April 23, 2018

Watch Out, Tighter Mortgage Lending May Still Be Coming

When will it stop!  After all the changes implemented to cool the housing market and reduce consumer debt, more tightening may still be coming.  Wouldn’t you think that the Ministry of Finance and OSFI would wait to see the impact before implementing more changes?

The recent changes targeted insured mortgages.  Now the Bank of Canada has identified the uninsured mortgage market as the next place to make tougher regulations.

The first measure that is likely being considered is related to Home Equity Lines of Credit (HELOCs). This is clear for two reasons. First, because the Bank of Canada believes that the greater use of HELOCs could also be contributing to increasing household indebtedness raising concerns that HELOCs may be putting some Canadians at risk of over borrowing.

The critical policy question that the Department of Finance could be considering is whether to extend the stress test for insured mortgages to uninsured mortgages as well.  This could possibly have an impact in further cooling the markets of Toronto and Vancouver.

Let’s hope the government shifts their focus to unsecured household debt instead of further secured debt restrictions. However, if the Bank of Canada’s review is representative of the Ministry of Finance’s considerations, watch out for changes to HELOCs with the stress test being applied to uninsured mortgages.

We should all write to our MP’s, enough is enough.  The market is cooling and all that is going to happen is more expensive mortgage financing and reduced competition.  Go after the unsecured loans and credit card companies, that is where consumer debt is out of control!

https://www.canadianmortgagetrends.com/2017/06/is-the-bank-of-canada-signalling-that-more-mortgage-rule-changes-are-coming/

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Oakville, Mississauga, Burlington and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on  www.mortgagesbycolleen.ca  or call 416-459-2406

Should You Get A Status Certificate?

With the current situation of house prices in the Toronto area, chances are first time buyers (and those of us downsizing) will be looking at purchasing a condo.  What is a Status Certificate.

Purchasing a condo or condo townhouse is very different from purchasing a detached home.  All condo buyers should be aware the unit’s status certificate as it provides important details about the unit you are interested in, as well as the condo corporation as a whole.  I strongly suggest you make your purchase conditional on a review of the status certificate.

Sometimes the seller will offer to provide you with a version of the status certificate that they previously obtained. But the certificate’s information could be out of date, and inaccurate.

Some questions about condos and the answers a status certificate will provide:

  • What’s in the condominium’s declaration, bylaws and rules? Often condos have rules regarding pet ownership, noise, balcony furniture, decorations, and even curtains and flooring material. Make sure you’re comfortable with these rules.
  • What kind of fees can I expect to pay?  What are your monthly fees for maintenance, landscaping, utilities in common areas, and other upkeep.  As well, are there special assessments that owners are still paying into.
  • Is the seller up to date on their fees?  If the seller is in arrears on their monthly fees, it’s the new owner’s responsibility to catch up the arrears, so find out beforehand.
  • What’s the financial status of the condo corporation?  Is there enough money in the reserve fund to cover future repairs? If the reserve fund isn’t large enough, you could end up facing a sudden hike in your condo fees or paying a special assessment.  Read this info carefully.  I left it for my lawyer to investigate only to find out the reserve fund had minimal deposits
  • Will I have full ownership of the included parking space or locker?  Will you personally own the space, or is it a common element that the condo corporation owns, and assigns to you. Be sure to confirm, with your lawyer, that the declaration documents match with the purchase and sale agreement in details such as the unit number, parking space number and locker number.

And what if the status certificate reveals something that gives you pause? If you make your offer conditional upon its review, you should be able to walk away from the deal.

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on  www.mortgagesbycolleen.ca  or call 416-459-2406

https://www.thestar.com/life/homes/2017/08/12/a-current-status-certificate-is-a-crucial-piece-of-your-condo-purchase-joe-richer.html

Shocking, This All Started 9 Years Ago!

If I were to ask when you remember the Office of the Superintendent of Financial Institutions (OSFI) making fairly recent changes to the mortgage rules, what would be your guess?  When was mortgage insurance banned on properties over $1 million?  Would you have guessed a couple of years ago?  It was actually 5 years ago!

Here’s a brief history of some of those key mortgage rule changes over the past decade:

  • January 1, 2017: OSFI imposed onerous capital requirements on default insurers, thus disadvantaging many bank competitors (and consumers) by jacking up rates substantially on low-ratio insured mortgages.
  • November 30, 2016: New stress test regulations were extended to include insured mortgages with 20% equity or more. It also banned certain mortgage types from being insured, including refinances, extended amortizations and single-unit rentals.
  • October 17, 2016: The federal government introduced a stress test to be used in approving all high-ratio insured mortgages with terms of five years or more. It required such borrowers to prove they can handle payments at the Bank of Canada’s posted 5-year rate (currently 4.84%).
  • February, 2016: The Department of Finance announced it was increasing the minimum down payment from 5% to 10% on the portion of a home’s price that’s above $500,000.
  • November, 2014: OSFI releases its B-21 guidelines, which set out insurer restrictions on everything from debt-ratio calculations and self-employment evaluation to borrowed down payments and cash-back mortgages.
  • July 9, 2012: The government reduced the maximum amortization period to 25 years for high-ratio insured mortgages, limited the gross debt service and total debt service ratios permitted to 39% and 44%, respectively, banned mortgage insurance on properties over $1 million and implemented a maximum 80% LTV for refinances.
  • March 18, 2011: Regulators introduced a 30-year maximum amortization on insured mortgages over 80% LTV, an 85% loan-to-value limit on insured refinances and eliminated government insurance on secured lines of credit (e.g., HELOCs).
  • April 19, 2010: The government introduced stress testing for insured mortgages using the Bank of Canada’s 5-year posted rate. Other key changes included a 90% LTV max. on refinances (down from 95%), and an 80% LTV maximum for rental financing.
  • October 15, 2008: The first mortgage rule changes announced by the government eliminated 40-year amortizations (dropping them to 35), raised the minimum insured credit score, added a new maximum total debt service ratio of 45% and additional loan documentation standards.

Further changes are still being proposed to tighten mortgage underwriting.  Now they are targeting the uninsured market, which would shut many borrowers out of the market!!

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on  www.mortgagesbycolleen.ca  or call 416-459-2406

https://www.canadianmortgagetrends.com/2017/07/osfi-proposes-tighter-mortgage-underwriting-standards/

The Facts Behind Our Rising Debt Levels

We are continually being reminded that Canadians are overextended and in too much debt. So much so, the Ministry of Finance has made getting a mortgage more difficult and changed the rules to qualify for financing.

What has recently been discovered is that while this may be true, we have generally borrowed wisely to build our net worth to record levels. Warnings about household debt often ignore assets and skew the picture.

The $10.3-trillion in net worth of Canadian households is the result of debt accumulated to finance assets such as real estate and investments, according to a Fraser Institute report. “When looking at debt levels it’s important to consider the degree to which Canadians are also using it to increase their net worth.”

Canadian household debt has topped $2 trillion but two-third of that is in mortgages (the rest is made up of credit card and other debt) and a new report says that helped fuel unprecedented levels of household net worth.

Canadians are not being irresponsible with household debt. Household assets, such as real estate, pensions, financial investments and businesses, have grown from $2.2 trillion in 1990 to $12.3 trillion in 2016.

It chastises governments for cautioning about household debt when their own finances are less favourable. “Governments across Canada have been racking up debt, particularly since 2007, but the net worth of governments in Canada has actually decreased,” said Di Matteo. “It’s somewhat hypocritical for governments to warn Canadians about rising household debt levels given the state of their own finances.”

Those without mortgages are seeing a declining trend in their average credit scores that began in 2015, along with an increasing likelihood of bankruptcy. As well, mortgage delinquencies for consumers over 65 are the highest of all age groups and rising, and higher delinquency rates for auto loans persisted throughout 2016. BMO Wealth Management reported that millennials say their top financial priority is paying down debt. It beat out finding meaningful and better-paying work, purchasing or upgrading a home and upgrading education.

“We may be borrowing, but we’re doing it in a pretty savvy way,” said Pattie Lovett-Reid, CTV News chief financial correspondent.

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

http://www.ctvnews.ca/canada/canadians-record-debt-levels-have-resulted-in-record-net-worth-report-1.3508018

The Art of Mindfulness

I read a very interesting article about a English teacher in one of the poorest areas of the Bronx teaching his students about Mindfulness.  About being aware of our feelings, our emotions and how they impact us.  About being focused and aware of our surroundings.  The school is known as ‘a transfer school’ designed to re-engage students who have dropped out or fallen behind.  Mindfulness is the ‘act of paying attention on purpose’ with a non-judgemental attitude.

The students were taught five-minute mindfulness exercises—from counting breaths and focusing on the sensations of breathing, to visualizing thoughts and feelings, to help train their attention, quiet their thoughts, and regulate their emotions.

Mindfulness is widely considered as an effective treatment for children, adolescents and adults with aggression, ADHD, anxiety or mental disorder.   It improves attention, reduces stress and results in better emotional regulation and an improved capacity for compassion and empathy.  Mindfulness is now spreading to schools, where it could potentially have an impact on students’ well-being.  It has to be better than all the drugs that are prescribed!

They started teaching mindfulness in the U.K. in 2007.  Teachers can enrol in a 6 week Mindful School Training in order to teach these skills to students.  Mindfulness would also help if applied to teacher education as a way to help prevent burnout, as it is a major issue, given that 20 percent of teachers in high-poverty schools leave within their first year.

A great reminder for us all!

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on  www.mortgagesbycolleen.ca  or call 416-459-2406