Tag Archives: down payment

New mortgage rules drive up housing market.

Tighter mortgage rules were intended to cool the Canadian housing market, but according to National Bank economist Marc Pinsonneault they are having the opposite effect in the short term.

The new rules require insured mortgage holders to put down a minimum of 10 per cent for any portion of a house’s price above $500,000. The 5-per-cent minimum down payment still applies for the portion of a house price below that.

Economists predicted last year the rules would temporarily drive the market up, as homebuyers raced to land a mortgage before the deadline.

But Pinsonneault says the effect will continue this year, because the new rules don’t apply to anyone who locked in a mortgage before Feb. 15 of this year, and those people have until July 1 to buy a home.

It seems like everything done in the name of ‘cooling’ the housing market has the opposite effect.  Read the full article here.

Should banks take on more risk?

There’s an article over at the CBC on the CMHC and CEO Evan Siddall.

Mr. Siddall is of the opinion that the CMHC should not be privatized as it acted as a ‘shock absorber’ during the last correction, but does think the banks should take on a share of the risk for insured mortgages.

“That ultimately will be a decision for government to make and we’re in the process of looking at different options that will take a few years to evaluate, but the idea is that people should have skin in the game,”

“In the insured mortgage businesses, the banks offload all that risk to the government through CMHC, The government’s interested in taking a reduced role in the housing market … so we’ll look at different ways to share risks with lenders.

What do you think, should the CMHC force banks to take on more responsibility for the insured loans they hand out or would the banks just use that as an excuse to charge more?

Read the full article here.

So who’s buying condos?

By now even the reader of the province know it’s a slow real estate market out there.  Not much is selling, sales to list ratio is low and prices are dropping.

..and yet, we still hear of new developments that have big opening day sales (where ‘opening day’ conveniently ignores months of marketing).

So who’s buying these new condos?

According to Bob Rennie it’s young people without any money:

Rennie Marketing registered 7,500 potential buyers before the sales launch, and he says the majority were under 28 years old. He believes it is the young demographic that is fuelling the sales of projects like the two he’s selling at Marine and Cambie. Part of MC2’s appeal is that because it’s not downtown (a 20-minute SkyTrain ride), the prices are lower. And pricing on more than half the homes was kept under $350,000, to appeal to the young demographic.

“So, we made the right decision bringing on both towers at MC2,” he reflects, sitting in a trendy coffee shop on Main Street. “We’ve released all the affordable product. There are 130 homes without parking so that we could get inventory under $300,000. We really did the research on the first-time buyer when we did Marine Gateway across the street, and 28 per cent of our buyers answered in an exit survey that they were receiving down payments from mom and dad, and grandparents.”

Full article in the Globe and Mail.

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.

New mortgage rules make buying hard

How’s this for an opener:

While the country’s new mortgage rules are meant to cool the market, eventually making housing more affordable, they’ve put home ownership out of reach for many prospective buyers.

Uh-huh. And what if the problem was that we put home ownership in reach of too many prospective buyers?

Those who don’t have a down payment of 20 per cent or more will be limited to a maximum amortization period of 25 years. Since 40 per cent of new mortgages last year were for 26 to 30 years, according to a survey from the Canadian Association of Accredited Mortgage Professionals, real-estate neophytes might feel the change most dramatically.

WHoa! Did they just say 40 percent of new mortgages were over 25 year amorts?

Another new rule announced by Mr. Flaherty sets the maximum gross debt-service ratio – the percentage of household income being used to pay for housing – at 39 per cent so buyers will be less likely to take on mortgages that are too big and could leave them floundering if rates increase.

That’s the one that Andrea Benton, a 37-year-old entrepreneur in North Vancouver, B.C., said hits her family of four hardest.

“It means my total family income would have to be an exorbitant amount to afford an $800,000 house,” she said.

You mean you’re expected to have a high income to afford an $800,000 house?!?

Read all the comedy in the full article here.