Thursday, February 24, 2011

Home Sales to Climb Eight Per Cent in 2011

BCREA Housing Forecast Update - First Quarter 2011

Vancouver, BC – February 23, 2011. The British Columbia Real Estate Association (BCREA) released its Housing Forecast for the first quarter of 2011 today.

BC Multiple Listing Service® (MLS®) residential sales are forecast to increase 8 per cent from 74,640 units in 2010 to 80,900 units this year, and increase another 4 per cent to 83,950 units in 2012.

“British Columbia housing markets are returning to normalcy after two years of volatility,” said Cameron Muir, BCREA Chief Economist. “Employment and population growth will fuel consumer demand over the next two years. However, higher mortgage interest rates and tighter credit conditions for low equity home buyers will limit home sales to below the ten-year average of 87,600 units.”

“Total active residential listings in the province declined 14 per cent since last spring. However, the inventory of homes for sale is expected to edge higher as the number of new listings to the market advances during the first two quarters of 2011,” added Muir. “Regional market differences continue in the province, with Vancouver trending into a seller’s market, while the Okanagan, Kootenay and Kamloops markets trend from a buyer’s market toward balanced conditions.”

The average MLS® residential price is forecast to increase 2 per cent to $517,000 this year and remain relatively unchanged in 2012, albeit declining by 0.4 per cent to $515,400

Copyright BCREA reprinted with permission

Tuesday, February 22, 2011

'Condo King' sells 128 Olympic Village units

Vancouver real estate guru Bob Rennie has managed to sell 128 condos at the former Olympic Village site over the weekend, he announced on Tuesday morning.

The sales are still subject to financing, but Rennie says response has been so strong he's considering clawing back some of the units that had been identified as rental condos.

Rennie says taxpayers of Vancouver, who are currently financially responsible for the project, should be pleased with the response. He had promised the receiver of the troubled condominium development that he would sell 60 condos in 60 days.

"I think we are off and running now and I just want to be cautiously optimistic that we have stabilized the asset for the taxpayer and now its time to move forward on an orderly basis," said Rennie.

The average price for the units sold was $778,000. The most expensive unit sold was nearly $3 million and the cheapest was $329,000.

"If we are together in a week and I can say I've sold another 20 or 25, I'll be a really happy guy," he said.

Tent city protest planned

As Rennie spoke, protesters gathered at the Olympic village site, angry the village contains far fewer social housing units than originally promised.

The city originally planned to use about 250 units in the development as low income social housing, but that figure was cut to 125 last year, when the city decided to rent 125 of the units to emergency workers at market rates.

Organizer Nathan Crompton says a tent village will be erected at the site on Saturday.

"I hope that Vancouver sees this as a city-wide issue and that thousands of people come down and to say that we are going to disrupt this marketing effort every day until we get the housing legacy that was promised," said Crompton.

Taxpayers still on the hook

A total of 230 units were offered for sale this past weekend. Another 265 units in the development were sold before completion and 250 have been assigned as rental stock by the city.

The $1 billion development, which has a total of 1,100 residential suites, has been in financial trouble since the original financiers backed out of the project prior to the 2010 Olympic Games.

The City of Vancouver was forced to step in and provide about $700 million in emergency financing. But the downturn in the real estate market made it difficult to sell the units after the Games, forcing the city to eventually agree to Rennie's plan to slash prices last week by an average of 30 per cent.

Rennie, who's been nicknamed the 'Condo King,' earned his reputation as real estate marketing guru by selling thousands of condo in projects across B.C.'s Lower Mainland

CBC NEWS February 22, 2011

Housing Activity to Move in Line with Demographic Fundamentals in 2011

After trending lower in the second half of 2010, housing starts are forecast to stabilize at levels consistent with demographic fundamentals in 2011 and 2012, according to Canada Mortgage and Housing Corporation’s (CMHC) first quarter Housing Market Outlook, Canada Edition.

Housing starts will be in the range of 157,300 to 192,900 units in 2011, with a point forecast of 177,600 units. In 2012, housing starts will be in the range of 154,600 to 211,200 units, with a point forecast of 183,800 units.

“Modest economic growth will continue to push employment levels higher this year and next. This, in conjunction with relatively low mortgage rates, will continue to support demand for new homes. Housing starts will remain in line with long term demographic fundamentals over the course of 2011 and 2012,” said Bob Dugan, Chief Economist for CMHC.

Existing home sales will be in the range of 398,500 to 485,500 units in 2011, with a point forecast of 441,500 units. In 2012, MLS®2 sales will move up and are expected to be in the range of 406,300 to 519,700 units, with a point forecast of 462,900 units.

Mr. Dugan also noted that the existing home market will remain in the balanced to sellers’ market range in 2011 and 2012. As a result, growth in the average MLS® price is expected to remain in line with economy-wide inflation in 2011 and 2012.

CMHC February 17, 2011

Wednesday, February 16, 2011

BCREA Housing Market Update - In Focus: Differing BC Market Conditions (Feb 2011)

BC Real Estate Association (BCREA) Chief Economist Cameron Muir discusses the January 2011 statistics and an in depth look at the differing BC market conditions.

Copyright BCREA reprinted with permission

Monday, February 14, 2011

Housing Market Continues Normalization Trend

The British Columbia Real Estate Association (BCREA) reports that Multiple Listing Service® (MLS®) residential sales in the province climbed 7 per cent in January from December 2010, on a seasonally adjusted basis. Compared to January of last year, MLS® residential unit sales were down 10 per cent to 4,137 units. The average MLS® residential price rose 11.5 per cent to $548,183 in January compared to the same month last year.

“Consumer demand continues to normalize alongside overall economic conditions,” said Cameron Muir, BCREA Chief Economist. “However, the pace of growth in home sales experienced since last summer is likely to moderate in the coming months as tighter credit conditions and upward pressure on mortgage interest rates impacts affordability and purchasing power.”

The inventory of homes for sale remained below 47,000 units for the third consecutive month in January, down 14 per cent from the spring of last year. “While demand and supply conditions province-wide exhibited balance last month, regional differences are pronounced,” added Muir. “Housing markets in the Lower Mainland/ South Coast exhibited stronger conditions than in the Kootenays and Okanagan, which remained in buyer’s market territory in January.”

Copyright BCREA reprinted with permission

Commercial real estate booming again – now what?

The commercial real estate market saw an unprecedented recovery last year, with investment growing 48 per cent as the economy improved and investors returned to the market.

Canadian commercial real estate sales volume reached $18.9-billion in 2010, according to CB Richard Ellis, from $12.7-billion in 2009 – though it’s still a long way from the $19.8-billion posted in 2005.

“Once we were a few weeks into 2010, we could feel momentum picking up so that by the year-end, we were about where we expected it to be,” said John O’Bryan, CBRE’s vice-chairman. “It was really a coast-to-coast recovery – something we haven’t seen before.”

The only market that didn’t see an increase in volume was London, Ont. Toronto finished the year with $7.4-billion in trades, up from $3.8-billion in 2009 as volume grew by 95 per cent.

There were some large deals that helped boost the numbers, including ING Groep NV’s sale of its Canadian portfolio for $2.2-billion to KingSett Capital and Alberta Investment Management Corp.

“It was a good year relative to 2008, but volumes are still down considerably from where they were prior to the recession,” said Colliers International senior vice-president Milton Lamb.

Here’s what three experts expect to happen next:

John O’Bryan, vice-chairman of CB Richard Ellis
Hot: Retail
“We all talk about Target as if it were the only one, but there will be lots of movement. There are several chains that find expansion in the United States difficult, but they are looking to Canada. I think you can finally look for some rental traction in industrial as well, especially in the last half of 2011.”
Cold: Calgary
“The terrific pace that Calgary set last year in terms of office leasing has to slow. It has to settle down – it was a great performance but it can’t keep going at that rate. And while this could be a good year for hotels in terms of trading, there are still going to be issues around financing. That’s the grey cloud over that industry.”

George Carras, president of RealNet Canada
Hot: Big deals
“Big is back – regardless if it’s retail, industrial or office, if it’s got proven income, then it’s going to be hot. You’ve got an abundant supply of buyers who like what they see in those spaces. So big is in vogue – and by that I mean deals over $50-million. And when you see the commercial-mortgage-backed securities market is showing a bit of a pulse, that’s pretty exciting.”
Cold: Bargain hunting
“Distressed-deal shopping. Everyone who had their powder dry last year waiting and waiting and waiting for distressed sales finally figured out it wasn’t going to happen. So now they are looking to deploy that capital on other assets, if they haven’t already. There’s also less appetite for value-added properties – people are mindful of how much lease-up risk they want to take on.”

Mark Rose, chief executive officer of Avison Young
Hot: U.S. real estate
“The No. 1 theme I see in Canada is Canadian investment in U.S. real estate. It started last year, when there was $2-billion invested. The Canadian dollar is at a premium and could go higher, and there are opportunities in the distressed market to achieve double-digit returns. Last year you saw companies such as Brookfield, RioCan, Artis, CPPIB [Canada Pension Plan Investment Board] and Manulife down there – this year, you’ll see them and maybe some others.”
Cold: Snap decisions
“There isn’t a market in Canada that couldn’t be made better if there was more confidence on the part of decision makers. Those who actually occupy real estate are taking their time making decisions and don’t yet have confidence in a full recovery. That is holding us back. It is very difficult to pick out a province where that lack of confidence isn’t a factor in the market.”


Another attempt to certify home inspectors

Despite efforts for many years by several individuals and groups, the Canadian home inspection industry is still very much unregulated. British Columbia is the only province that has licensed practitioners, although three or four other jurisdictions are considering legislation.

In this unregulated sector, anyone can simply print some business cards, buy a flashlight and clipboard, and promote themselves as a home inspector. On top of that, some associations, training schools and even government agencies have convinced thousands of gullible people that a two-week course or even a short online quiz will qualify them to earn a high income inspecting houses for an even more unsuspecting public.

In 2006, the Canadian Association of Home and Property Inspectors (CAHPI) announced that after 10 years of meetings and hard work, they, along with CMHC, HRSDC, the Construction Sector Council and other industry partners, had successfully developed and implemented a national certification for Canadian home inspectors. The goal was to create a large group of well-trained, field-tested and qualified home inspectors on whom the public and others connected to a home purchasing transaction could rely. The program would be administered by a CAHPI ‘arms-length’ committee (National Certification Authority – NCA) that would process all inspectors fairly and objectively.

In the years since then, more than 500 inspectors have applied, had their backgrounds evaluated, been field tested and received their National Certification. However, the estimated number of home inspectors in Canada is between 5,000 and 6,000, so obviously the program has attracted only a very small percentage of the inspector population.

Since the program was created to bring some uniformity and credibility to the industry, the results were less than stellar – disappointing those who had seen the program as an opportunity to bring more legitimacy to the relatively new home inspection industry. It became apparent that since CAHPI’s membership accounted for only about 15 per cent of the total number of inspectors in the country, non-members were not comfortable that the NCA would process and test them objectively, despite CAHPI’s genuine assurances. As a result, applications for national certification slowed to a trickle in recent years.

In early 2010, in an effort to breathe new life into the certification program, and to address the concerns of the industry, a new, fully independent, non-partisan certification body was established, with representation from all existing associations but no affiliation with or obligations to any, including CAHPI.

The National Home Inspector Certification Council (NHICC) was incorporated and quickly received recognition, encouragement and support from government agencies, home inspection associations and other stakeholders. The NHICC is a certifying body only, and is not an association, so it is not seen by the associations as competing for members. Most organizations have their own ‘certifications’ that can be complemented by the National Certification. One national group, the Professional Home and Property Inspectors of Canada (PHPIC) based its Mission Statement on support for the NCP and they have actually adopted the NCP requirements as their own. The program also makes it possible for inspectors who choose to not be members of any association to be recognized and certified competent by an independent third party.

The NHICC has embraced the requirements of CAN-P-9 and has also applied for accreditation from two international accrediting organizations, the Institute of Credentialing Excellence (ICE) and the International Organization for Standardization (ISO). This will provide evidence that the program and the policies, procedures and governance of the NHICC are being true to the terms and the spirit of the original certification model.

Home inspectors can now take comfort knowing that their education and abilities will be compared uniformly and objectively by the NHICC to the National Occupational Standards for Canadian Home Inspectors. Consumers and others can be assured that despite the proliferation of pseudo-professional organizations and groups posing as legitimate professional home inspection associations, there is ONE national, strong and valid certification that exists to rigorously evaluate and test inspectors based on actual occupational standards that were developed through thousands of hours of study and debate.

With the National Certification Program now revived and welcoming applications, home inspectors can once again take advantage of a vehicle that will objectively verify their competence. Consumers and others can choose home inspectors from any association they wish, but they can enhance their chances of getting a competent inspector by looking for someone who is also a National Certificate Holder (NCH) as designated by the NHICC.

REM online  Feb 14, 2011 By Bill Mullen

Thursday, February 10, 2011

CREA Boosts Annual Resale Housing Forecast

The Canadian Real Estate Association (CREA) has revised its 2011 forecast for home sales activity via the Multiple Listing Service® (MLS®) Systems of Canadian real estate Boards and Associations, and extended it to 2012.

Sales in the second half of 2010 rebounded faster than CREA had previously expected. “The hand-off going into 2011, together with the highs and lows for sales activity posted in 2010, provided guidance for CREA’s revised forecast,” said Gregory Klump, CREA Chief Economist.

“Home buyers recognize that low mortgage interest rates represent a once in a lifetime opportunity. At the same time, they expect that rates will rise, so they’re doing their homework in order to understand what it could mean in terms of higher mortgage payments down the road before they make an offer,” said Georges Pahud, CREA President. “The housing market and buyer psychology is different now than it was at the beginning of last year, so buyers and sellers would do well to consult their REALTOR® to understand local market trends.”

The upward revision to CREA’s forecast for 2011 reflects recent improvements in the consensus economic outlook and a further expected improvement in consumer confidence. National sales activity is now expected to reach 439,900 units in 2011, representing an annual decline of 1.6 per cent. In 2012, CREA forecasts that national sales activity will rebound by three per cent to 453,300 units, which is roughly on par with the ten year average.

“Recent additional changes to mortgage regulations will further ensure that buyers don’t buy more home than they can afford when interest rates inevitably rise,” said Klump. “The announcement of the new changes to mortgage regulations will likely bring forward some sales into the first quarter that would have otherwise occurred later in the year, particularly in some of Canada’s more expensive housing markets. This is expected to produce a milder version of the volatility in sales activity that we saw last year which resulted from additional transitory factors.”

Three transitory factors contributed to volatility in sales activity last year: changes in mortgage regulations announced last February, the early withdrawal by the Bank of Canada of its conditional commitment to keep interest rates on hold until the second half of 2010, and the introduction of the HST in BC and Ontario during the summer of 2010.

CREA expects that home sales activity will gain traction after dipping in the second quarter as the economic recovery and job growth continue, incomes grow, and consumer confidence further improves. “Even though mortgage interest rates are expected to rise later this year, they will still be within short reach of current levels and remain supportive for housing market activity. Strengthening economic fundamentals will keep the housing market in balance, which will keep home prices stable,” said Klump.

The national average home price is forecast to rise 1.3 per cent in 2011 and 2012, to $343,300 and $347,900 respectively. Average price is expected to rise modestly in most provinces, reflecting the continuation of a healthy balance between supply of, and demand for, homes listed for sale. Although the supply of new listings is expected to trend higher, the expected continuation of sellers’ market conditions in Manitoba is forecast to result in a bigger percentage increase in average price in 2011 and 2012 compared to other provinces.

Copyright CREA reprinted with permission

Tuesday, February 8, 2011

Now Is The Perfect Time To Buy

From an interest rate standpoint, now is a perfect time to become a homeowner. But transitioning from renter to homeowner is one of the biggest decisions you’ll make throughout your lifetime. It can also be a stressful experience if you don’t plan ahead by building a budget and saving prior to embarking upon homeownership.

Budgeting is a core ingredient that helps alleviate the stress associated with money issues that can sometimes arise if you purchase a home without knowing all of the associated costs – including down payment, closing expenses, ongoing maintenance, taxes and utilities.

The key is to create a realistic budget based on your goals. Track your spending and make your dollars go further by sticking to your budget once it’s in place. Budgeting offers a step-by-step formula for figuring out how to best save your hard-earned money to invest in homeownership.

Start by listing your household income, then your household expenses, and review your spending habits. All of this can be done on a pad of paper or on a computer spreadsheet.

Keeping receipts for everything that you purchase will enable you to accurately keep track of where your money is going each month so that you can review and make necessary changes to your plan.

Examine all areas of your life from entertainment to the type of food you buy, where you buy your food and clothes, and how and where you travel. Also look at your spending personality and make necessary adjustments. Are you a saver, a splurger, a spontaneous shopper or a hoarder? Become smarter with your money and avoid impulse buying.

If you find you’re spending a lot of money in one area, such as entertainment for instance, set aside a reasonable amount each month and prepare to stop spending money in this area once your budget has been exhausted.

Budgeting provides you with the opportunity to re-evaluate your needs and wants. If you can set your budget solidly in place before you head out home or mortgage shopping, you will be far more prepared to purchase your first home.

Following are three top tips to help you prepare for the purchase of your first home:

1. Set up a savings account. You can deposit a predetermined amount into this account each pay period that you will not touch unless it’s absolutely necessary. This will enable you to put money aside for a down payment and cover closing costs, as well as address ongoing homeownership expenses such as maintenance, taxes and utilities.

2. Save up for big-ticket items. As you accumulate money in your savings account, you will be able to also save for specific purchases to help furnish your home – avoiding the buy now, pay later mentality, which can have a negative impact on your credit when you’re seeking mortgage financing.

3. Surround yourself with a team of professionals. When you’re getting ready to make your first home purchase, work with your trusted real estate professional and find a licensed mortgage agent/broker. Experts are invaluable to you as you set out on the road to homeownership because we help first-time buyers through the home purchase and financing processes every day. Experts can answer all of your questions and set your mind at ease. Mortgage agents, for instance, have access to multiple lenders, and can help you get pre-approved for a mortgage so you know exactly what you can afford to spend on a home before you head out house hunting, while it’s our expertise that can match your needs with a house you can afford. Both parties will negotiate on your behalf to ensure you get the best bang for your buck. And, best of all, these services are typically free. We can also refer you to other reputable professionals you may need for your home purchase, including a real estate lawyer and home appraiser.

Examining the New Mortgage Rules

On January 17th, Finance Minister Jim Flaherty announced adjustments to the rules for government-backed insured mortgages that will come into force March 18th, 2011.

The new measures will:

• Reduce the maximum amortization period to 30 years from 35 years for new government-backed insured mortgages with loan-to-value (LTV) ratios greater than 80%

• Lower the maximum amount Canadians can borrow in refinancing their mortgages to 85% from 90% of the value of their homes

Additionally, on April 18th, 2011, the government will withdraw its insurance backing on lines of credit secured by homes, such as home equity lines of credit (HELOCs).

By paring back the maximum amortization from 35 years to 30, qualification will become harder for some borrowers – particularly first-time homeowners – as mortgage payments will increase. It’s hard to imagine that, not so long ago, Canadians could amortize their mortgages up to 40 years with zero down payment mortgages.

This is the second time in less than a year that the refinancing maximum was reduced – meaning Canadians can access less of their home equity. The first reduction from 95% of the value of your home to 90% came into force in April 2010. Now, as of March 18th, 2011, the second reduction will bring maximum refinance levels down to 85%.

This change will mean that fewer borrowers can consolidate high-interest debt such as credit cards and other unsecured loans into their mortgage at today’s low rates. This may force homeowners who are experiencing job loss, illness, separation, divorce or urgent unforeseen family crisis into having to sell their homes to gain access to their very own equity.

With these two reductions in the maximum refinance amount (totalling 10%) in less than a year, on a $300,000 home, that’s a difference of $30,000 homeowners can no longer access.

With interest rates sitting at all-time lows – with nowhere to go but up – and looming mortgage rule changes, now is the perfect time to purchase a new home, or refinance your mortgage to pay off bills or free up more cash flow.

Now more than ever it’s important for Canadians to practice financial responsibility, as options for reducing high-interest debt payments are increasingly being limited.

Record Home Prices for 2010

Vancouver, BC – January 13, 2011. The British Columbia Real Estate Association (BCREA) reports that Multiple Listing Service® (MLS®) residential sales in the province declined 12 per cent to 74,640 units in 2010. The annual average MLS® residential price rose 8.5 per cent to a record $505,178 in 2010.

“Tighter credit conditions and expended pent-up demand curbed home sales during the first half of 2010,” said Cameron Muir, BCREA Chief Economist. “However, low mortgage interest rates and improved economic conditions buoyed home sales in the latter half of the year.” MLS® residential unit sales declined 40 per cent January through July before climbing 43 per cent by the end of the year, on a seasonally adjusted basis.

“The inventory of homes for sale peaked at 53,375 units in May before declining 14 per cent to 46,000 units by December,” added Muir. “The combination of fewer active listings and increased consumer demand has improved market conditions in many areas.”

MLS® residential sales declined 25 per cent to 4,258 units in December from a near record level of 5,703 units in December 2009. After a 15 per cent increase in unit sales between October and November, a further 1 per cent increase was recorded in December on a seasonally adjusted basis. The average MLS® residential sales price was a record $523,990 in December, up 6 per cent from December 2009.

Copyright BCREA reprinted with permission

Changes to Mortgage Rules and Regulations

The Government announced three changes to the standards governing government-backed insured mortgages.


The amortization period is the length of time it will take to pay off the entire mortgage loan. It is usually much longer than the term of the mortgage. A typical mortgage in Canada may have a term of five years or less during which a specific fixed or variable interest rate will apply, and the mortgage can be renewed at the end of the term.

The measure announced today will reduce the maximum amortization period from 35 years to 30 years. For any given mortgage loan, a lower amortization period would result in a moderate increase in the monthly payment along with a significant reduction in the total interest paid over the amortization period. This measure is consistent with the principle of encouraging savings through home ownership. 

According to the Canadian Real Estate Association, the national average price (based on Multiple Listing Service sales activity) for a home sold in November 2010 was $344,268.


Borrowers can refinance their mortgage and increase the amount of the loan secured against their home. The measure announced today will reduce the limit on refinancing from 90 per cent to 85 per cent of the value of the home. Refinancing lowers the borrower’s equity in their home. Reducing the maximum loan-to-value ratio on refinancing will encourage Canadians to keep equity in their home and save through home ownership.

As an illustration, for a home valued at $300,000, refinancing at 90 per cent would allow the homeowner to access up to $270,000, whereas refinancing at 85 per cent would allow the homeowner to access up to $255,000. The lower refinancing limit means homeowners will keep an additional $15,000 in the equity of their home.


Under the current rules, a line of credit secured by the borrower’s home, such as a home equity line of credit, is limited to a maximum of 80 per cent of the value of the home. There has been a substantial increase in the credit available to Canadians through this type of secured line of credit over the past several years, and it is an important factor in the rise in overall household debt. These loans are generally non-amortizing, which means that borrowers are not required to make regular payments on the principal amount of the loan. Moreover, these loans are almost exclusively variable rate products, which expose borrowers to the impact of rising interest rates. While regulated lenders are not required to obtain insurance on lines of credit secured by homes at the time of origination, they may choose to obtain insurance after origination through what is known as “portfolio insurance,” where secured lines of credit are pooled into a portfolio and then insured by a mortgage insurer. At the time of insurance, the benefit of the portfolio insurance is to the lender by facilitating funding, rather than to the individual borrower. Other options exist for lenders to fund their secured lines of credit.

Many lenders now offer multiple loans or a multi-segment loan secured against a borrower’s home. If a loan or a segment of a multi-segment loan is in the form of a revolving line of credit that does not amortize over time, it will no longer be eligible for government-backed insurance. However, with established scheduled principal and interest payments, a loan will continue to be eligible for government-backed insurance, provided it meets the underwriting standards set by the mortgage insurer.

Withdrawing government insurance backing on these non-amortizing products is consistent with the Government’s objective of supporting the long-term stability of Canada’s housing market.


The adjustments to the maximum amortization period and the maximum refinancing amount will come into force on March 18, 2011. The withdrawal of government insurance backing on lines of credit secured by homes will come into force on April 18, 2011. Exceptions would be allowed after the new measures come into force where they are needed to satisfy a binding purchase and sale, financing or refinancing agreement entered into before the corresponding coming into force dates.


Mortgage insurance (which is sometimes called mortgage default insurance) is a credit risk management tool that protects lenders from losses on mortgage loans. If a borrower defaults on a mortgage, and the proceeds from the foreclosure of the property are insufficient to cover the resulting loss, the lender submits a claim to the mortgage insurer to recover its losses.

The law requires federally regulated lenders to obtain mortgage insurance on loans in which the homebuyer has made a down payment of less than 20 per cent of the purchase price (also called high loan-to-value loans). The homebuyer pays the premiums for this insurance, which protects the lender if the homebuyer defaults.

The Government backs insured mortgages in Canada. It is responsible for the obligations of Canada Mortgage and Housing Corporation (CMHC) as it is an agent Crown corporation. In order for private mortgage insurers to compete with CMHC, the Government backs private mortgage insurers’ obligations to lenders, subject to a deductible equal to 10 per cent of the original principal amount of the loan.

In October 2008, the Government adjusted its minimum standards for the mortgage insurance guarantee framework, including:

• Fixing the maximum amortization period for new government-backed insured mortgages to 35 years.

• Requiring a minimum down payment of five per cent for new government-backed insured mortgages.

• Establishing a consistent minimum credit score requirement.

• Requiring the lender to make a reasonable effort to verify that the borrower can afford the loan payment.

• Introducing new loan documentation standards to ensure that there is evidence of reasonableness of property value and the borrower’s sources and level of income.

In April 2010, the Government took additional measured steps to support the long-term stability of Canada’s housing market and continue to encourage home ownership for Canadians. Adjustments to the mortgage insurance guarantee framework included:

• Requiring that 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.

• Lowering the maximum amount Canadians can withdraw in refinancing their mortgages to 90 per cent from 95 per cent of the value of their homes.

• Requiring a minimum down payment of 20 per cent on non-owner-occupied properties purchased for speculation.


The Honourable Jim Flaherty, Minister of Finance, and the Honourable Christian Paradis, Minister of Natural Resources, today announced prudent adjustments to the rules for government-backed insured mortgages to support the long-term stability of Canada’s housing market and support hard-working Canadian families saving through home ownership.

“Canada’s well-regulated housing sector has been an important strength that allowed us to avoid the mistakes of other countries and helped protect us from the worst of the recent global recession,” said Minister Flaherty. “The prudent measures announced today build on that advantage by encouraging hard-working Canadian families to save by investing in their homes and future.”

“The economy continues to be our Government’s top priority,” continued Minister Paradis. “Our Government will continue to take the necessary actions to ensure stability and economic certainty in Canada’s housing market.”

The new measures:

• Reduce the maximum amortization period to 30 years from 35 years for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent. This will significantly reduce the total interest payments Canadian families make on their mortgages, allow Canadian families to build up equity in their homes more quickly, and help Canadians pay off their mortgages before they retire.

• Lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes. This will promote saving through home ownership and limit the repackaging of consumer debt into mortgages guaranteed by taxpayers.

• Withdraw government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs. This will ensure that risks associated with consumer debt products used to borrow funds unrelated to house purchases are managed by the financial institutions and not borne by taxpayers.

Our Government’s ongoing monitoring and sound underlying supervisory regime, along with the traditionally cautious approach taken by Canadian financial institutions to mortgage lending, have allowed Canada to maintain strong and secure housing and mortgage markets.

The adjustments to the mortgage insurance guarantee framework will come into force on March 18, 2011. The withdrawal of government insurance backing on lines of credit secured by homes will come into force on April 18, 2011.

CREA 2011

Bank of Canada maintains key rate at 1%

The Bank of Canada kept its target for the overnight rate at one per cent for the third consecutive meeting on January 18th, 2011. Correspondingly, the Bank rate remained at 1.25 per cent and the deposit rate remains at 0.75 per cent.

The Bank said that the global economic recovery was proceeding at a somewhat faster than expected pace, but noted that risks remain elevated. The main source of uncertainty to the global outlook remains sovereign debt concerns in several European countries.

The driver of the improvement in the global outlook was the pick-up in private domestic demand in the United States, which the Bank said would be further supported by recently announced monetary and fiscal stimulus, specifically, the Federal Reserve’s $600-billion asset-purchase plan and the extension of the Bush-era tax cuts.

The Bank noted that stronger global growth had contributed to a significant increase in commodity prices since the October Monetary Policy Report (MPR), but pointed to headwinds going forward, as emerging markets like China have already begun to take steps to keep their economies from overheating. More restrictive policy measures in emerging markets could cool demand for commodities, and put downward pressure on prices.

In Canada, the Bank said the recovery was proceeding broadly as anticipated. The Bank gave a small boost to the outlook for the Canadian economy, projecting growth of 2.4 per cent this year and 2.8 per cent in 2012. This is up from the forecast in the October MPR of 2.3 per cent this year and 2.6 per cent next year.

Despite the marginal increase in the outlook, it will nevertheless be a period of more modest growth, characterized by a rebalancing of demand away from government, consistent with announced fiscal plans, and households, whose balance sheets are increasingly stretched.

Picking up the slack will be continued strong growth in business investment and stronger net exports. While net exports are expected to improve with the uptick in U.S. activity and global demand for commodities, the Bank repeated its belief that headwinds would continue in the form of Canada’s poor relative productivity performance, and the persistent strength in the Canadian dollar.

The Bank did not alter its view that inflation would return to its 2 per cent target by the end of 2012, as the slight improvement in the outlook for growth was offset by soft growth in the second half of 2010.

Financial markets have been pricing in the next rate hike in March, but this is increasingly unlikely given the absence of any sort of hawkish tone in today’s announcement. Economic analysts remain largely of the view that the Bank will stand pat until July.

While the overnight rate remains very accommodative, the Bank nevertheless reiterated its statement that “any further reduction in monetary policy stimulus would need to be carefully considered.” While no mention was made of the recently announced changes to mortgage rules, these are generally viewed as giving the Bank some breathing room in the near-term. The strong Canadian dollar continues to be cited as a main risk to the expected improvement in the export sector. As such, the Bank does not want to get too far out in front of the U.S. Fed.

Mortgage lenders have also kept their rates on hold. As of January 18th, 2011, the advertised five year lending rate stood at 5.19 per cent. This is unchanged from December 7th, 2010, when the Bank made its previous policy interest rate announcement.

The Bank’s next Monetary Policy Report will be published on January 19th, 2011. The Bank will make its next scheduled rate announcement on March 1st, 2011.

(CREA 18/01/2011)

Resale housing market solid in December

OTTAWA – January 14th, 2011 – National resale housing activity in December 2010 was slightly above average for the month of December, according to statistics released today by The Canadian Real Estate Association (CREA).

Actual (not seasonally adjusted) national sales activity via the Multiple Listing Service® (MLS®) Systems of Canadian real estate Boards was down 14.4 per cent on a year-over-year basis in December 2010, which reflects record level sales for the month of December in 2009. Activity in December 2010 ran slightly ahead of the ten year average for the month (Exhibit 1).

The national trend for monthly sales remained stable in December, with seasonally adjusted sales activity having edged down by less than a percentage point from the previous month. Led by Calgary, Winnipeg, and Hamilton-Burlington, seasonally adjusted sales activity was up month-to-month in half of local markets. Toronto, Vancouver, and Montreal were among the markets that posted a small month-over-month decline in December.

“Overall sales activity has improved in recent months, but the upturn has been uneven among local markets,” said Georges Pahud, CREA President. “Housing market trends often differ due to a number of local factors, so buyers and sellers should consult their local REALTOR® to understand how trends are shaping up in their market.”

National home sales activity improved steadily over the second half of 2010, with seasonally adjusted sales up 18.3 per cent in December compared to the recent low reached in July. As a result, seasonally adjusted activity in the fourth quarter of 2010 rose 12.1 per cent from third quarter levels, and was up less than a percentage point compared to second quarter activity.

“The hand off to 2011 for sales activity in the fourth quarter suggests that the continuation of low interest rates will further support the housing market,” said Gregory Klump, CREA’s Chief Economist. “Sales may be starting to plateau in some of Canada’s most active and expensive housing markets. Combined with a pickup in new listings and further interest rate increases, the stage is being set for smaller price gains and a further deceleration in the growth of mortgage debt.”

Some 447,010 homes traded hands over Canadian MLS® Systems in 2010, down 3.9 per cent from 2009. Annual sales activity was higher than CREA had forecast previously due to stronger than projected sales activity in the fourth quarter.

The number of new residential listings on Canadian MLS® Systems held steady in December, rising by less than one percentage point on a seasonally adjusted basis. New listings remain 14.2 per cent below the recent peak reached in April 2010.

The housing market remained in balanced territory on a national basis in December, with sales as a percentage of new listings amounting to 55.2 per cent. Just over half of local markets in Canada were in balanced territory in December.

Three-quarters of the remaining local markets are sellers’ markets. “With activity having returned to healthy levels and a firm floor under prices, many sellers who shied away from the market heading into the summer are expected to list their properties heading into the spring,” said Klump. “Sales in the months ahead are not expected to continue trending upward as steeply as they have in recent months, so an increase in new listings may return many sellers markets to balanced territory.”

The number of months of inventory represents the number of months it would take to sell current inventories at the current rate of sales activity, and can be used to gauge the balance between housing supply and demand. The seasonally adjusted number of months of inventory stood at 5.8 months at the end of December on a national basis. This was unchanged from November, and remains 1.4 months below where it was in July. The number of months of inventory in December rose compared to November levels in British Columbia, Saskatchewan, Quebec, New Brunswick and Nova Scotia, and was down from the previous month in Alberta, Manitoba, Ontario and Prince Edward Island.

The national average price for homes sold in December 2010 was $344,551, up two per cent from the same month last year, and stable compared to average price in October and November. About 60 per cent of local markets recorded year-over-year gains in December. Average price was down on a year-over-year basis in 30 per cent of local markets, and remained stable in the remainder.

The annual average price for homes sold via Canadian MLS® Systems rose 5.8 per cent to $339,030. Much of the increase reflects compositional factors within and across housing markets that caused average price to be skewed downward in 2009.

CREA 2011

How to Pay Off Your Mortgage Faster and Save Thousands of Dollars

There's a major sense of accomplishment and peace of mind of owning your home outright. Paying off your mortgage sooner can make sound financial sense by saving you thousands of dollars in interest costs. Learning how to save on your mortgage can slice years off your loan. Finding out if you can save on your mortgage payments won't cost you anything, and you will discover whether you have the best loan available for your individual circumstances.

1. Shop around for the best mortgage possible with your credit score.

When a mortgage company has a small overhead cost to stay in business it typically means that they will not charge you unreasonable ongoing service fees. Make sure you know the fees charged by your mortgage company before you sign on a loan.

2. Select weekly or bi-weekly mortgage payments.

A bi-weekly mortgage payment means you make 26 half-monthly payments instead of 12 monthly payments. But keep in mind that unless your initial mortgage is set up as bi-weekly, some lenders charge an upfront fee of $300-$400 to make bi-weekly payments, and even though you're making a payment every two weeks, the lender only applies it once a month.

If you make bi-weekly payments of $415 instead of monthly payments of $830, you could save almost $27,000 in interest over the entire amortization period of your mortgage, and you could own your home about 4-1/2 years sooner.

3. Prepay a little extra every month, or any time during the term of your mortgage.

Increasing your payment by even a few dollars each month will pay down your principal amount faster. It is a good idea to pay 10-15% more each month. This amount shouldn’t put too much extra burden on you, and it will help to pay off your mortgage much faster. For example, if you increased your mortgage payments by just $170 from $830 to $1,000, you could save almost $48,000 in interest over the entire amortization period of your mortgage, and you could own your home about 8 years sooner.

4. Make an annual lump sum payment.

Use your tax refund, work bonus or any extra money you can save and apply it directly to your principal amount. Check your mortgage documents to find out how often you can prepay and in what amount. Many loans don't prohibit you from doing this, however the lender may have parameters on how many extra payments you can make. Ask this question when shopping for a mortgage loan.

5. Pay as much as you can at renewal time.

Most mortgages become open at renewal. This means you can pay as much as you want on your mortgage. If you chose a 5-year, fixed-rate term, and made a $10,000 lump-sum payment every time your mortgage came up for renewal, you would save about $37,481 in interest over the entire amortization period of your mortgage.

6. Red flag your extra payments.

Always check your mortgage statement to make sure that any extra payments you made are being counted against the principal and that your bank has accurately documented your payments. Make the extra principal payments on a separate cheque and make a note on the memo line stating that the payment should be applied to principal reduction only. At tax time, tally up those payments and make sure they've been applied correctly.

7. Stay informed.

Once you have a mortgage, aside from making the payments, it's easy to forget about it altogether. By keeping up-to-date on interest rates and new products could save you money. You may want to shop for another product that better suits your needs. For example, to qualify for a mortgage, you may have started out with a lower-rate adjustable rate mortgage, but you want to switch to a more long-term affordable fixed-rate mortgage later.

When Should You Hold Off on Paying Your Mortgage Faster?

While paying down a mortgage quickly may be a wise decision for many homeowners, it's not for everyone. For example, you may want to switch to investing in mutual funds when yields return 10-12% annually. For most people though, this is not a mathematical issue but one of security, as they just want that mortgage paid off. For people who are very debt-averse, the peace of mind of paying off the house more quickly is worth the price.

Secondly, if you are planning on moving soon, you may want to hold off investing money into your existing home as you may need the money for a down payment, closing costs or buying new furniture for your new home.

As you can see, with a little research, you could save on your mortgage. The truth is: the banks won’t tell you how to save money on your mortgage as they want to make the interest on the money that they have loaned to you. If they were to help you save money, they would lose money and their profits would stagnate. Make sure that if you implement changes to save on your mortgage it is the right decision for you.

10 Budget-Friendly Improvement Tips to Increase Your Home’s Market Value

Renovating your home will increase its value and make it a nicer place for you to live. But many people don't have the money to spend on expensive housing upgrades. Here is a few budget-friendly projects to add beauty, value and selling appeal to your home.

1.Give your kitchen a facelift

The kitchen is the heart of any home, so spend a few hundred dollars to spice it up. You can replace the kitchen faucet set, add new cabinet door handles, and update old lighting fixtures. If you have a dark or small kitchen, make it look larger and brighter by using a lighter finish on the cabinets.

If the kitchen countertop is outdated, consider using a Laminate countertop. They are inexpensive and come in all types of colours and patterns, some of which resemble much more expensive solid surface materials, such as stone or tile.

2. Liven up the bathroom

Buy "expensive-looking" hardware for taps and showers and get a sophisticated new look without cleaning out your wallet. Like in the kitchen, soft lighting and warm colours here can go a long way in increasing home value. Add vases and plants as design elements and make sure vanity mirrors are at an accessible height for every member of the family.

If your bathroom requires any plumbing or electrical fixing, get a professional to do it.

3. Add a fresh coat of paint

New paint makes everything look clean and bright, and you can do it yourself relatively inexpensively on interior walls.

Paint with a neutral colour such as beige. It will make the house seem larger, and it will be inoffensive to buyers. And don't forget the ceiling. Paint the trim a contrasting colour.

4. Add wood trim and cornicing

These are cheap and easy do it yourself, but can add tons of "WOW" factor to the look of your home. Simple ceiling trim and armchair railing are the easiest and most typical upgrades found in newer homes.

To make an even bolder statement, paint the walls a neutral, flat colour and paint the trim a high gloss white.

5. Consider your flooring options

If your home has hardwood floors covered with carpeting, consider restoring the original hardwood floors, particularly if the carpeting is old and worn.

If not, you can shampoo or steam clean your carpets, or use a dry cleaning system, which requires no water or steamer, and dries instantly while killing virtually all mold and bacteria. Apply according to the manufacturer’s instructions, and then vacuum. If all else fails, get a professional to do the carpets for you. You'd be surprised how much better your carpet will look after a good cleaning.

6. Enhance the lighting

Consider replacing the dining room lights with an eye-catching chandelier. Create a comfortable ambience with recessed lighting that is controlled with dimmer switches to provide the appropriate amount of light for different activities.

Use indirect lighting focused away from television and computer screens to reduce eyestrain.

7. Install modern light switches and outlets

Some of the new style switches can be easily installed using the wires already running to the old switches. Turn off the power to the room or entire house before doing any work. The new outlets look nice, and give the impression that the electrical wiring in the house is newer than it really is.

8. Create more storage

Extra storage is always a plus. You don't need to renovate to add more storage space, you can create more space for free and without remodelling your home! Revamping your existing closets can do the job.

Many old houses lack closet space. If you have cramped storage areas, add do-it-yourself wire and laminate closet systems to bedrooms.

Make your closets serve a variety of purposes. Try adding a shelving unit to a clothes closet where you can store pantry goods and other items.

9. Reframe your front entry

The front door is the statement that you make in your house, and a front door in need of work gives a wrong first impression.

Refinish the front door with a new coat of paint. Replace that worn, flimsy little knob on your main entry door with a more substantial-looking handle-and-lock set. A nice, big piece of hardware signals newcomers that this is a solid home.

While you are preparing the door for the finish coat, be sure to check the weather stripping for damage. With soaring energy costs, adding some new weather stripping can quickly pay you back in utility savings.

Placing planters on either side of the front door will also enhance the image of your entry.

10. Landscape the front yard

A nicely mowed lawn, a few well-placed shrubs and a swept walkway make a great first impression. Get your green thumb on, install some new sod, plant a few evergreen shrubs, and give your front yard a good cleanup. This will draw attention to your home and change people's perception of your home.

Today, there are dozens of choices of plant materials that can add colour and style to your front yard. Stop by your local landscaping centre — they'll have dozens of ideas for you.

Ready to renovate but on a tight budget? Spend money on what can be seen versus what can't be seen. Think new door handles, not new doors, and spiffed-up appliance fronts, not new appliances. Fix up the exterior first, then the interior.

If you put some of these tips in action, you will boost your home's value and live happily ever after in your dream home. Enjoy!

Market conditions were anything but uniform in 2010

Market conditions were anything but uniform in 2010. We went from super-charged sales activity during the first four months of the year, to a marked drop-off in transactions in the summer, and then in the fall saw sales climb back to levels that are sustainable over the longer term. The year will also go down in the record books as the year that realtors took a good look at the value added services clients are paying for.

Ontario – Third Best Year for Existing Home Sales

Toronto, January 6, 2011 - Greater Toronto REALTORS® reported 4,395 existing home sales for the month of December, bringing the 2010 total to 86,170 – down by 1.0% compared to 2009.

The average home selling price in 2010 was $431,463 – up 9.0% in comparison to the 2009 average selling price of $395,460. In December, the average annual rate of price growth was 5.0%.

"At the outset of 2010, we were experiencing annual rates of price growth at or near 20%. This was the result of extremely tight market conditions coupled with the fact that we were comparing prices to the trough of the recession at the beginning of 2009," said Jason Mercer, TREB's Senior Manager of Market Analysis.

"Balanced market conditions in the second half of 2010 resulted in more moderate home price appreciation," continued Mercer. "Expect the average selling price to grow at or below 5% in 2011. With this type of growth, mortgage carrying costs for the average priced home in the GTA will remain affordable for a household earning an average income."

In December, the median price was $355,000, from the $349,000 recorded during December of 2009.

Ottawa, January 6, 2011 - Members of the Ottawa Real Estate Board sold 620 residential properties in December through the Board’s Multiple Listing Service® system compared with 687 in December 2009, a decrease of 9.8%. The total number of residential properties sold through the Board’s Multiple Listing Service® system in 2010 was 14,199, down 3.6% from 2009. The average price for 2010 was $327,225, an increase of 7.7% over 2009.

The average sale price of residential properties, including condominiums, sold in December in the Ottawa area was $324,556, an increase of 5.6% over December 2009. The average sale price for a condominium-class property was $254,776, an increase of 3.5% over December 2009. The average sale price of a residential-class property was $355,860, an increase of 7.8% over December 2009.

Alberta - Single Family Homes and Condo Prices Slightly Lower in December

Edmonton, January 5, 2011 - The average price for a single family detached home in December was $355,270, down about $10,000 as compared to the price in November. The average condo price dropped less than $6,000 to $223,454. The marginal price reduction (down 0.45%) continued a SFD slide that started in June when average prices were over $390,000. Condo prices peaked at $252,700 in April and have continued a relentless march downward since then.

As compared to December 2009, single family home prices were down 2.5% and condo prices were off by 7.2%. The average price of all residential property sales in December was down 2.0% as compared to a year ago.

“Homebuyers are watching housing prices slide and may attempt to catch the market at the bottom by delaying their purchase but the low point is only evident about three months after it is reached,” said Larry Westergard, President of the REALTORS® Association of Edmonton. “Home sales are still happening each day and by waiting, the wary buyer may miss the ideal home.”

Residential sales activity in December was off 34% (784 sales) as compared to November but fewer homes (1,110) were listed and that reduced the available inventory by 18% to 5,721 residential properties on the Edmonton MLS® System. The average days on market rose from 59 to 66 days.

British Columbia – Stability Reigns in Latter Half of 2010

Surrey, January 5, 2011 - Stable property sales and a steady erosion of inventory for the last seven months of 2010 have brought equilibrium to Fraser Valley’s real estate market.

“Our market was a bit of a rollercoaster in 2010 with buyers appearing earlier than expected in the year, tapering in the summer and returning in the fall,” says Deanna Horn, Fraser Valley Real Estate Board president.

“As consumers regained their confidence in the overall economy, we saw a normalization of the market with sales at or slightly below average, inventory dropping and modest changes in home prices.”

A total of 895 sales were processed on the Board’s Multiple Listing Service® (MLS®) in December, a decrease of 17% compared to November and a decrease of 29% compared to 1,260 sales in December of last year. The Board’s 10-year average for December sales in the last decade is 1,020.

In terms of listings, the Board finished 2010 with 8,139 active listings, 10% fewer than in November and an increase of 25% compared to the 6,534 properties available in December 2009. December’s inventory represents a 28% drop from 2010’s peak of 11,411 active listings reached in May.

Overall, the benchmark price for Fraser Valley detached homes in December was $506,145, an increase of 0.3% compared to November and 1.7% higher compared to $497,732 in December 2009.

Copyright CREA reprinted with permission

2011 Canadian Real Estate Market Forecast and prediction

According to many real estate experts, the Canadian housing market is expected to stabilize in 2011 returning to more normal long-term growth patterns after a decade-long bull run.

The housing sector has avoided two extreme bubble-and-crash scenarios over the past three years when resale prices dropped sharply in 2008, then quickly rebounded as low mortgage rates and lower prices supported the turnaround.

Record low interest rates fuelled a home buying spree in 2009 that helped pull the Canadian economy out of recession and pushed home sales back to record levels. The market cooled rapidly over the summer of 2010 as the Bank of Canada began hiking interest rates, though recent data have indicated the market may be stabilizing.

In 2011, interest rates are expected to hike further as the economy improves. While still at historical lows, any hike in interest rates have big effects on mortgage rates. If interest rates are raised too quickly, this will further dampen real estate prices. On the other hand, if the government decides to lower the rates once again, as unlikely as this may seem, then home sales might surge slightly.

Government and institutional lending policies will also affect real estate prices. As banks and governmental policies become increasingly strict, more people will be turned down for mortgages. At the very least these potential home buyers will need to choose from more modest homes if their mortgage is declined.

In 2011, Canada will experience an overall decline of 0.9% in home prices. Not all provinces will feel the effects of fluctuating real estate prices equally. Some provinces will have a more profound move in housing prices than others.

While real estate prices might remain fairly stable, buying activity is expected to slow down significantly. The Canadian Real Estate Association expects a 7.3% decline in home sales. This means that homeowners in a panic to sell may have to drop their prices substantially in order to liquidate. Others may need to wait longer than in previous years to sell.

The drop-off in home sales comes from an anticipated slowing of economic growth along with a reduction in consumer spending. Less free floating capital means fewer large purchases. Ample inventory levels, steady demand, and moderate growth, both in terms of sales and prices, will characterize the market in 2011.

Is it a Good Time to Buy a Home in Canada?

Timing the market perfectly is a difficult task. Often it is easier to look at one’s income and decide if the stability of personal finances are adequate to acquire a house for the long term. If not, there is no shame in renting or leasing until circumstances permit such a purchase. But trying to perfectly time a house purchase with the market is like trying to buy a stock at its lowest point before a rebound – very difficult indeed.

Copyright CREA reprinted with permission

Mortgage Renewals

While most Canadians spend a lot of time and expend a lot of effort shopping for an initial mortgage, the same is generally not the case when looking at mortgage term renewals. Omitting proper consideration at the time of renewal costs Canadians thousands of extra dollars every year. Homeowners should never accept the first rate offer from their existing lender. Without any negotiation, simply signing up for the market rate on a renewal is unnecessarily costing the homeowner a lot of money on their mortgage. It may be worth your while to enlist the free services of a mortgage professional to get the lenders competing for your mortgage business at renewal time to ensure you receive the best mortgage options and rate catered to your specific needs.

Choosing your mortgage amortization

Selecting the length of your mortgage amortization period – the number of years it will take you to become mortgage free – is an important decision that will affect how much interest you pay throughout the life of your mortgage.

While the lending industry’s benchmark amortization period is 25 years, and this is the standard that is used by lenders when discussing mortgage offers, and usually the basis for mortgage calculators and payment tables, shorter or longer timeframes are available – to a maximum of 35 years.

The main reason to opt for a shorter amortization period is that you will become mortgage-free sooner. And since you’re agreeing to pay off your mortgage in a shorter period of time, the interest you pay over the life of the mortgage is, therefore, greatly reduced.

A shorter amortization also affords you the luxury of building up equity in your home sooner. Equity is the difference between any outstanding mortgage on your home and its market value.

While it pays to opt for a shorter amortization period, other considerations must be made before selecting your amortization. Because you’re reducing the actual number of mortgage payments you make to pay off your mortgage, your regular payments will be higher. So if your income is irregular because you’re paid commission or if you’re buying a home for the first time and will be carrying a large mortgage, a shorter amortization period that increases your regular payment amount and ties up your cash flow may not be the best option for you.

The key is to select the amortization that best suits your unique requirements and ensures you have adequate cash flow. If you can comfortably afford the higher payments, are looking to save money on your mortgage or maybe you just don’t like the idea of carrying debt over a long period of time, opting for a shorter amortization period may be ideal for you.

Advantages of longer amortization

Choosing a longer amortization period also has its advantages. For instance, it can get you into your dream home sooner than if you choose a shorter period. When you apply for a mortgage, lenders calculate the maximum regular payment you can afford. They then use this figure to determine the maximum mortgage amount they are willing to lend to you.

While a shorter amortization period results in higher regular payments, a longer amortization period reduces the amount of your regular principal and interest payment by spreading your payments out over a longer timeframe. As a result, you could qualify for a higher mortgage amount than you originally anticipated. Or you could qualify for your mortgage sooner than you had planned. Either way, you end up in your dream home sooner than you thought possible.

Again, this option is not for everyone. While a longer amortization period will appeal to many people because the regular mortgage payments can be comparable or even lower than paying rent, it does mean that you will pay more interest over the life of your mortgage.

Still, regardless of which amortization period you select when you originally apply for your mortgage, you do not have to stick with that period throughout the life of your mortgage. You can always choose to shorten your amortization and save on interest costs by making extra payments when you can or an annual lump-sum principal pre-payment. If making pre-payments (in the form of extra, larger or lump-sum payments) is an option you’d like to have, you should ensure the mortgage you end up with will not penalize you for making these types of payments.

It also makes good financial sense for you to re-evaluate your amortization strategy every time your mortgage comes up for renewal (at the end of each term of your mortgage, whether this is three, five, 10 years, etcetera). That way, as you advance in your career and earn a larger salary and/or commission or bonus, you can choose an accelerated payment option (making larger or more frequent payments) or simply increase the frequency of your regular payments (ie, paying your mortgage every week or two weeks as opposed to once per month). Both of these features will take years off your amortization period and save you a considerable amount of money on interest throughout the life of your mortgage.

5 steps to selling your home quickly

Spring is always a popular time of year for people to put their homes on the market. Perhaps it’s because they’ve had a long, cold winter to spend a lot of time indoors, and they’re anxious for new surroundings. Or maybe it’s because Spring offers a fresh start and represents opportunity for the months to come.

Regardless of why you decide to sell your home, there’s no doubt that you would like it to sell quickly and at the right price.

Following are five tips to help ensure smooth sailing when it comes time to sell your home.

1. Work with a pro. To ensure a quick sale, you have to be sure your buyers can afford to pay what they offer. Experienced real estate agents take precautions to make sure buyers are not overreaching their grasp. And based on our negotiating expertise, we can work with buyers and negotiate contracts that do not, as a rule, tend to fall through. We also bear all the costs of advertising your home. This can seem minor at first, but newspaper ads and signage can quickly add up. And, best of all, we work for you. It’s in our best interest to ensure your home sells fast and you’re pleased with the price you receive for your home.

2. Price accordingly. As your local real estate experts, we’re in the know when it comes to what’s selling in your marketplace. We have access to a database of statistics that enable us to help you set a price that will make your house attractive to buyers without undercutting your bottom line. After all, if your home stays on the market for an extended period of time, the process can become extremely hard on you and your family – especially if you have your eye on another home.

3. Set the stage. Aside from pricing your home accurately from the onset, the way your home is seen by potential buyers is the next most important aspect in ensuring a quick sale. Getting your house ready to sell can help you connect with buyers on an emotional level that enables them to picture themselves and their families living in your home. With the popularity of home decorating and renovation programs on TV, people are more accustomed to looking at houses with an eye for design. But this doesn’t have to cost you a fortune. The most important first step is getting rid of clutter and personal items so potential buyers can picture themselves easily moving in their belongings.

4. Go where the buyers are. If you want a quick sale at the best price, it only makes sense to compete on the biggest market – and there’s no question that the biggest market in Canada is the Multiple Listing Service (MLS). Going it alone means relying on yourself and, while that may sound appealing to some, the numbers argue against it.

5. Create word of mouth. Finally, if you have a home that one of your friends or acquaintances has often admired, put the word out to your friends and ask them to spread the word. Doing so could help you avoid the stress of staging and hosting open houses, and get you the quick sale you’re seeking.

As always, if you have any questions or concerns about selling your home quickly and for the right price, answers to your questions are just a phone call or e-mail away!


Starting April 13th, 2011 the Canadian mortgage rules are changing yet again. The maximum LTV (loan to value) on refinances is now 85% and the maximum amortization for all mortgages will be only 30 years (previously 35). What does this mean? The majority of first home buyers will not qualify for the home they want. If you are looking to purchase or refinance, I would HIGHLY suggest looking into this very soon.  Get your applications in before March 18th, 2011 and you will not be affected.