The amortization of a mortgage is divided up into smaller time periods called “terms”. Mortgage terms usually range from six months to five years, but some institutions will offer seven- or 10-year terms. The term is the period of time during which, with fixed-rate mortgages, the interest rate and payment amount are fixed. With variable-rate mortgages, the payment amount may, or may not, change; you should review your agreement to check when the payment amount may change. At the end of the term, you can renew your mortgage for a new term, at prevailing interest rates.
Generally, the longer the term, the higher the interest rate. Because it is not possible to know what the interest rates will be over any given period of time, many consumers seeking certainty choose a longer term with a fixed interest rate so that they know in advance, at least for a specified period, how much they will have to pay for their mortgage. This helps them to plan their finances better and enhances their feeling of security. However, during periods when interest rates are expected to fall, many consumers choose variable-rate mortgages so they can take advantage of lower rates without renegotiating their mortgage.
Amortization period compared to the term of a mortgage
The amortization period on a mortgage is the total length of time it will take you to pay off your mortgage. A typical amortization period is 25 years, but it can be longer or shorter.
In comparison, the term of a mortgage (which ranges from six months to 10 years) represents the length of time for which your mortgage agreement with a lender is valid.
Benefits and costs of a longer amortization period
Some people choose a longer amortization period because it lowers their mortgage payments: the longer the amortization, the lower the mortgage payments. This can mean, for some, the difference between buying and not buying a home.
However, the longer it takes you to pay back the mortgage principal to the lender, the more interest you will pay — which can affect your ability to save for other important things, such as retirement.
Bank of Canada says household debt and European crisis present the biggest risks to country’s financial stability.
Risks to Canada’s financial stability have gone up over the past six months because of the possibility that the European debt crisis and “severe tensions” in global markets could threaten the worldwide recovery, the Bank of Canada said Monday.
In their semi-annual review of Canada’s financial system, policy makers said it continues to function well and has actually strengthened since their last assessment in late 2009. However, they reiterated concerns about the amount of household debt that Canadians have built up amid historically low borrowing costs, and outlined how Canada’s strong economy could fall victim to fiscal troubles across the Atlantic Ocean if they fuel stricter lending standards among banks and a drop in demand.
“Many aspects of the Canadian macrofinancial environment have improved since last December, with the economic recovery proceeding as expected and conditions in Canada’s financial system generally strengthening,” the central bank’s governing council said in its latest risk assessment. Still, policy makers said, “near-term risks” to Canada have increased because of “heightened concerns that worldwide fiscal strains have the potential to cause tensions in interbank funding markets, to derail the global economic recovery, or to trigger a disorderly resolution of global imbalances.”
Policy makers said the level of risk has increased in three of five categories that they look at for their review, namely: funding and liquidity; the so-called imbalances in the global economy that exacerbated the financial crisis of 2008; and the current economic outlook.
Canadian banks’ capital levels, and the quality of what they possess, has improved since December, the central bank said, while the risks posed by household balance sheets remain “roughly unchanged” even as households’ financial vulnerability to economic shocks is growing. The rising debt-to-income ratio among Canadians, which policy makers such as Bank of Canada Governor Mark Carney have been warning about for several months, also could pose a risk to banks and the economy as a whole, should borrowers default on their loans and force banks to hold back on extending credit.
“In the event of a significant economic downturn, the credit quality of household loan portfolios could be undermined, prompting banks to tighten credit conditions and some households to reduce spending,” the central bank said. “Ultimately, this could result in mutually reinforcing declines in real economic activity and in the health of the financial sector.”
Measures being taken by European governments to get their fiscal houses in order need to be sufficient to keep investors satisfied that the problems are being addressed, the central bank said, while warning that “economic and political constraints” could complicate those efforts and lead to another period of “severe stress” in markets.
“Concerns over fiscal imbalances could also result in an abrupt increase in risk premiums and volatility for a wide range of assets and currencies,” the central bank said. “While Canada’s position is relatively strong, our financial system could be adversely affected by growing fiscal strains elsewhere.”
Also, sweeping new rules that Group of 20 policy makers are crafting for the financial sector could have “unintended consequences”’ or cause challenges for banks as they transition to whatever regime is approved, the central banks said.
“Given its unprecedented scope, pace, and complexity, there is a risk that regulatory reform could have unintended consequences,’’ the bank said. Nonetheless, policy makers said, “at least equally important is the risk that key elements of the reform agenda will be diluted, either because of complacency as economic and financial conditions improve or because of fears that reforms could harm a still-fragile recovery.”
The foreclosure process with Tony Spagnuolo, owner of Spagnuolo & Company
Make sure you watch BOTH videos below. Part 1 & 2 below
Foreclosure scares people because it means they may lose their house. But if you face foreclosure, you may still be able to help yourself if you understand what it is and how it works. Call me at 604-273-2002
What is foreclosure?
Foreclosure is a legal action that a lender can take if a person who borrowed money using a mortgage stops paying back the mortgage. Foreclosure allows the lender to take or sell the person’s house by first getting a court’s permission to do so.
What happens if you miss a mortgage payment or make a late payment?
You do not automatically lose your house. Lenders don’t want to foreclose if they don’t have to because it is expensive and takes a lot of time. A lender will probably not start to foreclose until two or three months after you stop paying. Normally, a lender will first send letters demanding payment. Then, if you don’t reply, the lender will usually start to foreclose and sue you at the same time.
If you have a short-term problem, like a temporary layoff, you may be able to make a deal with the lender to make smaller payments for a time, and add the amounts you fall behind to the total amount of your mortgage. Or you may be able to make smaller payments for a while and a larger catch-up payment later. Most lenders would rather make some sort of deal and keep the mortgage in good standing, instead of starting expensive foreclosure proceedings in court.
The law tries to help you if you have a good chance of paying what you owe and if you try to get your finances in order. Only in the worst case may you lose your house and any “equity” you’ve built up in it. Equity is the amount that your house value exceeds your mortgage loan and any other debts that other lenders have registered against your house.
If a lender starts to foreclose, what happens first?
The lender first applies to court for an “order nisi”, which is the first order of foreclosure. If there’s a Supreme Court Registry where your house is located, the lender has to start proceedings there, unless you agree otherwise.
You get a document called a “petition for foreclosure”, which is the lender’s application to the court. At the same time, the lender may also sue you in the same court proceeding for the amount of the mortgage that you still owe.
You must file a document called an “Appearance” within seven days of getting the petition
You can get an Appearance form from the court registry. You must file the Appearance at the court address shown on the petition. Once you do this, no one can take any steps in the foreclosure without notifying you. If you don’t file an Appearance, the foreclosure will go ahead without you, and you won’t be able to protect yourself. After you file the Appearance, you will get a document called a “Notice of Hearing,” which tells you when the lender will ask the judge for the order nisi to start the foreclosure.
What happens at the hearing?
The court will give the lender an order nisi, but in most cases, it will also give you time to “redeem” the mortgage by paying the full amount you owe, plus interest, costs and taxes. This time is called the “redemption period” and it’s usually 6 months. But sometimes the lender will ask the court for a shorter redemption period. The court can make an order to sell your house at any time, including at the order nisi stage.
So one good reason to attend the court hearing is to ask the judge for as much time as possible to get the money to pay off the mortgage or sell the house. If you need more time, you can ask for an extension. If you ask for a long redemption period or an extension, the court will want to know what you have done to pay off the mortgage and what chance you have of paying the mortgage or selling the house on your own or through your own real estate agent. You should use a lawyer in this case because a lawyer can advise you on your options, including possible refinancing, even with another lender.
When the redemption period ends, the court can give the lender a final order of foreclosure – see “order absolute” below. Or, the lender can ask the court for the right to have their own real estate agent list your house for sale. If there are other people or companies with a charge against your house, besides the lender who started to foreclose, they may ask for the right to sell your house. If the court gives the lender or anyone else the right to sell your house, it gives them “conduct of sale.” If this happens, you cannot sell the house yourself. If anyone asks the court for conduct of sale for your house, you should ask the court to give you exclusive conduct instead. This means that only you are in charge of selling it. Or you can ask the court to give you at least joint conduct with the other person or company, so you have some control.
You can do two things during the redemption period
You can pay off the lender that started to foreclose. To get the money for this, you can try to borrow from another lender or a relative, at a lower interest rate or over a longer repayment period. That would let you pay off the first mortgage and lower your monthly payments. Call me at 604-273-2002
Your can try to sell the house, preferably using your own real estate agent. Call me for a referral to a GOOD real estate agent. You may then choose the realtor you trust the most or feel most comfortable with. If you sell the house, you can use the money from the sale, first to pay any tax you owe, and then to pay the mortgage and other charges registered against the title, including court costs. If there’s any money left over (equity), you keep it. But if the money from selling your house doesn’t completely pay off all of the lenders, you may have to pay them the difference. Meanwhile, if the lender or anyone else with a charge against your house gets an offer to buy your house, they can apply to court for an order authorizing that sale.
What if you have no equity in your home?
If you owe more than you can sell the house for, you will probably want to get out of the situation with as little expense and trouble as possible. But you should still take action instead of ignoring the problem. You may want to work with the lender to minimize costs by agreeing to the foreclosure. Normally, you would only do this if the lender will give you a full release from your mortgage, meaning you won’t owe the lender any more money. If the lender won’t agree to this, you can just let the foreclosure proceedings go ahead and use the time as a rent-free period to get your finances back in order. If any other people or companies with debts registered against your house are not paid from the money from selling your house in the foreclosure, you will still have to deal with them. Otherwise, they can sue you for any money you still owe them.
The lender can apply to court for an “order absolute”
The final order for foreclosure is called an “order absolute,” and it comes after the redemption period ends. If the lender applies for an order absolute and the court grants it, the house then belongs to the lender and you have to leave it. You lose all rights to the house. You will no longer owe the lender any money, but if anyone registered a debt against your house after the mortgage, you’ll still owe that money. In exceptional cases, you can apply to the court for relief from losing your house if you can pay the balance in full. Then the court can order the lender to transfer the house back to you.
If the court makes an order absolute, you owe nothing more to the lender
If the lender sells your house after getting an order absolute, but doesn’t get enough money from the sale to pay off the mortgage, you don’t have to pay the difference. But lenders do not usually ask the court for an order absolute. Instead, they will usually sue you when they start to foreclose and ask the court for an order to sell your house to pay off the loan. If the money from selling your home doesn’t completely pay off the mortgage loan, the lender can try to collect the difference from you.
What happens if you have a second mortgage or other charges registered against your house?
Any mortgages or charges registered before the lender’s mortgage continue and are still valid. But any that were registered after the lender’s mortgage are cancelled and the holders of those charges lose their security. For example, if you have two mortgages on your house, and the first lender forecloses, the second lender will have to pay off the first lender or lose its security. Then the second lender would have to try to get you to pay its loss.
Summary
A mortgage is a contract to repay a loan, secured with a charge on land. It’s registered against your property in the Land Title Office. If you fail to pay the mortgage, for example, by falling behind in your mortgage payments, the lender may start to foreclose. Then if you can’t pay the mortgage loan in full, either by selling your house or in some other way, the lender can take your property or sell it to pay off the loan.
If you receive a foreclosure petition, get legal advice. It doesn’t cost much to have a first meeting with a lawyer. As well, you should see a lawyer if anyone asks you or your spouse to sign any new documents, because your spouse may not be liable under the original mortgage documents.
Housing starts across British Columbia remained depressed in the first quarter of 2009, falling almost 70 per cent from the same quarter of 2008, Canada Mortgage and Housing Corp. reported Wednesday.
While housing starts ticked up slightly in March on a national basis, builders in B.C. started work on 2,517 new homes in the first three months compared with 8,532 in 2008.
Locally, the declines in starts ranged from almost 93 per cent in Kelowna, where builders started on 72 new homes compared with 985 in the first quarter last year; to 31 per cent in Nanaimo, where builders started on 170 new homes vs. 247 in the same months a year ago.
New-housing construction slipped in March to a pace that would see builders across urban B.C. start work on 10,000 units in 2009, compared with a pace of 12,000 units seen in February.
In the Lower Mainland, Metro Vancouver saw starts fall by two-thirds, 1,829 units compared with 5,131 in the first quarter of 2008.
Robyn Adamache, senior analyst for Canada Mortgage and Housing in Vancouver, said the drop in starts now is a lagging response to the dramatic fall-off in sales that the Lower Mainland and other regions experienced through last summer and fall.
Comparing the current real-estate market correction to the past couple of market cycles, Adamache added that “it seems like builders have responded a little bit more quickly to the downturn in the resale market.”
Across Metro Vancouver, West Vancouver saw the steepest drop in the first quarter at 92 per cent, with the Tri-Cities and Surrey not far behind at 91 per cent.
Delta was the only municipality to see an increase in housing starts. Builders there started work on 81 new housing units, an increase of 55 per cent in the first quarter from a year earlier.
B.C., and Metro Vancouver in particular, did see a significant rise in the value of building-permit applications in February, which signals higher levels of building in future months.
Adamache added that current housing starts are well below her forecast for Metro Vancouver, so the permit numbers are evidence backing her expectation for “things to start improving a bit by the end of the year.”
Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association, said record attendance of almost 900 participants at his organization’s seminar for first-time homebuyers indicates to him that there is demand in the market that will support more housing starts later on.
“That [seminar], for me, was the litmus test of where we are,” Simpson said in an interview.
If the seminar had low attendance, coupled with low housing starts, “I’d say that’s going to be a long-term [situation],” Simpson added.
In the meantime, however, Simpson said the low level of starts does not bode well for employment in the construction sector.
Adamache said rising unemployment in B.C. is one factor that will weigh on housing in the months to come.
Douglas Porter, an economist with BMO Capital Markets said, “You are starting to see very real job losses in B.C. B.C. is, unfortunately starting to catch up with Ontario on that front.”
On the bright side, Porter said falling prices and lower interest rates have made homes more affordable, which will help mitigate the effects of higher unemployment.
Across Canada, home construction rose unexpectedly in March, led by Ontario and Quebec, CMHC said.
There were 154,700 housing starts on an annualized basis during the month, up from a revised 136,100 units in February, the government agency said. Many economists had expected housing starts to dip to 130,000 units in March.
@OwenGreaves That same obsolete agent is a salesman instead of a consultant R/T r Real Esta Agents Becoming Obsolete? - http://bit.ly/cdboti5 hours ago
Got out of the movie theater around 8:30 and it's already dark. Times a changing. Here's to an Indian Summer : ) 6 hours ago
