Will Home Ownership be a Pipedream for Gen Z?

There may be no better feeling than closing on your first home.  Over the last 10 years, first time homebuyers have seen the market change dramatically, whether it’s mortgage rule changes that impact qualifying, or rising house prices that took some first timers out of the market altogether. Combine that with stagnant incomes, and it’s not surprising that young people feel that the dream may never happen for them.

But is it still a dream for the younger generation? Last year – 2019 – was the last for millennial graduates. We are now in the Gen Z world.  Gen Z refers those born after 1996, so they’re now 23 and younger. Millennials were born between 1981 and 1996, so they’re now between 23 and 38.
This group grew up with an iPhone in their hand and an iPad on their laps, and clearly have learned to process information differently than generations before them. But what hasn’t changed is their desire for home ownership.

In fact, Gen Z is poised to overtake millennials in their desire for homeownership. A survey  conducted by real-estate company Zillow found that in 15 years Gen-Z homeownership will be bigger than the share of millennials who currently own their homes.

Another survey from Finder.com shows that 81% of the Canada’s Gen Z’ers think they’ll purchase a home in the next 20 years. Ten percent of the 18-24 age group say they already own their own home, while 35% (one in three) believe they’ll purchase a home within the next five years.

Interestingly, millennials are more likely to believe that homeownership is NOT in their future. The difference? It hasn’t been quantified yet, but anecdotally, Gen Z ‘ers don’t like the high cost of renting, and would rather make personal financial sacrifices to save for the large down payment needed.

For these future homeowners, education and information is key. And the best person to help guide the process is a mortgage broker.  The following information is not only for Gen Z, but for everyone looking for their first home.

There are six steps to the mortgage application process.

Step 1 – The Application/Pre-Approval

• It’s important to get all the following information. This allows your mortgage agent to determine the amount you qualify for and the best mortgage strategy/product for you. Current address. If you are less than three years at your current residence, you must provide your previous address as well. In addition, you will need to provide
•  Birthdate
• Contact number
• Do you own or rent your current home?
• If rented, is the rent paid monthly?  If not, specify term of rent
• If owned, is there a mortgage? If so, with whom, the value of your home, and mortgage payments
• Approximate value of assets -- identifiable assets like RRSPs, savings, investments, vehicles, other properties, etc.
• Approximate value of liabilities -- identifiable liabilities like car payments, line of credit, student loans, credit cards, etc.
• Any alimony or support payments
• Employer (if less than three years, previous employer as well)
• Title
• Tenure
• Salary and other compensation
• Self- Employment information that includes historical taxable income, historical gross business income

Step 2 – Qualifying

Your information is sent to a lender for a rate hold, pre-approval or approval.  All info is sent electronically and directly to a lender. A response can come within 24-72 hours.

Step 3 – Verification

Verification will be done on items such as your income, with a job letter and recent pay slip, and proof of down payment. Some lenders require tax returns and Notice of Assessments. Your mortgage agent will list out all the information needed and lead you through a straightforward verification process.

Step 4 – Purchase

Once you’ve found your new home, your Realtor will draw up a Purchase and Sale Agreement, which he or she will also send to your mortgage agent on your behalf. When writing your offer, it’s strongly recommended that a “subject to financing” clause be written in, even if you have a pre-approval. 

Step 5 – Approval

During this stage the lender will review all documents and will call your employer to verify employment. You will also receive a Letter of Commitment with the rate, term, payment amount or frequency, amortization, and more. Your mortgage agent will review the commitment letter in detail with you before you sign.

Step 6 – Funding/Closing

The only thing left to do is to register the transaction legally. This will require a lawyer or a notary, depending on where you live. The lender will forward all the documentation directly to your lawyer, and the lawyer will contact you to arrange a meeting.

During this meeting your lawyer will confirm the details of your transaction and will request a bank draft or certified cheque to cover the amounts outstanding before the closing date, which includes the down payment, the lawyers fee, property transfer tax and any other disbursements not yet paid for, less any deposits already paid.

The lawyer then receives the funds from your lender, disburses them and registers the title in your name – then you get the keys.

Digital Experience 

Gen Z’ers were born to process a massive amount of information 24/7, but info overload can negatively affect anyone. There’s a lot of mixed messages, and sometimes outright misinformation on the ‘Net. Despite the I-Generation “always on” environment, the human touch is still welcome.
Buying your first house is a journey, but don’t take it alone. Contact a mortgage professional to combine your digital experience with the human touch.

Government, Monetary Policy and Fiscal Policy Reactions to COVID-19

By Mark Kerzner, President TMG The Mortgage Group

There was a second emergency reduction in the Overnight rate of 50 basis points on Friday, March 13 – to ensure market liquidity, and in response to the unprecedented economic impacts of the COVID-19 virus.  Many are anticipating yet another 50-basis points reduction that would bring the overnight rate to 0.25% in the near future.

Rates ultimately received by the end consumer are determined based on discounts or premiums from BANK Prime rates

One of the big questions following the latest emergency Overnight rate reduction by the Bank of Canada last Friday was whether or not Banks would follow suit with their PRIME rates and if so by what amount.

Yesterday afternoon it was confirmed that Prime lending rates are dropping but the price that new consumers will pay for variable based lending products may in fact be staying flat or potentially going up.  Discounts from bank PRIME of up to 1% appear to be vanishing. For existing variable rate and line of credit clients, your rates should be decreasing.

Just to reiterate, existing discounts for variable in-force mortgages are not changing.  Current discounts would related to new, renewing and refinancing mortgage clients who are choosing variable rate products.

After the Global Financial Crisis over a decade ago, variable rate discounts went from P-85 to P+100 almost overnight. One difference is that the ARM was a much more popular product a decade ago as the spread between it and fixed rate was much more pronounced. Today, the vast majority of consumers have been taking fixed mortgages, and are likely going to continue to do so.

Some have been asking questions about how is it now, that with the reduction in PRIME rates, are we seeing increases in mortgage lending rates.  As bond yields fluctuate (in part due to the oscillating markets) and liquidity premiums starting to dramatically increase, the cost of funds and the desired margins earned by lenders increases.

The Government and Regulators are using other fiscal policy stimulants to work to protect the economy as well.

To stabilize funding, the Government of Canada, through CMHC, announced yesterday they were buying $50 billion of insured mortgage pools.

OSFI mandates the rate of the Domestic Stability Buffer – a rate of capital that is set aside to safeguard against shocks in the system. Over the past few years that amount has continually increased.

It was less than a year ago in April 2019, that the Big 6 banks were required to hold risk weighted capital of 2.25% against the backdrop of increasing indebtedness of Canadian households and increasing ‘vulnerabilities’ faced by those lending institutions.

Lowering the capital requirements to 1% increases the ability for banks to lend approximately $300B in freed up capital. This is largely anticipated to support small business loans, helping those firms meet immediate business and payroll obligations.

In the mortgage world one announcement that received attention on March 13th was OSFI suspending consultation on the minimum qualifying rate for uninsured mortgages. This means the previously announced changes to the Stress Test were now not coming into force. I can assume that OSFI and the Minister of Finance never likely imagined rates dropping this low and having people qualify at 4% (or lower) when they likely consider 4% to be a more normalized rate to begin with (and not a buffer rate).

For those with mortgages, it’s now very important to speak with a licensed mortgage broker to assess options you may have available to refinance, early renew, extend term, choosing longer term fixed rate products, etc.

For those of you in financial distress who are existing mortgage consumers you have a variety of options available to you. A mortgage professional can help you navigate that landscape with your current lender and potentially with your mortgage insurer as well.  Options may include, payment deferral, loan re-amortization, capitalization of outstanding interest arrears and other eligible expenses and special payment arrangements.

This situation is unprecedented and is requiring swift and significant action.

The Bank of Canada and the Federal and Provincial Governments are setting up defence mechanisms during this unprecedented global pandemic. Ensuring the financial system operates, protecting deposits, ensuring liquidity, and providing a means of support for business continuity are at the forefront.

A mortgage professional has always been best suited to guide you through your personal situation and to provide you with options worthy of consideration. That has never been truer than Today.

Recent changes may be good news for homebuyers

We’ve had back-to-back changes recently in the mortgage world – one direct, one indirect. The benchmark rate used to qualify will change downwards starting April 6, 2020, and the Bank of Canada (BoC) just cut its key lending rate from 1.75% to 1.25%.

Two years ago, the stress test was introduced as a safeguard against rising interest rates, to make sure homebuyers would still be able to make their mortgage payments if their rate increased. To qualify for a mortgage, buyers need to qualify at the greater of 2% higher than the contract rate or the Bank of Canada’s average 5-year rate, which today is 5.19%.

Earlier this month, Minister of Finance, Bill Morneau, announced changes to the benchmark rate used to determine the qualifying rate for insured mortgages – mortgages with less than 20% down payment. This change will come into effect on April 6, 2020.

There has been mixed response from the financial community about this change. For some, the new qualifying rate will make it more affordable; for others, it won’t make much of a difference, especially in hot-market areas, where prices are rising quickly.

Then, on Wednesday, March 4, 2020, the BoC cut its key lending rate by 50 basis points, from 1.75% to 1.25%, which had an almost immediate effect on lines of credit and variable-rate mortgages -- banks dropped their prime rate from 3.95% to 3.45%.

This means that borrowing costs for mortgages, auto loans and other lines of credit are set to head lower. Consider a $400,000 mortgage on a 2.95% variable rate. The mortgage rate would shift to 2.45%, and mean about $100 per month in savings.

Why is this happening?

The interest rate drop comes on the heels of the US Federal Reserve’s decision to lower its rate by .50 points due to the global economic challenge posed by the uncertainty of the coronavirus that will likely affect domestic spending. The BoC’s rate cut of the same percentage took many by surprise – it was expected that rate would drop a quarter of a percentage.

There were also other yellow alerts prior to the coronavirus – a drop in global equity markets and in oil prices, created uncertainty in the financial markets. It wasn’t a stretch to think that the same drop in confidence would hit consumers as well. The BoC does not want to jeopardize domestic growth.

With regard to the stress test, there has been pushback from some economists and housing experts who say that the new stress test will just further fuel the housing market.

Here’s what we know about the stress test

• Currently, the stress test for insured mortgages is 5.19% (the minimum rate at which homebuyers must qualify, no matter the actual contract rate.)
• The new stress test, if it was in place today, would be approximately 4.89%.
• The Big Banks will no longer determine the stress test rate. This is good news. Banks have been hesitant to cut their-five-year posted rates (which the stress test is based on). This has made it more challenging for borrowers to qualify for a mortgage.
• Borrower’s will have slightly more purchasing power

Here’s what we don’t know

• How it will affect the average buyer. This will depend on a variety of factors, including the location of the property being purchased. In smaller markets, the new benchmark could help affordability for some buyers – in larger markets such as Vancouver or Toronto, it may have little effect.
• If it will affect home prices. More consumers qualifying for a mortgage may increase demand and put upward pressure on prices – there is still a shortage of properties available for sale.
• The new benchmark calculation, as stated, is more flexible. If interest rates continue to fall, then, in many cases, buying power would also increase.

As always, time will tell how all this will play out and there is talk that the BoC will cut the rate at least once more this year.

What does this mean for fixed versus variable-rate mortgages?

Fixed rates are priced on the bond market, which have fallen quite dramatically since January, so it’s likely that fixed rates will continue to move lower.  Now, with the BoC rate cut, and the banks following suit by dropping their prime rate, variable-rate mortgages will also drop.

Many factors go into deciding whether to choose a fixed or variable mortgage, and it’s a topic to discuss with your mortgage professional.

For now, these changes could be good news for homebuyers.

Know Your Words – Mortgage Words, that is

Buying a home is a big investment. With so much at stake, it’s important learn what you can about the homebuying process as well as understanding the “language” of mortgage lending.

A recent survey conducted by the Financial Consumer Agency of Canada, and the Bank of Canada in 2019 suggested that homeowners don’t have a good understanding of the terminology used in mortgage lending. A large percentage -- 74% of homeowners or soon-to-be homebuyers -- did not fully understand what a mortgage term or amortization period were.

So, to help you better understand what you’re getting into, here is a partial list of terms to increase your mortgage knowledge.

• Adjustable Rate Mortgage (ARM): A type of mortgage in which the interest rate applied on the outstanding balance varies throughout the life of the loan. The interest rate resets based on the lender’s Prime rate plus or minus a variance. With most ARM mortgages, different from VRM mortgages (variable rate mortgages) the mortgage payment adjusts automatically with each change in interest rate.
• Adjustment Date: A date used by the borrower and lender to move payment dates to a schedule that suits the borrower. Between the funding date and the adjustment date, the borrower typically pays interest only vs. principal and interest.
• Amortization Period: The number of years over which you have to repay a loan. The most common period is 25 years for a first-time homebuyer.
• Benchmark Rate:  A qualifying rate set by the Bank of Canada and can be adjusted at any time.  All insured and insurable mortgages must meet the standard affordability tests (Gross Debt Service and Total Debt Service) “as if” the interest rate is the Benchmark Rate. Also referred to as a “stress test”.  Designed to ensure that borrowers and the housing market can sustain higher interest rates.
• Bridge Financing: (Also referred to as Interim Financing) A loan against a property being sold allowing the owner to use their equity to purchase a new property and take possession of the new property before the Closing Date of the sale.  There must be a firm sale of the property being sold.
• Closed Mortgage: A mortgage whose term cannot be altered until maturity, unless the lender agrees and the borrower agrees to pay a fee called a pre-payment penalty.
• Collateral Charges: Unlike a standard mortgage, a collateral charge is often re-advanceable, meaning the lender can lend you more money after closing without you needing to refinance and pay a lawyer. A collateral charge may not be transferable -- it cannot be assigned (switched) to a new lender like a regular mortgage.
• Deposit: Money placed under the care of a third party (real estate representative, lawyer or notary) by the purchaser when he makes an Offer to Purchase. The money is paid to the vendor upon closing the sale or returned if the conditions are not satisfied. This is typically held in trust.
• Downpayment: The part of the home purchase money that is not paid out of the mortgage loan.
• Equity: The total value of the owner’s interest in a property, calculated as the value of the home less the total outstanding obligations.
• Fixed Rate Mortgage: A mortgage for which the rate of interest is fixed for a specific period of time (See term).
• Gross Debt Service Ratio (GDS): The percentage of the borrower’s gross monthly income that is used for monthly housing payments (principal, interest, taxes, heating costs, and half of any condominium fees).
• HELOC: A home equity line of credit (pronounced hee-lock) is a loan in which the lender agrees to lend a maximum amount within an agreed period (called a term), where the collateral is the borrower's equity in his/her house. These are often re-advanceable.
• Insurable Mortgage: This type of mortgage can now be considered the new “insured mortgage”. These are still eligible for default insurance but may be portfolio-insured at the lender’s expense or high-ratio insured at the client’s expense.
• Insured Mortgage: A mortgage transaction where the default insurance premium is paid by the client, as is typical in a high-ratio mortgage. 
• Interest Rate Differential (IRD): A compensation charge that may apply if you pay off your mortgage prior to the maturity date, or pay the mortgage principal down beyond the amount of your prepayment privileges, usually in a fixed-rate mortgage.
• Loan-to-Value: The amount of the mortgage loan compared to the value of the property.
• Monoline Lender: Monoline lenders focus on just mortgages as opposed to banks and credit unions which offer a variety of services. 
• Mortgage Default Insurance: If you have a high-ratio mortgage (more than 80% of the lending value of the property) your lender will probably require that you purchase mortgage loan insurance, which is available from CMHC, Genworth Canada or Canada Guaranty.
• Mortgage Life Insurance: Provides coverage for your family should you die before your mortgage is paid off. This insurance can be purchased through your mortgage professional.
• Open Mortgage: Allows the borrower to pay any amount of the principal, including the entire balance, off at any time without penalty. You may pay a higher interest rate for the flexibility of an Open Mortgage, but perhaps warranted if a sale is anticipated or in the case of buying property to fix up and sell.
• Portable Mortgage: A mortgage with an option that allows a buyer to transfer a current mortgage to a new property. (Subject to full borrower and property approval)
• Qualifying Rates: The rate used to qualify a borrower for a mortgage. Lenders use these rates to calculate your debt-service ratio, which is the ratio between your debt and income. This serves as a gauge of your ultimate ability to repay the obligation over the life of the mortgage.
• Stress test and Stress Test Rate: Similar to Benchmark Rate and used for uninsurable mortgages. The Stress Test rate is the higher of the contract rate plus a government defined increment, currently at 200 basis points, or the current Benchmark Rate. All uninsurable mortgages must meet the standard affordability tests (Gross Debt Service and Total Debt Service) “as if” the interest rate is the Stress Test rate. Designed to ensure that borrowers and the housing market can sustain higher interest rates.
• Term: The length of time that mortgage conditions, including the interest rate you pay, are in effect. At the end of the term, the borrower (you) can pay off the mortgage or renew for another term. Mortgage terms can range from six months to ten years; the most common is 5 years.
• Un-insurable Mortgage: These mortgages are not eligible for default insurance and apply to refinances, rental properties, stated income clients, and on purchases greater than $1M.
• Variable Rate Mortgage (VRM): A type of mortgage in which the interest rate applied on the outstanding balance varies throughout the life of the loan.  The interest rate resets based on the lender’s Prime rate plus or minus a variance.  With most VRM mortgages, different from ARM mortgages (Adjustable Rate Mortgage), the mortgage payment does not adjust automatically change with each change in interest rate.  The lender typically reminds you that you may adjust the payment by contacting them. 

Of course there are more, but these seem to be the ones that homebuyers often ask about. If you need clarification or have question, contact your mortgage professional.

Buying a house doesn’t have to be stressful

Buying a house should be an exciting time but it can get pretty stressful, not only for first time home buyers, but for move-up buyers as well.

The number one worry is finding problems after moving in. The next worry is that prices will drop and the house won’t be worth the original purchase price.

You can reduce some of that stress and worry by putting together a team of experts who will guide you through the entire process. 

It starts with a mortgage professional who will take a look at your finances, including your credit score, to qualify you for a mortgage. A lot of information about you and your credit management abilities come up during this process. For example, derogatory items may be on your report, but that doesn’t necessarily deny your ability to qualify for a mortgage. Everyone’s situation is different and a mortgage agent is familiar with most situations, and can offer options.

Once you know the amount of house you qualify for, you can confidently work with a Realtor to find the right home for you. On average, home buyers spend five months house-hunting and visit 10 locations before deciding to buy. It’s certainly a good idea to take your time to make sure to get the house that’s right for you. 

Interestingly, a 2013 BMO Psychology of House Hunting report found that 33% of home buyers felt rushed into making a purchase – that increased to 39% for first timers. Sixty-eight per cent were prepared to settle for a home that was less than perfect. Four-fifths of prospective buyers said they know a home is right for them as soon as they step inside. So, you may not be alone.

Once you’ve put together the Offer to Purchase with a Realtor, working with a trusted lawyer is the best way to make sure there are no surprises at closing. The bottom line is to take your time, work with professionals and do some research. 

Here are the suggested steps to make sure you get on the right track and into your new home:

• Determine the location and the type of home to suit your  needs. Most people will have an idea of where they want to purchase their new home based largely on familiarity and convenience. For example, living close to work or schools might be a priority, or selecting a certain area of town with parks and amenities, and/or walkability scores. This is also a good time to think about how much you want to spend and what you can afford.
•  Get your finances in order. During the pre-approval process is a good time to make sure you have the finances to cover your down payment and disbursements on your anticipated purchase.
•  Start your home search. How you find the perfect property is entirely up to you. Many home buyers enlist the services of a Realtor. It’s important to only look at homes within your budget.
• Hire professional services. You will need a lawyer to complete a real estate transaction. A real estate lawyer ensures your paperwork is correct and that the transaction is complete. They will review the contract and mortgage documents, conduct a title search, purchase title insurance on your behalf, register the property in your name, get signatures, prepare a Statement of Adjustments that shows the amount you will pay in closing costs, and collect and disburse fees.
•  Hire a  home inspector. Home inspections have become part of the homebuying process for both new home purchases or resales. It might seem like a waste of money to pay for a home inspection for a newly-constructed home, but you might consider getting an inspection a few months before the expiration of the New Home Warranty.  Better safe than sorry.
• Insurance Agent. Lenders also require you to have fire insurance so an insurance agent will help you find the best coverage and the best price.
• Make an offer. This is done by presenting the seller with an Offer to Purchase. Sellers have the right to accept, reject or put in a counter offer. Remember to include all necessary details in your purchase offer. The deposit will be paid, in trust, to the Realtor.

If you’re planning on purchasing a first home or a new home, then get started with a mortgage professional.

Use the Smith Maneuver to Build Wealth

What’s the Smith Maneuver? It’s a wealth-building strategy to create a tax-deductible mortgage. You may have heard, and envied, that mortgage holders in the US can claim their mortgage interest as a tax deduction. Well, you may be able to use that strategy in Canada with the Smith Maneuver. Here’s how it works.

In Canada, if you borrow money to invest in a product that produces an income such as an investment property or a dividend paying stock, the interest on the borrowed money may become tax deductible.

If you borrow against the equity in your home, invest it in income-producing products, then you can use the tax refund to further pay down the mortgage. By repeating that a number of times, you can pay off your mortgage.

The man behind it all was Fraser Smith, a financial strategist based in Victoria, British Columbia. He pioneered The Smith Maneuver, a ground-breaking, legal strategy that lets ordinary Canadian homeowners make their mortgages tax deductible. In his work, he saw that too many Canadians were waiting until their mortgages were paid off before they started to build an investment portfolio, missing out on years of compounding interest, and putting themselves in the position of being house rich and cash poor in retirement, unlike his wealthier investors who used tax strategies to grow wealth. So, he learned the rules of tax deductibility and penned the book The Smith Maneuver for all Canadians.

In a simplified way -- here’s how it works: It starts with a re-advanceable mortgage, which is a mortgage linked with a line of credit. The credit limit for your mortgage plus the credit line is normally 80% of the appraised value of your home, but new rules have changed that to 65% of the value of your home. With each mortgage payment, you pay down some principal, which immediately becomes available credit in the credit line. You can now borrow this amount to invest directly from the credit line.  Your investment credit line interest is normally tax deductible and you should receive a refund, which will be small in the beginning.

Use the line of credit portion to invest in incoming-producing products but never in an RRSP – you’ll lose the tax deduction.

At tax season, you can deduct the annual amount of interest you paid on your line of credit against your income.  Then apply the tax return and investment income against your non-deductible mortgage and invest the new money that’s now in your line of credit. Repeat this until your nondeductible mortgage is paid off.

By doing this you get to build a large investment portfolio without waiting to pay off your mortgage first; you get to quickly pay down your non-deductible mortgage in a hurry; and your new investment loan is tax deductible.

To learn more about this strategy and to see if it can work in your situation, contact a mortgage broker.

Home Ownership, yes!

OOPS, what happened? I moved in and I didn’t consider all that needed to get done.

Most homeowners admit to making at least one mistake when they purchased their home, according to a homeownership poll conducted by RBC a few years ago. 

While owning a home is a dream come true for many, it can also be stressful if you find you’ve made an error. 



Below are the top three mistakes the poll found, along with a few more you might want to think about before taking the leap.

1.  Property needed work – a lot of it. Even with a home inspection, new homebuyers may get into a home and find it’s become a money pit. Don’t rush in, sit down and plan.
2. Not having a bigger down payment. Once in a house, many homeowners are overwhelmed with the costs. Once again, don’t rush in, sit down and plan.
3. No Home Inspection. If you skip this step you might find the cost of repairs needed may be astronomical, especially if you purchase an older home. An inspector will look at the overall foundation and structural features of the house, the plumbing system, will look for the presence of mould or pest infestations, check the heating and air conditioning, as well as the electrical system.
4. Not budgeting for the increased costs. When considering the extra costs, remember there are mortgage payments, property taxes, and usually higher utility bills. On top of that you’ll may want to redecorate, perhaps buy new furniture and/or appliances. There may be some landscaping work to be done and you may want to renovate. 
5. Not knowing the closing costs. Closing day is coming and you get the call from the lawyer to come in and sign the papers and, bring a certified cheque or bank draft for X amount of dollars. WHAT? Yes, fees and disbursements. There’s the land transfer fee, the title fee, the lawyer’s fee, etc. Don’t get caught short.
6. Forgetting about future needs. If you’re planning on having kids, you may want to consider the type and size of home you’re purchasing. 
7. Not getting a pre-approved for a mortgage. You won’t know what price range you can afford and what a lender will give you without a pre-approval. It’s easy; it’s free and absolutely necessary. If something turns up that may prevent you from purchasing, a mortgage professional can offer you solutions. 
8. Falling in love with a house. Fall in love with each other but not with a house because you may not listen to some good advice. You will ignore the obvious cracks in the foundation because it has 18ft. ceilings and has that great stone fireplace you’ve always wanted. Beware of buyer’s remorse.
9. Not checking market value of neighbourhood. This can cause some purchasers to pay too much; especially a home that has been upgraded to the max in an area that won’t keep its value – unless you plan to live there the rest of your life.
10. Focusing too much on interest rates. Don’t rush in to a market because the rates are low. And don’t focus on getting the lowest rate. Focus on the mortgage loan that works best for you and your financial situation. 

Having said all that, the most recent RBC poll (April 2019) found that Canadians are confident and know what they want.

• Eight-in-10 Canadians say a home or condominium purchase is still a good investment
• Canadians feel it makes more sense to buy than rent 
• Canadians are well positioned to weather a potential downturn in housing prices or an increase in interest rates 
• Affordability and being in a safe neighbourhood top the list of what Canadians must have, while buying in ‘the right‘ neighbourhood is less of a concern 
• Canadians are most willing to sacrifice the conveniences of being close to a major highway (16%), dining and entertainment (13%), good schools (11%) and public transit (10%).

So, bottom line is: Don’t rush in, sit down and plan. A mortgage professional can help you get that home by walking you through every step of the home buying process, with fewer mistakes, and fewer regrets.

Important Mortgage Features to Consider

Real estate continues to be a hot commodity in most parts of the country, despite the many changes we’ve gone through over the last few years. Prices in some areas are up and listings are in short supply in other areas, but the housing market overall has been moderating over the last year, and analysts are forecasting a balanced market for the rest of 2019 and into 2020.

Interest rates are comparatively low and competition among lenders to offer favourable rates is high.  It’s always a good idea to read the fine print to make sure you’re getting the best mortgage product, at the best rate, for your particular need.

Because lenders do differ, it’s important to know what features are important to you before deciding on a lender. Here are six characteristics of mortgages to assist home buyers assess their offers:

1. Blend and Extend. The “increase and blend” option has been around for almost 20 years and may be an option in some situations. For example, if your current lender doesn’t allow a change in the maturity date, then you’re locked into the remaining time left on the term.  While that’s not the end of the world, in a rising rate environment this can be inconvenient. If you’re moving up, and buying at your maximum loan-to-value, you probably don’t want just a 1 to 2-year term, and with the new benchmark rule, you may not even qualify.  If rates have dropped since the original mortgage you could run into the “Interest Rate Differential” (IRD), which might be too large and you can’t move.  
2. Early Payout Penalty Calculation. Some chartered Banks are known for their extremely large IRD penalties.  If you don’t know whether you’ll keep the mortgage for the entire term then make sure you understand the payout penalty. 
3. Mortgage Registration. Is the mortgage registered as a non-standard charge, either a running account, or a collateral charge? If so, then it becomes challenging to switch this mortgage out to take advantage of lower rates, although collateral switches are becoming more widely available. Consider this scenario: If the lending institution knows you will have to incur $1,000 or more in possible costs, as well as put in the time and effort to complete a refinance with another lender, then there might be little incentive to offer you best rates at renewal time when a small rate reduction might be enough to keep your business. On the other hand, there are advantages such as making it easier to qualify with fewer expenses down the road if you need to access additional funds.
4. Pre-Payment Privileges. Is the lender offering 10/10, 15/15, or 20/20?  That means allowing prepayments of 10%, 15 % or 20% annually on the outstanding balance of the mortgage.  Also, can these lump sum payments be made anytime per year or only at the mortgage anniversary? And how easy is it to make lump sum payments? Do you have to go into the branch, call a 1-800 number? Or can you simply go online and do it.  These are important factors to consider.
5. Porting Features. This feature can vary from lender to lender. Read the fine print, especially if you know you might need to move before the mortgage maturity date. Some lenders require a sale and purchase to occur on the same day in a port, which can be inconvenient. A more flexible, and available program allows typically up to 60 days gap or 60 days overlap; and then there can be exceptions allowing longer periods beyond that.
6. Online Access. All of the chartered Banks offer online access as do a number of monoline lenders. Generally online access allows you to see your balance, make additional lump sum payments, or make a payment increase. This can be a time-saving feature for tech-savvy consumers. 

There is more to getting a mortgage than just rate. Talk to a mortgage broker first who can help you navigate the mortgage terms and who can help you find the best product for your needs.

Mortgage Fraud – Don’t Let It Happen to You

There has been a growing concern about fraud in the industry for a number of years.  According to Equifax, suspected fraudulent mortgage applications have increased by 52% in Canada since 2013.

Because the mortgage industry’s rules and guidelines have become more complex, there is increased diligence among lenders and brokers.

The mortgage stress test has made it more difficult for some consumers to qualify for a mortgage. And in today’s high-tech world, it’s not always the case that lenders and borrowers meet face-to-face.

There is also pressure for some files to close quickly, from consumers who expect their real estate transactions to be fast, with minimal paperwork, which could lead to potential fraud.

Categories of Fraud

These are the general categories of fraud:

1. Fraud to get shelter. An individual commits fraud in order to get a mortgage on a home they could not otherwise obtain or afford.
2.  Title Fraud. The identity of a homeowner is assumed and a new mortgage is taken out assuming the homeowner’s name and credit history but with loan proceeds going to the fraudster. The fraudster will use forged documents to transfer ownership and will use fake identification to get the mortgage on the property.
3. As part of other criminal activities. A mortgage may be fraudulently obtained to get access to a home for illegal purposes.

These are the general types of fraud that occur:

1. Fraud Involving Property.  Overvaluation of property; misrepresentation of property characteristics; builder bail-out scheme using a “straw” buyer.
2. Fraud Involving Employment Status.  Forged employment letter; forged or altered pay stub; inflated income; misrepresentation regarding self-employment
3. Identification Fraud.  Forged or altered ID, nonexistent individual
4. Equity Fraud (Down Payment). Bogus gift letter; bank account statements not the borrower’s
5. Title Fraud. Fraudulent title transfer when mortgage has not been paid in full; property not in name of seller; identity theft relating to title fraud

Fighting Fraud

It’s in the best interest of the real estate and mortgage industry to work together, along with consumers, to reduce fraud. To further protect yourself and to help avoid the situation:

• Always store personal information, including birth certificate, SIN, bank account numbers and credit card details, in a secure place
• Shred documents, such as credit card statements
• Never reply to spam or e-mails that ask for banking information, credit card details, passwords or other sensitive information
• Safeguard your personal financial information.
• Contact your mortgage lender or broker first if you are having difficulty making your mortgage payments.
• Consult your lawyer before giving another person a right to deal with your home or other assets.
• Do a land title search with your provincial or territorial land registry office. This search will show the name of the property owner and any mortgages or liens registered on the title.

You can also help to protect yourself by inspecting your credit report at least annually by contacting Canada’s two credit-reporting agencies: Equifax Canada and TransUnion Canada.

Fraud is serious business in Canada and has a negative impact on the entire industry. Fraud hurts people, not just companies or the government. When lenders are defrauded, consumers pay the price.  Losses from fraud could ultimately result in higher interest rates and fees for borrowers.

TMG mortgage professionals stay up-to-date about mortgage fraud through internal training sessions, and through industry educational sessions. They understand the concept of fraud, recognize fraudulent schemes and understand their consequences. This knowledge helps brokers protect themselves, their clients, their business relationships, and the industry as a whole.

The Ongoing Stress Test Debate

By Mark Kerzner,
President, TMG The Mortgage Group

The controversy over the mortgage stress test continues. Banks, economists, mortgage lenders, Realtors, mortgage brokers, and its association Mortgage Professionals Canada (MPC) are urging government to make some changes, not to get rid of the stress test altogether, but to consider some variables, such as income growth and mortgage repayment which may not have been factored in.

So it was curious to hear Evan Siddall, CEO of Canada Mortgage and Housing Corporation (CMHC), imploring the Standing Committee on Finance to “..look past the plain self-interest of [mortgage brokers]… Apparently, the MPC [Mortgage Professionals Canada] is content to see home builders, real estate agents and mortgage brokers receive short term benefits while Canadians bear the long-term costs.” 

I am not sure where this personal attack is coming from or how this advances his agenda. As an industry we have provided a valuable sounding board and meaningful suggestions for tweaking rule changes to ensure a healthy and stable housing market today, and for the future.

When many industry experts support the position that a stress test could consider other factors such as principal repayment and income growth, for example – and such support also coming from very credible bank economists -- some of whose employers choose not to deal with brokers directly-, then it's uncertain why Siddall would personally attack an Association  representing the broker channel.
In addition, the Chief Economist of MPC, Will Dunning, just published a report further detailing reasons why the stress test should to be tweaked, along with market commentary by various economists and their positions on the subject.

The stress test was introduced without consultation from industry insiders and stakeholders and now the Government has a locked-in position they seem unwilling to change. The stress test is having a negative impact on the housing market and could very well affect the economy in the long term.
However, the story is not one side advocating for the all-out removal of stress tests against the other side locking into an unchangeable position.

Let’s look at the entire story. When the February 2010 stress test was introduced on mortgage terms less than 5 years, and on variable-rate products, it was done seemingly to protect a consumer’s ability to handle payments in an increasing rate environment at the time of renewal.

This time around it appeared as though the stress test was introduced for different reasons. The overall amount of sovereign debt was considered too high as it approached $700 billion.  There was concern about runaway prices in Toronto and Vancouver.

However, the stress tests introduced in October of 2016 by CMHC and then extended to conventional mortgages by the Office of the Superintendent of Financial Institutions (OSFI) in January 2018, was ostensibly to reduce future debt burdens. 

The result has kept an estimated 40,000 would-be homebuyers on the outside looking in, according to an April TD Report.  According to the Globe and Mail “The government [was] responding to concerns that sharp rises in house prices in cities like Toronto and Vancouver could increase the risk of defaults in the future should mortgage rates rise.”

From my perspective, if we are going to be heavily relying on a Benchmark rate in qualifying applicants, then the way the Benchmark rate is determined should also be changed.

It is currently set from the mode of the big banks’ posted rates. It should be determined either by a market-driven rate (perhaps as a delta to bond yields), have an established floor (say 4.25% for example) or relate specifically to the contract rate itself.

We have seen interest rates drop over the first two quarters of 2019, yet bank posted rates and the stress test have not. As interest rates were rising last year the banks chose to increase their posted rates, and the Benchmark rate was correspondingly increased. 

When the 2016 stress tests were introduced, the Benchmark rate on which it was calculated was 4.64%.  At the same time the discounted 5-year fixed rates were in the 3.69% to 3.99% range. Today, 5-year fixed rates can be found in the 2.89 to 3.19% range and the Benchmark rate is 5.34%.
For clients renewing their mortgages AND who have made their contractual payments as agreed, to qualify them at a rate higher than their contract rate if they want to transfer their mortgage is simply anti-competitive.

The mortgage industry supports high underwriting standards to ensure a buffer exists in our collective ability to withstand higher interest rates.

Instead of creating animosity and adversity, let’s work together to create an environment that encourages qualified and responsible First Time Homebuyers in accessing the market.

If you are a mortgage customer looking to access the market make sure to use the services of a mortgage broker who can help you navigate the rules, options and opportunities to align with your long term goals and objectives.

Buy a House Now or Wait?

There are a lot of questions surrounding affordability in the housing market. There is some uncertainly as to whether the housing market will continue to slow down, with prices starting to decline in some regions, which may make buying a house a reality for first-time home buyers. A common question is: Should I buy now or wait until later. Let’s take a look at a few factors.


Market Slowdown and the decision to buy

There is no doubt the market has slowed down compared to what it was doing two years ago, prior to the introduction of the B-20 rules and the mortgage stress test. It appears that the dire warnings from industry insiders about the impact the stress test would have on the housing market has played out as predicted. While some welcomed the stress test, it may have worked too well, to the point of inertia.
When housing prices and sales steadily rise, buyers and sellers feel confident about their decisions, but confidence in markets takes a dip when prices or sales fall or rise rapidly. Buyers and sellers want to know if the market has hit bottom or if it will decline further. Prospective buyers’ question when they should jump in.

Also, buyers can have different motivations: They may be transitioning from renting, switching homes, or looking for an investment property. Family make-up is another factor – some will have school-aged children, others may have extended family arrangements, still others may be downsizing. The right decision for a buyer or a seller depends on their circumstances and motivations.
A buyer may want to hold on to see whether prices will drop further over the summer, which may or may not be an effective strategy.  For others, especially parents of young children, a move during the school year can be challenging.

Sellers usually want to wait for prices to rise, or at least stop falling, before they list their properties.

Spring Market

The Spring buying market is late due to weather conditions across the country but there are some signs of improvement. The most recent data shows slow but steady activity in home sales across the country, with prices dropping in some regions – it’s all very fluid.

The Economic Big Picture

The Bank of Canada (BoC) has taken a new position on interest rates and is leaving them comparatively low. In fact, there are rumblings that rates could go down in the near future. Our economy is closely tied to the US economy where the Fed has stopped raising rates – Canada’s interest rates can’t really deviate too far from US rates.

At its latest interest rate announcement, the BoC left its rate unchanged, at 1.75%. More importantly, the Bank removed any reference to future rate hikes and instead acknowledged that “monetary policy needs to maintain a degree of accommodation … until the economic outlook improves.”

The Bank acknowledged that the slowdown in global economic growth in the latter part of 2018 was “greater than expected” and it attributed this in large part to uncertainty arising from “trade policy conflicts”. And once again, it predicted “that the economy will pick up in the second half of the year”.

There was no mention when rates would rise again, but did say, “it will closely monitor “developments in household spending, oil markets, and global trade policy to gauge the extent to which the factors weighing on growth and the inflation outlook are dissipating.”

What to do about the stress test?

The consensus seems to be to modify it. CIBC economist Benjamin Tal said in an interview recently that the stress test has had a broad impact on slowing down the housing market, affecting 50% of new mortgage originations. Because interest rates are not rising any time soon, Tal says the stress test may be too severe. The test also doesn’t take into account that over a 5-year mortgage term, incomes are rising while, at the same time, mortgage principal is getting paid down. By modifying it, more first-time home buyers may be able to get into the market.

There is a lot of pressure on the government from banks, mortgage broker and Realtor associations, as well as economists to consider modifying the stress test – we’ll see what happens as we head into the latter part of an election year.

So, do you buy now or wait and see?

The future is always uncertain. The best way forward is to get the facts about what’s happening, review your personal goals and work with real estate and mortgage brokers who can help you decide.

What’s really going on in Canada’s housing market?

What are we to make of the mixed messages in the media? Are we in a bubble? Has the bubble burst? Are prices going up? Are prices going down? Are sales down or are sales up? Are new housing starts up or are they down? Is this a good time to buy? Are first time home buyers abandoning the market?

According to the Canadian Real Estate Association’s most recent report national home sales were down slightly from December 2016 to January 2017 by 1.3%. Yet actual activity in January was up 1.9% from the previous year. Newly-listed homes dropped 6.7% but prices were up; however, the average sale price has hardly changed in a year. What are consumers to make of it all?

Then there are the recent changes made in the mortgage industry that many say have further eroded affordability and have made it more difficult for first time home buyers to purchase a home. What is really going on?

Here’s what we do know – all real estate is local. In cross-country interviews, a snapshot emerges that concludes the following:

1. There is a lack of supply in all provinces, which dampens market activity
2. First time home buyers are still in the market but are now looking at lower-priced homes
3. Many homeowners are taking a wait-and-see approach before deciding to list, which is contributing to the lack of supply
4. High-end homes are the slowest to sell
5. Spring is coming

Here’s what a sampling of TMG mortgage brokers say is going on in their provinces.

Katy Mackenzie, Vancouver, BC
Due to the introduction of the B.C. Home Owner Mortgage and Equity Partnership program, condos or strata properties are very attractive to first time homebuyers.  We’re seeing multiple offers still and the re-introduction of Realtors asking buyers for subject-free offers, which is always risky.  Even in cases where we can offer pre-approvals, and many lenders are not issuing those anymore, we all know that anything can change. Many lenders will not look at a deal unless there’s already an existing offer.

Detached homes in the Vancouver area are not moving because it’s become harder to qualify and homes over $1million dollars are not insurable so there are fewer buyers. The luxury home market has also gone quiet because sellers have not brought down their list price.

We’re seeing multiple offers on small sq-ft properties. For example, a 415 sq.ft unit sold for $24,000 over asking price, another went for $31,000 over.

First time home buyers are still there. With the new qualifying rules, those who were on the affordability margin have left the market. Some are discouraged but others are being pro-active and paying down debt. Those still in the market have the down payment but are looking for lower-priced homes.

February has been significantly busier. Home buyers are still active and are still qualifying in the $1 million and below price range.

Layne Walters – Calgary, AB
Contrary to popular opinion, the real estate market here did not correct much – prices have been the same here for 10 years. House values have roughly been the same. Because there are so many ups and downs, supply and demand is always adjusting.  There is a challenge in the high-end market but there is stability here – homes are more affordable now then in the 80s – it’s not any cheaper to rent.

It’s the economy that’s struggling here.  Half of the city works in the oil and gas industry and they have been impacted in the last few years. The other half of the population are still working and doing okay.

What I am finding, however, is more people taking the time to learn about mortgages and their options, getting pre-approved then waiting. There’s not an urgency to buy because they know prices are not going to rise.  The market is moving at a slower pace but it’s steady. People still buy when it makes sense for them.

The recent mortgage changes have had less of an impact. Affordability is not really an issue. Minimum wage has gone up and house prices have remained stable.  It’s a slow, steady market – boring actually, if you compare it to what’ s happening in Toronto and Vancouver. First time home buyers come in and ask what they can afford. We’re not impacted by the new rules as have other markets.

This year has some promise. The oil and gas industry is hiring again so there will likely be a migration shift back to Alberta. The economy is projected to expand. We do have inventory available – it’s going to be a slow, steady kind of year. Sometimes it’s good to be boring.

Amber Rambally, Saskatoon, SK
Market activity is starting to pick up here especially for homes that are priced correctly. New builds are sitting because they have been significantly overpriced, but we’re starting to see prices dropping in those as well. The market is flooded with new condos, but prices of older condo conversions have dropped significantly.

The resale market has stayed even in the last year depending on how much work they need. Houses built in the 80s, early 90s are good quality and are typically on larger lots and have held their value quite well. Bungalows from the 70s were priced high but have now become more affordable.

However, buyers have been hesitant about getting into the market because of the new mortgage rules.  There have been lay-offs due to the slowdown in the oil and gas industry but we’re seeing people going back to work.

Clients are asking more questions and wanting pre-approvals but I don’t see them making that decision to get into the market yet.

What is nice in this market is that first time home buyers don’t have to start in a condo, they can get into some single-detached homes. While the new rules may have impacted affordability, having the down payment has not been a challenge. I’m sure 2017 will be a growth year in the market.

Jeff Sparrow – Winnipeg, MN
The market is hot and has been on an upswing for the last 10 years. There are tons of new home starts and new developments -- we have one development in the south end that’s slated for 30,000 homes. That’s in addition to six other sub-divisions.

There’s also lots of activity in the resale market but due to lack of supply there are multiple bids – it’s the sign of the times.

We have lots of jobs – manufacturing, agriculture, blue-collar, white collar.  If you’re in the construction industry, you’re busy.

Winnipeg’s unemployment rate is low. Manitoba’s growth is slow and steady and very stable. I anticipate that 2017 will be a good year.

The mortgage industry here is competitive, not helped by the fact that we have the largest per capita population of credit unions in the country. We work hard each day for our business in a very active mortgage market, but we’ve been dealing with this for awhile. Our approach to working with clients has not changed – we educate them and we offer them options –something they can’t get from a bank.

We’ve also seen an uptick in first time, quality home buyers. These clients need someone to have an intelligent conversation with them about how the mortgage lending industry works. We usually win the client over.  We’re looking forward to 2017.


Mike Rogozynski – Woodstock, ON
Here’s the new normal -- lack of supply. We have buyers but nothing to buy.  When a desirable home comes on the market, Realtors set a day for offers, resulting in multiple offers.

I know this happens in many markets now but it does inflate the selling price. In these type of situations Realtors want no financing conditions.  This adds an extra challenge for mortgage brokers, so I make sure to have all documents beforehand and I really push the online application process, rather than an in-office meeting, to speed up the process. We haven’t seen skyrocketing prices yet, like in Toronto, but prices are increasing. Houses are also closing faster – 30-45 days in areas.

As for the mortgage rule changes, most people are not aware of them and are confused when told that someone with 20% down gets a higher rate than someone with 5% down. Even after it’s explained to them they can’t see the lender’s side of things. Even Realtors don’t understand it.

First time buyers are still in the market – they get a preferable rate because they usually have only 5% down -- and they tend to be much more educated about the market and mortgages.

Blake Wilson, Halifax, NS
Our market seems to be stable. Clients are looking for house a little earlier this year and Realtors are optimistic. Homes under a half million are doing well; over that, there are fewer buyers. New construction properties are selling well.

Mortgage approvals continue to be a challenge, especially among the self-employed and now first time home buyers, given the recent rule change -- affordability has eroded for them.  For example, I had approved a salaried electrician who had saved the 10% down payment for a Purchase Plus mortgage. With the introduction of the new mortgage qualifying rule, he had to now pay out his student loan to qualify.

I am also seeing a lot of confusion at the banks from customer representatives who don’t understand the rules themselves. Banks seem to declining more deals where we can get them approved because we have many options.  For example, I had one client declined by two banks and I had them approved in 24 hours.

This is a great opportunity for brokers.  I am bullish on 2017.

How will the recent rate cuts impact mortgage regulations

By Mark Kerzner, President, TMG The Mortgage Group

With the latest Bank of Canada (BoC) rate cut to 0.50% comes a reminder that many would like us to believe our housing market is tenuous.  Once again there is a lot of discussion about just how overheated our market is and the dire circumstances many current homebuyers are likely to find themselves at renewal time.

First, let’s think about why the Bank of Canada decided to cut interest rates once again last week. In January the BoC surprised many of us and cut the overnight rate in response to a rapid decline in oil prices.  This time around it did so because the Canadian economy has not rebounded the way the Bank had hoped.

In an effort to stimulate spending, the Bank used one of its levers to lower the cost of borrowing. In doing so the value of the loonie further decreased thereby making imports more expensive and exports cheaper. The hope is that foreigners will both invest in and buy Canadian goods.  The caveat to that appears to be Canadian real estate where many economists and policy makers would prefer that no additional investment takes place. The problem is, it’s hard to have it both ways.

The Canadian housing market is resilient – no doubt about that. But when we speak of the Canadian real estate market we really have to speak in terms of what is happening in Toronto and Vancouver and then the rest of Canada … the latter is nowhere near as hot as the former.

For the past seven-(ish) years the Bank of Canada, the Government of Canada, our mortgage Insurers and our lenders have introduced numerous lending restrictions designed to strengthen the underlying housing market, soften a blow at the time of renewal  --in the event of increased mortgage rates -- and reduce the rate of home price appreciation.  In the wake of these last two rate cuts, discussions are heating up again.

Now we are hearing rumours of increased down payment requirements as well as possibly reducing the maximum amortization. Both of these changes could have a significant impact on the market – and I do not believe the policy makers are looking for ‘significant’ market changes immediately preceeding an election. They could, however, prove to be precursors to a discussion to take place later this Fall.

In late 2008 the Bank of Canada reduced the overnight rate and the banks passed along only 3/4 of the reduction. So far in 2015 the banks have passed along only 30 of the 50 basis points.

While the banks do incur costs with each change to the overnight rate they are also ‘banking’ additional spread on both new and on their existing books of business. With arrears remaining at very low historical rates, and the high quality of borrowers, the banks are already protecting themselves from a potential overheating of the housing market. As such, to potentially trigger a downturn in the Canadian housing market by pushing regulations too far, such as increasing the down payment requirement to 10%, would not be prudent.

In the event the down payment requirements were to increase to 10% approximately 20% of first-time homebuyers could be affected. Some will find the means to borrow additional down payments and others may seek out secondary financing. At the margin, for the homebuyers that remain in the market, their cost of borrowing will increase.

Another “buy”-product of lower interest rates are lower bond yields. People look for better returns on their investments and some will move funds into equities.  Perhaps this will prove to be a good long-term investment strategy, though in the long run, real estate investing may turn out to be a sounder investment approach.

The reality is, in the wake of a massive global recession (2008-2009), followed by major geo-political uncertainty and a perilous Eurozone, our economy, and especially our housing market, have done phenomenally well. The steps taken over the past 6-plus years have proven prudent.

Once again we find ourselves in a sort of conundrum – borrowing costs are getting cheaper, the economy is stagnating yet our housing market, at least in two major cities, continues to push forward.  My concern is that we overshoot and impact one of the main engines -- first-time homebuyers -- that drives the marketplace.

I think it’s important to ensure that families who invest in real estate have the strength and ability to do so. I do not believe that policy makers should be trying to massage the actual market itself. As such, here are a few recommendations they may wish to consider.

• Register all first-time homebuyer mortgages at 30 or 35-year amortizations but set qualifications as well as payments at 25 years.  In the event of a future default, payments could then be set at 35 year amortizations to allow for some flexibility and preservation of cash flow.

• Keep the down payment minimum at 5%, though in certain geographic locations require liquid assets equal to 7.5% (plus closing costs).

• Index the cut off where mortgage insurance can be obtained. For instance a number of years ago a policy was created that restricts mortgage insurance on properties that were greater than $1M. That number should be indexed to allow for natural price appreciation (or depreciation) and geographic factors in the market.

 The housing and mortgage markets in Canada have proven to be resilient. Now more than at any point in our young history, it is vital for Canadians to seek the expert advice of mortgage brokers to navigate their options.

Top Six Mortgage Features

Real estate is a still a hot commodity in most parts of the country, and it’s also a competitive market. Prices are rising and listings are in short supply. And everyone wants your business -- from realtors to mortgage lenders. Interest rates are low and competition among lenders to offer favourable rates is high.  However, it’s always a good idea to read the fine print of these” low rates” to see if they are the best rate for your situation.

Steve Nipius, TMG’s Deal Centre Manager has complied his Top Six Strategies to assist home buyers assess their mortgage offers to make sure they’re getting what they need. It’s important for consumers to understand what features are important to them before deciding on a lender based on interest rate alone.

Take a look at some of the features you might consider:

1.  Blend and Extend. The introduction of the Benchmark qualification rate a few years ago has encouraged more lenders to offer this feature, whether on a refinance or a port and increase. For example, if your current lender doesn’t allow a change in the maturity date, then you’re locked into the remaining time left on the term.  While that’s not the end of the world, in a rising rate environment this can be extremely inconvenient. If you’re moving up, and buying at your maximum loan-to-value, you probably don’t want just a 1 to 2 year term and with the new benchmark rule, you may not even qualify.  If rates have dropped since the original mortgage you could run into the dreaded “Interest Rate Differential” (IRD) which might be too large and you can’t move.  Lenders that allow a blend and extend simply blend your current rate with the now current rate. 
2.  Early Payout Penalty Calculation. Some chartered Banks are known for their extremely large IRD penalties. The wording in some other no-frills products refers to the payout penalty as the greater of 3% of the balance or IRD -- this would mean a $15,000 minimum penalty on a $500,000 mortgage. Some lenders also carry large re-investment fees. If you don’t know you’ll keep the mortgage for the entire term then make sure to read the fine print in your mortgage documents, especially as it pertains to the payout penalty.
3.  Mortgage Registration. Is the mortgage registered as a non-standard charge, either a running account, or a collateral charge? If so, then it becomes almost harder to switch this mortgage out to take advantage of lower rates. Consider this scenario: If the lending institution knows you will have to incur $1,000 or more in possible costs, as well as put in the time and effort to complete a refinance with another lender, then there is little incentive to offer you best rates at renewal time when a small rate reduction might be enough to keep your business.   
4. Pre-Payment Privileges. Is the lender offering 15/15, or 20/20?  That means allowing prepayments of 15 % or 20% annually on the outstanding balance of the mortgage.  Also, can these lump sum payments be made anytime per year or only at the mortgage anniversary? And how easy is it to make lump sum payments? Do you have to go into the branch, call a 1-800 number? Or can you simply go online and do it.  These are important factors to consider.
5. Porting Features. This feature can vary from lender to lender. Read the fine print, especially if you know you might before the mortgage maturity date. 
6. Online Access. All of the chartered Banks offer online access as do a number of mortgage banks, including First National and Street Capital. Generally online access allows you to see your balance, make additional lump sum payments, or make a payment increase. This can be a time-saving feature for tech-savvy consumers.

Yes, there is more to getting a mortgage than just rate. Talk to a mortgage broker first who can help you navigate the mortgage terms and who can help you find the best product for you needs.