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Calgary Real Estate News

Mortgage Loan Insurance: Quick Reference Guide

This handy quick reference tool provides helpful information to submit applications to CMHC for homeowner and small rental loans, for all CMHC programs: Purchase, Improvement, Newcomers, Self-Employed, Green Home, Portability, and Income Property.

Benefits of mortgage insurance

Some of the benefits of CMHC mortgage loan insurance include:

  • Available for purchase of an existing residential property with or without improvements and for new construction financing.
  • Our Green Home program offers a partial mortgage loan insurance premium refund of up to 25%. Refunds are available directly to borrowers who buy, build or renovate for energy efficiency using CMHC-insured financing. Find out more with our Green Home Program.
  • Self-employed borrowers with documentation to support their income have access to CMHC mortgage loan insurance.
  • Our portability feature saves money for repeat users of mortgage loan insurance by reducing or eliminating the premium payable on the new insured loan for the purchase of a subsequent home.

Loan-to-Value (LTV) ratios

For homeowner loans (owner-occupied properties), the Loan-to-Value ratio for 1–2 units is up to 95% LTV. For 3–4 units, the ratio is up to 90% LTV.

For small rental loans (non-owner occupied), the ratio is up to 80% LTV.

Minimum equity requirements

For homeowner loans, the minimum equity requirement for 1–2 units is 5% of the first $500,000 of lending value and 10% of the remainder of the lending value. For 3–4 units, the minimum equity requirement is 10%.

For small rental loans, the minimum equity requirement is 20%.

Purchase price / lending value, amortization and location

For both homeowner and small rental loans, the maximum purchase price / lending value or as-improved property value must be below $1,000,000.

The maximum amortization period is 25 years.

The property must be located in Canada and must be suitable and available for full-time, year-round occupancy. The property must also have year-round access including homes located on an island (via a vehicular bridge or ferry).

Traditional and non-traditional down payments

A traditional down payment comes from sources such as savings, the sale of a property, or a non-repayable financial gift from a relative.

A non-traditional down payment must be arm’s length and not tied to the purchase and sale of the property, either directly or indirectly such as unsecured personal loans or unsecured lines of credit. Non-traditional down payments are available for 1–2 units, with 90.01% to 95% LTV, with a recommended minimum credit score of 650.

Creditworthiness

At least one borrower (or guarantor) must have a minimum credit score of 600. In certain circumstances, a higher recommended minimum credit score may be required. CMHC may consider alternative methods of establishing creditworthiness for borrowers without a credit history.

Debt service guidelines

The standard threshold is GDS 35% / TDS 42%. The maximum threshold is GDS 39% / TDS 44% (recommended minimum credit score of 680). CMHC considers the strength of the overall mortgage loan insurance application including the recommended minimum credit scores.

Interest rates

The GDS and TDS ratios must be calculated using an interest rate which is the greater of the contract interest rate or the Bank of Canada’s 5-year conventional mortgage interest rate.

Advancing options

Single advances include improvement costs less than or equal to 10% of the as-improved value.

Progress advances include new construction financing or improvement costs greater than 10% of the as-improved value. With Full Service, CMHC validates up to 4 consecutive advances at no cost. For Basic Service, the Lender validates advances without pre-approval from CMHC.

Non-permanent residents (homeowner loans only)

Non-permanent residents must be legally authorized to work in Canada (i.e. a work permit). Mortgage loan insurance is only available for non-permanent residents for homeowner loans for 1 unit, up to 90% LTV, with a down payment from traditional sources.

-CMHC

Calgary Real Estate News

Housing Market Inventory on the Rise

As expected, slow sales this quarter have persisted through March in the City of Calgary. This is not a surprise, after stronger growth in sales at the end of last year following the announced changes to the lending market.

First quarter sales totaled 3,423 units, nearly 18 per cent below last year’s levels and 24 per cent below long-term averages. Easing sales and modest gains in new listings caused inventories to rise and months of supply to remain above four months.

“Economic conditions are slowly improving, but it has not been enough to outpace the current impact of higher lending rates and more stringent conditions,” said CREB® chief economist Ann-Marie Lurie.

“We are entering the most active quarters in the housing market with more inventory, which could create some price fluctuations. However, the improving economy is expected to prevent overall prices from slipping by significant amounts.”

While prices trended down on a quarterly basis, they remained relatively unchanged over last year’s levels due to modest gains in the detached sector offsetting declines in the apartment sector.

The citywide benchmark price for detached product averaged $502,000 in the first quarter. This is slightly lower than the fourth quarter of last year, but comparable to levels recorded in the first quarter of last year. In March, the detached price reached $503,800, 3.6 per cent below pre-recession highs, but one per cent above the lows recorded during the recession.

“The market today is better than what we experienced at the peak of the recession,” said CREB® president Tom Westcott.

“You can find good value if you’re looking to buy a home, and you can also get good value if you’re selling. Being well-informed, in any economic condition, is the key, because there are differences in the market depending on what type of property it is and where it is located.”

Detached market inventories in the first quarter of 2017 were low compared to historical standards. This year, detached inventories have averaged 2,573 units over the first quarter, 10 per cent below first quarter averages recorded during 2015 and 2016.

Spring will have more inventory than last year, slowing progress on price recovery. However, the amount of price adjustment will vary depending on competing supply by location and product type.

-CREB

Calgary Real Estate News

What to know if you’re considering a mortgage from an alternative lender.

Samantha Brookes has been warning Canadians to take a close look at the clauses in their mortgage contracts for years, but her refrain has become a bit more prevalent in recent months.

Since the Office of the Superintendent of Financial Institutions’ mortgage stress test was implemented in January, the founder of the Mortgages of Canada brokerage has seen “a huge influx” of Canadians who fail to qualify for a bank mortgage turning to alternative lenders that range from risky loan sharks to larger, more conventional companies like Home Trust.

While alternative lenders can provide a lifeline for Canadians who have run out of other financing options, Brookes said they come with pitfalls for those who don’t bother looking at the fine print.

“You need to read those contracts,” she said. “(With an alternative lender), the interest rates are higher, the qualifying rate is higher than if you were going with a traditional bank and they are going to charge one per cent of the mortgage amount (as a lender’s fee) for closing, so that means your closing costs increase.”

Alternative lenders tend to offer less wiggle room on their terms, so Brookes said that means you should pay special attention to another dangerous term she’s seen slipped into mortgage contracts: the sale-only clause.

It’s less common, Brookes said, but if left in, it might mean the only way you can break your mortgage is by selling your home. She usually makes sure it’s nixed from her clients contracts immediately.

She also advises mortgage-seekers to research a potential lender’s reputation, which can easily be done online. Looking up some lenders will reveal their involvement in growing strings of court cases, she said.

“If they are constantly in court fighting with consumers for money, are you willing to put yourself at risk with that kind of person?” Brookes recommended asking yourself.

Still, she said alternative lenders “that don’t end up in court every two seconds” are out there and can offer a good mortgage, if you do your research.

Broker Ron Alphonso has seen what happens when you don’t look into your lender. He recently heard from a couple who borrowed $100,000 via a paralegal posing as a broker, who then convinced the couple to give the money back to him so he could invest it on their behalf. Instead of investing it, the paralegal disappeared to Sri Lanka with the funds, leaving the couple on the hook for the money and resulting in eviction from their home.

“They got very, very poor advice,” Alphonso said. “Apparently the person that arranged the mortgage was an agent and paralegal that has since been disbarred. If they had a lawyer working for them, at least the lawyer could have said (before they signed the mortgage) maybe this isn’t right.”

Alphonso recommends seeking advice from a broker, who he said should also be questioned about how tolerant a lender will be if you were to default on one of your payments.

Some lenders quickly force their clients into a power-of-sale or foreclosure, while others will find a way to work out an arrangement that will allow them to keep their home.

“If you are already in some kind of financial problem and you go to a lender that is not flexible, you make the situation worse,” Alphonso said. “If you miss one payment, (within) 15 days you can be in power-of-sale.”

When that happens, he often sees people refuse to leave their home and try to fight the power-of-sale or foreclosure. They take the matter to court and end up spending tens of thousands of dollars in legal fees that can eclipse any remaining equity they might have in their home.

If they lose their case, which Alphonso said happens often, they end up with a massive lawyer’s bill, no equity to cover it and no place to live.

That’s part of why he said those seeking financing should have an exit strategy to get out of any mortgages they sign with an alternative or private lender with a higher interest rate.

“Your goal should always be to get to a lower interest rate,” he said. “If they don’t go in with a true goal of how to get out of this private mortgage, there will be a problem down the road.”

Alphonso recommended looking for an open mortgage, where you can prepay any amount at any time without a compensation charge or a prepayment limit that you would often find in a closed mortgage.

Open mortgages come with higher interest rates, but give buyers the option to switch to a cheaper lender if something happens. However, switching does often come with penalties, he said.

Because some agents and brokers don’t give enough information or fully explain penalties and clauses, he said the best way to keep out of trouble when seeking a mortgage is to ask lots of questions and understand what you’re getting into before signing on the dotted line.

-TARA DESCHAMPS, Globe & Mail

Calgary Real Estate News

Home sales fall nearly 17% in February from a year ago: CREA

Canada’s national average home price was down five per cent and sales volume was down 16.9 per cent in February compared with a year ago, evidence that many buyers raced to purchase before new mortgage rules came into effect.

There was also a 6.5 per cent decline in transactions between January and February, the second month-over-month decline and the lowest reading in nearly five years, the Canadian Real Estate Association reported Thursday.

CREA’s latest monthly statistics show that home sales were down in February in almost three quarters of all local housing markets tracked by the national association.

“The drop off in sales activity following the record-breaking peak late last year confirms that many homebuyers moved purchase decisions forward late last year before tighter mortgage rules took effect in January,” said Gregory Klump, CREA’s chief economist in a statement Thursday.

The number of homes sold nationally in December hit a record high, ahead of a new stress test for uninsured mortgages that requires potential buyers to show they can service their mortgage payments if rates increase.

The federal banking regulator’s tougher rules, which took effect Jan. 1, now require a stress test to be applied even to borrowers with more than 20 per cent down payment.

To qualify for federally regulated mortgages, borrowers must be able to afford interest rates that are two percentage points above the contracted rate or the Bank of Canada’s five-year benchmark rate, whichever is higher.

The stricter residential mortgage lending regulations introduced by the Office of the Superintendent of Financial Institutions were aimed at reducing risk in the market amid high housing prices.

Homebuying activity has also been dampened by the Bank of Canada’s move in January to hike interest rates to 1.25 per cent. The quarter-point increase was the central bank’s third since last summer, after hikes in July and September. In January, Canadian home sales fell by 14.5 per cent from the previous month, according to CREA’s figures.

The national average house price for homes sold in February 2018 was just over $494,000, down five per cent from a year earlier. But excluding Toronto and Vancouver, the country’s most active and most expensive markets, the national average price was just under $382,000, up 3.3 per cent from $369,728 a year ago.

The number of newly listed homes in February increased by 8.1 per cent, following a plunge of more than 20 per cent in the month prior. However, new listings across the country in February were still 6.4 per cent below the 10-year monthly average and 14.6 per cent below the peak reached in December 2017. New home listings in February were also below the levels recorded every month last year except January 2017.

-Globe & Mail

Calgary Real Estate News

Condominium Property act. New changes April 1.18

RECA News

Beginning April 1, 2018, if a consumer is buying a new condominium in Alberta from a developer – an Alberta lawyer must hold the buyer’s purchase deposit in trust while the condominium is being built. Service Alberta announced this change in October 2017.

Prior to April 1, a real estate brokerage or the condominium developer could hold a buyer’s deposit in trust.

Real estate professionals who are representing buyers during their purchase of a new condominium from a developer should confirm the developer uses a lawyer who is an active member of the Law Society of Alberta, and that they operate a trust account under the Legal Profession Act. You must also ensure your clients write their deposit cheques to the developer’s lawyer, in trust, and not to the developer or a real estate brokerage.

Under this new rule, a developer who receives a buyer’s deposit must ensure their lawyer deposits it in the lawyer’s trust account within three business days of receiving it. If the developer agrees, a buyer can have their own lawyer hold their deposit in trust.

Take a few minutes to review the Condominium Developer Info Sheet from Service Alberta for more information about additional Condominium Property Act changes coming on April 1.

Real Estate Council of Alberta

T: 1-888-425-2754

F: (403) 228-3065

communications@reca.ca

www.reca.ca

Calgary Real Estate News

What Does Donald Trump Mean For Canada’s Housing Market?

U.S. President Donald Trump sent shockwaves through Canada’s economy this past week, first promising punishing tariffs on steel and aluminum imports, then at the last minute exempting Canada from those tariffs, at least temporarily.

It’s becoming painfully clear that Trump’s policies (or pronouncements, or whims, or whatever they are) have the potential to upend Canada’s economy, and with it, the lives of Canadians. So maybe it’s time for this real estate-obsessed nation of ours to pose a question that until recently seemed too obscure — or maybe just too weird — to ask: What does Donald Trump mean for Canada’s housing market?

It may seem counter-intuitive, but Trump’s aggressive protectionism might actually work to support house prices.

The Bank of Canada this week decided against yet another interest rate hike, and among its reasons was this statement: “Trade policy developments are an important and growing source of uncertainty for the global and Canadian outlooks.”

Analysts took that to mean the BoC is worried that Trump’s protectionist measures, such as the steel and aluminum tariffs or potential withdrawal from NAFTA, could harm Canada’s economy. And if Trump manages to scare the BoC into a more dovish outlook on the economy, it will mean fewer interest rate hikes in the months to come.

That might actually be good news for Canada’s heavily indebted mortgage borrowers, who are under increasing pressure these days. We’ve seen the BoC hike interest rates three times since last summer, and major mortgage lenders have followed suit. Meanwhile, new mortgage rules are forcing some homebuyers to scale back their ambitions.

The result is a slowing housing market, both nationally and in the two super-pricey markets of Toronto and Vancouver. And the Bank of Canada might now be getting worried about the impact of that slower housing market on Canada’s economy.

“Notably, household credit growth has decelerated for three consecutive months,” the Bank noted in its decision Wednesday.

Canada has been growing increasingly reliant on its housing market for economic growth in recent years, so a slowdown could take a real bite out of employment, and that, in turn, could mean a broader economic downturn.

The irony of it is that, if Trump were to abandon his protectionist measures and the BoC were to assume a more rosy outlook, it would likely mean more rate hikes ahead, and more downward pressure on housing.

All of which is not to say we should be hoping for Trump to slap Canada with massive tariffs or cancel NAFTA; a move like that would cause all sorts of economic damage of its own, regardless of housing. But if Trump pulls the trigger on his protectionist agenda, the Bank of Canada may well respond by freezing interest rates, and some analysts say it may even reverse course and start dropping them.

So a trade war with Trump’s America, while likely to be ugly, will at least help keep those property values from crashing. That may be the closest thing to a silver lining in this whole mess.

– Daniel Tencer  Senior Business Editor, HuffPost Canada

Calgary Real Estate News

High real estate prices are sparking a surge in unorthodox housing – and new ways to think about insuring a home

From tiny homes to laneway dwellings, Canadians are embracing an increasing range of unique and unusual abodes. But whatever you choose to call “home,” chances are a team of insurance professionals have been working on coverage specially designed to underwrite you.

Tiny homes are increasingly common, especially in urban areas where housing costs have skyrocketed, says Stefan Tirschler, CIP, product and underwriting manager, Square One Insurance Services Inc.

“In the beginning, tiny homes were lived in by a small community of people experimenting with a new way of living,” he says. “Today, we’ve seen zoning changes across the country, and that’s resulted in a wide range of small dwellings on the market. This includes anything from miniature frame homes, portable frame homes on wheels, tiny homes built from shipping containers, laneway homes—even yurt-style homes.”

Tirschler notes that underwriting for tiny homes tends to build on safety standards for existing homes or materials used in the structure.

“For example, a shipping container home is likely to be similar in coverage to a standard home once it’s been delivered,” he says.

Smaller prefabricated or manufactured homes have also become more common. A manufactured home is typically delivered to the site on a chassis, lifted off and mounted onto a foundation. A slight variation, a park model home, remains on the chassis, but can be lived in as a permanent residence.

“The question we ask ourselves as underwriters is, where do these homes fit and to what standard do they need to be built?” says Michael Hewett, senior product manager, leisure and lifestyle, with Aviva Canada Inc. “The Canadian Standards Association, for example, offers standards for manufactured homes and park model homes. We also look to these same standards as a basis to underwrite tiny homes that are built in a similar manner.”

He notes, however, that owners of manufactured homes should seek an appropriate amount of coverage for additional living expenses.

“A manufactured home may have lower value, but it could take up to year to order a new home from a manufacturer,” Hewett says. “We allow customers living in these homes to buy additional coverage for living expenses.”

Homes designated as heritage buildings also offer unique challenges for underwriters, says Jackie Murison, FCIP, CRM, ICP, portfolio and innovation specialist with The Commonwell.

“The policy must take into consideration when the home was built, whether someone of cultural or historical importance lived in it, or any unique building materials that must be used in a rebuild,” she says. “You couldn’t replace plaster walls with drywall or stained glass with regular glass. The homeowner won’t have a choice on that. Properly valuing those rebuilds can be a big challenge.”

She notes that the Town Hall in Lindsay, Ont., is a heritage building that happens to be two feet out of alignment because the builder shifted the surveyor’s pegs.

“If there was an insured loss, that same alignment would have to be considered,” she says.

High-value homes also require custom coverage, says Anthea McFarland, CIP, senior vice-president, personal insurance at HUB International.

“In many cases, we’re talking about homes with an average value of up to $1,000 per square foot, reflecting such building materials as the most valuable marble and granite finishes,” she says. “We send out specialist appraisers to these homes to come up with a number that covers exactly how much it would cost to replace the custom detail in these homes.”

Often, Canadian owners of high-value homes also own properties in the U.S., the Bahamas or the UK, and brokers such as HUB International work with a global network of insurers to cover all of the dwellings under a single policy.

“High-net-worth insurers also offer a range of additional policy coverage,” says McFarland. “These can cover anything from appliance failure and maintenance, kidnap or ransom insurance, and even cyberbullying insurance, to cover the services of a therapist for child victims. Some clients also request standalone insurance policies to cover specialized art collections, including van Goghs and Warhols. As a broker for this client group, we endeavour to be a one-stop shop.”

Canada’s housing market continues to evolve in fresh new ways.

“Technology continues to reduce the distance between customer and underwriter,” says Tirschler. “We’re much better positioned to take notice of customer needs and expectations and adapt and respond to them much more quickly – wherever and however they choose to live.”

This article was created by Content Works, Postmedia’s commercial content division, on behalf of the Insurance Institute of Canada.

-Calgary Herald

Calgary Real Estate News

How to choose the right Agent Part 3 – Things you need know before you list your home

Over the last two days we have talked about your Realtors networks and Passive vs. Active Marketing but there are a few things that you should know about listing your home that will set you up for success when you are ready to put your house on the market!

  1. Neat and Tidy

We know that you love your home, and you might have kids and kids can be messy, or maybe you have pets and sometimes pets smell. Realtors have homes, with all of these same things, I promise we don’t all live in pristine real estate marvels, in fact if you walk into my house I can promise you will be tripped by a hockey stick or a dog toy, BUT I cannot emphasize this enough, your home needs to be spotless for photos and for showings. it sucks, we all know this, it is hard to keep your home in show home shape, but it will not sell if it isn’t. Try and have it “show home” clean when you have your Realtor interview so that they can get a clear picture of what your home looks like on its best day!

2. Listen to your Lister

You are obviously going to have a conversation with your Realtor about the listing price of your home. Realtors have tools that they use to identify what your home should be listed at, these tools (called CMA, which we will talk about in a later post) combined with a savvy understanding of the current market conditions your Realtor can usually pin point pretty close what your home should be listed at and ultimately what it should sell for. One fatal flaw in home owners is that they don’t listen to this number, typically because they think their house is worth more. Some Realtors will push back because of knowledge and expertise, some will take the listing at a higher price tag, simply to get your listing… when this happens you can find yourself in a vortex of price dropping and haggling with offers when and if they come in. If your home is priced right (not too high or too low) it will sell. Don’t be afraid to ask questions about list price, but ultimately if your Realtor has stats to back the price point… take their advice.

3. Clear the Clutter 

This is your home, of course you would have personal touches, nik naks and frames. maybe some crazy feature walls, or novelty rooster collections. We know you love these items, we do too. BUT potential buyers don’t. Most people when viewing a home cannot look past the esthetic and see true potential of their own items in a home, in fact they have the same problem with empty spaces. This is why a staged home will always sell faster 10/10 times. You can start this by packing up any personalized items and clutter. particularly toys, and collections, photos and other chachkeys that can be distracting for the potential buyer. Think of it as a head start on packing for your move out!

4. Be flexible and realistic

Thinking about upcoming showings can be overwhelming and daunting, but showings are good, they are the pass that takes you right to the touchdown, showings is where your offer will come from. The worst part; showings aren’t typically a 9:00-5:00 job. Now, this is still your home, you call the shots. It is really important that you are as flexible and realistic when setting schedules with your agent. If you have a 2 year old, maybe any showings after 7:00pm aren’t acceptable, maybe you need 24 hours notice before a showing, these are normal requests and completely acceptable! it is your home after all. Set clear expectations with your agent, but be mindful that if they call you and someone wants to see your house in the next 3 hours and you say no… that could have been the person who wanted to buy it.

5.  Be patient, and communicate 

If you have questions about your listing, the market, the last showing… the weather you need to know that you should be asking! Your agent should be keeping you informed about your listing, but if you’re not getting what you need, call them! Some agents even have review software that will generate feedback immediately following a showing, really good agents follow up with the buyers agent to try and close a deal, or at the very least find out why they didn’t choose your home, and the Great agents bring in their own buyers… from that network we talked about!

Calgary Real Estate News

How to choose the right Agent Part 2 – Active Marketing

How important is marketing in Real Estate you ask? In short… it is incredibly important, in fact it can mean the difference between a sale and you sitting frustrated on your property for months, it can also be the difference in your listing becoming stale in the market because it sits for too long with little to no exposure.

I like to think that every Realtor has their own tips and tricks that they use to generate business, employ smart marketing techniques and do the very best for their client. The truth is, at the end of the day it breaks down to two types of agents. Active and Passive Marketers.

  • Passive Marketing

Every Realtor does this, and some pawn it off as highly effective marketing tools, but at the end of the day they are waiting for the business to find them. Waiting for the buyer to call. Passive marketing is listing the home on MLS, putting it on a website, (that may or may not generate google ad words). There is nothing wrong with passive marketing, and every Realtor should do it because there is always the online buyer who shops around and can and will find you on MLS, but it isn’t exceeding expectations and it isn’t going above and beyond.

  • Active Marketing 

Active marketing is when the rubber meets the road. We talked in my previous post about SELRES_9462f936-7d9e-4c3b-a82d-5fcb73a642d1NetworksSELRES_9462f936-7d9e-4c3b-a82d-5fcb73a642d1and this has a lot to do with that. Active marketing is when your Agent is actively searching the market for a buyer for your home. They can do this through their network, through lead capture services that they can deploy through various social media channels, and their website. Your Realtor should create a brand for your home. Does your Realtor use a professional photographer? are they a professional photographer? do they do home staging? what do they charge for home staging? All of these tools tie together and make your home sale something extra special, not just another MLS number on the proverbial YYC Real Estate shelf. Now, marketing costs money! The right kind of marketing costs lots of money! This is why you hire a Realtor, so you don’t have to navigate this alone. Always make sure to ask what the price tag is attached to any marketing plan when you are discussing commissions, offering photos and home staging is great, but ensure you know what that will cost you in the end. We will talk about where your money is going in a later post!

Kevin D’Costa Fun Fact! Did you know that I am an accredited staging professional RE. Did you also know that I offer this service to all of my clients? The best part, you rarely have to run out and buy thousands of dollars worth of furniture, usually just some minor esthetic and décor items are enough!

The point I am trying to make is this; When you’re interviewing a Realtor do not be afraid to ask them what exactly they are going to do for you? how are they going to market your home? Now that you know if you get the “I have a great webpage and I will list it on MLS” are the wrong answers, you can ask for more. expect more!