new-mortgage-rules

Previously, and up to November 30, 2016, buyers who put down more than 20% of their home price and owners who have more than 20% equity in their homes were considered “low-ratio” borrowers. They could enjoy “low-ratio” mortgage insurance at a much better rate due to the fact that their loans were less “risky”. However, starting on November 30, 2016 a big chunk “low-ratio” borrowers will not qualify for this plan anymore.

Buyers will not qualify for “low-ratio” insurance if one of the following applies:

  • amortization period is longer than 25 years
  • home’s purchase price is over $ 1 million
  • buyer has a credit score below 600
  • property is not owner occupied
  • if you are a self-employed individual applying for a stated income deal

What to expect?

In other words, when this huge segment of properties becomes ineligible for low-ratio insurance, lenders will have to pay higher insurance premiums, which will get passed down to borrowers in terms of higher interest rates on mortgages. In fact, this is already happening. Multiple key mortgage rates climbed higher since Wednesday, and are expected to continue rising, especially after new rules come into play. Keep in mind that when rates rise it will become very difficult to refinance in a constrained market.

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You’ve no doubt noticed the occasional news report about a product being recalled for safety reasons. For example, a car model with a brake problem, or a children’s toy that, under some circumstances, may cause injury.

You may not know that these news reports are merely the tip of the iceberg. For each product recall you hear about in the media, there are dozens that get little, if any, publicity.

That means there may be products in your home that have been recalled — and you don’t even know about it. It’s a scary thought.

How do you find out about recalled products that may affect you? Here are two tips.

  1. Always complete the registration that comes with many products. This is typically done by mailing in a registration card or filling out an online form. When you register, you’ll be alerted by the manufacturer if the product is recalled for any reason.
  1. Both Canada and the United States have agencies that list recalled products on their websites. In Canada it’s the Healthy Canadians website at www.healthycanadians.gc.ca. In the United States it’s the Consumer Product Safety Commission at www.CPSP.gov. It’s a good habit to check these sites every season.

If you discover that a product in your home has been recalled, contact the manufacturer immediately. Never assume that the reason for the recall won’t apply to you.

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What you should know about new mortgage rules.

On October 3rd, Finance Minister Bill Morneau announced that new mortgage rules will include more stringent “stress testing” for borrowers. The new rules are designed to lower debt levels, enforce some belt-tightening, and protect the housing market over the long term. Here’s how these new rules will affect Canadians.
THE HIGH-RATIO RULE

There has been a long-time rule that you must have “high-ratio mortgage insurance” if you have less than 20% downpayment. This insurance is there to protect the lender, and the premium is almost always added to your mortgage amount.

What’s changed? If you require an insured mortgage, you must qualify for your mortgage using the Bank of Canada qualifying rate (currently 4.64%) regardless of what your actual mortgage rate will be.

That means that – although lender/broker can find you a much better mortgage rate – you’d still need to show you can handle the mortgage using the qualifying rate. This financial “stress test” was already applicable for fixed and variable mortgages with terms of 1 to 4 years. Now, it also applies to fixed-rate mortgages of 5 years or longer.

Why the new rule? The government wants to be sure that borrowers can withstand any increases in mortgage rates when their mortgages come up for renewal.

Will my payments be higher? No. Your payments will still be based on your much lower actual mortgage contract rate. Keep in mind that mortgage rates are expected to stay at record lows into 2020. So this new rule isn’t costing you more. The potential change will be in how much mortgage you will qualify for: up to 20% less. You may need to plan on purchasing a less expensive home, or save up a larger downpayment, or ensure you eliminate all or most of your other debts.

Are any loans grandfathered? The new mortgage stress test does not apply when:

  • A mortgage loan insurance application was received before October 17, 2016;
  • The lender made a legally binding commitment to make the loan before October 17, 2016; or
  • The borrower entered into a legally binding agreement of purchase and sale for the property against which the loan was secured before October 17, 2016.

THE CONVENTIONAL MORTGAGE RULE

Maybe you have more than 20% down or equity in your home and you are planning to purchase, renew or refinance. Since you have strong equity, you aren’t considered a “high-ratio” borrower.

What’s changed? Effective November 30th, any mortgage loans that lenders insure using portfolio insurance must now meet eligibility criteria applicable to “high ratio” mortgages, including the new qualifying stress test. This means that rental properties, properties over $1 million, and mortgages with an amortization greater than 25 years will no longer be eligible for portfolio insurance.

Does this mean I will have trouble getting a mortgage? Certainly not. The change will only affect certain lenders that insure or securitize these types of mortgages. I have access to a wide range of lenders, which means I can help you find the best mortgage for your situation. But if you are thinking of refinancing, get in touch now just to be sure you lock in a low rate.
THE CAPITAL GAINS REPORTING RULE

Canadians love the capital gains exemption they get on their primary residence: if your home grows in value, you aren’t taxed on that growth when you sell.

What’s changed? Starting this tax year, the sale of a primary residence must be reported at tax time to the Canada Revenue Agency, even though all capital gains are still tax exempt.

Why? This new rule was designed to prevent foreign property purchasers from claiming a primary residence tax exemption to which they are not entitled.

Although there are definite regional variations, the Canadian housing market is strong. A good part of the reason for that strength is that we have had stringent mortgage requirements. Mortgage defaults in Canada continue to be very low: in spite of the ups and downs of the economy.

The new rules are aimed at ensuring home ownership continues to be a solid, long-term investment. Give me a call: I’ll help ensure you make the most of it!

dirtybackyard

When you put your home up for sale, you want it to look its best to potential buyers. That’s why you clean, tidy and de-clutter every room.

Some sellers, however, miss the backyard. You need to pay just as much attention to that space as you do to the interior of your home. The backyard is as important a living space as the family room. To some buyers, even more.

Buyers want to see an attractive backyard space, with the grass cut and the hedges trimmed. The more neat and tidy you can make it, the better. Be sure to sweep walkways and wipe down patio furniture.

Also, watch out for the following things that buyers do not want to see:

  • Bags of garage and other waste.
  • Doggie do-do. (Be sure to stoop and scoop!)
  • Rakes and other tools piled in the corner.
  • Cluttered and disorganized storage sheds, pool huts and other backyard structures.
  • Weeds in the flower beds.
  • Items stored underneath the deck.
  • Hoses not stowed neatly.
  • Electrical outlets and water faucets that don’t work.

These are not difficult issues to fix. Doing so will positively impact the impression the buyer gets of your backyard.

Do you have a backyard that shows particularly well in the summer? Here’s a tip: Take pictures. Those photos will help buyers be able to appreciate how it looks should you list your home in the winter.

Want more tips on making your home show well so that it sells fast? Call me today.

filipino-real-estate-agent-alex-macale-toronto

You’re standing by your window admiring the view. Then you notice it. Moisture has built-up around the edges of the glass. Should you worry?

It all depends on the reason for the build up.

Assuming you have traditional double-pane glass in your windows, there are a few things to look for if you notice moisture.

Often, moisture at the bottom of the windows is simply caused by too much humidity in your indoor air. If that’s the case, simply adjust your humidifier.

If the moisture is on the exterior of the window, typically there’s also no problem with the window itself. It may have rained recently or the outside humidity may have spiked causing the accumulation. Generally, there’s no reason for concern.

However, if the moisture is in between the two panes of glass, the seal has broken and surrounding air – along with its water content – has made its way in. This disrupts the thermal barrier of the window, reducing its energy efficiency. In fact, the glass might feel noticeably colder than your other windows on chilly days. In that case, you’ll need to replace the pane.

Similarly, if the moisture is coming in through only one spot — the bottom right corner, for example — then you might have a leak. If you have a wood frame or sill, you may also notice a growing water stain. It’s important to get leaks fixed quickly. There may be water damage occurring within the frame that you cannot see.

alex-filipino-realtor-attic-insulation

It’s the time of the year when we think of turning on the furnace heater and think about how to properly reduce gas and electric consumption. Did you know that the most culprit of cold starts from the attic?

One of most commonly-argued topics among attic insulation experts is whether fiberglass or cellulose attic insulation is better. In terms of overall performance and affordability, however, I think cellulose insulation is the more sensible choice, as this article explains.

Cellulose insulation material is essentially a recycled product. It is prepared from shredded paper and plant resins that are treated to become insulators. This fundamental difference between the two insulation materials makes cellulose a more affordable choice.

Although cellulose is made from recycled newspaper, it is not flammable, having been treated with borax. Regardless of which insulation you get, make sure it has the appropriate R-value for your climate zone. The higher the R-value, the stronger—and more expensive—the insulation. R-value will inevitably decrease over time, though, as the insulation settles.

Pros of Cellulose

  • Cheaper
  • Burns more slowly
  • Made from recycled materials
  • Insulates better

Cons of Cellulose

  • Requires professional installation
  • Messy to install
  • Installed damp, creating a chance for fungal growth if not dried well

Pros of Fiberglass

  • Installed dry
  • Simple to install
  • No harmful chemicals

Cons of Fiberglass

  • More expensive
  • Itchy on your skin
  • Settles, reducing in effectiveness over the years

However, Fiberglass insulation is more common and can be installed more easily. However, it does not prevent air leakage and is potentially flammable. Although Fiberglass insulation does not settle quickly compare to cellulose but it loses heat quickly in extreme low temperatures.

A testing had been conducted to prove this theory. You can watch this on YouTube click here. http://bit.ly/2dTisv9

 

LONDON, ENGLAND - MARCH 07: Sale and rent signs are displayed by estate agents on a block of flats near Wandsworth on March 7, 2012 in London. (Photo by Peter Macdiarmid/Getty Images)

When you’re about to sell your home, it may be disheartening to see so many other properties for sale in your neighbourhood. You may be thinking,

“That’s a lot of competition! Will our property get noticed?

Fortunately, there are many proven strategies for standing out in a sea of For Sale signs.

First of all, keep in mind that many home purchasers come from the REALTOR’S personal network of buyers who want to move into your area.
So, choosing the right REALTOR® is crucial.

Second, remember that when there are other properties for sale on your street, curb appeal becomes even more important. There are many simple
things you can do to make your property look great to those driving around looking at homes. Make sure your property looks as picture perfect as
possible.

In a competitive market, it’s also more important than ever to highlight features of your home that are unique and enticing. If, for example, you
have a large backyard deck and brand new hardwood flooring, make sure these are mentioned prominently on the feature sheet.

Finally, be as flexible as you can be when scheduling viewings and open houses. Don’t forget that other listed properties in your neighbourhood draw in buyers, who may notice your home. It’s not uncommon for a buyer to view a property and then scout the neighbourhood. So, you want buyers to be able to see your home on short notice and at a convenient time for them.

If there are several other nearby properties for sale, it means things are hot from a real estate point of view. You want to roll out the red carpet to
buyers.

Looking for help selling your home quickly and for the best price? Message me today!

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Preliminary official estimates are that 1 in 12 home buyers could be affected. Personally I don’t buy it. We’ve heard from numerous lenders and brokers today who estimate the actual number is twice that, maybe more.

Here’s what all of this really means to you:
Mortgage Approval Just Got Tougher

  • If you get a variable or 1- to 4-year fixed mortgage, most lenders make you prove that you can afford payments at the Bank of Canada’s posted 5-year rate (currently 4.64%).
  • This rule currently does not apply to fixed terms of five or more years. But effective October 17, it will. From a mortgage qualification standpoint, that’s a ginormous change—equivalent to a 2.25-percentage-point rate hike.
  • Today, someone with 10% down who makes $50,000 a year can qualify for a $300,000 home purchase. That hypothetical maximum mortgage amount will plunge 18% to $246,000, once this rule takes effect in two weeks.
  • This one regulation alone could shut out more buyers from the market than possibly any of the prior rule changes, including the reduction in the maximum amortization from 30 to 25 years (announced in 2012).
    • Way back in 2012 when home prices were lower, Altus Group found that 20% of buyers could not qualify without an amortization over 25 years. So one might assume that at least 20% of homebuyers will have to reduce their purchase price, or find a bigger down payment or co-signor, because of today’s announcement.
  • Key points:
    • If you’re renewing with your current lender, you won’t have to requalify at these inflated rates. In fact, it’s routine that lenders don’t requalify you at all if you stay with them for another mortgage.
    • If you were planning to refinance to 80% loan-to-value (the legal maximum for a prime mortgage), try to get your application in by mid- next week. Borrowers will be sprinting to meet the deadline, so the sooner the better.
    • Is this new rule warranted? Perhaps if you put down less than 10% it is. But if you put down 10% or more, most people could refinance after five years into a 30-year amortization (if they really had to). Even at 4.64%, their refinanced payments would be lower than when their rate was 2.39%. So the government’s “reducing risk” argument is questionable if we’re talking about payment risk.

Mortgage Rates are Headed Up

  • Countless lenders rely on default insurance in order to resell mortgages, mainly because investors demand it.
  • Effective November 30, the government will no longer allow lenders to insure:
    • Refinances
    • Amortizations over 25 years (today you can get up to a 35-year amortization if you have 20%+ equity)
    • Purchase prices of $1 million+
    • Non-owner-occupied rental properties.
  • You may wonder, “OK, so what?” Well, here’s what: It means that all of these mortgage types above will have to be sold to, or originated by, lenders who hold them on their balance sheet. That will meaningfully limit your choice of lenders, and seriously dent rate competition.

Mortgage Rates are Headed Up – Part II

  • Another rule taking effect soon is the new higher capital requirements for insurers. This rule, announced well before today, will lead insurers to double insurance premiums on some mortgages, particularly those at 80% loan-to-value or less.
  • Again, many non-bank lenders rely on this insurance. It could force them to jack up rates by 10-20 basis points, depending on the lender, borrower qualifications and down payment.
  • Big banks don’t need to insure and sell their mortgages, so they should be less impacted than most lenders. The net effect is further deterioration of competition.

Mortgage Rates are Headed Up – Part III
The Feds reaffirmed their intention to evaluate “risk sharing,” whereby lenders must pay a deductible if an insured borrower defaults.
Depending on how it’s implemented, this rule could turn the lending industry on its head. It would force prudent lenders with less capital out of the market (or make them pay banks to cover the deductible for them). Either way, the costs will be borne by Canadian borrowers.
Fewer Cost-Effective Refinance Options

  • Fewer lenders will be able to offer competitively priced refinances, due to the new prohibition on insuring them.
  • Borrowers who can no longer roll their debt into a prime mortgage may have to resort to higher-cost non-prime lenders or unsecured debt. (Does increasing borrowers’ interest costs make for a more stable housing market? Not on this planet.)

Stealth Rate Hike

Regulators have taken a systematic approach to raising lenders’ costs, and that’s not by accident.

This past summer there was reportedly a secret meeting between lenders and the Department of Finance (DoF). Sources tell the Spy that regulators indicated a preference to see mortgage rates rise, and were prepared to keep tightening regulations to make that happen.

It’s not clear if a specific rate target was set out by the DoF. What officials did reportedly indicate, according to my sources at that meeting, is that their plans (stricter capital requirements, securitization limits, insurance rules, etc.) will raise lenders’ funding costs and that is desirable. Regulators reportedly suggested that their policies could jack up rates more than 75 bps with minimal ill effect on borrowers.

Make no mistake. What we’re dealing with here is a stealth rate hike.

If Bank of Canada Governor Stephen Poloz can’t drive up Canadian interest rates, it looks like federal policy-makers are going to do it for him. And that’s going to cost you megabucks in mortgage interest.

Let’s hope the benefit (a more stable housing market) is truly worth it. Only 1 in 357 borrowers default as it is.

Moreover, let’s hope that housing stability is the actual outcome here, not the opposite. I can tell you one thing for sure. There’s going to be a lot of home sellers moving up their sale plans when they realize what just happened.

 

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Summary of Concerns Over Department of Finance Announcement

By now, you will have seen yesterday’s announcement from Finance Minister Morneau outlining mortgage insurance and qualification changes effective October 17 and November 30 respectively.

These changes were announced with no warning to our industry and, based on conversations we’ve had with a number of industry leaders, almost no consultation. The qualification changes requiring all ‘insured’ (bulk or high ratio) loans to meet 25-year amortizations and be qualified at the Bank of Canada benchmark rate (currently 4.64%) will force many would-be homeowners into the sidelines. The benchmark rate is generally 200+ bps higher than actual rates available in the market and will require anywhere from a 20-40% exaggeration of actual mortgage payments to be used to meet servicing ratios.

Additionally, the changes to mortgage insurance eligibility significantly impacts our monoline lenders. It has the potential to severely restrict their access to capital, their ability to compete with the traditional banks and the million-dollar purchase price limit effectively excludes them from the very markets that arguably have the greatest need for funding accessibility and availability.
These are just two of the issues in a very large list of complications these changes will bring to our marketplace.
Mortgage Professionals Canada is in communication with the Ministry of Finance and the Financial Sector Policy Branch and discussing the impact and unintended consequences to the marketplace these changes will bring. The mortgage broker channel originates approximately 33% of all mortgages in Canada, and approximately 50% of mortgages for first time buyers. We are an incredibly important segment of the economy and help maintain a healthy and competitive marketplace. We will keep you informed of our discussions and communications with government in the coming days.

If you have not yet seen the announcements, see below
To summarize:

  1. All insured mortgages will now need to qualify at the Bank of Canada benchmark rate (4.64%) instead of the contract rate offered on their commitment. This change is scheduled to come into effect on October 17, 2016.
  2. Portfolio (‘bulk’) insurance must now meet the same criteria as those that are high ratio insured. This change is scheduled to come into effect on November 30. This means that amortizations greater than 25 years, rental and investment properties and homes with values greater than $1M can no longer be portfolio-insured.
  3. Capital gains exemptions on principal residences will apply only to residents of Canada.
  4. In addition, there is further discussion about ‘sharing in risk’ that is currently borne in large part by the three mortgage insurers. While high ratio customers and portfolio insurance funders pay for this risk, there is discussion about sharing in the cost of losses beyond just the mortgage insurers. This in and of itself could have significant implications. We will continue to monitor any discussion around this as well.

dustmites

The more time we spend indoors, the more susceptible we are to airborne household allergens such as dust and dust mite residue, human and pet dander (i.e. dead skin), mould spores, and chemical off-gases from cooking, candles, smoking, and synthetic materials that were recently introduced into the home.

To reduce the risk of respiratory discomforts triggered by these irritants, it’s important to control indoor air quality (IAQ) by utilizing HEPAgrade filters in whole-home air circulation systems, as well as in portable air purifiers and vacuum cleaners. In addition, frequently wiping fixtures and furniture, plus cleaning carpets, throw rugs, mats, drapery, upholstery, cushions and dust covers will make a great contribution to improved IAQ.

Unfortuntely, there are a lot of HEPA air purifiers outhere that ranges from $50 to $5000 but they all have the same in common that is using BAGS or dry FILTERS but regardless of how many layers of filters they use there are still a chance of airborne dust escaping when filter is dry. The only way to completely prevent dust from flying is to neutralize it with water.

Also, just cleaning the air in the indoor environment are not all there is to it because the only way you can 100% purify your air is to 100% clean the dust on your bed, floor, walls, duct and air vent.

There are also a misconception of “suction” vs “airflow” in determining the quality of vacuum cleaner and air purification system. Most believe that suction supersedes the airflow in sucking the dust from the floor or air but in reality it is the airflow that is responsible of picking up dust and dirt from the air and floor.

Like to find out different home air purification system outhere that is certified by “Asthma & Friendly”, “AHAM” and “Carpet Industry Standard”? Message me.