Selecting Your Best Mortgage Term

Choosing the mortgage term that's right for you can be a challenging proposition for even the savviest of homebuyers, as terms typically range from six months up to 10 years. By understanding mortgage terms and what they mean in dollars and sense, you can save the most money and choose the term that is best suited to your specific needs. The first consideration when comparing various mortgage terms is to understand that a longer term generally means a higher corresponding interest rate. And, a shorter term generally means a lower corresponding interest rate. While this generalization may lead you to believe that a shorter term is always the preferred option, this isn't always the case. Sometimes there are other factors – either in the financial markets or in your own life – that you'll also have to take into consideration when selecting the length of your mortgage term. If paying your mortgage each month places you close to the financial edge of your comfort zone, you may want to opt for a longer mortgage term, such as five or 10 years, so that you can ensure that you'll be able to afford your mortgage payments should interest rates increase. By the end of a five- or 10-year mortgage term, most buyers are in a better financial situation, have a lower outstanding principal balance and, should interest rates have risen throughout the course of your term, you will be able to afford higher mortgage payments. If you're shopping for a mortgage for an investment property, you'll likely want to consider choosing a longer mortgage term – depending, of course, on your overall plan. This will allow you to know that the mortgage payments on the property will be steady for a long time and enable you to more accurately project your future income from the property. As well, if you know you will not be staying in the same home for the next five or 10 years, opting for a shorter term can save you significant fees when it comes to early payout penalties. Choosing the right mortgage term is a unique decision for each individual. By understanding your personal financial situation and your tolerance for risk, I can assist you in choosing the mortgage term that will work best for your situation. As always, if you have any questions about mortgage terms or your mortgage in general, I'm here to help!

Now is the Time to Invest in Property for Your Business

Low interest rates, low vacancy rates and tight supply are a cue to look at buying a building for your business. Read more...

Housing Affordability Slips

The costs of owning a home increased in most major cities across Canada after two consecutive quarters of improvement. According to the RBC Housing Trends and Affordability Report, Canada's housing affordability deteriorated slightly as homebuyer demand pushed home prices higher in the first quarter, driving the cost of owning a home modestly upwards. The RBC housing affordability measure captures the proportion of pre-tax household income that would be needed to service the costs of owning a specified category of home at going market values. A rise in the measure represents deterioration in affordability. RBC's housing affordability measure for the benchmark detached bungalow was up 3.1 percentage points in Vancouver to 88.9 per cent, up 1.2 percentage points in Toronto to 53.4 per, up 0.9 percentage points in Ottawa to 41.8 per cent and up 1.2 percentage points in Montreal to 41.4 per cent. Calgary (36.7 per cent) remained unchanged, while Edmonton saw a drop of 0.4 percentage points to 32.4 per cent "It became a little tougher on household budgets to carry the costs of owning a home at market prices at the start of this year," said Craig Wright, senior vice-president and chief economist, RBC. "Strong buyer demand was a principal driver of the modest rise in homeownership costs. While the deterioration in affordability was felt to varying degrees across the country, it was mild in most cases." Looking ahead, the banks said it expects further challenges on the affordability front across Canada once the Bank of Canada begins raising interest rates in the fourth quarter of 2012 and assuming the European economy stays on the rails. "Exceptionally low interest rates have been the key force in keeping affordability from hitting dangerous levels in Canada in recent years," added Wright. "Affordability headwinds are likely to increase next year, as interest rates make their way towards more normal levels. We anticipate that the central bank will begin hiking rates gradually, however, which should help mitigate any widespread negative impact on the housing market. A gradual pace of increases will allow income growth to provide some offset." Stark regional divergences in affordability witnessed last year carried through to the first quarter of 2012. British Columbia's housing and, more expressly, the Vancouver-area market are situated at the weaker end of the affordability spectrum, while housing markets in Alberta and Atlantic Canada remain at the more affordable end. Local housing markets in Ontario had slightly less attractive affordability in comparison to the national average, while markets in Saskatchewan, Manitoba and Quebec were slightly more attractive. The Report: www.rbc.com/economics/market/pdf/house.pdf Source: http://www.mortgagebrokernews.ca/news/breaking-news/housing-affordability-slips/123780/

Good news...your mortgage prepayment penalty can be tax deductible!

There's one piece of good news about mortgage prepayment penalties: The cost of the penalty can be used as a tax deduction if you're breaking your mortgage to move 40 km or more to be closer to work. The Canada Revenue Agency has a provision that allows you to deduct the costs of moving if you're doing so for a job or for full-time study at a university, college or other type of course at a post-secondary level. You can claim other costs associated with selling your old residence as well: advertising, notary or legal fees, real estate commission as well as that dratted mortgage penalty "when the mortgage is paid off before maturity." Keep the receipts and fill out form T1-M Moving Expenses Deduction. For tax purposes, the mortgage penalties get lumped under "other selling costs, specify" on Line 16 of the T1-M form.  Click here to read more.

Interest Rate at a Record Low

BoC turning hawkish? What the analysts say

The Bank of Canada kept its benchmark interest rate at a record low Thursday, but surprised with slightly cheerier commentary that has economists wondering whether the central bank has brightened up enough to entertain a rate hike sooner rather than later. Mark Carney, governor of the Bank of Canada, highlighted an improving near-term outlook in pretty much every category of concern in his January rate decision, including the European credit crisis, the U.S. economic recovery, global financial markets and the health of the Canadian economy. "The heightened uncertainty around the global economic outlook has decreased in the weeks since the Bank released its January monetary policy report (MPR)," the bank said in a release explaining its rate decision. "Recent developments suggest that the outlook for the Canadian economy is marginally improved from the January MPR." Mr. Carney said the economy will likely grow faster than forecast in the first quarter due to temporary factors, but underlying momentum still points to an expected year of middling growth.

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Two steady housing years ahead: CMHC

Canada's housing market has two good years ahead of it yet, Canada Mortgage and Housing Corp. said Monday, with low interest rates and a "moderately" expanding economy keeping price corrections at bay. The Crown corporation – which insures Canadian mortgages – has had a consistently rosier view of the market than many private sector forecasters. Canadian banks have recently issued reports probing the consequences of cheap money, and trying to predict whether there is a bubble in prices that will eventually pop and cause prices to crash. They are particularly concerned about Vancouver and Toronto, where some have predicted price corrections of up to 10 per cent because of overbuilding in the condo market. But CMHC said Monday Canadian markets would "remain steady in 2012 and 2013. "With the Canadian economy set to expand at a moderate pace and mortgage rates expected to remain low, activity levels in 2012 in both new home construction and sales of existing homes will stay close to levels seen in 2011," said Mathieu Laberge, deputy chief economist. Also in the forecast: "Housing starts will be in the range of 164,000 to 212,700 units in 2012, with a point forecast of 190,000 units. In 2013, housing starts will be in the range of 168,900 to 219,300 units, with a point forecast of 193,800 units. Existing home sales will be in the range of 406,000 to 504,500 units in 2012, with a point forecast of 457,300 units. In 2013, MLS sales are expected to move up in the range of 417,600 to 517,400 units, with a point forecast of 468,200 units. The average MLS price is forecast to be between $330,000 and $410,000 in 2012 and between $335,000 and $430,000 in 2013. CMHC's point forecast for the average MLS price is $368,900 for 2012 and $379,000 for 2013. The moderate increases in the average MLS price are consistent with the balanced market conditions that occurred in 2011, and that are expected to continue in 2012 and 2013."

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STEVE LADURANTAYE - The Globe and Mail

Canadian home prices slide...

Canadian house prices dropped in November for the first time in nearly a year, according to the monthly Teranet-National Bank house price index released Wednesday. The 0.2% drop followed two months of flat prices, and was the first decline in the index since a "brief correction during the three months ending November 2010," said National Bank senior economist Marc Pinsonneault. The national composite index, which tracks registered prices of homes sold at least twice, shows prices fell in eight of the 11 metropolitan markets tracked — one more than in October. November housing prices (% change m/m ~ % change y/y): Calgary: -1.6  ~ 0.5 Edmonton: 0.1 ~ 1.0 Halifax: 0.5 ~ 2.8 Hamilton: -0.3 ~ 4.4 Montreal: 0.4 ~ 7.2 Ottawa: -0.2 ~ 4.2 Quebec: -0.2 ~ 6.0 Toronto: -0.2 10.8 Vancouver: -0.2 9.1 Victoria: -0.9 -0.3 Winnipeg: -0.1 7.5 National Composite: -0.2 7.1

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