The Bank of Canada’s Mr Carney suggests that the authorities in Europe will find a solution.

How that solution unfolds and the timeliness as it relates to world economy remain a mystery.   2012 forecasts for the Canadian economy are expected to “to be more modest than previously envisaged” mostly due to world economy and situations beyond our control.

Present predictors are indicating a more “normal” economic forecast by the third quarter of 2013, but there’s a long way road between now and then, and homebuyers need to be advised and be smart.

The American mortgage crises offers us a valuable lesson to learn and apply today and in the future.  Buy a home within your means and learn to love it – rather than buy outside your means and fail to pay it!

There are several options for you – home equity loans used reasonably can help you update your existing home.  If you prefer to buy a new home, buy wisely.

Let me help you secure solid financing at rates you can afford.  Call Bettyanne Neufeld at (780) 980-2946

According to some experts, Alberta is once again facing the opportunity for strategic and maybe even “boom” rated growth as long as there is interest in the export of Alberta’s oil sands and it’s energy potential.  With a boom in economic growth comes the need for labor, homes and retailers to sustain the growth. If you are looking to sell your home, or are in construction of new homes, you may be in luck!

Not new to the Alberta landscape, booms come and go, often leaving families and employers alike in trouble.  A recent article in the Vancouver Sun discusses the short term future.

According to writer Tamara Gignac, the almost 4% growth rate predicted for the Alberta economy will outpace every province in 2012 except Saskatchewan.

Read more here.

Edmonton Alberta’s housing market is effected by the new families that move to the province and how they live together.  The past decade has shown clear signs of change, as families feel the pinch the children stay at home longer.  While perhaps diminishing the need somewhat for first time home buyer housing, the alternate thought is the financial savings and down payments that can be accumulated through planning, saving and wise spending habits.

The following article is copied for your convenience with permission by the author.  More detailed information on the original copy and location online can be found at the end of the article.

What makes for affordable housing rates?

Interest rates, wages and prices are all factors affecting housing affordability, which in turn influence housing demand by Alberta families. Of interest here is the influence of new households on the markets, as it is new entrants in the buyer market that keep construction going and demand strong.

In Alberta, it’s traditionally thought that inter-provincial migration has been the dominant source of new people. What shouldn’t be overlooked, however, is the impact that the boom had on how the average Albertan decided to cohabitate, especially among the younger generation.

There tends to be established trends, based on age, in how individuals in any community live together. Children live with parents before gaining independence and starting a household of their own. The path varies from person to person, but it is nonetheless a fairly consistent one.

While the path towards independence tends to be stable, shocks do sometimes occur. In the United States, for instance, massive unemployment has caused many formerly independent households to cohabitate with family or friends. In contrast, the boom years in Alberta probably encouraged more rapid formation of households among young adults.

Over the past decade, construction activity in Alberta was very strong and – even with stellar economic and population growth – was more than sufficient to accommodate the growing population. These extra homes were absorbed thanks to a jump in the household formation rate (HFR), with younger individuals being able to live independently sooner than in the past.

A major trend which will influence housing demand going forward will be the aging of the population, with relatively fewer young Albertans entering the housing market than during the boom. Offsetting this will be net in-migration, with international migrants becoming increasingly important.

Alberta’s construction boom

Combining household formation rates and demographic changes over the past decade, we see just how well the housing stock has managed to keep pace with demand. Over the decade there were roughly 344,000 net housing additions to accommodate an estimated increase of 316,000 new households.

However, it should be pointed out that using 2001 as the start year is rather arbitrary (but you have to start somewhere). For instance, construction activity during the latter part of the 1990s was particularly weak. As a result, some of the activity in the following decade was a result of some pent-up demand. Building tends to go in cycles, similar to the rest of the economy.

We used the HFR to help estimate what the trend demand for housing will likely be as the population changes. These trends may not be constant, however. When divorce became more prevalent, for example, the HFR rose, reflecting more households for a given population. Even more important than societal shifts are economic conditions, in particular, patterns that would be considered unusual when one thinks of the normal business cycle (e.g. Alberta in the mid-2000s).

Housing demand (as suggested by the HFR) indicates that, despite the record high levels of net migration, there were more than enough homes built between 2001 and 2006. Even so, by 2006, a once-in-a-generation boom in housing prices began when demand outpaced supply. The only explanation, consistent with such a strong level of construction, is a sudden jump in the HFR.

There were a number of economic factors that pushed the HFR higher by 2006, chief among them the extremely strong job market. This was especially true for younger workers, where the impact on the housing market was felt most acutely. Not only were there more jobs, but by 2005 there was a sudden jump in average weekly wage rates.

Another factor lifting demand was a series of changes in mortgage financing rules. The Government of Canada introduced 40 year mortgages with zero down payment requirements in 2006. This was a significant shift in the traditional mortgage market, which previously had only 25 year amortizations, and Canadians snapped them up (although they were available only to individuals with sufficiently high credit scores, i.e. these weren’t sub-prime loans). Ultimately, the change allowed households to leverage-up and buy more costly homes relative to their income than ever before.

For cultural and economic reasons, we don’t expect trend household formation to change significantly over longer periods of time. Today’s graduates don’t expect the same kind of bidding frenzy that occurred among their predecessors during the boom, and mortgage financing rules have been returning to more traditional levels.

To summarize, the pace of home construction over the decade of the 2000s was enough to accommodate a fast growing population – but it was still overwhelmed by the increase in the HFR that the economic boom and new mortgage market rules brought. If the HFR had not changed, the jump in construction would have meant an oversupply of anywhere between six months to a year in construction activity, and prices would not have spiked.

Future housing demand trends

The foregoing discussion highlights how the highly cyclical nature of Alberta’s energy based economy makes it very difficult to forecast housing trends. One trend that is rather easy to predict, however, is the aging of the population. While Alberta isn’t aging as quickly as the rest of the country, the birth rate is significantly below what it was in previous generations and this will no doubt influence housing demand going forward.

If we purposefully exclude any migration and forecast housing demand based solely on Alberta’s aging demographics, housing demand will drop off dramatically.

In 2012, native Albertans will have added 19,000 households, but by 2015 they will add only 16,000; by 2020, it falls to only 12,000. For the most part, this is due to a steady decline in the percentage of the native population aged 25-34 (the prime age at which most new households are formed).

Fortunately, robust economic activity in Alberta means it is a magnet for new migrants. In the past, inter-provincial migration was the dominant source of population growth, but increasingly international migrants are choosing Alberta. In fact, the number of international migrants actually jumped considerably exactly when inter-provincial migration started to wane, going from 16,500 in 2008 to 21,400 in 2009.

Toronto, Vancouver and Montreal attract the majority of new international immigrants. There are several reasons for this, including these cities’ large, diverse economies and already established ex-pat communities. As Calgary and Edmonton continue to grow, some of this momentum may shift in their favour. Inter-provincial migration, by contrast, is very volatile due to shifting relative economic opportunities and costs of living.

How much total migration will be required to offset upcoming lower housing demand stemming from an aging population? Net migration of around 45,000 individuals would keep total household formations at roughly 30,000 annually for the foreseeable future. This is higher than the previous 10-year average, but not impossible. The reason household formations stabilize at this level in the forecast is, with migration of this magnitude, the percentage of the population aged 25-34 also stabilizes.

Conclusion

In a boom/bust economy like Alberta’s, there can be great volatility from year-to-year, which makes it difficult for the construction industry to match supply with demand. Yet, common and predictable patterns remain – the most obvious being that children born will eventually move on to start families of their own. This is the natural rate of household formation.

While the household formation rate is influenced by economic conditions and housing affordability, causing either occasional surges in demand or weak periods, it tends to even out in the long run. This is why given assumptions on birth, death and migration rates, a rough estimate of the natural rate of housing demand can be made.

Clearly the trend towards smaller families, which started decades ago, will have an impact on the housing market. This isn’t to say it will cause a glut in housing or a precipitous drop in prices, as it’s hard to say how the market will adjust. The most plausible scenario would simply see new housing activity slowdown, which would have its own implications for the local economy.

One cannot escape the fact that even in Alberta the population is slowly aging; going forward, the province will come to rely increasingly on migration as a source of population growth and new housing demand. These migrants might certainly be coming given buoyant projections for Alberta’s energy sector, but we shouldn’t hold our breath expecting the real estate market to take off like it did in 2006 unless we see in-migration begin to rise precipitously.

Be Advised:  This article was printed with permission from Troy Media and appropriate comments from this author are included in red.

Will Van’t Veld is an economist with ATB Financial.

Lastest figures show that Canada added more than three times as many jobs in the second half of 2011 than was estimated.  Statistics Canada released reports stating that our employment rose by 26,100 from July through December.   How does this Canadian economy update effect your prospects of a new mortgage?

The housing market has proven itself a bit of an investment anomaly through a very rocky 2011, and with the uncertainty in the economy and unpredictability of the short term future, homebuyers are finding it useful to use a mortgage specialist to research their best options.

Normally, the average person may prefer a fixed rate mortgage, but is that the best option in these times?  Let me help you sort through the options.  I work for you, represent your interests and help you find the best resources for your new mortgage.

 People like the Hybrid mortgage because it can be the best of both worlds, offering the flexibility of a variable rate and some security found in the fixed rates.

For many years, we recommended the variable rate, as it helped our clients save money in the long run.  But these days, with the present economy, we are recommending the 50/50 much more often as the fixed rate is at near historic lows.

Let’s be honest, no one knows where this global economy is headed.  Even the best in the business are hesitant to be quoted, but with a decent amount of certainty we can say that the 50/50 offers rate diversification, and this may be a play safe in the foreseeable future.

In essence, you have two separate mortgages, while it is registered as one collateral charge.

You main find the 50/50 right for you if:

1. Normally choose variable but suspect the prime rate is at the lowest rate now.
2. Maybe you don’t like the idea of a fully fixed rate
3. You are indecisive and prefer to “hedge” your bets
4. You are a first time homebuyer and recognize a good catch when you see it.

According to Dominion Lending Centres, the features of the 50/50 are

• 20% annual lump-sum pre-payment privileges
• 20% annual payment increase ability
• Portability (the option to transfer your existing loan amount to a new property without penalty)

Ready to learn more- call me- let’s talk and see what the best options are for your situation.

Call Bettyanne Neufeld at Leduc 980-2946 – Edmonton 918-7928

Home financing can be pre-arranged

If you have a job awaiting you on Canadian soil, it’s possible to also secure the purchase of a home if you plan ahead and connect with professionals before you even begin packing.

The main reason you’ll want to get in touch with the right Edmonton home financing professionals before you start to pack is to find out what important paperwork you’ll need to set aside to ensure smooth sailing through the Leduc home financing and purchasing processes.

Your first step should be to get in touch with an experienced Alberta mortgages professional. In doing so, you can set the home financing process in motion by securing a mortgage rate guarantee and pre-approval, and figuring out what supporting paperwork you need to provide to purchase a home in Canada.

The services of Alberta mortgage professionals are typically free – they are paid by lenders for bringing in new business. Mortgage professionals in Edmonton have access to multiple lenders – including banks, credit unions and trust companies – where they can compare products and rates, and find the ideal mortgage to meet your unique needs.

In most cases, Canadian mortgage lenders and insurers want to see employment letters that prove your offer of employment and salary in Canada. You must also have at least a 5% down payment for the home from your own resources – which means it has to be your own money, not borrowed or gifted. So, for instance, if you’re selling your home in another country and using some of the proceeds as a down payment on a home in Canada, you must be able to prove this.

Lenders and insurers also want to see that you have a solid credit history. Although requirements for this proof vary depending on which insurer and lender your mortgage is funded through, your Edmonton mortgages professional will be able to tell you exactly what documents you’ll need to provide. Often, an international credit bureau is sufficient to prove your credit history. If this is not available, you can also provide 12 months’ worth of bank statements, mortgage or rental payment receipts, utility or telephone bills and so on. Again, there are several options from which to choose and your Leduc mortgage broker will be able to specifically tell you what a particular lender and insurer wants to see.

You must also apply for landed immigrant status to get the ball rolling on securing your social insurance number (SIN), which is required before you begin working in Canada.

By securing mortgage financing prior to moving to Canada, all you have to do when you arrive is find a home. This will be an easier task when you already know exactly how much you can spend, thanks to your pre-approval.

And since your Leduc mortgage broker can put you in touch with a trusted real estate agent prior to your move, you will also be able to research homes before you arrive in Canada. Again, real estate agents do not typically charge a fee to find you a home to purchase.

By planning ahead before making your move, you truly can save yourself a lot of hassle and stress when it comes to securing home financing in Leduc and purchasing a home.

And if you’re already living in Canada, many of the available New to Canada mortgage products apply to new immigrants who have been in the country for up to 36 months.

Paperwork to gather/set aside before packing:

• Proof of employment and salary in Canada
• Proof of at least 5% down payment from your own sources
• Government proof of residency application
• Copy of your immigration papers
• Copy of your passport
• Credit report
• Mortgage or rental payment receipts for the past 12 months
• Bank statements for the past 12 months
• Utility and phone bill payments for the past 12 months

Get the jump on home financing and be ready for your dream home

A pre-approved mortgage puts your Leduc home financing in place before you make an offer on a home. With a pre-approved Edmonton mortgage you’ll be able to make a firm offer on your dream home, without having to guess whether or not your financial institution will be on board with the purchase.

With specific budget numbers in mind, you can shop with confidence, knowing the homes you are viewing are within your price range.

A pre-approval can hold your rate for up to 120 days on fixed terms – guaranteeing you the best Alberta mortgage rate possible!

A 20% down payment is required for a conventional mortgage. The 5% down program was originally created to help first-time home buyers, but has since been opened up to other home buyers. It is still restricted to prinicipal residences and usually requires the homeowner to hold mortgage loan insurance to protect the lender.

A smaller down payment helps people stop renting and start investing in their own home sooner. Saving enough money to cover a 20% down payment can take many years, depending on a person’s income and the price of the house. For example, a 20% down payment on a $250,000 home is $50,000, compared to a 5% down payment of $12,500.

The downside is, the smaller the down payment, the larger the principal balance left owing on the home. The larger the down payment and the lower the prinicipal balance on the mortgage, the less interest you pay overall.

Talk to your Edmonton mortgage broker at Dominion Lending Centres to see if you qualify for the 5% down program.

• Program is designed for those who don’t have the 20% down payment for their Alberta mortgage.
• The 5% down program is for principal residences only (cannot be rental property).
• Under the 5% down payment program, borrowers must provide proof of down payment plus 1.5% of the purchase price for closing costs.
• Borrowers can select from a wide variety of payment terms.

Zero Down Edmonton Mortgages make it possible for you to own your own home without years of saving.

Requirements include (but not limited to) the following:

• Home must be principal residence – no rental properties allowed under this program.
• Buyers must have a good credit rating.
• Under the zero down payment program, buyers must take a 5-year term at posted rates, or a longer term which may be discounted partially. Buyers must qualify on the term they select and qualify on their own income.
• The lender will probably require mortgage loan insurance.

Without the burden of a downpayment, people can get into their own homes sooner and start investing in themselves with an Alberta mortgage. Talk to a Leduc mortgage broker at Dominion Lending Centres today to see whether you qualify for the Zero Down program.

]]> http://bettyanneneufeld.ca/2011/12/20/zero-down-program/feed/ 0 http://bettyanneneufeld.ca/2011/12/20/self-employed-program/ http://bettyanneneufeld.ca/2011/12/20/self-employed-program/#comments Tue, 20 Dec 2011 16:43:14 +0000 Bettyanne Neufeld http://50.116.82.175/~bettyann/?p=111 Self-Employment Leduc Home Finance Programs

Alberta Mortgage Programs for Self-Employed & Commissioned Sales Borrowers

There are many programs that make it easier for self-employed applicants with unverifiable income to qualify for an Edmonton mortgage with a low down payment.

• Purchasers must have a minimum of 5% down and must be able to verify that it is from their own resources. If using stated income, a minimum of 10% down will be required.
• Purchasers must be able to demonstrate that they have been in the same industry for a minimum of 2 years, even if not self-employed for that length of time.
• Self-employed purchasers may be asked to provide the most recent tax years Income Tax Notice of Assessment confirming that they have filed income tax returns and have no personal income taxes arrears owing. Sometimes this can be waived.
• Self-employed purchasers must have a good credit rating. Minimum credit scores apply for different down payment scenarios.
• If using stated income vs proven income, there are also further options available to self-employed clients that can be discussed with your Edmonton mortgage broker.

If you are self-employed and want to access equity that has already built up in your home, you might consider a Private Mortgage. Call me for more details.