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BC First Time Home Buyer Downpayment Loans

save_moneyThere has been a lot of changes with regards to qualifying for a mortgage as of late, but I was happy to see that there is now some relief available for Canadian first time home buyers when it comes to buying a home and  saving for a downpayment.

The BC Government has implemented the BC Home Owner Mortgage and Equity Program granted to Canadian citizens or permanent residents who have never previously owned a property and only apply to homes worth less than $750,000. A buyer must be able to     pre-qualify for a mortgage (that’s where I come in) and have a gross household income of less than $150,000. Applications open Jan. 16, and the program ends March 31, 2020.

The government would put a second mortgage on a property to reflect the amount it loaned, but not require any interest payments or payments on the principal for the first five years. After that, the 20-year repayment plan would be set at the prime lending rate plus 0.5 per cent, leaving the homeowner to pay back both the original mortgage and the down-payment loan at the same time.  There is no restriction to pay the loan out in part or full at any time.

The loans are available for condos, townhouses or detached homes. On a property worth $600,000, the government loan could help a buyer meet or exceed the federally set minimum down payment of $35,000. In one example, provided by B.C. Housing, a person who saved $30,000 could apply to get an additional $30,000 from the province, giving the buyer a $60,000 down payment.

Another example for reference is; as the minimum downpayment requirement is 5%, you, the consumer,  would have to come up with 2.5%, then the government would match the additional 2.5% required to make up the total 5% downpayment.  There are different sources of downpayment to consider as well;  RRSP, Borrowed, gifted from a family member or your own savings.

As always if you’re considering purchasing a home in the near future, the best thing to do is be informed.  My consultations are free and there is no obligation.  If you are simply looking to explore your options or curious and have some questions, please do not hesitate to email me at lisa@mortgageplayground.com or call me toll-free at 1-888-819-6536.

Lisa Alentejano

 

 

 

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New Mortgage Rules Coming Effective July 9, 2012

Some changes that will come into effect on July 9, 2012.   How will this affect homebuyers or home owners in terms of dollar amounts… Heres a quick snapshot below;

Payments based on a 25 year amortization vs a 30 year amortization would cost the borrower  a difference of $52.48 per month per 100K in mortgage.   In terms of borrowing power the homeowner that could buy a home for $300k would now only be able to afford a $266K home, a difference of approximately $34k based on the above changes from 30 year amortization to 25 year.  If your in the market for a mortgage or a refinance, I would consider firming those details up before July 9, 2012 to take advantage of our current options.

READ ON; After speaking in Halifax just hours after Finance Minister Jim Flaherty announced a series of changes that come into effect next month, Mr. Carney reiterated his concerns about the effects that his ultra-low interest rates have had on the behaviour of both borrowers and lenders, warning the economy cannot “depend indefinitely” on debt-fuelled spending, especially as incomes stagnate.

At the same time, Europe’s growing crisis is expected to keep the central bank on hold for a long time yet, leaving regulation as the only real avenue for reining in housing-related investment, which Mr. Carney said now makes up “an unusually elevated share” of the economy.

“In this context, Canadian authorities are co-operating closely to monitor the financial situation of the household sector, and are responding appropriately,” Mr. Carney, who was almost certainly involved in Mr. Flaherty’s decision, said in a speech to the Atlantic Institute for Market Studies.

“Today, federal authorities have taken additional prudent and timely measures to support the long-term stability of the Canadian housing market, and mitigate the risk of financial excesses.”

Last week, Mr. Carney and his policy team warned that Europe’s worsening drama could slam Canada with a “major shock” if it is allowed to spread out of control and further infect healthier regions, particularly the still-fragile U.S. economy. They also warned that more Canadian households could find themselves under water with their debt payments if a big unemployment shock were to result, and sharpened their warnings about Toronto’s booming condo market.

Some investors are betting that the situation in Europe and the failure of the U.S. economy to gain more traction could force the central bank to cut interest rates from the current 1-per cent level sometime later this year. However, in his speech, Mr. Carney strongly hinted that he is not even considering a reduction in rates, echoing much of the language on the economy from his last interest-rate statement on June 5, indicating his domestic outlook hasn’t shifted much since then.

“Despite these ongoing global headwinds, the Canadian economy continues to grow with an underlying momentum consistent with the gradual absorption of the remaining small degree of economic slack,” said Mr. Carney, whose next decision is scheduled for mid-July. “To the extent that the economic expansion continues and the current excess supply in the economy is gradually absorbed, some modest withdrawal of the present considerable monetary policy stimulus may become appropriate.”

Still, Mr. Carney left himself the same wiggle room from recent statements, saying that the “timing and degree” of any rate hikes would depend on how things play out.

There’s good reason for him to be cagey, and not just outside of Canada’s borders. Despite the worries about consumers over-borrowing, recent economic data suggest the housing market is already slowing down, and a report from Statistics Canada today showed that in April, retail sales fell – both in terms of prices and volumes.

Some analysts have already warned that the mortgage moves could be too effective and spark a slowdown in a key area of strength before the economy is ready for it.

Earlier Thursday, Mr. Flaherty confirmed that Ottawa will reduce the maximum amortization period to 25 years from 30 years, and will cut the maximum amount of equity homeowners can take out of their homes in a refinancing to 80 per cent from 85 per cent. Also, the availability of government-backed mortgages will be limited to homes with a purchase price of less than $1-million, and the maximum gross debt service ratio will be fixed at 39 per cent, and the maximum total debt service ratio at 44 per cent. All the changes will take effect on July 9.

Mr. Carney’s speech, meanwhile, was largely a re-hash of his views on what is needed to foster the more balanced and sustainable global economy on which export-heavy Canada’s fortunes largely depend, including an “open, resilient” financial system. The central banker, who is also chairman of the Group of 20-linked Financial Stability Board, again warned against delaying the implementation of reforms designed to make international finance safer for the global economy.

“The current intensification of the euro crisis has only sharpened our resolve,” he said, adding that a system that restores confidence will need to “rebalance” the relationship between government regulation and financial markets, and in which policy makers realize they must help do what’s good for the world rather than taking a simply national approach.

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Mortgage Rates – How to protect yourself when they increase – Video message!

Heres a video I personally did on how to take a proative approach to protect and prepare yourself with rising interest rates in the future and save thousands of dollars! Click below to view video

Inflation Hedge Strategy - Learn to protect yourself from rising rates

Lisa Alentejano

Posted in Bank of canada rates, BC Mortgages, BCMortgage, British Columbia Mortgages, Canadian Economy, Canadian Housing Market - Lisa Alentejano, Canadian Mortgage News, Low Interest Rates, Mortgage Affordability, Mortgage Language, Mortgage Rates

Bank of Canada maintains overnight rate

Bank of Canada maintains overnight rate target at 1 per cent

OTTAWA – The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

The global economic recovery is entering a new phase. In advanced economies, temporary factors supporting growth in 2010 – such as the inventory cycle and pent-up demand – have largely run their course and fiscal stimulus will shift to fiscal consolidation over the projection horizon. While the Bank expects that private demand in advanced economies will become sufficiently entrenched to sustain the recovery, the combination of difficult labour market dynamics and ongoing deleveraging in many advanced economies is expected to moderate the pace of growth relative to prior expectations. These factors will contribute to a weaker-than-projected recovery in the United States in particular. Growth in emerging-market economies is expected to ease to a more sustainable pace as fiscal and monetary policies are tightened. Heightened tensions in currency markets and related risks associated with global imbalances could result in a more protracted and difficult global recovery.

The economic outlook for Canada has changed. The Bank expects the economic recovery to be more gradual than it had projected in its July Monetary Policy Report, with growth of 3.0 per cent in 2010, 2.3 per cent in 2011, and 2.6 per cent in 2012. This more modest growth profile reflects a more gradual global recovery and a more subdued profile for household spending. With housing activity declining markedly as anticipated and household debt considerations becoming more important, the Bank expects household expenditures to decelerate to a pace closer to the rate of income growth over the projection horizon. Overall, the composition of demand in Canada is expected to shift away from government and household expenditures towards business investment and net exports. The strength of net exports will be sensitive to currency movements, the expected recovery in productivity growth, and the prospects for external demand.

Inflation in Canada has been slightly below the Bank’s July projection. The recent moderation in core inflation is consistent with the persistence of significant excess supply and a deceleration in the growth of unit labour costs. The Bank judges that the output gap is slightly larger and that the economy will return to full capacity by the end of 2012 rather than the beginning of that year, as had been anticipated in July. The inflation outlook has been revised down and both total CPI and core inflation are now expected to converge to 2 per cent by the end of 2012, as excess supply in the economy is gradually absorbed and inflation expectations remain well-anchored.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in an environment of significant excess supply in Canada.

At this time of transition in the global recovery, with a weaker U.S. outlook, constraints beginning to moderate growth in emerging-market economies, and domestic considerations that are expected to slow consumption and housing activity in Canada, any further reduction in monetary policy stimulus would need to be carefully considered.

The next scheduled date for announcing the overnight rate target is 7 December 2010.

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Bank of Canada signals rate increase..

The Bank of Canada has signalled it is likely to raise interest rates in the next few months in response to unexpectedly strong domestic growth, including a housing boom that has shown signs of developing into a speculative bubble.

In its latest monetary policy review on Tuesday the bank said it was maintaining its key overnight lending rate at 0.25 per cent for the time being, but it was “appropriate to begin to lessen the degree of monetary stimulus” with the recent improvement in the economic outlook.

Dropped from the statement was a pledge made repeatedly in recent months not to raise interest rates before the second half of 2010.

“The market is reading that as a signal that they’re going to hike on June 1 [the date of the next policy review],” said Shane Enright, currency strategist at Canadian Imperial Bank of Commerce. “The odds on an early rate hike have increased.”

The Canadian dollar rose above parity with the US dollar immediately after the Bank of Canada’s statement.

The central bank lifted this year’s growth forecast for Canada to 3.7 per cent, adjusted for inflation, from 2.9 per cent previously. However, it now expects the growth rate to slow to 3.1 per cent in 2011, compared with its earlier projection of 3.5 per cent.

The revision was based on stronger growth in other parts of the world, which has boosted the prices of Canada’s commodity exports, the booming domestic housing market and heavy government spending on stimulus projects.

House prices have soared to record levels in Toronto and Vancouver, and bidding wars have become commonplace. The government tightened mortgage lending rules this week in a bid to cool the market.

The Bank of Canada said the extent and timing of monetary tightening would depend on the outlook for economic activity and inflation. It would maintain its 2 per cent inflation target, it said. Meanwhile, it has halted measures to inject extra liquidity into financial markets.

Posted in BC Mortgages, British Columbia Mortgages, Canadian Economy, Canadian Mortgage News, Kamloops home mortgages, Mortgage by Lisa Alentejano, Mortgage Language, Protecting your biggest investment your mortgage

Choose mortgage words carefully!

When it comes to your mortgage contract, watch your language.  Many consumers fail to understand meaning of terms

Most consumers only look at their mortgage contract — one of the most important documents they will ever sign — just before they are about to close on a house, says Toronto real-estate lawyer Steve Brett.

“It’s very rare they come to me [first].

In residential transactions, they usually strike the deal first,” he says. “The mortgage commitment comes shortly prior to closing. I’ll talk to people over the phone and they’ll say, ‘These are the terms of the deal — is that the way it should be?’ ” For about $200, Mr. Brett says a consumer could run a pre-approved mortgage by him before buying a house. “But in 35 years, I’ve never had that happen.

I sometimes might get asked [to look at a mortgage contract] on refinancing.” Even the most basic mortgage contract terms, such as what constitutes the “prime rate” on a variable-rate mortgage, can create confusion.

“There can be different meanings to things like the prime rate or the base rate,” Mr. Brett says. “They could have prime rate of 2%, but the base rate for residential mortgages might be prime plus one [percentage point], so their prime rate becomes 3%. Clients could get into difficulty thinking they are getting a heavily advertised prime rate but they are not.” He had a customer come in recently with an offer of financing from a mortgage broker that said he was getting the “prime rate” from a specific company. “I pointed out that [their version] of prime rate might not be the same as the banks’.

He might have to pay a higher rate. His prime could be bank prime plus half a percentage point.” A bigger issue for consumers might be what their contract says about locking a variable-rate mortgage into a fixed rate during the term of the contract, usually five years. If they take advantage of the ability to lock in the rate, who gets to decide what that rate will be? “It can be pretty open-ended. The banks’ posted rates, for example, are not the real rate,” Mr. Brett says.

“You’ve got the right to lock in, but you are going to want to negotiate that rate and all the bank is obliged to do is give you the posted rate.” Mr. Brett says a preferable position would be to have a contract that says you have the right to negotiate at certain discounts to the posted rate if you lock in. “You always have the right to go elsewhere,” he says, adding that can mean financial penalties.