13 Feb

Big-6 Banks’ prepayment penalty charges give reason to consider fair-penalty mortgage lenders

Mortgage Facts & Stats

Posted by: Garth Chapman

From a recent Robert McLister article in the Globe And Mail. 

Committing to a mortgage for five long years exposes people to the most insidious aspect of residential financing: prepayment charges.

And when it comes to such charges – the penalties you pay come when you back out of your mortgage early – some lenders take a greater toll on your bank balance than others.

Big banks are usually the worst. Mortgage finance companies are often the best.

And these bank competitors want you to know it. More and more, smaller lenders are using their preferential penalty calculations as a selling point, as well they should.

This year I’ve seen lenders such as Equitable Bank, Manulife Bank of Canada, XMC Mortgage Corp., Merix Financial, CMLS Financial Ltd., RFA Mortgage Corp., First National Financial LP, and MCAP all go out of their way to step up marketing and educate consumers on how bad penalties from major banks can be. (Mind you, a few of these lenders also have “no-frills” mortgages with high penalties – for example, 3 per cent of principal. So watch out for those.)

Read more here

13 Feb

Alberta Amendment Condominium Property Regulations Announced

Home Ownership

Posted by: Garth Chapman

On November 27, 2019, the Government of Alberta released revised Regulations and Amendments to the Alberta Condominium Property Act that will come into force January 1, 2020.

The revisions to the prior draft regulation includes adding to the list of qualified reserve fund study providers; adjusting the fee scale for the provision of documents; clarifying recoverability of an insurance deductible; simplifying the standard insurable unit description; increases to sanctions and rental deposits; reducing the administrative burden surrounding the AGM.

These adjustments are the result of the Government’s five-month review to ensure that Regulations do not cause unnecessary administrative burden or challenge for condo boards, owners and corporations.

You can see the Province’s Announcement Here

You can see the revised Alberta Regulations Here

13 Feb

New Canadians and millennials want to own homes. Here’s how Ottawa can help them

Home Ownership

Posted by: Garth Chapman

There has been a lot of talk about housing lately: the impact of regulations such as the “stress test”; the effect on millennials; the level of household debt in Canada and its potential impact on our economy.

Over the past year, the Canadian Real Estate Association commissioned research into housing affordability. We looked at the attitudes of millennials – people between the ages of 18 and 38 – to determine if they shared previous generations’ yearning for home ownership. Recently, we expanded this group to include their parents and new Canadians.

We found out that the vast majority (85 per cent) of millennials and new Canadians want to own their own homes. Six in 10 feel “passionate” about it, which perhaps explains binge-watching of Property Brothers. The research, conducted by Abacus Research, confirmed what our members were seeing in the marketplace – younger people want to own their own homes. They are working hard, earning decent incomes and want to invest in themselves and their surroundings. New Canadians are arriving in our great country with big dreams: to live securely, prosper, raise and educate a family and grow roots here, which includes owning their own piece of Canada. The idea of renting for life does not appeal to either group.

More here

13 Feb

The mortgage stress test is making housing supply issues worse — and making homes even more unaffordable

Mortgage Facts & Stats

Posted by: Garth Chapman

With a growing number of first-time homebuyers frozen out of the market by the stress test, many builders have cut back on building.

Governments bear much of the blame for this undesirable market imbalance, as a narrow focus on suppressing household debt has dominated the policy mix while the root causes of undersupply — including excessive red tape, fees, taxes and nimbyism — have gone largely unaddressed.

If we want to address housing affordability in Canada, governments need to redesign the policy mix to confront these factors. For its part, the federal government could start by developing a more nuanced mortgage “stress test.”

First, consider mortgage debt in the Canadian context. More here

13 Feb

Could Canadians gain access to longer-term mortgages?

Mortgage Facts & Stats

Posted by: Garth Chapman

In the USA 15-year and 30-year mortgage terms are very common.  So why not in Canada? Is it that there is less banking competition, or are there other forces at play?

Longer-term mortgages would benefit Canadian homebuyers by bringing more stability to the homebuying process, says a recent brief from the C.D. Howe Institute.

In “One More Case for Longer-term Mortgages: Financial Stability”, author Michael K. Feldman argues that mortgage periods of ten years or longer would decrease the number of renegotiations homebuyers would be required to engage in over the course of a decades-long amortization, thereby limiting their exposure to higher rates.

On the demand side, most Canadians simply don’t realize that longer-term mortgages are a possibility. “I think if you asked most people, they would think you can get a loan for five years or less, and that’s it,” Kronick says, adding that the institutions providing longer-term mortgages also charge premium rates to mitigate the losses in revenue they face from less frequent loan negotiations/interest rate hikes and early mortgage pay-offs.

More here 

13 Feb

Does this Canadian city really have the world’s most affordable housing market?

Real Estate Market

Posted by: Garth Chapman

Fort McMurray has topped a ranking of the world’s most affordable housing markets.

The Alberta city leads affordability in the 2020 Demographia International Housing Affordability Survey which rates middle-income housing affordability using the “Median Multiple,” which is the median house price divided by the median household income; a score of 2 would mean it takes twice the median income to afford a median-priced home.

Fort McMurray with a median multiple of 1.8 ranks highly following economic disruption in recent years as oil prices and investment have tumbled.

More here 

13 Feb

OSFI Hints at Changes to the Mortgage Stress Test Qualifying Rate

Mortgage Facts & Stats

Posted by: Garth Chapman

OSFI on the STRESS TEST – expect a modest relaxation, likely not enough to really help us on the Prairies.

OSFI on RENEWALS – not sure if we’ll see elimination of the stress test for borrowers who want to move their maturing mortgage to another lender at maturation.

OSFI on HELOCS – we may see a tightening on this product as the ‘boss of the banks’ sees a threat from consumers using their HELOCs as bank machines.

More here 

13 Feb

Insured…Insurable…Uninsurable

Mortgage Facts & Stats

Posted by: Garth Chapman

Once upon a time we had high ratio vs. conventional mortgages, now they are Insured, Insurable or Uninsurable.

How it Was Then

High ratio mortgage – down payment less than 20%, insurance (aka CMHC insurance) paid by the borrower.

Conventional mortgage – down payment of 20% or more, the lender had a choice whether to insure the mortgage or not at their own expense.

How it is Now

Insured –a mortgage transaction where the insurance premium is or has been paid by the client.  Generally, a down-payment below 20%.

Insurable –a mortgage transaction that is portfolio-insured at the lender’s expense for a property valued at less than $1MM that fits insurer rules (qualified at the Bank of Canada benchmark rate over 25 years with a down payment of at least 20%).

Uninsurable – a mortgage that is ineligible for insurance. Examples of Uninsurable are refinances, single unit rentals (rental buildings with 2-4 units are Insurable), purchases/transfer for properties greater than $1MM, equity take-out mortgages greater than $200,000, any mortgage with an amortization greater than 25 years.

So what does this mean when you need a mortgage for a purchase or when you have a maturing mortgage you want to transfer?

  • If it was originally insured (borrower paid default insurance – aka CMHC insurance), we can get insured rates (lowest rate tier).
  • If it was originally back-end insured by the lender (basically the same as being conventional) we can get insurable rates (2nd lowest rate tier).
  • If the mortgage was placed before October 17, 2016, we can grandfather the insurable rates even if it was a $1 million+ value house and/or with a 30-year amortization.  It then depends if it was insured (borrower-paid insurance) or conventional as to whether you qualify for insured or uninsurable rates.
  • If it was placed after October 17, 2016 and the property was over a $1MM value or had a 30-year amortization, we can only get uninsurable rates (highest rate tier).

For insurable rates we need to consider the current loan to value and the beacon score.