What's Mortgage Default Insurance?

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Interesting Facts About First Time Home Buyers In 2015

This content was produced by Randall Anthony Communications, in partnership with The Globe and Mail’s advertising department.

We’re paying off mortgages faster than thought

TORONTO – A new report suggests that Canadian homeowners are paying down their mortgages faster than they’re being given credit for.

CIBC deputy chief economist Benjamin Tal says homeowners are taking advantage of record-low interest rates to accelerate their mortgage payments, and shorten their amortization periods.

The CIBC World Markets study says that homeowners are paying an additional $11 billion a year in principal that isn’t being officially recognized by the Bank of Canada.

It suggests that an estimated 30 to 40 per cent of households with mortgages are accelerating their payments. While 40 to 50 per cent of borrowers are estimated to have amortization periods of less than 20 years, rather than the standard 25 years.

Tal says that means the debt-service ratio in the Canadian mortgage market — what it costs to carry a mortgage as a share of disposable income — is 7.3 per cent, one point higher than the 6.3 per cent officially used in calculations by the Bank of Canada.

Tal adds that this makes the Canadian housing market much more stable than previously thought, if interest rates were to rise.

“Canadian households did not only resist the temptation of low rates, they used those low rates to pay down debt at a pace not seen before,” he said.

“Despite a lethargic labour market and an unemployment rate that is still too high for the Bank of Canada’s liking, debt service performance in Canada has almost never been better.”

by The Canadian Press
October 15th, 2014

Big Bank Predicts Rate Hike

The end of record-low rates is nigh, according to one major bank, which has taken a stance and predicted when the Bank of Canada will raise its long-standing overnight rate.

“Firming price pressures and strengthening labour markets are consistent with a gradual path to normalizing interest rates,” TD Bank’s quarterly economic forecast, released Thursday, states. “We see the Bank of Canada beginning to raise its overnight rate in mid-2015.”

The overnight rate has been held at one per cent since September 8, 2010.

“The Bank remains neutral with respect to the next change to the policy rate: its timing and direction will depend on how new information influences the outlook and assessment of risks,” the Bank of Canada said in its most recent statement about the overnight rate, released in early September.

TD Bank, however, predicts the short term rate will hit 2 per cent by the end of 2016. The bank believes even a slight increase will put a limit on household spending, as debt-to-income levels are still around 165 per cent.

Of course, it wouldn’t be an economic forecast if the bank didn’t mention the current state of the housing market, which it still holds a conservative stance on.

“In the near term, the housing market and household debt levels present an upside risk to the forecast,” the statement says. “Borrowing rates remain at record lows and housing momentum has stayed strong.

“Over the medium term, we still expect a cooling trend, consistent with a gradual increase in both trend inflation and interest rates.” 

by Jamie Henry | 26 Sep 2014

Eight Ways to Power-Save Your Way To a Down Payment

1. Move in with your parents or in-laws

Explain that you’re thinking strategically in moving back home. The

quickest way to get into the housing market is to maximize savings,

which is difficult to do when you’re paying the cost of rent in a big

city. You’ll pay your parents a token amount of rent, but most of

your savings will go directly into your house down payment fund.

Tell your parents to think of the grandchildren you’ll be raising in the

house you’re saving for.

2. Move down one level of rental

If you have a two-bedroom apartment, try going down to one bed-

room. Or, trying squeezing into a bachelor apartment. You could

also look at moving to a cheaper part of town, as long as it won’t

jack up your commuting costs. Get rid of stuff that won’t fit in your

new, smaller place, or store it in your parents’ basement. Don’t

spend money on a storage unit.

3. Sell your car and take the bus

You’ll be saving on fixed costs such as parking, insurance, gas,

maintenance and possibly car payments, and you’ll be protected

against the risk of financially catastrophic four-figure repair bills.

Rent a car or use a car-sharing service for those times when the

bus won’t cut it. A cheap bike will help you save on bus fare.

4. Stop buying lunch

A pain, but worth it. You’ll have to think ahead by either picking

up the right groceries to make your own lunch, or by scooping up

after-dinner leftovers. Healthier than your food-court lunch, which

you’re probably sick of anyway.

5. Dial down your vacations

New York is out. Maybe Buffalo. For West Coasters, maybe Seattle

instead of Hawaii. Use the likes of Airbnb (airbnb.ca) to find cheap

accommodations instead of staying in a pricey hotel. Or stay home

and use some of the money you saved on hotels to try some nice

restaurants in your town. This is good practice for when you own a

home and find that fancy vacations are unaffordable without going

into debt.

6. Put a $100 price limit on birthday presents

Extravagant presents are fun to both give and receive. But they’re a

luxury for people who are more financially settled than someone who is

 

madly saving for a house down payment.

 

 

7. Cut your cable, TV and landline

Almost like heat and hydro, an Internet connection is essential.

But a home phone is dispensable if you have a smartphone, and

cable TV can be replaced by Netflix, watching shows online and

using an HDTV antenna. Also, try buying up DVDs of movies

and TV show seasons at garage sales, or find stores that sell

used DVDs, CDs and videogames.

 

8. Halve your spending at Restaurants and Bars

Studies of Generation Y spending habits show that going out to

eat and drink is big. Hey, everyone needs a hobby. But this one

is too expensive for people who are set on buying a house. Aim

to eat out less often, and rather than pay marked-up restaurant

or bar tabs, grab a beer from the fridge.

And one more thought: Ask for a raise at work!

 

Stability for Spring Mortgage Rates

by Jamie Henry | 12 May 2014

Stable bond yields and a competitive spring market lead to status quo for fixed mortgage rates in the short term. Variable mortgage rates, however, aren't to change until 2016 as exports and inflation remain below the Bank of Canada's forecast.

Fixed Mortgage Rates: Unchanged: The busy spring buying season is in full swing, prompting lenders to stay competitive with their rates, as Canadian buyers snap up homes in droves. This is supported by stability among government bond yields, which have not fluctuated enough to warrant any pressure placed on fixed rates in the short term.

Variable Mortgage Rates: Unchanged: Central interest rates won't rise until 2016, according to the Bank of Canada's top man himself, Stephen Poloz. Lower-than-expected export activity and steep retail competition continue to depress inflation growth, the required driver behind a potential rate rise. Lowering rates isn't likely, as the Bank feels credit is cheap enough - household debt levels continue to grow amid such accessible borrowing costs.

 

4 Tips for a Stress-Free Summer Move

The majority of Canadians prefer to make their big move during the summer season.  There are a variety of reasons for choosing this time of year:  it is easier to transport boxes in good weather, no need to worry about your belongings freezing during transport, and children's lives are not disrupted by the transition since they are on summer holidays.  Minimize potential moving chaos by asking yourself the following questions:

Do you need to keep everything? Moving offers a good opportunity to reorganize your life by giving away, donating or recycling items that you no longer need.  You'll thank  yourself later when there is less to pack and to transport.

How well do you know your moving company?  The Office of Consumer Affairs drafted a Consumer Checklist for choosing a moving company and it reminds Canadians to request their moving estimate in advance and be mindful of seasonal rates (a summer move can be pricier).  Will your items be held in the transport vehicle overnight or a secure facility?  Consider purchasing Replacement Value Protection, which will ensure the company is liable if your possessions are damaged.

Do you have enough boxes and packing materials?  Start collecting boxes and newspapers in advance; ideally you should begin packing non-essential items a month in advance.  Pack and clearly label a couple boxes with important first day arrival items, such as toothbrushes, remote controls, medication, and pet food, which could otherwise become lost in the shuffle.

Once you step in the door, what are your top priorities?  After the bed is set up, most people are eager to get connected by hooking up their TV, internet and home phone.  Rogers introduced a free concierge service which makes this process easier by setting you up with a personal concierge agent.  The agent proactively connects with customers throughout the transition, reviews order details, answers billing questions, and can assist with any changes to your order if your moving date needs to shift.  Entering the next chapter of your life can be a thrilling time, but like any significant life change, the process can be quite overwhelming.  Control potential moving chaos by jotting down questions and tracking their completion on your personal checklist.

Source:  News Canada