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2013 housing sales off to better start than expected – Bruce Coleman, Vancouver Mortgage Broker

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Canadian Press | 13/06/17 |

Sorry to inform you, but ‘The Great Real Estate Crash of 2011…no…2012…no…2013′ has been postponed

OTTAWA — The number of Canadian homes sold so far this year is slightly higher than projected and it looks as if 2014 will show a rebound, according to a new forecast by the Canadian real estate industry’s main association.

The Canadian Real Estate Association said Monday it still expects fewer sales this year than in 2012 but says the decline will be smaller than what was predicted in March. It also projected that next year will show more sales than in 2013 or 2012.

“Until recently, it seemed that the only debate on Canada’s housing market was whether the landing was going to be of the soft or rough variety. Well, it appears that housing may not be so keen on landing at all at this point,” said BMO Capital Markets chief economist Douglas Porter.

“Sorry to inform you, but “The Great Real Estate Crash of 2011…no…2012…no…2013” has been postponed until 2014, or until further notice. More seriously, we believe housing remains on track for a fabled soft landing.”

CREA is now estimating 443,400 units will be sold in 2013, a decline of 2.5% from 454,573 in 2012. It had previously projected a decline of 2.9% from 2012.

CREA says the sales activity began to pick up at the end of the first quarter and accelerated in the second quarter.

The association also says 2014 will see a strong rebound, with 464,300 units of housing sold — about 9,700 more than last year.

The number of transactions dropped off in the second half of 2012 after new mortgage rules for lenders and buyers were introduced by the federal government last summer.

CREA reported there were 51,764 residential properties of all types sold across Canada last month, down 2.6% from May 2012.

On a month-to-month basis, May showed a 3.6% increase from April with 37,792 units and 36,473 units sold on a seasonally adjusted basis in the first two months of the second quarter.

The association’s home price index was up 2.3% in May, compared with a year earlier. That was slightly better than April’s HPI of 2.2% but still near two-year lows.

The May national average price, for all types of property in major markets across Canada, was $388,910 — up 3.7% from a year earlier. Almost all of the local markets that make up the average saw year-to-year increases.

101 Series: Reasons to Buy Title Insurance for Your Vancouver Home

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Reasons to Buy Title Insurance for Your Vancouver Home

There are a lot of little details that you have to take into account when buying a home or condominium in the bustling metropolis of Vancouver.

One of these oft overlooked details is known as “Title Insurance.”

So, what is title insurance and why do you need it?

Title Insurance Explained

Title insurance protects you from encountering and being encumbered by a number of legal issues that can easily complicate your life and cause you to end up in a costly litigation situation.

Although you would like to believe that everything is being handled by professionals on your behalf, you shouldn’t have to concern yourself with any worry about what happens behind the scenes.

Although most home or condo purchases go through without a hitch, sadly to say this is not always the case. So, what kind of potential legal issues could you encounter if you don’t have title insurance to give you that extra protection?

Some of the potential issues you could encounter when you are buying a Vancouver property could include the following:

• Issues involving property taxes which are still outstanding
• Zoning issues
• Mistakes made by the property surveyor which is challenged by a bordering neighbour or business owner
• Other financial liens which might be attached against the property such as by a collection agency or other forms of judgements
• A fraudulent title
• Encroachment issues

So, as you can see from the above list which is not all inclusive, there are a variety of legal issues which can throw a wrench into buying your dream home.

Simply put, title insurance can provide you with a valuable form of insurance protection which can help you if you get caught in one of these types of legal entanglements.

Is Title Insurance Expensive?  

That’s the beauty of title insurance. It is not all that expensive and it covers you for as long as you own your home. I suggest you do some comparison shopping as generally speaking the prices for the insurance range anywhere from around $150.00 to $350.00, but it really is well worth your while to have it.

You should also know that many lenders will require you have this insurance coverage before you can get approved on your mortgage anyway. Even if they don’t require that have you coverage, if have taken the time to purchase the insurance it will help smooth your way through the application and approval process

You can get title insurance directly through your lender as many of them offer a policy for their clients. Your other option is to get it either directly from your insurance company or through your insurance broker. Some policies are sold as a separate rider which you can buy along with your homeowner’s insurance policy.

However you buy it, I highly recommend you consider buying title insurance for that extra piece of mind and to protect yourself from a potentially costly legal lawsuit.

Trade and Investment to Support Canada’s Economy In 2013: RBC Economics

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Real GDP to increase to 1.9 per cent in 2013

TORONTO, June 19, 2013 — Canada’s economy started 2013 growing at a solid clip, as energy production continued to recover and the U.S. economy proved to be more resilient to a recession than was feared, according to the latestEconomic and Financial Market Outlook issued today by RBC Economics. Following an increase in Canadian GDP output of 1.7 per cent in 2012, RBC raised its real GDP growth forecast to 1.9 per cent through 2013 and expects a firmer 2.9 per cent rise in 2014.

The first quarter of 2013 saw a marked turnaround in the domestic economy, with Canada realizing a solid 2.5 per cent annualized gain, supported by a sharp turnaround in net trade which added 1.4 percentage points to the quarterly growth rate – the largest contribution since mid-2011.

“The improving trade balance underpins our forecast for Canada’s economy to grow at rates which should help propel the economy to full capacity in early 2015,” said Craig Wright, senior vice-president and chief economist, RBC. “Stronger demand for autos, houses and industrial machinery from the U.S. will help sustain the lift in export growth that Canada experienced so far this year for the remainder of 2013.”

Businesses reduced the pace of investment in structures and capital goods in recent quarters, likely a reflection of the uncertainties surrounding the effect of U.S. government’s fiscal restraint on U.S. demand for Canadian goods. Easy financial conditions in Canada coupled with indications that the U.S. will clear the fiscal cuts in good stead will support a rebound in business spending in the quarters ahead, RBC says.

“Company balance sheets are healthy – business financing made headway in early 2013 and will continue to provide Canadian firms with the capacity to invest at an accelerating rate in 2014,” said Wright. “After rising an expected 3.7 per cent this year, business spending will strengthen to 7.3 per cent in 2014.”

RBC says export recovery and business investment are necessary to keep the economy on track and to offset a softer housing market. Residential investment is forecast to decline 2.4 per cent this year and 0.7 per cent in 2014. This slowing partially reflects overstated strength in 2012 when residential investment jumped 6.1 per cent as home sales increased – likely to avoid a tightening in mortgage lending and fear of mortgage rate increases.

Cooling activity in the housing market led to a reduction in the pace of mortgage debt growth to the slowest level since 2001 in April, easing concerns that the economy is vulnerable to a significant shock. In fact, RBC indicates that debt service costs remain historically low and one-third of households continue to be debt free.

“The firm labour market is another factor mitigating the risk that a debt-associated downturn is brewing,” noted Wright. “With employment at an all-time high and household income and savings on the rise, we expect household debt to remain in check, which should limit the weakness in the housing market and support consumer spending.”

An easing in household credit growth coupled with a low level of inflation set the stage for accommodative monetary policy in early 2013. RBC says that new Bank of Canada Governor, Stephen Poloz, will likely maintain interest rates at the current level for the remainder of 2013, and expects the Bank will start to reduce the amount of stimulus in the second half of 2014.

Globally, RBC expects the world’s economy to continue growing at a modest pace in the first half of 2013 as a result of Europe’s ongoing struggle to get out of recession and the U.S. economy absorbing government austerity measures. Growth is likely to accelerate later this year, however, as the benefits from structural changes combined with very supportive interest rates boost global economic momentum.

After a generally disappointing finish to 2012, the economic performance across the majority of Canada’s provincial economies improved in early 2013. RBC forecasts that natural resource-intensive provinces will remain at the top-end of the growth rankings in 2013 and that stronger exports will be the mainstay for many of Canada’s provinces.

Newfoundland and Labrador will outpace all other provinces by a long shot to stand atop the 2013 provincial growth rankings. The Prairies – Alberta, Saskatchewan and Manitoba – will continue to grow at the top-end. The remaining provinces are expected to stand slightly below the national average for growth.

A complete copy of the RBC Economic and Financial Market Outlook is available as of 8 a.m. ET. A separate publication,RBC Economics Provincial Outlook, assesses the provinces according to economic growth, employment growth, unemployment rates, retail sales, housing starts and consumer price indices.

– 30 –

For more information, please contact:

Craig Wright, RBC Economics Research, 416 974-7457
Paul Ferley, RBC Economics Research, 416 974-7231
Elyse Lalonde, RBC Corporate Communications, 416 842-5635

Q2 2013 Bank Earnings – Mortgage Morsels

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Q2 2013 Bank Earnings – Mortgage Morsels

By Steve Huebl & Rob McLister, Editor,

CanadianMortgageTrends.com

If there’s one recurring mortgage theme from the Big 6 banks’ recent earnings announcements, it is “stress testing.” That’s where a bank simulates extremely adverse economic scenarios in a statistical model and then watches how its mortgages perform.

Stress testing has been a buzzword of late. Banks have been talking up their stress tests to show investors that things will remain under control if the floor drops out in the housing market.

Among other trends this quarter:

• Homeowners are increasingly renewing into fixed rate mortgages, which are more profitable for the banks
• Most banks are posting decreases in their insured mortgage portfolios (not surprising given last year’s insured mortgage rule tightening)

These and other observations can be found in the compilation that follows. It’s the fruit of pouring through quarterly earnings reports, presentations and conference calls. If you’re time-pressed, some of the focal points are highlighted, with our comments in italics. 

*********

 

Bank of Montreal
Q2 net income: $975 million (-5.3% Y/Y)
Earnings per share: $1.42

• BMO’s total Canadian residential mortgage portfolio stood at $81B. (Source)
• BMO said mortgage balances are up 13.7% Y/Y, with balances up 1.9% Q/Q, “reflecting (a) softer market.” (Source)
• 62% of the bank’s residential mortgage portfolio is insured, down from 70% in Q2’12. (Source)
• Average loan-to-value (LTV) on the uninsured portfolio is 59%. (Source)
• 64% of BMO’s portfolio has an effective remaining amortization of 25 years or less. (Source)
• Loss Rates for the trailing 4 quarter period were less than 1 basis point. (Source)
• 90-day delinquency rates have improved, dropping quarter-over-quarter and year-over-year. (Source)
• BMO’s condo mortgage portfolio is $11B with 56% insured. (Source)
• “…we’ve gained share in mortgages by bringing in new customers and encouraging them to borrow smartly with shorter amortization periods, and we’ve executed on cross-sell,” said William Downe, President and CEO. (Source)
• BMO said, “Tighter mortgage rules have restrained activity in the housing market, while weak global demand is holding back exports.” It added that “Strength in business loan growth should partly offset a slowing in consumer loans and residential mortgages.” (Source)
• BMO on regulatory changes: “In 2012 new residential real estate lending rules were introduced for federally regulated lenders in Canada including restrictions on loan-to-value (LTV) for revolving HELOCs, waiver of confirmation of income, debt service ratio maximums, as well as maximum amortization of 25 years and maximum home value of $1 million for high ratio insured mortgages (LTV greater than 80%). The regulatory changes resulted in some adjustments to loan underwriting practices including reducing the maximum LTV on revolving HELOCs to 65% from 80% previously.” (Source)
• BMO on stress testing:  “Residential mortgage and home equity line of credit (HELOC) exposures are areas of interest in the current environment. BMO regularly performs stress testing on its mortgage and HELOC portfolios to evaluate the potential impact of tail events. These stress tests incorporate moderate to severe adverse scenarios. The resulting credit losses vary depending on the severity of the scenario and are considered to be manageable.” (Source)
• “With respect to stress testing our portfolios, in a scenario that could be adverse, when we say that we are able to manage, it’s a combination of things. Firstly, I think even if our losses from that particular segment were to go up – and I’m not talking about the Consumer segment in total, because strangely but logically the losses really do not come out of the residential mortgages or from the HELOCs; they actually are felt more acutely in the Personal lines of credit as well as in credit cards,” Surjit Rajpal, EVP and Chief Risk Officer. (Source)
• Asked about BMO’s systemic problems in the U.S. with product origination, and issues surrounding incompetence around documentation, and whether BMO sees any systemic issues in Canada, Rajpal said: “Not that I can see, but if it was proven that systematically valuations were being done erroneously by somebody, then it could become an issue, but I don’t think that’s the case here; and so, it’s hard to see.” (Source)

CIBC
Q2 net income: $876 million (+8% Y/Y)
Earnings per share: $2.12 a share

• Residential mortgages were down $1.3 billion to $143.7 billion, “primarily due to attrition in our FirstLine mortgage business, partially offset by new mortgage originations through CIBC channels.” This follows a $1.1 billion decline in Q1. (Source)
  (We’ll evaluate CIBC’s mortgage market share losses in an upcoming story.)
• FirstLine mortgages stood at $37.1 billion, down from $48.2 billion a year ago. (Source)
• “Our exit from the FirstLine mortgage broker business continued to progress well, with both conversion volumes and spreads well exceeding our stated targets. The CIBC brand mortgage portfolio grew 12% year-over-year, which represented the 14th consecutive quarter of outperformance versus the industry,” said Kevin A. Glass, Chief Financial Officer and Senior Executive Vice President. (Source)
• 74% of CIBC’s Canadian residential mortgage portfolio is insured, with over 90% of this insurance being provided by CMHC. (Source)
• The average loan to value of its uninsured mortgage portfolio, based on March house price estimates, is 54%. (Source)
• Of CIBC’s $143-billion residential mortgage portfolio, approximately 46% is originated in Ontario, followed by B.C. at 20% and Alberta at 16%. (Source)
• “The credit quality of this portfolio continues to be high, with a net credit loss rate of approximately 1 basis point per annum,” said Thomas D. Woods, Chief Risk Officer and Senior Executive Vice President. (Source)
• Condos account for approximately 12% of the bank’s total mortgage portfolio, with about 72% of those in Ontario and B.C. (Source)
• 75% of the condo sub-portfolio is insured, and the uninsured portfolio has an average loan to value of 54%. (Source)
• David Williamson, Senior Executive Vice President and Group Head of Retail & Business Banking: “…With the runoff of the FirstLine book and a move to our branded products, happening in mortgages…the mix is moving more to profitable areas. And that’s where we get this kind of tailwind we’ve got, which is the impact of moving out of FirstLine and having a desire to get 25% of that into the higher-margin branded products. As I mentioned, we’re running quite a bit higher retention than the 25% and that’s having quite a positive impact. That’s one of the things that’s helping our NIMs, and frankly, offsetting the headwind, which everyone has, which is a slow interest rate environment.” (Source)

National Bank of Canada
Q2 net income: $434 million (-22% Y/Y)
Earnings per share: $2.49 a share

• Total revenues on personal banking were up $15 million or 2%, mainly due to higher consumer and mortgage loan volumes. (Source)
• Residential mortgages rose 4% Q/Q and 13% Y/Y to $34.8 billion in Q2. (Source)
• The loan-to-value for HELOCs and uninsured mortgages was approximately 59% and 55%, respectively.
• Mortgages in Toronto and Vancouver represented only 11% and 2% of National Bank’s books, respectively. 67.9% of National’s mortgage portfolio is in Quebec. (Source)
• During the six months ended April 30, 2013, the Bank acquired a portfolio of residential mortgage loans with a higher credit risk profile for a total amount of $328 million. (Source) “It’s one of three or four small portfolios that we purchased typically from banks that were exiting the Canadian market,” said William Bonnell – EVP, Risk Management. (Source)
•  The Bank does not have any significant direct position in residential and commercial mortgage-backed securities that are not insured by CMHC. (Source)
• “…the risk of economic slowdown is real and could adversely affect the profitability of the mortgage portfolio. In stress test analyses, the Bank considers a variety of scenarios to measure the impact of adverse market conditions. In such circumstances, our analyses show higher loan losses, which would decrease profitability and reduce the Bank’s regulatory capital ratios. To counteract the negative impact of an economic slowdown, the Bank has acted preventively by defining a contingency plan to guide its response in such an event.” (Source)

Royal Bank of Canada
Q2 net income: $1.94 billion (+26% Y/Y)
Earnings per share: $1.27

• Residential mortgage volume rose to $177 billion in Q2, up 5% Y/Y from $169 billion. Average LTV was unchanged at 47%. (Source)
• 42% of RBC’s residential mortgage portfolio was insured in the quarter, up from 40% in Q1. (Source)
• RBC repeated its wording from previous quarters, saying it has a “well-diversified mortgage portfolio across Canada” and that it continues to conduct “Ongoing stress testing for numerous scenarios including unemployment, interest rates, housing prices.” (Source)
• RBC states it has “Strong underwriting practices with all mortgages originated through our proprietary channels.” (Source)
• “We continue to see stable performance in our retail portfolios with provisions on residential mortgages of 2 basis points and 279 basis points for (credit) cards,” said Morten N. Friis, Chief Risk Officer. (Source)
• Peter Routledge from National Bank Financial asked this question: “Is there any reason to think that there is a systemic issue with appraisals that might rebound on the banks in the form of the CMHC refusing claims…How likely an outcome is that?” 
  
  Gordon M. Nixon – President and CEO, responded:  “…Most of the banks, including ourselves, use the emili appraisals service, which is CMHC’s own appraisal…They would do their own due diligence with emili. So, I don’t think it would be the nature of the appraisal service. I think where operational risk evolves is the representation of the fact. So, if they were to go back to the loan application and find that the facts on income or on rental versus cost, other costs are different than what was presented during the adjudication process, then I think you have technically an opportunity to negate the claim. But I don’t think it’s just on how you use appraisal. It’s really the adjudication process that would create most of the operating risk, which is why our bank, including I’m assuming most others, are very careful about our facts that are being submitted and how we put those applications together.”
  
  Morten N. Friis – Chief Risk Officer, added:  “…In terms of the use of emili…it is one of several tools that we use, depending on the property, we have full appraisal…So emili is a supplemental tool that we use in the appraisal process. To reiterate Dave’s point, the risk around refusal on the insurance all relates to the accuracy of the documentation that we provide. We have ongoing audits and reviews with CMHC and our track record with them is extremely strong. So, the point on the risk put-back (of claims to the bank), first of all, would be completely inconsistent with our historical experience with them, and as Gord was saying,I think it’s an extreme tail risk…They obviously as an insurer have some ability to dispute claims, but I think our track record on accurate documentation is pretty strong.” (Source)

Scotiabank
Q2 net income: $1.6 billion (+9.6% Y/Y)
Earnings per share: $1.23

• The bank’s residential mortgage portfolio totalled $188 billion in Q2, a 27% increase year-over year (or 7% increase excluding ING). Of this total, $169 billion is related to freehold properties and $19 billion is related to condominiums. (Source)
• Of Scotia’s residential mortgage portfolio, 58% is insured, unchanged from Q1. (Source)
• The uninsured portion has an average loan-to-value ratio of approximately 55%. (Source)
• “The credit risk in the Canadian residential mortgage portfolio remains benign and delinquencies are continuing to decline,” said Robert H. Pitfield, Group Head and CRO. (Source)
• Pitfield added: “The Canadian Housing market generally remains balanced between supply and demand. Reasonable economic performance has allowed consumers to manage debt levels well. However, we do expect some softness in the Canadian Housing market in the short-term.” (Source)
• “Credit quality and performance of the residential portfolio remains strong, a disciplined and consistent underwriting standards have resulted in extremely low loan losses and again have been stressed under a series of severe tests which confirm the appropriateness of our risk appetite,” Pitfield continued. (Source)
• Sean McGuckin, EVP and CFO, said, “In the last nine months on the mortgage portfolio you’ve seen that the customers who are renewing their mortgages or came in on a variable basis are now taking fixed term mortgages, which are giving also additional better margins.” (Source)

TD Bank
Q2 net income: $1.72 billion (+1.8% Y/Y)
Earnings per share: $1.78

• TD’s residential mortgage portfolio was up slightly to $156 billion in Q2, up from $155 billion in the previous quarter and $145 billion in Q2 2012. (Source)
• TD says its real estate secured lending (RESL) volume increased 4% Y/Y (Source)
• The bank’s 3% Y/Y growth in personal lending reflects “a slowing housing market and continued consumer deleveraging.” (Source)
• TD adds its RESL portfolio, including securitized mortgages, benefits from the fact that 68% of the portfolio is government insured, and 73% of HELOCs are in first lien position (down from 75% in Q1) and a further 23% are in second to a TD first (up from 20%). (Source)
• When asked about the substantial decrease in TD’s insured portfolio and increase in its uninsured portfolio, Tim Hockey, Group Head, Canadian Banking, Auto Finance, and Credit Cards, responded: “We’ve been quite concerned about the overall growth rate of real estate secured lending for the last number of years. And so the regulatory changes that have actually been taking place over a number of years, quite prudently implemented over a long period of time, are actually having almost precisely the effect that we would have expected, which is a slow landing.” (Source)
• He added: “…Because of the changes around the high ratio mortgage versus conventional, all the mortgage originations are down year-over-year, but conventional are down less. So in other words, what you would ascribe to be first-time home buyers have actually had more of an impact, which you could say is probably bang-on what the regulatory changes would have expected.” (Source)
• “We’re clearly seeing that even notwithstanding a low interest rate environment, and obviously there’s been lots of conversation about that rate, that consumers are not backing up the truck and actually creating a frothy housing market as low interest rates are usually incenting them to do.”
• “In terms of channel originations, all channels are down year-over-year. In our particular case, our broker channel is down less, but that I would ascribe much more to service improvements and changes we’ve made in our own channels as opposed to an industry phenomenon,” Hockey continued. (Source)
  (TD’s broker channel has seemed to get more competitive this year.)
• “I would say pricing is aggressive, but not unduly so for a spring market. And clearly it was a cold spring, so that does have an effect on the activity… There’s some speculation [on], is there going to be a resurgence? But if you talk to Craig Alexander at TD Economics, he would say our expectation is still for having a fairly tepid spring mortgage market.” (Source)
• “Every time we do [stress tests], and we’ve become quite expert at doing stress tests, it continues to show that in Canada, given the nature of this business, given the government guarantees and the insurance portfolio, that we continue to make money in Canadian banking overall – we don’t go into the negative.”
• “…Three or four years into the (mortgage rule) changes, [the market is] moderating exactly as expected. But if we’re wrong, at whatever percentage of likelihood that is, then we still feel good about the stress test(s).” (Source)
• “On the stress tests, it’s really not the mortgage portfolio that you’re worried about…If you paint that type of scenario where you have such a reduction in house prices across the country, it’s really your other credit portfolios that would be more of a concern – the unsecured credit portfolios, then your commercial portfolio. So we stress that as well, and really to the deepest scenario that we can paint, the Canadian operations remain profitable. It’s not a good picture but it’s a profitable picture,” said Mark Chauvin, Group Head & Chief Risk Officer. (Source)

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Note: Transcripts are provided by third parties like Morningstar. Their accuracy cannot be 100% assured.

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By Steve Huebl & Rob McLister, Editor,

CanadianMortgageTrends.com

 

 

Reasons to Avoid FSBO (For Sale by Owner) – Consult with a Vancouver Mortgage Broker

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Reasons to Avoid FSBO (For Sale by Owner)

For Sale by Owner or FSBO might sound like a good idea on paper but it could it end up costing you big time.

One of the major appeals of FSBO is that people believe it will make them more money because you don’t have to pay a commission to a realtor. Sounds like a great idea, because how hard can it be?

You probably think all you have to do it advertise the home on some website, put a “For Sale” sign on the yard, or an ad in the local paper. Prospects drop by and someone falls in love with your house and you sell it. It sound simple but here a few hard facts you should consider before you attempt to do so.

You Will Not Get a Good Real Estate Listing

Realtors have one significant advantage over you and that’s because only a licensed real estate broker can access the Multiple Listing Service which is also known as the MLS for short.

You can’t! And, that is a big disadvantage because this is actually what most serious homebuyers use when they are looking to buy a home. Also, if you think you’re going to be avoiding out of pocket expenses then think again. Listing you home on any other website or in the papers is going to cost you money.

FSBO’s Aren’t Very Reputable

Credibility is a very big concern when you are investing $500,000 in buying a new home. The Vancouver real estate market is hot which means home prices are high. Buying a home is the biggest single investment that most people make in their lifetime.

Let’s face it – is a new buyer really going to believe you when it comes to making a full disclosure about any issues they should know about when they are buying a house from a complete stranger? Although I have no doubt that most people are relatively honest, it’s just bad business if you don’t disclose everything that’s negative about your home.

You could end with more costly litigation issues because you could end up being sued, and it might not even have been your fault. The issue or problem might only have appeared after you sold the house and you had no legitimate knowledge about it. You might escape having to pay a judgement, but there’s still no avoiding the costly legal fees involved.

 Do You Have the Time It Takes to Sell a Home?

Real estate agents work wacky hours. They work when their clients need them and not the other way around. From evenings and weekends, when a client wants to see a house, it’s their job to do their best to accommodate that client.

And, if you and your partner are working, will you be able to take the time from work to show someone your home? Are you prepared to give up your evenings and weekends to accommodate a prospective buyer?

Are you really going to be getting quality viewers or just a bunch of time-wasting curious tire kickers who have nothing else to do? A real estate agent gets a feel about their clients and in most instances their clients are serious about buying, looking at and possibly putting in a bid on your home.

Another question you might want to ask yourself is whether you really know what it takes to prep a home for sale? If you don’t know what you’re doing and what it takes to sell a home, then you could end up wasting a lot of your valuable time and getting nowhere in the end.

Real estate agents are trained at their job and know what they’re doing so save yourself a bunch of headaches and hire a professional to the job for you.

101 Series – How to Buy a Vancouver Home with a Poor Credit Score – Bruce Coleman Vancouver Mortgage Broker

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How to Buy a Vancouver Home with a Poor Credit Score

Spending beyond your means is common today. Sometimes you get financially jammed up and get behind on those blasted credit cards and other bills.

This scenario can negatively affect your mortgage application. If you’re still struggling to make ends meet then buying a home should maybe be put on hold.

But, if you’re back on track and caught up on your debts then maybe you might be ready to tackle a new home. Your credit score is a reflection of how well you can manage the responsibility of taking on a mortgage.

There are two strategies that you can adopt to improve your chance of getting approved by lenders as the new B20 regulations (Underwriting Guidelines for Residential Mortgages) introduced by the Feds have made getting approved even more of a challenge.

Worst Case Scenario – Recent Bankruptcy

If you’ve recently declared bankruptcy or have made a credit proposal, then your best strategy to use in not only getting approved but qualifying for a decent rate is to hold off and wait it out for awhile.

Your only option at best in these circumstances when it comes to applying for Vancouver home mortgages is to hope that you get approved for a subprime rate. These were somewhat easier to get before the new regulations.

Right now however, it’s a tough sell as many lenders have tightened their belts and are performing a more rigorous due diligence when it comes to applications.

The majority of conventional lenders won’t even give you the time of day until you’ve managed to get 2 years beyond your bankruptcy discharge or credit proposal. You will also need to have qualified for at least 2 sources of credit that have at least a $1000 or $2000 limit with a 2 year track history of paying your debt on time.

If this fits your situation then you might be concerned how you are even going to get approved for any credit card. Well, you can as there are credit cards which you can apply for and these are called “secured credit cards.”

These “secured” credit cards require a security deposit before you are approved but they can help reinstate your credit rating and get you back in financial shape again. You also want to make certain that you choose a lender which will guarantee they will refund your security deposit after a certain period of time.

To rebuild the confidence in lenders you need to make sure that all your bills are paid on time including your household bills so you can rebuild your credit score again. You have to make a plan and stick to that plan and above all else you must be patient.

The More Expensive Approach

Even though you have declared bankruptcy or going through the process of a credit proposal it could be that your financial situation has improved so dramatically you believe you can swing a mortgage. You want a home now, but is it possible even with your circumstances?

It’s by no means impossible but you better be prepared to pay the price. Your best bet will be with a subprime mortgage and that’s going to mean higher interest rates. You will also have to be prepared to put down a fairly substantial down payment of at least 25% if not even more before a lender will give your application any credence.

You may also have fork out between 1 – 2%, and maybe even more for a broker or lender’s fee.

It’s a lot tougher to find subprime mortgages but they are out there.

If you got the cash for a down payment and are still determined to buy a home then you most definitely want to use an experience mortgage broker like me to evaluate and assist with your particular circumstances.

Bruce Coleman, Vancouver Mortgage Broker

Evidence mounts of soft landing for Canada’s housing market – Consult with a Vancouver Mortgage Broker

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You’d have to see rates move dramatically higher for a major correction

Canada’s housing market is showing signs of a soft landing amid evidence of robust demand and buoyant new construction plans.

Home prices in Toronto, Canada’s most-populous city, rose 5.4% in May from a year ago, the biggest increase in five months, the Toronto Real Estate Board reported Wednesday. Statistics Canada said the value of April municipal building permits posted a 10.5% gain.

Housing-market data are showing few signs of a sharp correction even amid warnings from analysts and policy makers that a bubble may have been forming. Finance Minister Jim Flaherty tightened mortgage rules for a fourth time last year on concern that an overbuilding of condos could lead to sharp price declines. Former Bank of Canada Governor Mark Carney identified record household debt as the biggest domestic risk to the economy.

“The base case scenario is a soft landing,” said David Tulk, chief macro strategist at Toronto-Dominion Bank’s TD Securities in Toronto. “You’d have to see rates move dramatically higher” for a major correction, he said.

Driven by historically low interest rates, Canadian banks have been increasing dependence on real estate lending to drive earnings, with residential and non-residential mortgage assets totalling $955 billion at the end of March, or 26% of total assets, according to OSFI data. That’s up from $521 billion five years earlier, which represented 20% of assets at the time.

Fading Impact

The impact of Flaherty’s policy changes are beginning to fade, Toronto Real Estate Board President Ann Hannah said in Wednesday’s release.

“A growing number of households who put their decision to purchase on hold as a result of stricter lending guidelines are starting to become active again in the ownership market,” Hannah said.

The average sale price rose to $542,174, from $514,567 a year ago, while a composite home benchmark price index for the city was up 2.8%, the Toronto Real Estate Board reported. Unit sales dropped 3.4% from a year earlier to 10,182, the board said in an e-mailed statement Wednesday.

The decline in Toronto sales was led by condominiums and townhouses, while purchases of detached homes rose in May. Prices were up in all categories of homes.

On a year-to-date basis, Toronto sales are down 9.6%.

‘Weaker Volumes’

“The story continues to be one of weaker volumes,” Derek Holt, vice-president of economics at Toronto-based Scotiabank, said in a note to investors. “The question is how that will carry over into construction and prices.”

Residential building permits rose 21% to $4.35 billion in April, Statistics Canada said today, led by a 51.9% jump in condominium construction intentions.

Vancouver made one of the largest contributions to the national increase among 34 cities, Statistics Canada said, with permits rising 50.7% led by multifamily dwellings. Calgary permits also rose 40.6% to $773 million on commercial buildings.

Vancouver’s real estate board said Tuesday that home sales rose 1% in May from a year ago, with composite prices down 4.3%.

Falling home construction, which helped lift Canada’s economy out of recession, has been a drag on growth over the past year, shrinking at an annualized pace of 4.7% in the first quarter, according to GDP data released last week.

www.bloomberg.com

How Bond Yields Affect Fixed Mortgage Rates

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How Bond Yields Affect Fixed Mortgage Rates

For those of you who are seeking to buy a home or if you’re considering refinancing your mortgage, then now might be the ideal time to do so.

Why? Vancouver mortgage brokers are keeping a close watch on what is happening with Canadian Government Bonds (GoC’s). The reason why GoC’s are important is because bond yields often have a direct impact on the direction of fixed mortgage pricing.

Just recently, Canada’s 5-year bond yield broached a 3-month high. The expectation of most Vancouver mortgage brokers is that the impact of these higher bond yields will also result in increased fixed mortgage rates.

The impact is already being felt as several mortgage lenders have already announced they are raising fixed mortgage rates 5-10 basis points higher on longer fixed mortgage terms. For those not familiar of what a basis point means then as a simple explanation 1 basis point is equivalent to 1/100 of a percent so 50 basis points for example would be equivalent to ½ %.

The Government of Canada 5 year bond yield has increased by 33 basis points in less than a month and is used by the mortgage industry as the pricing benchmark for determining fixed mortgage rates.

There are several reasons why this has occurred but it mainly stems from the rosier outlook which has transpired recently in the U.S. and abroad including:

• Home prices which has seen risen by 10.9% and the highest increase in the past 7 years
• Increased consumer confidence which is a 5-year high
• Record high prices for the U.S. stock market
• A diminished global risk perception (This generally results in lowering the demand for government bonds which are perceived as “safe”)

Bond markets have been rather bullish of late because of the global economic uncertainty but some analysts contend this might be coming to an end. These predictions should be taken with “a grain of salt” as they have made similar predictions before which didn’t pan out.

In any event, when it comes to a bullish bond market, even when the bond market cools it doesn’t necessarily mean it will suddenly reverse as it could just as easily stay flat and remain so for many years to come. Keep in mind that a bond yield will move in an inverse pattern to the bond price.

Another key factor which fuels bond yields and ultimately mortgage rates is the rate of inflation. The core inflation rate in Canada came in at a tepid 1.1% despite the fact that 2.0% was expected by the Bank of Canada. The low inflation rate was largely due to a weak GDP (Gross Domestic Product) and diminished gains on the employment front. It is not really certain that Canadian bond yields will continue to rise, but eventually you can expect that the higher bond yields will begin to fizzle out.

Most of the major economists in Canada have now changed their tune about the Bank of Canada making a rate change this year and now anticipate that it won’t happen until the latter part of 2014.

However, many Vancouver mortgage brokers are also aware this doesn’t mean that fixed mortgage rates won’t change now as they also usually increase well before the Bank of Canada raises its own rates.

1/3 of Canadians live paycheque to paycheque, survey suggests – Consult with a Vancouver Mortgage Broker

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“They felt that their incomes were not keeping pace with the cost of living,” said Rock Lefebvre, co-author of the study, which surveyed more than 1,800 people.

Almost a third of Canadian households report never or almost never having any money left to save after paying their bills, according to a new study issued Wednesday.

Households that reported no wealth accumulation tended to be working, middle-aged people — although of varying income levels, says the study by the Certified General Accountants Association of Canada.

Consumer debt

Consumer consumption, such the use of home equity lines of credit, were among things hurting the accumulation of wealth, Lefebvre said.

“This consumption pattern that has emerged over the last decade . . . is playing havoc with people’s ability to save,” he said.

“Because of the low interest rates coupled with the behaviour of borrowing, people are possibly buying homes and cars that are a little more expensive than what they would typically be able to afford.”

Meanwhile, two-thirds of households with no wealth accumulation — meaning the value of their assets was less or about the same as the amount of their household debt — didn’t expect to get any further ahead in the next three years, the study said.

However, about 70 per cent of Canadian households reported they had accumulated some wealth.

But Lefebvre said the result may have been more of a “feeling” than an objective assessment of wealth.

“They could be saving $100 or they could be saving $100,000,” said Lefebvre, vice-president of research and standards.

Lefebvre said one of the main ways for most Canadians to accumulate wealth is to pay off a mortgage as quickly as possible.

But the survey found that only 10 per cent of households had refinanced a mortgage to pay it off sooner.

“This is a beautiful time to get ahead with these low interest rates. (But ) people just seem to be living the life rather than make the sacrifice to get rid of this debt while it’s low interest and come out of it on the bright side.”

Fewer savers

Meanwhile, Canada’s household savings rate plummeted to 3.8 per cent at the end of 2012 from its peak of about 20 per cent in the early 1980s, the study said.

The wealth of an average Canadian adult increased by $6,600 in the four years up to 2012, or 2.7 per cent higher when compared to their net worth at the beginning of 2008.

The report also found that only three in 10 households surveyed believed the accumulation of wealth was a very important personal goal, while half saw it only as a somewhat important pursuit.

The online survey was conducted last Sept. 14-21 by Ipsos Reid with 1,805 Canadians aged 25 and older.

The polling industry’s professional body, the Marketing Research and Intelligence Association, says online surveys cannot be assigned a margin of error because they do not randomly sample the population.

Mortgage Buying Rules for the Self-Employed and Entrepreneurs

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Mortgage Buying Rules for the Self-Employed and Entrepreneurs

Did you know that over 16% of all working Canadians are self-employed or have entrepreneurial styled businesses?

These hardworking folk also need real estate financing to buy a home but the new B20 (Underwriting Guidelines for Residential Mortgages) have made this more of a challenge.

Knowing what to expect and getting prepared is your best strategy to overcome any hurdles that have to be tackled beforehand.

What’s Changed for the Self-Employed and Entrepreneurs?

The challenge with the self-employed is that that they don’t have a traditional salary. They use instead what is called their “stated income” which is the amount the borrower claims they have earned as income. Lenders would generally assess the ability of the self-employed to repay the loan based upon:

• Credit rating
• Size of the down-payment
• Debt repayment history
• Savings
• The cash flow of the business

The new regulations which came into effect have resulted in traditional lenders such as banks taking a more cautious approach for mortgage applications. Lenders are performing more due diligence to examine the income statements and tax returns of self employed applicants.

What Do Mortgage Lenders Want from the Self-Employed and Entrepreneurs?

Many lenders will examine your income as it relates to the average income earned for your particular industry or field. They will also examine your income relative to the type of business you run and to the amount of time you have been operating your business.

Another key area that is receiving closer scrutiny by lenders is the amount that is being written off of your income tax submissions. The purpose is to get a clearer understanding of your stated income versus how much you are reporting as income to Revenue Canada.

Mortgage Application Preparation Tips for the Self-Employed and Entrepreneurs

Although getting approved for a mortgage is more of a challenge for the self-employed and entrepreneurs, you can make the application much less painless by preparing your paperwork beforehand.

Some tips to keep in mind include:

Pay down your Debt

One of the key factors of getting a mortgage approved is known as “debt-service ratio.” Credit cards may be convenient, but too much credit dependence is a red flag for lenders. This refers to how much of your income is used to cover your debts including what you would pay for the mortgage, heating and property taxes.

Most lenders don’t want to see it much greater than around 32%. Lenders will check your credit history and credit rating so you should do this in advance to understand where you stand. This applies to both your personal credit and your business credit history and standing.

Financial Statements

Most lenders would like to see 3 years worth of your financial statements. This especially includes your income tax returns as lenders want to know how much tax you owe and how much you’ve written off on your returns.

You will also need to gather up your business license, articles of incorporation and your business financial statements. To show that you have a steady source of income, your client contracts and work orders will also demonstrate proof of your income and cash flow.

You should also be prepared to show that your GST/HST payments are all current as well.

The more information the lender knows about your business assets, the more comfortable they will be in approving your application.

How to Improve your Chances of Getting Approved

Several tactics you can use to bolster the strength of your mortgage application is to consider the following approaches:

• Increase the amount of your down payment
• Have an available co-signer

Bottom Line

Lenders feel they are taking more of a risk when it comes to the self-employed and entrepreneurs. You may be eligible for low rates but should be prepared to pay more for higher rates. Also, don’t forget about mortgage insurance as well.

When it comes to real estate financing you can increase your chances of success by working with a Vancouver mortgage broker like me. We can help you prepare the paperwork and have access to broad range of lenders to increase your chances for approval.