Here’s what we know about First-Time Homebuyers

In May 2014, the Canada Housing and Mortgage Corporation (CMHC) completed an on-line survey of 860 first-time buyers from across Canada. All who responded had taken a mortgage transaction in the previous 12 months and all were one of the prime decision-makers within their household for matters relating to housing finance and mortgages.

First-Time Buyers and Technology

• The majority of First-time buyers (84%) went online when gathering information about mortgage options and features. Among these, more than half (55%) went to lender sites and one-third went to broker sites. First-time buyers showed a high likelihood of visiting a broker site (33%).

• Overall, First-time buyers were much more active online compared to other mortgage consumers – they engaged in a variety of activities -- 80% used a mortgage calculator, 63% completing a financial self assessment, 42% either got pre-approved or filled an online form and 20% engaged in an online conversation.

• Twenty-three per cent used mobile devices to access mortgage related information, however; desktops are still preferred by almost nine-in-ten.

•  The use of social media as a tool when looking for a mortgage is increasing and was much more prevalent. In 2014, 40% of First-time buyers going online looked to social media when researching their mortgage options. This up from 28% one year ago. Social media used -- 58% used Facebook, and 38% used either online forums or blogs. Overall, online forums and blogs were found to be the most useful social media platforms for mortgage related information. Half of First-Time Buyers using online forums and 44% using blogs rated the information obtained through these platforms as “very useful.”

•  Social media is starting to play a role in how first-time buyers interact online. About one-in-five using social media (21%) posted a review or rating of either a broker or lender and 30% used social media to find a referral to use a specific professional (i.e. broker, lender, real estate agent or other professional).

Homebuying Process

• During the home buying process first-time buyers interacted with a variety of individuals. Seventy-nine per cent were in contact with a family member, 73% with a mortgage lender or a 72% with a real estate agent. Slightly more than half (55%) reported interacting with a mortgage broker.

•  Overall, 60% of first-time buyers mentioned that they had concerns during the home buying process. The nature of the concerns or uncertainty stems mostly from unforeseen costs. Forty per cent reported they actually incurred unexpected expenses during the home buying process. Among those unforeseen costs, the most common were adjustments (40%), lawyer fees (36%) and land transfer taxes (30%).

Experience with Lenders and Brokers

• Approximately four-in-ten (37%) of first-time buyers received a recommendation to use a specific mortgage professional. These recommendations came primarily from family members and real estate agents. Among those receiving a recommendation to use a specific lender, 37% came from a family member and 22% from a real estate agent.

• Almost half (48%) arranged their mortgage through a mortgage broker.

• Among those using a broker, 50% reported obtaining a mortgage with a lender other than the financial institution they were dealing with the most at the time.

•  Seventy per cent were satisfied with their mortgage professional and showed a greater likelihood of using their broker again in the future.

The survey findings are positive indicators that consumers are increasing their knowledge about financial matters. Consumers who educate themselves about their financial options are able to make consistent, informed financial decisions and that will help them to achieve their goals.

The survey also makes clear that mortgage professionals are in a unique position to help educate consumers about their mortgage options and ways to pay off that mortgage sooner. 

It’s been all about elections

We seem to be living in an election merry-go-round. In Ontario we recently had our provincial election. Torontonians are living through a municipal election. Canadians are prepping for a federal election in 2015. The US seems to be in an election cycle every two years. And within our industry we just completed the CAAMP election.

I am ‘electioned’ out! I can tell you from the prospective of both a voter and a candidate that our elections are long – too long.

The CAAMP election started with some consideration and a formal nomination by the end of August. Then there was preliminary campaigning and discussions throughout the first two weeks of September and then there is the actual election - which is essentially a two-week window.

Campaigning is exhausting. It is in and of itself almost a full time job. There were two things that really impressed me during the CAAMP campaign.

1. The level of engagement of voters was fantastic. I believe this will be recorded as one of the highest levels of voter turnout in recent years. Members were talking, debating, concerned, enthusiastic… you name it.

1. The level of support I received from countless people throughout the industry. This election (at least in Ontario) seemed to cross-organizational boundaries. It really seemed to be one that put the industry first.  For our industry to be strong we must have a collective voice with our lender and supplier partners. To me that voice was reaffirmed in this election.

Though I initially wrote this post before the CAAMP election results were known, I can tell you that as a successful candidate I am eager to work with the Board and the Association to represent our incredible industry.  When we put our collective passion, commitment and talents into our industry we will all succeed immeasurably.

I wish everyone a terrific FALL season and hope to see many of you in Montreal in just a few short weeks.

Cheers,

Mark

Talk of housing bubbles may be just hot air

The latest housing price statistics from the Canadian Real Estate Association (CREA) has created a buzz in the media and talks of bubbles and an overvalued housing market have resurfaced.  According to CREA, the average house price has risen 5% over last year.

What that number does not show, however, is the lowered house prices in many markets such as Saint John and Victoria, for example. The red-hot markets in Vancouver, Calgary and Toronto are skewing the average according to CIBC economists Benjamin Tal and Avery Shenfeld and more than one-quarter of the sales are now in cities where house prices are increasing by less than the current rate of inflation – approximately 2.10 percent in August of 2014.

The CREA stat is no reason to panic once the numbers are broken down. The majority of that price gain are for high-end homes in the most expensive cities in the country—Toronto and Vancouver, said Avery Shenfeld in a Globe and Mail article and in the “their urban cores, as opposed to lower-priced alternatives in the suburbs.”
Evan Siddall, CEO of Canada Mortgage and Housing Corporation (CMHC) also sees no need to worry. Interestingly CMHC has a Housing Price Analysis and Assessment tool that gauges the housing market and takes into account the following:

•  Overheating of demand in the market

• Acceleration in prices

• Overvaluation in prices

• Overbuilding

The assessment of Canada’s housing market at the moment shows no immediate problems at the national level. Sidall was quoted as saying, “Our educated opinion is that growth in house prices in Canada will moderate.”

This opinion is shared by many in the industry. John Bordignon, EVP, Strategic Development at Paradigm Quest says it boils down to supply and demand. “Certainly low mortgage interest rates have fuelled some of the increase in activity,” he said. “However, when we analyze the market, we can see that the increased price in the high-end market are skewing the average and cannot be sustained simply because that same price appreciation is not occurring in the move-up market.”

At the high-end of the housing spectrum we have a seller’s market, he explained – more buyers then there are homes, which would naturally increase the price. However, tighter mortgage lending guidelines coupled with changes to mortgage insurance regulation have priced out first time home buyers, making it more difficult for the move-up market to move. Higher prices at the top-end may be also causing some affordability issues among those considering a move up.

“Eventually, those high-end prices should moderate – when there are no buyers, prices come down, which is happening to prices in the mid-range due to fewer first time buyers.”

The two stats that bode well for Canada’s housing market according to Bordignon are employment levels and low interest rates. “Corrections occur when unemployment rises, interest rates increase and house prices continue to rise. Here in Canada, we have stable employment levels and interest rates are still relatively low.

Despite the talk of bubbles, resale activity has been relatively stable over the past few years. Unit sales have fluctuated between 35,000 and 40,000 units per month according to a report by CIBC’s Benjamin Tal. Sales of units at the low-to-mid price range have fallen notably since 2010. Sales for the mid-to-high price range have risen modestly and sales for the upper end of the market have increased rapidly.

“In the Toronto market, for example, we see that the more expensive the property is, the faster its price rises,” Tal said. “A household that owned a single-detached property valued at say $600K and would like to move up, would have to pay extra not only for the jump in category, say $900K, but also for the fact that the price of the move-up property has risen faster than the price of their own property.”

Despite all the talk of the ups and downs of house prices, the mortgage lending market remains robust. Mark Kerzner, President of TMG The Mortgage Group has watched activity in housing market rise and fall for many years and although tighter regulations over the past few years have slowed activity somewhat, overall the market is healthy.

“We’ve had a low rate environment for many years now, and while fixed rates are poised to increase due to higher bond yields, ARM discounts are also increasing thereby making ARMS more attractive. We anticipate PRIME will likely stay low into the first half of next year as the Bank of Canada stays the course with its benchmark rate that’s still at 1%,” he said.

Kerzner also highlights the fact that the Canadian economy is healthy and affordability is in check despite the increased regulatory insight. “Qualified buyers are still able to access very low rates and lenders are offering a variety of mortgage products to suit the needs of more buyers,” he said.

“If we examine the current situation we see low interest rates, a housing market where the prices in most markets are stabilizing, a healthy economy that is growing and an inflation rate that is holding steady,” he said.

“The most important factor is your personal readiness.  A home is a long term investment and its value will fluctuate up and down over the course of your tenure in it. It is both a commitment and an achievement that reflects your aspirations and lifestyle, and offers a great deal of personal satisfaction, as well as financial stability.”

Yes, prices have increased in a few cities so it’s important to analyze what’s going on in your local market because all real estate is local. Mortgage rates and house prices will fluctuate but over the long term, homeownership is a sound investment that compares well with other investments. When you invest in mutual funds, the mantra for most is buy and hold. Similarly, your home is a buy and hold investment.

Hello Friends and Colleagues

Although post-Labour Day symbolizes an end to summer and the start of a new school year for millions of Canadian students and their families, there is also a sense of renewal and excitement as a new year settles in.

As my wife and I helped prepare our three kids for school last week, I was reminded of just how quickly time passes, as well as the sense of anxiousness with what lies ahead.

For me, this “new year” is even more significant than the one we typically welcome in the cold of winter on January 1st. 

New beginnings allow us to review and reaffirm our current path while, at the same time, they encourage us to adapt and adjust our habits as we add and pursue new goals.

During the past few weeks I have spent some time thinking and reminiscing about the state of our industry – and more specifically – the state of our national association. I have always felt very much connected to the mortgage brokerage industry in Canada, working as an executive with our lenders and as president of a national mortgage brokerage. I now feel compelled to seek your support to become a Director (ONTARIO) of CAAMP.

I remember the first CIMBL (predecessor of CAAMP) conference I attended nearly 15 years ago. As a newly-minted mortgage executive I recall the excitement, the enthusiasm and that sense that we were all learning and growing as an industry. I knew at that moment that this was a very special industry and it was an association I would admire.  It was a place where seasoned mortgage professionals would come together, share best practices and chart a course for the future.

It seems there has been considerable chatter lately about the role of CAAMP, the regional associations, and the overlap between them. Questions around the need for a national association coupled with discussions about a broker’s only association have also been on the table. This is healthy dialogue and I am pleased to see the level of engagement about our representation in our industry.

I would like to take this opportunity to tell you the three key reasons why I continue to advocate for CAAMP:

1. I welcome the fact that our association is inclusive of brokers, lenders and suppliers alike. I feel that mix actually makes our voice stronger with the folks we are lobbying in Ottawa.
2. The fact that we share a board of directors to oversee this national association helps unify our day-to-day business interests. 
3. The majority of members are aligned in seeking a very strong and growing broker channel in Canada. 

CAAMP has been very effective in many respects but is not perfect.  A few areas where I see that CAAMP must improve are:

Co-ordination with all industry associations:events, sponsorship opportunities, research, government relations, etc. Doing so will benefit not just members of the various associations, but the strength and voice of our industry as a whole

In addition, CAAMP has to be more responsive and approachable. It has to advocate the broker channel while improving its events and symposiums. CAAMP has to remain the best source for government and the media with respect to all-things-mortgages.

Over the years I have asked my teams, “What is the solution? Don’t just tell me your challenges; tell me the recommendations to fix them.”

At this point in my career, I feel I must get more involved. I want to be part of the solution.

I have been a member of our national association since 2001 and an AMP since 2007. On a personal level, I feel that CAAMP has provided me with an opportunity to connect with a large number of people across our industry over the years. The way I see it, ours is a very small, close industry and the opportunities to interact with our colleagues, suppliers, and competitors have proved priceless.

I appreciate your support and welcome your feedback, comments and questions.

Cheers to a “new year” and a new perspective.

Mark

Avoid common mistakes when purchasing a home

Young Canadians feel that housing is still a good investment, according to the 21st Annual RBC Home Ownership Poll. Nearly nine-in-ten (86%) of those aged 25-34 believe that owning a house or condo is a very good investment, up from less than eight-in-ten (78%) in 2013. Interest in purchasing has increased in nearly every region in the country from last year. This change in buying intention bodes well for the housing market and shows a renewed confidence in young buyers.

Those potential home owners named job stability and manageable debt levels as the reasons why they would consider buying. Among those likely to buy a home within the next two years, four-in-ten will be first time homebuyers.

The old adage “Buyer Beware” however, still holds true. Most homeowners admit to making at least one mistake when they purchased their home according to the last year’s RBC Home Ownership Poll. While owning a home is a dream come true for many, it can also be stress-laden if you find you’ve made an error.

Here are 10 mistakes to watch out for when you take 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 costs more than they expected to make improvements.  Don’t rush in, sit down and plan.
2. Not having a bigger down payment.  Having a larger down payment can lower mortgage payments, which could help with the household budget.
3. No Home Inspection. If you skip the step you might find the 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. Consider all the costs involved and create a realistic budget.  There are monthly mortgage payments, property taxes, and utility bills. On top of that you’ll probably want to redecorate, buy new furniture etc. Plan your budget accordingly. 
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, oh, 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, shop accordingly.  
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 love with a house. Fall in love with each other but not with a house. You will not listen to the advice everyone is giving you. You will ignore the obvious cracks in the foundation because it has 18ft. ceilings and 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 and term that works for you and your financial situation.

New Director of Sales for TMG The Mortgage Group in Alberta & Prairie Regions

TMG The Mortgage Group is pleased to announce Dan Haight as Director of Sales for the Alberta and Prairies Regions. Haight comes to TMG with 20-plus years of financial and mortgage experience in the banking industry. In these management positions he was responsible for growing the mortgage teams, increasing mortgage volumes while working to strengthen existing and new business partnership opportunities. At TMG he will take on a similar role.

Working out of Calgary, Haight has developed a wide network of contacts and has developed relationships with top mortgage people, lenders, and referral partners.

His experience along with his respect for and commitment to the broker channel makes him a valuable addition to the TMG team.

His decision to join TMG came at a time when he was looking for a change both in his career and in his personal lifestyle. After meeting with Grant Thomas and Mark Kerzner, he made the decision to join TMG because he saw a company with quality individuals who had a great reputation in the industry.

“TMG has much to offer – excellent lender relationships, access to all levels of management, a great broker-friendly back office and a corporate culture that puts people first,” he said.

Mark Kerzner, President of TMG The Mortgage Group Canada Inc. has been impressed with Dan from the outset.  “I am thrilled he has decided to join the TMG team. He embodies the TMG values of professionalism, integrity, and putting the customer first. "
   

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.