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Lucky address can add up to big gains in house sales – ask a Vancouver Mortgage Broker

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house5You don’t have to believe in superstition for it to hex your house, if the results of a forthcoming Canadian study are any indication.

What bubble? Canadians have their mortgage covered, study shows

Mortgage arrears are actually going down in just about every market across Canada — making a U.S.-style meltdown unlikely,Conference Board says

Reporting in the journal Economic Inquiry, researchers uncover enormous costs associated with “magical thinking” in real estate transactions in neighbourhoods with a high concentration of Chinese residents. The good news, however, is that they also identify payoffs — on average, around five figures — when superstitions run in a seller’s favour.
“We do find premiums and penalties associated with numbers that are thought to be lucky or unlucky in the Chinese culture,” said lead author Nicole Fortin, a professor at the University of British Columbia’s Vancouver School of Economics. “And these are really sizable transactions.”

Analyzing nearly 117,000 home sales between 2000 and 2005, researchers discovered that in areas whose share of Chinese residents exceeded the metro average, houses with address numbers ending in ‘4’ were sold at a 2.2% discount while those with numbers ending in ‘8’ were sold at a 2.5% premium. Four is associated with death in Chinese culture, and eight with prosperity.
Given the average house price of $400,000 during the study period, Fortin said superstition ultimately meant the difference between an $8,000 loss or a $10,000 gain in comparison to houses with addresses ending with any other digit.
“Real estate agents are very aware of this, and they exploit it,” Fortin said.
In one Vancouver ad, for example, she found eight of 20 homes aimed at buyers from mainland China ended in ‘8,’ as did the asking price of 11 of the homes. Similarly, a 2012 analysis by Trulia.com found that in Asian-majority neighbourhoods, the last non-zero digit of an asking price ended with ‘8’ in 20% of listings — and 37% of those priced at a million or higher — versus just 4% for other areas.
Fortin cites important public policy repercussions, noting that some people will petition to change their addresses — often by subdividing or via another legal loophole — to make their properties “luckier.” One of her own neighbours, in fact, had the last number of his home altered from a four to a six.
“I wondered why he didn’t get an ‘8.’ He probably tried,” Fortin said. “But should municipalities allow people to change their address just because they don’t like the number?”
In Canada, where people of Chinese descent account for 5% of the population, Fortin said the implication is that something as seemingly innocuous as a home address could affect whether a property flourishes or is left to deteriorate.
To wit, study co-author Andrew Hill emphasized that disbelief in such superstitions doesn’t inoculate against them.
“If everyone knows that these belief premiums and penalties are going to persist — even if they don’t believe in (the same thing) — it can have an effect,” said Hill, assistant professor of economics at the University of South Carolina. “As a property investor, it just makes no sense to have a house number that could lose you money.”
Importantly, however, Edmonton real estate agent Taylor Hack said emotion can overcome reason in almost any purchase of a principal residence, regardless of cultural background.
“We have to take that into consideration when working with anyone,” said Hack, of Remax River City. “Everybody has their own level of superstition. If some people were aware that a traumatic incident happened in the home, they’d have trouble with it.”

Here’s why paying off your mortgage isn’t always the best idea – Consult with a Vancouver Mortgage Broke

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Vancouver Mortgage BrokerIt amounts to financial heresy to some conservative investors but paying down your mortgage early just might not be the best plan.

Should you rent or own your home?

People say that when you grow up, you buy a home. Who are these “people?” Your married friends, your parents and other grown-ups who ask: “Don’t you want to own something other than a bike? Aren’t you sick of putting money into your landlord’s pocket?”

The message of debt being out of control is directed at us continually. If it’s not the finance minister telling us to stay out of debt trouble, it’s some Bank of Canada official.

There is something to this message. The percentage of household debt to disposable income dropped a tad last quarter but it’s still at about 164% — close to an all-time high.

It’s not all that hard to see why. Interest rates continue to hover near record lows. The prime rate at most banks, which variable rate mortgages are tied to, is at 3% but ratesupermarket.ca says it’s more like 2.35% with discounting. Lock in for five years and you still get 2.94% for the term.

Pay that mortgage off? Why would you bother, especially if that money could be invested elsewhere at a higher rate?

Mortgage broker Calum Ross says there is an opportunity to invest in today’s market using the money you would otherwise earmark for your mortgage.

“If you don’t have a mortgage today and you are in the top tax bracket, you don’t understand the basic rules of personal finance,” says Mr. Ross.

You’ll need a little tolerance for risk to adopt his strategy but he says you might need that in order to avoid “flipping burgers” in your old age because you don’t have enough money for retirement.

For starters, you need to have some spare cash on hand. The key to his investment strategy is having some extra cash flow.

You have to make a clear distinction between your tax deductible investments and those not-tax deductible like the mortgage on your principle residence.

“If you’re borrowing for the purpose of investing, you can write off the interest,” says Mr. Ross, adding the key is not co-mingling your debt.

One thing you could do to create cash flow — and this involves actually paying down your mortgage — is sell some non-registered investments and use the cash to pay down your mortgage. You then borrow the same money back but as an investment loan.

“It’s called a debt swap. You’re taking non-tax deductible debt and making it tax deductible,” said Mr. Ross.

He says you have to be mindful of some rules the Canada Revenue Agency has on the timing of these transactions.

Mr. Ross has a simple formula for making sure the investment makes sense. Subtract your marginal tax percentage from one and multiply by the interest rate to borrow.

Say you borrow at 5% but have a marginal tax rate of 40%, the return you would need would be 3%. You get that by taking 1-.40 and multiplying by 5% for 3%.

“The average consumer does not conceptualize the difference between after-tax cost and and average tax rate of return. The advantage definitely goes to people in a higher income tax bracket,” says Mr. Ross.

He says it’s really not that hard to get a 3% return in the market and that’s based on 5% interest. It may look like a a strategy for high income earners but as Mr. Ross says “it doesn’t take long to get in the middle tax bracket in Canada.”

Real estate author Don Campbell wonders whether the strategy will work for some people from a discipline point of view. “They [get a loan and] put the money in the investment and when [the income return] starts coming back from the investment, do they pay the loan down? For some people they start thinking ‘maybe I should use the money for something else, go on a vacation’.”

You want to balance a healthy retirement with making sure you are not pinching yourself so you can’t make contributions

The rules change a bit as you hit retirement, when you want to get that mortgage paid so you don’t have it hanging over your head in your retirement.

Mr. Campbell also wouldn’t want any loans on his home that would leave him with less than 25% equity in the property. “I want a buffer in everything that I do,” he says.

There’s another issue to consider when it comes to paying off your mortgage and that’s not stretching yourself financially, says Michelle Snow, associate vice-president retail banking products and services at TD Canada Trust.

“You want to balance a healthy retirement with making sure you are not pinching yourself so you can’t make contributions,” said Ms. Snow, who still favours the concept of paying down that mortgage.

There are also contributions you might want to make to a Registered Education Savings Plan before paying off your mortgage. The government offers a grant of 20% for every dollar put into an RESP per child, up to $500 annually in grant money to a maximum of $7,400 lifetime.

There’s nothing to stop you from taking the big lump of cash you might have and pumping it into your RRSP, if you have unused room. Your tax refund could then be used to pay down your mortgage.

You also need a little cash to run your actual house and if paying down your mortgage hampers that, you need to reconsider.

“Owning a home has embedded expenses in it, be it property taxes, utilities etc.,” said Ms. Snow. “Consider all your financial obligations before making a decision.”

Illustration by Chloe Cushman, National Post

Analyzing BMO’s Go-Fixed Advice – ask a Vancouver Mortgage Broker

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Vancouver Mortgage BrokerFixed rates are now “superior,” said BMO in this report released Thursday.

“While we have in the past supported going variable,” circumstances now “favour…locking in…”

That’s been BMO’s rally cry since 2010 when it proclaimed “Time to Say Goodbye…to Variable.” In retrospect, that advice would have cost mortgagors handsomely. But BMO was far from alone in that call.

Few anticipated the economy would drag along the bottom, depressing rates for five years after the great recession. People are now becoming desensitized to statements like “We may not see such low fixed rates again any time soon” (BMO’s latest prognostication).

Sooner or later, economists will be right on fixed rates, partly for the reasons BMO mentions (including higher inflation). But there are things about BMO’s report that people need to know about.

1) Variables may not perform as well as advertised

BMO writes that “Historically, there has been little contest” with variable rates being the better play. It argues that 85% of the time since 1975, variable rates were more cost-effective.

Well, it helps that 1975 is the start date for BMO’s analysis. In the 30 years preceding 1975, prime rose 6.00 percentage points. Excluding pre-1975 data improves variable-rate performance in backtests. In the 30 years after 1975, prime rate fell 4.75 percentage points, helping variable rates win by default.

But more questionable is that BMO’s analysis uses posted rates. Posted rates haven’t been relevant for years. Mortgagors rarely pay them anymore.

York University professor Moshe Milevsky, the man who wrote the book on fixed vs. variable performance, foundthat when discounted rates were used, the frequency of variable-rate outperformance dropped by 13 percentage points (based on data from 1950 to 2007).

The spread between posted fixed rates and posted variable rates is currently 199 basis points. If you backtest that spread you’ll get markedly different results than if you use today’s actual difference of 65 basis points. Canadian Mortgage Trends’ research shows that, in this latter more realistic case, the frequency of variable-rate outperformance is not 85%. It’s 59%.

Studies based on spreads that no longer exist are inapplicable to today’s rate environment. Of course, applying today’s spreads to the 1970s and 1980s is also imperfect. The difference is that it’s much more realistic to assume that lenders could have offered bigger discounts in the past, than it is to assume posted rates will apply to the future.

2) “One can always lock into a fixed rate at a later date.”—BMO

Sure you can, but at what rate?

Today you can get a 5-year fixed rate of 2.99% or less. But people who lock in don’t typically receive those rates. Instead, they get their lender’s “conversion rate.”

For many big-bank customers, that conversion rate is the bank’s “special offer” rate. This is the rate often paid by people who don’t negotiate. It can be 50 basis points or more above rates on the street. Paying an extra half-point premium to lock in would cost an extra $4,700 in interest over five years on a $300,000 25-year mortgage.

And then there’s the “little” problem of rate timing. Many people give themselves far too much credit when it comes to timing interest rates. Some folks believe they can wait for the Bank of Canada to announce a rate hike, and then lock in, thus beating the jump in 5-year fixed rates. Unfortunately, by that point bond yields (which drive fixed rates) may have already risen by up to one-half per cent or more.

Coupled with the conversion rate premium, people with bad timing could pay upwards of one percentage point more than today’s best 5-year fixed rates when locking in.

Long story short, if you’re likely to lock in later, lock innow.

3) Our interest rate outlook now projects an advantage to choosing a fixed rate.”—BMO

That’s what economists projected in 2009, 2010, 2011, 2012 and 2013…

In fact, the most objective and credible rate forecaster in the country, the Bank of Canada, has been wrong with its own forecasts for over four years.

Rate predictions are moving targets. Economists are paid to guess wrong. There are piles of research documenting how their forecasts are little better than coin flips most of the time. (More on that…) As a result, rate estimates deserve among the least weighting of all factors in mortgage-term analysis.

One strategy: Take the Lowest Rate All the Time

Some argue that the “best” mortgage strategy is picking the lowest possible rate, every time. That’s a horrible plan if the mortgages you pick have prepayment and refinance restrictions that cost you more than the rate savings. But assuming you chose reasonably flexible mortgages, this strategy would have served you well the majority of the time throughout history.

In the low-inflation and low-growth environment to come (read this report from Morgan Stanley), a short-term/variable-rate mortgage strategy should continue winning more often than not. But there will be cases when it doesn’t, and today may be one of them (albeit, we’ve heard that before).

In general, the cheaper it is to insure against higher rates, the more sense it makes for typical Canadians to be “insured.” The cost of laying off risk to your lender is the difference between long-term and short-term mortgage rates. Nowadays, that premium is roughly half of its historical average since 1970.

Put another way, it’ll cost you a heck of a lot less if you make the wrong rate choice today.

Fixed vs. Variable Decision Criteria

Relying on short- and medium-term economic forecasts are one of the least effective ways to choose a term. Using common sense yields far better results. That entails weighing criteria like:

1) Your finances

2) Your 5-year plan

  • Taking out equity, adding to your mortgage, or outright breaking the mortgage can get expensive if you pick a 5-year term with a harsh penalty or bad refinance policy.

3) Your ability to qualify

  • Lenders assess whether you can afford a variable rate by projecting higher hypothetical payments using the Bank of Canada’s 5-year posted rate (4.99% today).
  • By contrast, if you get a 5-year fixed you only have to prove you can afford that payment (based on a rate that’s roughly 2.00 percentage points below the posted rate).

4) The risk/reward

  • Can you stomach a potential 25-35% jump in your interest costs? (Note: Some lenders keep your payment fixed but you’ll still pay more interest if prime rate rises.)
  • Over the next five years, if the Bank of Canada lifts rates by even one percentage point and nothing else, a 5-year fixed mortgage costs less (based on interest cost alone, a mid-2015 hike and a mortgage with favourable prepayment and refinance conditions).

5) Economic factors

  • While the least useful of all considerations, Canada’s position in the economic cycle should at least be contemplated.
  • When variable rates have underperformed in the past, it has typically occurred after economic downturns.
  • If we are indeed emerging from a trough in the business cycle, the next major move in rates should be up. In the last three rate cycles, the average prime rate increase from trough to peak has been 3.16%.

********

The preponderance of evidence suggests putting your faith in a variable-rate mortgage…over the long run. Those last four words are key because there are always exceptions, and those exceptions are more common than publicized studies suggest.

If prime rate were 1.50 percentage points higher and/or the fixed-variable spread were 1.50 (for example) instead of 0.65, variables might be a safer bet. But, as BMO implies, today’s fixed-rate premium is now low enough to back the underdog: the 5-year fixed.

Rob McLister, CMT (email)

Mortgage shopping? Two stars and four dogs from today’s market – Ask a Vancouver Mortgage Broker

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ROBERT MCLISTER–  Special to The Globe and Mail

Vancouver Mortgage Broker

A variable-rate mortgage entails a vulnerability to possible short-term rate increases by the Bank of Canada.
(RAFAL GERSZAK FOR THE GLOBE AND MAIL)

Eight months ago, some were proclaiming the end of 2.99-per-cent five-year mortgage rates, for years to come.

And now, low and behold, they’re back.

But you have to hunt much harder for 2.99 per cent than you did last spring. Some lenders, especially banks, are wary of advertising sub-3-per-cent rates. In a few cases, lenders are even preventing brokers from discounting below 3 per cent. Financial institutions are trying their best to protect margins, and Ottawa’s rate police might also be having an effect (more on that).

If you’re lucky enough to find a five-year fixed rate near 3 per cent, don’t feel pressured to lock in. Regulators, the Finance Minister and former Bank of Canada boss Mark Carney practically guarantee that higher rates are coming … eventually. But no one can define “eventually,” so it pays to consider some of the other factors behind the ideal mortgage term.

With that in mind, here’s a look at two stars and four dogs from today’s mortgage market.

The Stars

The five-year fixed
Over half of all Canadian homeowners choose five-year fixed terms. They’re the easiest mortgages for lenders to raise capital for, which creates fierce competition and aggressive discounting. If you know where to look (hint: online), you’ll find five-year rates just above 3 per cent. In some cases, even 2.99 per cent or less. That’s just over half of a percentage point above most variable rates.

These five-years rates may or may not be around for long, depending on what government bond yields do (rising yields lead to rising fixed mortgage rates). In terms of interest cost alone, today’s five-year is the safest bet if you expect average mortgage rates to jump 1.50 percentage points or more through 2017. Ask most economists and they’d imply you’re crazy to bet against that “small” of a rate hike.

But not all five-year terms are created equal. Be vigilant for adverse penalty calculations, limited prepayment options, restrictions on refinancing and/or porting ((porting is when you move your mortgage to a new property), short rate-hold periods and uncompetitive rate blend policies (a “blended rate” refers to the rate you get if you need to add money to your mortgage later). These considerations apply to all terms, but especially five-year mortgages that bind you to your lender for longer.

The three-year fixed
Many risk tolerant borrowers are trading in their five-year terms for a more agile three-year fixed. I say “agile” because three-year mortgages give you lots of options. For one thing, you can lock in your renewal rate in just 32 to 33 months. Why 32 to 33 months? Because you can get rate-holds 90-120 days in advance of your three-year maturity date.

A three-year also lets you refinance sooner without a penalty. That flexibility can help if you need to withdraw equity from your home or switch to a different type of mortgage (e.g., one with a line of credit). The shorter term also helps if you plan to move before five years is up, as 31 per cent of first-time buyers and 19 per cent of repeat buyers plan to do, according to the Canada Mortgage and Housing Corp.

Some lenders even let you blend and extend their three-year mortgages early, which is like locking in without a penalty – handy if you want to secure cheap borrowing costs before rates head higher.

At the moment, you can find three-year terms for 2.69 per cent or less. That’s at least 0.40 percentage points below most five-year fixed rates. The best way to compare a three-year mortgage to a five-year is to assume that you’ll renew into a two-year term (three years + two years = five years total). In that scenario, if two-year fixed rates jump more than 1.25 percentage points in 32 to 33 months, you would have been better off just taking a five-year fixed, based on interest costs alone.

The Dogs

The 10-year fixed
Lenders aren’t doing us any favours with 10-year pricing. Most decade-long mortgages are offered at 4.29 per cent or more. That’s a fat premium over a five-year fixed. Rates would have to jump almost three percentage points in five years for a 10-year to be less costly than a five-year, based on interest cost alone. That’s not impossible, it’s just improbable given the degree of inflation it would imply. (Inflation drives interest rates. The Bank of Canada along with our modestly growing mature economy have both been tempering inflation.)

The four-year fixed
Four-year terms are currently 2.99 per cent or thereabouts. That’s no match for one of the following: the markedly cheaper three-year fixed or a similarly priced five-year term with generous flexibility.

Six- and seven-year fixed rates
Perennially on the dogs list, suffice it to say, their rate premiums work against them. You’re protected from rising rates for an extra year or two but pay 0.60 to 0.80 percentage points more for that “insurance.” The math just doesn’t work out.

All of these comments above apply to well-qualified borrowers with provable income who plan to have a mortgage for five years or more. If that doesn’t sound like you, some personalized advice might serve you well.

Robert McLister is a mortgage planner at intelliMortgage Inc. and founder ofRateSpy.com. You can follow him on Twitter at @RateSpy and@CdnMortgageNews.

Mortgage Terms: Stars & Dogs – Consult with a Vancouver Mortgage Broker

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6a00d8341c74cb53ef01a3fcd18cd9970bAfter “What is your best rate?” the next most popular mortgage question is probably “Which term do you recommend?” — or a variation thereof.

But it’s tough to generalize about the best mortgage because borrowers have unique needs. To get around that, we have to use limiting assumptions and make a best guess at the risk/reward of each term. And that’s how we’ve picked the stars and dogs in this week’s Globe column.

After that Globe piece went to print, a few readers emailed asking, “What’s wrong with variable?” and “What’s wrong with a 4-year fixed?”

In the case of variables, it’s a question of how much reward you can expect for the risk of rates rising. (Economists claim we’re still two percentage points below “normal” rates, for what that’s worth.)

The reward part of the equation is seemingly more easy (that is, unless rates unexpectedly drop, which throws all of this math out the window). Assuming economists, the Bank of Canada, OSFI, the Department of Finance, politicians, commentators and your neighbour’s dog are all right, then rates will return to normal. So, if you take a variable, you’re banking on saving roughly 65 basis points up front versus a 5-year fixed.

But even if the prime rate rises only one percentage point in 2015, and nothing more, going variable today will cost you more than a flexible 5-year fixed mortgage with a fair penalty.

As for a 4-year term, if rates jump 100, or even 200, basis points over the next five years, both a 3-year and 5-year fixed beat the 4-year fixed based on projected interest cost alone. (The assumption is that you renew the 3-year into a 2-year and the 4-year into a 1-year.)

Keep in mind, the above is based on:

  • a strong applicant with provable income
  • financing for a marketable owner-occupied home
  • no need to break the mortgage for five years
  • equal payments in all cases (i.e., if you have a 3-year fixed you’d make the equivalent of the 5-year payment — to keep the cash flows apples to apples)

There are so many other considerations of course, so competent, personalized advice never hurts.

More at Mortgage shopping? Two stars and four dogs

Rob McLister, CMT (email)

Jim Flaherty move shocks brokers – Ask a Vancouver Mortgage Broker

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Finance Minister Jim Flaherty has stepped down.

“Yesterday, I informed the prime minister that I am resigning from cabinet,” Flaherty said in a statement. “This was a decision I made with my family earlier this year, as I will be returning to the private sector.”

Flaherty – who has been unpopular among the mortgage broker community – has served as the Finance Minister since 2006. Still, a recent MortgageBrokerNews.ca poll revealed only 52 per cent of brokers believe the industry will benefit from Flaherty’s resignation.

“There aren’t too many changes they can make anyway; we’re pretty much at the point where they have stripped it down to where it was a decade ago or even farther back,” Len Lane of Verico Brokers for Life told MortgageBrokerNews.ca at the time. “I guess it’s better to keep somebody we know than to have someone else.”

For his part, Flaherty believes he has had a successful run and that he will turn his focus to the private sector.

“As a government, we achieved great things for Canada and I could never have accomplished what I have as finance minister without the full support of Prime Minister Harper,” Flaherty said in the statement. “I will focus on life beyond politics as I return to the private sector.

Still, some may view the move as the Flaherty’s first step toward his own run for the leader of the Conservative party.

Why Joe Oliver as Finance Minister is just a short-term fix for Stephen Harper – Consult with Vancouver Mortgage Broker

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OTTAWA/CALGARY • Surprise or not. Best candidate or not. Neither much matters. In the end, Joe Oliver’s appointment as Finance Minister was obviously the best choice for Prime Minister Stephen Harper.

Unlike Jim Flaherty, new Finance Minister Joe Oliver has already earned his Bay Street cred

 

Bank of Canada

Theresa Tedesco: Canada’s new Finance Minister is a man of the Street.

Unlike his less buttoned-down predecessor Jim Flaherty, Montreal-born and Harvard educated, Joe Oliver looks and sounds every inch the elder statesman investment banker even though he’s been out of the financial business for almost a decade. Read on

For now.

Despite his proven competence with the Natural Resources file, Mr. Oliver, 73, is not likely to remain at his new post over the long haul. Perhaps, not much past the 2015 federal vote.

“By appointing someone who’s in his early 70s, the prime minister avoided choosing from amongst his potential successors, who are of a younger generation, and put that decision off until after the next election,” says Brian Lee Crowley, a public-policy expert based in Ottawa.

Mr. Harper would “consider that a great advantage.”

Some of the stars that appear to be rising are Tony Clement, now President of the Treasury Board, and Jason Kenney, currently Minister of Employment and Social Development, as well as Foreign Affairs Minister John Baird.

“Assuming that the government is re-elected, the prime minister would almost certainly regard that as an opportunity to … see what talent he’s got to work with,” said Mr. Crowley, managing director of the Macdonald-Laurier Institute, and someone who rubbed with Mr. Oliver when the new finance minister was still working in the financial world.

“I’m sure he [Mr. Harper] will want to restructure his cabinet at that point.”

Mr. Oliver comes to his new job with plenty of accolades and some concerns over his handling and style at Natural Resources.

The former head of the Investment Dealers Association of Canada and executive director of the Ontario Securities Commission is a first-time politician, having been elected as a Conservative MP for the Toronto area in only 2011. His business and legal knowledge  — an MBA from Harvard Business School and law degree from McGill University — made him an interesting choice for a cabinet post.

Mr. Oliver was officially appointed Finance Minister on Wednesday, one day after Mr. Flaherty announced his resignation after eight years as the No. 2 federal minister. Greg Rickford, 46, previously Minister of Science and Technology, takes over at Natural Resources.

Given his private-sector investment experience, Mr. Oliver “provides a solid background and understanding in the Finance job,” said Charles St-Arnaud, a Canadian economist at Nomura Securities in New York, who previously worked at the Finance Department and the Bank of Canada.

“He has also proved to be a very strong and energetic supporter for the Keystone XL pipeline, which has likely put him in [Mr.] Harper’s good book,” he said. “However, his lack of experience in Ottawa may be a bit more challenging when having to head a department that is so much at the center of economic policy, [and] decision-making and with multiple links with other organizations.”

Still, in his previous cabinet post, Mr. Oliver was not afraid to rock the boat and was a relentless champion of new pipelines to diversify markets for Canada’s oil and gas.

“He has been very focused on the market-access issue, which is the biggest issue facing the industry today,” said Brian Maynard, government affairs director at Marathon Oil Canada Corp. in Calgary.

Mr. Oliver increased the profile of Natural Resources portfolio by speaking at home and abroad about opportunities in Canada’s natural resources, and followed up by removing barriers, from streamlining pipelines’ regulatory approvals to promoting discussions with aboriginal communities.

He pushed for new regulations across various departments to improve transportation safety and was unusually accessible.

“He has been a huge champion for the industry,” said one industry insider.

If he brings the same “fire” to Finance, “there could be some interesting, creative things happen, particularly in the run up to an election.”

One area in which he faced criticism was in his dealings with environmentalists, which he lambasted for being opposed to all types of development.

His departure leaves a big void as U.S. President Barack Obama prepares to rule on whether to give a permit to the Keystone XL pipeline from Alberta to the U.S. Gulf. Mr. Oliver has been involved in discussions with the U.S. for a joint approach to greenhouse gas emissions for the oil and gas industry that could be proposed as a condition of Keystone XL’s approval.

In his new job, Mr. Oliver will carry Mr. Flaherty’s budget-balancing torch into the next election.

There is little doubt he will officially eliminate the deficit by the 2015 target, in time to head into the federal election, expected in the fall of that year.

Ottawa’s deficit was set at $2.9-billion in Mr. Flaherty’s 2014 budget, but padded with a $3-billion contingency fund, in case the global economy and ours soured in the meantime.

“There isn’t a long window from the budget to an October 2015 election,” said Avery Shenfeld, chief economist at CIBC World Markets.

“So unless [Mr.] Oliver decides on his own to step down, it’s likely that his term as Finance Minister will last for the remainder of the Conservative’s mandate.”

So you are bankrupt, does that mean you can’t buy a house? – Consult with a Vancouver Mortgage Broker

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Vancouver Mortgage Broker | More from Garry Marr | @DustyWallet

Nobody will loan you money for a cup of coffee, let alone provide you with a mortgage on a house.

When will our hunger for debt abate?

Canadians’ collective debt mountain is now $1.422-trillion, and experts agree if we don’t slow down there will be trouble. Here are some tips for breaking the habit

Can you ever come back from that type of credit meltdown, one that even saw you declare bankruptcy? The answer is yes but it will take time.

“It may sound counter-intuitive but for some people filing a bankruptcy or a consumer proposal may be the quickest way [to home ownership],” says Andy Fisher, a trustee in bankruptcy with A. Farber & Partners Inc. “There are people who are carrying a lot of unsecured debt where it is difficult to carry that debt and save money to buy that house.”

Filing a consumer proposal or declaring bankruptcy allows a consumer to reduce those debts immediately and come up with some sort of payment plan.

“They owe $60,000 plus interest on unsecured lines of credit plus credit cards, etc. They do a consumer proposal for $21,000 without interest and the money they are saving would allow them to save more money to buy a house,” says Mr. Fisher.

There’s no question when it comes time to buy a house, your credit rating will be a key factor in whether a bank will loan you the money. A bankruptcy is not going to help with that. But lenders will also look at what your down payment is relative to the value of the house and what you are currently earning.

That person with loads of unsecured debt may have a better credit rating because they’ve managed to stay afloat but could be considered a bigger risk when it’s time to borrow for a house because their financial position is weaker.

Reestablishing that credit is a little trickier. One way to start is with a car loan. RRSPs loans also work well because banks are willing to lend the money out because they know where the investments are located.

Bankruptcies stay on record with the credit bureau for six years after they are discharged and Mr. Fisher says on average stay on your record for eight years, the extra two being the time to pay back the debt agreed to at proceedings.

“I’m not suggesting you go bankrupt to try and buy a house,” Mr. Fisher said, emphasizing consumers need to understand a bankruptcy won’t leave them shut out of home ownership forever.

Paul LeFevre, director of operations of Equifax Canada Inc., said coming up with the credit score is a trade secret but he can provide a little insight into what goes into it.

About 35% of the score is based on payment history and looks at late payments and severity of delinquencies. Another 30% of the score is utilization of your credit, basically how much of your credit have you used.

“You could go over your limit at the store and the payment will go through but that will have a significant impact on your score,” said Mr. LeFevre.

The next 15% is the length of your credit score history. The type of credit you have, including how many retail cards or credit cards you have, makes up another chunk of your credit score. Those cards can have a high impact because they come with higher risk than your car or home.

If you forget to make a couple of credit card payments after you declare bankruptcy, you have shot yourself in the foot with the majority of lenders

“You have to have your home and you need to get to your work [so you are more likely to pay those debts],” says Mr. LeFevre.

The final component is the history of background checks on your credit. People who seek credit a lot are considered higher risk and that can account for up to 10% of your score.

“Applying for a product won’t kill your score on its own” he says, adding the best advice he can give any consumer who currently can’t get a home mortgage is “pay every bill on time and pay down or eliminate all existing balances.”

Rob McLister, editor of Canadian Mortgage Trends, says people who have gone bankrupt are not a “tough sell” from the lender point of view, if they have fully established their credit.

“Generally the rule of thumb is they need a two-year track record of paying their bills on credit or car loans on time [after discharge],” said Mr. McLister, adding usually that means credit cards limits or loans outstanding worth $2,000 or more.

All this applies to prime lenders, the people you’ll need to hook up with to get those record-low interest rates on mortgages.

“You can still apply with a non-prime lender. There are people who will give you a loan the day after bankruptcy,” said Mr. McLister. “If you want the best rates and terms, you have to show them you have good credit.”

There are some lenders who will “up charge” or increase your interest rate until a bankruptcy falls completely off your credit report but they are generally second-tier lenders and not banks, says Mr. McLister.

You still need reasonable debt limits and a good job but the real issue after discharge is making sure you have a flawless record. No missed payments whatsoever on even the smallest debt.

“If you forget to make a couple of credit card payments after you declare bankruptcy, you have shot yourself in the foot with the majority of lenders,” said Mr. McLister. “You have to earn a lenders’ trust and by default the lender is not going to have the same trust with a post-bankrupt as opposed to a well-qualified customer.”

A second bankruptcy? That’s about as bad a credit risk as you can get. “You are going to be relegated to the world of non-prime lenders after that,” he says. “I’ve never had a double bankruptcy, I would just send them away.”

Illustration by Chloe Cushman, National Post

Home buyers squeezed out of market must save more – or settle for less – Consult with a Vancouver Mortgage Broker

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DAVID ISRAELSON- Special to The Globe and Mail

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Before the mortgage rules were tightened, some buyers were ill prepared for making such a big purchase, says Kristina Berg, mortgage consultant with Dreyer Group Mortgages in Surrey, B.C.
(Rafal Gerszak For The Globe and Mail)

When the Occupy movement hit the headlines in 2011, we heard about the 99 per cent, but when it comes to getting a mortgage there’s another group in Canada – the 9 per cent.

These are the nearly one in 10 prospective home buyers who as recently as two years ago qualified for mortgages but no longer do so. Rule changes have made it tougher for them to scrape together down payments, to get mortgage insurance and to arrange affordable payment terms.

What’s a buyer in the marginal category to do? It’s estimated that the typical 9 per center needs up to three and a half years longer to buy a home than before the rules were tightened, and the finish line keeps moving in popular centres where home prices are rising, such as Toronto or Vancouver.

“My question for young people [seeking a mortgage] is: If someone loses their job in your household, how are you going to get out of this? You find that all of a sudden you’re in a hamster cage,” says Kristina Berg, a mortgage consultant with Dreyer Group Mortgages in Surrey, B.C.

The federal government has tightened mortgage lending rules at least four times since 2008, to discourage buyers from taking on excessive debt that could lead to defaults, foreclosures and bankruptcies, as happened in the United States and other countries.

The tighter rules include regulators putting an end, in 2012, to zero-money-down mortgages, as well as shortening the maximum amortization period for a mortgage to 25 years, down from 30, making payments higher.

Purchasers can still put as little as 5 per cent down. But those who put down less than 20 per cent are required to buy insurance from Canada Mortgage and Housing Corp., which has just raised premiums. Also, the rules for obtaining home equity lines of credit and purchasing rental properties are tighter.

Despite the squeeze, wannabe purchasers have a few, limited options.

“The short answer is to look to the bank of mom and dad,” says Bill Johnston, manager and legal counsel with Bosley Real Estate Ltd. and director of the Canadian Real Estate Association. Indeed, with house prices nearing the stratosphere in major centres, young Canadians are turning more to parents and relatives to help put together a down payment.

The difficulty, of course, is that not everyone has relatives who can shell out money. For those who don’t, another option is to lower your expectations, says Trish Bongard Godfrey, a Toronto real estate agent.

“If people can’t afford houses they can look at condos. People are also buying farther from downtown,” she says. In Toronto, “I know everyone wants to live downtown, but they’re now looking in places like Hamilton and Markham. That’s why we need better rapid transit – we absolutely need to fix that.”

The 9 per centers who are first-time buyers can also borrow from their own registered retirement savings plan, says Ms. Berg. They can borrow up to $25,000 from their RRSPs – there is no tax penalty if they pay this back within 15 years from the time of their home purchase.

“If you only have 5 per cent to put down you can get an RRSP loan for the next 5 per cent and then borrow from your own RRSP,” Ms. Berg says. First, however, you should make sure that your financial institution doesn’t have a rule requiring you to keep the money in your RRSP for a minimum length of time, she warns.

Another option is to be creative about where you want to live, and how, Ms. Berg adds. Some young people are looking at co-ownership with other couples, for example – buying a house with separate living quarters and sharing the mortgage payments.

Others are looking at homes that include rental units. These do cost more, though, and as a landlord, you’re responsible for upkeep in your tenants’ quarters, too.

The wisest thing to do, says Ms. Berg, is to try to live within your means. The new rules are “a reality check,” she says.

“Pay off some debt. Don’t buy a car; lease or get a used one. Save a little more.”

Realtors say Canada’s housing market can still grow – Ask a Vancouver Mortgage Broker

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Vancouver Mortgage BrokerHome sales and prices are expected to still grow over the next two years, albeit at a slower pace, says the national organization that represents realtors.

In Canada’s housing market here’s what $500 K buys: A lake in Edmonton … a condo in Toronto

From four bedrooms in Windsor to one-bedroom in Vancouver, check out how far $500,000 goes in 8 major markets across Canada. Read on

The Ottawa-based Canadian Real Estate Association says sales are forecast to reach 463,700 in 2014 which would represent a 1.3% increase from 2013. The national average home price is forecast to be $397,000 in 2014, a 3.8% increase from a year earlier.

CREA said a particularly tough winter and the fact consumers pushed purchases forward into the summer of 2013 to take advantage of low rate pre-approved mortgages may have contributed to sluggish sales to start off 2014.

But the group, which represents about 100 boards across the country, says the market should bounce back with mortgage rates heading down.

“I expect fixed mortgage rates will edge marginally higher in the second half of 2014 as evidence confirms an anticipated pick-up in economic growth,” said Gregory Klump, chief economist with CREA, in a statement. “Marginally higher mortgage rates are likely to counterbalance that lift provided by stronger economic and continuing job growth and restrain the momentum of sales activity.”

By 2015, sales are expected to reach 469,400 units which would be a 1.2% increase from a earlier. By 2015, the national average price is forecast to be $401,400 which would be another 1.1% increase.

Meanwhile, CREA also released results for February sales which were up 0.3% from a January. The increase ended five straight months of declines but sales are still off 9.3% from the peak.

“Sales in February rebounded in some of the smaller local markets where activity was impacted by harsh winter weather in January,” said Laura Leyser, president of CREA, in a release.

Actual not seasonally adjusted sales were up 1.9% in February from a year ago with most of the gain coming from increased sales in British Columbia’s lower mainland and to some extent Calgary.

The average home sold for $406,372 in February which was a 10.1% increase from a year ago. CREA emphasized the year-over-year gain was impacted by the lack of activity in some of the country’s most expensive markets in 2013, in particular Vancouver.
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