Michael Babad, The Globe and Mail
Toronto heads for buyers' market
Here’s the bottom line on Toronto’s housing market from Robert Kavcic at BMO Nesbitt Burns: Toronto is on its way to becoming a buyers’ market for the first time since the slump.
The BMO economist was referring today to the Toronto Real Estate Board’s latest numbers, released yesterday and which showed residential real estate sales plunging 21 per cent in September from a year earlier, though you’ve got to factor in two more business days a year ago.
Still, the signs are clear, particularly in the condo market, which has been a major area of concern and where sales lost 27 per cent. Standard detached homes sank by 19 per cent.
Prices climbed, by 8.6 per cent on average, but that’s bound to change.
“With new listings up 4 per cent year over year against a backdrop of falling sales, and with plenty of potential resale condo supply coming over the next year, Toronto is quickly heading for buyers’ market territory for the first time (depending on your definition) since the recession,” Mr. Kavcic said.
As National Bank Financial pointed out, the ratio of active listings to sales in Toronto hit its highest level in at least 14 years, excluding periods of recession.
Canada's housing market has been slowing in general, though some cities, such as Calgary, are still seeing sales increases.
The markets in Toronto and Vancouver, in particular, have worried observers.
Wednesday, 10 October 2012
Tuesday, 9 October 2012
Insured Buyers are the Majority
Rob McLister, CMT, CanadianMortgageTrends.com
Mortgage insurance is typically mandatory for homebuyers without 20% equity.
Putting down 10% on the average $350,152 home, for example, means you’ll cough up a $6,302 insurance premium (given fully documented income and decent credit). Since insurance premiums are tacked on to your mortgage, that adds up to $9,000+ if you amortize it over 25 years.
Of course, you can avoid insurance altogether by plopping down 20% or more. The challenge is, only a minority of buyers have that sort of equity.
Mortgage insurance is typically mandatory for homebuyers without 20% equity.
Putting down 10% on the average $350,152 home, for example, means you’ll cough up a $6,302 insurance premium (given fully documented income and decent credit). Since insurance premiums are tacked on to your mortgage, that adds up to $9,000+ if you amortize it over 25 years.
Of course, you can avoid insurance altogether by plopping down 20% or more. The challenge is, only a minority of buyers have that sort of equity.
According to the latest data from Will Dunning, Chief Economist of CAAMP, less than 4 in 10 buyers have 20% down payments.
For those purchasing from 2010 through spring 2012:
Given the widespread use of mortgage insurance, it’s easy to see how regulator’s insurance rule changes can rapidly alter home buying trends. In another few months, we’ll get a good sense for how the most recent rule tightening has impacted nationwide mortgage volumes.
For those purchasing from 2010 through spring 2012:
- 41% had less than a 10% down-payment
- 21% had a 10-19.99% down-payment
- Only 39% put down 20% or more.
Given the widespread use of mortgage insurance, it’s easy to see how regulator’s insurance rule changes can rapidly alter home buying trends. In another few months, we’ll get a good sense for how the most recent rule tightening has impacted nationwide mortgage volumes.
Sunday, 7 October 2012
Mortgage Life Insurance - What you should know
If you've ever had a mortgage, chances are you've been offered mortgage insurance. When it comes to mortgage insurance, I find the majority of people out there just sign up for whatever's offered, whether they understand what they're signing up for or not. Not to say this is good, or bad for the client, but I think it's important everyone have a general idea about what mortgage insurance is, and some key misconceptions out there. I should first say, I'm a mortgage broker, and not an insurance agent, I'm not licensed in insurance, so I only know what i've taken upon myself to learn. It's always a good idea to consult a licensed insurance expert to verify information, as most mortgage brokers and bank mortgage reps, are not licensed in insurance.
The basics on Mortgage Insurance:
-Sharie Marie Francoeur, Mortgage Professional with TMG The Mortgage Group Canada Inc. 2507300239 sharie@mortgagegrp.com
The basics on Mortgage Insurance:
- There are several different coverages you can apply for including life (that typically pays off the balance of your mortgage if you pass away), disability (that can either pay the balance of your mortgage, or make mortgage payments for a pre determined amount of time if you become disabled), or critical illness (that can either pay off your mortgage balance or make your payments for you, if you become critically ill).
- Any mortgage insurance that pays off the balance of your mortgage only pays that, the balance of your mortgage. So the coverage that you're provided with is a declining balance (as you pay your mortgage down over time). There is no remainder amount paid directly to you typically.
- Any benefits paid, are paid directly to the lender
- There are several different types of coverage (as with any insurance), that can include lender policies, brokerage policies, private policies. Any coverage has its benefits and drawbacks, so it's important to be informed on what you're signing up for.
- Mortgage insurance is different from term insurance, as it covers your mortgage balance only, compared with term insurance that provides you with a set amount of coverage for a specific term, and never goes down.
- Mortgage insurance is 'post underwritten'. I hear this all the time from insurance brokers as a reason for their clients to not buy it. What does it mean? It means your risk is not assessed beforehand, so the insurance company has the option if you pass away, to say, "Oh, well if you would have told us you had cancer, we wouldn't have insured you." In which case they will return the premiums you've paid, but not pay out the benefit of the policy. To my understanding, this is true with some insurance policies. But this is about the company, and not mortgage insurance specifically. Many insurance policy's are done this way, and many aren't. The mortgage insurance offered by my company (TMG The Mortgage Group) specifically, is not post underwritten (so your risk is assessed up front and you're covered or not covered from the beginning). It's important to know whether or not your coverage is pre or post underwritten.
- "If you change lenders you have to redo your mortgage insurance and your premiums increase because you're older, but the benefit amount has gone down." This I hear a lot as well. This is true if you purchase lender mortgage insurance. If your coverage is through your lender, and you switch lenders, you need new coverage. However, not all mortgage insurance policies are through the lender. If you purchase on through your mortgage broker, it's likely transferable if you change lenders, so your payment wouldn't increase as your current policy would stay in place.
- "It's expensive!" This is something I hear from time to time. Mortgage insurance, like any insurance, can be expensive, or can be inexpensive. It's important to compare your quote with the quote of an insurance broker, as sometimes it is expensive and sometimes it's a great option. It depends on the company you're working with, the type of coverage, and your personal health situation.
-Sharie Marie Francoeur, Mortgage Professional with TMG The Mortgage Group Canada Inc. 2507300239 sharie@mortgagegrp.com
Friday, 5 October 2012
Is it time to regulate road reps?
By Nestor Arellano, Mortgage Broker News
Should bank road reps come under industry regulation?
This is the question some brokers are asking as the heated debate on road reps appropriating the mortgage broker title continues to a simmer.
“I think this is the perfect time to look into having road reps licensed and regulated,” said Brian Lambert, broker with Real Mortgage Associates in Barrie, Ont. “Regardless of what name they end up using, this will help ensure that a governing body is overseeing their conduct and the service they provide.”
Like many mortgage professionals, Lambert argues that brokers go through strict education, training and licensing procedures before being allowed to practice. He believes banks should move to have their road reps and mortgage specialists undergo the same rigours to protect clients.
That would ensure the education that road reps get is standardized, he said, “and that the public is assured a governing body is keeping tabs on integrity and quality of service.
Banks encountered a similar quandary with bank employees representing themselves as financial advisers and giving clients investment advice even when they did not have any license or accreditation, recalled Lambert, a former insurance and investment adviser.
“Because of numerous problems and complaints from the public, the banks eventually required these advisers to be accredited,” said Lambert. “I am hoping we will see the day when bank employees giving mortgage advice are fully licensed just like brokers.”
Should bank road reps come under industry regulation?
This is the question some brokers are asking as the heated debate on road reps appropriating the mortgage broker title continues to a simmer.
“I think this is the perfect time to look into having road reps licensed and regulated,” said Brian Lambert, broker with Real Mortgage Associates in Barrie, Ont. “Regardless of what name they end up using, this will help ensure that a governing body is overseeing their conduct and the service they provide.”
Like many mortgage professionals, Lambert argues that brokers go through strict education, training and licensing procedures before being allowed to practice. He believes banks should move to have their road reps and mortgage specialists undergo the same rigours to protect clients.
That would ensure the education that road reps get is standardized, he said, “and that the public is assured a governing body is keeping tabs on integrity and quality of service.
Banks encountered a similar quandary with bank employees representing themselves as financial advisers and giving clients investment advice even when they did not have any license or accreditation, recalled Lambert, a former insurance and investment adviser.
“Because of numerous problems and complaints from the public, the banks eventually required these advisers to be accredited,” said Lambert. “I am hoping we will see the day when bank employees giving mortgage advice are fully licensed just like brokers.”
Road reps borrow 'broker' name
By Vernon Clement Jones, Mortgage Broker News
“For ease of use” some road reps are casually calling themselves “mortgage brokers who work for banks” to better "explain" their role to clients, one told MortgageBrokerNews.ca, arguing the practice is harmless.
“I don’t think it’s a big deal,” an Ottawa mortgage specialist recently quoted in a major Canadian newspaper told MortgageBrokerNews.ca. “What I do, to make it easier for the client to understand, is tell them that I’m a 'mortgage broker' who works for a bank. They don’t necessarily understand what a mortgage specialist or mortgage development manager is, so using ‘mortgage broker’ makes it easier for them to understand what it is I do.”
That September news article also refers to the mortgage specialist as a "broker."
The road rep, speaking on condition of anonymity, is among the growing number of specialists winning the kind of media attention all mortgage professionals covet as an increasingly complex housing market has reporters scrambling for expert commentary.
But mortgage specialists are largely using the term “broker” to better describe themselves to potential clients rather than as a tool to win greater media coverage, said one Monday.
The fact is some of their Realtor-referral partners are doing the same, using their websites to describe those road reps as “mortgage brokers.” Ostensibly, that is for the same ease-of-use reasons.
These latest examples come as CREA moves to downgrade its outlook for the Canadian real estate market, with the growth in home sales and prices slowing.
While new mortgage rules are largely responsible for the slowdown, they’ve also increased consumer need for mortgage advice, say industry veterans, worried unlicensed road reps borrowing the broker name unfairly position themselves to win some of that new business.
“For ease of use” some road reps are casually calling themselves “mortgage brokers who work for banks” to better "explain" their role to clients, one told MortgageBrokerNews.ca, arguing the practice is harmless.
“I don’t think it’s a big deal,” an Ottawa mortgage specialist recently quoted in a major Canadian newspaper told MortgageBrokerNews.ca. “What I do, to make it easier for the client to understand, is tell them that I’m a 'mortgage broker' who works for a bank. They don’t necessarily understand what a mortgage specialist or mortgage development manager is, so using ‘mortgage broker’ makes it easier for them to understand what it is I do.”
That September news article also refers to the mortgage specialist as a "broker."
The road rep, speaking on condition of anonymity, is among the growing number of specialists winning the kind of media attention all mortgage professionals covet as an increasingly complex housing market has reporters scrambling for expert commentary.
But mortgage specialists are largely using the term “broker” to better describe themselves to potential clients rather than as a tool to win greater media coverage, said one Monday.
The fact is some of their Realtor-referral partners are doing the same, using their websites to describe those road reps as “mortgage brokers.” Ostensibly, that is for the same ease-of-use reasons.
These latest examples come as CREA moves to downgrade its outlook for the Canadian real estate market, with the growth in home sales and prices slowing.
While new mortgage rules are largely responsible for the slowdown, they’ve also increased consumer need for mortgage advice, say industry veterans, worried unlicensed road reps borrowing the broker name unfairly position themselves to win some of that new business.
Thursday, 4 October 2012
As housing market slows, industry scrambles to paint positive picture
Garry Marr
Organized real estate is unable, it seems, to admit the glory days may be behind it.
Organized real estate is unable, it seems, to admit the glory days may be behind it.
Sales plummet in major markets and the industry comes up with a new explanation for the decline, draping its comments with a sense that everything is just fine. The excuses are piling up.
This month’s gem comes from the Toronto Real Estate Board: It complained September didn’t have enough working days — too many weekends.
I always thought people bought homes on weekends, but it seems the transactions are registered during the week.
“The number of transactions was down 21% in comparison to September 2011,” said TREB in a release. “However, it is important to note that there were two fewer working days in September 2012.”
This logic has produced a new measure from TREB: Sales were down only 12.5% — not the actual 21% — from a year ago on a “working-day basis.”
This will only make the conspiratorially minded angrier — most of them convinced that the so-called benchmark indices produced by organized real estate are covering up a major decline.
Vancouver’s real estate board likes to tout what it calls the MLS HPI (home price index) composite benchmark price for all residential properties. It was down 0.8% to $606,100 in September from a year ago and off 2.3% over the past three months.
Doesn’t sound too bad. But when you pull out actual sales data, you find year-over-year prices in August in Canada’s most expensive housing market were off 6.9%. For the first two-thirds of the year, prices fell 7.3%. The decline is happening; it’s the severity that seems to be under dispute.
The industry will tell you the benchmark is a more realistic measure because it is not skewed by, say, a sudden swing in sales in one segment of the market.
“The HPI takes into consideration what averages and medians do not — items such as lot size, age, number of rooms, etc. These features become the composite of the ‘typical house’ in a given area,” says Vancouver’s board on its website.
David Madani, an economist at Capital Economics, chuckles at some of the language used in real estate circles.
“It’s a bit lame,” says the notorious bear on the housing market.
“The answer is to ignore what they are saying. Sales are plummeting in Toronto and Vancouver. I say get used to this because this is going to go on for a couple of years. Our view is a 25% price decline.”
The normal course in any cycle is for sales to correct first and then for prices to follow, he adds. “There is a time lag, that’s what happened in the United States. There’s a time lag as sellers hold on, refusing to drop their asking price, eventually they acknowledge the market has shifted under them.”
Real estate’s other complaint these days is that Ottawa’s mortgage rules, introduced July 9, savaged the market. One of the main changes was the dropping of amortization lengths from 30 years to 25 years, which has the impact of handing the consumer a larger monthly payment.
Vince Gaetano, a principal at monstermortgage.ca says a tightening of lending requirements which affected the self-employed might be the bigger factor. But still, he wonders whether the housing market just needs a break.
“I think the market is tired,” says Mr. Gaetano, adding the impact of amortization changes is probably cumulative. The maximum amortization length for a government-backed insured mortgage has declined from 40 years in 2008.
“Every five-year drop represented a 1% interest rate hike in cash flow,” says Mr. Gaetano. “All of [the rule changes] have layered on top of each other. It’s a cash flow crunch. I think the reality is real estate is slowing down.”
Even Phil Soper, chief executive of Royal LePage Real Estate Services Inc., is feeling the heat to promote real estate after his company’s release yesterday suggested a decline is to be expected after a long expansion. “I got a hate email from someone in the industry saying ‘how could you talk about negative things in the housing industry.’ Well it’s a cyclical industry,” says Mr. Soper.
It’s not like his release didn’t have any positive spin: “The dream of home ownership is very much alive among young Canadians,” the CEO said in his release.
Maybe that’s not good enough. Perhaps no U.S. style housing nightmare is coming but the dream of home ownership is fading for some Canadians.
Wednesday, 3 October 2012
Vancouver showing ‘clear reduction in buyer demand’, real estate board says
Garry Marr
Vancouver’s real estate board says there have probably been “some reductions” in prices in some of its hottest markets, acknowledging the country’s most expensive city to buy a home in is now a buyer’s market.
The Real Estate Board of Greater Vancouver maintains that prices remain stable overall in its market. It says its benchmark price index is $606,100, a 0.8% drop from a year ago and a 2.3% decline over the last three months.
But there is no mistaking the steep decline in sales activity which in September was 41.6% below the 10-year average.
“There’s been a clear reduction in buyer demand in the three months since the federal government eliminated the availability of a 30-year amortization on government-insured mortgages,” said Eugen Klein, president of the board. “This makes homes less affordable for the people of the region.”
The board said there was 1,516 sales in September, a 32.5% drop from a year and an 8.1% decline from just a month earlier.
It was also well below the 10-year September sales average of 2,597.
“The summer of 2012 drew to a close in September with home sale activity well below historical averages in the Greater Vancouver housing market,” said the board in its release.
New listings for detached, attached and apartment properties were 5,321 in September, a 6.3% drop from a year ago but still a 31.6% increase from August. In total, Greater Vancouver had 18,350 residential property listings Multiple Listing Service in September which is a 14.1% jump from a year and a 4.5% climb from August.
“Today, our sales-to-active-listings ratio sits at 8%, which puts us in a buyer’s market. This ratio has been declining in our market since March when it was 19%,” said Mr. Klein, emphasizing the impact has yet to be felt on price.
“Prices in the region remain relatively stable overall, although we do see some reductions in the areas that have had some of the largest price increases over the last year or two.”
The benchmark price for detached properties dropped 0.5% from September 2011 to $935,600. The benchmark price of an apartment property fell 0.7% from a year ago to $368,600.
Tuesday, 2 October 2012
Mortgages and Loans: Harder for the Self-Employed?
Nancy Carr, special to the Globe and Mail
As a self-employed website developer who had recently restructured his business, Greg Schmidt knew that refinancing his mortgage wasn’t going to be a piece of cake.
“I had a little bit of a line of credit built up from shifting the focus of the business and my car lease had come up for being bought out, so I needed money to take care of that,” said Mr. Schmidt, a single 42-year-old who owns a home in Toronto that includes an apartment for income. “It turned out the best way to go was to do a new mortgage, increase the amount of the old one and take care of those costs.”
However, when he approached his bank, he was told “the numbers didn’t work for them.”
For salaried workers, “the numbers” would simply be printed out in black and white on a recent pay stub or a T4 slip, proving their income. But for someone like Mr. Schmidt, who has various clients and no guaranteed paycheque from week to week, the requirements are more complex.
When lenders work with self-employed people, they have to rely on what’s called stated income, rather than verified income. Stated income is the amount of income the borrower attests to having, and which can be supported with documents such as tax returns, notices of assessment, contracts and financial statements.
Meridian Credit Union, for example, requires that business owners applying for a mortgage provide two years of financial statements and their most recent notice of assessment.
“The two years of financials tell us the strength of the business and the ability of the business to pay the business owner a reasonable salary for that business owner to have cash flow to repay debt,” said Rick Arnds, senior manager, emerging markets at Meridian in St. Catharines, Ont. “The [notice of assessment] tells us how much this person is actually reporting out back to the government as their income. There’s a balance between those two.”
That’s because business owners often report relatively small income after they have accounted for all of their expenses. They’re usually not subject to the normal gross debt service and total debt service ratio formulas, but lenders do look for a reasonable reported income, according to Mr. Arnds. For example, he said, a notice of assessment indicating annual income of $5,000 and a request to borrow $60,000 would raise a red flag.
Lenders will also assess the borrower’s assets. If someone is applying for a $400,000 mortgage and his notice of assessment doesn’t show income that would normally support that but his business owns vehicles and expensive equipment, the credit union will have a closer look.
“We would look at the situation and say, this is a strong business, it has strong assets that have been accumulated over the years, there’s a solid credit report with good repayment history and there’s cash flow within the business to repay the $400,000 principal residence loan,” Mr. Arnds said. “So we would probably give them the mortgage.”
Essentially, the lender needs to understand the borrower’s ability to service the debt they’re asking to take on. And the best way to do that, according to Richard Goyder, vice-president of personal lending at Royal Bank of Canada in Toronto, is for the lender to get to know the business and the business owner as well as possible.
“The best advice that I can give to self-employed people looking to take out a loan is to make sure that you have a relationship with your bank,” Mr. Goyder said. “When the bank is making decisions around whether to lend them money, those decisions are all around: How well do we understand this person’s business? How well do we understand their finances? And how well do we understand their ability to pay back this loan?”
Even if a business owner has a long-standing relationship with a lender, she might be denied the loan or mortgage she has asked for. In that case, Mr. Goyder said, the lender’s credit adjudicators will come back to the account manager or mortgage specialist and ask for additional supporting information or suggest a different way of structuring the loan. Or the loan might be offered at a higher interest rate.
“There may be an increase in the rate if you are high risk but, obviously, part of the point in the process of establishing income is to try to demonstrate that you do not represent a higher risk than somebody who’s on salary,” Mr. Goyder said.
In the end, Mr. Schmidt went to a mortgage broker, who secured a new mortgage for him with Merix Financial. The weeks leading up to the approval were stressful, he said, but it’s a stress he’s willing to take on if it gives him the freedom of running his own business.
“This happens once every couple of years, and all the benefits easily outweigh the reduced level of stress I have the other 59 months of the five-year term,” Mr. Schmidt said.
What you’ll need:
As a self-employed person, here are some of the documents you will need to apply for a mortgage or loan:
1) Tax returns and notices of assessment for the past two or three years
2) Financial statements
3) Confirmation that HST/GST payments are up to date
4) Contracts showing ongoing expected revenue
5) Personal credit score
6) Business credit score
If the lender is reluctant, you can bolster your case with these:
1) Co-signer
2) Bigger down payment
3) Proof of assets, such as business equipment, vehicles, property
4) Proof of skills, in case you were required to find a salaried position
“I had a little bit of a line of credit built up from shifting the focus of the business and my car lease had come up for being bought out, so I needed money to take care of that,” said Mr. Schmidt, a single 42-year-old who owns a home in Toronto that includes an apartment for income. “It turned out the best way to go was to do a new mortgage, increase the amount of the old one and take care of those costs.”
However, when he approached his bank, he was told “the numbers didn’t work for them.”
For salaried workers, “the numbers” would simply be printed out in black and white on a recent pay stub or a T4 slip, proving their income. But for someone like Mr. Schmidt, who has various clients and no guaranteed paycheque from week to week, the requirements are more complex.
When lenders work with self-employed people, they have to rely on what’s called stated income, rather than verified income. Stated income is the amount of income the borrower attests to having, and which can be supported with documents such as tax returns, notices of assessment, contracts and financial statements.
Meridian Credit Union, for example, requires that business owners applying for a mortgage provide two years of financial statements and their most recent notice of assessment.
“The two years of financials tell us the strength of the business and the ability of the business to pay the business owner a reasonable salary for that business owner to have cash flow to repay debt,” said Rick Arnds, senior manager, emerging markets at Meridian in St. Catharines, Ont. “The [notice of assessment] tells us how much this person is actually reporting out back to the government as their income. There’s a balance between those two.”
That’s because business owners often report relatively small income after they have accounted for all of their expenses. They’re usually not subject to the normal gross debt service and total debt service ratio formulas, but lenders do look for a reasonable reported income, according to Mr. Arnds. For example, he said, a notice of assessment indicating annual income of $5,000 and a request to borrow $60,000 would raise a red flag.
Lenders will also assess the borrower’s assets. If someone is applying for a $400,000 mortgage and his notice of assessment doesn’t show income that would normally support that but his business owns vehicles and expensive equipment, the credit union will have a closer look.
“We would look at the situation and say, this is a strong business, it has strong assets that have been accumulated over the years, there’s a solid credit report with good repayment history and there’s cash flow within the business to repay the $400,000 principal residence loan,” Mr. Arnds said. “So we would probably give them the mortgage.”
Essentially, the lender needs to understand the borrower’s ability to service the debt they’re asking to take on. And the best way to do that, according to Richard Goyder, vice-president of personal lending at Royal Bank of Canada in Toronto, is for the lender to get to know the business and the business owner as well as possible.
“The best advice that I can give to self-employed people looking to take out a loan is to make sure that you have a relationship with your bank,” Mr. Goyder said. “When the bank is making decisions around whether to lend them money, those decisions are all around: How well do we understand this person’s business? How well do we understand their finances? And how well do we understand their ability to pay back this loan?”
Even if a business owner has a long-standing relationship with a lender, she might be denied the loan or mortgage she has asked for. In that case, Mr. Goyder said, the lender’s credit adjudicators will come back to the account manager or mortgage specialist and ask for additional supporting information or suggest a different way of structuring the loan. Or the loan might be offered at a higher interest rate.
“There may be an increase in the rate if you are high risk but, obviously, part of the point in the process of establishing income is to try to demonstrate that you do not represent a higher risk than somebody who’s on salary,” Mr. Goyder said.
In the end, Mr. Schmidt went to a mortgage broker, who secured a new mortgage for him with Merix Financial. The weeks leading up to the approval were stressful, he said, but it’s a stress he’s willing to take on if it gives him the freedom of running his own business.
“This happens once every couple of years, and all the benefits easily outweigh the reduced level of stress I have the other 59 months of the five-year term,” Mr. Schmidt said.
What you’ll need:
As a self-employed person, here are some of the documents you will need to apply for a mortgage or loan:
1) Tax returns and notices of assessment for the past two or three years
2) Financial statements
3) Confirmation that HST/GST payments are up to date
4) Contracts showing ongoing expected revenue
5) Personal credit score
6) Business credit score
If the lender is reluctant, you can bolster your case with these:
1) Co-signer
2) Bigger down payment
3) Proof of assets, such as business equipment, vehicles, property
4) Proof of skills, in case you were required to find a salaried position
The Value of a Mortgage Broker
The real estate and mortgage industry is a competitive business. Recent changes in policies have slowed down the market somewhat, but hasn't stopped it. Forecasts may point to a slower pace in sales but each year hundreds of thousands of properties trade hands and this will continue. For consumers, competition is a good thing because it gives you choice. In the mortgage industry, with historically low interest rates, it's easy to shop the market to find a low advertised rate, whether from your local bank or from your mortgage broker. However, mortgages are not as simple as some make them out to be, especially when rate is all that is considered. Home buyers need to educate themselves on what is contained within the mortgage: pre-payment terms, penalties, fixed vs. variable, open vs. closed, etc.
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When a borrower works with a licensed mortgage broker, that broker takes on the role of a trusted adviser and problem solver, which differentiates them the rest of the crowd. Brokers take the time to first understand a client's needs, both short term and long term, then recommend the right mortgage and present options. In addition to straight home purchases, brokers work with clients who refinance to consolidate debt, who are looking to purchase second homes, who are looking for the best options at renewal time and brokers help clients make property-related investment decisions.
Many clients are doing research online and we encourage that. We can counsel clients who have less-than stellar credit or home buyers who don't qualify under the new mortgage rules on ways they can get that home. We take care of our existing clients, understand our lenders and keep educating ourselves. We add value by making sure we understand what a client wants and needs - their financial and personal goals - not just in the short term but over the long haul. From TMG The Mortgage Group Canada Inc. | |
Monday, 1 October 2012
Single Home Buyers Face Greater Headwinds Than Couples
Sunny Freeman - Toronto, The Canadian Press
Cobi Falconer single-handedly paid down the mortgage on her Vancouver condo while also paying tuition for four university degrees and working numerous jobs simultaneously.
Some 17 years after she bought the studio space in the trendy Kitsilano neighbourhood at the age of 23 – with some down payment help from her father – Ms. Falconer is proudly mortgage-free.
“It was a very rewarding experience, it’s all part of growing and learning and maturing,” says the 39-year-old archivist, who took on two full-time serving jobs during the summer and added co-operative and teaching assistant gigs during her grad school years.
“As a young person investing early it just made so much sense to not have to put money towards rent, it’s like investing in yourself.”
Census data released by Statistics Canada this week show that, for the first time, there are more people living alone in Canada than there are couples with children. One-person households now make up 27.6 per cent of all homes, a threefold increase since 1961.
Many Canadians are getting into the market on their own as low mortgage rates make ownership easier to finance and young people stay in school longer, get married later in life – or not at all – while baby boomers settle down on their own after a split.
But experts say singles should be extra diligent about some choices that come with buying a home.
“There is something about being on your own – the individuality, and you don’t answer to anybody – but if something goes wrong, you don’t have a backup too,” says Mark Weisleder, a Toronto-based real estate lawyer.
When deciding whether it’s time to buy or keep renting, one of the most important factors is how “rooted” you are, says Farhaneh Haque, director of mortgage advice at TD Canada Trust.
If you have a stable job and know you’re going to be in the same city for the foreseeable future, buying is a better investment opportunity than renting, she says.
But you have to be able to commit for at least three to five years. It’s not wise to buy if you may sell in one or two years because the expenses associated with selling – including the 5-per-cent commission paid to a realtor, plus legal fees, land transfer fees, etc. – can erode any investment gains made.
Also decide whether you’re willing to give up some of the perks, like travelling, dinners and nights out, of not being tied down to commit more of your income to a property.
For her part, Falconer decided against owning a car, rents out her parking space for extra income and eliminated frivolous purchases.
Being single makes it a little more difficult to save up a sizable down payment, so you may have to choose a condo or a property you can rent out to help pay some of your mortgage.
“When you’re buying by yourself, as opposed to buying as a couple, you sort of have to do double the work in terms of thinking about how you’re going to afford this,” TD’s Ms. Haque says.
Save up the biggest down payment you can – you don’t have to pay mortgage insurance if you’ve got 20 per cent – to make monthly payments more affordable and to pay less interest. In addition, you have to have an adequate nest egg set aside to cover costs associated with the initial purchase.
Your priorities as a single likely differ from those of a couple, so make sure you choose a property that aligns with your lifestyle as well as what you can afford. Ms. Falconer’s small studio space by the beach works because she can walk everywhere she needs to go.
For a single person, going with a condo may better fit your lifestyle because its requires a lot less maintenance. It could be harder to do things like just leave on a trip on a whim due to security concerns or financial burdens associated with upkeep of a non-condo property, Mr. Weisleder says. However, condos owners usually incur extra charges for amenities, security and some upkeep on the building.
If you’re unsure about whether buying is right for you, create a budget that includes your rent as well as living expenses and see how much you have left over to determine if you could comfortably carry a mortgage.
Owning costs about $500 to $600 more per month on average than renting, so you need to have that cushion, in addition to saving for a down payment, Mr. Weisleder says, adding that housing costs should ideally not eat up more than 30 per cent of your monthly income.
And remember that lenders can be harder on a single person because they are deciding based on only one credit report and one income – so you may qualify for less house or have to get a co-signer.
Mr. Weisleder says singles should be very careful before agreeing to waive financing conditions on a home purchase because he’s seen lenders make a deal that the home buyer thinks is ready to go, then receive a call later saying a co-signer is required. This happens more often to single people than couples because lenders are more nervous about factors such as net worth and income.
Cobi Falconer single-handedly paid down the mortgage on her Vancouver condo while also paying tuition for four university degrees and working numerous jobs simultaneously.
Some 17 years after she bought the studio space in the trendy Kitsilano neighbourhood at the age of 23 – with some down payment help from her father – Ms. Falconer is proudly mortgage-free.
“It was a very rewarding experience, it’s all part of growing and learning and maturing,” says the 39-year-old archivist, who took on two full-time serving jobs during the summer and added co-operative and teaching assistant gigs during her grad school years.
“As a young person investing early it just made so much sense to not have to put money towards rent, it’s like investing in yourself.”
Census data released by Statistics Canada this week show that, for the first time, there are more people living alone in Canada than there are couples with children. One-person households now make up 27.6 per cent of all homes, a threefold increase since 1961.
Many Canadians are getting into the market on their own as low mortgage rates make ownership easier to finance and young people stay in school longer, get married later in life – or not at all – while baby boomers settle down on their own after a split.
But experts say singles should be extra diligent about some choices that come with buying a home.
“There is something about being on your own – the individuality, and you don’t answer to anybody – but if something goes wrong, you don’t have a backup too,” says Mark Weisleder, a Toronto-based real estate lawyer.
When deciding whether it’s time to buy or keep renting, one of the most important factors is how “rooted” you are, says Farhaneh Haque, director of mortgage advice at TD Canada Trust.
If you have a stable job and know you’re going to be in the same city for the foreseeable future, buying is a better investment opportunity than renting, she says.
But you have to be able to commit for at least three to five years. It’s not wise to buy if you may sell in one or two years because the expenses associated with selling – including the 5-per-cent commission paid to a realtor, plus legal fees, land transfer fees, etc. – can erode any investment gains made.
Also decide whether you’re willing to give up some of the perks, like travelling, dinners and nights out, of not being tied down to commit more of your income to a property.
For her part, Falconer decided against owning a car, rents out her parking space for extra income and eliminated frivolous purchases.
Being single makes it a little more difficult to save up a sizable down payment, so you may have to choose a condo or a property you can rent out to help pay some of your mortgage.
“When you’re buying by yourself, as opposed to buying as a couple, you sort of have to do double the work in terms of thinking about how you’re going to afford this,” TD’s Ms. Haque says.
Save up the biggest down payment you can – you don’t have to pay mortgage insurance if you’ve got 20 per cent – to make monthly payments more affordable and to pay less interest. In addition, you have to have an adequate nest egg set aside to cover costs associated with the initial purchase.
Your priorities as a single likely differ from those of a couple, so make sure you choose a property that aligns with your lifestyle as well as what you can afford. Ms. Falconer’s small studio space by the beach works because she can walk everywhere she needs to go.
For a single person, going with a condo may better fit your lifestyle because its requires a lot less maintenance. It could be harder to do things like just leave on a trip on a whim due to security concerns or financial burdens associated with upkeep of a non-condo property, Mr. Weisleder says. However, condos owners usually incur extra charges for amenities, security and some upkeep on the building.
If you’re unsure about whether buying is right for you, create a budget that includes your rent as well as living expenses and see how much you have left over to determine if you could comfortably carry a mortgage.
Owning costs about $500 to $600 more per month on average than renting, so you need to have that cushion, in addition to saving for a down payment, Mr. Weisleder says, adding that housing costs should ideally not eat up more than 30 per cent of your monthly income.
And remember that lenders can be harder on a single person because they are deciding based on only one credit report and one income – so you may qualify for less house or have to get a co-signer.
Mr. Weisleder says singles should be very careful before agreeing to waive financing conditions on a home purchase because he’s seen lenders make a deal that the home buyer thinks is ready to go, then receive a call later saying a co-signer is required. This happens more often to single people than couples because lenders are more nervous about factors such as net worth and income.
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