The following is the press release from the Canadian Association of Accredited Mortgage Professionals annual Fall report on consumer perceptions and choices.
November 18, 2008 (Toronto, ON) - Residential mortgage consumers remain remarkably positive as they weather the financial storm, according to a report released today by the Canadian Association of Accredited Mortgage Professionals (CAAMP). Attitudes towards local conditions have shifted only slightly with 38 per cent of Canadians believing now is a good time to purchase and 32 per cent believing it is a bad time. Mortgage arrears remain low and steady at .28 per cent and an overwhelming 84 per cent of home owners are satisfied with their mortgages. The information was gathered by Maritz from an online survey of over 2,000 Canadians in mid-October and analyzed in conjunction with CAAMP Chief Economist Will Dunning.
Canadians do expect housing prices to fall: 35 per cent, more than twice as many as last fall, now believe prices will drop; half of those surveyed gave a neutral answer while the number who thought prices would go up fell from 40 per cent to 20 per cent. Westerners, who have endured particularly hot housing markets, are most negative, and in British Columbia, 48 per cent of those surveyed said they expect prices to fall, far above the national average. “As we confront these challenging times, borrowers foresee changes in their local housing markets, yet remain confident in a stable Canadian mortgage system,” said Jim Murphy, AMP, President and CEO of CAAMP. “CAAMP anticipates mortgage credit growth to slow, but remain relatively strong, surpassing the $1 trillion mark by 2010.”
Despite the traumatic American mortgage fall out, Canada has managed to steer clear of deflated markets. The Canadian system is supported by low and steady interest rates, better underwriting processes, different products and normal re-sale activity levels. “Canada is a financially conservative country where consumers are able to meet the terms of their mortgages and buying decisions are based on affordability,” said Dunning. “This contributes to a solid real estate market that will not experience the same drop off we see south of the border.”
Housing equity positions are strong in Canada with a growing trend of re-financing mortgages. About one in five borrowers took out an increasing amount of cash from their mortgages, with the average draw rising 20 per cent to $41,000 compared to last year. Fifty-six per cent of respondents said they used this money, which totals $18.5 billion nationwide, for debt consolidation and repayment; 30 per cent of these funds went towards home repair and renovation.
New home buyers took advantage of alternative mortgage products - half of new mortgages taken out in the last year were for amortizations longer than the traditional 25 years, an increase of 13 per cent. Longer term amortizations now account for 16 per cent of all outstanding mortgages and six per cent are 40-year terms. The federal government has now introduced stricter regulations on insured mortgages. CAAMP’s survey found Canadians had low awareness of the new regulations; however once explained, 60 per cent supported the changes.
The “Annual State of the Residential Mortgage Market in Canada” report contains a wealth of additional industry data, including regional breakdowns of survey responses, where Canadians obtain their mortgages, the role of job creation in fuelling Canada’s housing market, and additional insight into housing forecasts in Canada and the United States. For a full copy of the report, please visit: www.caamp.org.
Thursday, November 20, 2008
Monday, November 17, 2008
Optimum Mortgage: What's Happened to Alternative Lending?
Here is an interesting article we received on November 13, 2008 from Optimum Mortgage (a division of Canadian Western Bank). It is an interview with manager Les Shore, and explains the current market conditions for alternative lending.
What's Happening with Alternative Lending?
As world capital markets struggle to absorb the impact of the sub-prime fiasco from the United States, borrowing costs remain high, which in turn negatively impacts rates for fixed term mortgages for all borrowers. How has this affected the world of Alternative Lending? How has this affected those borrowers who still need the assistance of an Alternative Lender? (e.g., small business owners with good credit history but who do not necessarily meet "A" lender income criteria, and/or borrowers with less-than-ideal credit ratings). Lester Shore has been at the hub of Alternative Lending since Optimum Mortgage first entered the Alternative Lending marketplace in 2004.
Q: What is the current state of 'Alternative Lending'?
A: "In today's markets, the business funding model where Alternative Lenders could advance these mortgages and easily bundle-and-sell them to other investors has ultimately proven unsustainable. As such, many Alternative Lenders have quietly exited the marketplace. However, the demand for this type of lending has not disappeared. In contrast to media headlines of late, many individuals and small businesses in Canada have continued to prosper through this market turmoil."
Q: Is Alternative Lending still available?
A: "Yes, however, borrowers and brokers will see higher mortgage pricing through the foreseeable future, which reflects the significant increase in deposit costs currently faced by all financial institutions. Alternative Lenders that remain in the marketplace have also become more cautious with regard to their underwriting criteria. Real estate values have moved steadily higher across the country over the past several years, and we are now seeing the impact of moderated residential sales activity. Lenders are reducing their maximum loan-to-value on new advances to reflect more "normalized" home values, particularly in Western Canada which experienced the largest run-up in prices. Credit definitely remains available - as our economy has continued to perform relatively well and delinquency rates are not excessive - but it is being provided on a more cautious and select basis."
Q: So, who continues to lend into the Alternative Lending market?
A: "Primarily deposit-taking institutions that have not been reliant on selling mortgages into pools as their main source of funding. The more disciplined lenders who have been in this business for a while have confidence that is based on experience, and have reacted proactively to changes in the marketplace. I expect these institutions, like Optimum Mortgage, will continue to meet the needs of borrowers."
Q: Do you see any "positives" in recent events?
A: "Real estate values have remained on a relatively steady long-term growth trend in most parts of Eastern Canada, and we anticipated the price corrections observed on property values in areas of Western Canada - simply because the rate at which values were increasing was unsustainable; affordability was becoming an issue. Overall, moderated sales activity will not only be healthy for both the real estate and the mortgage/lending markets, but ultimately, for the consumer."
Q: What does the future hold for Alternative Lending in Canada?
A: "Some borrowers may have a tougher time finding credit - reflecting more stringent underwriting standards and the fact that there now are fewer lenders in the marketplace - but credit remains available for the majority of this segment. We remain very optimistic about future opportunities in this business, and overall values remain solid providing adequate protection for our loans. We also have confidence that our clients will continue to repay their loans in a satisfactory manner."
What's Happening with Alternative Lending?
As world capital markets struggle to absorb the impact of the sub-prime fiasco from the United States, borrowing costs remain high, which in turn negatively impacts rates for fixed term mortgages for all borrowers. How has this affected the world of Alternative Lending? How has this affected those borrowers who still need the assistance of an Alternative Lender? (e.g., small business owners with good credit history but who do not necessarily meet "A" lender income criteria, and/or borrowers with less-than-ideal credit ratings). Lester Shore has been at the hub of Alternative Lending since Optimum Mortgage first entered the Alternative Lending marketplace in 2004.
Q: What is the current state of 'Alternative Lending'?
A: "In today's markets, the business funding model where Alternative Lenders could advance these mortgages and easily bundle-and-sell them to other investors has ultimately proven unsustainable. As such, many Alternative Lenders have quietly exited the marketplace. However, the demand for this type of lending has not disappeared. In contrast to media headlines of late, many individuals and small businesses in Canada have continued to prosper through this market turmoil."
Q: Is Alternative Lending still available?
A: "Yes, however, borrowers and brokers will see higher mortgage pricing through the foreseeable future, which reflects the significant increase in deposit costs currently faced by all financial institutions. Alternative Lenders that remain in the marketplace have also become more cautious with regard to their underwriting criteria. Real estate values have moved steadily higher across the country over the past several years, and we are now seeing the impact of moderated residential sales activity. Lenders are reducing their maximum loan-to-value on new advances to reflect more "normalized" home values, particularly in Western Canada which experienced the largest run-up in prices. Credit definitely remains available - as our economy has continued to perform relatively well and delinquency rates are not excessive - but it is being provided on a more cautious and select basis."
Q: So, who continues to lend into the Alternative Lending market?
A: "Primarily deposit-taking institutions that have not been reliant on selling mortgages into pools as their main source of funding. The more disciplined lenders who have been in this business for a while have confidence that is based on experience, and have reacted proactively to changes in the marketplace. I expect these institutions, like Optimum Mortgage, will continue to meet the needs of borrowers."
Q: Do you see any "positives" in recent events?
A: "Real estate values have remained on a relatively steady long-term growth trend in most parts of Eastern Canada, and we anticipated the price corrections observed on property values in areas of Western Canada - simply because the rate at which values were increasing was unsustainable; affordability was becoming an issue. Overall, moderated sales activity will not only be healthy for both the real estate and the mortgage/lending markets, but ultimately, for the consumer."
Q: What does the future hold for Alternative Lending in Canada?
A: "Some borrowers may have a tougher time finding credit - reflecting more stringent underwriting standards and the fact that there now are fewer lenders in the marketplace - but credit remains available for the majority of this segment. We remain very optimistic about future opportunities in this business, and overall values remain solid providing adequate protection for our loans. We also have confidence that our clients will continue to repay their loans in a satisfactory manner."
Friday, November 14, 2008
What's Up With Lenders!
Here is some enlightened information we received this week from only a few of our lenders . . .
Lender 1
- 100% Financing still available!
- No Notice of Assessments (NOA's) for self-employed
Lender 2
- 1 year term rate special at 4.49%
- 4 year term rate special at 5.34%
Lender 3
- Will lend on foreclosures, bruised credit, no income
- Lending up to 75% loan to value (LTV)
Lender 4
- Stated Income Program at the best fixed rates. Up to 95% LTV for self-employed and 100% commissioned, and up to 65% LTV for salaried employees.
- Rental Program at the best fixed rates. Up to 90% LTV insured, up to 80% LTV conventional, and an 80% rental offset is available on the subject property.
Because we deal with so many lenders, we can offer you the best available mortgage for your own particular situation.
Stressed about mounting debts and high monthly payments?
OR
Curious whether or not you are receiving the very best deal from your bank?
Whatever your concerns or circumstances are, feel free to call us anytime (evenings and weekends included)!
Lender 1
- 100% Financing still available!
- No Notice of Assessments (NOA's) for self-employed
Lender 2
- 1 year term rate special at 4.49%
- 4 year term rate special at 5.34%
Lender 3
- Will lend on foreclosures, bruised credit, no income
- Lending up to 75% loan to value (LTV)
Lender 4
- Stated Income Program at the best fixed rates. Up to 95% LTV for self-employed and 100% commissioned, and up to 65% LTV for salaried employees.
- Rental Program at the best fixed rates. Up to 90% LTV insured, up to 80% LTV conventional, and an 80% rental offset is available on the subject property.
Because we deal with so many lenders, we can offer you the best available mortgage for your own particular situation.
Stressed about mounting debts and high monthly payments?
OR
Curious whether or not you are receiving the very best deal from your bank?
Whatever your concerns or circumstances are, feel free to call us anytime (evenings and weekends included)!
Tuesday, October 21, 2008
Purchasing a Home With Rental Income
Whether you are buying a home to owner-occupy with a rental suite (a great mortgage helper!) or a rental property on its own, take advantage of one of the very few lenders offering deep discounted low interest rates and providing up to 80% loan to value on a 40 year amortization (yes, a 40 year amortization is still available!).
More importantly, the lender will use an 80% rental offset on the subject property. What that means is if the rental income is $1,200 per month, then the lender will deduct 80% of this rental income (or $960) off of the mortgage payment for qualifying purposes. We have helped many clients that now enjoy home ownership today by using the above scenario.
More importantly, the lender will use an 80% rental offset on the subject property. What that means is if the rental income is $1,200 per month, then the lender will deduct 80% of this rental income (or $960) off of the mortgage payment for qualifying purposes. We have helped many clients that now enjoy home ownership today by using the above scenario.
Tuesday, October 7, 2008
You Can Still Buy With Zero Down!
With the recent announcement that the Federal Dept. of Finance has eliminated 100% financing, a few lenders are still offering a 5% cashback incentive (which provides for the 5% downpayment) provided that you accept their posted 5 year closed term (or longer). So, if you purchase a residential property for $200,000, the lender will provide the necessary 5% downpayment in order to qualify for CMHC/Genworth insurance.
Using today's 5 year posted rate of 7.20% and a 35 year amortization, the monthly payment is $1,265.05 per month (o.a.c.) for a mortgage amount of $195,985 (the CMHC/Genworth premium is $5,985 and is added to the mortgage.
For those of you renting and perhaps considering home ownership in the near future, but are finding it difficult to save for the downpayment, this could be a great alternative. Once your 5 year term is over, you can then qualify for the bank's best discounted rates for the balance of the amortization.
Using today's 5 year posted rate of 7.20% and a 35 year amortization, the monthly payment is $1,265.05 per month (o.a.c.) for a mortgage amount of $195,985 (the CMHC/Genworth premium is $5,985 and is added to the mortgage.
For those of you renting and perhaps considering home ownership in the near future, but are finding it difficult to save for the downpayment, this could be a great alternative. Once your 5 year term is over, you can then qualify for the bank's best discounted rates for the balance of the amortization.
Tuesday, September 23, 2008
Interest-Only Line of Credit or Variable Rate Mortgage - Which to Choose?
First of all, both products have one similarity. They both are set to the Prime lending rate. However, an interest-only line of credit (LOC) requires no principal payments, and you only pay the interest owing on the outstanding balance each month. The amortization is "infinity", and you will end up with the exact mortgage you started with at any future date, unless you pay extra in addition to the interest owing. For a line of credit, all banks normally charge their best clients the Prime rate, which today is 4.75%. For example, a $300,000 mortgage will cost you $14,250 of interest annually, or approx. $1,187.50 per month. An advantage of a line of credit is that you can always re-borrow whatever you have already paid down on your mortgage. The lenders refer to this type of mortgage as being re-advanceable. This is a great feature for those who have irregular income or are often purchasing and liquidating investments and require the ability to have access to funds when needed.
With a variable rate mortgage, the interest rate is also set to Prime, but at a lower rate, as the rate is usually set at Prime minus (for example, the rate could be set at Prime minus 0.50%). However, the major difference between a variable rate and a line of credit is that principal payments are required on a variable rate mortgage. For example, a $300,000 mortgage, amortized over 35 years at Prime minus 0.50%, will cost you $1,366.90 per month. Because a small portion of the monthly payment is put towards the mortgage itself, the mortgage balance after 5 years is $279,090.34,. This means your mortgage will have reduced $20,909.66 or an average of $348.49 per month (this is assuming that the Prime rate stays the same over the 5 year period; however, in reality, we will see changes over time, up and down).
The key difference is that you will be paying more for your interest-only line of credit (a half of one percent more!) which on a $300,000 is approx. $1,500 annually!
So which to choose? A re-advanceable interest-only line of credit at Prime, or a variable rate mortgage (with principal and interest payments) at Prime minus 0.50%?
My answer is both! But that's a discussion for another day, so stay tuned for more!
With a variable rate mortgage, the interest rate is also set to Prime, but at a lower rate, as the rate is usually set at Prime minus (for example, the rate could be set at Prime minus 0.50%). However, the major difference between a variable rate and a line of credit is that principal payments are required on a variable rate mortgage. For example, a $300,000 mortgage, amortized over 35 years at Prime minus 0.50%, will cost you $1,366.90 per month. Because a small portion of the monthly payment is put towards the mortgage itself, the mortgage balance after 5 years is $279,090.34,. This means your mortgage will have reduced $20,909.66 or an average of $348.49 per month (this is assuming that the Prime rate stays the same over the 5 year period; however, in reality, we will see changes over time, up and down).
The key difference is that you will be paying more for your interest-only line of credit (a half of one percent more!) which on a $300,000 is approx. $1,500 annually!
So which to choose? A re-advanceable interest-only line of credit at Prime, or a variable rate mortgage (with principal and interest payments) at Prime minus 0.50%?
My answer is both! But that's a discussion for another day, so stay tuned for more!
Tuesday, September 9, 2008
Now is a Great Time to Refinance!
There is no question that during the past several years, home values have increased. Depending on when you purchased your residence, the value of your home most likely appreciated substantially. Perhaps when you bought, you did not have an opportunity to add more to your mortgage because of your loan to value or debt servicing concerns, but these extra funds may have been useful for home improvements at that time. In today's market, it may be an excellent time to take advantage of your home equity to do those long awaited home improvements, or maybe consolidate all your other higher interest debt to just one convenient lower interest rate payment by considering a refinance of your existing mortgage.
Why is this a good time to consider refinancing? Lenders can now approve a mortgage up to 80% loan to value without requiring CMHC insurance (previously, the limit was 75%). If (and this is only an "if") home prices trend downwards in the future, the amount you will be able to borrow without needing CMHC insurance may be decreased. The longer you delay your refinance, there is a chance that you may have less equity in your home in the future, which may not make it possible to do a refinance on a non-insured basis.
Of course, we would first complete an analysis of your particular situation to determine if this is a good time for you to refinance. We would need to consider your individual circumstances such as, is your current mortgage locked-in? What is the penalty to get out of your existing mortgage? Is it better for you to wait until the end of your current mortgage term, or perhaps refinance with your existing lender? Whatever course of action you may take with your refinance, we are here to assist you!
Why is this a good time to consider refinancing? Lenders can now approve a mortgage up to 80% loan to value without requiring CMHC insurance (previously, the limit was 75%). If (and this is only an "if") home prices trend downwards in the future, the amount you will be able to borrow without needing CMHC insurance may be decreased. The longer you delay your refinance, there is a chance that you may have less equity in your home in the future, which may not make it possible to do a refinance on a non-insured basis.
Of course, we would first complete an analysis of your particular situation to determine if this is a good time for you to refinance. We would need to consider your individual circumstances such as, is your current mortgage locked-in? What is the penalty to get out of your existing mortgage? Is it better for you to wait until the end of your current mortgage term, or perhaps refinance with your existing lender? Whatever course of action you may take with your refinance, we are here to assist you!
Thursday, August 28, 2008
Why a Blog?
Every day, we receive valuable information on the mortgage industry, and thought we'd share it with you!
We'll keep you abreast of the best mortgage rates available, along with current rate specials (the "hot" deals!). We'll also keep you informed of any mortgage trends, stats, and any new general information. We trust you will find your visit here informative!
So here goes . . .
Today, most lenders have since reduced their amortizations to 35 years and no longer provide 100% financing. Well, it just so happens that we do have a few lenders still accepting applications for the Zero Down Mortgage and willing to approve a 40 year amortization up until October 13, 2008.
This product is great for those now ready to buy, but just haven't saved for the downpayment yet. The longer amortization is also helpful if debt servicing is a bit tight for what you wish to buy. You can always increase your mortgage payment later, as most lenders allow a payment increase of up to 15% to 20% without penalty each year, which will ultimately reduce your amortization.
Stay tuned for more to come! Have a great day!
We'll keep you abreast of the best mortgage rates available, along with current rate specials (the "hot" deals!). We'll also keep you informed of any mortgage trends, stats, and any new general information. We trust you will find your visit here informative!
So here goes . . .
Today, most lenders have since reduced their amortizations to 35 years and no longer provide 100% financing. Well, it just so happens that we do have a few lenders still accepting applications for the Zero Down Mortgage and willing to approve a 40 year amortization up until October 13, 2008.
This product is great for those now ready to buy, but just haven't saved for the downpayment yet. The longer amortization is also helpful if debt servicing is a bit tight for what you wish to buy. You can always increase your mortgage payment later, as most lenders allow a payment increase of up to 15% to 20% without penalty each year, which will ultimately reduce your amortization.
Stay tuned for more to come! Have a great day!
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