James Pasternak, Financial Post 

It is a legal document that stretches about 30 pages and runs about 10,000 words. Its execution takes no more than a couple minutes and when the ink dries on the signature lines, more times than not it is never read and gets slipped into a file folder, largely forgotten.

But despite its casual handling, the residential mortgage agreement governs the largest debt of over 5 million Canadians and within its fine print are the provisions that can make or break a household’s financial future. There’s a lot at stake. At the beginning of 2004, Canadians held $517.7-billion in mortgages.

“I think most of the major bank representatives do a good job of explaining these provisions to their clients but I think most people zone out and don’t really listen. All they think about is getting a mortgage at 3.8% and ‘I want to get this done’,” says Len Rodness, Partner, of Toronto-based law firm Torkin Manes (www.torkinmanes.com)

But beyond the interest rate there are a wide range of options and clauses in the mortgage agreement that deserve scrutiny. In a competitive lending environment, shopping for the right mortgage can bring significant savings and peace of mind through the amortization period.

Take the case of Hamilton, Ont., couple Kathy Funke and Dan Perryman. When they were shopping for a home in 2003, the interest rate was the top priority. They also wanted flexible prepayment options and accelerated weekly mortgage payments. To leverage the competitive interest rate they received, they went with a variable rate mortgage. They paid off a $230,000 mortgage in 5 ½ years.

“The power in these things comes from people who know how to manage [the] various privileges. It has a huge [savings] effect on amortization….The ideal thing is to understand what your privileges are and then combine them to your advantage — to what you can afford to do; to fit your lifestyle and ability to pay,” says Jeff Atlin of Thornhill, Ont. based Abacus Mortgages Inc.

And privileges there are. You just have to shop for them.

Accelerated Payment Options: Getting the loan paid earlier

It just seemed like yesteryear when everyone was paying their mortgage on the 1st of every month. Now, in addition to the first of the month option, some of the more common options are accelerated weekly and biweekly or semi-monthly options.

These frequency options result in long term savings. For example if one selects the accelerated biweekly option one is making 26 payments in a year, the equivalent of two prepayments per year over the monthly option. When a $150,000 mortgage amortized over 25 years is paid under an accelerated bi-weekly option, the debt is retired in 21 years and the interest savings are around $18,000.

Toronto resident and electrician Karl Klos, 26, selected “weekly rapid” payments on a mortgage amortized over 35 years. The mortgage payments are made each week but he added the “rapid” option by increasing the amount paid. Mr. Klos says that the payment frequency will pay off his mortgage in 25 years instead of 35 years.

“I can’t understand why anybody would do monthly payments anymore now that the banks offer the ability to have weekly payments. It may be a cash flow situation. If you do a weekly mortgage payment it could save you a significant amount of money,” says real estate lawyer Len Rodness.

Restating mortgage agreement vows

It doesn’t take long after one signs a mortgage agreement to hear from a neighbour or friend that they received a better rate. So when you dig out the mortgage agreement see if there’s a clause that allows borrowers to renegotiate their agreement before the end of the term. The bank might use a model called “blend and extend.” For example, if one has a $100,000 mortgage at 6% mortgage with two years to go they might blend it with the current five year rate of 3.79%. So according to mortgage broker Atlin when they average out 2/5 of the mortgage at 6% and 3/5 are at 3.79%, the customer will get a new reduced rate of about 4.6%. But the borrower is tied to the bank for another 5 years.

Putting spare cash against the mortgage with no penalty

Almost all mortgage agreements have options for mortgage prepayment without penalty. Klos’s mortgage agreement allows prepayments of up to 15% of the annual balance. Most financial institutions provide prepayment options in the 10-20% range. Some lenders allow borrowers to make the prepayment any time during the year while other agreements restrict the prepayment to the anniversary date.

Also, some financial institutions allow customers to make multiple smaller prepayments during the year as long as they don’t exceed the annual limit. Funke and Perryman were able to retire their $230,000 mortgage in 5 ½ years primarily because of the prepayment provisions in their mortgage.

Coming up with more money for each payment

Some lenders will allow borrowers to increase the payments without penalty. Depending on the wording of the mortgage agreement the increased payments can range from around 15% to 100% of the current payment. So if one is paying $1,000 per month under the 15% rule, a borrower can raise it to $1,150 per month. Klos’s weekly rapid payment plan was based on him raising the weekly payments by 5%.

“Payment and amortization are a function of each other. Any time you raise the payments you shorten the amortization; any time you shorten the amortization you raise the payment,” says Mr. Atlin.

The mortgage prenuptial: Penalties for getting out of your mortgage

“A mortgage is a contract first and foremost. It is a contract between a borrower and the lender,” Atlin says. And if someone hasn’t felt that cold business approach during the course of their mortgage, they certainly will if they try to leave early. Most borrowers pay out their mortgages when they sell their house, win a lottery or are offered a better interest rate by another company. Until recent years, the standard penalty for breaking a mortgage agreement was three months of interest. Paying out a $200,000 mortgage could amount to a $2,500 penalty.

In many current mortgage agreements, the penalty for an early exit (and not extending) is either three months of interest or an interest differential, whichever is greatest.

The mortgage differential penalty can be quite expensive. If a mortgage is at 5% interest rate and you have three years left in your term, the bank will use the difference between the agreement rate and the current market rate to calculate the penalty. Using the 5% case above, let’s say the current 3-year mortgage is available at 3.5%. The bank will charge the difference between 5% and 3.5% for the balance of your term.

Bank customers who have an open mortgage with a variable rate can usually pay them out with little or no penalty. Some mortgages are closed for the first few years and then revert to an open option. The penalties, if there are any, would be much lower once the mortgage converts to an open one. If one can, it would be best to wait until the mortgage kicks into open status.

When paying out the mortgage try to have some of it calculated as your annual no-penalty prepayment option. Therefore, if you are paying out a $200,000 mortgage and you also have a 20% per annum prepayment option you might be able to save penalties on $40,000. If the mortgage prepayments can only be done on the anniversary date, make sure that is the day you select to pay out the mortgage.

Mortgage Lifelines

Mortgages are often signed and sealed with the borrower having every intention to pay. However, the world is paved with best intentions and recessions are everyone else’s problem until the boss comes into your office with the bad news.

“That is something that nobody turns their attention to at the time. The original document is done. The legal issues are in that original document. For a practical point of view given the state of the economy these [clauses] might be something beneficial,” said Len Rodness of Torkin Manes.

Some mortgages include a Rainy Day option. This option allows the borrower to skip one principal and interest payment each mortgage year. The interest portion of the skipped payment or payments will be added to the outstanding principal balance.
Read more: http://www.financialpost.com/personal-finance/mortgage-centre/story.html?id=2631845#ixzz0iTZkol9e

Nicolas Van Praet, Financial Post Montreal — The era of fearing Canada’s high-flying loonie might finally be passed.

Trading near US98.6¢, the dollar is now the closest it’s been to one-on-one status with the U.S. greenback since July 2008. And Jim Flaherty, Canada’s finance minister isn’t flinching.

“We see where it’s at now and it’s competitive,” Mr. Flaherty said of the currency’s impact on the Canada’s economy in an interview on Bloomberg Television. The economy could be at risk if the loonie rose to an uncompetitive level but that is not expected to happen, the minister said.

There was a time not so long ago when a loonie edging closer to parity with the U.S. dollar would trigger hoots of outrage from business leaders and federal opposition ranks alike, demanding the Canadian government do something to tame the bird or face ballooning welfare rolls and corporate bankruptcies. Just last summer, Mr. Flaherty himself expressed worry about the loonie’s quick rise.

But the country has now lived with a Canadian currency that’s stayed above US90¢ for much of the past year after hitting a high of US$1.10 in 2007. And today, that indignation may be over amid a raft of data suggesting Canada’s economy is surging back to life.

The S&P/TSX Composite Index on Tuesday rose to its highest level has since September 2008. Oil prices firmed up past US$81 a barrel. New government data showed labour productivity improvements blasted past expectations to 1.4% in the fourth quarter — the fastest rate in almost 12 years.

The governing Conservatives are also taking heart in this past Friday’s labour force survey, which showed Canadian employers hired more people than expected. Employment has been on an upward trend since July 2009 as 159,000 jobs have been added over the past eight months. The economy grew at an annual rate of 5% in the fourth quarter.

But another key element is what’s happening with manufacturers, who typically get hit when the Canadian dollar rises because the goods they sell outside the country become more expensive.

Fresh manufacturing figures Tuesday added to the evidence that Canadian companies are adjusting better than in the past to currency swings, as long as those swings aren’t gigantic. January manufacturing sales rose 2.4% to $44.6-billion, a fifth straight month of growth for a sector hit hard by weak demand during the recession.

“For manufacturers, this situation now is really like a bad remake of Groundhog Day. We’ve seen this before,” said Jeff Brownlee, spokesman for the Canadian Manufacturers and Exporters association. “What we’ve been saying to our members is that the new normal is the dollar at par or beyond. Par is not a ceiling. And if you can compete at par, and if the dollar doesn’t go there, you’re going to be making money.”

Examples abound of Canadian exporters which have reinvented themselves or stepped up their game to stay alive and win in the face of a higher dollar. Kitchener, Ont.-based Christie Digital Systems Canada, Inc. realized the televisions it was making could no longer compete with cheaper-made Korean and Chinese rivals. So it switched its vocation and now makes advanced video projection systems used at concerts around the world.

Others have taken less dramatic steps, protecting themselves with currency option contracts, retooling plants with new machinery, or engineering their operations to ensure U.S. denominated revenue was used to pay U.S. suppliers.

“Exporters to the U.S. have had fair warning and they’re tried to adjust to it. So maybe to some extent they’ve got used to it,” said Dale Orr, an independent economist. “They’ve lost a little bit of steam in terms of getting public sympathy or government sympathy, that’s for sure. It isn’t there like it was.”

Behind the latest numbers and the success stories however lies the stark fact that nothing dramatic has changed in the competitive fundamentals of Canadian companies over the past three years, warned Don Drummond, chief economist at TD Bank Financial group.

To take just one measure, although Canada’s private sector productivity soared in the fourth quarter, it was its first uptick in more than a year and it fell during the recession as the United States’ output per hour worked rose sharply. Productivity still trails that of our trading partner.

“Canadian businesses have not become more competitive this time around than they were the last time the dollar was reaching parity,” Mr. Drummond said. “There’s no tangible evidence looking at the productivity and the cost-effectiveness of the business sector to suggest that they’re in a better position this time around. In fact if anything, they’re worse.”

Read more:

http://www.financialpost.com/news-sectors/story.html?id=2690063#ixzz0iQxuJjCR

Clarification on Qualifying Interest Rate   On February 16th, the government announced new parameters regarding the application of the government guarantee supporting the mortgage insurance industry, but did not stipulate the rules around qualifying interest rates. Effective April 19th, 2010, the qualifying interest rate used to assess borrower eligibility will change only for loans with an LTV greater than 80% as follows.   Fixed-Rate & Variable-Rate Mortgages For loans with a fixed-rate term of less than five years and for all variable-rate mortgages, regardless of the term, the qualifying interest rate is the greater of:

• The benchmark rate
• The contract interest rate

For loans with a fixed-rate term of five years or more, the qualifying interest rate is:

• The contract interest rate

Mortgages with Multiple Interest Rates (eg, Multi-Component Mortgages) Each component must be qualified using the applicable criteria defined above.   CMHC defines the benchmark rate as the Chartered Bank – Conventional Mortgage Five-Year rate that is the most recent interest rate published by the Bank of Canada in the series V121764 as of 12:01am (ET) each Monday, which can be found at: www.bankofcanada.ca/en/rates/interest-look.html

  CMHC Self-Employed Policy Changes   Mortgage loan insurance applications submitted to CMHC on or after April 9th, 2010 will include different criteria for self-employed borrowers without traditional third-party validation of income.   CMHC is reducing the maximum LTV for the Self-Employed Product Without Third-Party Validation of Income as follows:

• For purchase and portability transactions, the maximum LTV is being reduced from 95% to 90%
• For refinances, the maximum LTV is being reduced from 90% to 85%

The CMHC Self-Employed Product Without Traditional Third-Party Validation of Income is intended for self-employed borrowers who have difficulty providing documentation for their current income level. Typically, these are borrowers who recently became self-employed.   Accordingly, self-employed borrowers who have been self-employed in the same business for more than three years will not be eligible under this product. CMHC continues to require that the borrower have a minimum of two years of experience in the same field. This can include time spent working as a non-self-employed worker in the same field.   As CMHC has found that commissioned income can be relatively easily substantiated, borrowers who earn income through commission will no longer be eligible for the CMHC Self-Employed Product Without Traditional Third-Party Validation of Income

The MBABC has confirmed that the following will be the qualifying interest rate on new high ratio mortgage applications as of April 19th.

For loans with a fixed term of less then 5 years and for all variable rate mortgages, regardless of term, the qualifying interest rate is the greater of:

• the benchmark rate

• the contract interest rate

For loans with a fixed term of 5 years or more, the qualifying interest rate is:

• the contract rate

For mortgages with multiple interest rates, each component must be qualified using the applicable criteria defined above.

CMHC defines the benchmark rate as the chartered bank conventional mortgage 5 year rate that is the most recent interest rate published by the Bank of Canada in the series V121764 as of 12:01 am (Eastern Time) each Monday and which can be found at http://bankofcanada .ca/en/rates/interest-look.html.

The MBABC has also confirmed that the following changes will be implemented to CMHC’s Self-Employed Product without Traditional Third Party Validation of Income as of April 9th.

CMHC is reducing the maximum LTV for self employed products without third party validation of income as follows:

• For purchases and portability transactions , the maximum LTV is being reduced from 95% to 90% and
• For refinance transactions, the maximum LTV is being reduced from 90% to 85%

March 2 (Bloomberg) — The Bank of Canada kept its benchmark interest rate at a record low today, and said that inflation and economic output have been higher than policy makers expected, signaling rate increases in coming months.

The target rate for overnight loans between commercial banks remained at 0.25 percent, where it’s been since April, as predicted by all 22 economists surveyed by Bloomberg. The bank also repeated a pledge to leave it unchanged through June unless the “current” inflation outlook shifts.

The economy grew at a 5 percent pace in the fourth quarter, Statistics Canada said yesterday, faster than the bank’s Jan. 21 prediction of 3.3 percent. Inflation has also accelerated close to the central bank’s 2 percent target, suggesting the bank could raise rates before the June commitment ends, said Derek Holt, an economist at Scotia Capital in Toronto.

“They are signaling a bias shift here that primes the path for rate hikes, potentially earlier than markets are expecting,” Holt said in a telephone interview. “They could hike now as far as I’m concerned.”

The Canadian dollar gained 0.9 percent to C$1.0316 against the U.S. currency at 9:14 a.m. in Toronto, from C$1.0414 yesterday.

Firmer Inflation

“Core inflation has been slightly firmer than projected, the result of both transitory factors and the higher level of economic activity,” the Ottawa-based bank said in a statement. Fourth quarter growth came from “vigorous domestic spending and further recovery in exports.”

The bank said the expansion, which was the fastest in almost a decade, pushed Canada’s output to a level “slightly higher than the Bank had projected.” Governor Mark Carney has said there must be a transition towards private expenditures instead of government stimulus to create a sustained recovery.

The bank’s statement dropped a reference made in January to inflation risks being “tilted slightly to the downside.” The statement also omitted a reference to the central bank having “flexibility” even with the key interest rate close to zero.

“What’s not in the statement is at least as important as what’s in it,” Holt said. “Removing the reference to inflation risks to the downside, that signals the bank is worried that core inflation is overshooting its expectations.”

Sending a Message

“It doesn’t take huge changes in words to send a message,” said Doug Porter, deputy chief economist with BMO Capital Markets in Toronto before the announcement. “They have to slowly but surely set the landscape for rate hikes.”

Canada’s annual inflation rate was 1.9 percent in January, the fastest pace in more than a year, Statistics Canada said Feb. 18. The so-called core inflation rate, which excludes gasoline and seven other volatile items, rose 2 percent, underscoring what Carney has called “stickiness” in that rate.

Carney has also said Canada’s economy will operate with “slack” through the middle of 2011. Growth will be curbed by the Canadian dollar’s strength and a low volume of U.S. orders, the bank reiterated today. Canada’s dollar appreciated 25 percent against the U.S. dollar over the past 12 months to about 96.6 U.S. cents.

“It’s better to move sooner than later but be less aggressive,” said Yanick Desnoyers, assistant chief economist at National Bank Financial in Montreal. He predicts an April rate increase.

Spare Capacity

Statistics Canada also revised its earlier growth figures to show the country’s first recession since 1992 was deeper than thought, with a 7 percent annualized contraction in the first quarter of last year.

The capacity left in the economy means the bank can wait until after its June commitment ends to raise rates by a quarter point, Porter said. “It would take an awful lot to push the bank into an earlier move,” he said.

The bank should raise its key lending rate in half-point moves after June, University of Western Ontario professor Michael Parkin said in a Feb. 23 paper. Taking the rate to 3.75 percent by mid-2011 is needed to keep inflation in check as an economic recovery is “taking hold,” Parkin wrote for the C.D. Howe Institute, a research group chaired by former Bank of Canada Governor David Dodge.

The Bank of Canada will probably raise the key rate to 0.75 percent in the third quarter and to 1.25 percent by the end of the year, according to the median forecast of economists surveyed by Bloomberg News. A separate survey for the U.S. shows economists don’t expect the Federal Reserve to raise its benchmark rate to 0.75 percent until the fourth quarter.

A 300k mortgage can go up $120 a month with the new suggested rate hikes of 50basis point increases that can happen 4-6 times throughout the 2nd half of 2010 and through 2011.

Call 604-802-3983 or tune into The Mortgage Show with AMP of the year Canadawide Angela Calla on CKNW AM980 7pm to learn everything you need to know about our changing mortgage market.

Paul Vieira, Financial Post   

OTTAWA — Pressure on the Bank of Canada to move early on raising interest rates mounted Monday after data on fourth-quarter gross domestic product suggested the economy is roaring its way out of recession after recording the fastest pace of growth in nearly a decade.

The central bank could provide hints of a change Tuesday morning when it releases its latest statement on interest rates. Its plan for almost a year has been to conditionally keep its benchmark rate at 0.25% until July in an effort to pump up economic growth after the great recession.

Data from Statistics Canada suggest the emergency-level rates have worked their magic, perhaps faster and better than anticipated.

The economy expanded 5% in the final three months of 2009, blasting past market expectations for a 4% gain – and the bank’s own 3.3% forecast – and setting the stage for robust growth this quarter. It is also the fastest pace of quarterly economic growth since late 2000. Further, the data were solid across the board, with personal consumption and net trade contributing to the performance.

Third-quarter data were also revised upward, with growth of 0.9% as opposed to the original 0.4% reading.

This comes on top of January inflation data that indicated price increases have moved closer to the central bank’s 2% target earlier than envisaged.

“With growth being stronger than expected and inflation sticky … we remain of the view that the Bank of Canada has the full green light to hike as emergency conditions have passed and with it justification for sticking to the zero lower bound on rates,” said economists Derek Holt and Karen Cordes from Scotia Capital.

Yanick Desnoyers, assistant chief economist at National Bank Financial, said a rate hike could come as early as next month, when data might show the output gap – or the amount of slack in the economy – is narrowing faster than the central bank expected.

He added the headline GDP data might be underestimating how quickly economic slack is being absorbed. For instance, gross domestic income – or the sum of all wages, corporate profits and tax revenue – climbed by 8.5% in the quarter, the best showing since 2005. And that follows a 4.5% gain in the third quarter.

Sheryl King, chief economist and strategist at Bank of America/Merrill Lynch Canada, said she expects a rate hike in June, based on a belief the central bank will want to see through its conditional pledge for as long as possible.

Among the data points she said she found most encouraging was a 4% gain in real wage growth – defined as gains in household income excluding transfers from governments. The last time there was growth in this category was prior to the recession.

“This signals that risk taking and organic growth is coming back in Canada,” she said.

Of course, not all analysts believe the data will push Bank of Canada governor Mark Carney to veer off course. Douglas Porter, deputy chief economist at BMO Capital Markets, said the data surely raises the odds of a July rate rise but anything earlier than that remained remote. Analysts at TD Securities also shared a similar view.

Also, the data contained one key blemish – a 9.2% drop in machinery and equipment investment by Canadian companies, which does not bode well for efforts to boost abysmal productivity levels.

The GDP data attracted investors, as the Canadian dollar gained a full US1¢, to US96.01¢, on the possibility of an early rate hike.

Canadian growth should remain robust as the global recovery takes hold. Business surveys released Monday indicated manufacturers continue to lead the recovery, with factory activity expanding last month across Asia, the United States and Europe.
Read more: http://www.financialpost.com/news-sectors/economy/story.html?id=2628952#ixzz0gySOg5Bz

Mortgage Bytes

New mortgage rules

Paul Vieira, Financial Post with files from Garry Marr in Toronto 

OTTAWA — Jim Flaherty, the Finance Minister, says he is targeting “reckless” speculators who buy up multiple condominium units in the country’s biggest cities with new rules introduced yesterday that will make it tougher for Canadians to get a mortgage.

The reforms were submitted after nearly a week of non-stop warnings from people ranging from a prominent money manager to former Bank of Canada governor David Dodge about an impending housing bubble. The concern was that the real estate market was getting ahead of itself, as buyers took advantage of record-low interest rates to acquire homes.

In introducing the tougher mortgage requirements, Mr. Flaherty said there was “no clear evidence” of a real estate bubble in this country, the kind of which sideswiped the U.S. economy and sparked the worldwide financial crisis.

“The measures will not affect the ability of a Canadian family to buy a house. It will affect those who are speculating,” the Finance Minister said. “What we’re getting at is the speculation in multiple condominium units in particular which we see in Vancouver, Montreal, Toronto and in some other places in Canada.”

Home builders were taken aback by the measures introduced, saying they could result in “severe implications” for the condo and housing markets.

The changes, scheduled to come into effect on April 19, will make it harder for first-time buyers to qualify for government-backed mortgage insurance — from either Crown agency Canada Mortgage and Housing Corp. or private-sector providers — which is required if down payments are less than 20% of the property’s value.

Borrowers now have to meet standards for a five-year fixed-rate mortgage, even if the buyer wants a shorter-term, variable rate product.

Some analysts, however, indicate the shift is not as big as it appears. Eric Lascelles, chief economist at TD Securities, said the revamped rule likely means the minimum household income cutoff for Canadian mortgage applicants would be about $5,000 to $8,000 higher.

Further, Ottawa has raised the minimum down payment on rental income properties — where the buyer does not plan to live — to 20% from 5%.

Mr. Flaherty said one goal is to protect Canadians from overextending themselves financially as interest rates are likely to climb from present historic lows. The other, he added, is to root out speculation in real estate, which he suggested was happening with greater frequency based on prebudget consultations.

“I don’t know how that serves the Canadian people and why the government should insure mortgages like that,” Mr. Flaherty said. “People can do it with their own money and if they can find someone who will lend them the money on an uninsured basis. But I just don’t want CMHC and the Canadian people to be in the business of guaranteeing speculative mortgages.”

Derek Holt, vice-president of economics at Scotia Capital, said the condo market could feel the pinch. Industry experts estimate roughly 40% of condo purchases are investment-related, with buyers looking to rent the units for income and perhaps sell them at a later date at a higher price.

“Evidence of the greatest speculative excess has been in the condo segment in the past few years,” Mr. Holt said.

Others weren’t so sure. Ben Myers, executive vice-president of Urbanation, a Toronto firm that tracks the city’s condo market, said the move would have “very little” impact because most condo builders already require down payments of 15% to 20% for their units once they are occupied.

Still, home builders were shocked by Mr. Flaherty’s contention that the real estate market was at the mercy of speculators.

“I don’t know if they have thought this through as to who a speculator is,” said Peter Simpson, chief executive of the Greater Vancouver Home Builders Association. “Just because someone buys a second property doesn’t make them a speculator.”

He added that these new regulations, combined with the coming harmonized sales tax in British Columbia on July 1, could lead to a “perfect storm” that hits the province’s housing market.

The chief operating officer of the Canadian Home Builders Association, John Kenward, said the rule aimed at condo speculation came as a surprise to his members.

“It had not been the subject of conversation [between the government] and the industry,” said Mr. Kenward. “It could have serious implications going forward. We don’t know why it was introduced.”

Overall, Mr. Lascelles said, the economic implications from the proposed moves “are unlikely to be severe, and we expect the housing market to slow its ascent without crashing back down to Earth.”

SUMMARY OF CHANGES

*Borrowers must qualify for a five-year fixed rate mortgage instead of a three-year loan when calculating gross debt service and total debt service ratios.

*Refinancing will be capped at 90% for government-backed high-ratio mortgages versus 90% previously.

*A down payment of 20%, instead of 5%, will be required for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation.

WHAT CHANGES MEAN FOR A $337,000 HOUSE

*The difference between a three-year mortgage rate and a five-year mortgage rate is currently in the range of about 50-100 basis points. The average house in Canada costs $337,000, which means that this change will require that mortgage applicants have the capacity to absorb an extra $2,500 per year in mortgage costs than in the past, according to calculations by Eric Lascelles at TD Securities. Effectively, the minimum household income cut-off for Canadian mortgage applicants is now about $5,000-8,000 higher than it was previously, to fulfill the new rule. 

To hear more tune into The Mortgage Show with AMP of the year Angela Calla on CKNW AM980 Saturdays at 7pm