|
Call Now! 1-866-932-8412 or
Email: info@mortgagegirl.ca |
by Helen Morris,
National Post
Edmonton Mortgage Rates
Securing a great mortgage deal can take a bit of work and planning, but if you are a salaried employee then you will be taking a well-trodden path. Experts and friends and family alike will all be there to offer advice and tell you about their experiences.
However, if you are self-employed, the process can be more complex.
The most straightforward way to qualify for a mortgage as a self-employed individual is for the lender to look at the income on your Canada Revenue Agency notice of assessment for the past two years and see if you qualify for a loan in much the same way as an employee would.
“The first thing I make sure is that the tax filings and financial statements are in order so we can see the track record of their earnings,” says Rob Regan-Pollock, senior consultant at Invis mortgage brokerage in Vancouver. “If the last two years of earnings are sufficient to qualify for the mortgage that they’re looking to take out, then they are a regular-income-qualified file and can put as little as 5% down.”
Insurers such as the Canada Mortgage and Housing Corp. (CMHC) will allow self-employed individuals to increase the income on their notice of assessment by 15% for the purposes of mortgage qualification. This is a generally accepted increase to compensate for non-cash items such as business use of the home. Their website gives a full rundown of the requirements for self-employed borrowers. read the following PDF for more information:
http://cmhc-schl.gc.ca/en/hoficlincl/moloin/hopr/upload/CMHC-Self-Employed.pdf.
“Consistency in income is your best bet [in order to secure a mortgage],” says Carol Bezaire, vice-president, tax and estate planning, at Mackenzie Financial in Toronto. “If you are thinking about going for a mortgage, make sure that over the last two or three years you are consistent in how much income you are bringing in.”
In order to determine your income, CMHC will average your income from the past two years, but if your income has been rising each year for the past four years or more, they will use the most recent year for their calculations.
However, in order to take advantage of certain tax strategies, many self-employed individuals may keep money in their business rather than generating income. If you are unable to qualify based on your verifiable income you can still obtain insured mortgage finance, but CMHC will charge you a higher premium. Since April this year, CMHC only permits you to state your own income if you have been in business for less than three years.
Ranjit Dhaliwal, a mortgage broker with Mortgage Intelligence in Brampton encourages clients to register their business, as the licence or article of incorporation can show if they have been in operation for less than three years.
Mr. Dhaliwal says to get the best rates when stating your own income, many lenders will be looking for mortgage loan insurance unless you can put down a deposit of more than 35%.
The insurers also recommend that lenders demand higher minimum credit scores from borrowers stating their own incomes.
“It’s absolutely essential that they have a good credit score,” says Mr. Dhaliwal. “Self-employed individuals tend to have higher balances on their credit cards, lines of credit and so on because they are using that for their business. If they’re planning on purchasing a house or refinancing a house, maybe bring these balances down a few months before going to see a mortgage broker.”
The early years of self-employment can be a time of financial uncertainty while you establish your business and build up a reputation with customers.
Financial advisors say look before you leap into anymore debt at this time.
“Once you’ve checked your finances and you’ve looked at your credit score and everything else, it may not be the time to buy,” says Ms. Bezaire. “Maybe it’s the time to rent for a little bit, until you get firmer ground under your feet.”
Read more:
http://www.nationalpost.com/
2010 Canadian Housing Observer
Canada Housing and Mortgage Corporation (CMHC) has released the 2010 Canadian Housing Observer, a detailed annual review of housing conditions and trends in Canada and of the key factors behind them.
The annual Housing Observer report examines the state of Canada’s housing from a variety of perspectives, combining national coverage with provincial/territorial and metropolitan detail and discussing influences on housing demand, current market developments, housing finance, housing affordability, and other topics.
Some of the highlights of the 2010 report are:
- Housing-related economic activity accounted for $307 billion in 2009, over one-fifth of Canada’s total gross domestic product.
- The residential construction sector is comprised of numerous labour-intensive small businesses—some 71,000 residential construction firms and 158,000 specialty trade contractors in 2009—that can enter and exit the sector with relative ease, thanks in part to the relatively modest investment in fixed capital required for prospective firms and the extensive use of subcontracting.
- Canada’s Economic Action Plan in Budget 2009 provided a total of $7.8 billion in tax relief and funding of actions to stimulate the economy through housing. When provincial contributions are taken into account, the total stimulus value is $9.2 billion.
- The Government of Canada commitment in figures:
- 2008 of $1.9 billion over five years to invest in housing and alleviate homelessness
- Canada’s Economic Action Plan (Budget 2009) which announced a one-time investment of more than $2 billion over two years to build new and repair existing social housing
- Up to $2 billion over two years in low-cost loans to municipalities through CMHC to fund housing-related municipal infrastructure projects.
- Real estate—which includes principal residences and second homes—accounts for over 40 per cent of the assets of households.
- Throughout Canada, mortgage arrears remained low and mortgages remained available.
Historically low mortgage interest rates benefited home buyers as well as those renewing or refinancing their existing mortgages. - By October 2009, the use of the Bank of Canada’s regular short-term liquidity facilities had declined to nearly half of the level of its peak use of $40 billion in December 2008.
- The Insured Mortgage Purchase Program had lower auction volumes in 2009 than in 2008, and was ended in March 2010. It resulted in purchases through auctions of $69 billion of National Housing Act Mortgage-Backed Securities
- Sales of existing homes through the Multiple Listing Service® (MLS®), which had trended lower in 2008, began to recover in January 2009. Overall, MLS® sales reached 465,251 units in 2009, up from 431,823 in 2008.
- Historical lows in interest rates, when coupled with a small inventory of existing homes listed for sale, helped to push the average MLS® price up by 5.0 per cent in 2009 to $320,333.
- To a large extent, resale price gains in 2009 reflected a rebound back to levels that prevailed prior to the economic downturn. In particular, measured from the fourth quarter of 2007 to the fourth quarter of 2009, resale home prices rose 7.1 per cent. This translates to an average annual rate of price growth of 3.5 per cent over this period, which is in-line with average historical rates.
Read More:
2010 Canadian Housing Observer
CMHC Forecasts Stable Housing Market Into 2011
The Canada Mortgage and Housing Corporation (CMHC) issued a forecast for the remainder of this year’s housing activity, and into 2011. By their calculation, the future of the Canadian housing market looks encouragingly stable.
Bob Dugan, Chief Economist for the CMHC, points out that, in late 2009 and early 2010, sales activity included much pent-up demand from early 2009. With the demand now exhausted, and with interest rates starting to creep upwards, the pace of activity in the resale market will finally ease. Dugan predicted that as MLS® sales ease and inventory levels increase, the existing home market will move toward balanced conditions in the next two years.
“Canadian housing markets have recovered from the low levels posted in 2009,” noted Dugan. “Moving forward, housing starts will moderate as activity becomes more in-line with long term demographic fundamentals. New measures for government-backed mortgage insurance introduced by the Government of Canada that took effect on April 19, 2010 will continue to support the stability of Canada’s housing market.”
From a pricing perspective, with the forecast of an improved balance between demand and supply, the average MLS® price is expected to stabilize through the end of 2010, and then rise modestly in 2011.
As CMHC points out, all real estate is local, and the trends in your area — or even in your building! — may not necessarily follow the national forecast. If you’re thinking of buying or selling, you are advised to obtain a detailed history of local real estate activity, specific to condominiums, and first-hand knowledge of new properties on the market.
More than any other province, first time home buyers in Alberta are expecting to pay less than the asking price for their home (71% vs. 65% nationally). One-quarter (26%) expect to pay asking price and only 3% expect to pay more than asking price.
These are the findings of the first TD Canada Trust Home Buyers Report, which surveyed Canadians who have purchased their first home in the past 2 years or who intend to purchase a home in the next 2 years.
Albertans also report putting down as much as they can afford for a down payment (95% vs. 88% nationally). 65% say they saved or plan on saving for two years or less for their home purchase. Despite the majority putting down as much as they can afford, only 25% plan to have more than a 20% down payment. The remaining 75% will require their mortgage to be insured by organizations like the Canada Mortgage and Housing Corporation (CMHC). Two-thirds (65%) are worried about being able to afford their home if interest rates rise.
“It’s only natural to want your first home to be the home of your dreams, but it is important to be realistic about what you can afford as a down payment and what that will mean for both the type of home you buy and for your mortgage payments over time,” says Farhaneh Haque, Regional Sales Manager, Mobile Mortgage Specialists, TD Canada Trust. “I advise first time home owners to consider a larger down payment because a 10% or greater down payment will make a big difference. It may mean that you need to save longer before buying your first home, but it will pay off in the end. Speak with a representative at your bank about setting up an automatic savings plan to help you save.”
73% of those surveyed in Alberta have or plan to have a fixed-rate mortgage.
“Historically you are more likely to save interest costs with a variable rate or short-term mortgage option, so if they can handle some volatility then I recommend buyers choose a variable rate. If people are adverse to interest rate fluctuations then a fixed-rate is best,” says Haque.
Albertans are doing their homework:
Nearly all home buyers are making informed financial decisions before buying their home. Top activities before buying a home include getting pre-approved for a mortgage (94%), learning about mortgage options (93%), calculating closing costs (89%) and speaking to a mortgage lender before shopping for a home (89%). However, land transfer tax, closing costs and property taxes were the top costs that buyers felt unprepared for (53%, 51% and 48% respectively).
What type of home do Albertans want?
59% of Albertans prefer fully detached homes, followed by condominiums (17%) and semi-detached homes (14%). If two homes were at the same price point, 68% would prefer a newer home over an older home. Albertans are split about the preferred location for their home; for the same price, 55% would prefer a smaller home closer to work and 45% would prefer a larger home that requires a longer commute to work.
Home shopping process:
People in Alberta do their due diligence when searching for a home, spending almost 9 months looking for a home and viewing on average 13 homes. They spend a lot of time shopping in Alberta because they plan to live in their first home for longer than people in other provinces. In fact, only 5% of people plan to spend less than 3 years in their first home (compared to 11% nationally). 39% plan to spend more than 10 years in their home or to never sell.
About the TD Canada Trust Home Buyers Report:
Results for the TD Canada Trust Home Buyers Report were collected through a custom online survey conducted by Environics Research Group. A total of 1,000 completed surveys were collected between June 8-21, 2010, including 100 from Alberta. All participants either purchased their first home within the past 24 months, or intend to purchase their first home within the next 24 months.
About TD Bank Financial Group
The Toronto-Dominion Bank and its subsidiaries are collectively known as TD Bank Financial Group. TD Bank Financial Group is the sixth largest bank in North America by branches and serves more than 18 million customers in four key businesses operating in a number of locations in key financial centres around the globe: Canadian Personal and Commercial Banking, including TD Canada Trust and TD Insurance; Wealth Management, including TD Waterhouse and an investment in TD Ameritrade; U.S. Personal and Commercial Banking, including TD Bank, America’s Most Convenient Bank; and Wholesale Banking, including TD Securities. TD Bank Financial Group also ranks among the world’s leading online financial services firms, with more than 6 million online customers. TD Bank Financial Group had CDN$574 billion in assets on April 30, 2010. The Toronto-Dominion Bank trades under the symbol “TD” on the Toronto and New York Stock Exchanges.