Residential Mortgages
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Negative Equity Also referred to as being underwater, having negative equity means your mortgage balance is greater than the value of your house. The risk of this is higher for those who make smaller down payments, such as 5% (Or even less). In that case, it only takes a small depreciation in home value for the equity to turn negative.... For example, if you had bought a property for $150,000, with a mortgage for $120,000 and the property is now worth $100,000, you would be in negative equity. However, if you had bought a property for $150,000 with a mortgage for $120,000 and it’s now worth $130,000, you would not be in negative equity. How does it impact home owner If a home owner is impacted by negative Equity is depends on his scenario. 1) If you are planning to sell your house immediately then having negative equity can hurt your plan. Unless you have savings that you can use to repay the difference between the value of your home and the mortgage, you might find it difficult to move. 2) It can also be difficult if you want to remortgage; perhaps to a fixed rate or a cheaper deal. Most lenders will not let people with negative equity switch to a new mortgage deal when their existing one ends. if you are not at renewal or plan to sell your house in near future. Means you can hold on to your property. then negative equity should not take your nights' sleep. As the realestate market goes downturn and upturn, its just a mater of time. So hold your nerves and have patience. think long term, and don't get impacted by short term gains or losses (Both GAINS and LOSEES) Shiv [email protected]

CMHC’s First-Time Home Buyer Incentive (FTHBI) CMHC CEO Evan Siddall confirmed a few more details last week during an interview with Evan Solomon. Here are some of the points Siddall confirmed in that interview:... - The maximum home price that would qualify under the FTHBI ranges from $505,000 to $580,000, and is based on a combination of the down payment and whether it’s a new or existing home. - The program provides down payment assistance of up to 5% for existing homes or 10% for new builds, with CMHC then sharing proportionately in the future gains or losses. We buy your house with you and then get out of your way We just share in the gains or losses in the home you buy, Siddall said. - For example, on a $500,000 house, the 10% down payment assistance would be $50,000. If the value of the home doubles, you then owe CMHC $100,000 (for its 10% share of your million-dollar house), Siddall said, noting the reverse is true if your property declines in value. - If the homeowner defaulted on the loan, the lender would get paid before CMHC. About 100,000 people are expected to participate in the program. Asked if CMHC would benefit from appreciation due to renovations performed by the homeowner, Siddall said that’s something they’re still working out.

Majority of Canadians Don’t Understand the Stress Test Despite the stress test having been in effect for nearly a year and a half, many Canadians admit to not understanding the new rules and how they affect their finances. A new survey from TD Bank found 43% of Canadians aren’t confident in their knowledge on the stress test, while a majority, 59%, said they don’t understand how the rules affect them.... This reinforces the value mortgage brokers can bring to the table when it comes to helping borrowers navigate the new regulatory environment. Other findings from the survey include: - 81% of respondents don’t understand how a potential rise in mortgage rates will affect them financially - 31% are not confident in their understanding of mortgage prepayment rules - 28% do not understand the difference between a pre-approval and pre-qualification CMP

Variable/Adjustable Rate (V/ARM) Mortgage As you might guess, the interest rate on an adjustable rate mortgage fluctuates. Exactly how the interest rate changes depend largely on the type of loan you get.... In many areas of the world, including Britain and Australia, adjustable rate mortgages are the norm, though they’re much less common in the U.S. If interest rates are going down, ARMs let homeowners take advantage of that without refinancing. If interest rates rise, however, ARMs can result in surprisingly sky-high payments. Variable Rate Mortgage: This is just another name for an ARM, but a true variable rate mortgage will have adjusting rates throughout the loan term. Rates normally change to reflect a third party’s index rate, plus the lender’s margin. Mortgage rates will adjust on a set schedule, whether every six months, every year, or on a longer term, and many cap the maximum interest you’ll pay. Hybrid ARMs: These adjustable rate mortgages come with an initial fixed rate for a particular period of time. Common hybrids are 3/1, or three years of fixed interest followed by floating interest rates, and 5/1, the same but with a five-year introductory period. Option ARM: This type of ARM offers the borrower four monthly payment options to begin with: a set minimum payment, an interest-only payment, a 15-year amortizing payment, or a 30-year amortizing payment. Often, an Option ARM is used to get a borrower a larger loan than he would otherwise qualify for.

What are the upfront costs associated with buying a home? Aside from calculating the amount you can afford to purchase a house, you must save up enough money to pay for the following upfront costs as well: -) Down payment: a partial and initial payment of the home’s purchase price... -) Home inspection and appraisal fees -) Insurance costs (e.g., property insurance, mortgage loan insurance, etc.) -) Land registration fee: the amount is typically a percentage of the home’s purchase price -) Prepaid property taxes and utility bills: Bills paid in advance by the seller must be reimbursed by the homebuyer -) Potential repairs or renovations -) Moving costs -) Legal or notary fees -) Other taxes: Goods and services tax (GST), harmonized sales tax (HST) and Quebec sales tax (QST) on newly built homes or mortgage loan insurance If you did the math and it tells you that you are ready to buy a home, then you may finally seek out a mortgage broker to explore your financing options. Perhaps things are a little tight? Here are some of the things you can do to turn things around: * Improve your credit score by consulting with your lender or a credit counsellor * Re-evaluate your current budget and figure out which expenses you can trim down. * Pay off some of your outstanding loans and debts * Wait a few more years and save enough money for an even larger down payment * Set your sights on a more affordable home