DoF May Soon Mandate Higher Down Payments

This is a great article from our friend Robert Mclister

By the end of January, the Department of Finance may recommend raising the minimum down payment to 10%. That’s what I’m hearing from a high-level lender source connected with the DoF, who declined to be identified.

Policy-makers are reportedly considering a graduated scale based on either the home value or mortgage amount—something like this:

• $0 to $500,000 requires at least 5% down
• $501,000 to $700,000 requires at least 7% down
• Over $700,000 requires 10% down

These numbers are purely speculative, but such a methodology would do two things:

1. Insulate first-time buyers (who typically have mortgages in the high $200k or low $300k range), and
2. Shield smaller markets that haven’t seen the stratospheric home prices of Toronto and Vancouver.

Research from Mortgage Professionals Canada suggests up to 115,000 recent buyers might not be able to afford a 10% down payment, forcing them to defer purchases for potentially years. Studies like that probably factored into the DoF considering a graduated scale. Kudos to DoF policy-makers, by the way, if they do in fact avoid an across-the-board 10% down payment requirement and spare young buyers and weaker housing markets.

The DoF will presumably make its recommendation to Minister of Finance Bill Morneau. Morneau would then need to weigh the political and economic implications of this move. Our bet is that he’d side with senior policy-makers who are concerned about Ottawa’s exposure to the housing market, and put this into regulation sometime next year.

We’re currently awaiting comment from the Finance Department, but there’s likely not much they can say ahead of a formal public announcement. Sources say that if they do implement higher down payment rules, it would not require a public comment period and could be done relatively quickly.

visit us at www.imortgagecanada.com

Joel Sida

How to get my notice of assessment online

It’s common for lenders to ask for Notices of Assessment (NOAs) when validating a mortgage application, especially if the borrower is self-employed or has bonus income, for example.

But applicants often misplace their NOAs, or can’t get them quickly enough from their accountant.

Inaccessible NOAs can sometimes limit your lending options, a problem that’s magnified if you have a tight closing or a financing conditions removal date.

The inability to produce an NOA can also cost mortgage brokers business on occasion. MrTaxes.ca owner Robert Stone says that happens when “the client goes away to find their NOA and does not return because their accountant may be working with another broker. Or, [the client] gets frustrated and goes to the bank, thinking the bank can help them.”

For reasons like these, Stone has built a standalone business of providing NOAs to folks who need them fast.

MrTaxes.ca’s NOA service costs $50. For that, the company guarantees a 24-business-hour turnaround time or it’s free. Stone estimates he meets that timeframe 90% of the time. “We, as other accountants do, use our RepID service with CRA to get NOAs instantly.”

Of course, you can always request your own NOA by calling the CRA (Canada Revenue Agency) at 1-800-959-8281 and answering their questions. You can also get NOA information online (but not the NOA itself) using CRA’s My Account. The problem is that, for security, CRA asks for information from your return that often isn’t available if the NOA is inaccessible.

Moreover, if your accountant has used a different address for service, you might not know which one he/she used (your service address is a mandatory question). In those cases, you have to resort to a written request, which can take up to 2-3 weeks or more, depending on the time of year. That’s a long delay when applying for a mortgage.

Thank you the Canadian Mortgage Trends for the information

www.imortgagecanada.com

Welcome to the November issue of the Mortgage Financing Journal

Welcome to the November issue of the Mortgage Financing Journal, which is designed to help keep you in the know regarding Real Estate and Mortgage related matters! Fall is finally here and I hope you are enjoying the beautiful weather! This month's edition takes a look at what to expect for your family finances under a new Liberal government and who to call when getting a mortgage! Please let me know if you have any questions or feedback regarding anything outlined below. Thanks again for your continued support and referrals! Call Your Local Professional We have seen no shortage this year of headlines from ‘credentialed’ observers of the Canadian Real Estate market from around the world loaded with dire forecasts. Another year another story of the IMF, a foreign banks analyst, or some other entity making predictions about a market that does not exist. There is no National Real Estate market, and forecasts about Canadian Real Estate are as useful as forecasts about Canadian weather Here are a few things about the home that you own which most of these analysts seem not to consider: You live there and you have to live somewhere. You are not leaving very easily. Canadian mortgages are ‘Full Recourse’ mortgages. You cannot throw your keys on the banker’s desk and walk away, the banker will follow you wherever you go and they will get the very last pennies owed to them. Canadian mortgage qualification standards are among the most stringent in the world. Despite this many CDN’s borrow significantly less than they qualify for. We CDN’s are a prudent bunch. Unlike the stock market, where a position can be liquidated with the click of a button, liquidating Real Estate is slow, cumbersome, and often tedious. Taking weeks, if not months. On this final point, many a Real Estate investor can attest to wishing that at 4am, when roused from a deep slumber, and racing to a tenant’s property to stop a leaking pipe flowing into the unit below - that if there were a ‘sell’ button it would get pressed at that moment. Just as many a homeowner, watching tall trees swaying near their home in a windstorm (or worse) would also press that button ‘just to be safe’. But Real Estate is neither bought nor sold in split seconds, often logic exits the equation as well. Instead nearly every purchase and sale decision around Real Estate is driven by emotion - emotions which are driven by life circumstances. Wonderful circumstances drive purchases and sales alike. Just as challenging circumstances can drive sales and possibly purchases as well. Understanding that you are emotional is the first step. The next is enlisting your best allies; A level-headed Realtor. A level-headed Mortgage Broker. The right team will protect you from selling too low, buying too high, moving too quickly, and even from moving too slowly. Seek professional guidance, a third party that will offer perspective that could be missing from an otherwise overheated experience. We are here for you. Nine Ways your Family Finances will Change under a Liberal Government Rob Carrick Contributed to The Globe and Mail http://bit.ly/1PxnYy0 Here are nine things you need to know about how your personal finances will change under the new Liberal government. These points are based on measures the party campaigned on prior to the electionMonday. 1. Middle class tax cuts: People with taxable income between $44,700 and $89,401 will save as much as $670 per year on their income taxes. 2. Tax increases for high earners: The Liberals willincrease income taxes on people making more than $200,000 a year. At $300,000, the extra tax would amount to $3,330; the top combined federal and provincial marginal tax rate will be above 50 per cent in Manitoba, Ontario, Quebec, New Brunswick and Nova Scotia. 3. Changes to the TFSA limit: The annual contribution limit would likely fall back to $5,500 from the current $10,000. 4. Goodbye, Family Tax Cut: This current income splitting measure allows the higher-earning spouse in a family with kids under 18 to transfer up to $50,000 of income to the lower-earning spouse so it can be taxed at a lower rate. The maximum tax break under this measure is $2,000. 5. A new Canada Child Benefit: This will replace the current Universal Child Care Benefit and provide an extra $2,500 a year or so for a typical family of four. Families with household income of $200,000 or more will not receive this benefit. 6. OAS at 65: The Liberals have said they would not go ahead with plans to gradually raise the age of eligibility for Old Age Security by 2023. 7. CPP Enhancement: The Liberals have talked about working with the provinces to bolster Canada Pension Plan benefits. This calls into question the future of the proposed Ontario Retirement Pension Plan. 8. Home buying: Relaxing the rules under which people can pull money out of a registered retirement savings plan for a house down payment. The Home Buyers’ Plan currently focuses on first-time buyers; people would additionally be able to use it multiple times when moving for work, after the death of a spouse, after a marital split or to take in an elderly relative. 9. Student loans: Grads would not have to repay student loans until they earned at least $25,000 a year, with interest paid by the federal government during that period; also, the maximum Canada Student Grant for low-income students would rise to $3,000 annually for people studying full time. 10 Ways to Save Money This Holiday Season... The Holiday season is right around the corner. Here are a few pointers on how to keep your finances in order while preparing for all the festivities!  Call Joel Sida at 778-999-6145

Pressure on Banks to Increase Rates in the Coming Days

Heads Up: Key Indicators in Capital Markets Suggest Pressure on Banks to Increase Rates in the Coming Days Although we have not been given any word at all regarding an increase, key indicators in capital markets would suggest pressure on banks to increase rates in the coming days/weeks. We have already seen at least a couple banks dramatically increase rates today, and other banks may be pressured to do the same. I think it's prudent to provide you with this heads up for your discussion with clients thinking about their options

visit Joel Sida at www.imortgagecanada.com

HOW TO AVOID THE 7 BIGGEST MISTAKES REFINANCE SHOPPERS MAKE

Whenever interest rates drop or housing values jump, a refinancing frenzy follows. Whether you are looking to trim your mortgage payments, eliminate credit card debt or renovate, experts say you should fully understand all the options available to you before deciding to refinance. Here are some common pitfalls that consumers can avoid when refinancing:

1. Check interest rates to see if your new rate will pay off the penalty for leaving your present mortgage. It is best to decrease your interest rate by at least .75% to 1%. This would save you $100.00 a month on a $150,000 mortgage.

2. Know what your costs are – Check with your bank to find out what the penalty would be for an early payout.. It may be 3 month’s interest or more.. Don’t tell them you are moving your mortgage or they will pass you on to a high pressure salesperson who will try to talk you into coming into the branch to discuss the issue. It’s easier to say you are thinking about paying out your mortgage early.

3. Be sure to compare apples to apples- Make certain the rate you were quoted over the telephone was for a similar product. Comparing 3 year rates at one lender to 5 year rates at another is like comparing apples to oranges.

4. Overvaluing your Home – pride of ownership sometimes overshadows our common sense. You may expect the value of renovations to be equal to the cost of labour and materials. While return on investment for new carpeting or new paint jobs is close to 100%, it can be as low as 15% for a granite entranceway. Some people use their tax evaluations which may be too high or too low. Consider checking with your realtor or someone who recently sold their home on your street.

5. Not considering future plans – getting locked into a 10 year fixed rate when your kids will be leaving for college in 3-5 years may not be a smart move. If you are planning on buying a vacation home or an investment property why not plan for it now? You might be able to get it sooner than you expect.

6 Don’t let low interest rates or catchy slogans stop you from shopping around. Often the lower rates come with unattractive conditions: they may not be portable to a new home, the interest rate may only be available in one province, or you may be tied to the mortgage unless you have a bonafide sale of the home.

7 Finally don’t go to your present bank first. If you don’t know the rates you won’t get the best rate. The major reason people go to their present lender is convenience. There is comfort in “being known” and a belief that they should receive special treatment. The reality is that all lenders are under pressure trying to process the unprecedented volume of refinances. They have to set priorities. And you would be a low one as they already have your loan. They may lower your present rate from 3.99% to 3.79% to pacify you but if you shopped around you might find that other lenders are offering 3.19% at this time.

In conclusion, be a good consumer. Consult with your  mortgage professional who can review the best options with you. We can help you make an informed decision on your finances.

Welcome to the October issue of the Mortgage Financing Journal, which is designed to help keep you in the know regarding Real Estate and Mortgage related matters! Fall is here! Bundle up in wool socks and turtle necks! The crisp autumn air is upon us!  This month's edition takes a look at consumer proposals and how to prepare your garden for the fall months. Please let me know if you have any questions or feedback regarding anything outlined below. Thanks again for your continued support and referrals! How to Qualify for a Mortgage Post Consumer Proposal There is no shame in going through either a consumer proposal or bankruptcy. Life throws wrenches into our well laid out plans. This is why we have these financial resources to get us back on our feet.  What is most important is that we don’t make the same mistakes again, really get to know how the mortgage and credit world works and use a mortgage planner along with your trustee or debt counsellor to have a plan of action! There are no quick fixes or programs to get you back on track! Don’t get sold on some “swindler” taking advantage of your situation. There is a company out there that will loan you $2,500 that you pay back over 2 years and they report it to bureau for you. The cost - $900! That’s crazy and completely unnecessary. Here are the Coles notes on what you need to know for those in consumer proposal. Remember, every situation is unique, so always have an experienced broker work with you: You can refinance your home when in a consumer proposal and pay it out. You need more than 20% equity to do this. The sooner you pay it off, the faster it comes off your credit bureau. If you are going with an INSURED mortgage (ie. 5-20% down) then you must be discharged from consumer proposal for two years and your credit has to be re-established. Most lenders want the consumer proposal paid in full prior to mortgage approval. Very few will look your deal while in proposal. Area dependent - small rural communities are harder to get approvals. You want to plan to have some savings that are more than just your down payment if you are buying. Don’t be house rich and cash poor. Sometimes we can use secondary credit like your car insurance, cell phone, or your rental payments to a landlord. If we can prove good repayment for the last couple years, we should be able to take it to a bank. Also, you really need to ensure that, at the three year mark after you are done, that your consumer proposal is removed from credit bureau. I have seen someone refinance 2 years into their 5 year proposal and pay it out and forget to remove it from the bureau a year later, so it keeps hurting your score and years of damage for no reason. How long does a consumer proposal stay on a credit report?  Once you enter into a consumer proposal, it will start reporting on both Equifax and TransUnion credit reports within 30 days. Depending on your consumer proposal agreement with creditors, you will be making payments in a consumer proposal generally between three to five years. Consumer Proposal will stay on your credit report for 3 years from the date you are discharged (made your last payment) regardless if you are looking at your Equifax or TransUnion report. Where do I start in building my credit again?  You can start rebuilding your credit as soon as you file your proposal. Bankruptcy is a bit different. You need to aim for TWO credit cards, open for TWO years, with an eventual available credit of $2500 each.  Just get TWO that start reporting. For more information on which credit cards are right for you, click here. Your credit and what have you can do to make it better:  They are lending YOU money, so a good broker will need to explain your situation, who you are, why you had issues and what you have done to improve your situation. This is called the 5 C’s of credit. This is a method used by lenders to determine the credit worthiness of potential borrowers. The system weighs five characteristics of the borrower, attempting to gauge the chance of default or you being a chronic mismanager of debts. Character - When lenders evaluate character, they look at stability - for example, how long you’ve lived at your current address, how long you’ve been in your current job, and whether you have a good record of paying your bills on time and in full. If you want a loan for your business, the lender may consider your experience and track record in your business and industry to evaluate how trustworthy you are to repay. Capacity - refers to considering your other debts and expenses when determining your ability to repay the loan. Creditors evaluate your debt-to-income ratio, that is, how much you owe compared to how much you earn. The lower your ratio, the more confident creditors will be in your capacity to repay the money you borrow. Capital - refers to your net worth - the value of your assets minus your liabilities. In simple terms, how much you own (for example, car, real estate, cash, and investments) minus how much you owe. Collateral - refers to any asset of a borrower (for example, a home) that a lender has a right to take ownership of and use to pay the debt if the borrower is unable to make the loan payments as agreed. Some lenders may require a guarantee in addition to collateral. A guarantee means that another person signs a document promising to repay the loan if you can’t. Conditions - Lenders consider a number of outside circumstances that may affect the borrower’s financial situation and ability to repay, for example what’s happening in the local economy. If the borrower is a business, the lender may evaluate the financial health of the borrower’s industry, their local market, and competition. It all starts with the planning the day you decide to file for a consumer proposal. If you are finding you are starting to fall behind in payments or considering a consumer proposal call us - we may be able to help. Getting Your Garden Ready for Fall Summer is not the only season to nurture your garden. Find out how to keep your garden fresh during the cooler monthshere. Thanksgiving Leftovers After cooking all day, preparing the place settings and enjoying the long weekend, we have a few ways to show you how to maximize your Thanksgiving leftovers. Here are some recipes to get the most out of your feast!

Election Promises

Market Commentary

Ahhh, election promises. Those snappy little sound bites that grab your attention and get you talking. The latest is Stephen Harper's pledge to create 700,000 new homeowners in Canada by 2020.

Based on the latest available numbers – which are from 2011 – that would push the Canadian home ownership rate from 69% to 72.5%; a record high.

It sounds exciting: job creation, financial stability, strong communities. But how? The Harper announcement was light on details and it turns out the 700,000 figure is based on projections already in place from CMHC and the Canadian Home Builders Association. They are calling for 140,000 new homeowners per year over the next six years.

It also turns out the Harper pledge is somewhat aspirational. The Conservatives "hope" to see this kind of home ownership growth. The plan to get there includes existing programs like the increased, $10,000 contribution limit for TFSAs along with previous election promises like expanding the Home Buyer's Plan, a permanent home renovation tax credit and (yet to be defined) measures to control foreign ownership.

But economists and market watchers agree, the two biggest factors in driving home ownership will be real wage growth and continued low interest rates.

www.imortgagecanada.com

Joel's Mini Blog

We have noticed some lenders with a lot of rate activity and warnings about changes, I don't expect a big impact on them but I do expect them to grant smaller discounts.

It seems like banks want to make more money therefore Variable rates discounts might be affected as they are becoming more popular and the consumer is going for them more and more. Banks always prefer when consumers go for 5 years fixed so they can have them in their books for longer and can forecasts their numbers.


PS:  My phone is on - all the time (including weekends).  Text me to get my attention, I'll call you back within 10 minutes.  

www.imortgagecanada.com