Panic buying? When will the housing market slow down?

Houses selling over asking price is becoming the norm, these days. Kinda crazy. Sometimes a house is just listed under market value to attract a frenzy of buyers. An old tactic that has worked well in larger urban markets. Today, that tactic is being used in smaller communities, too.

What’s unclear is if this selling tactic is contributing to houses selling for more than they’re worth. And what is a home worth, anyway? I always thought a house was worth what someone was willing to pay in the open market. That’s still true in most cases, today.

When I see reports of houses selling for $100k, $200k and $300k over asking, it makes me wonder. How long will this market last? Will it crash? And if so, when? It’s hard to make forecasts and I can’t see into the future, but let’s examine this a little.

WHEN WILL THE HOUSING MARKET CRASH?

I spoke with some experienced realtors and senior management of reputable financial institutions. They tell me the end doesn’t appear to be in sight. The lack of houses for sale is driving the market. The lack of new homes being built in major urban centres, like Toronto (and GTA), Hamilton, Vancouver, is fueling this increase. And with immigration of between 100,000 to 150,000 new residents in the GTA expected each year, this will also drive up demand. People want to own their homes.

In 2016, house prices were reported to increase by 22% in Greater Toronto and 15% in Greater Vancouver. Consumers are reading this and thinking they will never get in if they wait, so they buy…some of them will “panic buy”. I’m not one to promote ‘panic buying’. A real estate purchase should be made for the long term. Plan on owning for 7 years. This is how long it will take to amortization the acquisition and disposal costs of real estate. It’s simple math. And mortgage rates are still near all-time lows. Making it more affordable.

ANOTHER REASON HOUSE PRICES WILL CONTINUE TO RISE

Perhaps there is something else going on.. Are builders shying away from building due to the fact house prices have gone up so much? Are they worried they won’t be able to sell and make a profit at these levels? And if this trend of low supply and higher demand continues, when will it end?

I don’t have the answers, but one thing I will say is that you shouldn’t treat real estate like a penny stock gamble or a day at the horse races. Don’t speculate. This is a large amount of money to gamble with. I love real estate as a long term investment. It’s a proven winner over the long term. Be sure you can hang in there if there is a correction. In any down market, the pessimists will always come out of the woodwork to say, “I told you so”. If you can stick it out for those 7 years, chances are, you will be happy you did. History supports this.

FOR THOSE THAT BOUGHT IN THE LAST 10 YEARS

Speaking of pessimists…. what happened to all those negative forecasters that were telling us not to buy a house, 3, 4, 5 6, 7, 8 and 9 years ago? Haven’t seen them for a while. If you listened to the housing bears, how much would you have lost? House prices have doubled and some causes, tripled over the last 10 years.. Where are those housing bears today?

For this reason, please don’t rely solely on flash reports from the loudest mouth in the media. Get some expert advice to find out if buying a house is right for you. Speak with an experienced Mortgage Broker and Realtor. Yes, a good realtor or mortgage broker won’t push you into something you aren’t ready for. Speak with a trusted advisor. Get guidance from someone you trust or ask them who they would recommend. - Steve Garnganis

- Posted by Steven Porter, Mortgage Agent - Mortgage Architects
Steven can be reached through his website at www.1800Mortgages.ca

Buy now and pack up your mortgage with you.

One of the biggest hurdles for most move-up home buyers is having to pay huge mortgage discharge fees and penalties for breaking an existing home mortgage early and taking out a new one. So what happens to most home buyers, is they delay purchasing that dream home, sometimes for years, until the end of the term of their mortgage.

The good news is you don’t have to wait. It is possible to transfer your mortgage from one home to another. This practice is known as a mortgage “Port”. Porting your mortgage is when a homeowner transfers their mortgage from one property to another. An example of this option would be when you have sold your current home and purchased a new home. 

Porting can be a valuable tool if the interest rate on your current mortgage is no longer offered on the market.  Conversely, if the current mortgage rates are lower than the rate that you have, you may not want to port your mortgage. However, you will also need to consider if there are  penalties for breaking your mortgage early if you choose not to port it.
 
On a cautionary note, some lender mortgages allow Ports and some do not.  So if you plan on using this feature and moving during the term of the mortgage, then is important to know if this is a feature of your current mortgage. 

Even if you are not planning on moving in the short term mortgage "Portability" can still be an important feature.  Circumstances change: from careers to kids to the relationship with the co-owner, we never know what the future may hold.  More often than not, many buyers who port their mortgage did not plan on porting it when they first got their mortgage, but the feature ends up saving them thousands in penalty costs.  The next time you get a mortgage make sure to ask your mortgage broker if the mortgage he is recommending is portable. A good mortgage broker should tell you which mortgage products allow porting, and which do not. 

So what happens if you need a bigger mortgage on your new home? When a mortgage is ported, it is very common that you will require a larger loan than exists on your current residence.  This is not an issue.  Your Broker can offer what is referred to as a “blend and extend” or “blend to term” depending what works best for you. This is essentially a weighted average between the existing mortgage amount and interest rate and the additional funds you require at the current mortgage rate.

Example:
Existing Mortgage:  $100,000
Interest rate: 2.5%
Require: $150,000 (so $100,000 will be ported and $50,000 will be ‘new money’)
Current Interest rate: 3.0%
Therefore, the new mortgage will result as a $150,000 mortgage with a blended rate of at 2.9%.

In conclusion, portability is a feature offered on many mortgage loans and allows you to move your current mortgage from your existing home, which has sold, to a new property you have purchased.
 
The pros of mortgage portability are:

1. If your current mortgage rates are better than mortgage rates currently offered, you can keep your better rate.
2. Breaking a mortgage early can result in penalties. It is sometimes better to “Port” your existing mortgage to your new home instead.
3. It is also possible to increase the amount of your mortgage when you port it.

Mortgage portability is not for everyone. Some lenders do not allow mortgage portability or in some cases porting your mortgage would not be financially beneficial. Each lender has their own conditions for mortgage portability. To see if porting is right for you, contact Steven Porter, Mortgage Agent with Mortgage Architects. There is no obligation, so call today.

Steven Porter, Mortgage Agent – Mortgage Architects | 905-875-2582 | steven.porter@mtgarc.ca | www.1800Mortgages.ca

Multiple Offers - Questions to consider in a sellers market

When home buyers outnumber sellers, the result can be a multiple offer scenario. If you’re searching for homes in a competitive market environment, you’ll want to take time to understand the dynamics of multiple offers and understand how this might impact your negotiating strategy. Some questions to discuss with your buyer’s representative:

Will I know if I’m in a multiple offer situation?

Not necessarily. Typically it works to a seller’s advantage if buyers are told they are competing with one another. But a seller must disclose the existence of other offers before this can be shared with your buyer’s rep.

How will offers be presented to the seller?

The seller decides how they want this handled, either individually or as a group presentation. Once presented, a seller can elect to accept (or counter) one offer, reject all offers, or reject all offers in conjunction with a request to resubmit a “highest and best” offer.

Will the details of my offer be kept confidential from other buyers?

The only way to preserve confidentiality is to ask the sellers to sign a confidentiality agreement before presenting your offer (which also applies to their agent). However, if the seller decides to have a group presentation of offers, you’ll either have to withdraw your offer or revoke the confidentiality agreement.

If my offer has the highest price, can I be confident that I’ll beat out other buyers?

No. Sellers can accept whichever offer they consider “best” and that may be based on other factors, like the certainty of closing (e.g., the buyer is already approved on their mortgage) or flexibility on closing dates.

What are my options for writing a stronger offer?

In addition to firming up your financing (or paying cash) and offering flexibility on timing, there are a number of other things you can do, including eliminating contingencies, increasing your earnest money deposit or paying closing costs, to name a few. Discuss your options with your buyer’s rep.

If I don’t want to compete with other buyers, can I withdraw my offer?

Yes, as long as you deliver notification to the seller revoking your offer before they’ve accepted it.

Every home buyer benefits from having their interests represented in a real estate transaction, but in a multiple offer scenario, you’ll gain even more if you’re working with your own Buyer’s Representative.

Discuss these and other questions with your buyer’s rep so you can anticipate each step in the negotiation process and improve the likelihood of a successful outcoe

 Steven Porter is a licensed mortgage agent with Mortgage Architects and is formerly a successful real estate broker/Accredit Buyer Representative (ABR) with 30 years past real estate experience. Steven can be reached at 905-875-2582 or EMail: steven.porter@mtgarc.ca

How to Weed Out Problem Tenants

The last thing a landlord wants to do is rent to the wrong tenant. So for property managers who are taking care of the leasing details, they are the first line of defense in keeping problem tenants out of the building. Landlords are leaning on these property managers and expecting them to find renters who aren’t going to damage the property, be late with rent payments, or take the landlords to court.

So how do you ensure your tenants are the right ones? Global real estate network Lamudi offers five tips for selecting a good tenant.

1. Meet the applicants. This is about preventing problems before they start. The rapport you have with tenants will be crucial in enduring their happiness living in a property. Schedule face-to-face meetings with applicants to get a better sense of who they will be as tenants and how you can work with them. If you can’t meet face-to-face, schedule a phone call instead.
2. Be thorough with documentation. Keep a copy of tenants’ identity cards or passports, and require proof of income before administering a lease agreement. Ask for an employee contract as well as copies of their most recent pay-stubs. If you need extra confirmation of a tenant’s ability to pay, ask for them to provide previous landlords as references.
3. Check their credit history. This might seem like something more for a home buyer than a renter, but landlords/property managers should always check a tenant’s credit history. This will tell you how much outstanding debt they have, as well as whether they have a history of paying their bills on time. Even if they can afford the rent on their salary, other repayment obligations may affect their budget.
4. Look out for warning signs. Pay attention to a prospective tenant’s rental history. If they’ve moved around a lot, that could indicate issues between the tenant and their past landlords. Most landlords will want a tenant who can commit to staying for a longer period of time.
5. Listen to your instincts. Even if all the information and documentation a renter provided checks out, there may still be something holding you back from offering them a rental contract. If you feel uncomfortable renting to someone, listen to your gut — even if they look good on paper.

—REALTOR® Magazine

Should you rely on a broker for a great mortgage?

If you visit different mortgage broker websites, you’re bound to come across wording like this: “We work with over 50 lenders to serve you better.”

The idea is that having more lenders to choose from when shopping for a mortgage improves your odds of getting the best deal. But is more really better and is it enough to rely on a broker to contact lenders on your behalf – or should you call around yourself?

Access to multiple lenders is a key benefit that brokers like to promote. However, the pool of banks that brokers have access to has shrunk since 2007, when Bank of Montreal, Canadian Imperial Bank of Commerce, ING and others began exiting the independent broker market. Those banks feel they can profit more by selling mortgages directly to customers.

Furthermore, most brokers don’t compare every available lender. Maritz Research found that 90 per cent of the typical broker’s volume goes to just three lenders. That’s partly because some brokers feel more comfortable in knowing a few lenders well, versus many lenders superficially. It’s also because brokers often get preferential rates and service – like better turnaround time – from their primary lenders.

Yet another reason, in certain cases, is self-interest. Lenders pay financial incentives to brokers who send them a certain amount of volume. Such incentives can be a conflict of interest if they lead a broker into recommending a less competitive mortgage.

When a broker deals with just three lenders, he or she might as well be a sales rep for those companies. There’s nothing necessarily wrong with that – if the lender has the best mortgage for the customer, but that’s not always the case.

One way to avoid brokers who don’t shop around sufficiently is to deal with an established and experienced high-volume broker, someone who isn`t as pressured to send a set amount of volume to a particular lender. These brokers are typically found high up in Google’s local search results, due to their longevity, referrals and professionally-run businesses.

In a perfect world, it would be easy to find a broker who shops all lenders objectively, even lenders that don’t pay brokers. Unfortunately, most brokers don’t have the time or technology to closely track the rates, terms and guidelines of 50-plus lenders. And brokers, like bankers, like to get paid and seldom recommend outside lenders.

So if you truly want to shop all major lenders, you’ll need to do your own legwork. If you’re getting a new mortgage, you must:

Contact these non-broker lenders yourself: RBC, BMO, CIBC, HSBC, ING, Manulife Bank, PC Financial

Go direct or use a broker to get quotes from these lenders: Scotiabank, TD Canada Trust, National Bank, Industrial Alliance, Desjardins and the major credit unions

Use a broker to get quotes from wholesale lenders like First National, MCAP, Street Capital, Home Trust, Merix Financial, ICICI Bank, CMLS, MonCana Bank, Radius Financial, RMG Mortgages, AGF Trust, B2B Bank, Xceed and others.

In short, you’ll never truly know all the deals out there unless you take matters in your own hands and contact dozens of lenders. However, you need to be sure it’s worth your time. You might save another 0.05 or 0.10 percentage points off a great bank or broker rate by shopping yourself (that’s about $49 savings per $100,000 of mortgage per year).

But the legwork could literally take hours of asking the right questions and negotiating with all the key lenders. And if you inadvertently pick a lender with onerous fine print, the cost of that lender’s restrictions could easily outweigh any upfront rate savings.

Using rate comparison sites for leverage is another strategy. The problem there is that rate sites typically don’t reveal all the limitations of a mortgage (e.g., penalty calculations, porting rules and mortgage increase policies, to name a few). So you still need advice or lender feedback to find the ideal mortgage at the absolute lowest possible rate.

Even if you plan to get your mortgage directly through a bank – like 57 per cent of Canadians do – contacting a broker might work in your favour. At worst, you’ll get market and rate intelligence that you can use to your advantage at the bank. At best, the broker may find you a flexible product that costs less, and/or suggest a strategy that saves you interest.

And, brokers have dozens more options than any single lender, which gives them access to cut-rate pricing, easier approvals for people with special situations (eg. self-employed or with bad credit history), lower penalties for breaking a mortgage early, and more choice of features, like pre-payment privileges, linked credit lines and the ability to extend your term before the mortgage comes due, penalty-free. (Banks too have unique features not available through brokers. Examples: BMO’s Cash Account, TD’s HELOC and Manulife’s One account.)

Comparing dozens of lenders on your own can be educational, but it takes considerable effort and some know-how. If you know what questions to ask, that extra effort can lead to a slightly lower upfront rate. I’ll list the essential questions in a future column.

Just remember this. The cheapest rate doesn’t necessarily equal the least money out of pocket. Things like costly payout restrictions, lender refinance policies and accelerated payoff privileges can add or subtract thousands from your total borrowing costs.

In practice, most Canadians lead busy lives and are content to let a banker or broker find them a mortgage that’s “good enough.”

But if you have the spare time and truly want the best deal, you can engage a broker to shop for you, and call the non-broker lenders yourself and cross reference your quotes with a rate comparison site. And while you’re at it, don’t be afraid to get a second broker opinion.

by: Robert McLister editor of CanadianMortgageTrends.com

Retiring with a Mortgage?

Throughout our working careers the goal most often is to own our home, mortgage free at least by the time we retire.

Here are a few considerations for you if you have reached your retirement, still have a mortgage and want a little extra money to enjoy your retirement years.

Downsize
By selling you your larger or higher priced home with a mortgage you may be able to purchase a smaller or lower priced home in another area and eliminate or reduce the size of your current mortgage.

Refinance
If monthly cash flow is a concern, refinancing your mortgage to a lesser rate and.or extending your mortgages amortization period could reduce you monthly payment obligations.

Alternative Cash Flow
Your home may lend itself to creating an income suite to generate monthly rental income. The money required to complete such a project my be accessed through the equity in your home.

Reverse Mortgage
Switching your current mortgage to a reverse mortgage with no monthly payments may also be a beneficial consideration.

Changes like the ones listed above should not be taken lightly. Be sure to discuss these options with you financial professionals and your mortgage lender.

Steven Porter, Mortgage Advisor with CIBC. steven.porter@cibc.com

How Cash Back Mortgages Work

 When buying a home, some homeowners might want to buy all new furniture, complete a home renovation or two, or simply have a safety net of cash for the first few months of homeownership. For many, though, the thought of having extra cash when purchasing a home is nothing more than a dream. Fortunately for those people, some lenders offer something called a “cash back mortgage” which can help make that dream a reality.

With a cash back mortgage, you receive a lump sum cash rebate when your mortgage closes, commonly around the 5% mark – though it can be anywhere from 1.00% to 7.00%, depending on which lender you choose. The rebate is tax-free and can be used for almost any purpose, such as to pay for closing costs, complete renovations, buy furniture or pay down other high-interest debts. Some lenders even let you use the cash back as part, or all of, your down payment.

To see how a cash back mortgage works, here’s a simple example. You purchase a home for $350,000 and put down 20% ($70,000) to avoid CMHC insurance, which means you need to borrow $280,000 via a mortgage loan from the bank. If the lender you chose offers a 1.00% cash back mortgage product, you could get a $2,800 ($280,000 x 1.00%) cash back rebate when your mortgage closes and use that money for whatever you want.

The one downside of cash back mortgage products it that they always come with a fixed mortgage rate, and the interest rate is slightly higher than what’s available for standard (non-cash back) mortgage products; this means you’ll pay more interest, over the life of your mortgage, to compensate the lender for letting you borrow extra money from them.

If we continue with the same example above, because you chose the cash back mortgage product with a rate of 3.79% vs. your lender’s standard 5-year fixed mortgage product at 3.25%, you would pay your lender an additional $4,378 over 5 years – and that’s after you deduct the $2,800 cash back rebate you received from them.

Additionally, if you need to refinance your mortgage or break your mortgage term early, you may be on the hook for a portion of your cash back rebate (a pro-rated amount based on how many months you have left in your term). Some lenders even require you to pay back the amount in full.

If we continue with the example above, let’s say you had to break your mortgage 3 years into your 5-year term. Your lender originally gave you a 1.00% cash back rebate amounting to $2,800, which they now want a pro-rated amount of returned, in addition to any prepayment penalty.

With 2 years (24 months) left in your 5-year (60 month) term, you would need to pay back 40% (24 / 60) of the cash back amount you received; that’s $1,120.

While a cash back mortgage might not be an ideal choice for everyone, it can be a great option for a buyer who needs a little extra money while making such a large financial transaction. If you don’t mind the higher interest rate that comes with it, a cash back mortgage can help you pay for any number of things or simply boost your cash flow during the first few months of homeownership.

Alyssa Richard

Founder; RateHub

Lessons from a condo bankruptcy

 The bankruptcy of a proposed condo development and the arrest of a prominent real estate lawyer last month left many buyers potentially out of deposits totaling millions of dollars. It shouldn't have happened.

Here's why:

When you buy a new home or residential condominium from a developer in Ontario, part of your deposit is protected by the Tarion New Home Warranty Program.

This covers up to $20,000 for a new residential condominium deposit and $40,000 in deposits for a new house. However, deposits over and above these amounts are not protected. Similarly, no deposits for a proposed commercial or hotel condominium development are protected by Tarion. In most cases, all deposits are paid to the developer's lawyer, to be held in trust.

Under the regulations governing the Condominium Act, a lawyer is not supposed to release the moneys from trust unless and until they have been given proof by way of a security bond from the developer that the money is protected. In virtually all cases, the money is released when the developer is ready to begin construction on the project and would like to access the deposits for this purpose. As long as the security bond is provided, the law firm will release the funds from trust.

In the Centrum condominium bankruptcy in North York, the Bratty's law firm was holding millions of dollars in trust for the proposed residential condominium that was never built. The money was never released to the developer Yo Sup (Joseph) Lee and the buyers who purchased these residential units will get their deposits back, in full, even though the development is bankrupt and it appears that Lee has disappeared.

However, Lee retained another lawyer, Meerei Cho, to handle the commercial/hotel condominium project and although over 14 million dollars in total was placed into her trust account from buyers, it has since disappeared, even though construction never started and it does not appear that any security bond was posted. In another twist, 1.9 million of the 14 million dollars in deposits was originally placed into Bratty's trust account but developer Lee then instructed Bratty's to pay this money to Cho, which they did, and this money is part of what is now missing.

If Cho made an error in releasing the money, then part of this loss may be covered under her errors and omissions insurance policy, but this may only provide 1 million dollars in coverage for the victims. The law society has a discretionary fraud victim fund of $150,000 but this will also not be nearly enough to compensate all of the victims.

I imagine that some buyers may sue the Bratty's law firm for giving the money to Cho but in my opinion, as long as Bratty's obtained proof from Cho that the money was going to be held by her in trust according to the rules, they should succeed in any claim against them.

The good news is that over the past 20 years, in thousands of new condominium buildings, this has not occurred before, showing that in virtually all cases, lawyers follow the rules and buyers are protected.

The main lesson when buying a new condominium is still the same; check out the reputation of the builder. Reputable builders follow the rules, finish buildings on time and deliver what they promise. Still, whenever you are paying more than the Tarion protected deposits, you should now insist that the developer provide proof that they have sufficient security to protect any deposit over $20,000 if it is a new residential condominium and over $40,000 for a new residential home. It would also be a good idea for the government to just change the rules and make it a law that all lawyers holding trust moneys be bonded themselves, so it can't happen again.

Mark Weisleder is a Toronto real estate lawyer. Contact him at mark@markweisleder.com

2 Reasons to Switch Mortgage Providers at Renewal Time

 If you’ve ever renewed a mortgage before, chances are you’ve at least entertained the idea of switching mortgage providers. Switching providers is often the best choice, for two reasons: new lenders can usually offer you the best mortgage rates, as well as better prepayment options. The differences in these numbers from one lender to the next may seem insignificant, at first, but waiting until you find the best options can save you thousands of dollars in interest charges over the course of a mortgage term. Here’s why you should make the move:

1. Switch for a Better Mortgage Rate

Let’s say you purchased a home for $400,000, made an $80,000 down payment (20%) and took out a $320,000 mortgage amortized over 25 years. After 5 years, you need to renew, but your existing mortgage provider says the best they can offer you is another 5-year fixed rate of 3.89%. At that rate, your monthly mortgage payment would be $1,664 and you’d pay $48,975 in interest over 5 years.

If, instead, you had shopped around for a better rate/product for you, you could’ve found a 5-year fixed rate of 3.19% with a new mortgage provider. At that rate, your monthly mortgage payment would be just $1,343 and you’d pay $41,060 in interest over 5 years. By switching to a new provider, you could’ve saved $7,915 in interest during your 5-year mortgage term.

2. Switch for Better Prepayment Options

The second reason to consider switching mortgage providers at renewal time is if another lender can offer you better terms and conditions, with prepayment options being among the most important of them. Most lenders will let you increase your monthly mortgage payment amount once each year, but the amount you can increase it by often varies from lender-to-lender. The bigger the allowable increase, the more you can potentially save.

Example: 10% vs. 20% Prepayment Options

Let’s say you bought a $300,000 home, put $85,000 down and took out a $215,000 mortgage amortized over 25 years. If your current mortgage provider offered you a 5-year fixed rate of 3.79%, your monthly mortgage payment would be $1,107 and, over 5 years, you’d pay $37,880 in interest.

If, however, you decided to take advantage of your current provider’s prepayment options, you could increase your monthly payment amount by 10%:

$1,107.00 x 10% = $110.70

$1,107.00 + $110.70 = $1,217.70

If you did that just once* at the beginning of your new 5-year term, you’d pay just $37,229.22 in interest; that’s $650.78 less than if you had stuck with the original payment amount.

Now, if we assume you found a new mortgage provider who offered the same mortgage rate (3.79%) but a 20% prepayment option, your monthly mortgage payments could go up to:

$1,107.00 x 20% = $221.40 

$1,107.00 + $221.40 = $1,328.40 

If you increased it just once* at the beginning of your new 5-year term, you’d only pay $36,576.01 in interest; that’s $653.21 less than if you had stayed with your current provider and taken advantage of their 10% prepayment option, and $1,303.99 less than if you had done nothing.

*Remember that you could potentially increase your payment amount once each year and save even more, but we kept it simple for this example.

How to Make the Switch

If you find a new mortgage provider with an offer you’d like to accept and switch over to, you’ll need to submit a formal application, not unlike the one you originally submitted for your previous mortgage term. Keep in mind that the qualifying criteria may differ from lender-to-lender, so a new provider will likely require certain types of documentation with your application, such as proof of homeownership, employment and home insurance.

When your application is approved, the new provider will ask your existing provider for something called a Payout Statement. The statement outlines information regarding your current mortgage, including the outstanding balance as of the renewal date—this is the amount the new provider will use for your mortgage application.

Just before the switch is made, you’ll have to meet with the new provider again, to pay any outstanding fees for this new mortgage. These fees can include, but aren’t limited to, an appraisal fee, legal fees for signing the new agreement, a mortgage transfer fee and a discharge fee.

The entire process can seem a little daunting, but this is a great example of why it’s smart to work with mortgage brokers. Not only can a mortgage broker shop around for the best mortgage rate/product for you, they’re experienced in the process of switching providers and are happy to guide you through the process.

So, while the renewal slip your existing provider pops in the mail may seem tempting, it’s worth making an appointment with a broker and seeing what kind of offer they can find you. Just remember to give yourself lots of time: if you wait too long and your current mortgage term passes its maturity date, your existing provider will automatically renew you for another term.

More landlords refuse to rent to social assistance recipients

 An increasing number of landlords are reportedly not accepting people on social assistance until they receive the proper support system from provincial government.

Provincial governments will pay a heavy price for not having a fair system in place to support private landlords that house those on social assistance.

That is the view of many landlords who are now refusing to accept those on social assistance. “In Cambridge, we have 3,100 families waiting for non-profit housing and yet there are only a few hundred units being built,” says Kayla Andrade from Ontario Landlords Watch. “Investors are shying away until there are better systems in place.”

She says that landlords want a “three strikes and out system” in place. “They should have to pay their rent with social assistance money or their payment gets cut off,” she says. ‘Every landlord I know wants the three strikes and you are out system.”

While recognizing the frustrations of landlords dealing with non-paying tenants, the Federation of Rental-Housing Providers of Ontario (FRPO)  advises landlord not to refuse a rental to someone just because they are on social assistance support.

"To do so would be a serious violation of section 2.(1) in Ontario’s Human Rights Code (likely also in other provinces) and would certainly result in heavy fines and penalties against the landlord (up to $25,000). Landlords should conduct credit checks, income checks and reference checks, but should never consider social assistance support as a ground for refusal. Landlords can also better protect themselves by requiring guarantors and conducting criminal background checks on rental applicants."

Many landlords have cited the growing number of “professional” tenants taking advantage of loopholes in the system and more sophisticated methods to deceive the landlord.

“We are seeing more tenants bring their own credit checks, which are often fake, to landlords that do not cop on that they are false,” she says. “Work papers are also being forged. There are many places now to get these false papers and so it’s easier for them.”
Written by  Grainne Burns

Steven Porter, Broker - REMAX Aboutowne Realty Corp., Brokerage

How to win a bidding war on a home

In many hot housing markets, bidding wars have been breaking out on a regular basis -- and some house hunters are getting beaten out time and again.

But it's not always about who has the most money. Sellers will accept lower offers if it means less hassle.

What sellers really don't want to do is waste time. That means getting pre-approved for a mortgage and having all your paperwork -- your pre-approval, proof of income, work history and bank statements -- in hand. It also helps to have your lender at the ready so you can act fast.

Related: Fast online mortgage preapproval

But first you have to beat out all of those other bidders.

Here's how you can win over a seller and get the house you want:

Pay with cash. The best way to get a seller's attention is with cold hard cash. That is, if you can afford it. In fact, all-cash sales have become extremely common, representing more than 40% of recent sales. Ever since the US housing meltdown, getting a mortgage has become a longer and more arduous process.

With all-cash offers, sellers are sure the buyer is qualified. And they won't have to wait through the loan approval process.

Depending on the market and the seller's situation, they may even accept a lower offer just because it's in all cash.

Get your mortgage ready in advance. Don't have a ton of cash to put on the table? Try pre-underwriting a mortgage instead.

With pre-underwriting, lenders take the pre-approval process a step further by reviewing all of the income and asset documentation that they would typically need to approve a mortgage.

Related: A foolproof plan to secure the best financing rates

Sellers look favorably on pre-underwritten offers because they don't have to worry that the buyer's mortgage application will be rejected. All that needs to be done after the contract is signed is to complete an appraisal.

Be flexible (but not foolish) with contingencies. Contingencies are clauses that allow buyers to back out of deals if specified conditions are not met. A bidder will sign a contract to buy a home contingent on the appraisal coming in at or over the selling price, for example.

Another common contingency clause is the right to back out if you can't find a buyer for your home. In hot markets, buyers often waive this right because they figure it should be easy to sell their old home quickly. In less heated markets, you could get stuck paying two mortgages.

Related: Housing Market Newbies BEWARE

One contingency you should think twice about before waiving is the home inspection. Should the inspector discover a major problem, such as widespread insect damage or a badly cracked foundation, it could cost far too much to fix. You want to know that before making a commitment you can't back out of.

Related: 11 Home Inspection Pitfalls

Be first. See the home as soon as it comes on the market. That way, you can get your bid in early and preempt later offers.

Real estate agent Steven Porter, has a new service that can help. Its a VIP House Hunter service that enables buyers to receive notification of new listings the moment signal that they're put up for sale allowing buyers to beat out the competition. Homebuyers can find these potential properties by neighbourhood, price, type or city.

Agree to outbid everyone. Do you really want the place? You can outmatch every other bidder by creating a contract with a so-called "escalation clause?"

The clause basically states that you will pay $1,000 or $10,000 more than whatever the highest bidder offers.

So if the seller gets an offer for $200,000, your bid will automatically jump to $201,000 if you have an escalation clause.

Related: How to negotiate a better price

The danger with escalation clauses is twofold. You never really know if the other offer is real. Sellers can ask someone to submit an offer just to get the buyer to raise their bid.

The second problem is that the final home price may be a lot higher than the appraised value of the home. That could jeopardize the mortgage or force you to come up with a lot of cash to make up for the shortfall.

One way to prevent that from happening is to place a cap on the bid, offering to pay no more than 10% or 20% above the original asking price.

Using a cap means, however, that you may not end up with the home in the end. 

Find homes for sale.

Based on a editorial by Les Christie, CNN Money

Steven Porter, Broker, Buyer Rep. - REMAX Aboutowne Realty Corp. Brokerage

HOME PRICES UP 0.8% IN MAY

In May the Teranet-National Bank National Composite House Price Index™ was up 0.8% from the previous month. This increase, though substantial in itself, was the fifth smallest for May in the 16 years covered by the index. The countrywide composite index rose to an all-time high, but only three of the 11 metropolitan markets surveyed did the same. Prices were up from the previous month in seven markets and by more than the national average in five. The 3.1% monthly gain in Halifax was the largest in the history of that market. Prices rose 2.0% in Hamilton, 1.6% in Quebec City, 1.3% in Toronto, 1.1% in Calgary, 0.6% in Edmonton and 0.5% in Montreal. Calgary's advance was the fourth in a row exceeding 1%, taking prices to a new high. New records were also reached in Hamilton and Toronto. Prices were unchanged from the month before in Ottawa-Gatineau and Vancouver. The reading for Vancouver ended 12 consecutive months of rising prices. Prices were down from the previous month in Victoria (−0.1%) and Winnipeg (−0.3%).

Since in May 2013 the monthly rise of the composite index was 1.1%, this May's 0.8% rise meant that 12 month home price inflation decelerated 0.3 percentage points to 4.6%, where it was in March. For the third month in a row, prices were down from a year earlier in all four markets east of Toronto: Quebec City (−1.6%), Ottawa-Gatineau (−1.4%), Montreal (−1.2%) and Halifax (−0.4%). In Victoria prices were flat from a year earlier. The 12-month rise trailed the countrywide average in Winnipeg (+1.0%) and Edmonton (+2.6%) and led it in Hamilton (+5.9%), Toronto (+6.0%), Vancouver (+8.2%) and Calgary (+8.7%). The softness of prices east of Toronto is consistent with the excess supply prevailing in the resale markets of these metropolitan areas. That being said, market conditions are generally balanced elsewhere, and are even tight in Calgary.

Source Terranet National Housing Bank Price Index

Steven Porter, Broker - REMAX Aboutowne Realty Corp

Joe Oliver’s hands-off stance on mortgages a ‘mistake’ in overheated market, warns Sun Life

  Canadian Finance Minister Joe Oliver’s hands-off stance on mortgage rates is a mistake in an overheated housing market, Sadiq Adatia, chief investment officer at Sun Life Global Investments Inc., said. Canadian lenders including Bank of Nova Scotia cut five- year fixed mortgage rates below 3% this spring. While Oliver said in May he would “monitor the market closely,” similar moves last year by banks elicited a rebuke from former Finance Minister Jim Flaherty. The low rates didn’t last.

Full article –http://tinyurl.com/kvrxa4m

Reposted from the Financial Post by Steven Porter, Broker - RE/MAX Aboutowne Realty Corp.

CMHC drops some mortgage insurance products

 Jun 2, 2014
Canada Mortgage and Housing Corp. has discontinued the Second Home and Self-Employed Without 3rd Party Income Validation mortgage insurance products. Self-employed Canadians can still qualify for CMHC-insured financing through CMHC homeowner products with a validation of their income using traditional methods.

The federal housing agency says the two programs combined account for less than three per cent of CMHC’s insured business volumes in units. “Given the limited use of these products, their discontinuation is not expected to have a material impact on the housing market,” says the agency.

CMHC introduced its Self Employed Without Traditional 3rd Party Validation of Income product in 2007. The product allowed self-employed borrowers who were unable to provide traditional sources of income validation to access CMHC-insured financing for a one or two-unit owner-occupied property.

CMHC introduced the Second Home product in 2005. It offered borrowers more financing options when purchasing an owner-occupied second home in Canada.

CMHC says it will limit the availability of homeowner mortgage loan insurance to only one property (one to four units) per borrower/co-borrower at any given time.

Posted by Steven Porter, Broker, REMAX Aboutowne Realty Corp.

Mortgage rates in Canada just fell below 2% from lenders

 If you thought mortgage rates could not go any lower, you were wrong. Investors Group is rocking the mortgage world with what appears to be the deepest discount in Canadian history on a floating rate loan, offering a deal that takes an effective mortgage rate down to 1.99%.
Full article –http://tinyurl.com/l9zureb

Why variable mortgages are the way to go this spring

Video

Rob Carrick, Globe & Mail talks to David Larock, a mortgage broker with Integrated Mortgage Planners, about why homeowners may want to consider variate-rate mortgages as we head into the spring buying season. http://fw.to/UEHEk9c 

Reposted by Steven Porter, REMAX Aboutowne Realty Corp.

5 Questions to ask before ever breaking your mortgage.

  So you're looking to "trade-up" or break your mortgage to enjoy these record low interest rates.? Not so fast, it could cost you  $1,000's more than any anticipated savings.

The KEY question is: How much will it cost YOU?

Get the answers to these questions from your current lender before you ever commit to trading up to a new home or breaking your mortgage:

1. You need to know what the penalties will be if you break or port your mortgage to another home. Know this before you ever sign a mortgage.
2. Can I port the mortgage to another home? Let’s say you have to sell your home, can that mortgage be transferred to the next property you buy?
3. Are you tied to the lender you signed your mortgage with forever? Some mortgages cannot be broken unless you sell your home.
4. What are the prepayment privileges on your mortgage? Large prepayment privileges will allow you to mitigate large penalties by making lump sum payments thereby lowering any penalty for breaking the mortgage prior to the end of its term.
5. How is the interest rate differential penalty calculated? This may be the most important factor. If the bank uses the qualifying rate or posted rate to calculate any penalty, it could cost you a bundle.

Steven Porter - REMAX Aboutowne Realty Corp.

Reverse Mortgages – A mortgage option for Retirees

 What exactly is a Reverse Mortgage?

A Reverse Mortgage is a loan available only to homeowners 55 or older. The amount you can borrow is based upon several factors including your age and the value of your home.

What's the difference between a Reverse Mortgage and a traditional loan?

There are two main differences. First, unlike a traditional loan, you can get a Reverse Mortgage regardless of your income or credit rating.

Second, you are not required to make any payments on a Reverse Mortgage until you choose to move or sell your home. (However, you can make payments on the loan if you choose to do so. You’ll even get a discount on the interest rate if you do.)

When you do decide to move or sell, the loan is repaid from the proceeds of the sale of the home. After the loan is repaid, all remaining money belongs to you and your estate.

How much equity (money) will be left in my home after I repay the loan?

On average, homeowners have well over 50% of the value of their home left to enjoy after repaying the loan. This money belongs to you. The exact amount will depend upon several factors, including: the amount of your loan, the value of your home, and the amount of time passed since you took out the loan.

Repost by Steven Porter, REMAX Aboutowne Realty Corp.

Self-employed? Navigating through the recent mortgage rule changes

  For years, the self-employed could count on getting a mortgage on the strength of their credit score, and on their word that they were earning enough from their business to repay the loan.

These days, because of rules brought in almost two years ago by the regulator of Canada’s chartered banks, borrowing money to buy a home has become harder for many of the country’s 2.75 million self-employed workers.

In the summer of 2012, the Office of the Superintendent of Financial Institutions introduced Guideline B-20, which required federally regulated banks to tighten their processes for approving mortgages and home equity lines of credit. As part of B-20, banks must now look more closely at incomes before approving a mortgage application.

This presents a problem for self-employed workers, who typically lower their taxable income by maximizing business expenses and personal deductions. Because of the discrepancy between what’s on their tax return and how much money they actually earn, self-employed workers have typically obtained their mortgage through “stated income” applications, which required a signed income declaration and proof of self-employment such as a business registration number or articles of incorporation.

Today, self-employed workers can still apply for a stated income mortgage at some banks, but under B-20 they can borrow only 65 per cent of the purchase value – 10 per cent less than what was allowed before B-20 – without requiring default insurance from Canada Mortgage Housing Corp., Genworth Canada or Canada Guaranty.

If you have less than 35-per-cent down payment, your mortgage now has to be insured, and insurers have specific guidelines that you need to meet. CMHC will allow a stated income application as long as you have been self-employed for less than three years. More than three years and you have to qualify according to your net taxable income.

So what can the self-employed do to improve their chances of qualifying for the mortgage they need, on terms that work for them?

• Providing complete and current financial and tax documents is critical. Which includes the latest notice of assessment from Canada Revenue Agency and financial statements from the past two years.
• Bank statements to show regular income going into your bank account may also be required.
• Make sure you are up-to-date with income and sales tax returns, and that you don’t owe taxes.
• The more information you can provide the a bank about your business the better it can help self-employed borrowers qualify for the mortgage they want.
• Certain lenders allow add backs of things like car expenses, capital cost allowance or housing expenses. these add backs may enable an applicant to qualify.
• Some lenders take a different approach to increase the mortgage eligibility of self-employed workers for example adding 15 per cent to reported income if the self-employed borrower provides financial statements showing deducted business expenses totalled 15 per cent or more.
• Note that credit unions are not affected by B-20 and many still extend a mortgage of up to 80 per cent of purchase value to stated-income applicants without the need for default insurance.
• For sole proprietors or owners of an unincorporated business, making the leap to incorporation may also help. Most banks prefer salary, and if you have a corporation you can pay yourself a salary. That may make it easier for a self-employed individual to qualify for a mortgage.

Incorporating could also reduce tax rates and allow the business owner to collect a higher salary or dividend payout.

Posted by Steven Porter, Broker  -  RE/MAX Aboutowne Realty Corp., Brokerage
based on a story in Globe & Mail titled More self-employed mortgage wall because of recent rule changes

Breaking News - CMHC raises premiums

CMHC is increasing its mortgage insurance premiums for homeowners and 1-4 unit rental properties effective May 1, 2014.

The change will only apply to mortgages underwritten after May 1, 2014 and it will apply to all homeowner business from that day forward as a result of increasing capital targets. Premiums will rise about 15 per cent, according to CMHC, though it isn’t expected to have a major effect on the housing market.

 “In 2013 the average CMHC insured loan at 95 per cent loan to value ratio was $248,000; using these figures a higher premium will result in an increase of approximately $5 to the monthly mortgage payment for the average Canadian homebuyer,” Peter De Barros, at CMHC ‘s executive director of communications said during the media conference call. “This is based on a five-year term using current mortgage rates and 25 year amortization. The premium increase is not expected to have a material impact on the housing market.”

CMHC also expressed its plans to make an announcement about its premiums – which are reviewed each year – in Q1 of every year going forward. The Crown Corporation has made a number of changes to its premiums; though this hike is the first increase since decreases between 2002/2003 and 2005/2006.

The increase was not a department of finance initiative, according to CMHC.

“Not in response to anything in particular although, certainly, the international and Canadian regulatory guidelines over the past years have trended to higher capital holding levels for mortgage insurers and obviously we are no exception to that,” Brian Nash, chief financial officer of CMHC told reporters.

It remains to be seen whether Canada’s two other insurers, Canada Guaranty and Genworth follow suit.

“I can’t comment on what they might do,” Steven Mennill, CMHC’s vice-president, insurance operations told reporters.

by Justin da Rosa MortgageBroker News