Banks reporting mortgage woes

CIBC takes $885-million hit

Canadian Imperial Bank of Commerce, the third big bank to report its third-quarter earnings, said Wednesday that it earned $71-million, down from $835-million a year ago, as it took a hit of more than $880-million relating to risky securities.

CIBC is the Canadian bank that's been hardest hit by the U.S. subprime mortgage crisis, because of its large exposure to securities tied to subprime housing. The exposure caused it to take a $2.48-billion writedown in the previous quarter.

BMO burned by subprime mortgage exposure

Bank of Montreal has been dragged further into the subprime mortgage crisis, putting aside hundreds of millions of dollars for troubled loans tied to the U.S. real estate sector.

At the same time, BMO continues to be tripped up by a variety of complicated investment products, demonstrating that financial markets continue to sour.Chief executive officer Bill Downe - who was cautiously optimistic earlier this year that things might get better - said Tuesday that the challenging times aren't going to let up soon. With the U.S. economy continuing to slow, "falling house prices, rising unemployment, tightening credit standards and high gasoline and grocery bills are all expected to depress consumer spending," he said. "In particular, house prices will continue to decrease until the large inventory of unsold houses is absorbed." BMO's profit fell by 21%.

Consider using a mortgage broker

What can a mortgage broker do for me and why should I consider using one ? How much is it going to cost ? Why not just go to my bank instead of a mortgage broker ?

Well these and many more questions is what we'll try to answer today.

You've decided to buy your first house - hooray ! An exciting time. You've spent lots of time with a realtor looking at homes and comparing neighbourhoods etc and now an offer is in which is (hopefully) conditional on financing and time is ticking away to remove that condition and firm up your sale. Or maybe you're up for renewal of that mortgage after your intial term is due.

You could listen to a family member ... they're always willing to give advice. After all, Uncle Ernie says he got a mortgage for 2% interest rate so why shouldn't you ?

The problem with that is (most likely) your family members are not mortgage brokers or have any experience in the real estate and mortgage market except for ages ago when they bought their own home. So, its like going to a gas station to get your aching tooth looked at. What I mean by that is you're going to the wrong place for advice. As much as your Uncle Ernie loves you and wants to help, you're better off going to a trained and experienced professional who works in the field day in and day out. They and only they are in touch with the numerous lenders on a regular basis to get the latest product information to help guide you through to the right financing choice for you.

So what can a mortgage broker do for me ? Let me throw this at you: I recently heard someone say that time is the new currency. There are too many things to do in a day and not enough time - ever experience that ? I don't think anyone can argue with that. We wake up early for a long commute to the office, work long hours for people who take our efforts for granted, come home to a house full of chores and shopping or errands to be done and then all of a sudden you've got to get to bed just in time to get up and do it all again. You want to spend time with kids, parents, neighbours etc so how much time is left in your day to day life to do something as exciting as researching your financing options ? When do you have time to get to a bank, investigate their products and then comparison shop at another or several others to make sure you are getting the best deal and product for you ?

In a word ... never. I think that people today are finding that a service to save their time can be invaluable. You may have a cleaning lady or a lawn service ... a mortgage broker performs a diffent service but the end result is the same. You save your time and spend it on what is important to you. One difference being of course is that in the vast majority of cases, a mortgage broker will not charge you since they are paid by the lender.

OK so you get a free service from a licensed and trained professional. Need more reasons ?

Here's another. A mortgage broker can deal with many different lenders at the same time (I can deal with over 30) ... all from the comfort of their office and quite often with a single visit by you including one application and one credit bureau search. Why not use me as your personal shopper? Spend my time while saving yours.

So if your time dosn't have the same value as I think it does then let's look at the potential savings in interest. Bank posted rates for 5 year mortgages are currently in the 6.85% range. You walk in and that's what they offer you ... whether you're an existing client or not. Maybe a little negotiation goes on and after promising to bring them your other business to plead your case, the clerk visit the manager's office and they decide to give you .25% or maybe even .50% off. You feel that you've "beat them" and sign on for five years. Forget the fact that they will now service charge you to death on all other products, you just saved half a percent. Feel better ? Probably not because all the interest you've just saved is going right back out the window on service charges.

Now let's look at the same scenario by using a mortgage broker. You can call, email or fax the information needed for an application. The mortgage broker can send the application to 1, 5 or 30 different lenders at the same time. In effect, they will bid for your business. Since the lender doesn't have to pay overhead costs for having the broker as an employee, they can pass those savings along in the rate - no haggling required. The banks that have retail branches are pretty much the same ones who also accept applications from mortgage brokers. Remember the 5 year posted interest rate ? Well in today's market a 5 year interest rate to a mortgage broker is available at just 5.29%. That's over 1.5% less and you didn't even have to beg or promise to move all your other business there to sweeten the deal. You can maintain your RSP wherever it currently is ... your credit cards stay where they are ... chequing and savings etc - no changes required.

So we've saved you time and saved you money - enough reasons yet ?

How about that sinking feeling that maybe you didn't get the best deal ? Everyone has experienced buyers remorse of one kind or another. Well as previously mentioned, a mortgage broker does not work for one single lender - they only work for you and your best interests, not the lender. Obviously we have to protect the interests of the lenders against fraudulent transactions etc but a professional mortgage broker bank or lender will ask questions and complete a profile on you that leads to the best product for your situation and wishes. If you went to a lender on your own, do you really think their employee is going to know their competitor's product line and steer you towards it if it is the best deal for you ? Not if they like their paycheque they won't !

So as you can see the reasons are many and I've only just touched on 3 or 4 here in this post. Please check in next time for more valuable information about how using a mortgage broker can help you along the way. If you're looking for a mortgage brokerage website, try RMA-Spencer Group Mortgages for more information and to contact the poster directly.

Welcome to August !

Happy August 1st everyone ! We're about to enjoy a long weekend here in Ontario and hope the weather is going to cooperate. The kids don't know it yet but only 1 month til school starts again.

Have a safe and happy weekend everybody and look for our next post on the benefits of using a mortgage broker coming in a couple of days.

GE Money announces winding down of Canadian mortgage business

"To our broker partners,

GE Money wishes to advise that, effective at the close of business this coming Thursday, July 31, we will no longer be accepting mortgage applications. This difficult decision to wind down our mortgage business in Canada comes as a result of a lengthy analysis of our global business, as GE and GE Money continue to apply investment capital in areas providing the best potential return for our shareholders.

Though we will stop taking mortgage applications as of Thursday, we will fund our outstanding commitments.

We are grateful to our employees, and to our many broker and business partners who assisted in the development and launch of our mortgage products across Canada. Our first priority today is to assist the members of our talented team who have been impacted by the announcement with the transition to the next steps in their careers.

Best regards,

Joe Veckerelli
President, GE Money-Mortgages"

Computer crash and a forced holiday

Hi there and sorry for a little radio silence here but the "blue screen of death" as the techies like to call it paid our blog computer a visit and interrupted the flow here (but it was a nice time for a forced holiday !) Who would have known that 5 years lifespan was "pushing it" for a laptop ?
We're back and at it again refreshed and a little soggy after all the rain we've experienced here in Southern Ontario lately. I guess now those recent posts on water conservation tips seem a little silly don't they?
Starting in a day or so we'll kick off a run of postings about why borrowers at any stage of experience should seriously consider using a mortgage broker to help arrange the financing they require.
Have a great holiday weekend everybody ... can't believe the end of the week sees the arrival of August already !

Ottawa tightens mortgage rules to avoid "bubble"

Globe and Mail
LORI McLEOD & KEVIN CARMICHAEL

The federal government is cracking down on the mortgage industry in a move that could help protect against a U.S.-style housing bubble, but will also make it tougher to borrow money to buy a home.
The Finance Department said Wednesday it will stop backing mortgages with amortization periods longer than 35 years as of Oct. 15.
It will also start demanding a down payment equal to at least 5 per cent of the home's value, rather than guaranteeing mortgages where they buyer has borrowed the total amount.
“Today's announcement marks a responsible and measured approach by the government to ensure Canada's housing market remains strong, and to reduce the risk of a U.S.-style housing bubble developing in Canada,” the Finance Department said in a statement.
Existing 40-year mortgages will be grandfathered, a Finance Department spokesman said.
In 2006, the maximum amortization period was extended to 40 years from 25, and longer-term mortgage products have become increasingly popular with buyers looking for lower monthly payments as the price of Canadian homes soared.
Last year, 37 per cent of new mortgages were for terms of longer than 25 years, according to the Canadian Association of Accredited Mortgage Professionals (CAAMP).
But while longer amortizations stretch out monthly payments, they also greatly increase the cost of a mortgage over its lifetime.For example, the total interest on a $300,000 mortgage can soar from $286,161 over the life of a 25-year mortgage to $498,416 over a 40-year amortization period – adding more than $200,000 to the cost of the home.This, combined with the fact that these mortgages are often combined with little or no equity, raised alarm bells with policy makers looking at the turmoil that took place in the U.S. when house prices started to fall.
“We've seen an inclination now, a trend, toward longer-term amortizations and smaller down payments, and that is a matter of some concern,” Finance Minister Jim Flaherty said in a speech in May. Mr. Flaherty was not available for comment Wednesday.
Jim Murphy, president and chief executive of CAAMP, said in talks with him the government expressed concern about the risky lending products that collapsed the U.S. housing market.
The Finance Department was also worried about the future impact of competition between mortgage insurers, which led to the introduction of 40-year mortgage in 2006, Mr. Murphy said.
“I think you have a clear case of the government sitting down and looking at its risk exposure and wanting to review that. They have financial guarantees in place for the CMHC and private insurers, and they were saying, ‘What is our risk, and what is the risk to the Canadian taxpayer?' ” he said.
Reaction from the industry was mixed.“CMHC supports the new parameters … . We also support their efforts to maintain the strong Canadian housing market,” said spokesperson Stephanie Rubec, adding CMHC will stop insuring 40-year and zero down payment mortgages in October.
“It's the right move,” said Nick Kyprianou, president of Home Capital Group Inc., whose principal subsidiary, Home Trust Co., provides alternative mortgages. “Why get people overextended? Nobody wins by getting people right to the end of the cliff.”
Others, however, say home buyers and banks have been prudent with their finances, and are being punished for the more lax approach south of the border.
“Things here are not like they are in the U.S. where they had those NINJA loans, no income, no job, no assets. … It's only going to hurt the consumer,” said John Panagakos, owner of Toronto brokerage Mortgage Centre.
The move actually comes at a time when the housing market has moved on to other concerns, the most pressing of which is chilling consumer sentiment due to high fuel prices, said Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc.
“It's a bit like closing the barn door after the horse has already run down the road.”

Water saving tips for you lawn and garden - Part 3

Tips for Trees, Shrubs and Flower Gardens

Here are some water-saving tips for trees, shrubs and flower gardens:

Direct water to the root system. In the case of trees and shrubs, the roots that take up the most water are generally located within the top 30 cm of the soil and near and even beyond the drip line. This is the area directly below the outer tips of the branches.
Plants have different watering requirements at various stages of their growth. Keep soil moist in the first growing season. One rule of thumb is to water trees with a one-hour trickle using a soaker hose at least once per week, barring a good rainfall and more frequently during hot weather. Taper off watering in the fall. In the second growing season, water twice per month in late spring and summer. Once established, trees that are well-selected should require little or no watering other than that provided by rainfall, but ensure they get adequate watering during periods of low rainfall or drought. Actual water needs depend on factors like soil type and species.
Water perennials and vines well in the first growing season after planting. One rule of thumb is to water with a one-hour trickle at least once per week using a soaker hose for the first three weeks, barring a good rainfall and subsequently during hot dry weather. Afterwards, perennials selected to match site conditions should need little or no supplemental watering. If you notice wilting or browning on your perennials, water to a depth of 10 to 20 cm to help restore the plant's turgidity and vigour.
Apply a layer of mulch about 5 to 7.5 cm deep over the soil surface of the garden to retain moisture, moderate soil temperature, control erosion and suppress weeds. Wood chips, bark and crushed rock are just a few of the materials that can be used as mulch.
Use a soaker hose placed at the base of plants, rather than using a sprinkler. This will help to apply water to the soil and roots—rather than the leaves— and reduce evaporation.
Believe it or not ... we've got one more instalment to come so check back again in another couple of days.

Water saving tips for your lawn and garden - Part 2

Tips for Your Lawn

Established lawns generally require about 2.5 cm (1 inch) of water per week to thrive (Newly seeded or sodded lawns have greater water demands, actual water requirements depend on individual conditions, such as soil type ) If Mother Nature is providing this amount of rainfall, your lawn will thrive without supplemental watering. When rainfall does not provide adequate moisture, your grass may start to turn brown. This does not mean it is dead—it's simply dormant. An established lawn will recover and resume its green appearance shortly after sufficient rainfall returns.
Apply these tips to save water and money without compromising the health of your lawn:
Apply about 2.5 cm of water not more than once per week and skip a week after a good rain. The correct amount can be estimated by placing an empty tuna can on your lawn as you apply water evenly across the surface. When the water level reaches the top of the can, you've applied about 2.5 cm of water which is all your lawn needs. You can time how long it takes to reach this level, then set the timer on your sprinkler.
Water thoroughly. Deep watering at this rate is better than frequent, shallow watering because it encourages deep roots.
Don't water your lawn excessively. When it's waterlogged, it may turn yellow and develop fungus and diseases. Oxygen and mineral uptake may be restricted on heavy clay soils. Too much watering can also lead to thatch and fertilizer leaching.
Check your municipality to see if watering restrictions are in effect.
Avoid mowing and unnecessary traffic on your lawn when the lawn is dry or dormant.
Don't cut your lawn too short. Set the blade on your lawn mower to cut no lower than 6-8 cm so that the roots are shaded and better able to hold water.Aerate your lawn once a year in the early spring or fall to improve water penetration. Afterwards, topdress by applying a thin layer (max. 15 mm) of organic material and rake to distribute evenly. You can overseed after this to help thicken the lawn.
A thick, vigorous lawn is the best prevention against weed invasions and can better withstand heat and dryness. A healthy lawn needs nutrients, such as nitrogen. Application rates, sources and timing will depend on many factors including soil type. As a rule, a healthy lawn with good soil needs about ½ kg of nitrogen per 100 sq. m. of lawn area every year. Leave grass clippings on the lawn to return nitrogen to the lawn, and reduce moisture loss.
Check back in a couple of days for part 3 - your garden will love you for it !

Water saving tips for yhour lawn and garden - Part 1

In the summer months, municipal water use doubles. This is the season when Canadians are outdoors watering lawns and gardens, filling swimming pools and washing cars. Summer peak demand places stress on municipal water systems and increases costs for tax payers and water users. As water supplies diminish during periods of low rainfall, some municipalities must declare restrictions on lawn and garden watering. By applying some handy tips, your lawn and garden can cope with drought conditions and you can minimize water wastage.

General Tips

Much of the summer peak demand is attributed to lawn and garden watering. Often water is applied inefficiently, resulting in significant wastage due to over watering, evaporation or run-off. Here are some general watering tips to help avoid wastage:
Before watering, always take into account the amount of water Mother Nature has supplied to your lawn or garden in the preceeding week. Leave a measuring container (empty it once per week) in the yard to help you monitor the amount of rainfall and follow the tips below to help determine how much water to add. Also bear in mind any watering restrictions that may apply in your municipality.
Water in the early morning, before 9 a.m., to reduce evaporation and scorching of leaves from the sun. Water on calm days to prevent wind drift and evaporation.
Set up your sprinkler or hose to avoid watering hard surfaces such as driveways and patios. If you're not careful, it's water and money down the drain.Water slowly to avoid run-off and to ensure the soil absorbs the water.
Regularly check your hose or irrigation equipment for leaks or blockages.
Collect rainwater from your roof in a rain barrel or other large container and keep it covered with an insect screen. Direct the down spout of your eaves troughs into the rain barrel.
Choose an efficient irrigation system. A soaker hose placed at the base of plants on the ground applies water to the soil where it is needed—rather than to the leaves—and reduces evaporation. Drip or trickle irrigation systems are highly efficient because they deliver water slowly and directly to the roots under the soil surface. This promotes deeper roots, which improve a plant's drought resiliency. If you use a sprinkler, choose one with a timer and that sprays close to the ground.
Tune in again in a couple of days for our next instalment !

"Canada's housing boom is over"

Tony Wong
Business Reporter
Toronto Star

The number of new listings of homes for sale set a consecutive monthly nationwide record in May, while prices rose by 1.1% annually – the smallest increase in seven years according to the Canadian Real Estate Association.
“Rising food, fuel and home process are denting consumer confidence” association economist Gregory Klump said.
New listings on the Multiple Listing Service hit 54,029 units on a seasonally adjusted basis in May, the most on record and a 2.2 % increase over the previous peak in April, according to the real estate association.
“The six-year housing boom has indeed fizzled and the poor winter results were not just weather and holiday related.” BMO Capital Markets analyst Robert Kavic said in a note. “The breadth of the declines is eye-catching.”
Nationally, the average price of a home is $337,071. With an increase of 1.1% prices are rising at a pace below the inflation rate.
Sales were also down by a significant 16.9% from last May at 35,040 units.
The association says western provinces, which have seen blistering price appreciation, have finally begun to cool.
“Canada’s housing boom is over, and the days of 40% plus price appreciation in Alberta are behind us,,” says Kavic.
In Edmonton, average house prices are down 4.8%, while Calgary house prices are down 2.4% year over year. House prices were also down 5.5% in hard-hit Windsor, where auto layoffs have taken a toll.
In the Toronto market, listings were up 15% in May, as sales continued a five-month slide. However, prices are still up a moderate 4% year over year.
Meanwhile, an uncertain economy means the market is not expected to pick up anytime soon.
“Increasingly cautious homebuyers may keep listings on the market longer before being sold, which increases the importance of realistic pricing,” Klump warned.

Mortgage rates going up today

Well the Bank of Canada may not have changed rates this week but the institutional lenders are changing some rates this morning anyways. They most likely had already built in a little anticipation of a drop into their rates ahead of Tuesday's meeting and now have had time to crunch the numbers and are adjusting to where they think they should be. Nine out of the 20 lenders available had changed their rates in the last 2 days.

Here is a short recap of rates available through our mortgage brokerage partner site Spencer Group Mortgages ... why not pay them a visit and find out a little more ?

Bank Prime 4.75%

Fixed Rates
1 Year 4.90%
2 Year 5.39%
3 Year 4.99%
4 Year 5.39%
5 Year 5.24%

Variable rate prime minus .60%

E. & O. E. rates subject to change without notice, rates subject to lender criteria

"Bank of Canada holds rate steady but acknowledges weak economy"

HEATHER SCOFFIELD Globe and Mail Update

June 10, 2008 at 9:12 AM EDT

OTTAWA — The Bank of Canada is holding its key interest rate steady, even though it acknowledges the economy has stagnated and could well weaken further.
The central bank announced Tuesday it is putting an end to its aggressive streak of rate cuts because soaring commodity prices have prompted a fresh fear of inflationary pressure.
“Although the composition of U.S. growth has not been favourable for demand for Canadian goods and services, overall, global growth has been stronger and commodity prices have been sharply higher than expected,” the bank said in a statement.
“The balance of risks to the bank's April projection for inflation in Canada has shifted slightly to the upside.”
The bank's decision maintains the overnight rate at 3 per cent, and shows how much thinking about the global economy has shifted in the past few weeks to focus on the pain consumers feel at the pumps.
Bank of Canada Governor Mark Carney has said in the past that he expected commodity prices to fall because global demand was weakening. That projection has proven wrong, as oil has skyrocketed to close on Monday at more than $134 (U.S.) a barrel.
Economists and market players had widely been expecting a small rate cut of a quarter of a percentage point to stimulate the economy as it deals with recessionary conditions in the United States as well as tighter credit conditions.
But economists had also said that the central bank could quite easily justify a more aggressive rate cut to confront a slowdown in Canada, or swing the other way and freeze rates in the face of rising commodity prices.
The Bank of Canada has cut rates by a total of 150 basis points since late last year, attempting to stimulate the economy as it deals with a rapid slowdown in demand from buyers in the United States.
Indeed, the bank's statement recognized that Canada's gross domestic product contracted slightly in the first quarter. The economy is now in a state of slack, and is expected to slacken further this year.
Growth should pick up later in 2008, and accelerate into 2009 as the U.S. economy recovers and as past interest rate cuts in Canada begin to have an effect, the bank said. Still, there is a risk that growth will be weaker than expected.
Clearly, however, the bank's first preoccupation is inflation, and not sagging growth.
“If current levels of energy prices persist, total [consumer price] inflation will rise about 3 per cent later this year,” the bank warned.
Core inflation, which excludes volatile prices such as energy and some food, will remain below the bank's 2 per cent target, however, throughout this year and next.
The bank said it had already done enough to boost growth in Canada, saying “the current stance of monetary policy is appropriately accommodative.”
Economists have pointed out that inflationary pressure in Canada is relatively benign, giving the central bank room to cut rates if it chooses.
In April, total inflation was running at a 1.7 per cent annual pace, while core inflation was 1.5 per cent – both well below the central bank's target.
“Canada's relatively muted inflation performance gives the bank the luxury of pondering further rate cuts if need be,” said Douglas Porter, deputy chief economist at BMO Nesbitt Burns, in a note to clients Tuesday.
“We think a cut is justified on the fundamentals in Canada – cool core inflation that will likely remain so, and weak GDP figures that sill leave behind a fumbling economy,” said economists at Bank of Nova Scotia Tuesday.
But central bankers around the world are warning about rising inflationary pressure, as they watch commodity and food prices soar, hurting consumers. The European Central Bank has suggested its next move could be an interest rate hike because of inflation. The U.S. Federal Reserve has hinted that its rate cuts have come to an end.
And on Monday, the head of the Bank of France pointed out that central bankers have a tough job in deciding monetary policy these days, as rising commodity prices compete with slowing growth.
“Today we may be at the start of a cycle in the world economy where there is less growth and more inflationary pressures,” Christian Noyer said in an interview. “That is more difficult for central bankers to deal with than in the past, when inflationary pressures were lower.”

No rate cuts by Bank of Canada

Variable-rate mortgage holders were slightly disappointed this morning. The Bank of Canada surprised many Bay Street economists by not lowering it's key interest rate. As recently as Sunday, 12 of 12 primary securities dealers had thought a 1/4% cut was in the cards. It once again shows how hard it is to predict rate direction and the Bank of Canada's intentions. Perhaps there was some herd mentality in those forecasts as well.

The Bank of Canada said:

• The risk of inflation has "shifted slightly to the upside."
• The Bank projects that "economic growth will pick up this year and accelerate in 2009."
• "If current levels of energy prices persist, total CPI inflation will rise above 3 per cent later this year."

By 9:15am, Canada's 5-year bond yield had soared to 3.57%. It hasn't been this high since January. That could slow or halt the decline in fixed mortgage rates as well.

Bank of Canada meeting June 10,2008

The Bank of Canada is set to meet June 10,2008 to decide on changes to the key "overnight" interest rate which affects the bank prime and other lending rates as well. Analysts have been expecting a further cut in the rate by .25 basis points which could mean a drop in the bank prime from 4.75% to 4.50%. A change in the overnight rate usually results in corresponding changes about a day later in the bank rates. Many consumers still have confidence that we will enjoy these relatively low rates for the next while and are not rushing to lock-in their mortgage rates just yet.
Not everyone is in agreement with the theory of a potential drop in rates and are instead expecting a hold in the rate. Many expect the rate to begin a slight climb in the fall of this year and feel we may have touched bottom for a while at this level.
Make sure you check back here and for the results of the meeting and how it may affect your cost of borrowing.

"U.S. home sales dip as backlog at record"

Recent news from the U.S. to compare to our situation here in Canada. Due to differences in our two economies like the strength of Canadian natural resources combined with stricter lending criteria, fewer cases of fraud and lower exposure to the "asset backed commercial paper" (sub-prime) melt-down, things are not this bad here in Canada. I hope this article doesn't push an alarm bell for you. Perhaps its time to think about buying that retirement property in the U.S. you've always dreamed about. With the CDN dollar still strong vs the U.S. greenback and the decline in valuations to the south bringing proces down, it may be the perfect storm of opportunity many snowbirds have been waiting for. We strongly suggest you consult a real estate professional and consider tax implications (both income and property) as well as foreign ownership rules.

Reuters News Agency
Washington

Sales of previously owned U.S. home slipped last month and the backlog of unsold properties hit a record high, according to data yesterday that suggested the market's downturn still has a long way to run.
Home resales fell 1% in April to a 4.89 million-unit annual rate, the National Association of Realtors said.
The sales pace was a bit better than expected on Wall Street, but the stock of unsold homes surged 10.5% to 4.55 million units, leading economists to warn of further market woes ahead.
At the current sales pace, the supply of homes reached 11.2 months' worth, the highest since the trade group began tracking single-family and condo properties together in 1999. For single units, the supply was 10.7 months' worth, the most in 23 years.
"The increase in unsold inventory suggests that the housing downturn will continue on through this year and well into the next," said Moody's Economy.com chief economist Mark Zandi.
The report showed the median home price in April was down 8% from a year ago, at $202,300. It was the second largest price decline on record, following the biggest drop in February.
"The big surprise was the inventory of unsold homes rising to a record level," said Rudy Narvas, a senior analyst at 4Cast Ltd in New York.
Other price measures have shown even steeper drops.
The Standard & Poor's/CaseShiller home price index of 20 metropolitan areas showed a drop of 12.7% in the 12 months through February, with prices down 15.8% from their June 2006 peak. The March index will be released Tuesday.
"With prices collapsing, the incentive not to buy a home is increasing by the week, and with inventory showing no sign of improvement prices will keep falling," said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhall, New York.
Moody's Zandi said about one fourth of the sales likely were due to foreclosure, which he said was another negative sign.
NAR chief economist Lawrence Yun said that the foreclosed homes, which sell at substantially lower prices, were increasingly showing up in the existing homes sales data.
"Several markets are seeing a significant rise in home sales," Yun said. "These markets are also the markets that have witnessed a substantial decline in prices.
"The trade association said last month's existing home sales pace was 17.5% below the rate of April 2007, with single-family home sales off 16.1% and sales of multiple family units down 27.9%.

First time buyers are determined despite rising housing values and short inventory

by John Robinson Jr

While higher housing values and tight inventory levels have hampered home-buying activity so far this year, longer amortization periods and alternative housing types have offset the impact on most major markets across the country, according to a report released today by RE/MAX.
Despite a higher degree of frustration in the marketplace than in previous years, the RE/MAX Affordability Report found that first-time buyers, in particular, remain steadfast in their determination to purchase a home. In fact, entry-level purchasers are adjusting their expectations by sacrificing size, location, and even long-term financial freedom, to overcome challenges such as rising prices and serious supply issues. Innovative financing has become key to homeownership in today’s environment with longer amortization periods gaining favour in 62 per cent of the major centres surveyed. Low or no down payments were popular with first-time buyers in 38 per cent of markets.
“Doom and gloom reports coming from south of the border have yet to hinder overall momentum,” says Michael Polzler, Executive Vice President and Regional Director, RE/MAX Ontario-Atlantic Canada. “First-time buyers are still leading the charge, taking advantage of every resource available to achieve homeownership. They’re determined to get into the market sooner rather than later. If suburban locations, smaller condominiums and town homes, or a little sweat equity is what it takes to get into the market, these purchasers are game.”

"Canadian economy stalling as exports hit hard: Bank of Canada"

By Julian Beltrame, The Canadian Press

OTTAWA - The economy has sharply deteriorated to near recessionary levels and the cost of filling the tank and putting bread on the table is going to go sharply higher, Canadians were told Thursday.

A bleak economic assessment came from the Bank of Canada's quarterly monetary report, which warned that Canadian exports, particularly from manufacturers in central Canada, will be hard hit this year by the U.S. slump and tight money in the credit markets.

At the same time, reports said the price of gasoline will soar as crude prices skyrocket on world markets and the cost of everything made from flour - from bread to cakes and bagels - will also go up.

Bruce Cran, president of the Consumer Association of Canada, said Canadians will likely have to change the way they eat and "perhaps it's time to give some serious thought to buying on the basis of choosing goods that are actually produced near where you live."

"So if you've got a grandmother who's got recipes on how to can food during the summer that will last through the winter, maybe you should salvage those while the going's good."

In Laval, Que., Prime Minister Stephen Harper acknowledged that "the increasing prices of certain products in certain regions of the country limit the budgets of Canadian families."

But he said Canada and its diversified economy are in a good position to weather the economic storm that is brewing in the United States and abroad.

"Canada is not an island, and our trade-intensive economy is expected to grow more slowly over the next two years," the prime minister acknowledged in a speech to a Quebec audience.

"The economic slowdown in the United States, the difficult credit market, global financial volatility, (and) the drop in the American dollar, represent the biggest challenges for us."

The Bank of Canada assessment gave a clearer understanding of what the central bank's governing council was weighing Tuesday when it slashed its key interest rate by half a percentage point to three per cent.

After predicting in January that an upturn would begin this quarter, the bank now says Canada has entered an economic flat spot with growth in the current quarter barely above recessionary levels at a 0.3 per cent annualized rate, and won't recover fully until 2010.

The bleaker outlook for the economy comes amid other potential bad news for Canadian consumers, who already face rising fears about losing their jobs in central Canada's battered manufacturing sector:

-CIBC World Markets predicted Thursday that the Canadian average gasoline prices, now about $1.23 a litre, will top $1.40 this summer and $2.25 by 2012 as crude oil prices continue to soar and reach US$225 a barrel in four years. That could mean the cost of filling the tank could rise to $80 this summer and $135 in four years.

-The country's largest bread maker, Canada Bread Co warned that consumers can expect to pay more for bread, bagels and other flour-based products after a 32 per cent drop in first-quarter profit amid "significant margin compression due to rising wheat prices."

But Bank of Canada governor Mark Carney said Canada won't fall into recession thanks to the relatively strong internal economy buttressed by oil and mineral exports and the record number of Canadians who have jobs.

"The decline in exports ... is counterbalanced and in our view more than counterbalanced by the strong domestic demand," he said.

Still, Carney noted that the bank will likely have to put more stimulus into the economy over and above the 1.5 percentage points it has cut from the overnight rate since December.

Several economists, including TD Bank's Don Drummond and Ted Carmichael of JP Morgan Securities, suggested that if anything Carney is sugar-coating the situation.

Both predicted the economy will actually advance only 1.1 per cent this year and that next year's growth will also be lower.

"Our forecast anticipates that weak growth and below target core inflation will prompt the bank to ease further, cutting the policy rate (50 basis points) to 2.50 per cent by July 2008, before going on hold," Carmichael said.

Part of the reason more rate easing is needed is that tight credit conditions have increased the cost that the chartered banks pay for capital, causing them to pass on only a portion of the central bank's stimulus to businesses and individuals in the form of lower borrowing costs.

The Bank of Canada estimates that commercial interest rates are up to three-quarters of a point a higher than might otherwise be the case given the bank's monetary actions. As well, obtaining credit has become more difficult, particularly for businesses.

"There has been a tightening of credit, but certainly it's much better in Canada in this situation than it is in the other major economies," Carney said.

He said Canada's banks have not seen the same elevated funding costs as in the U.S. and are better capitalized, which has allowed them to lend more broadly.

While it was reluctant to use the word recession, the bank said the American economy will contract slightly during the first half of this year, before growth resumes thanks to the tax-rebate package passed by the U.S. government, lower interest rates and higher exports encouraged by the weak U.S. dollar.

Still, the advance will be weaker and take longer than first thought, and that will prevent Canada, which sends about 75 per cent of its imports to America, from mounting a quick recovery.

The U.S. slump is also dragging on global growth, projected at 3.7 per cent this year and 3.5 per cent next, well below last year's 4.9 per cent advance.

"These global developments will have consequences for the Canadian economy," the bank says.

"First, exports are projected to decline this year. Second, turbulence in financial markets will continue to make financing in capital markets more costly and difficult for Canadian businesses and banks. Third, business and consumer sentiment in Canada is expected to soften somewhat."

The bank says credit conditions and the Canadian economy won't return to normal until late 2009 or possibly 2010.

As it reported Tuesday, the bank has scaled back its growth projection for the Canadian economy to 1.4 per cent this year and 2.4 per cent next, then 3.3 per cent in 2010.

The bank also expects Canada's inflation to remain below two per cent for the next two years and looks for commodity prices to slip about 15 per cent and oil prices to drop to just $100 US a barrel in the next two years as global demand cools.

One strength in the Canadian economy continues to be housing - a key difference from the United States.

"Demand should ease, since affordability has deteriorated and economic growth is expected to slow," the bank says.

"However, a general reversal in house prices is unlikely as there are few signs of excess housing supply."

Bruce Cran, president of the Consumer Association of Canada, said Canadians will likely have to change the way they eat as rising commodity costs are making all types of food - from fresh produce to bread to meat - more expensive.

"I think you're probably going to see some changes in the way people choose their food and perhaps it's time to give some serious thought to buying on the basis of choosing goods that are actually produced near where you live," he said.

"So if you've got a grandmother who's got recipes on how to can food during the summer that will last through the winter, maybe you should salvage those while the going's good."

It was a long vacation but ... we're finally back !

We're back and ready to go with new information gathered on our travels ... watch for more blog posts coming this week ... survey results, more tips etc - it's good to be back!

"Housing boom officially over"

LORI MCLEOD Globe and Mail Update
April 17, 2008
It's time for Canadians to bid the housing boom farewell as data for the first quarter of the year, released Thursday by the Canadian Real Estate Association (CREA), showed a 13 per cent tumble in existing home sales year-to-date.
“Canada's six-year housing market boom is officially over. Aside from a few choice Prairie locales, sales are melting faster than this year's snow pack,” Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc., said in a research note.
Double-digit declines in sales activity in “more markets than you can shake a stick at,” suggest the weakness has spread across Canada rather than being centred in any specific market, Mr. Porter said in an interview.
Home sales waned and new listings surged in the first quarter of 2008 as activity in Toronto cooled and a glut of sellers hit the markets in Western Canada, according to CREA's data.
In the first three months of the year 75,467 housing units changed hands in Canada, a 13 per cent drop from the first quarter of 2007, according to CREA. Sales tumbled by 18.7 per cent in March compared with the same month a year ago.
While the drop likely had something to do with this year's nasty winter weather, the cross-country weakness in sales suggests a deeper trend, Mr. Porter said.
While he's willing to declare an end to the housing boom now that a full quarter's worth of data are available, it will be important to watch the traditionally strong spring months to get a better handle on where the market will end up in 2008, he added.
By contrast with the weakening sales figures, new listings soared to their highest recorded level at 154,217 units in the first quarter, led by Calgary, Edmonton and Vancouver. Seasonally adjusted new listings climbed by 4.8 per cent quarter-over-quarter, despite a drop in newly listed properties in Toronto, the country's largest resale market.
In March, sales fell by 22 per cent year-over-year in Toronto, which accounts for one-quarter of existing home sales across the country. Last month, CREA attributed 53 per cent of the 5.6 per cent month-over-month drop in resale home sales to the softer Toronto market.
“Sales activity in a number of major markets trended lower while listings swelled in the first quarter. Many major markets are becoming more balanced and price gains are becoming more modest as a result. This trend is forecast to continue, as rising mortgage carrying costs and property taxes erode affordability,” Gregory Klump, chief economist at CREA, said in a statement.
Year over year basis, sales volumes fell in 16 of the 18 major markets for which data were available, led by a 35.9 per cent drop in Calgary and a 29.8 per cent decline in Edmonton.
In its statement, CREA also said seasonally adjusted sales activity hit new quarterly records in Regina and Saskatoon, but data for those cities were listed as not available in the tables included with the release.
The only two markets where sale activity rose, year over year, in the first quarter according to available data were Newfoundland and Labrador, and Thunder Bay, which showed increases of 14.3 per cent and 9.5 per cent, respectively.
The average price of a resale home rose by 5.5 per cent year-over-year in the first quarter to $327,620, the smallest such increase since the fourth quarter of 2001 and just half of last year's 11 per cent rise.
In March, the average existing-home price rose by 4 per cent year-over-year to $329,383, with new records set in markets including Saskatoon, Winnipeg, Hamilton-Burlington, Ottawa and Halifax.
None of the markets in the study showed a decline in home prices, and like many other economists, Mr. Porter expects moderate price gains this year.
“The residential average price continues to increase, unlike conditions in many U.S. markets,” said CREA president Cal Lindberg in a statement.
“The size of the increase is returning to what we consider more normal levels for most markets in Canada, reflecting a sound but cooling market for existing homes.”
In its release, CREA said the Canada's resale housing market was more balanced in the first quarter of 2008 than it has been compared with any other quarter over the past nine years.
This statement from CREA is enough to suggest that things are “calming down quickly,” Mr. Porter said.

What is home staging?

Maybe you've heard the term recently. Is it just a new fad ? Another angle for someone to get their hands on some of your hard earned money or make more profit from you selling your home?
Well let's start with what home staging is - a professional service to prepare your home for sale. It is a great selling tool with the sole purpose of securing the highest amount of equity in your home. A home stager can visit you in the comfort of your home and at your convenience. If a few simple suggestions could give your home's selling price a lift of several thousand dollars ... don't you think that would be time and money well spent ?
The process usually starts with a one-on-one, in-home consultation where a home stager will walk you through every room in your home, providing a written assessment on all elements that need to be addressed to showcase your home.
The services can also include:
1. Assisting you in packing & decluttering after identifying what needs to be done to showcase the look and space of your home
2. Furniture and accessory rental - ashamed of those hand-me-downs you'll be getting rid of as soon as you move ? There's nothing like the look and feel of brand-new, updated furniture to make a potential buyer see themselves enjoying a luxurious lifestyle in your home.
3. Furniture and accessory placement - where should the sofa go ? And what about knick-knacks, candles etc ? Let the home stager worry about it for you.
How long does this take ? A professional home stager can usually make the transformation in your home and have it ready to show within ONLY one week!
And if that isn't enough reason to consider a home stager, recent studies show that staged homes will sell 2 to 3 times faster than unstaged homes – that means less time having people in and out of your home at all hours for viewings.
If you are considering selling your home then of course ask us about your mortgage financing needs but don't forget to ask us (or your local real estate professional) how to put you in touch with an Accredited Home Stager!

Here are the don't do's they never tell you about

Ever notice that all the advice you read is like a big "to do" list? Well here's a list of "don't do's" that are equally important:
1. Don't believe everything you hear, especially from family & friends (everyone you talk to thinks that they're a mortgage expert). Just because somebody got a cavity once doesn't mean they are a dentist - right ? Same thing is true with mortgages
2. Don't apply for new credit cards or loans - you'll have plenty of time to do so after you move in!
3. Don't open a "don't-pay-for-a-year" account - most lender policies mean that they will input a phantom payment on that debt which may mean your maximum qualification is affected due to lower credit score or higher debt load
4. Don't guarantee or co-sign a loan or mortgage for anyone else - again, that other payment is included in YOUR debt load as far as the bank is concerned which means you may qualify for less money on the mortgage
5. Don't stop paying your bills (including your current mortgage) - just because you are approved today doesn't mean you can suspend all your other payments
6. Don't spend part (or all) of your down payment on other things - there are rules that lenders go by to determine your downpayment money is properly accumulated and accounted for in order to get your low interest rate
7. Don't let the value of your investments slip below the amount you need to "close the deal"
8. Don't wait until the last minute to provide proof of your down payment
9. Don't pack documents that may be required to verify income or down payment - keep a "mortgage" folder or envelope separate from your packed documents and clothes
10. Don't make large deposits to your bank account (unless you're prepared to provide an explanation with supporting documentation)
11. Don't underestimate your closing costs (your lawyer, notary or mortgage consultant can help you with this) - all costs and adjustments are paid on closing day, no loans or I.O.U.'s !
12. Don't forget to ask your lawyer or notary about property tax adjustments - no need for a surprise scramble to come up with more money on closing day
13. Don't quit your current job - the lender may make a decision to provide financing based on the stability of your employment so a change after the fact may mean approval is cancelled
14. Don't change the status of your employment from full-time to part-time - same as above
15. Don't change your closing date without telling your mortgage consultant - a courtesy of course but also as the "quarterback" of the proceedure they also inform all others in the transaction of important information ... if certain work is done for no reason because of your silence you may get billed for it!
16. Don't neglect to satisfy all outstanding conditions of your mortgage approval - the lender doesn't care that you were too tired or too busy to send in required documentation, it's their money that you are borrowing remember
17. Don't wait until the last minute to arrange for home insurance - you need to know that your home is actually insurable or at least have time to get issues resolved before issuance of insurance
18. Don't ignore telephone calls from your lawyer, notary, real estate representative or mortgage consultant - they are always working for you so why not help yourself in the end ?
19) AND LAST BUT NOT LEAST ... DON'T JUST RUN TO YOUR BRANCH THINKING THEY'LL GIVE YOU THE BEST DEAL ... USE A MORTGAGE PROFESSIONAL
Visit Spencer Group Mortgages to find out more or get more clarification on these or other questions.

February 1st - snow day !

Winter returned with a vengence today here so we're taking a snow day and just writing a little thank you to some of our visitors from the month of January. And don't forget to visit our website Spencer Group Mortgages for even more information on Ontario mortgage financing options, rates etc. We have an easy access newsletter signup, simple mortgage application form and much more.
We had several visitors from the USA ... Florida, Louisiana, Arizona and Idaho as well as those further afield in places like San Miguel de Tucuman in Argentina and Bramley (a suburb of Johannesburg) in South Africa.
Homegrown visitors from Ontario included those from Whitby, Unionville, Islington, Ottawa, Weston, Oakville, Guelph and Don Mills.
How do we know all this ?? Try google analytics ... it's amazing what you can find out about your web traffic !
Next post this weekend after we dig out from this snow storm and of course finish watching the Superbowl.

A notice from Accredited Home Lenders

I know we said last time that my next post would be a list of "don't do's" but this news release just came across my desk and I thought I'd post it. This illustrates what is happening to some of the "alternate" lenders in Canada due to the problems experienced in the "sub prime" market worldwide. Other lenders have ceased operating or seriously cut back on lending and administrative operations here since the middle of August 2007 but in no means does it apply to all lenders. - Marshall

"Valued Broker,

As you are aware, current difficult conditions in the secondary markets have resulted in the inability to sell or securitize loans in Canada. At Accredited, we have worked hard over these past few months to continue funding loans. Unfortunately, the secondary market head-winds have become too strong - so we are no longer accepting new loan applications at our production offices in Toronto and Vancouver.

We are downsizing the size of the Canadian workforce appropriately to reduce our costs in Canada while we monitor the market in the future. In addition, we will continue all Canadian servicing and administrative functions in order to maintain the highest level of loan servicing.

Here's what this means to you:

* Effective January 25, 2008, we will no longer be accepting new loan submissions for approval.

* We will honor all outstanding funding commitments, and expect that the last funding commitments will expire in early February.

* The True Blue Rewards program has been discontinued effective immediately. If you are a True Blue Rewards member with an existing point balance, you will have ample opportunity to redeem your points for rewards. Details and instructions for redemption will be sent to members separately.

If you have any questions, please contact our Vancouver office at (866) 862-7610.

Thank you for your support and patronage. This decision is not a reflection of our valued relationship with you, but rather necessitated by deteriorating secondary market conditions that cannot currently sustain a viable origination platform in Canada.

Sincerely,

Joseph J. Lydon
President and Chief Operating Officer
Accredited Home Lenders"

Changing rates and lots of uncertainty

Following up on our post earlier this week prior to the Bank of Canada's (BOC)announcement ... not much happened!
The "Fed" in the USA dropped it's rate by .75% in an effort to spur their ecomony and faltering housing market. At least we don't have to worry about the housing market in Canada! We continue to enjoy strong sales of both single family and condominium units and we don't have the same rising default rate as our neighbours do either.
Our rate reduction was a little less - .25% - however we aren't in as bad a condition as our south of the border friends. There is noise already being made that on the next meeting and announcement by the BOC (March 4/08) there will be another .25% reduction.The effect on institutional mortgage lending rates was minimal. Some lowered their "prime" interest rates by the same .25% so if you are currently in or investigating a variable rate mortgage, that is good news to you. Generally you can obtain a variable rate mortgage at "prime minus .50%" which means that is equal to 5.25%. For all the details on a variable rate mortgage see Spencer Group Mortgages or email me at marshall@spencergroupmortgages.ca
Unfortunately all lenders did not follow with rate drops in the prime category however we'll give them the benefit of the doubt and hope they catch up right away.Fixed rate mortgages also dropped at some lenders but again not all followed suit. For example, posted 5 year mortgage rates are currently 7.49% which remains largely unchanged from pre announcement days. Using the services of a mortgage professional will get you access to 5 year mortgage rates of approximately 5.89% (on approved credit). For a more complete review of rates please click here.
We did notice some slight rate reductions of .10% so it looks like some of those analysts were correct in their predictions that the banks would cushion some of their losses through increased lending rates. This time they didn't have the optics of raising their rates ... but accomplished the same results by not lowering them as much as they could have done.
Check back with us next time when we suggest a list of "don'ts" when applying for financing.

What's happening with interest rates?

The easy answer is ... who knows ? This summer I was lucky enough to hear an economist from one of the big banks who gave some interesting opinions. At the time, in Ontario and Eastern Canada the manufacturing sector was preparing for a rough ride. The loonie was strong - it wasn't yet near or over parity as we saw in the fall of 2007 - which seemed to be a result of the overall strong economy and oil sector in Western Canada. So the predicament facing the Bank of Canada (B.O.C.) was: raise interest rates and maintain the strong/rising dollar (hurt the East in other words) OR lower rates to take momentum away from the increasing Canadian dollar and hurt the west. A no-win situation to be sure. We all remember what happened and the eastern part of the country has been feeling the hit ever since.
The B.O.C. will again be setting rates tomorrow and this time around we have a new puzzle to decipher. Added to the ever present question of what they will do (raise, maintain or lower) to rates, we have a new twist in the mix. Some analysts and people in the know are hinting that the "normal set of rules" may not apply this time in how the country's banks and lenders react to the B.O.C.'s decision.What are the normal rules ? If the B.O.C. lowers it's rate the banks follow and reduce theirs too and if the B.O.C. raises then they follow suit. Now for the twist. Perception is that with all the trouble in the U.S. mortgage lending industry and the big Canadian banks' exposure - writedowns/layoffs etc due to non-performing or just plain poor investments - the lenders here may not lower their rates EVEN IF THE B.O.C. DOES SO. The plan if it turns out to be true would mean that the banks are going to try to recoup their U.S. losses on our shoulders.
Whatever happens in the next couple of days it will be interesting. Check back with us and see what the fall out is - see you then !

Think about a home inspection when buying

A popular conversation topic these days is the value of a home inspection and particularly the services of a professional home inspector. We feel that home inspections are valuable since they can identify structural issues that may require repair or replacement expenditures and provide you with back up to ensure you don't overpay for the home in question. As with most things, the key to a home inspection is to start by hiring the right professionals. You may want to start with the Canadian Association of Home and Property Inspectors, founded in 1982. It is the national body that all provincial organizations are members of. The Ontario member is the Ontario Association of Home Inspectors which formed in 1987. According to their website, "The OAHI is dedicated to enhancing the technical skills and professional practice of home inspectors, and maintaining high professional standards through education and discipline."

As tired as this sounds, for most Canadians buying a home is the single largest investment they'll ever make so they want to get good value for their money. Not just as in a bargain price or something which will appreciate over time but the knowledge that they are making the right choice and that the asset has no underlying problems. Today's homebuyers are relying on the experts before they firm up their offers. What was once a rarely used service in residential real estate has become commonplace especially with the rapid increase of prices in recent years.

The inspector takes a close look, starting beneath the surface and then reports in detail their findings in written form for the potential purchaser. Covering things like the condition of the foundation, electrical/plumbing/heating services, roof (shingles and underneath), insulation, termites and other pests plus other factors as well. If repair work is to be done either now or in the future, the report indicates what may be required and gives an idea as to when the homeowner will have to incur the expense.

The OAHI website has links for both consumers and realtors as well as information on becoming a home inspector.

Should you cash in your RSP to help buy a home - Part II

For the investor in you, this is not such a great deal. Zero percent growth on that withdrawn portion of your RRSP until you pay it back and can reinvest. The whole idea behind an RRSP is tax sheltered growth of funds for retirement. The benefit is of course that you avoid paying interest to the bank on that portion you would have had to borrow along with your mortgage. AND you also got a reduction of your income in the year of contribution. You’ll need to decide for yourself if this is compensating you adequately for having a poor investment inside your RRSP.

Generally, the answer is "no", it does not compensate you adequately. There is of course, one situation where this doesn't matter, and that's when you otherwise simply wouldn't have the funds to purchase the home. When you make less than a 20% downpayment on the purchase of a home you get dinged with a "mortgage insurance" premium. This can increase the effective interest rate on your mortgage by a couple of percent, depending on your credit history. Ask your mortgage broker to calculate for you what the effective yield on your mortgage will be. If it's significantly higher than the interest rate that you could earn by holding a bond in your RRSP then taking advantage of the Home Buyer Plan may be a good idea.

Lots to think about we know ... that's why you should sit down with a mortgage professional and your investment counsellor to have the numbers worked out for you before making a decision. Check out our recommended mortgage broker website Spencer Group Mortgages for more mortgage information and a simple application form. While you're there, sign up for the helpful newsletter for information on this and many more interesting and important topics whether you're a first time home buyer or a veteran looking for the latest information.

Should you cash in your RSP to help buy your home ? Part I

In Canada, you are eligible to borrow up to $20,000 from your RRSP under the "Home Buyer Plan" if you haven’t owned the home you live in over the last five years. If your spouse also has an RRSP, they can do the same, so you come up with up to $40,000 for down payment. To withdraw funds, just fill out a form T1036 and submit it to your financial institution.
IMPORTANT: by using this form you avoid it being a regular withdrawal with tax deducted from the proceeds.
Once you've made the withdrawal you have until September 30 of the following year to purchase a home. A further one-year period is allowed to move into it and make it your primary residence. This is very important too: that it be your primary residence. The money you withdraw from your RRSP is now a zero-interest loan to yourself. Repayment commences with 1/14th of the amount every year for 14 years, beginning two years after you withdrew the funds. If you don't buy a home, don't make it your primary residence, or don't pay the money back to your RRSP, then the money you withdrew will be treated as income and you will have to pay income tax on it.Two more unique situations that you should be aware of: you cannot make a contribution to your RRSP and then immediately withdraw that same contribution under the Home Buyer's Plan. You must wait at least 90 days. This does not mean you cannot contribute to your RRSP during those 90 days, just that there must have already been enough money in the RRSP to cover your withdrawal. Finally, if you become a non-resident of Canada you will have to repay all of the money still owing to your RRSP within 60 days of leaving the country.
Next time we look at the investment implications and ask "is this really such a good deal"?

Happy 2008 from Thunder Bay Mortgage News

All the best to our readers for a fantastic New Year. Make sure to keep tuned this year for more exciting articles and new web links. Hope to see you again soon !