Category Archives: mortgage arrears

How rising interest rates are squeezing homeowners

Mortgage holders on tenterhooks as they prepare for Bank of Canada’s next rate announcement Oct. 25

Gerry Corcoran is bracing for Oct. 25. That’s when the Bank of Canada will make its next interest rate announcement, on the heels of two consecutive rate hikes. Corcoran said he can’t afford a third.

“A lot of us with variable rate mortgages are on pins and needles because we’re like, ‘Are we going to get hit again?'”

‘It’s kind of smacked my finances around a little bit.’– Gerry Corcoran, new homeowner

Corcoran, 38, signed the mortgage for his two-bedroom condo in Stittsville back in June.

Two weeks later, on July 12, the Bank of Canada announced a rate increase of .25 per cent, the first increase in seven years. It was followed by a second .25 per cent increase in September.

As someone with a variable rate mortgage, Corcoran says those small rate hikes have had a sizeable impact. He estimates they’ll cost him about $65 per month.

While it’s a cost he says he can absorb, as a new homeowner Corcoran only has a few hundred dollars a month in disposable income. It’s also meant he’s had to put on hold his plan to enrol in his employer’s matching RRSP program until next year.

“It’s kind of smacked my finances around a little bit,” he said. “It hurts.”


 


Gerry

‘A lot of us with variable rate mortgages are on pins and needles because we’re like, ‘Are we going to get hit again?” (Ashley Burke/CBC News)

Homeowners in ‘panic mode’

After years of record-low interest rates, people in the mortgage business say they’ve been waiting for this other shoe to drop.

Erin MacDonell, a mortgage agent with Mortgage Brokers Ottawa, says she saw a spike in calls after the rate hikes. Many callers were eager to buy — or refinance their mortgages — before rates went up again.

“People are in a little bit of a panic mode,” MacDonell said.

But even if interest rates continue to climb, she says a new federal “stress test” will help mortgage holders weather the changes.

Erin MacDonell, mortgage agent, ottawa mortgage brokers

Mortgage agent Erin MacDonell says calls from both potential buyers and homeowners looking to refinance spiked when the Bank of Canada announced a rate increase in July. (Ashley Burke/CBC Ottawa)

Under the safeguard introduced last October, a borrower had to be approved against a rate of 4.64 per cent for a five-year loan — even though many lenders are offering much lower rates. That rate is now 4.84 per cent.

The test applies to all insured mortgages where buyers have down payments that are less than 20 per cent of the purchase price.

“No one should be struggling too, too much,” MacDonell said.

Instead, she predicts future rate hikes will simply mean “people won’t be qualifying for as big of a house as they maybe wanted in the past.”

Gerry Corcoran says despite being forced to tighten his belt, buying was still the right choice for him.

“At the end of the day, even with mortgage and condos fees, I am still paying less to own this place than [I’d pay] to someone else to rent it.”

Source: Karla Hilton · CBC

Advertisements
Tagged , , ,

Things You Should Know About Mortgages

Things You Should Know About Mortgages

House hunting can be both exciting and stressful and it’s one of the biggest purchases most people make in their lives. When it comes to financing your home or business, Northwood Mortgage can answer all your mortgage questions, taking the edge off an exasperating experience.

What does a mortgage broker do?

A mortgage broker secures financing for you. He or she can steer you in the right direction and provide guidance on what would be most beneficial to your personal situation. A broker knows the marketplace and is constantly in touch with banks and other lenders to get you the best mortgage possible. Mortgage agents work for mortgage brokers who hold licences.

Who pays them?

The bank or lender is responsible for paying the broker’s commission. That amount depends upon how much you’ve borrowed.

Fixed mortgage

You’ll be paying the same amount in principal and interest for the term of your mortgage no matter what interest rates do. Many homebuyers prefer this type of mortgage because they know what to expect even though there’s a chance interest rates may drop. It’s a tradeoff for stability.

Variable mortgage

Keep an eye on the prime rate because with a variable mortgage you’ll be paying according to what interest rates do. There is a chance you may have to pay more if the rate increases, but on the other hand, you’ll shell out less if rates drop.

Open versus closed rates

An open rate can be variable or fixed. It’s generally more flexible and has a higher rate of interest than a closed mortgage. You can pay it off or make more payments with any penalty. A closed rate can also be variable or fixed. Most folks opt for closed rate mortgages since the rates are lower, but you can only pay on the principal as stated. Paying it out early will net you penalties.

What about the Canadian Mortgage and Housing Corporation (CMHC)?

This government corporation gives residential homebuyers default loan insurance, providing assistance to those who find it financially cumbersome when it comes to buying a house. This insurance will cost you anywhere from 1.75 to 2.95 per cent of the entire amount of your mortgage. It gives banks and lenders protection in case you can’t pay your mortgage. You must be a Canadian citizen to take advantage of what CMHC offers.

Northwood Mortgage is one of the largest mortgage brokerage firms in the Greater Toronto Area and we know the ins and outs of the lending world and will be able to answer any queries you have. Not only do we arrange mortgages for homebuyers, but we also work with investors and those in the industrial and commercial sectors to arrange loans in the millions of dollars.

With all there is to know about mortgages and all the terms that come with that information, your best course of action is to call Northwood Mortgage. One of more than 200 experts available will tell you about their exemplary services.

Source: http://www.NorthwoodMortgage.com

 

Tagged , ,

CBC FORUM House keys sent to the bank? Your thoughts on mortgage defaults

The federal government is worried about Albertans making strategic defaults on their mortgages.

 

Some Albertans are walking away from their mortgages by putting their keys in the mail and sending them back to the bank.

It’s a phenomenon known as jingle mail — sparked by a combination of high debt and lost jobs — and was a big problem in Alberta back in the 1980s.

As a result, the federal government is watching the Alberta market closely. Jingle mail, or strategic defaults, weaken the housing market and increase loan losses among Canada’s banks, say experts.

We asked what this means to you: Does your mortgage keep you awake at night? What would make you send your house keys to the bank? Any personal mortgage anecdotes you want to share?

You weighed in via CBC Forum, our new experiment to encourage a different kind of discussion on our website. Here are some of the best comments made during the discussion.

Please note that user names are not necessarily the names of commenters. Some comments have been altered to correct spelling and to conform to CBC style. Click on the user name to see the comment in the blog format.

Many chimed in with their own mortgage advice.

  • “Sending house keys back to the bank seems very irresponsible. The banks are not going to absorb the costs — customers will be on the hook in the end.” — EOttawa​
  • “People who buy the McMansions in the hopes that someday they will become part of the upper class are the ones who should worry. Big risks have serious consequences. Good luck with it.” —Chris K
  • “No, it doesn’t keep me awake for the simple reason that we bought a home well within our means with a mortgage way lower than what the banks said we could borrow … It’s a question of common sense and priorities.” — docp

There was some discussion on who should be blamed.

  • “Lots of blame and finger pointing to go round. Bottom line, as many others have said, it falls on personal responsibility to make good decisions and sometimes circumstances outside our control force us to make tough decisions to survive — like using ‘jingle mail’ in Alberta.” — Don Watson

Several commenters even had their own jingle mail stories.

  • “My ex-husband and I returned the keys to the bank when it became clear that he was unable to maintain the mortgage payments on the home he had bought before we were married. This happened in the first year of marriage and it was a terrible blow to him. Later he declared bankruptcy.” — LinneaEldred
  • “We purchased our home within our means and have been able to keep up with the payments. We lived in Fort McMurray for four years, after they went through the downturn of the economy in the early 80s. Folks were turning in their keys then and walking away. People still don’t learn from past mistakes.” — Leslie Riley​

There were even some thoughts on the future … or lack of it.

  • “I have a mortgage and I also have a full-time job, yet I still worry about the future of my mortgage. I don’t believe that we need to point out the fact that even if you were or are smart about your money, you cannot predict your future.” — Samantha R.

You can read the full CBC Forum live blog discussion on mortgages below.

Can’t see the forum? Click here

Source: By Haydn Watters, CBC News Posted: Feb 09, 2016 12:26 PM ET

 

Tagged , , ,

…mortgages made simple…

Slide3

THE RAY C. MCMILLAN ADVANTAGE

The Ray McMillan Mortgage Team  is licensed through Northwood Mortgage Ltd. We deal with major banks, trust, life insurance, finance companies and private lenders. We are licensed to provide the most competitive mortgage rates and terms available for your real estate financing needs throughout Ontario.

OUR SERVICE INCLUDES:

 

  • First and second mortgages
  • Transfers
  • Condominium/Townhouse purchases
  • Home Improvement Loans
  • Construction Loans
  • Debt Consolidation
  • Refinancing
  • Power of Sale
  • Multi-residential
  • Vacant land
  • Cottages and recreational properties
  • Rural and farm properties

 

 

ARE THERE ANY COSTS INVOLVED?

When we arrange a prime residential first mortgage the lender pays us a finder’s fee.This does not affect the rate our terms of the mortgage in any way.

When we arrange any other type of mortgage that does not qualify as a prime residential mortgage then the lender does not pay us. We must then charge a brokerage fee*. The fee is based on the complexity involved to arrange the mortgage.

any-questions

You have mortgage questions, the Ray McMillan Mortgage Team has answers.

Tagged , , , , ,

O’Leary: Real estate makes for a poor asset given current market conditions

In an interview hosted by Business New Network, O’Leary Financial Group Chairman Kevin O’Leary shared his take on the current housing market; he revealed that he does not see the 30 to 50% correction that other industry experts are anticipating, but still considers real estate a very poor investment for this cycle.

“You’d be an idiot to buy a house,” O’Leary said during the interview.

He reasoned that investing in real estate is a bad decision, stating that he does not think that homes would considerably appreciate in value within five years. He also noted that buyers still have to pay real estate taxes and transfer taxes on the land, as well as pay their brokers 3 to 5%. All these closing transaction costs make real estate one of the more expensive asset classes to trade.

O’Leary surmised that it would cost investors between 8 to 12% to trade real estate assets. He also added that given the way things are, the chance an investor would enjoy a 12% appreciation over five years on a property is next to zero.

For close to 18 years, Canada has experienced a housing bull market, with perpetually low rates encouraging both homebuyers and speculators to snap up properties with almost zero capital. O’Leary expects that at the very best conditions will plateau soon, slightly improving chances of material appreciation on houses.

He goes on to mention the potential housing bubbles other pundits have observed in areas such as Vancouver, Montreal, Ottawa, and Toronto, where “shoebox condos” have begun sprouting to accommodate the large number of immigrants and/or millennials looking to move into the cities. With too many buyers and speculators participating in these popular markets, only time will tell when the bubbles will eventually burst.

O’Leary suggested that investors look into short duration, investment-grade corporate debt, as he sees it as an even more attractive and safer option than real estate. He also suggested to prospective homebuyers to look into renting instead, so that they can invest their cash into other things.

Source: MortgageBrokerNews.ca  04 Dec 2015 

Tagged , , , ,

Rate hike could leave mortgage holders stretched, survey finds

Many mortgage holders in Canada have very little financial cushion and could be in trouble if rates rose or they lost a job, according to a new survey.

About 15 per cent of respondents to a survey done for Manulife Bank of Canada said they would have difficulty making payments if their mortgage payments went up. That means they might face tightened circumstances if rates have risen by the next time they renegotiate their mortgage, a likely circumstance as most analysts believe interest rates will rise this year.

Nearly half said they couldn’t manage a 10 per cent increase in their mortgage payment.

“Having your payments go up 10 per cent sounds like a lot, but if you have a $200,000 mortgage and interest rates go up one per cent, that’s a 10 per cent increase in your mortgage payments,” said Manulife Bank CEO Rick Lunny said. “So there’s not much room here for those people.”

It is likely the Fed will raise rates by one quarter of a point only this fall and the Bank of Canada may not follow immediately, but mortgage rates also could be affected by movements in the bond markets.

Oliver Roundtable 20141127

As housing costs rise, Canadians find themselves with little wiggle room after they pay the mortgage. Losing a job or seeing rates rise could leave some people in trouble. (Darren Calabrese/Canadian Press)

Faced with loss of employment by the major breadwinner, most respondents to the survey said they had a very limited financial cushion.

About 16 per cent said they’d be in trouble within a month and a total of 43 per cent said they’d have difficulty within three months if someone in the household lost a job.

The online survey was done for Manulife by Research House between Feb. 10 and 27. The survey polled 2,372 Canadians in every province, all of them homeowners between the ages of 20 and 59 with a minimum household income of $50,000.

The rate of mortgage default in Canada is very low, but as housing costs rise, many observers have warned about the amount of debt Canadians have taken on.

Manulife found the average amount these homeowners had outstanding on a mortgage was $190,000.

Albertans were carrying the heaviest debt load — an average of $242,400 on the mortgage. That’s followed by $217,600 in British Columbia, $197,100 in Manitoba and Saskatchewan and $193,000 in Ontario.

But 78 per cent of respondents to a survey said paying down debt was a priority for their household and 40 per cent had either increased the amount they pay towards the mortgage or made a lump sum payment within the past year.

Source: CBC News Posted: Jun 16, 2015 12:49 PM ET