Efforts to stave off the Housing Bubble

The Honorable Finance Minister made a statement this morning to help what is perceived by some to be a housing bubble or the potential of an overinflated real estate market in the Toronto GTA that includes Mississauga and Oakville. They [[Gov of Canada] made modest changes to the guidelines the government issues to banks.

Click to listen to the speech details here.

Summary

New Rules to Come into Force April 19th, 2010

Federal Finance Minister Jim Flaherty announced changes to mortgage insurance rules this morning, which are set to come into force on April 19th, 2010.

This means the government will adjust the rules for government-backed insured mortgages as follows:

Requires that all 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. This initiative will help Canadians prepare for higher interest rates in the future.

Lower the maximum amount Canadians can withdraw in refinancing their mortgages to 90% from 95% of the value of their homes. This will help ensure home ownership is a more effective way to save.

Require a minimum down payment of 20% for government-backed mortgage insurance on non-owner-occupied properties.

There were no changes to down payment requirements or length of amortizations for owner-occupied residences.

[http://www.fin.gc.ca/n10/10-011-eng.asp] Click here for additional details on the changes.

Lets review;

Qualification has always been based on the five year fixed rate and in some cases the average of the five year and three years rates (Source RBC) No changes were made to the 5% down program and the banks still have cash back on closing mortgages. Amortizations did not change.

Non Owner occupied was a minimum of 15% down has now moved to be 20% down.

New conference tid bit Two thirds of Canadians own their own home.

So if you are new to Canada and would like a mortgage it is possible with 5% down and your landed documentation. Give us a call. I was very flattered to have the CBC call for an interview about how I felt these changes would effect the real estate market but in reality the changes are very minor. There was no headline for me.

Living in a plastic world; Tips for managing your debt

In the early 20th century, Canadians had very little personal or consumer debt. Individuals mainly used cash to purchase products and services while universal credit cards didn’t even exist until the 1950s. In the early 1900s, banks would seldom lend money to middle and working class people so they rented their homes or paid for them as they were being built. This meant no mortgages, no lines of credit, no car loans, and no credit cards.

Most of us probably can’t imagine a life where we save up for years before making major purchases. In fact, according to the Canadian Bankers Association, there were 64.1 million Visa and MasterCard cards in circulation in Canada in November 2008. It’s safe to say that debt plays a large part in the lives of most young people these days – but that’s not necessarily a bad thing.

Good debt vs. bad debt

Debt is often made to sound like a bad word but in reality, low-interest loans that allow you to obtain a higher education or a place for your family to live can be a good thing. They make large purchases affordable to the average consumer. The problem lies in carrying high-interest-rate, non-deductible debt such as credit cards.

But what should you do if you find yourself drowning in debt?

First, let’s talk about what you shouldn’t do. You shouldn’t pay off your highinterest debt by using some of your Registered Retirement Savings Plan (RRSP) money. When you remove cash from your RRSP to pay a debt you’ll have to pay income tax on the money you withdraw, and you’ll forfeit the years of tax-deferred growth that would have contributed to your retirement lifestyle.

That being said, you must find extra money somewhere and here are a few tips to help you do so.

Consider a debt consolidation loan

Ask about combining or “consolidating” your debts into one loan that is used to pay off all your debts. In return, you make monthly payments on the loan at a lower interest rate. Then, you can use the extra money you have left over every month to pay down your debt even faster. Of course, while you are reducing your overall monthly payments, be aware that you may also be extending the length of time over which you are carrying the debt.

Budget, budget, budget

Take a critical look at your income and expenses. Do you know where your money goes every month? Small changes in your spending habits can yield big returns – and every extra cent you save can be used to pay down your debt. Remember to plan a budget reasonably. If your goals are too lofty, chances are you won’t stick to them at all.

Pay close attention at tax time

Another way to free up cash flow is to take advantage of every possible tax deduction and tax credit that may apply to you – including items like moving expenses, child-care expenses, tuition fees, medical expenses and charitable donations.

It’s true that the average household debt has increased during the last few decades; however, this doesn’t have to mean financial crisis for your family. By taking a serious look at your debt and finding small ways to reduce it, you can improve your financial situation and still save for your future. For more ideas on how to trim your debt, give us a call.

JOHN SCHOLL, B. Math, CGA, EPC   John's Home Page

Budget Highlites for Real Estate Toronto

Here are some key points mentioned in todays budget that will help us in our industry.

Canada's Mortgage Industry Welcomes Federal Budget Announcements

Earlier today, federal Finance Minister Jim Flaherty tabled the federal budget. Several measures affect Canada's housing and mortgage industry.

Temporary home renovations tax credit of up to $1,350 for eligible home renovations and alterations.

Increase in the home buyers RSP plan, withdrawal limit increased to $25,000 from the current $20,000

A new first time home buyers tax credit that will provide up to $750 in tax relief for closing costs. They're giving first time home buyers tax breaks designed to deal with added expenses like legal fees and - in what's certainly a message to Mayor David Miller - land transfer taxes. Those buying an abode will get a 15 per cent tax credit on up to $5,000 in costs.

Broad based personal tax reductions including an increase in the personal exemption and increases to the limits for the two lowest tax brackets.

Complete Budget details

Vivien Lai, AMP Mortgage Specialist Mortgage Alliance Real-T-Mortgages
Tel:(416)816-8252 Fax:(905)272-3833 vlai@tmacc.com
www.mortgagealliance.ca/vivienlai