednesday’s increase, variable rates -- hovering between 2.05% and 2.25% these days -- still offer savings compared to fixed-rate plans in the near term.
 
But there is an argument for locking into a fixed rate sooner rather than later, said Gary Siegle, a Calgary-based regional manager at Invis.
 
The rate for the popular five-year fixed mortgage has recently dropped to a commonly available 3.89% and is as low as 3.6% in some cases.
 
We haven’t seen rates this low in recent memory, Siegle said.
 
“There are lots of people out there who are saying: Why would you overlook the fact that we haven’t seen five-year rates this low in a long, long time?
 

“Why would you not take advantage of historic low interest rates?”

Unfortunately, the answer isn’t clear-cut, Siegle said.
 
Some people are choosing to overlook low fixed rates because the variable options are still cheaper and may be for some time.
 

However, mortgage holders do need to consider that variable rates do change eventually.

“And the direction everyone is predicting that they’ll go is up. It’s a question of how much and when,” Siegle said.
 

Floating rates have historically been the cheaper option over the entire life of a mortgage but not everyone can stomach the often dramatic swings in monthly expenses.

“It’s a question also of psyche,” Siegle said.
 
People who are generally nervous or who are on a tight budget might be better off locking in now, he said.
 

“Even though they are giving up that 1.25%, they are gaining a lot of peace of mind.”

Homeowners considering the switch to a fixed plan could look into whether there is penalty for switching mid-term, Siegle said.
 
Either way, both variable and fixed-rate mortgage holders can take advantage of current borrowing prices by paying down as much of the principal amount as quickly as possible. That way, as rates go up, total debt burden will be lowered come renewal time.
 

Whereas the central bank influences variable rates, the bond market influences fixed-rate mortgages.

The slower-than-expected economy has fuelled investor interest in the bond rally, pushing yields down and allowing banks to offer attractive fixed-rate products.

Read full post

The Canadian Press
 
OTTAWA - The Bank of Canada may be concerned about the level of debt homeowners are assuming, but consumers who have recently taken out or renewed their mortgage are not.
 
A new online survey of Canadians active in the mortgage market, including first-time buyers, shows the vast majority are not only comfortable with their level of debt, but two thirds think they will pay their loans off sooner than required.
 
The annual survey by Canada Mortgage and Housing Corporation also suggests that Canadians are savvy consumers when it comes to buying a home.
 
On average, consumers surveyed say they took a year to think through their decision and 89 per cent said they used the Internet to research mortgage options.
 
"First time home buyers, they do their homework," said Pierre Serre, the CMHC's vice president of insurance product and business development.
 
"The key findings are that people are getting more into the Internet, people are getting informed and people are comfortable with home ownership."
 
According to the CMHC, nine in 10 new buyers believe ownership is a good long-term investment and that now is a good time to purchase a home.
 

The housing market has been one of the mainstays of the economic recovery, with prices and sales already back, and in some markets, beyond pre-recession levels.

In a separate report Monday, the real estate brokerage firm Re/Max said luxury home sales had soared in the first quarter of 2010, with nine of 13 markets shattering records for the winter months.
 
Kelowna, B.C. led the way in terms of percentage increase at 700 per cent, followed by Montreal at 300 per cent and Victoria at 275 per cent. Canada's most populous city, Toronto, was not far behind with a 263 per cent advance.
 
"Recovery in the upper end has been nothing short of remarkable," said Elton Ash, the regional vice-president for Re/Max in western Canada.
 
It's been such home-buying enthusiasm that has raised concerns at the Bank of Canada about super-low interest rates luring some into taking on more debt than they can afford. Although affordability remains high, given the low rates, household debt has risen to a record $1.47 per $1 of disposable income.
 
Bank governor Mark Carney and his deputies have warned that buyers should make sure when they purchase a home, they can afford not only the current mortgage but payments when interest rates rise.
 
The central bank has hinted it may start raising its policy rate as early as June 1, but already, chartered banks have increased longer-term, closed and some variable mortgages by close to a percentage point.
 
On Monday, Royal Bank bumped up its mortgage rates on all its lending terms by nearly a seventh of a percentage point. It was the third mortgage rate increase in recent weeks, reflecting the rising costs of borrowing on the bond market, where banks finance their mortgage lending.
 
The CMCH survey of 2,500 who have actually taken out a first mortgage, or renewed their mortgage in the last year, strongly suggests they are doing so with eyes wide open.
 
The survey found that 81 per cent are "comfortable" with their level of debt. But even the 19 per cent who did not answer in the affirmative didn't raise a red flag - 13 per cent were neutral, five per cent were somewhat not comfortable, and only one per cent said they were very uncomfortable.
 
Among first-time buyers, 85 per cent said they had a good understanding of how much of a mortgage they could afford.
 
The results are not surprising to CIBC economist Benjamin Tal, who recently researched the housing market for his bank. Tal's report tended to undercut concerns that Canadians were significantly vulnerable to rising interest rates.
 

"The number of people who are really, really vulnerable is a relatively small number," he said,"Clearly, when you have a situation of interest rates rising there will be defaults rising, but it will not be over the cliff like the U.S., it will not be a crisis."

 

Tal says Canadians traditionally adopt a variety of strategies to rising rates, including locking in to longer-term fixed mortgages, something he says is already occurring.

The other difference between the Canadian situation and that of the U.S., where the sub-prime crisis triggered a financial market meltdown, is that lower-income Canadians tend to be more conservative than higher-income buyers, said Tal. In reverse of the U.S. situation, lower-income Canadians tend to take out fixed-rate mortgages, he said.

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Major banks like RBC have finally lowered interest rates on home loans in tandem with the Bank of Canada’s rate cut made last week.

 

Big lenders have begun offering fixed-rate mortgages at rock-bottom rates of as little as 2.84 per cent, while smaller lenders can be found providing fixed-rate loans at as low as 2.69 per cent.

 

Meanwhile home loans with variable rates – i.e. with an interest rate that’s not set but instead floats up and down – have edged below 2 per cent.

 

The renewed mortgage rate wars sparked by the Bank of Canada’s surprise cut are sure to draw out house hunters in the weeks and months ahead. But can you afford that mortgage, even at the current ultra-low levels of interest?


Rule of thumb


The historical rule of thumb among mortgage experts is that no more than about 32 percent of household pre-tax income should be spent on housing costs, like your mortgage, utilities, condo fees and property taxes.

A record boom in housing prices however has thrown that threshold out the window for more than a few Canadian households. Royal Bank of Canada suggests the average family who owns a home dedicates 42.6 per cent of their income to covering the mortgage, utilities, property taxes as well as fees for condominium owners.

 

In some centres – notably Vancouver (83.6 per cent) and Toronto (56.3 per cent) – the percentage is far higher.

 

How much house can you handle? Use this calculator to find out.


For condo owners, simply lump monthly fees into property taxes. (And to determine your potential monthly payment, use this calculator to find out.


Affordability Calculator

Mortgage experts suggest no more than 32% of household income be spent on housing costs. Whether you're looking for a home or already have one, use this calculator to determine your affordability reading.

 

Original Article by Global News

Read full post

by Chris O' Sullivan - cosullivan@mortgagwriters.ca

The answer to this question depends on one two things: One’s current financial situation and do you want to save on paying the interest part of the mortgage.

I will go over the different payment options available and provide a chart on how much a mortgage will cost you depending on the payment option you decide on.

The Monthly Mortgage Payment:

This is the most standard payment. You pay your mortgage once a month. This is the most expensive option, since you don’t save anything on interest fees. You will have 12 payments for the entire year.

Semi-Monthly Mortgage Payment:

This option requires two equal payments ( 50% on the monthly payment), which makes 24 payments for the entire year. This is a better option than the monthly payment. It will save you more on the interest payments.

Bi-Weekly Mortgage Payment:

This option requires the borrower to make mortgage payments every two weeks on the same day. You will pay a total of 26 payments for the year.  You make half the monthly payment every two weeks. So you will make 13 full payments for the entire year. This will save you a bit more on the interest then the semi-monthly option.

Accelerated Weekly Mortgage Payment:

This will give you slightly better interest rate savings then the accelerated bi-weekly payment option. You will make 52 payments per year. This results in an additional monthly payment for the year.

This chart will assume a mortgage of $200,000, for a 5 year fixed term at 3.39%, with amortization of 25 years.  Below are the different payment options and the savings associated with each from a monthly payment option.

 

Total Payments

Total Interest Paid

Time To Payoff Mortgage

Savings 

Monthly Mortgage Payment

$296,088

$96,088

300 months

(25 yrs.)

N/A

Semi-Monthly Mortgage Payment

$295,765

$95,765

300 Months (25 yrs.)

$323.00

Bi-Weekly Mortgage Payment

$283,606.59

$83,606.59

266 months

(22 yrs. and 2 months)   

$12,483.21

Weekly Mortgage Payment

$283,470.10

$83,470.10

266 months

(22yrs. And 2 months)

$12,619.71

 

This chart will assume a mortgage of $450,000, for a 5 year fixed term at 3.39%, with amortization of 25 years.  Below are the different payment options and the savings associated with each from a monthly payment option.

 

Total Payments

Total Interest Paid

Time To Payoff Mortgage

Savings 

Monthly Mortgage Payment

$666,200.36

$216,200.36

300 months

(25 yrs.)

N/A

Semi-Monthly Mortgage Payment

$665,471.25

$215,471.25

300 Months (25 yrs.)

$729.10

Bi-Weekly Mortgage Payment

$638,114.83

$188,114.83

266 months

(22 yrs. and 2 months)   

$28,065.52

Weekly Mortgage Payment

$637,804.92

$187,804.92

266 months

(22yrs. And 2 months)

$28,395.44

 

If you can, it is well worth to use a bi-weekly or weekly payment structure to pay down your mortgage.
Chris O'Sullivan
 
Chris O'Sullivan is a mortgage agent for The Mortgage Writers and can be reached at cosullivan@mortgagewriters.ca
 
 
 
  
Read full post

This is the question that I get most asked: Should I go with a fixed or variable mortgage?

In the past, when the spread between the variable and fixed rates were way farther apart, it was an easy answer, as long as the client didn’t mind their monthly payments fluctuating. I would always answer: Go with the variable.

This was because, historically, the variable has saved homeowners money more than 85% of the time. However, times have changed and the spread between the variable and fixed rates has become a lot closer, since banks are not discounting the variable rates as much,  the best variable now is prime – 0.35%, that equates to 2.65%. The best fixed rate right now for a five year term is 3.29%. The spreads have come closer primarily because banks are losing money on the variable side and are trying to direct borrowers to the fixed side with lower spreads.

So back to the question: Should I go with the variable or fixed mortgage?

With the fixed rate mortgage, homeowners lock in their mortgage for a period of time, the most popular being the five year fixed-rate mortgage. Since rates can arguably only go up from the rates we are at, it seems like a logical decision to go with a fixed mortgage.

The difference between today’s variable rate, which is 2.65% and the four year fixed, 2.99%, is a difference of 34 basis points or just over one rate hike.

This is a small difference to have the security knowing that you won’t have to pay more if rates were to rise.

Moshe Milevsky, professor at York University and an author of mortgage studies says that the savings that one may get from variable rates in the future will be a lot lower then what was once enjoyed.

However, a person’s circumstances should dictate if they should go with a fixed or variable mortgage. If a person can take on the fluctuation of monthly payments, then the variable is ok for them.

One must remember that a mortgage is only one piece of a person’s total financial plan.

However, if you are still struggling to decide which mortgage is right for you, these are the top considerations to think about:

1.     Your Financials

Since variable – rate mortgages take on more risk, a person needs to know whether they are able to take on a fluctuating variable – rate mortgage. A person’s income should be stable, their debt should be low, a person’s sensitivity to risk should be low, and any assets a person has, are able to be turned into cash if cash flow tightens.

2.     Spreads

This is the difference between the variable – rate mortgage and the fixed rate mortgage. When this difference tightens, the variable losses some advantage. When the spread is less than one percentage point and the economy is at the bottom of an economic cycle, like we are now, the fixed has a higher probability of outperforming. Today’s spread between a five year fixed and a variable mortgage is half a percentage point. Based on this, a fixed is likely to outperform.

3.     Breaking Your Mortgage Early

One bank study pegged the duration of a five year mortgage is 3.3 years. This is because people break their five year mortgage early to refinance, sell, divorce, or just change to a mortgage with a better rate. Penalties on variables tend to be less, only three months interest, compared to breaking a fixed rate mortgage. Penalties for breaking the fixed rate can be a lot more expensive because of lenders interest rate differential penalties. If there is a chance you will break your mortgage, a variable may cost you less.

4.     Flexibility

Variables give you the option of changing your mind and locking into a fixed rate option. However, a lender’s rate to convert is about a fifth to a half a percentage point above its best fixed rate.

5.     Alternatives

The five year fixed and the variable mortgages are not the only options; look at shorter fixed terms. Today, you can find a two year fixed rate at 2.49%, where most variables are at 2.7% - 2.90%. You can diversify risk by using a hybrid mortgage. This is part fixed and part variable.

6.     Knowing Your Rate

There is comfort to know what your monthly payments will be from month to month. Variable rate borrowers don’t have this comfort and may have to tolerate some anxiety if rates start to rise.

Read full post

Well, we finally have some details and insight for the 2011 housing market, and it's about to get tougher for new home owners, and even those currently in the market.

There have been significant announcements this week for everyone interesting in buying or selling a home.  Timing is everything, and it appears that once again, there will be some significant changes that you need to be aware of. 

Considering the forecast for the Calgary Housing market to start increasing in pricing, and the tighter mortgage rules that will be coming into force in 60 days, now might be a vital window for home owners that are currently considering a move.

It is especially urgent for homeowners who are currently wishing to sell their current homes and lock in a new mortgage rate on a newly purchased home.  With only 60 days to finalize before the new rates come into effect, it will be a challenge to get a home on the market and sold in time to take advantage of the current status.  The up side is that over the next two months, the market may get very fluid with those who need to take advantage of the current mortgage rules.

I received the following details from one of my mortgage specialists advising that there will be some major changes in how mortgages are approved. This is a significant tightening for those of you who are currently considering purchasing a new home.

1.       No more 35 year amortizations

 

As of March 18, 2011 all insured deals will be allowed a 30 year amortization. Any fully signed contracts whether it be a purchase or refinance committed to by CMHC on or before March 18 will be honoured over 35 years.  You cannot have an increase in price after this date - if you do, you will be subject to the 30 year amortization.

2.       Refinancing has been scaled back to 85%.

 

As of March 18th,  home owners will have access to 85% of the value of a home instead of the current 90%. This will affect  you as a  home buyer when you take equity out of your home for a down payment.  In this case, you won’t be able to get as much funding up front and your monthly  payments will be higher.

Current and potential buyers please note that the magic date is March 18th, 2011.

On a $450,000 purchase with 5% down, this would save you $200.00 per month in mortgage payments and your affordability increases by 3%.

For those who are considering a home purchase requiring an insured mortgage (less than 20% down payment), you will want to complete pre-approval and possession of home prior to March 18 2011.

If you are currently sitting on the fence as to whether or not to make your move it is important to understand that buying today will save you money in the long run. After March 18th, this window will be closed.

If you are currently considering a home purchase and would like to speak to a mortgage specialist, I have excellent resources who are very talented in obtaining financing.  Please feel free to call me at 403-399-0809 and I will put you in touch with someone who can assist you according to your current circumstances.

For further information on these changes, and the background associated, here are a few links you can visit:

The Harper Government Takes Prudent Action to Support the Long-Term Stability of Canada’s Housing Market

Backgrounder: Supporting the long-term stability of Canada’s housing market

CALGARY HERALD ARTICLE: FeDERAL GOVERNMENT TIGHTENS MORTGAGE RULES AGAIN

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Now might just be the best time to lock into a fixed-rate mortgage, especially for those homeowners on a tight budget, according to an expert broker.
 
The Bank of Canada hiked its overnight lending rate by 25 basis points Wednesday, and variable mortgage rate products offered through major lenders are expected to rise in step.
 
Despite Wednesday’s increase, variable rates -- hovering between 2.05% and 2.25% these days -- still offer savings compared to fixed-rate plans in the near term.
 
But there is an argument for locking into a fixed rate sooner rather than later, said Gary Siegle, a Calgary-based regional manager at Invis.
 
The rate for the popular five-year fixed mortgage has recently dropped to a commonly available 3.89% and is as low as 3.6% in some cases.
 
We haven’t seen rates this low in recent memory, Siegle said.
 
“There are lots of people out there who are saying: Why would you overlook the fact that we haven’t seen five-year rates this low in a long, long time?
 

“Why would you not take advantage of historic low interest rates?”

Unfortunately, the answer isn’t clear-cut, Siegle said.
 
Some people are choosing to overlook low fixed rates because the variable options are still cheaper and may be for some time.
 

However, mortgage holders do need to consider that variable rates do change eventually.

“And the direction everyone is predicting that they’ll go is up. It’s a question of how much and when,” Siegle said.
 

Floating rates have historically been the cheaper option over the entire life of a mortgage but not everyone can stomach the often dramatic swings in monthly expenses.

“It’s a question also of psyche,” Siegle said.
 
People who are generally nervous or who are on a tight budget might be better off locking in now, he said.
 

“Even though they are giving up that 1.25%, they are gaining a lot of peace of mind.”

Homeowners considering the switch to a fixed plan could look into whether there is penalty for switching mid-term, Siegle said.
 
Either way, both variable and fixed-rate mortgage holders can take advantage of current borrowing prices by paying down as much of the principal amount as quickly as possible. That way, as rates go up, total debt burden will be lowered come renewal time.
 

Whereas the central bank influences variable rates, the bond market influences fixed-rate mortgages.

The slower-than-expected economy has fuelled investor interest in the bond rally, pushing yields down and allowing banks to offer attractive fixed-rate products.

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The Canadian Press
 
OTTAWA - The Bank of Canada may be concerned about the level of debt homeowners are assuming, but consumers who have recently taken out or renewed their mortgage are not.
 
A new online survey of Canadians active in the mortgage market, including first-time buyers, shows the vast majority are not only comfortable with their level of debt, but two thirds think they will pay their loans off sooner than required.
 
The annual survey by Canada Mortgage and Housing Corporation also suggests that Canadians are savvy consumers when it comes to buying a home.
 
On average, consumers surveyed say they took a year to think through their decision and 89 per cent said they used the Internet to research mortgage options.
 
"First time home buyers, they do their homework," said Pierre Serre, the CMHC's vice president of insurance product and business development.
 
"The key findings are that people are getting more into the Internet, people are getting informed and people are comfortable with home ownership."
 
According to the CMHC, nine in 10 new buyers believe ownership is a good long-term investment and that now is a good time to purchase a home.
 

The housing market has been one of the mainstays of the economic recovery, with prices and sales already back, and in some markets, beyond pre-recession levels.

In a separate report Monday, the real estate brokerage firm Re/Max said luxury home sales had soared in the first quarter of 2010, with nine of 13 markets shattering records for the winter months.
 
Kelowna, B.C. led the way in terms of percentage increase at 700 per cent, followed by Montreal at 300 per cent and Victoria at 275 per cent. Canada's most populous city, Toronto, was not far behind with a 263 per cent advance.
 
"Recovery in the upper end has been nothing short of remarkable," said Elton Ash, the regional vice-president for Re/Max in western Canada.
 
It's been such home-buying enthusiasm that has raised concerns at the Bank of Canada about super-low interest rates luring some into taking on more debt than they can afford. Although affordability remains high, given the low rates, household debt has risen to a record $1.47 per $1 of disposable income.
 
Bank governor Mark Carney and his deputies have warned that buyers should make sure when they purchase a home, they can afford not only the current mortgage but payments when interest rates rise.
 
The central bank has hinted it may start raising its policy rate as early as June 1, but already, chartered banks have increased longer-term, closed and some variable mortgages by close to a percentage point.
 
On Monday, Royal Bank bumped up its mortgage rates on all its lending terms by nearly a seventh of a percentage point. It was the third mortgage rate increase in recent weeks, reflecting the rising costs of borrowing on the bond market, where banks finance their mortgage lending.
 
The CMCH survey of 2,500 who have actually taken out a first mortgage, or renewed their mortgage in the last year, strongly suggests they are doing so with eyes wide open.
 
The survey found that 81 per cent are "comfortable" with their level of debt. But even the 19 per cent who did not answer in the affirmative didn't raise a red flag - 13 per cent were neutral, five per cent were somewhat not comfortable, and only one per cent said they were very uncomfortable.
 
Among first-time buyers, 85 per cent said they had a good understanding of how much of a mortgage they could afford.
 
The results are not surprising to CIBC economist Benjamin Tal, who recently researched the housing market for his bank. Tal's report tended to undercut concerns that Canadians were significantly vulnerable to rising interest rates.
 

"The number of people who are really, really vulnerable is a relatively small number," he said,"Clearly, when you have a situation of interest rates rising there will be defaults rising, but it will not be over the cliff like the U.S., it will not be a crisis."

 

Tal says Canadians traditionally adopt a variety of strategies to rising rates, including locking in to longer-term fixed mortgages, something he says is already occurring.

The other difference between the Canadian situation and that of the U.S., where the sub-prime crisis triggered a financial market meltdown, is that lower-income Canadians tend to be more conservative than higher-income buyers, said Tal. In reverse of the U.S. situation, lower-income Canadians tend to take out fixed-rate mortgages, he said.

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