Hello there,
Canadian Finance Minister Jim Flaherty has come forward to state that regulations for real estate purchases and mortgage amortizations could change soon. In view of the recent meltdown in the US that caused a global recession,his intentions are to increase the minimum down payment (probably to 10%) and lower the over all amortization from 35 years (high-ratio) and 40 years (conventional) to a lower amount (likely 30 years) amortization. Home owners are taking on too much debt and if they are forced to save more to create a larger down payment, it will help for the overall stability of the country. Unlike the US, our banking system is still very secure and citizens in general have reasonable debt loads. However the American economy is very fragile and could crumble at any time. The more we are prepare with limited debt and the ability to handle larger rates, the better. With a larger initial down payment, we will be able to handle a drop in home prices when it comes to refinancing or selling. The initial concern about these potential changes will affect home values. The number of buyers will decrease significantly causing more supply and less competition. First home buyers will also be hit hard with this including existing owners and investors. Too many Canadians rely on their home equity as a retirement fund avenue. This is terrible financial planning and many will be impacted down the road. Personally I think they should tighten qualification guidelines prior to resorting to such extreme measures.
I don’t think they should cut out 5% down completely but instead only make it available for people who aren’t over leveraged. Currently we are able to use up to 44% TDS (total debt servicing ratio) with a 5% down payment. My suggestion is to decrease that number to 40%. This forces people to keep their debt load down which teaches better financial planning. A large portion of first home buyers are coming into the market with only 5% down. By increasing the minimum down payment, you will probably lose upwards of 20% – 25% of potential purchasers, which our economy needs until stability is no longer dependent on the real estate market. Decreasing the mortgage amortization from 30 – 35% won’t cause a huge affect in the suburbs but will certainly cause issues downtown. The properties are already overpriced and out of reach for many purchasers even with a 35 year am.
Personally, I wouldn’t change the 35 year amortization but perhaps again only offer it to those who aren’t over leveraged.
There is a rule in the land of banking to remember; they lend to those who don’t need money and don’t lend to those who need it.
Keynote speech from Jessi Johnson January 27th in Langley: Finding your niche and branding yourself are key when marketing your business but there are equally important topics requiring attention that many business owners forget. Working efficiently allows more time to market yourself and keep on the radar of your potential clients. Harnessing Social media, your database and properly using email campaigns will significantly add to your future success. Join me for an hour of interactive discussion on above topics. Click here to reserve seats and obtain more details.
Next seminar after the Olympics is coming Thursday March 18th at the Point Grey Community Centre from 7:00 – 8:00 pm. If you are interested in getting some free education and entertainment, Click here to reserve seats.
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Interest Rates
Today (January 19th),the Bank of Canada met again to discuss the over night lending rate, and they chose to keep the rate at its current value and revisit the circumstances in three months. This means all you lucky people with LOC’s (line of credit’s) or VRM’s (variable rate mortgages) get to enjoy record breaking rates even longer. Are you about to purchase and can’t decide whether to go fixed or variable? Check out my blog with Vancouver realtor Mike Stewart on Fixed vs. VRM. Whether you go fixed or variable is a win win situation at this point.
Media
Nothing to tell you this month, my wedding on the 5th & 6th has kept me out of the media.
Past Articles
What does a payment of $______ get me with today’s rates? I was recently ask an excellent question that at the time I wasn’t able to answer. What does a payment of _______ get me for a mortgage these days with today’s rates? This is a difficult question to have an answer right off the bat because… CLICK HERE TO READ
Jim Flaherty Comments On Tighter Lending Standards & Canadian Mortgages. Canadian Finance Minister Jim Flaherty has come forward to state that regulations for real estate purchases and mortgage amortizations could change soon. In view of the recently meltdown in the US that caused a global recession, he motioned his intentions were to…. CLICK HERE TO READ
AM730 Mortgage Secret™ radio spots: CLICK HERE TO LISTEN
you.com (Featured article for CMP magazine): About three and a half years ago, I obtained my mortgage broker license. It was a good day, but now what do I do? I can ramble on for hours about marketing but none of it means anything unless…. CLICK HERE TO VIEW THE ARTICLE
Client Success
I was recently approached to pull out a small amount of equity from a client’s current residence which was clear title (mortgage free) home. The plan was to pull out and put 20% down on a new purchase. He and his wife were going to move into the new home and rent out the existing property. After asking a number of relevant questions I advised the client to restructure things and this is why; A rental property is an income producing entity where you earn income but also pay tax. Many people don’t realize that you can write off the interest portion on a mortgage if it is being using for the purpose of business. So in this case we instead refinanced the current home to 80% LTV and put a massive down payment on the new property. Mr and Mrs “X” are going to REALLY appreciate me every year at tax time when they get a massive tax return that they wouldn’t have previously had.
Suggest someone you think would appreciate some real estate advice and get a free copy of this book!
The Groom -To-Be’s Handbook: Funny story about how I came to possess the fine piece of literature. It must have been a year ago when I was minding my own business on a bright sunny weekend afternoon. My future brother in law decided to break into my car and place this book on my car seat. It came complete with a black tie and ring (you will notice the ring is missing.) At first I had a good laugh because this was a clear hint and in a very creative way. At the same time I was honoured to have their blessing and stamp of approval. I don’t have too much to say about the book because I am sure you can guess the majority of its content. I would however certainly suggest reading this or something like it before taking the next step. In a relationship you are consistently learning about your partner. Somethings good and some things even better. It’s how you deal with the relationship’s circumstances that really matter. This book was a pleasant reminder of my intentions but also provided some good examples and suggestions on how to think before acting. Make sure to plan ahead and be properly prepared for this wonderful milestone in your life. |
