Tighter Mortgage Rules Threaten Economy’s Recovery

New borrowing rules have hit homeowners so hard that it could undermine any economic recovery in Canada, says a new study from the country's mortgage brokers. The Canadian Association of Accredited Mortgage Professionals says since new rules went into effect in July, 2012, resale housing activity is 8% lower between August and October than a year earlier. Among the changes instituted by the government was a lowering of allowable amortization from 30 years to 25 years for consumers borrowing with mortgage default insurance which is backed by the federal government. A longer amortization allows consumers to lower their monthly payment and qualify for a larger loan at the expense of paying more interest over their mortgage period.

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Fall & Winter Home Maintenance Calendar

Fall is the perfect time to get your home ready for the coming winter, which can be the most gruelling season for your home. During winter months, it's important to follow routine maintenance procedures, by checking your home carefully for any problems that may arise and taking corrective action as soon as possible. Fall

• Check fireplace and chimney; service or clean if needed
• Clean range hood filter
• Clean leaves out of eavestroughs
• Check roofing and flashing for signs of wear or damage
• Close outside hose connection
• Close windows, skylights
• Check weather-stripping around doors and windows
• Clean and reactivate heat recovery ventilator, if it was turned off
• Winterize landscaping
• Test space heating system
• Close vents to crawl spaces
• Test your smoke alarms; change the batteries at least once a year

Winter

• Clean or replace furnace filter
• Check/clean heat recovery ventilator; wash or replace filter
• Clean humidifier and turn it on if needed
• Check exhaust fans
• Check exhaust fans
• Ensure that air intake, exhausts and meters are clear of snow
• Clean range hood filter
• Check basement floor drain
• Do safety checks: fire escape routes; fire extinguishers; door and window locks
• Ensure gas valve is clear of ice and snow

Annually

• Dust or vacuum electric baseboards
• Vacuum ducts behind warm air and return air grilles
• Test plumbing shut-off valves to ensure they're working
• Test pressure relief valve on hot water tank; drain water from tank
• Check and, if needed, oil door hinges
• Lubricate garage door motor, chain, etc
• Check attic for signs of moisture in summer or fall
• Check septic system; clean if needed (usually about every three years)

Every Two to Five Years

• Check and repair driveway cracks
• Check and repair the chimney cap and the caulking between the cap and chimney, re-caulk as necessary
• Refinish wood surfaces, including window frames and doors

For other great home maintenance tips, visit: www.cmhc.ca.

Collateral vs Standard Charge Mortgages...This is IMPORTANT!

Since an increasing number of lenders are moving towards collateral charge mortgages these days, it has never been more important to understand the differences between a collateral and standard charge mortgage. The primary difference is that a collateral charge mortgage registers the mortgage for more money than you require at closing. For instance, up to 125% of the value of the home at closing with TD Canada Trust or 100% through ING Direct and many credit unions, instead of the amount you need to close your transaction (as is the case with a standard charge mortgage). The major downside to a collateral mortgage becomes evident at your mortgage renewal date. For borrowers who want to keep their options open at maturity and have negotiating power with their lender, this isn't the best product feature because collateral charge mortgages are difficult to transfer from one lender to another. In other words, if you want to change lenders in order to seek a better product or rate in the future, you have to start from the beginning and pay new legal fees, which range from $500 to $1,000. With a standard charge mortgage, in most cases, the new lender will cover the charges under a "straight switch" in order to earn your business. Also, you will pay title insurance on a larger mortgage amount, this can add few hundred dollards to your legal fee's. In addition, with a collateral charge, it could be difficult to obtain a second mortgage or a home equity line of credit (HELOC) unless your home significantly appreciates in value. Lenders offering collateral charge mortgages promote the benefit that it makes it easier and more cost effective to tap into your equity for such things as debt consolidation, renovations or property investment. There's no need to visit a lawyer and pay legal fees – the money is available as your mortgage is paid down. Yet, if you read the fine print, you may still have to re-qualify at renewal. A standard charge mortgage gives you the ability to move to another lender at renewal should you want to without incurring legal fees, and many borrowers find it more beneficial to keep their options open. If you need to borrow more with a standard charge mortgage, you have the option of a second mortgage or a HELOC, which also enables you to take money out as your mortgage is paid down. Navigating through the mortgage process alone can be tricky. Working with a mortgage professional who has access to multiple lenders will help ensure you receive the product and rate catered to your specific needs. As always, if you have any questions about the information above or your mortgage in general, I'm here to help! Mark Kupina | #M11001703 | 905.730.4782 | mark@kmortgage.ca

Why you Need to Visit a Broker for your Mortgage Renewal!

We hear countless stories of people willing to pay hundreds of dollars in cancellation fees to switch cell phone, cable or even home security providers yet when presented with an opportunity to save thousands of dollars, some mortgage holders don't seem to want explore their options. When you add in the fact that banks routinely charge higher interest rates to existing clients than they do to new ones, mortgage holders may be better served by shopping around at renewal time. Clearly, the best way to shop for rates is by using the services of a mortgage broker, yet 73% of Canadians choose not to, even though, on average, the ones who did, saved 19 basis points on their mortgages. Those who renewed or renegotiated with a mortgage broker reported an average rate decrease from posted  of 1.4 basis points, compared with 1.0 points among all renewers. While 48% of first-time buyers used a mortgage broker only 27% of those refinancing and 21% of those renewing used one. At renewal, 88% of consumers remained loyal to their lender. So, with a discrepancy of up to 40 basis points at renewal, why are so many staying loyal to their existing lenders? It might make sense to stay with your original lender, but not always. After all, your mortgage broker offered you the best mortgage and interest rate at the time of purchase. But some lenders such as FirstLine have now left the market, while others, including your existing lender may have changed their pricing strategies. To know whether changing lenders is right for you it is vital to understand the process and the costs. The number one cost or "friction" is the need to re-qualify. Most lenders will automatically offer their good customers a renewal. If you need additional funds or plan on transferring or switching to another lender, that new lender will first have to re-qualify you. When you switch lenders you or the new lender will request a payout statement -- in many cases your mortgage broker can assist you with this.  There may be a discharge fee, perhaps a penalty on your existing mortgage and an appraisal may be required. In some instances the new lender will pick up the cost of legal fees and appraisal costs. There are no penalties when a mortgage reaches maturity, however, if you transfer or refinance your mortgage prior to maturity there may be contractual penalties. The most common are the Interest Rate Differential (IRD) for fixed rate terms and three months interest for adjustable/variable rate mortgages. So let's assume that financially it makes sense to switch –now let's look at the numbers. Assuming a mortgage balance of $250,000 on a 5-year fixed rate and an amortization of 25 years, here is a comparison of three scenarios: $250,000 mortgage, 5 year fixed, monthly payments, 25 year amortization (numbers are used for illustrative purposes only)

Rate	Payment Int.	Cost (term)	Balance (end of   term)	Increase cost   over #1
1. 3.19%	$1,207.63	$36,918.05	$214,460.25
2. 3.38%	$1,232.40	$39,167.47	$215,223.47	$2,249.42
3. 3.59%	$1,260.09	$41,658.85	$216,053.45	$4,740.80

  The savings identified above are after tax dollar savings, which can be significant. It is worth it to consult with a mortgage broker. Reviewing options with a broker does not negate an offer to renew with your existing lender.  In the end the broker may advise you to stay where you.  However, it's worth finding out whether or not you can financially benefit by switching. Cost and rate aside, mortgage brokers can lessen the "friction" by facilitating the process on your behalf. With a single application and credit review they can navigate the market on your behalf, assessing options from multiple lenders. They will advise on product features including prepayment options and penalty calculations to match you with the right product for your unique circumstances. Call us today at 1.888.955.9011

Homebuilding to Slow in Canada

The pace of homebuilding in Canada will continue to moderate in the last quarter of 2012 and into 2013, while existing home sales should hold steady and prices climb at or just below the inflation rate, Canada Mortgage and Housing Corp says. The federal housing agency's forecast on Monday for a weaker, but still healthy, housing sector echoed a string of data that has shown Canada's recently red-hot real estate market cooling, but without signs of a crash landing. Long convinced the country's housing boom would never end in a crash, Canadians have watched this autumn as a sharp slowdown in real estate spreads across the country, leaving would-be home buyers hopeful and sellers scared. A weaker outlook for global economic conditions and the waning of the effect of pre-sales from late 2010 and early 2011, which contributed to support multi-family starts this year, will bring moderation in housing starts next year," MathieuLaberge, deputy chief economist at CMHC, said in the agency's fourth-quarter outlook. "Nevertheless, employment growth and net migration will help support housing starts activity going forward," he added. Canada's housing market, which roared higher in 2011 and the first half of 2012 aided by low interest rates, started slowing after the government tightened rules on mortgage lending in July in a bid to cool things down and prevent home buyers from taking on too much debt. Statistics Canada data released on Monday showed the value of building permits fell by an unexpectedly large 13.2% in September from August, dragged down by a major drop in the non-residential sector, but with housing permits holding steadier. The overall fall in permits – the biggest since a 23.7% plunge in April 2011 – was far greater than the 3.0% decrease forecast by market operators. Statscan revised August's advance to 9.5% from an initial 7.9%. But the value of residential permits climbed by 0.4% after two monthly decreases. Single-family dwellings advanced by 3.4%, while multi-family dwellings dropped by 3.8%, suggesting some strength remains on the housing side. "On the year, residential permits remain up 19%, highlighting the booming homebuilding sector that continues to thrive under a low-rate environment," CIBC World Markets economist EmanuellaEnenajor said in a research note. Still, the tighter mortgage lending rules that took effect in July are expected to continue to help to rein in the market. "Although the value of residential building permits increased slightly in September, the effect of tighter mortgage lending regulations announced by the government in July will likely put a damper on new residential construction over the near term," Deutsche Bank economist JohnClinkard said in a research note. Permits in the non-residential sector plummeted 30.8% in September after increasing 27.7% in August. Industrial and institutional permits posted particularly steep drops. In its quarterly outlook, the CMHC said housing starts will be in the range of 210,800 to 216,600 units in 2012, with the most likely outcome 213,700 starts. Homebuilding should slow further in 2013, with starts in the range of 177,300 to 209,900, and a most likely outcome 193,600, the agency said. Economists at CIBC World Markets said last week they see a slowing in housing starts to 180,000 a year by 2014, down sharply from the 220,000 range today. In that scenario, the impact on growth in gross domestic product would be a drop of 1 to 1.5 percentage points, CIBC said. The Bank of Canada has forecast economic growth of just 2.3% in 2013 and 2.4% in 2014. The CMHC forecast existing home sales to slow to a range of 449,200 to 465,600 in 2012, with the most likely outcome of 457,400. In 2013, sales are expected to rise to 433,300 to 489,700, with the most likely outcome 461,500. Price gains are expected to slow in 2012 but regain some strength in 2013. CMHC's forecast for the most likely average price calls for a 0.2% gain to $365,100 in 2012and a 1.5% gain to $370,500 for 2013. "A weaker outlook for global economic conditions and the waning of the effect of pre-sales from late 2010 and early 2011, which contributed to support multi-family starts this year, will bring moderation in housing starts next year," MathieuLaberge, Deputy Chief Economist for CMHC, said in the federal agency's fourth-quarter outlook. "Nevertheless, employment growth and net migration will help support housing starts activity going forward," he said. © Thomson Reuters 2012