Ontario Mortgage News – No Money Down Mortgages Are More Expensive!

For those who are finding it difficult saving up the minimum 5% required down payment to buy a home, you will be happy to learn that no money down mortgages are still available. While it has been in the Ontario mortgage news that CMHC is tightening its lending guidelines and TD Bank economists have suggested that CMHC should increase the minimum required down payment, CMHC is still high ratio insuring no money down mortgages and banks are still financing them.

No money down mortgages cannot be obtained unless an applicant has excellent credit. The minimum required beacon score for an applicant to qualify for a no money down mortgage is 680. The applicant must also have good income and stability.

When consumers obtain no money down mortgages the bank essentially finances the 5% down payment. This is not financed through a conventional loan or line of credit but rather it is financed through the mortgage interest rate. This means that if you want a no money down mortgage you can expect to pay 1%-2% higher interest than whatever the current prime lending rate is. The increased interest results in the bank receiving back the equivalent of a 5% down payment over the mortgage term.

There is less flexibility with no money down mortgages. You cannot obtain a variable rate no money down mortgage. You also cannot have any less than a 5 year mortgage term on no money down mortgages because the 5% down payment is repaid through interest over the 5 year mortgage terms. No money down mortgages almost always bears a 5 year fixed rate mortgage term.

At the end of the day if you can come up with a 5% down payment to buy a home, try to do it. There are just too many benefits to ignore. Not only will you have more flexibility when it comes to arranging your mortgage terms but you will also benefit from significantly lower interest rates on your mortgage. A mortgage that is 1%-2% less interest will result on a mortgage payment that is much lower (more than one hundred dollars per/month) and when you look at the interest savings over a 5 year time period it amounts to thousands of dollars.

If coming up with a 5% down payment is too difficult then a no money down mortgage may be your only option to realize your dream of owning a home. With interest rates at historic lows, a no money down mortgage even at the higher rate is still a very affordable option, considering that the higher rate no money down mortgage is still less interest than what your interest rate would have been had you purchased a home with a 5% down payment 5 years ago. With that in mind, if you need a no money down mortgage now is the time to do it. Not only are interest rates low enough but the Canadian Government has been consistently tightening Canadian Mortgage and Housing Corporation guidelines, so if you wait too long, no money down mortgages may not even be available in the future.  It will be important to pay attention to Ontario mortgage news.

For more information about Ontario mortgage news and no money down mortgages please call Paul Mangion at 416-204-0156 or visit www.gtamortgagematters.com.

Ontario Mortgage News – Is a Fixed Rate Mortgage The Best Choice? A CIBC Poll Seems to Think So

In the past few years interest rates have been some of lowest we’ve ever seen. Ontario mortgage news outlets have continuously speculated about when they are going to go up. Whether or not interest rates go up and down depends on so many factors including not only the economy at home but also the economy in the US and abroad.

Ontario mortgage news outlets are now reporting on a shift in the types of mortgages consumers are choosing which seems to indicate that Canadians are thinking that interest rates are on their way up. 

CIBC released a Poll conducted by Harris/Decima that revealed that half of Canadians said they would choose a fixed rate mortgage if they had to decide today, which was a substantial increase over last year. The poll also found that Canadians expect that mortgage interest rates will go up over the next 12 months and that Canadians are seeking to lock-in at today’s low fixed rate mortgage rates.

Here are some of the statistics that were revealed in the poll:

·         50 percent of Canadians said they would choose a fixed rate mortgage today, compared to only 39 percent last year

·         32 percent of Canadians said they would choose a variable rate mortgage today, the same percentage as last year

·         Another 18 percent said they were uncertain which mortgage would be right for them, considerably lower than the 30 percent who were undecided in 2011

·         86 percent of Canadians believe mortgage rates will either stay the same or be higher 12 months from now

·         Only 6 percent of Canadians believe mortgage rates will be lower 12 months from now

Variable rate mortgages carry more risk than fixed rate mortgages because if mortgage interest rates increase so does the interest on a variable rate mortgage. This can result in an increase to a consumer’s mortgage payment or in the interest portion of the mortgage payments that are applied to principal. Fixed rate mortgages are fixed for a pre-determined period of time so if you lock-in to a fixed rate mortgage for 5 years for example, your mortgage rate will not change during the 5 year term. 

This is why so many Canadians are turning towards fixed rate mortgages. Let’s face it, interest rates are not going to stay at the historic lows that they have been forever. While some banks may still have rate wars from time to time, interest rates are bound to go up eventually.  

Those who want to take advantage of variable rate mortgages and mitigate their risk can opt for a variable rate mortgage that offers the option to lock-in. This way if interest rates start to rise you can lock-in at any time.  

With that said, with mortgages at some banks as low as 3% interest, you can’t really go wrong by locking in at these types of rates over a 4-5 year term. The best thing you can do if you are in the market for a new mortgage is to pay attention to Ontario mortgage news so that when the time is right you will be ready to make your move. 

For more information about Ontario mortgage news and fixed rate mortgages please call Paul Mangion at 416-204-0156 or visit www.gtamortgagematters.com.

Ontario Mortgage News – Mortgage Interest Rates Increased by Two of Canada’s Banks

In Ontario mortgages news this week it seems that the rate wars are over; with RBC and TD Banks recent announcement that they are increasing their mortgage interest rates. Their five year closed interest rate will be increased by .2% to 5.44% and their fixed 4 year interest rate will be increased by .5% to 3.49%. Likely the rest of the banks will follow suit in coming days and weeks. 

This change comes amidst growing concerns from bank economists and even the Canadian Government about the ability of some Canadians to manage their high personal debt loads. The CBC reported that the mortgage interest rate increases follow recent comments by Finance Minister Jim Flaherty Thursday, criticizing banks who have called on Ottawa to tighten lending and saying that it’s their job. 

In recent Ontario mortgage news, a TD bank economist suggested that Minster Flaherty should further tighten CMHC lending guidelines by increasing the amount of down payment that Canadians have to make in order to qualify for high ratio mortgage financing and it seems that, at least for the time being, Minister Flaherty is sending a message to the banks that he has no intentions of doing so.

Household debt does continue to be a growing concern and a concern that has been repeatedly raised by The Bank of Canada. The average ratio of debt to personal disposable income is now over 150% and economists are predicting that this will rise over 160% in the next year. The CBC and in other Ontario mortgage news outlets reported that TD Bank chief economist Craig Alexander has estimated more than one million Canadian households, or about 10 percent of those that currently have debt, will have to devote 40 percent or more of their income to making their monthly debt payments if rates rise by two-to-three points to more normal levels.

The Canadian Government has already intervened a number of times to tighten up on high ratio mortgage financing requirements in recent years and while Minster Flaherty is not prepared to do so again, immediately he has been clear that he is prepared to tighten mortgage insurance rules again, if necessary.

Canadians who own homes and are currently in debt should be thinking of a plan to deal with their debt. Looking at a home equity loan to consolidate debt is often a great option. Home equity loans can enable homeowners to cut the interest on their debt, reduce their monthly income which increases cash flow and do away with dangerous high interest credit cards.

The fact remains that if an improvement in the job market doesn’t occur resulting in Canadians incomes increasing and Canadians don’t come up with a way to deal with their debt, Canadians will be at risk of CMHC further tightening lending guidelines which will make it more difficult and more expensive for the average Canadian to obtain a mortgage. If you have been thinking about buying a home and have been waiting for the right time, now is it. The wait and see approach could have consequences that include not being able to obtain a mortgage at all.

For more information about mortgage interest rates or to see if you qualify for mortgage financing please visit www.gtamortgagematters.com  or call Paul Mangion at 416-204-0145.

Ontario Mortgage News - TD Bank Wants Government to Increase Required Down Payment

Canada is quite different than the US and a major reason why is because of the Federal Governments oversight of our banking system. In Canada, if banks want to be able to lend more than 75% of a property’s value they must obtain high ratio mortgage insurance from the Canadian Mortgage and Housing Corporation (CMHC). When a mortgage is insured by CMHC, both CMHC and the bank will have to approve your mortgage application. CMHC has legislated guidelines that banks must follow in order to obtain high ratio mortgage financing. 

Last year Minister Flaherty tightened up CMHC guidelines and Canadians can no longer amortize CMHC insured mortgages longer than 30 years. In addition, they reduced the percentage to which you can refinance your home and no longer will high ratio insure home equity lines of credit.

This week in Ontario’s mortgage news, TD bank released a report asking the government to increase the minimum down payment required to purchase a home from 5% up to 7%.

Minister Flaherty met with economists in early March and received advice that he should clamp down on Canadian’s appetite for housing and new debt.  TD Bank's chief economist Craig Alexander suggests that the Minister reduce the maximum amortization on mortgages to 25 years from 30, or increase the minimum down payment that Canadians are required to make when purchasing a home from 5% to 7%, or mandate a “means test” for those seeking loans by ensuring they can afford to make payments as if mortgage interest charges rise to 5.5 percent, about twice as high as many current rates.

Debt has continued to rise in Canada and especially in Ontario faster than incomes; the average debt service ratio in Canadian households exceeds 150%. With the latest figures released indicating that household debt accumulation is still rising at six percent annually and the fact that The Bank of Canada has asserted that household debt is the “biggest domestic risk” to Canadians; one or more of these options may be considered by CMHC.

With that said, Minister Flaherty has expressed fears that discouraging home buying could cause a loss of construction jobs, a sector the economy  was hit very hard with in Ontario during the last recession and was covered extensively in Ontario mortgage news. Disruption to other parts of the economy has also been a major reason that The Bank of Canada has held back on raising interest rates.

What does this mean to you? Well, if you are someone who has aspirations of owning a home and only has a 5% down payment or cannot afford a large mortgage payment, the time is now to act to ensure that you can secure your mortgage financing before more changes come down the pipeline. Increased pressure from economists may result in Minister Flaherty taking recommendations in the coming months that could seriously impact your ability to buy a home and qualify for mortgage financing. One thing that is important is that you pay attention to Ontario mortgage news and keep on top of announcements so that you don’t find out that something major has changed after it’s too late.

For more information about Ontario mortgage news or to see if you qualify for mortgage financing in Ontario please contact Paul Mangion at 416-204-0156 or visit www.gtamortgagematters.com