Interest Rates on the Rise?
The Bank of Canada has signaled that they do not expect to hold present interest rate levels past the end of June…..
See the March 11, 2010, Business Week article, Canada January New Home Prices Rise 0.4%, Seventh Straight Gain
We are presently enjoying the lowest interest rates seen since the Korean War, and the only thing we can absolutely count on is that rates will inevitably rise. The ‘experts’ cannot seem to agree on when or by how much, but the varied opinions range upwards to an increase of 2.0% – 2.5% by the end of 2011.
I believe that now is the time to become pro-active and ensure that you take advantage of the present interest rate environment. Do you wish to explore the possibility of ‘renegotiating’ an existing mortgage? Would you like to ‘lock-in’ an interest rate for an upcoming purchase? Does your mortgage ‘mature’ in the next few months? Fixed rate vs. variable rate?
Our mortgage professionals are your best source for mortgage advice and can explain all your available options.
Walt Neufeld
What term mortgage should I choose?
Historically, the shortest term mortgage (ie. 6 month terms for 25 years) has been the least expensive route when financing your home.
Floating has been less expensive than fixed mortgages as institutions do not have to build in a hedge to offset interest fluctuations.
Longer terms provide stability against interest fate fluctuations as well as not having to deal with the paperwork and the stress of numerous renewals.
Here are some questions that you should consider:
1) Are you able to tolerate interest rate fluctuations and do you have the temperament to not worry about them?
2) What do you think interest rates are going to do?
3) What are your personal plans? Do you have a growing family and need more space? Are the kids leaving home and you want a smaller place? Is there a chance you can be transferred? (ie. I think I will be transferred in 3 years so I want a 3 year mortgage.)
My advice is to take a mortgage that fits your needs. Talk to your banker, accountant, lawyer, mortgage broker, etc. There is wisdom in much counsel.
Rory Campbell
Changes to Lending Guidelines for Insured Products
Jim Flaherty, Canada’s Minister of Finance, announced new lending guidelines for Canadian Mortgage and Housing Corporation (CMHC) backed mortgage loans in a recent announcement.
The new rules are as follows:
1. All borrowers must qualify for a mortgage using the five year fixed rate regardless of the term chosen.
2. When refinancing a home, Canadians will only be able to refinance up to 90% of the value instead of the previous 95%.
3. If you want to purchase revenue property CMHC will no longer insure you. You’ll need to put 20% down to take out a conventional mortgage.
These changes will take effect April 19, 2010.
What does this mean to the consumer who is presently trying to qualify for the maximum mortgage amount? I would recommend putting your plans in motion for purchase or refinance before the rapidly approaching deadline.
See the Government of Canada Department of Finance website for more details
Chris Pahl
Use RRSPs as a Down Payment…
This program allows the home purchaser(s) to borrow up to $25,000 from their RRSPs. They do not have to pay tax or interest while using the funds as part or all of their down payment. This also applies to the spouse or partner allowing as much as $50,000 to be put towards the down payment.
To qualify, the following criteria must be met:
- Participants must be either first time home buyers or cannot have owned a home for four years plus a day.
- The loan must be paid back to the RRSP over 15 years. The first payment is due within the year that the funds were borrowed and 1/15 of the loan must be paid back annually.
- Participants must be residents of Canada.
- The property must be owner occupied.
- Funds being drawn from the RRSP must have been invested for at least 90 days.
This program has proved both helpful and popular with many Canadian home buyers. Be sure to consider this option when buying your home.
Len Shorkey
Video: Who Borrows from a Mortgage Investment Corporation and Are the Rates Higher?
Walt Neufeld answers the question, “Who Borrows from a Mortgage Investment Corporation (MIC)?”. He also discusses the rates for borrowers and explains why the rates may be higher.
