Category Archives: mortgage

Is financing getting tougher for the self employed?

It seems that more and more Canadians are self employed.

The self employed tend to have less steady income then full time employees and as a group it can be more difficult to get a mortgage or refinancing.

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.”

Read the full article in the Globe and Mail.

Is the door closing on home buyers?

Airborne Canine pointed out this PDF from the Real Estate Board of Greater Vancouver arguing that taxes and government regulation are putting home ownership out of reach of buyers.

That’s right, it’s not a problem with prices, it’s the PTT and ‘government regulation’.

As Best Place on Meth angrily points out, that last one is a bit odd.  The recent changes to insured mortgages weren’t government interfering more in the mortgage market, it was less.  They’re simply rolling back the increases in amortization terms to their historical norm.

He also points out a math error:

“How much do the new federal rules cost a buyer of a $609,500 home with a 15% down payment of $91,425?
$270.20 more per month”

In order to make that math work you have to disregard that you’ll be paying that lower monthly cost for 5 more years which means more interest payments.  In fact a 30 year mortgage under the old terms would cost a buyer $53,849.76 MORE than the new 25 year standard term over the life of the loan.

The proposal to reduce property transfer tax and lobby the federal government to increase the amortization period for government-backed insured mortgages doesn’t actually address the root problem: Speculation has driven house prices beyond what the local economy can support.  Trying to juice the market further is not a long term solution.

On a side note Data Junkie is a commenter on this blog who says they’ve done some work for the REBGV as a government relations policy analyst.  If you have a questions about his experience working at the board you can post them in the comments section below.  The highest rated questions will be sent on for Data Junkie to answer.

And last but not least 604x points out that the Select Standing Committee on Finance and Government Services accepts submissions from anyone through their web portal:

https://www.leg.bc.ca/budgetconsultations/survey.asp

As 604x puts it:

Perhaps some of our VCI heavyweights like Jesse, Scuba, VHB, VMD, b5baxter, AG Sage, and the rest could submit summary data illustrating the insanity of past government policies and the impact of CMHC loosening.

The big push now from real estate lobby groups seems to be on restoring the bubble through looser finance and tax breaks. The Committee needs evidence that the bubble is ultimately destructive over (and short-term pain of adjustment downward in prices will help everyone over the longer-term).

Housing Affordability deteriorates to new low

Thank goodness we don’t have a housing bubble in Vancouver!

Otherwise one might start to worry about these latest numbers on housing affordability.

The housing affordability index takes local family income and then looks at what percent of it would would be required to service the debt on an average benchmark bungalow.

The entire province of BC is at 69.7% and blows away the rest of Canada for overpriced houses. Only Ontario starts to come close with an affordability index of 43.9%. Even Toronto can’t compete in the overvalued housing arena, coming in at 54.5%.


According to RBC Vancouver is the champion of overpriced houses. To buy the benchmark bungalow here it would take 91% of a local families pre-tax income to service the debt.

From Macleans magazine:

Nothing, of course, could persuade condo king Bob Rennie that the Vancouver housing market is in a bubble (or, worse yet, a bubble that’s starting to let the air out).

For everyone else, take a look at this chart RBC put out today with its latest survey of housing affordability in Canada (which is deteriorating in most provinces, by the way)

No problem, just arbitrarily knock 20% off those Vancouver numbers and we’re not much worse than Toronto.

If you look around the world, you may be able to find a few markets that have an even worse affordability index than Vancouver, with lower incomes or higher house prices. But for some reason, most of those places seem to be able to pull in higher rents than Vancouver.

Mortgage rates rise at RBC, more to follow?

Looks like RBC just upped two of it’s mortgage rates by one fifth of a point.

What will we do without our record low mortgage rates?

It’s probably just a minor fluctuation, but other banks are expected to follow as bond yields have edged up in the last month.

So if you want to do a rate lock in now might be the time.

Helmut Pastrick of Central One Credit Union explains:

“Sentiment has improved with respect to Europe and the economic outlook,” Pastrick said. “The economic news was quite negative for a period of weeks and now it is somewhat less negative.”

RBC’s posted rate for a three-year, fixed-rate mortgage will go up 0.2 percentage points to 4.05 per cent. Meanwhile, an RBC special-offer rate for five-year closed mortgages rises to 3.69 per cent.

The rise in the cost of funds for banks will mean other lenders will probably also raise their rates, or absorb some of the cost increase to hold onto or gain market share,” Pastrick said.

Read the full article over at the Vancouver Sun.

 

First time buyer regrets

A new report from TD Canada Trust shows that many first time home buyers wish they had done things differently.

Despite being the single largest purchase of most peoples lives, research doesn’t seem to play a big role for most first time buyers.

More than half of those surveyed said they would have preferred to have a bigger down payment and bought sooner.

Many first-time homebuyers said they could have been better prepared and more thorough when budgeting, the poll found. Thirty-seven per cent of those surveyed did not budget for ongoing costs such as maintenance and utilities, while 17 per cent overlooked some of the one-time charges like inspection fees and five per cent didn’t budget for anything beyond the down payment and mortgage payment.

That article quotes a mortgage broker who advises that you make sure you’re able to make the monthly payment, don’t worry so much about the down payment or the timing of your purchase.

Some of the extra costs that some first time home buyers don’t seem to be budgeting for are inspection, appraisal, property transfer tax, legal fees, CMHC fees, Strata fees or mortgage rate increases.  Then of course there’s ongoing maintenance and insurance.

I suspect a ‘bigger down payment’ will always be on the wish list, but if the Vancouver market does the bubble pop dive you may see the ‘bought sooner’ wish drop right off there.