CMHC Backing Fewer Loans

Canada Mortgage and Housing Corp. is cutting back on mortgages it insures as the Crown corporation edges closer to a $600-billion cap imposed on it by the federal government. A CMHC spokesman confirmed that it had approached a number of lenders at the end of 2011 about reducing its "bulk or portfolio insurance" after third-quarter results showed the agency had committed to back $541-billion in mortgages. CMHC, which guarantees mortgages held by financial institutions, is ultimately backed by the federal government and needs approval to go over the $600-billion limit — something that would create greater risk for taxpayers should the housing market collapse. "CMHC has recently received an unexpected level of requests for large amounts of CMHC portfolio insurance." said Charles Sauriol, a spokesman for the Crown corporation, in an email. "To ensure equitable access to portfolio insurance within CMHC's annual limits, an allocation process is being established which has caused some delays. Portfolio insurance provides lenders with the ability to purchase insurance on pools of previously uninsured low ratio mortgages and does not impact CMHC's transactional business." Financial institutions are required to have mortgage-default insurance when a consumer has less than 20% equity. However, the banks have been seeking insurance on loans with even high downpayments — something not required by law — so they can securitize those bulk lending loans, thereby getting them off their balance sheets and reducing their capital requirements. In those cases in which the loans to value is less than 80%, the bank pays the insurance charge instead of the consumer.

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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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Mortgages: A Head Scratcher For Consumers

"We, the consumer, read about these mortgage issues in the media and try to understand but the complexity of these issues leave us somewhat baffled." The Bank of Canada decided to leave the overnight lending rate at 1%, and we're all but assured that rates will mill remain at current levels for the remainder of 2012.  Sure, things could change but for rates to trend upwards would mean that the BOC is no longer concerned about our fragile economy.  There was also good news – the Minister of Finance said there would be no changes to the  "mortgage rules" at this time.  With the caveat that Finance is prepared to intervene if necessary. What would make it necessary for the Fed's to intervene? Where's the line in the sand?  That's what I find intriguing about about the "consumer debt" debate.   Many have stated there should be real concern over the consumer debt levels but no one has stated that if we reach a point where the debt exceeds "X' percent we will have passed the point of no return.  Talking about these issues in an abstract or theoretical context may be interesting, and illuminating, but for it to have real impact – a change in borrowing habits – clearly defined parameters are required. Open dialogue is healthy and all stakeholders should be a part of the discussion.  I find it curious that the one stakeholder who we haven't heard much from as it relates to the "consumer debt" debate is, well, the consumer.  The text being allocated to this issue is courtesy of the politicians, bankers and those suppliers who benefit economically from increased borrowing.  I'm not sure what the collective voice of the consumer would be regarding this issue but if I was to venture a guess I would think it might sound something like this… "Firstly, we the consumers would like to thank the bankers, economist and politicians for giving us an opportunity to have our voices heard.  We consumers aren't as smart you folks are when comes to credit.   You're the experts and you do this everyday.  We read about these  issues and  try to understand but the complexity of these issues leave us somewhat baffled.  We hear from you really smart folks that our homes are overvalued by 10% to 15%.  Some of you  are also concerned about how much money we're borrowing.  Yet you same smart folks just started an interest rate war.   This is where it gets really complicated for us.  You say homes are overvalued yet you lower your  interest rates so you can compete for over valued properties to mortgage?   You say you're concerned about our debt levels yet you lower rates so we can take on even more debt?  These issues are way above our heads so we the consumers are going to focus on something which is much easier to understand,  like how to split an atom". Until next time, Cheers. Article written by Boris Bozic on the 24 Jan 2012: Article

5 Year Bond Yields...still good.

Canadian 5 yr bond yields markets to 1.408.  The spread (based on the 5 yr published rate of 3.39%) is still within the comfort zone at 1.982  http://www.tmxmoney.com/HttpController?GetPage=BondsAndRates&Language=en. The rate of return on your bond, can be read through a yield curve. If the increase in bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise. The comfort zone is between 1.85 and 2.10 Mark Kupina | Kupina Mortgage | 1.888.955.9011

Ferreira Home Inspections

Buying a home is a big decision. Knowing you are purchasing your home for the right value includes safety and good home maintenance. A thorough home inspection will help you get to know the property inside and out. For a personal and complete home inspection, we recommend Ferreira Home Inspections. Their home evaluation will help you in making an informed buying decision and includes an information information package. You are invited to follow along and are encouraged to ask questions throughout the inspection. Their quality service will provide you with the peace of mind in your homebuying decision. To book an appointment and for further information contact Ferreira Home Inspections. Joe Ferreira - Owner - (416) 460-1681 Email: ferreira_homeinspections@hotmail.com  

Making Your Mortgage Interest Tax Deductible

For US homeowners, mortgage interest is automatically tax deductible. But for Canadians, the write-off is not so straightforward. In order to make your mortgage interest tax deductible, homeowners must be able to prove that the money is being reinvested and is not being used for personal expenses. A properly structured mortgage-centric tax strategy has several key elements – the most important of which is a multi-component, re-advanceable mortgage or line of credit. It's best to have a single collateral charge with at least two components – usually a fixed-term mortgage and an open line of credit – that can track and report interest independently. This is absolutely essential under Canada Revenue Agency (CRA) rules and guidelines. Second, the strategy must employ conservative leverage-investment techniques – which is why a financial advisor must be involved in order to comply with federal regulations. The financial advisor should be a Certified Financial Planner (CFP) who is experienced in leveraged investing, and able to actively monitor a homeowner's portfolio on an ongoing basis. Homeowners who opt for a tax-deductible mortgage interest plan make their monthly or bimonthly mortgage payments the same way they would when making any type of mortgage payment. The payments go towards reducing the principal amount of the mortgage and are then moved over to the line of credit as the mortgage is paid down. But in order to be tax-deductible, the funds must then be transferred to an investment bank account, which can be done automatically by your CFP. Once the money is in an investment bank account, it can be reinvested and the money becomes tax deductible. Essentially, the homeowner is borrowing from the paid portion of the mortgage for reinvestment purposes. If you have a rental property, you can also use this tax-reduction strategy even further. When you receive your rent, you can then use the funds to help pay down your personal mortgage. Once paid, the rental funds move to the line of credit and are then transferred to the investment bank account. They are then used to pay down the mortgage on the rental property. Using this method, it is possible to have your mortgage interest become fully tax deductible in only 3.5 years. The ideal client Ideal borrowers for an advanced mortgage and tax strategy are typically professionals or other high-income earners who have a conventional mortgage (have at least 20% of the cost of the home to put towards a down payment) and have built up substantial equity. As high-income earners, their total debt-servicing ratio will be quite low and they will have excellent credit (700+ Beacon scores). These borrowers are financially sophisticated homeowners that are keenly interested in establishing a secure financial future and comfortable retirement. They also have good investment knowledge. The risks The financial benefits of tax-deductible mortgage interest are indisputable and justify the risks to the right borrower. That said, a problem can arise if a homeowner spends the funds as opposed to reinvesting them. As well, any tax refunds have to flow through the investment cycle in order to realize the benefits of paying down the mortgage as quickly as possible – and making as much of the interest payment as possible tax deductible. Short-term financial risk is liquidity risk (sometimes referred to as cash flow risk). Cash flow risk addresses the possibility that interest rates will sharply drive up the cost of borrowing at the same time as markets falter, resulting in a negative client monthly cash flow for a brief period of time. This short-term risk is typically only prevalent in the first two to four years because, after this period of time, the homeowner has stockpiled enough equity through annual tax refunds that other liquidity options exist and the risk is fully mitigated. Liquidity risk varies widely based on the balance sheet strength of the homeowner. Highly qualified homeowners are easy to manage as these borrowers have no difficulty meeting the short-term cash flow demand should the need arise. Take a look at the following website:  http://www.smithman.net/  I highly recommend Fraser Smith 's book and strategy, The Smith Manoeuvre. For more information on this strategy and discuss further, do not hesitate to contact us.

Kupina Mortgage | 1.888.955.9011 | info@kupinamortgage.com

5 year 2.95%...take that BMO!

The newest, unthinkable rate is now beatable! If you are looking to purchase or renewing/refinancing your existing mortgage, now would be the time to do it! For those considering the 2-week BMO promotion, be aware of its restrictions. Why deal with us vs. BMO... 1)     Max 25 year amortization vs. 30 years with us 2)     Max 10% Prepayment Privilege Payments vs. 15% and higher with us 3)     Max 10% Increase Payments vs. up to 100% with us 4)     BMO's Flexible Mortgage Features (called Break & Family Care) are not available with this mortgage vs. our lender's Flexible Mortgage Features which are available. 5)     Full repayment before maturity or discharge cannot occur before 5 years unless there is a bona fide sale of the property or if the mortgage is renewed and/or refinanced with BMO. Vs. Repayment with us is allowed with standard prepayment penalties 6)     Our Personal Mortgage Service Hours are the best in the business...24/7! Contact us for more information!!

Kupina Mortgage | info@kupinamortgage.com | 1-888-955-9011