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Friday, 29 July 2016

First time home buyers? Tips to protect from Contingencies and Disclosures

Buying a home is a dream for many. Getting the right house with the hard earned salary requires proper planning and guidance. One has to be really careful in making sure that they get the house for the money’s worth and has to finish many formalities in order to finalise the deal on the house. There are many forms of contingencies and disclosures that have to be in order to make sure that you do not spend money than it should be spent.

All the first time home buyers need to be extra cautious about the deals and the transactions. They are generally advised to get the help of the professionals who have some experience in the field. Since this deals with a lot of money, it is always better to get the help of some experienced person who would be able to guide you in finalising the deal after making sure that you do not face any threat from the disclosures or the contingencies that follows.

What are the contingencies and disclosures?

Contingencies are the set of deals that are struck between a buyer and a seller. This is called as the “If-Then” deals. For instances, the buyer would have a deal with the seller of the house that, “If” I am able to sell my current property, “then” I would buy the property from you. These are included in the purchase contract and some can be controlled and the others cannot be. Some common contingencies that have to be in order are:

  • Finances: This deals with the scenario where the buyer has to take steps to obtain finances for purchasing the property. If he/she fails to do so, then the buyer cannot be penalised in any way for being unsuccessful in qualifying for the home loan.
  • Home inspection: The seller might fix a price in the deal for the house, but the buyer must get the home inspected by a qualified home inspector to make sure that the deal is set right. All the repairs and remodelling the house needs would be verified here. 
  • Selling the current house: This contingency state that, the deal can be finalised based on the sale of the current house that the buyer has possession over. If the deal is unsuccessful, the seller can back out from the deal.
The Disclosures deal with the defects and the environmental hazards that the house might potentially have. The buyer must be thoroughly informed about the same before negotiating the deal.
Some common disclosures are:

  • Standard disclosures: In this, the seller provides a list of the items that might be missing from the house like the mechanical parts and other such major issues. The buyer must verify the whole list completely. 
  • Hazard zones: Few properties might have been built on zones that are prone to earthquakes, fires, floods and other natural calamities. The buyer must get the area checked for such cases.
  • Paint used: Seller must give the full detail about the composition of the paint that has been used. The buyer must be given a time of 10 days to conduct tests to check the lead composition in the paint.

These contingencies and disclosures are to be followed closely since a small mistake can lead to the loss of huge amounts of money.

The experienced mortgage brokers of MortgagePRO Ltd. have access both institutional and private lender funds for the leading edge in home financing and refinancing.
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Friday, 15 July 2016

Government wants lenders to tighten underwriting on residential mortgages

Last week’s open letter from the Office of the Superintendent of Financial Institutions (OSFI) to Canada’s big banks is a better economic bellwether than the Bank of Canada’s announcement to hold interest rates steady, according to MortgagePRO Ltd.
Green said the federal government can’t use its go-to of raising interest rates to stem a hot housing market because the overheating is related to two isolated real estate markets -- Vancouver and Toronto -- and the rest of the country needs affordable lending rates due to an “unsettled” economy.
The Bank of Canada is relying on fiscal stimulus from federal infrastructure spending and the Canada Child benefit to boost growth in the third quarter, according to Scotiabank economists in in a note to clients .
The OSFI warns if Canada’s big banks don’t tighten up mortgage lending requirements for locals and foreigners, an already shaky economy could become even shakier.
“The current macroeconomic environment in Canada is characterized by elevated financial risks and associated vulnerabilities for Canadian financial institutions. Persistently low interest rates, record levels of household indebtedness and rapid increases in house prices in certain areas of Canada (such as Greater Vancouver and Toronto) could generate significant loan losses if economic conditions deteriorate.”
Green added the OSFI, in place to supervise and regulate federally registered banks and insurers, trust and loan companies, and private pension plans, has keyed in on foreign lending as a big problem. Specific areas warranting increased attention include income verification, non-conforming loans, debt service ratios, appraisals, loan-to-value ratio calculations and institutional risk appetite.
Green said a lot of this has to do with different rules that apply to foreigners when it comes to getting a mortgage either in Canada, or through an international bank.
“They want better income verification including sources that are outside of Canada. So that means some of the programs for non-residents which are actually much easier to obtain mortgage financing, instead of someone who lives in Canada that has a job here.”
This is all quite interesting given the context, he added.
“A number of years ago the only reason the major banks created these non-resident or ‘new-to-Canada’ programs that are more lenient than regular programs is due to the government insisting that the banks have them.”
- with files from Albert Van Santvoort

Monday, 11 July 2016

Mortgage insurance, is it a must or smart move?

By Hometrust
Mortgage default insurance is one of those things that many home buyers don’t often think about when purchasing their new home. But if you don’t have at least 20% of the purchase price available as a down payment, you will need to purchase this form of insurance before you can arrange financing. In this Home Trust Mortgages Blog post, we’ll discuss what you need to know about mortgage default insurance.
Many home buyers, especially those purchasing their first home or those buying in one of the country’s more in-demand areas, often have less than 20% of the purchase price available as a down payment. In markets like Toronto and Vancouver where the average price of a new home is now well above $500,000, a 20% down payment easily exceeds $100,000. This is not an insignificant amount, and it is understandable why many fall short of this 20% down payment.
Conventional Mortgage Versus a High Ratio Mortgage
A down payment of 20% or more means you can arrange for a conventional mortgage. For the lender, this means the property has sufficient equity to protect the lender from a shortfall should the borrower default on the mortgage. A higher down payment also means the borrower has a greater personal investment in the property making them less likely to default.
For those with at least 5%, but less than 20% of the purchase price available for a down payment, it is still possible to arrange a mortgage, but this will be considered a mortgage. The higher loan-to-value (LTV) percentage of a high-ratio mortgage means there is less equity available to protect a lender from losses in the event of a default. To ensure lenders are able to provide mortgages to buyers with smaller down payments while still protecting the financial institution from the greater risk that comes with a high-ratio mortgage, separate mortgage default insurance is required.
While having to obtain mortgage default insurance does add to the cost of purchasing a new home, it also make it possible for those with limited savings – particularly first-time buyers – to get into the market sooner.
Mortgage Default Insurance Providers
Home Trust works with three approved mortgage default insurance providers. The Canada Mortgage and Housing Corporation is a crown corporation and is the largest provider of mortgage insurance in Canada. Home Trust also accepts insurance guarantees from Genworth Canada and Canada Guaranty.
It is the lender that actually arranges and pays for the mortgage insurance, but this cost is typically passed to the borrower and is incorporated directly into the mortgage payments. Insurance premiums are based on the amount borrowed and the down payment. To qualify for mortgage default insurance, the following conditions must be met:
·         Minimum 5% down payment
·         Single-family dwelling or two-unit building
·         Total monthly housing costs not to exceed 32% of gross monthly income

·         Total debt load not to exceed 40% of gross household income

MortgagePRO is one of the best choices getting a mortgage when you purchase or refinance, remortgage your home. We provide low, best possible rate mortgages with the best mortgage products available. Free advise is just the beginning as we believe the educated buyer has a better chance to save and makes a better deal, gets a better mortgage!
MortgagePRO Ltd. is an Alberta Corporation based in Calgary, licensed by the Real Estate Council of Alberta (RECA)and proud member of the Alberta Mortgage Brokers Association (AMBA), we offer unique mortgage solutions: across Canada truly a Canadian Mortgage Broker. We have broker partners and lenders across Canada to fund in jurisdictions MortgagePRO is not licensed.

Monday, 4 July 2016

Impact of Brexit on Canadian Mortgage Industries


The world is changing. The United Kingdom (commonly known as UK or Britain), just left the European Union. For those who don’t know, the European Union is a conglomeration of European countries bringing them under the same umbrella, with a common currency, and cutting down on many cross country migration laws. #Brexit has been trending on every social platform. The European Union includes most European countries, of which the Great Britain Republic (GBR) is no longer a part of.  The UKs parliament voted out of the European Union just recently and this caused a global stir.

The reason provided by the British was that the immigrants were too high due to this and this suppressed their native population. Some might think that this is comical for a country, who almost occupied the whole world with their conquering, but it has happened, and this article will give you an insight into what Brexit can do to Canada and its mortgage industries and the entire world as well. While most other countries voted to remain in the EU, the British exited, causing furore across the world.

What it Means, the Exit? 

The exit is bound to bring about many different things as UK was one of the major and most important countries in the EU. Here are few points that can show the effect that Brexit will have on this world.

  • This can cause a breakup of the entire UK, followed or preceded by the entire EU. 
  • Brexit will be followed by referendums and repudiations by different countries which might result in the entire break down of the union. 
  • Financial turn of events, with drop in value of both Euro and the Pound Sterling. 
  • The I, me, myself sort of ideology is on the rise, marking Brexit as the first of its kind. 

The Canadian Mortgage Rates

The Canadian Mortgage rates will also see a changeover with this exit.

  • Fixed Rate Mortgages:
    Fixed rate mortgages are the short term mortgages, which are predicted to not fluctuate much. If you happen to own a lot of British Pounds, then you are in for a period of volatile ownership, while others, not much. Even if there is precipitously large fall, lenders will not bring about any immediate cuts. Knee jerking reactions is not something that lenders want to do.
  • Variable Mortgage Rates:
    The Canadian and the US monetary policy links are very closely related and thus, investors should be careful about the direction of US Federal Reserve’s moves and calculate their risks accordingly as Canada’s market moves in a straight line with the US monetary policies.
    While the basics of the mortgage systems seems to be firmly placed on the ground, Brexit will not bring about any major changes in the short-term mortgages, but it can be predicted that in the longer run, Brexit will have major impacts, which can be seen only with time. Heightened financial risk is eminent and it should and will be a cause for concern at a later stage. 

The experienced mortgage brokers of MortgagePRO Ltd. are happy to help you find solutions for your clients’ mortgage needs. Call Us: 403-253-2022 or Email Us: