Our Recommended Service Providers

Shopping for a Mortgage? A Stricter Stess Test is Likely on the Way

barb.eglauer@mortgagegroup.com

If you’re in the market for a mortgage over the next several months, you’ll want to read on.

Several new mortgage changes are coming down the pipeline that could affect your ability to qualify for a loan. Below we cover these changes and how they may impact you. 

A Stricter Stress Test (Potential impact: medium for uninsured mortgage borrowers)

Last month, Canada’s banking regulator proposed changes that will tighten the stress test for uninsured mortgages (those with a down payment of 20% or more). 

The Office of the Superintendent of Financial Institutions unveiled its proposal that would see the current qualifying rate rise from 4.79% today to 5.25% starting June 1. OSFI said it would also “revisit the calibration of the qualifying rate at least once a year to ensure it remains appropriate for the risks in the environment.”

Experts calculate that the tightening will result in a reduction in purchasing power of about 4%. In other words, if you can qualify for a $500,000 mortgage today, after June 1 that will be reduced to $479,000. 

Most uninsured borrowers who are well-qualified shouldn’t have a problem meeting the new qualification criteria, but if you’re currently near the limit of your borrowing capacity, you’ll want to run the numbers with me to ensure you can still qualify. 

Vacancy Tax for Foreign Buyers (Potential impact: none for Canadian residents)

Despite calls for the federal government to rein in house price growth, Finance Minister Chrystia Freeland’s first budget was absent of any significant measures aimed at cooling the housing market. 

More Rule Changes to Come?

It’s widely expected that the Department of Finance will eventually announce a tightening of the insured stress test to bring it more in line with the proposed changed for the uninsured test. This would apply to those obtaining a mortgage with a down payment of less than 20%. 

There’s been no confirmation as of yet, however when OSFI released its revised stress test proposal the Minister of Finance said this: “We will continue to monitor housing market conditions across the country. To inform potential steps the government may take, we will closely examine the results of the consultation announced by the Superintendent of Financial Institutions.”

Do you have a renewal coming up or are you considering a refinance? Are you concerned about the potential impacts of the stress test changes? The key is having all of this new information in hand before embarking on the process, and I’d be happy to review the changes with you. 

Forecasting Canada’s Housing Market in 2021 – Barb Eglauer One Of Our Preferred Service Providers

https://uandimortgage.com/

Earlier this year, the Canada Mortgage and Housing Corporation made a now-infamous prediction that home prices would fall by up to 18% over the course of 2020 and into 2021. 

Instead, prices have since risen by approximately 22% to $603,000, as of November. 

That discrepancy illustrates how difficult forecasting the housing market has become due to the economic uncertainty created by the pandemic.

For instance, factors suggesting a strong economic recovery in 2021 include promising developments on the vaccine front, sizeable spending by the federal government to support and stimulate the economy, pent-up consumer demand and historically low interest rates. 

On the other hand, rising COVID infection rates, long-term unemployment and a drop in exports are just a few of the factors that could continue to hinder the economy, and in turn impact housing demand and home prices. 

Current Home Price Forecasts for 2021

Despite the challenges of forecasting in today’s environment, multiple predictions have been issued over the past couple of weeks. Here’s a summary of where analysts see home prices headed in 2021:

The Bulls

  • The Canadian Real Estate Association (CREA): +9.1%
    • “Current trends and the outlook for housing market fundamentals suggest activity will remain relatively healthy through 2021, with prices either continuing to climb or remaining steady in all regions,” the association said.
  • RE/MAX Canada: +4% to +6%
    • “While we’ve seen a significant shift in buyer preferences this year. 
      We believe factors such as the supply issue, pent-up demand and historically lower interest rates will continue to fuel activity in 2021,” Elton Ash, a regional executive vice president at RE/MAX, said in a release.
  • Royal LePage: +5.5%


The Bears

  • RBC (+0.6%) and Scotiabank (+0.4%)
    • Both banks essentially expect flat price growth over the year, citing continued pandemic-related economic headwinds, continued weakness in regional condo markets and growing affordability concerns.
  • Fitch Ratings: -3% to -5%
    • “Declining rents, a significant drop in immigration and the B-20 mortgage affordability stress test will put pressure on Canadian home prices.
  • CMHC: -9% to -18%
    • As recently as September, CMHC announced it was standing by its original forecast of a peak-to-trough decline in home prices of between 9% and 18% before they start to recover in 2021.

With current forecasts all over the map, some will prove to be more accurate than others. But given how wrong the forecasts from earlier this year turned out to be, the lesson learned is not to take any home price predictions to the bank.

When purchasing a home, it’s important to consider all the other factors as well including; how well it meets your housing needs, affordability, etc.

I would be happy to speak with you to help you decide the best time to buy a house, and put a plan together, regardless of what’s happening or not happening in the housing market. 

Call me today!

Barb Eglauer – Should I Refinance My Mortgage?

I think we can safely say that 2020 has been a strange year. A year of lockdowns due to a pandemic, financial support from the government, and the lowest interest rates in recent history.  This has led to a rise in the number of homeowners who are considering refinancing their mortgage.  According to a recent poll, approximately 20% of Canadian homeowners say they plan to refinance their mortgage in the next 12 months.

Like all financial decisions, it’s important to look at the bigger picture, which includes reviewing your goals.  

First Things First — What’s a refinance?

A refinance alters the terms and conditions of your mortgage – it’s essentially a new mortgage.  Specifically, you are increasing the amount of your mortgage, whether to pay off consumer debt, finance a renovation, invest, or to get a lower rate.  

Here are a few reasons to opt for a refinance:

  1. Decrease your overall monthly debt payments by using the equity in your home to pay off those high-interest credit cards or unsecured loans.
  2. Lower monthly mortgage payments. A borrower may be able to lower their monthly payments by either securing a lower mortgage rate or by extending their loan term, which would spread their payments out over a longer time period. This can be important for those with a tight monthly budget and who are looking for additional financial breathing room.
  3. You can refinance to purchase another property. Using the existing equity in your home can be a great way to buy a rental property which, if done right, can also make the interest you pay tax deductible.
  4. You could also take out some of the equity for investment purposes — an option that many homeowners consider this time of year as they look ahead to the new year
  5. And there are more uses for your equity such as helping putting your kids through school.
  6. You can also finance a renovation or home improvements.

Repayment – What You Need To Know

Borrowing against your property is not free money – it’s a mortgage loan — and like any other loan, it has to be repaid. 

Speak to a Professional to Understand Your Options

There are many factors to consider before deciding to refinance. Each individual’s financial situation is different. Let’s talk about your unique situation and the options available to you. 

Call me today!

What You Can Expect From Caydence Photography – Our #1 Photographer of Choice

You Need the Best Photos!

Thoughtful and creative photography captures the attention of target buyers that enables your home to sell quickly, and at a higher price. Caydence Photography’s images are memorable as they tell the story of the home and help future homeowners picture themselves in the space. With meticulously taken real estate photos, the story of the home remains at the forefront of their minds and continues to engage positive feelings and aspirations. 

Setting the stage

The surest way of attracting competitive offers on a property is to collaborate with a professional real estate photographer and a stager. The staging designer prepares the home, helps to declutter and sets the stage for a fresh canvas. This allows them to create a clean, comfortable and inviting space. With new furniture and accessories, the images can communicate new possibilities to potential buyers.

Once the staging is complete, a professional photographer will use composition, proper lighting techniques and the latest technology to ensure that the property is presented at its absolute best, covering all sections of the property from different angles while remaining true to the real features and condition of the house. Caydence Photography ensures that every property is captured and represented to elicit that ‘wow’ factor from potential buyers and to bring them in for a walk through.

In turn, the property’s listings will get the much deserved attention and inquiries from investors, which allows you to get the best return on the property. In fact, expert photography is no longer a luxury; it is a requirement for selling properties effectively.

Stats to Mull Over

Recent studies have demonstrated that the vast majority of buyers find photographs exceedingly useful and influential in their buying decisions. For example, a 2018 study states that homes with high quality photography sell 32% faster.  Homes with more photos sell faster, too. A home with one photo spends an average 70 days on the market, but a home with 20 photos spends 32 days on the market. For homes in the $200,000 to $1 million range, those that include high-quality photography in their listings sell for $3,000-$11,000 more. 

In the current real estate world, unprofessional photos that look dark, crooked, inaccurate and amateur will deter clients who are browsing MLS listings. On the flip side, bright, sharp photos will entice potential buyers. This creates a distinct advantage over other listings in your neighbourhood that may not be using high quality, beautiful images.

Outdoing the Competition

In the Calgary real estate market, with the pandemic and struggling economy, the competition is stiff and the market is saturated. If you fail to use stunning images of your property, you may not be able to compete with other listings. You should also keep in mind that your home is an investment that has the potential to get you a substantial return if it has the best representation. Using spectacular images will enable you to be more competitive and successful, and to earn you back your investment.You do not want to miss out on the best prices for your home. That’s why Caydence Photography is the best choice for your Calgary Real Estate Photography.

What The New Stress Test Means For You By Barb Eglauer – One of Our Recommended Service Providers

What the New Stress Test Means for You  A few years ago, the stress test was introduced as a safeguard against rising interest rates, to make sure homebuyers would still be able to make their mortgage payments if their rate increased down the road. To qualify for a mortgage, buyers need to qualify at the greater of 2% higher than their actual rate, or the Bank of Canada’s benchmark 5-year rate, which today is 5.19%.

Earlier this month, Minister of Finance Bill Morneau announced changes to the benchmark rate used to determine the qualifying rate for insured mortgages – mortgages with less than 20% down payment. This change will come into effect on April 6, 2020.

There has been mixed response from the financial community about the effectiveness of this change. For some, the new qualifying rate will make it more affordable; for others, it won’t make much of a difference, especially in hot-market areas, where prices are rising quickly.

There has been pushback from some economists and housing experts who say that the new stress test will just further fuel the housing market.

Here’s what we do know:
1. Currently, the stress test for insured mortgages is 2% above contract rate or the benchmark rate, whichever is greater.
2. The new stress test, if it was in place today, would be approximately 4.89%, which is about 30 basis points below the current benchmark rate.
3. The Big Banks posted rates will no longer directly establish the benchmark rate.

4. Borrower’s will have slightly more purchasing power

Here’s what we don’t know:
1. We are still waiting for clarity on how the stress test on conventional (those with more than 20% down payments) mortgages will be determined.
2. If it will affect home prices. 

The new benchmark calculation, as stated, is more market-driven. If interest rates continue to fall, then, in many cases, buying power would also increase. Some economists are predicting rate cuts later this year, which could drop the median rate for the stress test even further.

The one truism is that every homebuyer has a unique situation. The stress test notwithstanding, each mortgage has to be tailored to each homebuyer. This will ensure that the mortgage is meeting their needs and helping achieve their financial goals.

I’d love to discuss these new developments, so call me today and let’s talk.        

Four Questions To Ask Your Mortgage Broker

Four Questions To Ask Your Mortgage Broker   Buying a new house should be exciting, but it can get pretty harrowing at times. You may worry you won’t qualify. You may feel unsure about house prices and worry about interest rates.  If you’re considering renovating instead of purchasing, you may worry you won’t qualify for a refinance. 
 
As we head in to the Spring season, this is the ideal time for us to discuss your goals, including a review of your financial goals, your credit profile, and find the best solution for your personal situation.  I will help you answer the following questions:

1. How much can I afford?

Usually people pick their homes before they organize their financing, but it should be the other way around. Determine what monthly payment you would be comfortable with and what money you have available for a down payment before delving into your house hunting. We can review your current sources of income and credit profile to help you determine the maximum purchase price you can afford and are comfortable with.

2. What type of mortgage should I consider?

Fixed or variable? A fixed interest rate is set when you sign for the mortgage; it won’t change for the entire term. A variable rate, however, may change according to market interest rates. While market fluctuations are hard to predict, I can give you historical data and economic information to help you make this decision. 

3. How much do I need for a down payment?

Many homebuyers assume they need to make a large down payment in order to get the best mortgage rate, but that’s not always the case. Mortgage insurance products allow buyers to put as little as 5% down and still get the same competitive mortgage rates.

4. What should I take into account for the future?

Everyone is excited about buying a beautiful home, but not everyone is thinking about what that means in the long term. For example, do you plan to have children, go back to school or take a trip of a lifetime? We would factor in the costs of your future potential plans as well. 

In 2017 and 2018 the government imposed the Benchmark Rate and Stress Test rate on all mortgages funded by federally-regulated institutions. We will review these factors and see what impact, if any, it has on your ability to qualify for a mortgage.

Summary

I have access to many primary lenders who offer the lowest interest rates, best terms and conditions. They also have the most stringent qualifying criteria.

I also have access to numerous “alternative” lenders. These lenders consider files with less stringent criteria than the primary lenders for qualification.

In addition, I have access to several pools of private mortgage options and to individuals who invest directly in mortgages. 

I realize that every individual has their unique situation. I will sit with you and go through all your possible options and outcomes so you can make an informed decision.

Let’s talk!    

The Mortgage/Housing Year In Review By Barb Eglauer- One Of Our Preferred Service Providers

The Mortgage/Housing Year in Review

We have seen a number of challenges in the housing market over the past few years. Housing prices have been up and down; housing sales were down but have rallied in many areas of the country in the last half of 2019. The government also introduced the First Time Home Buyer Incentive and enhancements to the RRSP Home Buyer’s Plan. Yet, affordability continues to be a hot topic across Canada.

Interest rates inched up slightly for variable rates and lines of credit. We’ve also seen a slight increase to fixed-rates in recent weeks due to the upward pressure on bond yields and increases to the cost of funds. Still, rates are relatively low – perhaps this is the new normal.  

The Canadian dollar is trading at approximately 75 cents to the US dollar (at the time of this writing) and there is continued concern about high consumer debt, but we continue to look on the bright side, supported by some new information.

According to a recent report from RE/MAX, an increase in consumer confidence could be a key factor affecting the housing market in 2020. 

The report found that Canadians have adjusted to the mortgage stress test, which was introduced three years ago on mortgages with less than 20% down payment and expanded to include all bank mortgages a short time after.

The report also found that older millennials are now moving into their peak earning years and will drive the market in 2020. RE/MAX found that more than half (51%) of Canadians are considering buying a property in the next five years, especially those under the age of 45. This is up from 36% at the same time last year.

A Reuters’ poll found that a strong domestic economy, rising immigration and lower mortgage rates have helped the housing market make a comeback in the second half of this year. “It is not just low interest rates that are helping the housing market – the fundamental support is demographic and that is largely from a rapidly growing population driven by international migration,” Sal Guatieri, senior economist at BMO said in an interview with Reuters.

The Canadian Real Estate Association’s (CREA) prediction for 2020 are that housing sales will continue to improve through 2020, albeit slowly. National home sales are forecast to rise by 7.5% to 518,100 units next year. Ontario and Quebec are predicted to see sales rise by about 7% in 2020, while activity in Alberta will recover by about 5% compared to 2019. The number of homes trading hands in other provinces is predicted to edge up or down only marginally.

With all the positives going into 2020, if you’re thinking of buying a new home, renewing a mortgage or refinancing an existing mortgage, or just want an update about your local market, let’s talk. 

Wishing you health, happiness, and prosperity in 2020

One Of Our Recommended Mortgage Specialists – Barb Eglauer on Debt and Debt Settlement Services

https://uandimortgage.com/

It seems as if the debt-to-income ratio is always in the headlines. Just recently it was reported that the ratio edged down to 177.1% in the second quarter of this year, from 177.5% between January and March. The number means Canadians owe $1.77 in debt – including mortgages and consumer debt like credit cards – for every dollar of disposable income. In 2016, the ratio was sitting at 167.3% and increased each year until October 2018, when it started to come down, thanks to both a slowdown in borrowing and healthy income growth.

While increases worry some policy-makers, studies have shown that consumers are able to pay their debts reliably.  Low interest rates on mortgages, for example, have allowed consumers to pay down more of their mortgage principal, with payments split almost evenly between interest and principal. 

But for some, the debt load can be unmanageable and then the search is on for a solution. Many are familiar with advertising from Debt Settlement services that offer to settle a consumer’s outstanding debt, for a fee. If you’re considering these options, make sure to do your research and find a reputable company to work with. 

There are also not-for profit credit counselling services that offer Debt Management and Consolidation Programs who can help you negotiate a repayment plan of 100% of your outstanding debts through something called a debt management plan. They cannot offer a debt settlement because they do not settle your debts for less than you owe. If you only have a few debts, a debt management program may be a good option. 

For a larger debt loads where there is equity availably in your property, debt consolidation may be an option. Mortgage professionals may be able to consolidate debt with a refinance. 

When arranging a consolidation mortgage loan the amount of the mortgage principal may be increased to pay out the total amount of debt. This becomes part of the mortgage commitment and a condition of the mortgage loan. On closing, your lawyer will disburse the funds to your creditors and register the new mortgage. 

What you need to know

Refinances

A refinance alters the terms and conditions of your mortgage. For this purpose, you are increasing the amount of your mortgage to pay off debt. Your mortgage payment may or may not increase, depending on a number of factors, and you may incur a penalty to break your existing mortgage if you are refinancing midterm. Depending on your current mortgage, you could be paying off the refinanced debt at a much lower interest rate, which could save you thousands of dollars in interest in the long run.  

Renewals

It’s always a good idea to review your mortgage with a mortgage professional, not only when you’re considering consolidating debt. A mortgage professional can shop the rates for you and get you the best deal, tailored to your particular situation. Then, if you decide to switch lenders, there are no penalties at renewal time.

One of these options may be the perfect solution if you know someone who may be struggling with debt please have them call me.

https://www.tmgplayer.com/brown/default.asp?player=4043

The First Time Home Buyer Incentive -Barb Eglauer one of our Preferred Service Providers

 
The First Time Home Buyer Incentive

The 2019 federal budget included an incentive for prospective first-time homebuyers that would see the government contribute up to 10% of the purchase price of a home.

Under the new First-Time Home Buyer Incentive, the Canada Mortgage and Housing Corporation (CMHC) would use up to $1.25 billion over three years to help lower mortgage costs for eligible Canadians.

It’s more like an almost interest-free loan where the repayment plan doesn’t require any payback until years in the future. The money would go to first-time home buyers applying for insured mortgages. Borrowers would still have to come up with a down payment.

The response from stakeholders and economists have been mixed – some hopeful, while some in high-priced markets are questioning whether it will help their prospective buyers.

As of September 2, 2019, the First-Time Home Buyer Incentive became available for qualified first-time homebuyers. For many Canadians, especially young people and first-time buyers, finding an affordable place to call home is not just a challenge – it feels like an impossibility. This initiative is designed to make owning a home more affordable.

You are considered a first-time homebuyer if you meet one of the following qualifications:

  • You have never purchased a home before
  • You’ve recently experienced a breakdown of a marriage or common-law partnership
  • In the last four years, you did not occupy a home that you or your current spouse or common-law partner owned

Qualifications guidelines:

  • Need minimum down payment to qualify
  • You can apply for a 5% or a 10% shared equity mortgage
  • Maximum qualifying income no higher than $120,000
  • Total borrowing is limited to a 4x the qualifying income

How does it work?

Each client has different needs and different financial goals. I can help make your mortgage financing happen.

  • Need minimum down payment to qualify
  • 5% or 10% for first-time homebuyers for purchase of new construction

How does it get paid back?

 You can repay the Incentive at any time in full without a pre-payment penalty. You have to repay the Incentive after 25 years or if the property is sold, whichever happens first. The repayment of the Incentive is based on the property’s fair market value.

How does the “shared equity” work?

  • Repayment based on property’s fair market value EXAMPLE:  You receive a 5% incentive of the home’s purchase price of $200,000, or $10,000. If your home value increases to $300,000 you pay back 5% of the current value or $15,000. Or, you receive a 10% incentive of the home’s purchase price of $200,000, or $20,000 and your home value decreases to $150,000, your repayment value will be 10% of the current value or $15,000.

    The property must be located in Canada and must be suitable and available for full-time, year-round occupancy.

Eligible properties include:

  • New construction
  • Re-sale home
  • New and re-sale mobile/manufactured homes*Residential properties can include 1 to 4 units

Types of residential properties include:

  • Single family homes
  • Semi-detached homes
  • Duplex
  • Triplex
  • Fourplex
  • Town houses
  • Condominium units

 

Other costs:

 The incentive may be associated with additional costs:

  • Additional legal fees: Your lawyer is closing two mortgages so you may be charged higher fees.
  • Appraisal fees: To repay your incentive, you may need to have an appraisal done to value determine the fair market value of your home.
  • Other fees: Additional fees may be incurred throughout the life cycle of the incentive, like switching your first mortgage to a new lender or refinancing your first mortgage.

 

For more information about this incentive and how it may help you buy your first home, please contact me today.