More bad news about collateral loans
More collateral info in the press. As we have been saying for more than a year now; collateral loans can trap you later. Leverage the expertise of a person who has dealt with mortgages all day for more than 10 years when deciding what is best for you.
Short version of the article below: it is going to cost you about $2,500 to get out of a mortgage with a collateral charge when the term is done. That is not a “payout penalty” but the cost to re-register your mortgage later at a different bank when they try to renew you at a higher rate at the end of your term.
Mark Herman, top Calgary Alberta Mortgage Broker for Renewals
Search "collateral" in this blog search bar to see the other articles on this topic.
A collateral mortgage can trap you: Roseman
You may want to change lenders at the end of a mortgage term. But with a collateral mortgage, your freedom to move will be constrained.
Your residential mortgage is coming up for renewal. Your lender won’t match the competition, so you decide to get a better rate elsewhere.
Moving a mortgage at the end of a three-year or five-year term is no big deal. The new provider usually covers any transfer fees.
But switching is more costly if you have a collateral mortgage. You must hire a lawyer and pay about $1,000 to discharge the mortgage before you can move to a new lender.
Since 2010, TD Canada Trust has sold only collateral mortgages. Tangerine Bank (formerly ING Direct) changed to collateral mortgages in 2011. National Bank also offers them.
Having a collateral mortgage affects your ability to transfer your mortgage to a new lender and your ability to borrow additional funds. It can also affect your ability to discharge the mortgage after repaying the loan in full.Many people don’t know the difference between a conventional and a collateral mortgage, since the information is buried in the fine print of a detailed agreement.
Last August federal Finance Minister Joe Oliver announced an agreement with eight major banks, under which they would voluntarily disclose general information about collateral mortgages at their websites by Sept. 1, 2014, and in their branches by Nov. 30, 2014.
Finally, the banks would provide specific information to consumers who were entering into a new mortgage agreement by Jan. 31, 2015.
Has voluntary disclosure worked? I found almost nothing when checking the banks’ websites. But the Canadian Bankers Association’s website has an article, “Mortgage Security,” to which individual members can provide links.
With a conventional charge, only the amount of the actual mortgage loan is registered against your home. If you borrow $250,000, the lender will register a $250,000 amount as a liability on your property.
With a collateral charge, an amount higher than the actual mortgage loan may be registered against your home. If you borrow $250,000, the lender can choose to register a $300,000 or $400,000 amount.
This allows you to get an extra $50,000 to $100,000 at a later date, secured by the mortgage, without having to discharge the loan and go through a costly refinancing. However, you must meet certain conditions in order to borrow more money.
“You will need to apply and be approved by the lender for the increased amount, based on the current criteria of the lender, your ability to repay the mortgage loan and verification that your home’s value supports the mortgage loan request,” says the CBA.
Dan Faubert, an Ottawa mortgage broker, wrote a blog post last August about thepitfalls of a collateral mortgage. He used the example of John Smith (not his real name), who was denied a loan to fix up his home.
The man owned a home worth $375,000. He had $25,000 left on his mortgage and a $250,000 balance on his home equity line of credit — a total debt of $275,000.
Unfortunately, he didn’t know the bank had registered a $375,000 mortgage against his home. Most collateral mortgages are registered at 100 per cent of the property’s value and some go up to 125 per cent, depending on the lender.
Smith wanted $25,000 to renovate. He was planning to sell his house. But since he was retired and had a lower income than when he borrowed the money, he didn’t qualify for a bank loan.
Faubert couldn’t get him any more money, nor could any other mortgage broker, since the collateral mortgage was registered for 100 per cent of the property’s value.
Smith had borrowed $275,000 and his home was worth $375,000, but there was no equity against which to register a mortgage. It is a dilemma that could face other Canadians who carry a mortgage with them into retirement.
“Any mortgage with any bank that has multiple products in one mortgage is also registered as a collateral mortgage,” says Faubert, who recommends asking lenders for an explanation before agreeing to new financing.
I predict the trend to collateral mortgages will spread. Banks benefit by making it more difficult — or impossible, in some cases — to switch lenders before a mortgage is discharged.
Oliver should check the banks’ voluntary disclosure under the agreement announced last year. Customers need to know in clear terms, explained by a real person and not just in fine print, about a key change to the standard mortgage contract.
http://www.thestar.com/business/2015/02/17/a-collateral-mortgage-can-trap-you-roseman.html
Averge YYC home prices to be > $500,000 in 2017
I have had many people ask what home prices are going to do over the next 4 or 5 years. Well here are the numbers!
Remember, if Alberta were a country our growth would be the same as the world leader – China! – Mark Herman, Calgary Alberta Mortgage Broker.
Calgary resale home average prices to balloon to more than half a million dollars
Report says average to hit $517,016 in 2017
CALGARY – The average price for a resale home in Calgary will balloon to more than half a million dollars by 2017, according to a new real estate report released Tuesday.
The Conference Board of Canada’s Autumn Metropolitan Housing Outlook, commissioned by Genworth Canada, said the average price for all residential property in Calgary will grow from $431,760 this year to $517,016 in 2017.
“Calgary is facing a lack of inventory in particular areas,” said Tanya Eklund, a realtor with RE/MAX Real Estate (Central) in Calgary.
“Buyers looking for land for redevelopment and homes for renovation have been in very short supply and have driven up pricing due to multiple offers and low inventory. Low interest rates, strong unemployment rates, low vacancy rates and an overall strong economy have also added to strength in the Calgary market.”
Calgary’s economy and housing demand continue to thrive as energy sector activity remains healthy. Rising GDP is spurring employment growth,” said the report.
“On the resale housing market front, solid sales will lead to sound price gains this year and next. The new housing market is benefitting from strong absorptions, which are trimming unsold stocks of new units and fostering new construction. The medium term also looks decent.
“Ongoing economic growth will continue to produce gains in resale sales and prices and keep housing starts above their 20-year average. Good housing affordability, measured against local incomes, is an ongoing benefit to this market and allows single-family starts to maintain a high market share compared with other cities covered in this report.”
The report said summertime flooding in Calgary will limit Calgary’s GDP to 3.3 per cent growth in 2013, modest by recent standards. Output will rise a slightly faster 3.4 per cent in 2014, spurred by government-funded rebuilding efforts.
The job market will continue to expand, with annual growth of 2.4 per cent this year and 2.8 per cent in 2014 cutting the unemployment rate from 4.9 per cent this year to 4.6 per cent in 2014. Economic health should continue between 2015 and 2017, with GDP expanding roughly three per cent and employment rising about two per cent each year, it said.
“Calgary’s strong economic fundamentals allowed its resale market to largely shrug off the floods. Seasonally-adjusted sales and the average resale price actually rose during June, the flood month, and have subsequently advanced,” said the report.
“Price growth is accelerating, although increases remain far below boom-era advances. We expect the market to remain balanced and price growth to stay healthy in 2014 and over the following few years.”
The report’s forecast for average prices over the next few years and annual growth rate are:
2013: $431,760, 4.7%
2014: $451,798, 4.6%
2015: $473,470, 4.8%
2016: $497,139, 5.0%
2017, $517,016, 4.0%
Forecast for sales in the resale market for the next few years and annual growth rate are:
2013, 28,111, 5.5%
2014, 28,793, 2.4%
2015, 29,418, 2.2%
2016, 30,027, 2.1%
2017, 30,620, 2.0%
“Unsurprisingly, Calgary’s resale prices are rising briskly. Year-over-year growth has averaged a solid 4.6 per cent in the latest four quarters, including a first quarter jump near eight per cent,” said the report. “These increases will lift Calgary’s average price 4.7 per cent in 2013, the largest gain since 2007 and finally exceeding that year’s peak value. Similar price growth is expected between 2014 and 2016, with a slight tapering in growth to four per cent in 2017.
“These increases will slightly erode local housing affordability. Principle and interest charges on Calgary’s average resale home were under 16 per cent of average household income the last two years and are expected to remain there in 2013. But house prices will rise faster than incomes, pushing the ratio to roughly 20 per cent by 2017. This remains decent, as affordability is better only in Edmonton, Ottawa, and Winnipeg among the cities in this report.”
The report said buoyant housing demand is also energizing the new home market. Absorption of new units averaged 11,200 units in the four quarters to the second quarter of 2013, up 25 per cent from a year earlier. This included a surge to an annualized 15,000 units in the second quarter, the most since 2008. This strength will lift absorptions to a full-year total of 12,140 units in 2013, up 25 per cent from 2012. Another increase of nearly six per cent in absorptions is expected for 2014, but still trailing the peak of 13,700 units reached in 2008.
“Healthy new-unit take-up fuelled a big jump in housing starts to 13,186 units in 2012, more than double the recessionary trough in 2009, but well off peak levels of the last decade,” it said. “We expect starts to ease a modest 2.7 per cent in 2013 as an 11 per cent dip in multiple starts slightly outweighs a seven per cent gain in single-detached starts. For 2014, rebounding multiple starts will fuel a five per cent increase in total starts despite relatively unchanged single-detached construction.
“In the medium term, we expect housing starts to ease slightly, as both single-family and multiple construction dip. By 2017, we expect 11,400 units to get under way; this would slightly outpace the 20-year average of housing starts. While multiple starts are expected to increase their market share, they are forecast to make up only 52 per cent of total starts between 2013 and 2017.”
Calgary top-rated market for overall real estate prospects
Calgary top-rated market for overall real estate prospects
This is great news for buyers … you are buying a home and a great investment – not the case for other provinces.
As we have always been saying … Alberta’s in-bound migration and strong job market will support home prices.
Did you know that Alberta is short 25,000 jobs in the oil field right now? That is going to continue for the medium term! – Mark Herman
Strong economic and employment growth forecast
CALGARY – For the second year in a row, Calgary is the top-rated market in Canada for overall real estate prospects, according to a survey of industry experts.
Calgary kept the top spot with the highest ratings for prospects in three categories – investment, development and homebuilding, said the Emerging Trends in Real Estate report by PwC and the Urban Land Institute.
“The Calgary economy continues to post solid gains, despite the disruption caused by summer flooding,” said the report. “The energy industry, primarily oil, remains strong and will continue to benefit from economic growth around the world.
“Locally, energy and energy service companies have dominated office demand. Economic activity is being supported by growth in both the goods and services sectors. Manufacturing and construction will lead the goods sector, and personal services and transportation and warehousing are the key drivers on the service side.”
The report is based on a survey of over 1,000 industry experts including investors, fund managers, developers, property companies, lenders, brokers, advisers and consultants.
The ratings of other Canadian cities in order following Calgary are: Edmonton, Saskatoon, Vancouver, Toronto, Winnipeg, Ottawa, Halifax and Montreal.
The report said economic activity in Calgary is projected to grow at a 3.3 per cent rate in 2013 and a 3.4 per cent rate in 2014. Employment growth is expected to slow but remain good through the end of this year and into 2014, growing at 2.4 per cent and 2.8 per cent, respectively.
#Mortgage RATES to stay low for a while yet – that is great news!
Below is the technical, boring stuff we read to see where rates are going for you. Just ask us for the short version.
Short version is that the Bank of Canada is going to leave the rates the same for a while yet – like a year.
Long boring version is below.
Canadian Dollar Down in Wake of BOC Dropping Tightening Bias
TORONTO–The Canadian dollar is lower Thursday morning as it struggles with the implications of the Bank of Canada’s erasure of its tightening bias amid a broader retreat in commodity currencies.
The U.S. dollar was at C$1.0409 Thursday, from C$1.0384 late Wednesday, according to data provider CQG.
Its high for the session so far at C$1.0419 fell just shy of resistance around the C$1.0420 area.
The Australian and New Zealand dollars are also lower Thursday amid concerns about monetary policy and banking system liquidity in China. Any threat to economic growth in China puts pressure on commodities and commodity-linked currencies because Chinese demand for commodities is a key support for the asset class.
But the Canadian dollar is also grappling with the implications of the Bank of Canada’s decision on Wednesday to drop its 18-month-old tightening bias, a move some analysts believe could prompt a new round of weakness in the Canadian unit as it undermines the perception the Bank will raise interest rates before other advanced economies.
Currency strategists at UBS said in a report the Bank’s move derailed a rally they had expected to see in the currency.
“Having felt conditions were ripe for a CAD rally, we were taught a harsh lesson on Wednesday by the BOC: never ever underestimate the determination of a small, open economy’s central bank to defy expectations for a positive outlook,” they said.
The tightening effect on the Canadian economy from any gain in the Canadian dollar is simply too big for the Bank of Canada to risk, and the bank wanted to keep policy steady in order to retain maximum policy flexibility, UBS said.
Write to Don Curren at don.curren@wsj.com
YYC & YEG set to lead ALL of Canada for growth
Calgary and Edmonton and all of Alberta continue to grow = housing price support, which is pretty much the theme to 50% of the data I post. Alberta is the only province that is continually growing and we would be competing with China’s growth rate if Alberta were a country.
—
Edmonton housing market overtakes Calgary in investment ranking
Both cities poised to lead Canadian economic growth
CALGARY — Edmonton has overtaken Calgary as the top community in Alberta to invest in residential real estate.
The ranking was done by the Real Estate Invesment Network and released Saturday. Edmonton was second behind Calgary on last year’s list.
“Before the flood hit, Calgary’s real estate market was performing right in tune to the underlying economic fundamentals. Not too hot, not too cold,” said Don Campbell, senior analyst of the REIN Research Institute. “After the floods hit, the rental as well as the housing markets over-performed the underlying fundamentals and have pushed it into the too hot level, but this situation should not last longer than 12 months. We continue to experience zero vacancy rates, strong in-migration, one of the strongest job creation economies in the country. So slowdown of the effect of the post-flood transaction bump will not be felt negatively in the market due to the pent-up demand. Good news overall for Calgary’s market for the coming years.
“Calgary did not, in essence, lose its No. 1 ranking. It is still one of the top places in North America for property investment. However, Edmonton grabbed the No. 1 ranking because it is behind Calgary in its residential and industrial recovery curve. This means that Edmonton’s market, beginning at a lower position in the real estate cycle, should slightly outperform the returns a homeowner or investors will experience in Calgary, which is already 12 to 18 months ahead on the cycle.”
Campbell said both cities are poised to be economic leaders in Canada in 2014 and 2015 and therefore the forecast for in-migration and housing demand remains very strong.
The ranking for other Alberta communities are: 3. Airdrie; 4. Leduc; 5. St. Albert; 6. Red Deer; 7. Fort Saskatchewan; 8. Fort McMurray; 9. Grande Prairie; 10. Lloydminster; 11. Okotoks; and 12. Lethbridge.
Good Economic News for Canada
Good news in Canada easily goes unnoticed. Below is some good stuff:
• Canadian 10-year bond yields touch 2.00%, marking an 8-month high. = MORTGAGE RATES will have pressure to creep up! This is one of the indicators I watch.
• TD Economics has pushed back the first Bank of Canada rate hike to the first quarter of 2014.
• November GDP surprises markets on the upside, growing by 0.3%.
• Small business owners were more optimistic in January, with near-term hiring intentions at a post-recession high.