Government of Canada Takes Action to Strengthen Housing Financing

The Honourable Jim Flaherty, Minister of Finance, today announced a number of measured steps to support the long-term stability of Canada's housing market and continue to encourage home ownership for Canadians.

"Canada's housing market is healthy, stable and supported by our country's solid economic fundamentals," said Minister Flaherty. "However, a key lesson of the global financial crisis is that early policy action can help prevent negative trends from developing."

The Government will therefore adjust the rules for government-backed insured mortgages as follows:

• Require that all borrowers meet the standards for a five-year fixed rate mortgage even if they choose a mortgage with a lower interest rate and shorter term. This initiative will help Canadians prepare for higher interest rates in the future.
• Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per cent from 95 per cent of the value of their homes. This will help ensure home ownership is a more effective way to save.
• Require a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation.

"There's no clear evidence of a housing bubble, but we're taking proactive, prudent and cautious steps today to help prevent one. Our Government is acting to help prevent Canadian households from getting overextended, and acting to help prevent some lenders from facilitating it," said Minister Flaherty. "If some lenders aren't willing to act themselves, we will act. These measures demonstrate the Government is committed to taking action when necessary to support the long-term stability of a sector that is so vital to our economy and the financial well-being of Canadian families."

These adjustments to the mortgage insurance guarantee framework are intended to come into force on April 19, 2010.

Winter has arrived here in Halton Hills and staging your home for a quick sale can be a time consuming task, even more so during the winter months. Not only does one have to contend with other homes on the market, and numerous buyers, but the weather can present a problem in terms of access to the home and the cleanliness of the interior. In order to ensure your home shows to its full capacity during the winter months, here are some good things to do.

Access to a home is crucial during the winter. Sidewalks and driveways can easily become danger areas as ice and snow can turn even the nicest yard into a skating rink. Its a daily task to ensure that the driveways and walkways are clear and safe. Keep a good supply of rock salt or another de-icing agent on hand. The last thing you want is a prospective buyer to slip on their way to the door. Remember if people have to trudge through knee deep snow to reach your front door, it won't look good for you as a seller. Keep the driveway shoveled and de-iced at all times. Its also a good idea to clear snow off the eaves and edges of the roof. Make sure there are no dangers to the visitors to your home.

Keeping the inside of a home clean while the weather is cold and snowy presents a different challenge. This is compounded if your home is a popular showing. During the cold months is a great idea to keep the house warm and inviting. If you have a fireplace, light it. The ambience and warmth will help visitors to stay longer and explore all that your home has to offer. Ideally you would like your home to be as inviting and interesting as possible. The winter months give a homeowner the opportunity to showcase their homes during the dreary winter weather. It's a chance to turn your home into a winter palace that will interest buyers from the moment they see it.

The rebound that occurred in Greater Toronto’s residential housing market in 2009 was nothing short of incredible. Having started the year a dismal 47 per cent off 2008 levels, sales steadily clawed back, with Toronto poised to record its second best year on record. Purchasers who held off in the final quarter of 2008 and the first quarter of 2009 quickly acclimatized to new market realities and moved to take advantage of favourable lending rates. Yet, inventory levels proved a signifi cant impediment, as supply struggled to meet demand—down considerably for much of the year. Buyers refused to be daunted, despite the re-emergence of the multiple-offer scenario. Activity continued to ramp up, with sales reaching 10,955 units in June—the second best month on record. The city finally eclipsed year-to-date 2008 sales in August. The unprecedented momentum shocked economists and industry experts alike. In fact, housing remained a steadfast bright spot in a province that experienced among the worst of the economic turmoil.

The strength of housing clearly defied the weakened fiscal foundation throughout the year. Pent-up demand was the main driver of activity in 2009, given the thousands of purchasers who waited it out on the sidelines in 2008. Interest rates have been another principle factor, providing impetus at all price points. Consumer confidence buoyed sales as positive economic indicators—however sporadic—made their way into the headlines. Rising prices have also served as a catalyst, as it became evident that there were no deals to be had, despite the current economic uncertainty.

Although the global recession had little lasting impact on Greater Toronto’s housing market in 2009, the economic recovery is expected to bolster resale housing going forward. Overall, the GTA is expected to see housing sales reach 85,000 units, an increase of 14 per cent over 2008. Average price may break the $400,000 mark by year end or hover slightly below that significant milestone.

Given that the GTA boasts 40 per cent of the nation’s business headquarters, almost one-fifth of the country’s gross domestic product, nearly half of Ontario’s GDP, and 40 per cent of all immigrants, any improvement from an economic standpoint is bound to be felt at the consumer level. Supporting growth in 2010 will be a strengthened automotive sector, improved exports and commodity prices, greater retail and consumer spending, and a significant investment in capital projects. The implementation of the Harmonized Sales Tax (HST) in Ontario is expected to cause a run up in housing activity during the spring market, as purchasers move to avoid additional expenses. In the longer-term, new construction is expected to be impacted much more extensively, shifting some buyer demand to the resale sector—at least until buyers adjust to the new normal.

Inventory levels in Greater Toronto are expected to remain quite low, although some improvement will occur in the first half of 2010. Multiple offers will remain a factor, most evident on well-priced, well-located product, listed from $300,000 to $700,000. Hot pockets will continue to elicit bidding wars next year. The phenomenon will not be limited to single-family homes, as desirable starter condominium units in prime locations will also experience competition in 2010. Of all types of product, the upper-end—priced over $1 million—is expected to record yet another year of strong activity. Given the momentum that currently exists and the fact that all segments are now working in tandem, further increases in sales and average prices are forecast for 2010. Seller’s market conditions will continue to prevail, with condominiums and single-family homes predicted to experience a four per cent rise in prices in 2010, bringing average price to $415,000, while unit sales continue to edge higher, amid more favourable economic conditions, reaching 86,000 units.

Undoubtedly the hardest thing to do – especially for first time homeowners, is saving for their down payment. Historically this has been the case with most Canadian consumers, and to assist the consumer, the government introduced mortgage insurance to get more people into the housing market. Today, when less than 25% of the purchase price is put down (a high ratio mortgage), the lender will require the consumer to use mortgage insurance to protect them against any payment default.

Now that the lender is protected and has minimized their risk, they are more willing to lend up to 95% of the purchase price and in some cases up to 100%. What this means to today’s consumer that they can purchase a home with as little as 5% down in most cases and in some cases with no money down. This has made it easier for many new Canadians to realize their dreams of home ownership much faster and easier than previous years.

There are two companies in Canada that offer this type of insurance, Canada Mortgage and Housing Corporation (CMHC) and Genworth Financial. CMHC is a government agency designed to assist homebuyers get into home ownership, while a newer entry into the market has been the privately owned Genworth. The policies of both of these companies are basically the same, and in order to qualify for mortgage loan insurance you need to meet certain conditions.

Here are a few of the main ones:
- The home must be the consumer’s principal residence and located in Canada;
- A down payment of at least 5% must be available, or if 100% financing is needed the consumer must further qualify for this option;
- Home expenses must not be greater than 32% of the monthly household income, and
total monthly debts can’t be more than 40% of monthly income; and,
- A further 1.5% of the purchase price must be available as closing costs.

The question of where the premium is set is based on the amount of money put down as a down payment. The simple rule is the greater the percentage that’s put down, the lower the premium. Premiums range from .5% on the low end to 2.75% at the top of the scale. This premium is a lump sum and is usually added to the mortgage.

A qualified mortgage professional can explain all of the details and costs of a high ratio mortgage. He or she will also go through all the options available to find out which is the best mortgage for any situation and potentially save thousands of dollars throughout the term of the mortgage.

For information on how to obtain a qualified mortgage professional call Domenic Manchisi at 905-875-4594 or email to Domenic@DomenicManchisi.com.

Credit score in not just a number obtained through the statistical analysis of your credit report. It is an efficient, reliable, unprejudiced and reasonable underwriting tool that helps the mortgage lender to evaluate your credit worthiness. In other words, it helps them to ascertain the amount of loan that you will be able to pay back in a timely manner. Thus, by improving your score, you can boost up your chances of getting a mortgage home loan at a better rate of interest. Here are a few realistic ways of improving your score.

• Pay your bills before the due date- The payment history in your credit report shouldn’t bear any negative marks because these black points remain on the report for no less than 7 years. For an excellent payment history, pay all your bills before the last date. If you don’t pay the bill for more than 30 days, a negative mark will automatically come up on the report.

• Don’t sit upon your debt load- If you are already bearing a huge debt load on your shoulders, then it is important for you to reduce it without delay. By adding to the load, your debt will simply become unmanageable, and in the long run, it would adversely affect your credit score.

• Maintain your old accounts- The chief benefit of a long credit history is that it increases your credit utilization ratio. Hence, it is essential to maintain your old accounts. At times, it is unusually difficult to manage numerous accounts simultaneously. However, if you are able to do this, your credit score would swell up exorbitantly.

• Avoid using more than 20% of the available credit- By utilizing only 20% of your credit limit, you can increase your score dramatically. The best way to make this possible is to wind up the debt backload before taking up a new loan. All your efforts to stick to the 20% limit will leave a positive effect on your credit report.

• Keep your credit report spick and span- Inconsistencies and errors on the credit report serve to ruin your credibility as well as your score. Hence, they should not only be detected at the earliest, but should also be rooted out. If you are unable to track down the errors, then you can engage a credit report management company to get the discrepancies removed as quickly as possible.

• Be vigilant while opening new accounts- In a bid to allure customers like you, credit card companies provide countless irresistible offers and discounts. Instead of grabbing each one of them, do a bit of research to find out the best available option. This is important because each credit enquiry would serve to knock down your score.

Experian, Equifax are two major credit bureaus in the Canada. that have the reputation of calculating the credit score accurately. The first thing that you should do is to get your score calculated. Thereafter, follow the above mentioned tips ardently to improve it. In a short period of time, the positive results will start appearing on your credit report.

Call Domenic Manchisi for more information or a free no obligation consultation on how to obtain your report and how to make sense of it! 905-875-4594 or Domenic@DomenicManchisi.com

10 Good Reasons to List Your House During the Holidays

1.     People who look for a home during the holidays are more serious buyers

2.     Serious buyers have fewer houses to choose from during the holidays, so you have less competition

3.     Houses “show better” when decorated for the holidays

4.     Buyers are more emotional during the holidays

5.     Buyers have more time to look for a home during the holidays

6.     Many people want to buy before the end of the year for tax reasons

7.     January is traditionally the month for transfers. Transferees can’t wait until Spring to buy. You must be on the market to capture that market.

8.     You may still restrict showings during your personal family events

9.     You can sell now, but specify a delayed closing or extended occupancy until early next year if you desire

10.   By selling now you have an opportunity to buy during the Spring, when many houses are on the market

Bottom Line?

By listing now, you may have fewer actual showings, but more qualified and motivated buyers.

The Reason.

          You have less competition, resulting in a quicker

I’m often asked if this is a good time to buy a home.  Some clients are concerned that home prices may fall further than they have already.  They are assuming that the best course of action is to wait for the bottom in the market and then buy.  The problem with this approach is that you don’t know where the bottom is until you see it in the rear view mirror, meaning until you’ve missed it!

Home prices are one factor in determining your cost of ownership, but so are interest rates and financing availability.  Even though interest rates have gone up in the last six months, they are still near historic lows.  Since your monthly mortgage payment is a combination of paying down your principal and paying the interest owed, if home prices come down a little further but interest rates go up, it could cost you even more to service a mortgage on an identical home!

While a home is a major investment, it is also the center of your personal life.  It’s important to live in a home that reflects your taste and values, yet is within your financial “comfort zone.”  To that end, it may be more important to lock in today’s relatively low interest rates and low home prices, rather than to hope for a further break in prices in the future.

Please give me a call if I can be of any assistance in determining how much home you can afford in today’s market.