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The price of the average Canadian home sold in October was up almost six percent from a year ago at $481,994.1 That’s just the average; these numbers will vary depending on where you live. In Toronto, for example, the average price of a detached home is more than $1.3 million.2 In Winnipeg, the average price is $284,799 while in Fredericton, its $159,370.3

Still, with the rising cost of home prices, increasing taxes, and unforeseen expenses, it can be extremely difficult to save for a 20% down payment. But, with the help of a mortgage professional like Canadalend.com and Mortgage Default Insurance, Canadians that are unable to scrape together a 20% down payment can still get on the property ladder.

Mortgage Default Insurance

Mortgage default insurance—more commonly referred to as mortgage insurance—helps Canadian homebuyers with a smaller down payment. Qualified borrowers can purchase a home with as little as five percent down.

In Canada, mortgage insurance is needed for all high-ratio mortgages. That is a mortgage with a down payment of 20% or less. Three different companies provide mortgage insurance in Canada : Canada Mortgage and Housing Corporation (CMHC), Genworth Financial Canada, and AIG.

How Mortgage Insurance Works

Mortgage insurance protects the lender in case the borrower defaults on the mortgage. This gives lenders the ability to offer those with low down payments the same kind of low interest rates they would otherwise offer to homebuyers with more equity.

The cost of mortgage insurance depends on two factors: the type of mortgage and the amount of the down payment. Just like any other insurance policy, there is a premium that has to be paid. It is charged to the lender who, in turn, passes the cost of the premium onto the borrower.

The mortgage insurance premiums typically range from 0.5% to 2.9% of the total mortgage amount. The lower the down payment is, the higher the premium. For example, a premium could be as low as 0.5% for a mortgage with a 20% down payment but could be as high as 2.75% for a mortgage with a five percent down payment.

A mortgage insurance premium can be paid in a lump sum upon closing, but it is normally added to the mortgage and paid out over the lifetime of the mortgage.

Qualifying for Mortgage Default Insurance

• To qualify for mortgage default insurance, you must meet a number of conditions:4
• The home must be located in Canada
• The minimum down payment is five percent on the first $500,000 and 10% on the rest.
• Mortgage default insurance is not available on home purchased for more than $1.0 million
• Total monthly housing costs should not be more than 32% of gross household income
• Total debt should not be more than 40% of the total gross household income

Pros and Cons of Mortgage Insurance

On the plus side, mortgage insurance allows homebuyers to purchase a home with a lower down payment. This opens up the Canadian housing market to tens of thousands of potential homebuyers who would otherwise not be able to buy one.

While it can be difficult to get life insurance, mortgage insurance has a high acceptance rate. In some instances, it can be used to protect your family from mortgage default in the unlikely event of disability or death. This can provide peace of mind for those who have risky jobs or health concerns.

Unfortunately, homebuyers have to pay for this privilege. Mortgage insurance adds to the cost of the mortgage , anywhere from 0.5% to 2.9% of the total mortgage amount.

You also have to pay the full premium amount, even if you earn more after you get the mortgage and are able to pay it down more quickly. As the amount of the mortgage declines the premium amounts stay the same.

Canadalend.com, Mortgage Brokers Working for You

There’s more to consider when looking to buy your dream home than the mortgage and interest rates. If you’re interested in seeing how much of a mortgage you qualify for, the different types of mortgages, and mortgage insurance, the independent, licensed mortgage professionals at Canadalend.com can help. They can also give you the specific premium costs and benefits of using mortgage insurance.

Canadalend.com is the nation’s leading low-cost private mortgage solution provider . Because Canadalend.com agents are independent, they are able to draw from hundreds of banks and lenders to help you find the mortgage best suited to meet your needs.

We’ll sit down with you and evaluate your financial situation and find the right lender.
The mortgage brokers at Canadalend.com can also get you pre-approved for a mortgage or loan in 24 hours or less.

If you’re interested in seeing what kind of mortgage you qualify for, contact Canadalend.com today or apply online and a Canadalend.com mortgage specialist will set up an appointment at your earliest convenience.

Sources:

1. “Canadian Home Sales Rise in October,” Canadian Real Estate Association, November 15, 2016; http://www.crea.ca/news/canadian-home-sales-rise-in-october/.
2. “GTA Realtors Release Monthly Resale Housing Market Figures, Toronto Real Estate Board, November 3, 2016; http://www.trebhome.com/market_news/release_market_updates/news2016/nr_market_watch_1016.htm.
3. “Comparing Housing Costs in Canada and the U.S.,” CTV News, November 16, 2016; http://bc.ctvnews.ca/from-86k-to-3-3m-comparing-costs-of-housing-in-canada-u-s-1.3155283.
4. “What are the General Requirements to Qualify for Homeowner Mortgage Loan Insurance?” Canadian Mortgage and Housing Corporation, last accessed November 16, 2016; https://www.cmhc-schl.gc.ca/en/co/moloin/moloin_003.cfm.

With interest rates near record lows, many first-time homeowners are wondering if they should take the proverbial leap onto the property ladder. But before visions of signing on the dotted line and painting your new living room run through your head, there are a number of things you need to consider.

A house is probably going to be the biggest purchase you ever make, and chances are you probably won’t be able to buy it upfront in cash. Like most Canadians, you’ll need to get a mortgage.

The experts at Canadalend.com know mortgage shopping can be daunting, even at the best of times. Are you getting the best interest rate, and are the terms and conditions best suited to your economic situation and lifestyle?

Shopping around, asking questions, comparing, and negotiating could end up saving you thousands of dollars. For example, if take out a 30-year, $250,000 mortgage with a five percent interest rate, you would end up spending $233,139 in interest alone! Get that same loan at 4.5% and you pay $206,016 in interest; saving over $27,000!

Big banks may be the first place that pops into your mind when considering a mortgage. However, you have to ask yourself: will the big banks help you secure competitive rates and terms? What if you have bad credit? Will they look out for your best interests, or their bottom line?

10 Benefits of Using a Mortgage Broker

Buying your first house and getting your first mortgage can be an overwhelming experience. Thanks to soaring housing prices in Toronto, many find the process of applying for a mortgage to be the most intimidating part.

While many turn to Canada’s big banks to help them secure a mortgage, refinance, or renew a mortgage, more and more people are turning to a mortgage broker. Why should you use a mortgage broker? Below is a list of some of the top reasons to choose a mortgage broker over a traditional bank or lender.

They Represent You

One of the top reasons to use a mortgage broker is that they are financial experts that work on your behalf and not on behalf of a particular bank.

A loan officer at a big bank works for just the one bank. And they get paid by the bank, either through commissions or salary, or a combination of both.

This means they will only recommend their own financial products to you, whether they suit your needs or not, just so they can sell something. Or, because they get a salary, they may not be looking out for your best interest.

Instead of being limited to one set of financial products from one lending institution, a mortgage broker works with hundreds of different lenders to make sure you get the best-priced, best-structured financial product possible. Moreover, they get paid a commission from the lender, not from you.

They Save You Time

What else does a mortgage broker do for you? A mortgage broker will help you save time and do all the legwork when it comes to paperwork and negotiating with a lender. On top of that, they can help you get preapproved for a mortgage. And, going forward, they can be your personal contact for everything related to your financing.

They Offer Lower Interest Rates

According to a Bank of Canada report, shopping around and negotiating skills are key to getting the best deals on a mortgage. The paper also noted that borrowers who use a mortgage broker pay lower rates .

Mortgage brokers have good relationships with a large number of different types of lenders and are able to negotiate lower rates.

They Let You Secure a Mortgage with Bad Credit

Because of stricter lending rules in Canada, it’s become difficult for those with bad credit, who are self-employed , have low or unstable income, have a short record of employment, or have declared bankruptcy to get a mortgage with a traditional lender.

Mortgage brokers can help those turned down by traditional lenders secure loans. That’s because they work with hundreds of different lenders and specialized institutions, many of which specialize in helping those with bruised credit get a mortgage.

They Help You Find the Best Mortgage Lenders

Mortgages are complicated; as a result, there is no one-size-fits-all approach. Everybody’s needs are different, and there is more to consider when getting a mortgage than just the interest rate. Do you want a variable or fixed mortgage? What is the amortization period and payment schedule?

Because mortgage brokers are independent , they are not limited to the products they can offer you. As your broker, they will find the best lender and mortgage product specifically designed for your needs, whether it comes from a Chartered Bank, Trust, Insurance Company, or private lender.

Banks do not have a network of lenders. Every home loan application the bank receives is from the same lending institution.

In Many Cases, There Is No Need to Pay a Mortgage Broker

Another benefit of using a mortgage broker is that, in most cases, you don’t need to pay for their services. Mortgage brokers receive a fee from the financial institution that arranged your mortgage.

Expert Advice

Canadalend.com agents are licensed professionals. Each of our independent agents have taken courses, passed exams, and undergone extensive training. Not all brokerages are created equal; don’t be afraid to ask your agent about his or her qualifications and years of experience.

Independent

Unlike banks, brokerages work for you, not the lender. At Canadalend.com , our goal is to help you navigate the often confusing world of mortgages. Our agents draw from all available mortgage products that match your needs to provide you with impartial advice and make recommendations. Our agents can also refer you to other qualified professionals, from property appraisers to real estate lawyers.

Getting You Approved

At Canadalend.com, we know how anxious people get when applying for a mortgage. That’s why it’s our mission to get you approved in 24 hours. The experienced agents at Canadalend.com can help even those with bad credit receive approval.

Stress-Free

Canadalend.com takes care of the details so you don’t have to. We work hard at ensuring your mortgage experience goes smoothly, all the way through to the closing. We work with all major banks and lending institutions and know how to present your application and improve your chance of approval. We aren’t done until you’re 100% satisfied!

Canadalend.com, Mortgage Brokers Working For You

Is it better to use a mortgage broker or bank? The choice is clear. If you are ready to purchase your dream home, refinance, or renew your mortgage , let the licensed, independent, agents at Canadalend.com help you find the best mortgage with the best options.

Canadalend.com is the nation’s leading low-cost, private mortgage solution provider . Because Canadalend.com agents are independent, they are able to draw from hundreds of banks and lenders to help you find the mortgage best suited to meet your needs.
We’ll sit down with you and evaluate your financial situation, help you determine what kind of mortgage you qualify for, and find the right lender.

The mortgage brokers at Canadalend.com can also get you pre-approved for a mortgage or loan in 24 hours or less. Getting pre-approved will show you how much of a mortgage you can qualify for. The pre-approval rate lasts for 120 days and is protected even if interest rates rise.

If you’re interested in seeing what kind of mortgage you qualify for, contact Canadalend.com today or apply online and a Canadalend.com mortgage specialist will set up an appointment at your earliest convenience.

Source:

1. “Discounting in Mortgage Markets,” Bank of Canada, last accessed November 9, 2016; http://www.bankofcanada.ca/wp-content/uploads/2011/02/wp11-3.pdf.

How New Mortgage Rules Will Impact First-Time Homebuyers

The Federal government introduced new stricter mortgage lending rules on Monday, October 17, that will seriously limit the amount of money Canadian homebuyers can borrow. The move is designed to help cool the red-hot housing markets in the Greater Toronto Area (GTA) and Metro Vancouver. The tighter lending rules will also help prepare first-time homebuyers for higher interest rates.

Not matter how you look at it, though, under the new mortgage rules, first-time homebuyers will not be able to borrow as much as they could before October 17, 2016. Whenever a home is purchased with less than a 20% down payment, the mortgage needs to be insured.

Beginning October 17, everyone interested in buying a home under $1.0 million needs to pass a stress test to ensure they can pay their mortgage should interest rates increase. First-time buyers need to show they can repay their mortgage against a higher five-year rate. The posted rate at Canada’s big banks is often significantly lower, often by two percentage points or more.

If homebuyers cannot pass the five-year test, they will not qualify for a mortgage. To qualify for a mortgage, they’ll have to come up with a larger down payment (which is difficult if you live in Toronto) or lower their expectations.

With the new mortgage rules, it is estimated that the amount first-time homebuyers can afford will fall by around 18%. That’s significant.

For example, before the new rules kicked in, first-time buyers with a family income of $80,000 and a down payment of $40,000 would have been approved for a maximum price of $520,000. Under the new rules, that same family will only get approved for a property with a maximum price of $425,000.

Impact of New Mortgage Rules on Housing Prices

The new mortgage rules are designed to ensure first time home buyers can handle an interest rate hike and cool the red-hot housing market. Unfortunately, for first-time homebuyers in Toronto , the new lending rules give less buying power at a time when real estate prices are soaring.

In September, the average price of a home in the GTA increased 20.4% year over year to $755,755. The price of a semidetached home in the region increased 23% year over year to $1.29 million. The price of the average townhome was up 24% at $655,466; semidetached sales increased 19.7% to $887,916, while the cost of a condo was up 6.5% at $446,612.1

The new mortgage rules will not have any impact on first-time homebuyers looking for a detached home. Homes valued at more than $1.0 million require the standard down payment of 20% and are therefore not insured.

There aren’t a lot of first-time homebuyers looking at homes priced above $1.0 million. And most semidetached homes and townhouses are priced below the $1.0 million threshold.

The one area that will be impacted by the new mortgage rule changes is the Toronto condo market, where the average sales price is well below $1.0 million and is a popular choice for first time buyers will down payments of less than 20%.

Where competition was spread around to a wide variety of housing types and price points, with the new mortgage rules, it’s possible that more and more first time home buyers will be competing for more affordably priced homes. At the same time, those who own a higher priced home may find it more difficult to sell their property.

Canadalend.com, Helping First-Time Homebuyers in the GTA Secure a Mortgage

Canada’s new stricter mortgage rules will be a shock to many first time home buyers. It’s now a lot more difficult for first time home buyers to qualify for a mortgage . The new mortgage rules also make it more difficult for others looking to step onto the property ladder, including those who are self-employed, have bad credit, or unstable income.

What many potential home buyers don’t know though is that the new mortgage rules only apply to those seeking a mortgage from one of Canada’s big banks or other traditional financial institutions. Canada’s non-traditional lenders are not bound by the new mortgage rules.

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Fortunately, you don’t have to use one of Canada’s big banks to secure a mortgage. As the country’s leading low-cost private mortgage solution provider, the licensed agents at Canadalend.com can help you get the mortgage that’s right for you. That’s because Canadalend.com agents are independent.

Canada’s major lending institutions will only tell you about their financial products, whether they’re suited to your needs or not. At Canadalend.com, our agents work for you. Because we’re independent, we have access to hundreds of lenders, and we work to get you the best financial products available at the best rates.

We’ll evaluate your financial situation, help you figure out how much of a mortgage you qualify for, and help you find the right lender.

If you’re interested in seeing what kind of mortgage you qualify for, contact Canadalend.com today or apply online and a Canadalend.com mortgage specialist will set up an appointment at your earliest convenience.

Sources:

1. “GTA Realtors Release Monthly Resale Housing Market Figures,” Toronto Real Estate Board, October 5, 2016; http://www.trebhome.com/market_news/release_market_updates/news2016/nr_market_watch_0916.htm.

What Are the New Canadian Mortgage Rules?

Sweeping new mortgage requirements were introduced in Canada by the federal government on Monday, October 17. While the tighter mortgage rules in Canada are designed to cool the housing markets in Toronto and Vancouver, they could also make it difficult for first-time home buyers everywhere else in the country to qualify for a loan.

First, the government closed a loophole for non-residents. Before the new mortgage rules kicked in, non-residents could claim a capital gains exemption for selling a principal residence if they were not a resident in Canada in the year they acquired the property. This will impact those who try to flip houses and not pay the capital gains tax.

Under the new mortgage rules, the government also restricts insurance on mortgage loans with a maximum amortization period of 25 years and homes with a purchase price of less than $1.0 million, As well, borrowers must have a minimum credit score of 600.

Before the new, stricter lending rules kicked in, buyers with a down payment of at least five percent of the purchase price but less than 20% needed to pass a stress test to ensure they could afford to cover their mortgage payments when interest rates rise.

As a result of Canada’s changing mortgage rules , everyone now has to qualify for a loan based on the five-year posted mortgage rate. The difference between the posted and contract rates is often two percentage points higher for mortgages with terms of five years or more.

Even though a potential home buyer in Toronto could get a mortgage approved at 2.5% from a lender, they now have to qualify at the Bank of Canada’s posted rate of 4.64%. If they can’t pass the stress test, they’ll be turned down for a mortgage, even though they don’t actually have to pay the extra money.

This means many first-time home buyers in Toronto will not be able to qualify for an insured mortgage , which requires total carrying costs of the home (mortgage, insurance, property taxes, and heating costs) to not exceed more than 39% of the family’s gross income. Instead, many first-time home buyers in Ontario and elsewhere will qualify for smaller loans.

How will first-time home buyers with less than a 20% down payment be impacted by the new mortgage rules? A buyer who was once eligible for a $300,000 mortgage on a five-year fixed rate, with five percent down, will now only qualify for a $237,000 mortgage.

Under the old mortgage rules, a first-time home buyer with a family income of $80,000 could have qualified for a mortgage of $400,000. Under the new mortgage rules, the same buyers would be approved for a mortgage of $320,000.

What this means is first-time homebuyers will need to consider either increasing the size of their down payment or lowering their expectations.

What Are the Effects of the New Rules on Existing Mortgages?

The stricter lending rules will not just impact first-time home buyers. Those looking to sell their properties will also be affected by the new mortgage rules in Ontario in 2016 . In fact, the impact of new mortgage rules means what used to be a seller’s market in Toronto and Vancouver is going to become a buyer’s market. But it’s going to come with a lot of restrictions.

Those who currently own homes in Toronto and other major urban centres may be negatively impacted by the changing mortgage rules, especially if they are refinancing or selling, as they may lose some of the equity built up in their home. That’s because their home’s value is based on the buyer’s affordability; less affordability could result in a decrease in their home’s value/equity.

Whether you’re a buyer or seller, the new mortgage rules will have an impact on your future. Ultimately, you need to make sure you are informed on all of the changes to the mortgage rules and regulations before purchasing, selling, or refinancing.

Non-Traditional Lenders Not Affected by New Mortgage Rules

Canada’s new tighter lending rules only impact those who turn to Canada’s big banks. Canada’s non-traditional lenders are not bound by the new mortgage rules. And a growing number of Canadians are turning to mortgage brokers. In fact, more than 10% of all mortgages originate from non-traditional lenders.

In addition to helping Canadians who do not qualify under the new mortgage rules, non-traditional lenders can also help those who are self-employed , have bruised credit, or have unreliable income to secure a mortgage.

Canadalend.com, Helping First-Time Home Buyers Secure a Mortgage

Ottawa has just made it a lot more difficult for first-time home buyers to qualify for a mortgage. They have also made it difficult for those who are self-employed, are single-income earners, have bad credit, or have unstable income to qualify for a mortgage.

Fortunately, you don’t have to use one of Canada’s big banks to secure a mortgage. As Canada’s leading low-cost, private mortgage solution provider , the independent, licensed agents at Canadalend.com can help you overcome the new stricter mortgage rules.

Not only that, they’ll help you find a mortgage best-suited to your long-term financial and lifestyle needs. How does Canadalend.com do it? While the big banks only offer their own financial products, Canadalend.com has access to hundreds of different lenders.

If you’re interested in seeing what kind of mortgage you qualify for, contact Canadalend.com today or apply online and a Canadalend.com mortgage specialist will set up an appointment at your earliest convenience.

Sources:

1. Isfeld, G. “New mortgage rules will ‘reduce the risk’ a housing crash poses to Canada’s economy,” Financial Post web site, October 3, 2016; http://business.financialpost.com/personal-finance/mortgages-real-estate/new-mortgage-rules-will-reduce-the-risk-a-housing-crash-would-pose-to-canadas-economy.