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.

Call me to discuss 604-273-2002

Mark Fidgett | 604-273-2002

“Your Personal Mortgage Consultant….For Life!”

PS – Please Don’t Keep Me a Secret

A REFERRAL is when you INTRODUCE someone you care about to someone you TRUST!

T 604.273.2002 | F 604.522.2072

W http://www.notapennydown.com

An independent Mortgage Specialist associated with the Verico Mortgage Network.

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.”

Bank of Canada says economy is ‘vulnerable’

Call me to discuss 604-273-2002

Mark Fidgett | 604-273-2002

“Your Personal Mortgage Consultant….For Life!”

PS – Please Don’t Keep Me a Secret

A REFERRAL is when you INTRODUCE someone you care about to someone you TRUST!

T 604.273.2002 | F 604.522.2072

W http://www.notapennydown.com

An independent Mortgage Specialist associated with the Verico Mortgage Network.

Today is day one of the government’s new mortgage rules.

Here’s a quick video rundown on qualifying rate….

QUALIFICATION RATE

The biggest rule change affects borrowers who put down less than 20% and want a variable or 1- to 4-year fixed term.

Yesterday, you might have qualified for a high-ratio $250,000 variable-rate mortgage with a 3.8% qualifying rate.

Today, lenders will demand you qualify with a 6.10% rate.

That means your income needs to be around 25% higher today than it did yesterday to be approved for the same variable or 1- to 4-year fixed rate mortgage!

Nothing changes with 5- to 10-year mortgage terms.

The qualification rate will still be based on the rate you’re quoted.

REFINANCES

Starting today, insured refinances will be limited to 90% loan-to-value.

2ND HOMES

Second homes now qualify for high-ratio insured financing if, and only if, they have no more than one unit.

RENTAL FINANCING

People buying rental properties now have to put down 20% (instead of 5% last week) to get insured financing.

You can put down less than 20%, but you’ll generally need to use an uninsured lender, which means higher interest rates.

In short:

When a subject property or owner-occupied property generates rent:
50% of gross rent is added to the borrower’s income
Property taxes and heat are excluded from Total Debt Service (TDS) calculations.
For non-owner occupied rental properties:
100% of net rental income is added to the borrower’s gross income
The mortgage payment, property taxes, and heat are excluded from TDS calculations.

Net rental income:

A 2-year average of rents is required to establish net rental income (we’re checking on what exceptions may be permitted)
Net rental income is proven via the borrower’s T776 Statement of Real Estate Rentals OR lenders can use their own guidelines to validate rental income. Net rental income can be grossed up 15% if the borrower takes deductions for depreciation or amortization, or rental-related self-employed income.

PS  on Investment property

However, the 20-per-cent minimum down payment rule is less likely to make a significant dent in real estate activity as there are no rules as to where those funds can come from. There is nothing in the rules that would prevent homeowners from withdrawing equity from their primary residences to meet the 20 per cent threshold on a second investment property, for example.

Creative financing will become increasingly popular.

Here again, I can’t stress how important it is to get the

RIGHT ADVICE – AT THE RIGHT TIME…

Ultimately, I think home buyers will continue to tap their personal credit lines and family connections to get the money they need to enter the housing market.

Bottom line – If you’re going to invest in real estate, you’ll have to put down a minimum of 20 per cent.

You may want to contact me to discuss Email me

Mark Fidgett | 604-273-2002

“Your Personal Mortgage Consultant….For Life!”

PS – Please Don’t Keep Me a Secret
A REFERRAL is when you INTRODUCE someone you care about to someone you TRUST!

T 604.273.2002 | F 604.522.2072
W http://www.notapennydown.com

An independent Mortgage Specialist associated with the Verico Mortgage Network.