Published: August 03, 2010 3:00 PM in the Comox Valley Record
“Beware of more than just the rates when you’re shopping for a mortgage,” say mortgage brokers Paul Healey and Karen Ewing, partners at Invis in Comox Valley.
With rates near all-time lows, many people are now seeking mortgages for a home purchase, to help with debt consolidation through a home equity loan, or even for an investment property purchased during this buyer’s real estate market.
Unfortunately, too many people are wooed by low rates and don’t realize there are huge differences between one company’s mortgage and another — differences that can be costly if a consumer is not careful.
Consumers should talk with a mortgage broker who will ask the right questions before researching the best mortgage products available for each individual’s unique situation.
For instance, the terms of some loans include huge penalties for pre-payment, even if someone is selling the property.
Most mortgages charge the borrower the greater of three months’ interest or the “interest differential,” which is the difference between what the borrower would have paid in interest and what the lender can get by relending the money to a new borrower for that time period.
These penalties can be substantial and truly blind-side a borrower. For example, when a borrower wants to sell his house two years into a five-year mortgage, the company can charge the difference between the rate on the mortgage and the rate being offered on new mortgages. This calculation can differ dramatically from lender to lender.
So, if prepayment or a future move may be in the picture, the broker will look for a mortgage that allows pre-pays or does not have an interest-differential penalty.
Pre-payment penalties are not the only mortgage trap. Some people are sadly surprised when they want to refinance for some reason, but the mortgage won’t allow it.
Another important term to consider is “portability.” That simply means that a borrower can take his or her mortgage with him upon selling the property, which is a significant perk if rates go up.
The rate and terms of the mortgage are simply moved over to the new property and carry on as it was. An experienced broker can review these with a borrower to be sure the loan fits the borrower’s needs.
Even when a mortgage is portable, there may be limitations. For instance, some lenders will only lend for a home in a certain geographic area. If the borrower has any thought of moving during the time of the loan, portability should be discussed with the broker to avoid being shocked when that is not allowed.
Showing posts with label mortgage lending. Show all posts
Showing posts with label mortgage lending. Show all posts
Wednesday, August 4, 2010
Thursday, July 29, 2010
Toronto, Calgary lead drop in housing sales
Garry Marr, Financial Post · Thursday, Jul. 15, 2010
Existing home sales continued their rapid decline last month, with 70% of markets showing a drop in sales in June from May, the Canadian Real Estate Association says.
But at least one senior executive in the industry says market watchers need a little perspective about the real estate sector.
“The pace we had seen couldn’t be sustained. It’s important to have a word of caution when you talk about it slowing down,” said Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada.
“This is by no stretch a buyer’s market. At best it’s a balanced market in the majority of markets. People are not out there giving their houses away yet.”
Ottawa-based CREA, which represents 100 boards across the country, said sales were off 8.2% from a month ago on a seasonally adjusted basis. Toronto and Calgary led the decline.
CREA said tighter mortgage rules and rising rates were behind a 13.3% drop in sales over the past quarter.
“As expected, these two national factors contributed to a widespread decline in activity, with transactions down in all but a dozen or so smaller markets,” CREA said.
Sales activity was down 19.7% in June from a year ago, when there was a record number of sales for the month.
Actual second-quarter sales were down 2.8% from a year ago but for the year are still up 13.6%.
There was a slowdown in Canadians putting homes up for sale, which should be good for the market and prices. The number of new listings on the market in June dropped 6.8% from May.
But year-over-year price increases are starting to slow. CREA said the national average sales price rose just 4.9% from a year ago to $342,662.
CREA chief economist Gregory Klump said there could be help on the way for prices in the coming months. “While the pricing environment is becoming more challenging, a recovering economy and job market will provide support for housing activity and prices,” he said.
The number of months of inventory in the market, which represents the number of months it would take to sell current inventories at the current rate of sales activity, is also rising. It was 5.7 months across the country at the end of June, up from 4.2 months a year ago.
“The housing market is becoming more challenging for sellers,” said Georges Pahud, CREA president. “Buyers are in less of a hurry.”
Economist Adrienne Warren of the Bank of Nova Scotia said the market has peaked.
“Canada’s housing market has clearly shifted gears, with monthly sales [seasonally adjusted] now running about 25% below last December’s peak,” she said. “The sense of urgency see n last fall and winter in the lead-up to tighter mortgage-lending criteria and the introduction of the HST in Ontario and British Columbia has faded.”
Financial Post
Existing home sales continued their rapid decline last month, with 70% of markets showing a drop in sales in June from May, the Canadian Real Estate Association says.
But at least one senior executive in the industry says market watchers need a little perspective about the real estate sector.
“The pace we had seen couldn’t be sustained. It’s important to have a word of caution when you talk about it slowing down,” said Michael Polzler, executive vice-president of Re/Max Ontario-Atlantic Canada.
“This is by no stretch a buyer’s market. At best it’s a balanced market in the majority of markets. People are not out there giving their houses away yet.”
Ottawa-based CREA, which represents 100 boards across the country, said sales were off 8.2% from a month ago on a seasonally adjusted basis. Toronto and Calgary led the decline.
CREA said tighter mortgage rules and rising rates were behind a 13.3% drop in sales over the past quarter.
“As expected, these two national factors contributed to a widespread decline in activity, with transactions down in all but a dozen or so smaller markets,” CREA said.
Sales activity was down 19.7% in June from a year ago, when there was a record number of sales for the month.
Actual second-quarter sales were down 2.8% from a year ago but for the year are still up 13.6%.
There was a slowdown in Canadians putting homes up for sale, which should be good for the market and prices. The number of new listings on the market in June dropped 6.8% from May.
But year-over-year price increases are starting to slow. CREA said the national average sales price rose just 4.9% from a year ago to $342,662.
CREA chief economist Gregory Klump said there could be help on the way for prices in the coming months. “While the pricing environment is becoming more challenging, a recovering economy and job market will provide support for housing activity and prices,” he said.
The number of months of inventory in the market, which represents the number of months it would take to sell current inventories at the current rate of sales activity, is also rising. It was 5.7 months across the country at the end of June, up from 4.2 months a year ago.
“The housing market is becoming more challenging for sellers,” said Georges Pahud, CREA president. “Buyers are in less of a hurry.”
Economist Adrienne Warren of the Bank of Nova Scotia said the market has peaked.
“Canada’s housing market has clearly shifted gears, with monthly sales [seasonally adjusted] now running about 25% below last December’s peak,” she said. “The sense of urgency see n last fall and winter in the lead-up to tighter mortgage-lending criteria and the introduction of the HST in Ontario and British Columbia has faded.”
Financial Post
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