Canadian banks are chopping their mortgage rates across the board by up to a third of a percentage point as the cost of borrowing in the bond market falls.

The popular five-year closed mortgage gets the biggest cut.

At TD Canada Trust, a five-year closed mortgage drops three-tenths of a percentage point to 5.55 per cent. At the Royal, the five-year closed term falls three-tenths of a point to 5.49 per cent. At BMO, a five-year loan also falls to 5.49 per cent, but that represents a drop of .36 of a percentage point.

These are all posted rates. The big banks typically offer discounts of at least a full percentage point on most closed mortgages.

BMO and RBC say they're offering a special rate of 4.19 per cent on their five-year mortgages. A few smaller financial institutions such as First Calgary Savings are currently offering five-year loans for just under four per cent.

At the big banks, most other mortgage terms were trimmed by smaller amounts. A one-year closed mortgage falls a fifth of a percentage point to 3.70 per cent at BMO and RBC. A 10-year closed mortgage drops a fifth of a percentage point to 6.70 per cent at TD and to 6.75 per cent at the other two.

Analysts say low mortgage rates have helped to turn around the Canadian housing market in recent months. Real estate statistics for July show that the number of resales across the country surged more than 18 per cent from a year earlier to a record high. The average MLS sale price in July was up 7.6 per cent from July 2008.

The Bank of Canada is widely expected to keep its key overnight lending rate unchanged at its current record low of 0.25 per cent when it makes its next interest rate policy announcement on Thursday.

Canadian housing starts fell unexpectedly in July, dropping 4.1 percent from June and breaking a two-month run of gains, largely because of a drop in construction of multifamily dwellings.

Canada Mortgage and Housing Corp said on Tuesday that starts fell to a seasonally adjusted annualized rate of 132,100 units in July from a downwardly revised 137,800 units in June.

Analysts had forecast a rise to 145,000 starts. June starts were previously reported at 140,700 units.

The fall in July was attributed to a 9 percent decrease, to 61,000 units, in starts on urban multiple dwellings such as condos and apartment buildings. Single family homes dipped 1.1 percent to 52,500 units.

The figures paled against the buoyancy of recent data for existing home sales and building permits, but economists were encouraged that the July number was still above the average for the second quarter.

"In the second quarter, starts averaged a 127,900 annualized pace so July's data shows a modest improvement from that level," said Dawn Desjardins, assistant chief economist at Royal Bank of Canada.

"Canada's housing market is showing signs of emerging from its slump with the July level of housing starts putting the economy on track to record a quarterly increase for the first time since early 2008."

Rona Inc , Canada's biggest home-improvement chain, said on Tuesday that soft housing starts in the second quarter were partly to blame for its weak quarterly profit. It also said it remained cautious about recovery in the housing sector.

Starts increased 16.6 percent in Quebec in July, but fell in other regions. Urban starts dropped 17 percent in the Prairies, 15 percent in Ontario, 10 percent in British Columbia, and 1.4 percent in Atlantic Canada.

Rural starts were estimated at a seasonally adjusted annual rate of 18,600 units in July.

The worst of Canada's housing market woes appear to be past but the sector's rebound will be tenuous as a rise in mortgage rates and high unemployment limit the recovery in prices and sales.

Property experts say first-time buyers and Bank of Canada rate cuts have helped restore stability to a market that slumped from late 2008 to early this year, when the worst leg of the global financial crisis battered consumer confidence.

"We should be less fearful than we were six months ago, but I don't think we should be exuberant yet. The resale markets in Canada are very strong. May numbers were pretty good, and June numbers will be even better," said Will Dunning, an economic consultant who specializes in the housing market.

"But by July and into the fall there will be an offset of considerably slower activity. I don't think it's likely to go off a cliff. It'll depend on what happens in employment and the broader economy, and how that affects confidence."

Recent data suggests Canada's residential property market, which weathered the financial crisis much better than its hard-hit U.S. counterpart, has been thawing for several months.

The latest Canadian Real Estate Association data shows May resale home prices rose 0.4% to $319,757, topping the previous record set a year earlier. It was the first year-over-year increase since May last year. And sales activity climbed for a fourth straight month.

The industry group, which represents more than 97,000 real estate brokers and agents, also cut its forecast for a drop in home prices this year and said it expected sales activity to trend higher.

Meanwhile, Canada Mortgage and Housing Corp., the national housing agency, forecast in its second-quarter outlook that new home construction is expected to decline to 141,900 units in 2009 but rebound next year.

Still, no one predicts the residential property market is headed back to the heady times seen between 2002 and 2007, when prices surged and outpaced income growth. In some cities, such as Vancouver, British Columbia, and Calgary, Alberta, home prices doubled and are now going through a sharp correction.

A "stable but unremarkable" period for the real estate market is expected this year, said Philip Soper, chief executive officer of Brookfield Real Estate Services, an arm of Canadian property giant Brookfield Properties Corp. that holds real estate broker brand Royal LePage.

"Stability is something you can't overemphasize in terms of its importance for the housing market right now."

Unless the global financial system succumbs to another crisis, analysts expect the Canadian home market is likely to stabilize further.

Activity from first-time buyers appears to be providing support because of stimulative measures by the federal government that allow these buyers to defray closing costs and withdraw more from retirement funds.

The Bank of Canada has also pledged to keep interest rates near zero until mid-2010, which could underpin confidence.

But the economy is still on shaky ground, contracting for the ninth straight month in April. And the unemployment rate spiked to an 11-year high in May, boosted by massive layoffs in the factories of Ontario.

Experts warn that further job losses in pockets of Canada's export-oriented economy could slow the momentum that has been gathering in the housing sector.

"We don't expect the recession to end until the fall. It's clear that the spring fling in housing markets, this remarkable surge in resales and prices, has been driven by record low mortgage rates," said Sal Guatieri, senior economist at BMO Capital Markets.

These record low rates, whether variable or fixed, had increased affordability for many buyers. But weakness in the bond market, caused in part by reduced investor demand for safe-haven assets, has pushed mortgage rates higher.

The posted rate on a five-year mortgage at Royal Bank of Canada, the country's largest lender, has risen to 5.85% from 5.25% in April.

Brookfield's Mr. Soper has been telling his management team to prepare for softness in the housing market in the second half.

"The advice I have been giving ... is to accept the recovery this spring with humility, to continue to plan for a difficult second half of the year although the comparables are going to be positive simply because the second half of 2008 was so poor," he said in an interview.

"But at least we have a stable market and stable prices, which is something that you need to encourage consumers to trade."

Housing starts rose more than expected in May, with increased construction seen in both single and multiple dwelling sectors, according to Canada Mortgage and Housing Corporation.

The seasonally adjusted annual rate of starts increased to 128,400 units during the month from 117,600 in April, CMHC said Monday.

"Housing starts are expected to improve throughout 2009 and over the next several years to gradually become more closely aligned to demographic demand, which is currently estimated at about 175,000 units per year," the Crown corporation said.

Economics expected housing starts to total 126,000 units in May.

The seasonally adjusted annual rate of urban starts was up 11.1% to 107,800 units in May, CMHC said. Multiple unit urban starts rose to 60,900 units and single unit starts increased to 46,900 units -- with both categories rising by a similar 11.1% from the previous month.

"The increase in May is broadly based, encompassing both the singles and multiples segments," said Bob Dugan, CMHC's chief economist.

Overall urban starts were up 22% in Ontario, 16.8% in the Prairies, 7.3% in Atlantic Canada and 3.3% in Quebec. Meanwhile, urban starts fell 5% in British Columbia.

Rural starts were little changed at 20,600 units in May.

"The broad-based nature of the increase in residential construction activity in May was an encouraging development for this beleaguered sector of the Canadian economy," said Millan Mulraine.

"Indeed, after plunging precipitously since late 2007, and appearing to be in free-fall in recent months, this rebound may be an indication that the sector is perhaps stabilizing.

"Nevertheless, with the Canadian labour market continuing to weaken and the overall economy remaining quite soft, we expect residential building activity to remain in the current depressed range for some time."

TABLE

Housing starts in May (seasonally adjusted):

Canada, all areas 128,400

Canada, rural areas 20,600

Canada, urban centres 107,800

Canada, singles, urban centres 46,900

Canada, multiples, urban centres 60,900

Atlantic region, urban centres 7,300

Quebec, urban centres 34,200

Ontario, urban centres 41,600

Prairie region, urban centres 15,300

British Columbia, urban centres 9,400

New and revolutionary mortgage payment discoveries explain how Consumers in Canada, the United States, the UK, Australia and the Commonwealth, give away huge amounts of money, freely every week or month with each mortgage payment. In fact this is true around the world for almost all Borrowers. We pay our mortgages and loans on terms dictated by the Lender without the expertise of a new wave of professionals who specialize in turning debt and mortgage payments to the financial advantage of the Consumer.



Lenders extend their loan repayment terms over 15, 25 and 30 years for maximum profits on the loan. Consumer Mortgage Repayment Specialists could shrink those profits by thousands of dollars depending on their experience and skill at saving you excessive and unnecessary payments. With some coaching, you too could divert new dollars to pay off the home loan in record time with big savings.

You would create these savings from Mortgage over payment if you could reduce taxes, eliminate excessive interest charges and shrink other payments on the loan. Success with the new way to pay means an early end to payments for an extended number of months. These are payments that in fact, are entirely un-necessary but you think you must make because usually you follow the Lenders' Plan.

Canadians, for example, are allowed tax deductions for retirement savings, as business expenses, and as tax credits for the costs of money used for investment purposes. Unfortunately, many Consumers forgo these allowable tax deductions. These lost tax dollars could be utilized efficiently to reduce excessive mortgage interest payments.

Citizens and Residents of the United States of America too, as Borrowers, have become desensitized to this huge wastage in mortgage costs because of:

• Record low interest rates recently
• Rising house values followed by the sub-prime mortgage fiasco
• The fact that Americans can deduct interest costs on their taxes and
• Aggressive home equity loans by Banks and Mortgage Lenders so that the average North American Home has become a virtual ATM Machine loaded with instant cash available to the Home Owner to spend

As a result, Borrowers and Home Owners continue to add their hard earned dollars to huge Bank Profits, unwittingly. We lack fundamental knowledge about how best to make mortgage payments and home equity loans work in our best interests. New approaches to faster mortgage payments show results very early. Savings of $10,000.00 in one year are not uncommon. About $30,000.00 of savings after three years of payments is almost always achievable.
Any good early, mortgage re-payment program can cause the disappearance of as many as 70 to 120 months of mortgage payments you no longer must make. In order to succeed, the Borrower must follow with discipline, a skilfully designed and specific fast mortgage repayment plan that applies money concepts differently.

This is a complex field. Consumers do not know which story to believe. How do you separate the genuine Mortgage-Payment Wiz-Kid" from the fraudulent, scam Artists and Pushers of get-rich-quick schemes that never work?
The News Media generally favors an easy and sensational story like credit card interest, pay day loans, or the recent surge in foreclosures. Academics, Statisticians and Researchers are not generally practical in their approach to these problems. Professionals in the Mortgage and Loans Industry have been funded largely by the Lending Establishment.

Almost all of them, including the brightest ones work for Lenders. As a result, Consumers have been abandoned, left to the mercy of Bank Profits and Mortgage Loan Officers' fees. What compounds the problem even more is the multitude of self made "Specialists", who in fact know little about the subject. Many of those who comment on fast mortgage payment options may hardly have basic college level math. Some may not ever have had any practical experience in paying a mortgage. You are reading. So here's your mortgage how to tip.

The most important tool for use in designing a good mortgage repayment plan is an amortization schedule that lists all payments from Payment #1 to the Final Payment. To design a good plan, you must compare and contrast different repayment scenarios for that mortgage. The average Canadian mortgage contract is written so that the loan will be repaid in 300 Payments. American mortgages get repaid in 360 Monthly Payments, generally. You must know and include the impact of related financial decisions such as taxes, retirement savings and investments etc. Even additional fees and costs must be considered. Three key components of your plan make a big difference in delivering dollars into your retirement account because of your skill in devising a clever mortgage repayment strategy:

The first of these components is the frequency of compounding and the frequency of payments. For example, Canadian Lenders do not exact a fee for changing from monthly payments to a bi-weekly mortgage repayment schedule. Many American Lenders charge such a fee. In Canada therefore, it is standard knowledge that you would reduce the number of years of payment from 25 to around 22 years by simply changing to a Bi-weekly mortgage payment schedule. A good plan from the new breed of Mortgage Payment Planners would pay off that mortgage in 10 to 12 years.

The second major planning component is the application of tax rules to benefit the Borrower. Our generous Uncle Sam allows US Taxpayers to deduct the interest on the mortgage loans on their homes to a maximum loan size of one million dollars. Canadian Mortgage Payment Planners, however, must distinguish themselves by devising various schemes to make the Canadian Mortgage Interest Tax deductible. Clever yet perfectly legitimate tax planning schemes could make a difference in your mortgage costs to the tune of tens if not hundreds of thousands of dollars.

Thirdly, a clever investment program that is closely integrated with the mortgage repayment plan could free you, the Borrower from loan payments much sooner and leave an Investment Account at the end.

Consumers have been diverted successfully to focus their attention on the low interest rate game. They are also enticed with other gimmicks such as interest-only payments, 100 percent financing, cash back from the mortgage at closing. These offers sedate and distract us from the real meaningful issues such as the time it would take to repay the entire loan. How much does the mortgage really cost? Such costs must be counted in before tax dollars and in after tax dollars. What are the penalties, fees and costs for early repayment?

A fast mortgage payment plan that ignores any of those three key components above is an Amateur’s Plan. Unfortunately, most mortgage pay off plans do not include such considerations. At the time of approvals and funding, Consumers become overwhelmed with the mortgage process. Even professionals, like dentists and doctors, teachers, nurses and police, even accountants and financial planners can be so intimidated with the experience that they accept the Lenders' Payment Plan without question. That payment plan usually has a built-in, profit pool to be counted in the hundreds of thousands of dollars over the life of the mortgage. The new breed of Mortgage Payment Specialists knows how to design a Consumer friendly, Mortgage Payment Plan that integrates tax issues, compounding frequency and investments. All three components, when skilfully integrated into a mortgage payment plan, deliver savings counted in the hundreds of thousands of dollars over the life of the mortgage.

Already you can see that the overwhelming majority of Borrowers do not usually create their own specific, mortgage payment plan. Those who do would not have the tools to integrate tax planning, payment and compounding frequency, in addition to investments into their plan. So you must consult an expert who has those skills. Since space does not permit, we will end here. Later on, we will explore the real benefits of a Fast Mortgage Payment Plan. In another article, we will explain the magnitude of those savings in numbers the size of which once again are too often misunderstood.

Metro Vancouver housing starts showed another substantial drop in April leaving new-home construction at about one-third the level it was a year ago, according to figures from Canada Mortgage and Housing Corp.

Builders started work on 483 new homes across Metro Vancouver in April, almost 70 per cent fewer than April, 2008.

To the end of April they'd started 2,302 new housing units, some 66 per cent fewer than the first four months of last year.

Starts were down in every municipality except Delta, which has seen construction start on 93 new homes up to the end of April, a 75-per-cent increase from a year ago.

"New home construction is facing competition from a well-supplied resale market and a growing inventory of unsold new homes," Robyn Adamache, a Canada Mortgage and Housing Corp. analyst said in a news release.

"Builders will remain on the sidelines until some of the existing new and resale supply is absorbed."

Construction across B.C.'s urban areas remained depressed in April with builders starting only 842 new homes during the month, down 73 per cent from the 3,092 started in the same month a year ago.

Once booming Kelowna saw the steepest decline with only 29 new starts in April, down 88 per cent from the 249 started in the same month a year ago.

In Victoria, starts were down 87 per cent at 54 units, and in Chilliwack starts were down 87 per cent at 21 new units.

Vernon was the only urban area to see an increase in starts with 64 new units reprsenting a 16 per cent increase from a year ago.

Overall, however, builders started work on just 3,363 new homes to the end of April compared with 11,385 in the first four months of last year.

Canadian housing starts rose an unexpectedly strong 13.7 per cent in March, breaking a six-month losing streak thanks to renewed strength in Ontario and Quebec, Canada Mortgage and Housing Corp said Wednesday.

Ground breaking on new homes climbed to a seasonally adjusted annualized rate of 154,700 units from an upwardly revised 136,100 units in February, CMHC said.

Analysts had predicted 130,000 starts in March.

The Canadian dollar strengthened on the data and by 8:25 a.m. was at $1.2331 to the U.S. dollar, or 81.10 U.S. cents, compared to $1.2378, or 80.78 cents, at Tuesday's close.

Construction of urban single-family homes rose 1.3 per cent to 46,400 units last month from 45,800 in February. Construction of multiple dwellings, such as condos, jumped by 28.3 per cent to an annual rate of 81,500 units from 63,500.

"New home construction is now at a more sustainable level after having been exceptionally strong over the past seven years, exceeding 200,000 units per year," the CMHC said in a statement.

Rural starts in March were estimated at an annual rate of 26,800 units, unchanged from February.

The housing downturn in Canada has hit starts, home prices as well as sales activity. Economists describe this as part of a "correction" in the sector, which is expected to last the better part of this year before rebounding in 2010.

Canadian housing starts fell by a greater-than-expected 12.3 percent in February on declines from the single and multiple dwellings sectors, Canada Mortgage and Housing Corp. said on Monday.

New home construction dropped to a seasonally adjusted annualized rate of 134,600 units from 153,500 units in January, CMHC said.

The number of starts in February was below the consensus expectations of analysts who had called for 145,000 starts.

Urban single family home construction declined 11 percent to 44,500 units last month from 50,000 units in January. New construction of multiple dwellings, such as condos, fell 17.5 percent to an annual rate of 63,300 units.

Rural starts were estimated at a seasonally adjusted annual rate of 26,800 units in February.

The average price of a Canadian home is expected to decline by 8 per cent this year before rising by about 1 per cent in 2010, says a forecast by the Canadian Real Estate Association.

"We are caught in a cycle where consumer confidence has been eroded by job losses, and consumer confidence is an essential ingredient for housing sales activity," CREA president Calvin Lindberg said in a report released yesterday.

The average Canadian home price was $303,594 at the end of 2008, but that should drop to $279,400 by the end of this year before rebounding slightly next year, according to the association that represents realtors in Canada.

Ontario should see prices fall to an average of $279,100, down from $302,354, while British Columbia will see the biggest hit to prices with a fall of 10.9 per cent, followed by Alberta at 8.9 per cent. Newfoundland is predicted to buck the trend, with prices rising by 4.8 per cent this year.

Sales activity is also forecast to fall by 16.9 per cent this year, but realtors are predicting a rebound of 9.9 per cent in 2010, marked by a second-half acceleration based on a recovering economy.

While the forecast is optimistic compared with those of some analysts – who believe the housing market may not recover for several years given the last housing downturn, which saw average prices fall for seven straight years in the Toronto area – the report is in line with other economists who predict the housing market will start to show signs of recovery next year.

"The correction in Canada's housing market continues to unfold and it appears the pace is a bit quicker than we had originally anticipated," Charmaine Buskas, senior economics strategist with TD Securities, said in a note yesterday. "In the face of continued economic weakness, housing may not see a rebound until early 2010."

Canadian housing starts fell 10.9 per cent in January to 153,500 annualized units, the fifth consecutive monthly decline, resulting in the slowest pace of residential construction activity since 2001, according to a separate report by the Canada Mortgage and Housing Corp. yesterday.

"The Canadian housing correction is in full swing, having a wide impact across the country," BMO Capital Markets economist Robert Kavcic said in a note. "With sales activity showing no signs of life, residential construction will be under pressure for most of 2009."

The Toronto Real Estate Board reported 2,670 sales in January compared with 5,075 at the same time last year, a drop of 47 per cent.

The average price was $343,632 – more than $30,000 less than the same time last year.

Meanwhile, a report by Toronto-based Altus Group reiterates fears over the burgeoning condo inventory in the Greater Toronto Area.

According to the housing research firm, 94 new projects were launched in the GTA in 2008, with 55 per cent of units remaining unsold by year's end.

Altus forecasts project cancellations will be more frequent this year as "many projects in the pre-construction stage are far from achieving a sufficient per cent of units sold to obtain financing."

The report says the situation may be less dire than during the housing bubble of the '80s because mortgage rates and investor activity were much higher then.

Creating a fast mortgage repayment plan can save you a bundle. Having such a plan is itself a revolutionary idea. Action delivers guaranteed results. Here are key components to include that will save your mortgage dollars counted in the $100,000.00's.

New and revolutionary mortgage payment discoveries explain how Consumers in Canada, the United States, the UK, Australia and the Commonwealth, give away huge amounts of money, freely every week or month with each mortgage payment. In fact this is true around the world for almost all Borrowers. We pay our mortgages and loans on terms dictated by the Lender without the expertise of a new wave of professionals who specialize in turning debt and mortgage payments to the financial advantage of the Consumer.



This article is restricted to mortgage payment practices in Canada and the United States, since these are the mortgage markets most familiar to us. Lenders extend their loan repayment terms over 15, 25 and 30 years for maximum profits on the loan. Consumer Mortgage Repayment Specialists could shrink those profits by thousands of dollars depending on their experience and skill at saving you excessive and unnecessary payments. With some coaching, you too could divert new dollars to pay off the home loan in record time with big savings. You would create these savings from Mortgage over payment if you could reduce taxes, eliminate excessive interest charges and shrink other payments on the loan. Success with the new way to pay means an early end to payments for an extended number of months. These are payments that in fact, are entirely un-necessary but you think you must make because usually you follow the Lenders' Plan.

Canadians, for example, are allowed tax deductions for retirement savings, as business expenses, and as tax credits for the costs of money used for investment purposes. Unfortunately, many Consumers forgo these allowable tax deductions. These lost tax dollars could be utilized efficiently to reduce excessive mortgage interest payments.

Citizens and Residents of the United States of America too, as Borrowers, have become desensitized to this huge wastage in mortgage costs because of:

• Record low interest rates recently
• Rising house values followed by the sub-prime mortgage fiasco
• The fact that Americans can deduct interest costs on their taxes and
• Aggressive home equity loans by Banks and Mortgage Lenders so that the average North American Home has become a virtual ATM Machine loaded with instant cash available to the Home Owner to spend

As a result, Borrowers and Home Owners continue to add their hard earned dollars to huge Bank Profits, unwittingly. We lack fundamental knowledge about how best to make mortgage payments and home equity loans work in our best interests. New approaches to faster mortgage payments show results very early. Savings of $10,000.00 in one year are not uncommon. About $30,000.00 of savings after three years of payments is almost always achievable. Any good early, mortgage re-payment program can cause the disappearance of as many as 70 to 120 months of mortgage payments you no longer must make. In order to succeed, the Borrower must follow with discipline, a skilfully designed and specific fast mortgage repayment plan that applies money concepts differently.

This is a complex field. Consumers do not know which story to believe. How do you separate the genuine Mortgage-Payment Wiz-Kid" from the fraudulent, scam Artists and Pushers of get-rich-quick schemes that never work?

The News Media generally favors an easy and sensational story like credit card interest, pay day loans, or the recent surge in foreclosures. Academics, Statisticians and Researchers are not generally practical in their approach to these problems. Professionals in the Mortgage and Loans Industry have been funded largely by the Lending Establishment. Almost all of them, including the brightest ones work for Lenders. As a result, Consumers have been abandoned, left to the mercy of Bank Profits and Mortgage Loan Officers' fees. What compounds the problem even more is the multitude of self made "Specialists", who in fact know little about the subject. Many of those who comment on fast mortgage payment options may hardly have basic college level math. Some may not ever have had any practical experience in paying a mortgage. You are reading. So here's your mortgage how to tip.

The most important tool for use in designing a good mortgage repayment plan is an amortization schedule that lists all payments from Payment #1 to the Final Payment. To design a good plan, you must compare and contrast different repayment scenarios for that mortgage. The average Canadian mortgage contract is written so that the loan will be repaid in 300 Payments. American mortgages get repaid in 360 Monthly Payments, generally.

You must know and include the impact of related financial decisions such as taxes, retirement savings and investments etc. Even additional fees and costs must be considered. Three key components of your plan make a big difference in delivering dollars into your retirement account because of your skill in devising a clever mortgage repayment strategy:

The first of these components is the frequency of compounding and the frequency of payments. For example, Canadian Lenders do not exact a fee for changing from monthly payments to a bi-weekly mortgage repayment schedule. Many American Lenders charge such a fee. In Canada therefore, it is standard knowledge that you would reduce the number of years of payment from 25 to around 22 years by simply changing to a Bi-weekly mortgage payment schedule. A good plan from the new breed of Mortgage Payment Planners would pay off that mortgage in 10 to 12 years.

The second major planning component is the application of tax rules to benefit the Borrower. Our generous Uncle Sam allows US Taxpayers to deduct the interest on the mortgage loans on their homes to a maximum loan size of one million dollars. Canadian Mortgage Payment Planners, however, must distinguish themselves by devising various schemes to make the Canadian Mortgage Interest Tax deductible. Clever yet perfectly legitimate tax planning schemes could make a difference in your mortgage costs to the tune of tens if not hundreds of thousands of dollars.

Thirdly, a clever investment program that is closely integrated with the mortgage repayment plan could free you, the Borrower from loan payments much sooner and leave an Investment Account at the end.

Consumers have been diverted successfully to focus their attention on the low interest rate game. They are also enticed with other gimmicks such as interest-only payments, 100 percent financing, cash back from the mortgage at closing. These offers sedate and distract us from the real meaningful issues such as the time it would take to repay the entire loan. How much does the mortgage really cost? Such costs must be counted in before tax dollars and in after tax dollars. What are the penalties, fees and costs for early repayment?

A fast mortgage payment plan that ignores any of those three key components above is an Amateur’s Plan. Unfortunately, most mortgage pay off plans do not include such considerations. At the time of approvals and funding, Consumers become overwhelmed with the mortgage process. Even professionals, like dentists and doctors, teachers, nurses and police, even accountants and financial planners can be so intimidated with the experience that they accept the Lenders' Payment Plan without question.

That payment plan usually has a built-in, profit pool to be counted in the hundreds of thousands of dollars over the life of the mortgage. The new breed of Mortgage Payment Specialists knows how to design a Consumer friendly, Mortgage Payment Plan that integrates tax issues, compounding frequency and investments. All three components, when skilfully integrated into a mortgage payment plan, deliver savings counted in the hundreds of thousands of dollars over the life of the mortgage.

Already you can see that the overwhelming majority of Borrowers do not usually create their own specific, mortgage payment plan. Those who do would not have the tools to integrate tax planning, payment and compounding frequency, in addition to investments into their plan. So you must consult an expert who has those skills. Since space does not permit, we will end here. Later on, we will explore the real benefits of a Fast Mortgage Payment Plan. In another article, we will explain the magnitude of those savings in numbers the size of which once again are too often misunderstood.

Canada Mortgage and Housing Corporation (CMHC) is a Canada Government Crown Corporation which can provide insurance coverage on your mortgage in case of default.

That is if you can no longer service your mortgage and the lender incurred a loss as a result, Canada Mortgage and Housing Corporation will compensate the lender for the loss.

Canada Mortgage and Housing Corporation assists potential home buyers to purchase a home with little or no down payment sooner because you do not have to save for a downpayment.

Why do I need to buy mortgage insurance!

If you are borrowing 80% or less of the value of a property, you do not need to buy Canada Mortgage and Housing Corporation insurance.

If you are borrowing more than 80% (referred as High Ratio Mortgage), you must buy insurance coverage from a mortgage insurance company before any financial institution will lend you the money.

Canada Mortgage and Housing Corporation will provide insurance coverage, subject to borrowers meeting certain criteria, up to 100% of the value of a property.

Borrowers pay a premium ranging from 0.5% to 3.10% of the mortgage amount, depending on the loan to value ratio. The higher the ratio the higher is the premium.

There used to be a limit on the value of the property if it needs mortgage insurance. This requirement has now been eliminated and you can purchase a property of any value for mortgage insurance purposes.

Imagine what the premium will be on a $400,000.00 mortgage at maximum 3.1%. That's a cool $12,400.00. If you do not have the cash, the premium may be added to the mortgage amount and repayment spread over the amortization period chosen.

Genworth Financial Mortgage Insurance Company of Canada is a public company that can also provide default insurance coverage for high ratio mortgage.

For new mortgage the maximum amortization period is 25 years. Recently Canada Mortgage and Housing Corporation has extended the amortization period to 30 and 35 years at an additional premium of 0.25%. Genworth Financial Canada is offering a 30 year mortgage at a 0.2% premium and a 35 year mortgage at a 0.5% premium. The effect of a longer amortization period is that the monthly mortgage payment is reduced to a more affordable level for many borrowers.

Please note that you do not need to get in touch with CMHC or Genworth to apply for a mortgage insurance. Your mortgage broker or bank mortgage officer will apply on your behalf.

What is my chances of getting mortgage insurance?

If you have a good and proven track record, a good steady job, your income is sufficient to service your monthly mortgage payment and other debts, you have a good chance of getting approved.

Construction of new housing in Ottawa fell 36 per cent in November, led by big declines in townhouse units, Canada Mortgage and Housing Corp. said Monday.

Despite the big decline, housing starts are still running 7.7 per cent ahead of last year as builders put shovels in the ground for developments that were sold earlier in the year before sales of new units plunged this fall..

CMHC said that construction started on 492 units during the month, down from 769 units a year earlier. The big decline followed an unusually strong October in which Ottawa bucked a national decline in starts triggered by economic problems.

The number of new row housing units fell 61 per cent 108 units and single-family starts declined 31 per cent 266 units.

The declines were partly offset by increased construction of semi-detached and apartment units.

Despite a significandt decline in single-family housing starts to 266 units from 386 units a year earlier, it was still the single biggest generator of housing construction during November — a testamant to the fact that despite rising prices, buying a single-family unit is still more affordable here than in most big Canadian cities.

Sandra Perez Torres, senior Market Analyst at CMHC, said in a statement: “Single-detached construction is a better barometer of the health of the new construction market. After exceptional new construction activity in October, single detached construction still represented over half of total construction in November.

"Total housing foundations for this type of dwelling remained at a very high level, just marginally lower than last year’s numbers”, she said.

While blue skies and picturesque lakes certainly drew people to this valley, its postcard-perfection hasn’t been enough to stave off the effects of worldwide economic trouble.

The first signs came when water-cooler talk changed from estimating real estate gains to lamenting losses in retirement plans and higher costs for just about everything.

Legitimate concerns about the state of the economy made consumers nervous and more thrifty, despite assurances of “strong economic fundamentals” from Canada’s mortgage economists and political leaders.

And then came the more literal signs. For Sale boards started to pop up in front of houses and never left.

Home owners and speculators who once bragged it only took a week or so to sell their houses or condos are now just boasting “reduced” or “new price” on their sale signs.

While economists were slow to acknowledge what most could surmise by a walk through their neighbourhoods, there are now significant rumblings of a slump in prices for houses this side of the border.

Some are going so far as to call it a housing recession, as realtors and sellers are already well into contingency plans that will allow them to ride out the storm.

Where the market is going

A report last month from Central 1 Credit Union said the province’s housing market in a recession, and it’s not expected to be a quick dip.

According to Helmut Pastrick, the bank’s chief economist, housing sales across B.C. will decline by 30 per cent this year, 17 per cent next year and five per cent the year after that. And prices will be in tow.

Prices will continue falling from their March 2008 high into next year, bringing the provincial median sales price down 13 per cent to $310,000 in 2009 and by a further five per cent in 2010—in total nearly an 18 per cent drop.

Things are supposed to look up later that year following a sales turnaround and relaxing credit conditions. “Recession in any industry—housing, auto or lumber—is a period where the industry experienced sustained declines in output and in prices, and that fits what’s happening in B.C.,” said Pastrick.

He noted that the Okanagan won’t be exempt from any downward trend.

“All regions are participating in this to largely the same degree and the trends and conditions are very similar throughout the province, which is usually the case when we have major economic event or factor coming into play.”

That major economic effect is, of course, the financial crisis in the United States, which has put a crimp on the many industries that are finding it difficult to access credit and move operations forward.

In turn, its stagnated economic growth across the U.S., and to some degree, in Canada hypotheque as well.

“As the general economy suffers and slows down, it has feedback into housing sector.”

Over at the B.C. Real Estate Board, chief economist Cameron Muir is on the same page, although his group’s fall forecast projects declines in the area of 10 per cent, as opposed to 18.

According to him, Okanagan home prices should be down to 2006 levels by the end of the year and remain flat throughout 2009.

“Throughout the province there’s quite an imbalance between supply and demand. There are more homes for sale, while home buyers have dropped off considerably from a year ago, and the combination of those two factors has put downward pressure on prices,” he said.

Muir said real estate markets most conducive to recreation and investment buyers— such as the Okanagan—will be a little bit worse off than major markets, like Victoria and Vancouver, simply because of the fact that there are fewer investment and recreation home buyers around now.

Kelowna, he said, is well diversified but part of the responsibility of the downward trend can be placed upon the same group who helped drive up prices.

Just as fast as oil money flowed into the Okanagan, it’s started to dry up in relation to the Albertan housing market flattening.

Calgary, for example, saw their housing prices start to tumble months before B.C. felt any pangs of contraction, said Muir.

Basically, that’s meant those who were leveraging gains in home equity for new home purchases are out of luck and, as a result, no longer looking to buy.

But, that’s not what Kelowna residents will have to worry about.

The real test of how this region will fare is the level to which residents are able to comfortably live and work here, Muir said.

“What we really need to look at is what are the financial conditions and the confidence of people who live work and raise their families there because they are the ones who drive positive demand,” he said.

“Unlike the U.S., the financial condition of households in this province, and in Kelowna, are on relatively strong footing.”

B.C. isn’t seeing a sharp increase in foreclosure activity, the unemployment rate is staying quite low from a historical perspective as are interest rates, Muir said.

“Without a collapse in household financial positions, homeowners are not in a position where they have to sell at any price like they are in the U.S.”

According to Muir, the biggest stumbling block is consumer confidence, which is at the lowest it’s been in 26 years.

Realtors

A lack of consumer confidence is something local realtors are far too familiar with.

Ian Share, of the Century 21 office in Glenmore, has seen a sharp decline in sales, although he said he remains busy. The problem, as he sees it, is that sellers are having a hard time adjusting to the market. A house that may have flown off the market a year ago for a cool $500,000 isn’t going to have the same appeal today as buyers have far more to choose from and are taking their time.

While his focus is on North Glenmore, Lake Country and Phoenix, Arizona, he says only the latter market is seeing eager buyers.

Share tapped into the Phoenix market successfully to pursue an opportunity he saw resulting from the U.S. financial crisis.

“The conclusion you can start to draw is that the real estate market is adjusting and correcting massively and that the buyers that are willing to step up to the plate are few and far between,” he said.

“Generally they consist of investors picking up rental properties and other clients who are relocating here for work.”

Drawing upon some of his office stats, Share also pointed to a much sharper decline than the 10 or 20 per cent the economists are forecasting—and it’s happening now.

Share was the listing agent on one of only two homes that sold in Lake Country (excluding Carrs Landing) last month—118 were listed.

While the lack of sales may be disturbing, Share pointed out it’s actually the pricetag changes that are the most dramatic, citing the two Lake Country listing sales examples.

“One was originally listed for $549,000 and sold for $400,00—that’s a difference of $149,000,” he said.

“The other was originally listed for $449,000 and sold for $351,500—that’s a difference of $97,500.”

In the months leading to the dry spell, Share added only nine single family homes sold and the average price difference from the original list price to the sold price was $37,966, whereas this last month the average price difference was $123,250.

“Even though we’re been reassured that our banking system is solid and that our economy is ticking along nicely…in my opinion we’re crazy to think that Canada is impervious to some sort of significant adjustment in our economy and in the real estate market,” he said.

That said, this is the time for buyers to gather their resources and plunge into the market and time for sellers to start listening to their agents, Share believes.

“Sellers that are in this current market generally dump realtors if they haven’t sold their homes during the listing period, and they probably most likely figure they’ll just get someone else that will get the job done,” he said.

“The majority of time it may not be the fault of the realtor if he or she priced it correctly and aggressively to start with…If it isn’t priced right in this market then both the realtor and the seller get frustrated as they’re simply just spinning their wheels.”

Over at Coldwell Banker, Horizon Realty, Paul Pofpnikoff is also feeling the pinch.

Like Share, he’s finding a way to leverage the conditions of the current market so they work to his benefit and opened a sideline project.

Focusing on developers who have a property they need to market, he’s created a website—www.propertyexchangekelowna.com—that lures potential buyers from markets as far flung as Europe.

He has to go there “to create opportunities” because he admits things have dried up locally.

“I know realtors have to have this rosy picture, but currently there aren’t many buyers and I am finding many people that could are resorting to renting their place rather than selling it,” he said.

“I have had vendors calling about listing, and quickly changing their mind, saying, ‘The price we’d be getting wouldn’t be good enough—we’ll rent for a year or two until the market gets better.’”

It’s something “everyone” is seeing and he too blames it on the problems in the U.S., the “troubling effect it’s had on the psychology of the buyer.”

Reduce the price, or rent?

For contractor Robert Tissington, building, buying and selling homes has been a way of life for as long as he can remember.

It’s what his dad and grandfather did, and he followed their lead into the local market a few years ago.

His first house—among several properties he owns and can’t currently sell—was purchased in Kelowna’s North End a few years ago for about $200,000.

He added a carriage house to it for about $130,000 and got ready to move into another place.

When he listed his property with a real estate agent, he was told to list somewhere in the area of $700,000, which he thought to be quite high, but competitive. It didn’t move. His price dropped by nearly 10 per cent and it still didn’t move.

With that, he decided to take it off the market.

“A year ago I thought selling it for about $550,000 would have been brilliant, but it’s the type of property you hang onto,” he said.

His property is a good rental—a market that’s not shrinking—and will continue to earn as the real estate market fluctuates.

In the meantime, he didn’t see the point of putting his life on hold waiting for the property to sell.

“The amount of tire kickers you have to go through—the people who want to see all the houses, but aren’t prepared to buy, even if they think they are—just aren’t worth it.”

He’s comfortable with the idea of riding out the changes in the meantime, and as a contractor thinks he sees a lot of opportunity in the current market—if not to sell, to buy.

“You just sort of acquiesce, give it a reasonable chance, and go off in another direction,” he said.

“Now I feel great about the decision, but you have to be moving forward or backward.”

Tissington said that the current market should have been expected, as Kelowna functions on a six-year cycle.

“Prices peak and everybody lists when they sense it’s the end of cycle and then there’s a glut of houses on the market,” he said. “The last one was in 2001, and before that in 1993-94.”

When he bought his house for $212,000, that seemed like an incredible amount of money for an old house, but he pointed out it was worth the investment.

“This whole economic situation is running alongside what may have been a natural price adjustment anyway,” he said.

The good news

Property owners may be in a pinch, but this region has suffered the pains of rising costs for years.

Reports earlier in the year boasted that young buyers were still entering the housing market with “reduced expectations,” while many complained prices became too restrictive for many to enter the market at all.

Now prices are becoming more competitive. Developers trying to unload units are offering bonuses, rent to own incentives and coming out with a product that’s more attainable.

All in all, it’s something Brenda Moshansky, a director with the Okanagan Mainline Real Estate Board, believes will create some opportunities for first-time home buyers looking to get into the market.

“Properties that are marketed competitively will continue to sell, and with the interest rates where they are, it’s a wonderful time for buyers to get into the market,” she said, adding realtors are working a lot harder to draw interest in their listings.

Moshansky said that the Okanagan and its natural allure will ensure that the prices don’t dip too drastically.

“One thing that’s very unique about this region is that it’s a little bit immune to some of the problems because it’s a destination market,” she said.

“Ski hills are expanding, popular resorts as well as accommodations are coming here and we accommodate a lot of recreational consumers for second homes as well as being a retirement market.”

Although Moshansky knows the economic predictions for the next year, she believes that the market is already correcting itself as fewer listings are starting to come out. “Real estate is traditionally very cyclical,” she said.

“Some people say it’s a six year cycle, others say it’s seven…it will turn around. Real estate is not as volatile as the money market.”

When it will end?

Housing is a high reach industry. Realtors, retailers, builders and architects are just a few who will feel the pinch if the bottom falls out of the market.

Construction has become a major economic driver of this region, and job growth has been substantial, with some estimates being in the area of 94 per cent.

“Usually there is a time delay to response in new construction and housing market conditions after sales decline,” said economist Helmut Pastrick, adding that housing starts are likely to drop off by 30 to 40 per cent next year.

But, things will get better.

“It’s not a downward endless spiral,” said Pastrick.

“There will be forces at play to reverse the downturn and some of them are already beginning to materialize.”

It’s still early in the decline of sales and prices, but by 2009, and 2010, things will get better.

“Lower interest rates, lower mortgage rates and lower prices can stimulate demand so that will set the stage for some improvement in housing sales,” he said.

“It’s open to debate how strong that recovery will be—at this time it doesn’t look that strong, but as long as the decline ends…that’s positive.”

Canadian banks are trying to convince consumers to lock in their mortgage rates because more than 20 per cent of the home loans they have negotiated have become unprofitable, according to industry sources.

The push has come after the banks cut the discount they offered to consumers with variable-rate products tied to the prime lending rate. Two weeks ago, a consumer could get a variable rate product at 0.60 percentage points below prime; today it is one percentage point above prime.

"Banks are scaring people and those people are calling asking whether they should lock in.
( hypotheque montreal )

Anybody with a mortgage negotiated in the past two years would be out of their mind to lock in to, say, a five-year term. They would be going from a rate as low as 3.35 per cent to 5.79 per cent. Lines of credit previously negotiated at a rate below prime are also still valid.

"If you've got a mortgage rate negotiated below prime, you have a dinosaur. It doesn't exist anywhere.
You should hold onto until the end of the term. The banks propped up all their rates 160 basis points because they knew the Bank of Canada would be lowering rates."

Last week, the Bank of Canada lowered interest rates by 50 basis points only to see the major banks cut their prime lending rate by half that amount. After some pressure, most of the banks cut their prime lending rate by the full 50 basis points.

Joan Dal Bianco, vice-president of real estate-secured lending with Toronto-Dominion Bank, said the banks were reluctant to pass on the full 50-point rate cut because they were losing money on variable-rate products.

"At the prime minus rates we were basically earning zero or negative. We kept holding off (cutting the discount)," said Dal Bianco, adding that in the past year 50 per cent of her bank's new mortgages were variable-rate products.

With a cost of funds generally above four per cent because of the lack of liquidity in the market, the mortgages previously negotiated ended up below water after the latest rate cut.

Prime is now 4.25 per cent at TD but two weeks ago the bank was offering a variable rate of 60 basis points below prime, meaning the consumer was borrowing at 3.65 per cent.

For those now entering the housing market, the rate is 5.25 per cent for a variable rate product but Dal Bianco said that might not be high enough. "We are not making much money on those if anything." she said.

The move into variable mortgages tied to prime has come in the last five year with many of the banks promoting products that allow consumers to float with prime but lock in a rate at any time during the term of their mortgage.

The Canadian Association of Accredited Mortgage Professionals says, as of 2007, 21 per cent of mortgages were variable rate, 72 per cent were fixed rate and seven per cent were a mix of the two.

Asked whether the banks are actively encouraging consumers to convert variable rate products, Dal Bianco said that hasn't happened. "We are making sure (staff) have the right conversations if people are really nervous and do not want to see their payment moving."

Another key question going forward for consumers will be whether the prime rate at the banks will continue to move with Bank of Canada's rate and nobody is guaranteeing that.

"It's not that (prime) is less meaningful, it just doesn't mean what it used to," says David Wolf, chief economist at Merrill Lynch Canada. "(Prime) is more likely to fall if the overnight lending rate is zero than if it's 2.5 per cent."

New home construction in Canada was nearly unchanged in September as a decline in single-family homes erased a jump in multiple dwelling units, and economists predicted the credit crunch would lead to a slowdown in ground-breaking.

Housing starts inched to a seasonally adjusted annualized rate of 217,600 units from an upwardly revised 217,400 units in August, Canada Mortgage and Housing Corp. said on Wednesday.

The September number beat the consensus expectation of analysts who had called for 203,000 starts. August starts were originally reported at 211,000 units.

While construction activity again stayed above the 200,000 unit mark, some analysts said this level would not likely be sustained in months to come.

"Because residential building permits tanked in August and the credit crunch reached a crescendo in September and into October, this could well be the last starts print north of 200K," Scotia Capital economists wrote in a report.

Canadian housing data has been in stark contrast with the state of the housing market in the United States, hit by a crisis that began in the subprime mortgage sector and spread across other parts of the market and the broader economy.

Economists generally expect the Canadian housing market to ease but not fall into crisis as it has in the United States, largely because risky mortgages are not a large part of the market. Even so, the Canadian economy is also expected to slow, which would likely soften demand for housing.

"This slowdown, however, is expected to be both measured and orderly, and in no way do we expect the extent of the correction to be comparable to that currently taking place in the U.S.," said TD Securities strategist Millan Mulraine.

Gains were reported across the country, except in Ontario and Quebec. British Columbia and the Atlantic provinces both reported 10 percent gains, followed by the Prairies.

Urban single home starts declined 8.1 percent to 70,000 units from 76,200, while urban multiple starts rose 5.5 percent to an annual rate of 122,500 units from 116,100 in August.

Rural starts were estimated at an unchanged seasonally adjusted annual rate of 25,100 units in September.

Buying a home is an expensive endeavor so getting the best possible mortgage rate should be one of your main priorities. By deciding to get the best mortgage rate in Montreal possible you will be making a positive decision to help you for many years to come. However, just deciding to get the best Canadian mortgage rate available is not going to get you the best mortgage rate available. Instead, you will need to learn the tips and tricks for negotiating with your mortgage lender in order to receive the best possible mortgage rate for your personal situation.

Mortgage Rate Tip #1
Your mortgage rate might be low in your mind, but you must take the origination fee into account as well because this can increase your APR. Lenders frequently charge 1%, but you can always negotiate the mortgage rate origination fee lower. Also, if the origination fee is much higher than 1% you need to either negotiate it down, or find another lender with a more favorable overall mortgage rate.

Mortgage Rate Tip #2 Lock in the Rate
When negotiating your mortgage rate, make sure your lender is prepared to lock in your rate for at least 30-60 days. This way you will be guaranteed a particular rate even if rates skyrocket the next day. Another not trick many individuals are not aware of is to include a clause that also will allow you to take a lower rate if rates fall during this period. This is a great mortgage rate tip because you get your mortgage rate locked in so it can’t go any higher, but if the average mortgage rate goes lower you receive the lower rate.

Mortgage Rate Tip #3 Fight
If the mortgage rate drops significantly and you have already signed a deal locking in a particular mortgage rate and don’t have a clause that ensures you will receive the lower rate, then you need to fight. You simply need to call your lender and say that while you signed the lock in agreement you want the lower rate. This will take some negotiating, but your lender wants you business and might be willing to negotiate the mortgage rate with you.

Here is the cold, hard truth on valuations and what appraisers will NEVER tell you. Keep these points in mind on every loan you do.

1. Cosmetic stuff such as paint, new carpets, window treatments, etc. do not increase appraised value, they only increase the perceived value of the property from the viewpoint of the buyer. Yes, cosmetics will affect your asking price and what the buyer is willing to pay, but it will NOT increase the intrinsic value of the house on the appraisal report. It also won’t get a customer out of PMI if you try to refinance him and all he has done to improve the property is wallpaper and paint. Lenders are much savvier than this and (if the time period has only been a year or two and prices haven’t increased) will require “significant” property upgrades to kick off PMI, not just cosmetic effects. Remember this.

2. Also, high end appliances such as sub-zero freezers and granite counter top upgrades do nothing to increase value on the actual appraisal report. And even if by chance they do, it will be very, very low and insignificant. Yes, some appraisers will try to tell you that they took the upgrades into account when determining value, when the real reason is they didn’t. Appraisers just say that, because it’s the borrowers who belly ache with “well I put all this work into the house, and surely my shiny new stailess steel appliances added some value, didn’t they....

3. On condo’s, the appraiser must first look within the same complex development for comparable properties BEFORE looking elsewhere to justify a value. That’s because lenders want to know what other units next to it have sold for, and most likely, these units are all similar in nature and have a common historical precedence for valuation.

4. If the appraiser goes outside the normal mileage boundaries of the area to search for comparable properties, there must be a valid and overriding reason given. And this reason must be CLEARLY articulated and stated on the appraisal report. Failure to do this and you risk having the appraisal report kicked back to you from underwriting and requesting additional comparables. (This delays the closing, risks your interest rate lock and may even kill the whole deal!)

5. Carefully watch your hits and adjustments on the rate sheet and beware of pricing bumps because of a low appraisal. If the “loan to value” on the property is too high and the customer is taking cash-out, then this WILL affect the interest rate and--more importantly--your income! On the other hand, if the appraisal comes in higher making the “loan to value” lower, you can either keep the extra yield spread you earn or pass the savings onto the customer and lower their interest rate or reduce some of the closing costs. If you do nothing, you can simply use this additional “found capital” as additional leverage to make yourself more competitive with the borrower. As the deal progresses, you may have to bargain and cut your fees to save the loan. Keeping a bit of padding, gives you a way to make amends without losing your shirt!

6. Keep in mind that appraisal values are a moving target and that the appraiser can only go back so far to pull out comparable properties, typically no more than 3 to 4 months. Anything longer and the bank will condition you for it and ask for more comps. Again, you don’t want to delay the closing and risk losing your commission.

7. Any value that is given to a home is only as good as the value of the other properties surrounding it. If the market is in a downward trend (as we are today), then the prevailing prices will be downward. Duh?! Customers don’t like to hear this. Everyone thinks they are sitting on a “goldmine” and I can’t even tell you how many BBQ’s I’ve been at where so-and-so is bragging about how much their house is worth. You can imagine the shock on their face when they try to refinance and get the appraisal report. That alone is enough to deflate their enthusiasm. Sorry to spoil the party, Mr. Customer, but all value is subjective and only as good as what someone else is willing to pay.

8. Tell customers, that no matter what the property value comes in at, you have absolutely no control over it. Appraisers are independent third parties and their opinion is usually firm. They are bound by legal, ethical and moral obligations and could lose their license if they stray too far beyond the guidelines. They could lose their job!!!

9. If customers doubt the appraised value and think it should be higher (again the goldmine mentality), tell them that it is up to them to get a second opinion if they choose too. However, be sure to tell them that it will cost them another appraisal fee (this usually is enough to stop them cold in their tracks!). Reiterate the points mentioned above. You are acting as their trusted advisor so they should heed your advice.

10. As a last resort, you could call the appraiser and see if they may have overlooked something on the report such as significant upgrades (meaning finished basements, porches, attics, additional rooms, etc.) Also, are there any other recent sales in the area that you know of? Could the appraiser use one of those comparable properties instead? Maybe this will help you get to the value you are looking for. Maybe not.

Remember when working on loans you need to set expectations with the borrower. I always tell customers that no matter what they “think” the property is worth we actually have no idea until an independent third party takes an objective look at it. It’s no use trying to guess and speculate!

When someone tells me the value of their home I take it with a grain of salt because I know that most likely the appraisal will come in far less than they think…and I price my loans accordingly. I suggest you do the same. Listen to your gut instinct and never just take the borrowers word for it.

I hope the above tips regarding appraisals help you in this ever changing market. If you want to survive you’ll need to adapt and become your customer’s best friend. The better educated you are about the mortgage process, the less fall-out you’ll have and the more loans you’ll ultimately close.

A mortgage loan is a loan secured by real property through the use of a mortgage (a legal instrument). However, the word mortgage alone, in everyday usage, is most often used to mean mortgage loan. A home buyer or builder can obtain financing (a loan) either to purchase or secured against the property from a financial institution, such as a bank, either directly or indirectly through intermediaries.

Features of mortgage loans such as the size of the loan, maturity of the loan, interest rate, method of paying off the loan, and other characteristics can vary considerably.According to Anglo-American property law, a mortgage occurs when an owner (usually of a fee simple interest in realty) pledges his interest as security or collateral for a loan. Therefore, a mortgage is an encumbrance on property just as an easement would be, but because most mortgages occur as a condition for new loan money, the word mortgage has become the generic term for a loan secured by such real property.

As with other types of loans, mortgages have an interest rate and are scheduled to amortize over a set period of time; typically 25, 30 and in recent years 40 years. All types of real property can, and usually are, secured with a mortgage and bear an interest rate that is supposed to reflect the lender's risk.

Governments usually regulate many aspects of mortgage lending, either directly (through legal requirements, for example) or indirectly (through regulation of the participants or the financial markets, such as the banking industry), and often through state intervention (direct lending by the government, by state-owned banks, or sponsorship of various entities). Other aspects that define a specific mortgage market may be regional, historical, or driven by specific characteristics of the legal or financial system.

Mortgage loans are generally structured as long-term loans, the periodic payments for which are similar to an annuity and calculated according to the time value of money formula. The most basic arrangement would require a fixed monthly payment over a period of ten to thirty years, depending on local conditions. Over this period the principal component of the loan (the original loan) would be slowly paid down through amortization. In practice, many variants are possible and common worldwide and within each country.

There are many types of mortgages used worldwide, but several factors broadly define the characteristics of the mortgage. All of these may be subject to local regulation and legal requirements.
Interest: interest may be fixed for the life of the loan or variable, and change at certain pre-defined periods; the interest rate can also, of course, be higher or lower.Term: mortgage loans generally have a maximum term, that is, the number of years after which an amortizing loan will be repaid. Some mortgage loans may have no amortization, or require full repayment of any remaining balance at a certain date, or even negative amortization.Payment amount and frequency: the amount paid per period and the frequency of payments; in some cases, the amount paid per period may change or the borrower may have the option to increase or decrease the amount paid.

Prepayment: some types of mortgages may limit or restrict prepayment of all or a portion of the loan, or require payment of a penalty to the lender for prepayment.The two basic types of amortized loans are the fixed rate mortgage (FRM) and adjustable rate mortgage (ARM) (also known as a floating rate or variable rate mortgage). In many countries, floating rate mortgages are the norm and will simply be referred to as mortgages; in the United States, fixed rate mortgages are typically considered "standard." Combinations of fixed and floating rate are also common, whereby a mortgage loan will have a fixed rate for some period, and vary after the end of that period.

In a fixed rate mortgage, the interest rate, and hence periodic payment, remains fixed for the life (or term) of the loan. In the Canada the term is usually up to 40 years (25 and 30 being the most common), although longer terms may be offered in certain circumstances. For a fixed rate mortgage, payments for principal and interest should not change over the life of the loan, although ancillary costs (such as property taxes and insurance) can and do change.

In an adjustable rate mortgage, the interest rate is generally fixed for a period of time, after which it will periodically (for example, annually or monthly) adjust up or down to some market index.
Common indices in the Canada include the Prime Rate, the London Interbank Offered Rate (LIBOR), and the Treasury Index ("T-Bill"); other indices are in use but are less popular. Adjustable rates transfer part of the interest rate risk from the lender to the borrower, and thus are widely used where fixed rate funding is difficult to obtain or prohibitively expensive. Since the risk is transferred to the borrower, the initial interest rate may be from 0.5% to 2% lower than the average 30-year fixed rate; the size of the price differential will be related to debt market conditions, including the yield curve.