Do you need title insurance for a new-build home?

mortgage Leslie Morris 28 Feb

The housing supply shortage is one of the top issues in Canada’s real estate market. To address it, cities like Calgary are seeing a massive boom in new-build housing.

New construction offers many advantages, like more energy-efficient heating and cooling systems. Their titles can also feel less risky to transfer. After all, if the land was previously vacant, there’s no chance of unpermitted work from a previous owner causing losses for new buyers.

But did you know that new builds carry most of the same title and off-title risks as existing homes? Here’s why.

the home may be new, but the land isn’t

Even unimproved land belongs to someone. The land for the new construction may have changed hands several times before the developer bought it. Every transfer of the land can add defects to the title. Those defects can cause losses for the people who buy homes built on that land. On top of that, both the municipality and the developer might make a mistake or miscommunicate, which can end up causing a problem with the property.

Here are just some of the issues that can cause losses for owners, even on new constructions:

  • Zoning mistakes, which can happen on either the municipality or the developer side.
  • Setback agreements the developer didn’t know about, which results in homes built too close to the road.
  • Pre-existing liens, for example from property tax still owed by the previous owner.
  • Errors in the registration of the title.
  • Pending legal action against the property that the developer didn’t know about.
  • Builders’ liens, if the developer wasn’t able to fully pay a supplier or contractor.

subdivisions can add extra complications

When an owner buys a property in a subdivision, they’re getting the title to that specific property. But all the land in that subdivision would have been under one original title before it was parceled out. The problem is, if someone has a claim against that original title, every property in the subdivision could be subject to it.

If the land for the subdivision was assembled from existing properties, that can add complications to the title of the assembled land. Those issues can then impact the new properties parceled out of that assembled land.

The developer could also make mistakes setting the property lines in a subdivision. If that happens, or if there are issues with the Real Property Reports/surveys conducted for any of the properties, the owners of those properties could have to deal with the consequences down the road.

how can title insurance help alberta’s new housing starts?

Title insurance is a great solution for new construction because it can cover homebuyers for the risks associated with all properties, risks introduced by subdividing land, and even title fraud. A title insurance policy protects the insured for as long as they have an interest in the property. It also works as a better closing solution than Western Conveyancing Protocol alone, or gap-only insurance.

Builders help with some of the risks of new construction by issuing a Real Property Report to the owner. It’s a useful document, but it has a limited scope and doesn’t offer owners any recourse if an issue comes up. It also becomes obsolete if an owner puts up a new exterior structure, like a fence or a deck. A title insurance policy covers the outside elements of a property as well as the home itself, which means it still provides protection to future buyers if the current owner adds structures.

post construction endorsement

FCT offers more protection on new construction with our Post Construction Endorsement. It advances the policy date by one year for 14 covered risks, including encroachments, work orders and zoning bylaw violations.

That means the policy covers any later improvements to the property the developer had contracted for before the closing date. Owners can take possession of their new-build home knowing that FCT is here to help handle surprises down the road.

Enjoy more protection for new-build home purchases with a residential title insurance policy from FCT.

4 Key Things to Know about a Second Mortgage

financial Leslie Morris 8 Feb

A second mortgage is a mortgage that is taken out against a property that already has a home loan (mortgage) on it. Generally people take out second mortgages to satisfy short-term cash or liquidity requirements, have an investment opportunity or to pay off higher-interest debts (such as credit cards and student loans) that a second mortgage might offer.

If you are considering a second mortgage for any reason, here are a few key points to keep in mind:

Second Mortgages and Home Equity: Your second mortgage and what you can qualify for hinges on the equity that you have built up in your home. Second mortgages allow you to access between 80 and 95 percent of your home equity, depending on your qualifications.

For example, if you seeking 95% Loan-to-Value loan (“LTV”):

House Value = $850,000
95% LTV (maximum mortgage amount) $807,500
less: First Mortgage ($550,000)
Amount Available Through Second Mortgage $257,500

Second Mortgages and Interest Rates: When it comes to a second mortgage, these are typically higher risk loans for lenders. As a result, most second mortgages will have a higher interest rate than a typical home loan. There is also the option of working with alternative and private lenders depending on your situation and financial standing.

Second Mortgage Payments: One advantage when it comes to a second mortgage is that they have attractive payment factors. For instance, you can opt for interest-only payments, or you can select to pay the interest plus the principal loan amount. Work with your mortgage broker to discuss options and what would work best for your situation.

Second Mortgage Additional Fees: A second mortgage often comes with additional fees that you should be aware of before going into the transaction. These fees can vary widely but often are a percentage of the mortgage. Other fees to consider include appraisal fees, legal fees to set up the second mortgage and any lender or broker administration fees (particularly with alternative or private lenders).

Second mortgages are a great option for many homeowners and, in some cases, may be a better solution than a refinance or a Home Equity Loan (HELOC). If you are interested in learning more or want to find out if a second mortgage is right for you, don’t hesitate to reach out to me today.

Refinancing Your Home

General Leslie Morris 12 Feb

When it comes to our debt, it may seem very difficult to pay it off. Equifax Canada, which provides consumer credit bureau information, reported that in the second quarter of 2017, non-mortgage debt has risen 3.3 percent. This is already a problem as many people throughout Canada are already struggling to make ends meet. Some people find themselves living paycheck to paycheck and they are unable to afford to pay off their debt.

If you are struggling to pay off your debts, it may be worth it to try and consolidate all of your debt into one payment. One of the best methods to do this is exclusive to homeowners in Canada. The Canadian Government allows homeowners to be able to borrow up to 80 percent of the appraised value of their home, minus the remaining balance on the mortgage. If you have paid a portion of your home’s mortgage off or if your home has just increased in value, then this method is a good way to get the money you need to pay off your non-mortgage debt off.

The method of consolidating your debt into your mortgage can help you to only have one interest rate payment for your debt instead of multiple payments at different rates. Consolidating them are a great way to get a handle on your debt.

This method is useful for things such as renovations that need to be made on your home or emergency repairs that cost more than you anticipated. For home renovations, this can actually add equity to your home and make your investment even better.Refinance-your-home

However, if you would rather pay off your debts than consider refinancing your mortgage. Your mortgage interest rate will more than likely be lower than any of the interest rates that your other debts are under. This can also save you money in the immediate future as you will not be spending as much when it comes time to make your payments.

One word of caution about this method is that it can be tempting to spend the available credit that you now have after freeing yourself from debt. If this happens then you will be in further debt than you were before you refinanced your mortgage and freed yourself from debt.

Another benefit to refinancing your mortgage is that you will have the option to change your mortgage rate from fixed to variable or back. This is a great thing if the market is favourable for one way or the other and you don’t have the ability to change that on your own.

Refinancing your mortgage is something that can be a great financial move if done right. If it helps to reduce your mortgage payment, shortens the term of your loan, or helps you out of your debt then it can be a wonderful decision to make. However, if you aren’t careful you could end up landing yourself into more trouble. Consider your financial situation and see if refinancing your home is a worthy move.

Renting vs Buying a Home

General Leslie Morris 2 Feb

In today’s market, there is an ever increasing worry about the price of homes. Getting a home is looking to be more expensive and many first-time buyers are worrying about making the big purchase. The question of whether it is better to try and buy something now or wait it out and remain a renter until the market cools down is on many people’s minds. Some people would argue that taking your savings and investing into the market now is the best thing to do as the market is probably going to continue to increase. Others would argue that it isn’t worth it to break into the market now and that it is going to be forced to cool down soon. Making that decision is something that you must make on your own but there are some things to consider.

One of the main things to consider about purchasing your own home is that once you purchase your home, it is yours. There is no longer a landlord that you must deal with, there isn’t the uncertainty that you may be forced to move because of a decision your landlord made. If there are any renovations that you want to do or if you want to do any work on your home, you are free to do whatever you want.
mortgage broker
The next thing that you must consider is that eventually, you can stop paying for your home once you purchase one. While a mortgage can last 25-30 years, you will always have to pay rent. Once you finish paying off your mortgage, the money you spent on the mortgage is yours to do whatever you want to do. If the idea of eventually paying off your home and no longer needing to spend money on it is appealing, it may be worth it to invest in a home now.

A home is one of the better things that you can use to build equity. Paying your mortgage on time is a very good indicator to potential lenders that you can pay your debts on time. The home itself is also a great source of equity and you can lend against it if need be. This equity can help you finance your next home or a potential financial investment.

However, there are some things that some people might not realize about owning a home. Once you own a home, you are bound to the property. If your job has an opportunity that requires you to move, you may not be able to move if you are bound to paying off your home. Your home ties you down and if you are someone who craves freedom, then having the freedom to move is great.

When it comes down to your decision over renting or purchasing your home, it is a highly personal one. There are benefits and downsides to both decisions. Purchasing a home is something that requires thought and is a significant financial decision. If you feel ready for it, then seeking out a good broker is a proper first step.

3 Mortgage Terms You Should Know

General Leslie Morris 20 Jan

When we deal with our mortgages, there are three terms that we all come across: prepayment, portability, and assumability. They look like words we recognize, but in the finance world, they’re different than what you might think. So let’s go over them.

Prepayments

A prepayment is the payment of a bill or expense that settles the account before it becomes due. The nice thing about mortgage prepayments is that they allow you to pay off your principal faster meaning less future interest and faster total repayment.

Prepayments are something to ask your broker about because each lender is different. You might want to make an increase on your prepayments meaning you pay a little more each week or month depending on your payment schedule. You can also make a lump sum payment. Maybe you got a holiday bonus from work or a cash gift from a relative. You can throw that on your mortgage and get your debt paid quicker.

Portability

Portability means that you can sell your home and take your mortgage to a new home. One thing to remember about portability is that we can’t decrease the mortgage but we can increase it (often through a second mortgage or mortgage extension). Portability gives you the flexibility of being in control of where you mortgage is going and not having to break your mortgage every time you move.

Moving a mortgage to a new property avoids annoyances like discharge fees, legal costs, and the very real possibility of incurring a higher interest rate. Portability allows you to keep your (presumably good) interest rate for its full term rather than having to break and pay penalties halfway through.

Assumability

An assumable mortgage allows a mortgage and its terms can be transferred from the current owner to a buyer. By assuming the previous owner’s debt, the buyer can avoid having to obtain their own mortgage.

Assuming a mortgage happens most often with parents and their children. Say your parents have a mortgage and you move into that house. Rather than you going out and getting a new mortgage and making your parents pay discharge fees, you can assume their existing mortgage. All you have to do is apply. One thing to note is that you still need to be approved on the mortgage’s remaining balance by a financial institution just like you would on any other mortgage.

Changes to Canadian Mortgages in January 2018

General Leslie Morris 4 Jan

There are some big changes to mortgage lending rules that have taken effect on January 1st, 2018. These rule changes impact both existing mortgage holders and those seeking mortgages. Here are some key points everyone should know.

What’s the big change?

New mortgage guidelines require lenders to vet applicants with down payments of 20 percent or more by subjecting them to a stress test. Applicants must prove if they can afford their mortgage payments if interest rates were raised two percentage points.

Stress tests are already mandatory for mortgages with less than 20 percent down payment. The rules, which are meant to ensure that Canadians don’t take on too much mortgage debt, effectively reduces the size of mortgages that borrowers can get by 20 percent.

How will this impact us Canadians?

  • New rules could disqualify up to 10 per cent of prospective home buyers who have down payments of 20 percent or more according to the Bank of Canada.
  • There should be a cooling down of home purchases country-wide, but particularly in real estate hot spots like Toronto and Vancouver.
  • Between now and the end of 2019, as many as 200,000 homeowners will fail the stress test at the time of their mortgage renewal.

Credit unions are not affected.

January’s new rules and stress tests do not apply to credit unions, which are regulated at the provincial level rather than federal level. By using a credit union in 2018, homebuyers can sidestep the stress test and get a larger mortgage.

I’m pre-approved for a mortgage in late 2017. What should I do?

Some lenders have confirmed they will grandfather existing preapprovals under the 2017 lending rules for up to 120 days. However many lenders will not – for them Jan. 1, 2018 is a hard stop on old lending rules. Some lenders have not announced their policy on the matter at all.

Your best bet is to pick up the phone and call your mortgage broker to ask them where your preapproval stands.

I already have a mortgage. How does this affect me?

Adding new money, or moving the mortgage to a new property will trigger a re-evaluation under the new rules, stress test and all. Don’t change your mortgage if you don’t have to!

Who is safe from the stress test?

You’re safe if you’re simply renewing your current balance. None of these changes will impact you if you are renewing your mortgage for the same amount with the same lender.

The new conventional mortgage ‘Stress Test’ unnecessary and harmful

General Leslie Morris 13 Oct

The new mortgage stress test is unnecessary and harmful.

With additional mortgage regulations on the horizon it is more important than ever to deal with a mortgage broker who understands the industry and can help you make the right financial decision for your mortgage needs.
If you are considering refinancing your mortgage to access equity for any purpose NOW is the time.

These new regulations could potentially have a considerable impact on your borrowing power.

 

Mortgage Broker News.ca

http://www.mortgagebrokernews.ca/news/osfis-new-mortgage-stress-test-is-unnecessary-and-harmfulthink-tank-232341.aspx

A new stress test for all uninsured mortgages is unnecessary and could increase costs for homebuyers, according to the latest report from the Fraser Institute.

Study author Neil Mohindra wrote the proposed stress test “will do more harm than good” by limiting access to mortgages for some homebuyers.

“The mandatory standard for stress testing could result in a less competitive and more concentrated mortgage market,” Mohindra stated, as quoted by The Canadian Press.

The study came amid news that the Office of the Superintendent of Financial Institutions is finalizing new lending guidelines.

Among the changes being considered is a requirement that homebuyers who have a down payment of 20% or more and do not require mortgage insurance still have to show they can make their payments if interest rates rise.

The head of OSFI has said that Canada’s banking regulator wants to reduce the risk of mortgage defaults because of high levels of household debt.

“We are not waiting to see those risks crystallize in rising arrears and defaults before we act,” OSFI head Jeremy Rudin said last week.

Canadian household debt compared with disposable income hit a record high in the second quarter. Statistics Canada reported last month that household credit market debt as a proportion of household disposable income increased to 167.8%, up from 166.6% in the first quarter.

However, Mohindra said that instead of a prescriptive test, OSFI could use its existing powers to fix what it believes are deficiencies in policies and procedures.

The Bank of Canada has raised its key interest rate target by a quarter of a percentage point twice this year.

The increases have pushed up the big bank prime lending rates which are used to determine rates for variable-rate mortgages and lines of credit.

 

How do Mortgage rates work?

General Leslie Morris 6 Sep

Ever wonder how your mortgage rate is determined? What factors make it jump from percentage to percentage? We are getting down to the nitty gritty today and giving you the facts on what impacts mortgage rates.

What affects a Mortgage Rate?

There are 10 factors that affect a mortgage rate:

1. Location
Depending on which province your home is located in, this will have an overall effect on your mortgage rate. Generally speaking, provinces with more competitive markets will have lower rates.

2. Rate Hold
A rate hold is a guarantee on a rate for 90-120 days. If your closing dates do not fall within this timeframe, then your hold will be re-assessed. If your rate hold is re-assessed and the lender’s rates at that time of re-assessment are higher than your initial rate, then your rates will go up accordingly. We always follow up with all of our clients on a regular basis to avoid this situation whenever possible!

3. Refinancing
Movement on your mortgage of any form can affect your rate typically when you are working with your existing lender. New buyers will have lower rates than refinances, but refinances will have lower rates than mortgage transfers. Mortgage Brokers can access multiple lenders to find the most suitable product for their client’s unique needs.

4. Home Type
Lender’s assess the risk associated with your home type. Some properties are viewed as higher risk than others. If the subject property is considered higher risk, the lender may require higher rates.

5. Income Property/ Vacation Home
As previously mentioned, lenders assess the risk on your property. If you are buying an income property or a vacation home than the lender can assess at a higher risk and a higher rate may apply. This is one of the major benefits to having a mortgage broker on your team! They have access to a variety of lenders that can offer you a rate lower than others as they can compare a large variety.

6. Credit Score
We have talked a lot about credit on our blog, and there is a reason for that. Your credit score is a large determining factor for your rate. Lenders want to see that you have a history of managing your credit well and that you will be able to pay back the lender overtime. For more information on fixing your credit, check out our free e-book, Credit Medic.

7. Insured or uninsured
With the changes that the federal government made back in October 2016 this has had a significant impact on mortgage rates if your mortgage is insured or not. Read our Change of Space guide to find out the full impact of these changes.

8. Fixed/Variable Rate
The type of rate you are wanting to get will also affect your rate. Fixed rates are based on the bond market and variable rates are based on the Bank of Canada (economy).

9. Loan to Value (LVT)
The higher the Loan to Value the higher the risk. You can have someone who has a $1 million mortgage but has $2 million in equity in that property and they would be viewed as a lower risk than someone who has a $200,000 mortgage and their property is only worth $220,000. To boot with the federal changes, the person with the higher risk mortgage (insured) is likely to get a more competitive interest rate than the client with $2 million in equity.

10. Income level
The final part in this rather large equation is your income level. Although this does not necessarily impact the rate itself, it does impact your purchasing power and the amount you are able to put down on a home. Essentially indirectly impacting the rate.

Each of these factors plays a factor in the rate you will be able to get through a lender. The easiest way to get the lowest rate is to work with a dedicated mortgage professional. They will put together a fail-proof plan to get you the sharpest rate. They also have access to a variety of lenders which saves you the time and trouble of shopping for your mortgage on your own. As a final point, mortgage brokers can also assess your unique situation and find the right mortgage for you. Their goal is to see you successfully find and afford the home of your dreams and set you up for future success.

Bank of Canada increases the key lending rate to 1.00%

General Leslie Morris 6 Sep

The Bank of Canada forged ahead with another interest rate hike in a nod to the country’s

surging economy, while signaling its appetite for further tightening may be curbed by a rising Canadian dollar and sluggish inflation.

Policy makers raised their benchmark rate for a second time since July, by 25 basis points to 1 percent. At the same time, they cited risks including continued excess capacity, subdued wage and price pressures, geopolitics and the higher Canadian dollar, along with worries about the impact of rising interest rates on highly indebted households.

“Future monetary policy decisions are not predetermined and will be guided by incoming economic data and financial market developments as they inform the outlook for inflation,” the Bank of Canada said Wednesday in a statement from Ottawa.

Governor Stephen Poloz is trying to strike a balance between bringing interest rates back to more normal levels amid the strongest

growth spurt in more than a decade, and acknowledging the persistence oflow inflation and subdued wage pressures. He may also be attempting to restrain market expectations it will get too far ahead of the Federal Reserve.

Futures trading suggests investors were anticipating — before Wednesday’s rate decision — as many as three hikes from the Bank of Canada by the end of 2018, versus one more for the Federal Reserve. Only five of 26 economists surveyed by Bloomberg News expected the central bank to hike its benchmark rate. Futures trading was assigning about a 40 percent chance of an increase. Another rate increase is now almost fully priced in by December.

Market Reaction

Canada’s currency climbed as much as 1.8 percent after the decision, reaching C$1.2146 against its U.S. counterpart, the highest intraday level since June 2015, and extending the gain this year to 10 percent. Bonds yields surged, with the two-year note jumping eight basis points to 1.43 percent, the highest in more than five years.

The bank didn’t repeat language from previous statements about the current degree of stimulus being appropriate, which may suggest it will stay on its tightening path.

“What they are saying to me is they are leaving the door open to future
hikes,” said Derek Holt, head of capital markets economics at Bank of Nova
Scotia in Toronto. He changed his forecast last week to correctly predict the
rate increase.

Considerable Stimulus

The bank cited Canada’s stronger-than-expected economic performance for the hike, warranting a removal of some of the “considerable” stimulus in place. In effect, the Bank of Canada fully removed the two rate cuts from 2015, which were meant to counter the negative impact of falling commodity prices.

The Bank of Canada also cited recent better-than-expected data supports its view that growth is more “broadly-based and self-sustaining.” It also cited more “widespread strength” in business investment and exports, and “stronger-than- expected indicators of growth” globally.

Yet, there was an introduction of cautionary language in the statement, and new worries about financial market developments, that weren’t in the last rate decision and suggests the central bank isn’t quite ready to declare victory on whether the economy has totally eliminated its slack.

“There remains some excess capacity in Canada’s labor market, and wage and price pressures are still more subdued than historical relationship would suggest,” according to the statement.

The Bank of Canada said there remains “significant geopolitical risks and uncertainties” around international trade and fiscal policies that have weakened the U.S. dollar. The suggestion is the Canadian dollar gains aren’t totally reflective of growth. It was the first reference to the Canadian dollar in a rate statement since March.

The bank also said it will pay close attention to the “sensitivity” of the economy to higher interest rates given “elevated” household indebtedness, and added it will pay “particular focus” to the evolution of the economy’s potential growth rate, possibly a suggestion that the economy can run at a faster pace than the bank originally thought without triggering inflation.

— With assistance by Greg Quinn, and Erik Hertzberg

Copyright Bloomberg 2017

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