Christmas Vacation Round-up

I will be taking a break for a week or so. Here is some real-estat news that caught my attention recently.

Gregory Klump and the CREA come up with a "weighted average" to show that prices have fallen less than the 9.8% of the traditional average. I haven't had time to examine this but I suspect the weighted average is reasonable. However I wonder why they didn't introduce it when prices were increasing. Hmmmm.....

Read the Globe and Mail's article how high-risk mortgages crept north. Here is a post I had last year last year on the subject.

Mike Fotiou has a post comparing the first 16 days of December to 2007 in Calgary. SFH prices down 6-7% condos down 10-12%.

Merry Christmas everyone!

The 40-year mortgage

Longer amortization is becoming more popular in Canada. Here is what RBC had to say about longer term mortgages.

Longer amortization mortgage products are a large and growing share of monthly mortgage originations, particularly in the high ratio mortgage segment. This development has unfolded within the past year and a half as the market has gone from standard 25-year options towards 30-, 35- and 40-year mortgages.

With a 40-year mortgage the amount of equity built through payments is very low. With a $300,000 loan at 6.25% it works out to about $3,600 after 2 years. Probably less than property taxes an owner would have to pay. Also combined with a high ratio mortgage it takes YEARS to pay off the insurance using a 40-year mortgage. With $30,000 down the CMHC insurance is $7,800 for a 40-year and $6,000 for a 25-year.

Not building equity too quickly paying mortgage insurance for 4 years.

"GIT-R-DONE" with non-conforming loans

"GIT-R-DONE" summarizes the attitude mortgage brokers have getting people into non-conforming loans in Edmonton. This article in the Edmonton Real Estate weekly goes over many of the available options with these products. It describes these options as blessings for the consumer without any cautions to the drawbacks. There is also the attitude that any form of ownership is superior to renting:

Rents have also escalated dramatically and rental units are scarce, leaving tenants discouraged and financially strained, looking for a better way to put a roof over their heads but hoping to stay in Edmonton.

How to stay in Edmonton without renting?


"GIT-R-DONE" with higher debt service ratios:

non-conforming lenders, available primarily through mortgage brokers, may allow as much as 50% of the monthly income to be used for both housing and consumer debt.

"GIT-R-DONE" with creative and non-legal income:

Some examples of acceptable income are self-employed income, as little as one day in business, part-time employment, overtime earnings and even non-declared tips. Other commonly used income includes GST cheques, child tax, child support and alimony payments (both court-ordered and not), pensions, foster parent income, workers’ compensation payments and even rental income from a roommate or illegal basement suite.

"GIT-R-DONE" with whatever this means:

In some cases non-taxable income received can be grossed up by as much as 25% to help qualify for the mortgage.

"GIT-R-DONE" with longer amortization:

Another way to improve the chances of qualifying for a mortgage is by stretching the repayment period out over a longer amortization period, as much as 40 years.

Just be sure to "GIT-R-DONE":

Don’t talk yourself out of trying to buy because you think you can’t qualify with today’s prices. With the hundreds of mortgage products available to borrowers today through a mortgage broker, the odds are certainly in your favour!

Update: I thought i was being original but there appears to be a Git-r-done mortgage shop already open for business.