Sunday, January 31, 2010

Why is one neighbourhood better than another for you family?

Once you've become pre-approved for a mortgage, you should be ready to put your house-hunting efforts into full gear. But don't skip the important step of scouting out many neighborhoods before you start your search for the perfect house.

The neighborhood in which you live will heavily dictate your whole way of life - things like walking to a nearby park with your kids, knowing your kids are attending good schools, feeling safe when your children play outdoors, being close to restaurants and shopping, enjoying a short commute, and knowing your home will appreciate at a healthy rate.

Of course one way to get started in your neighborhood search is to get in your car and explore, especially if you're unfamiliar with the area. Get an idea about the neighborhoods by driving around and seeing which areas appeal to you. Walk around, explore, and talk to some of the residents. Take note of the general appearance of the homes. Are they well maintained? Are they nicely landscaped?

If you have children, you might be looking for a neighborhood with plenty of children around, as opposed to neighborhoods that attract more seniors or young singles. Other factors you'll want to consider are the schools, crime, your family's specific needs, and appreciation - as in how much the value of the home is likely to increase.

A good Realtor will be very familiar with all the neighborhoods in the area and should be able to tell you about the strengths and weaknesses of the specific neighborhoods you're eyeing.

The School District

Even if you don't have school-aged children, buying a home in a district with good schools will be in your best interest.

When and if you sell the home at some point in the future, future buyers may have children and will likely consider good schools their top priority. And neighborhoods with good schools typically attract more buyers. Some points to consider:

• Ask your Realtor about information on schools in the area.

• Talk to people in the neighborhood, especially people with children.

• If you have children, visit the schools and take a tour. It's important that your decision isn't based purely through facts gathered online. Get a true feeling for what the school is like.

Crime Statistics

No one wants to live in a neighborhood where break-ins and burglary are the norm. In researching a neighborhood, you must first determine your needs. Some suburbs may have lower crime statistics, but may be farther from your work. Some areas of downtown may have more crime, but may have other qualities that you consider more attractive, such as convenience and cultural activities.

Use the following tips to help you learn about crime statistics in a neighborhood:

• Talk to neighbours.

• Talk to the local police division.

• Keep in mind that if you're looking in-town, you may not be able to get away from everything you consider unappealing (such as noise and traffic).

Keep Your Family in Mind

A home isn't just an investment when you have a family to think of. You'll need to consider more than just the number of bedrooms or whether it has an attached garage. You'll need to consider the community first and foremost. Do you want schools that are in walking distance? Do you want to be close to your place of employment or is a car commute OK? Do you want to be close to shopping, restaurants, and other services? You'll also want to research property values before you find a home in the neighborhood that you like; property values reflect a community's overall health.

And when you do your research, if neighbourhood appreciation is important, find out what houses sell for now versus five years ago and how much property taxes have gone up.

Friday, January 29, 2010

How your mortgage can set you free of other debt

by Michelle Warren,
Wednesday, January 6, 2010provided by

Credit crunch, debt crisis — call it what you will, but the current economic climate is spurring people to get their own finances in order. For Jack and Sarah Stewart, of Toronto, this means tackling the $40,000 in debt they've allowed to balloon during the past eight years. With their mortgage coming up for renewal, they're thinking of clearing the slate and rolling the burden into their mortgage.

"We want to consolidate our debt, but we're not sure if increasing our mortgage is the best way to do it," says Jack, who asked that his and his wife's names be changed to protect their privacy.

He's not alone. Laurie Campbell, executive director of Credit Canada, says it's a question people grapple with all the time. "Homes in the past have been your sacred cow," she says, referring to the drive to pay down one's mortgage as quickly as possible.

These days, however, with people juggling debts and paying varying rates of interest, increasing one's mortgage can be a smart move, even if it takes longer to pay off.

Lowering interest rates

Peter Majthenyi, a mortgage planner with Mortgage Architects, in Toronto, says it's a common theme as homeowners strive to bring down the overall interest they pay, as well as reduce their monthly obligations. He prefers to think of it as repositioning one's debt, and in his experience, "in almost all cases, it's justified."

"If you have debt that is sitting at 18 percent interest, then it certainly makes sense," says Campbell, adding that it's something to consider only if you have enough equity in your home and if your mortgage is coming up for renewal (read the fine print to find out if the penalties for breaking a mortgage outweigh the possible benefits).

Majthenyi notes that if you're working with the same lender, there's often no penalty involved with increasing your mortgage before the term expires.

The Stewarts seem like prime candidates. They have a $200,000 mortgage on a house worth about $425,000. They have plenty of equity, they're up for renewal at the end of the year and they say they're serious about getting their finances in order. Ideally, they'd roll the debt into their mortgage, continue an accelerated payment program whereby they pay every two weeks and they would not increase their amortization period, but instead increase their payments.

Dealing with debt

It's a good plan, says Campbell, who thinks all mortgage holders should accelerate their payments. She also likes the idea that they plan to stick to a 17-year amortization instead of renegotiating another 25-year mortgage. However, she stresses that none of this amounts to much if the Stewarts are going to continue the same spending habits and find themselves in a similar position five years from now. "They have to understand what got them into this $40,000 debt in the first place. They have to make sure they don't fall victim to that again."

She recommends cutting up credit cards, especially store cards, which have higher rates of interest, and not using one's line of credit like a bank account.

The Stewarts say the bulk of their debt was incurred for renovation costs, including a new kitchen and installing hardwood flooring, but admit their spending habits need a makeover. "We're always dipping in to our line of credit because we're strapped for cash," says Sarah Stewart. "I think if we consolidate the debt, it'll increase our cash flow and we'll be able to live within our means."

Jeanette Brox, a Certified Financial Planner with Investors Group in North York, Ont., always encourages her clients to look at the big picture when it comes to financial health: "My job is to make them think outside the box." She says helping people manage debt, while securing their future, is essential. "People need to think beyond what our parents did, which was paying down the mortgage," she says. "I used to think that way too, but I don't anymore."

In her view, the Stewarts and others like them need to take an aggressive approach if they ever want to get ahead. Not only do they need to improve cash flow, but they also need an emergency fund for unforeseen expenses, not to mention a retirement plan.

Planning for the future

Brox admits a lot of people would balk at the idea, but she thinks the Stewarts, both in their early 30s, should not only roll their debt into the mortgage, but increase their mortgage an additional $35,000 for a total of $275,000. To make payments more manageable, she'd also recommend increasing the amortization period to 25 years. She would invest $25,000 in mutual funds and further $10,000 in a money market account (earning about two percent interest).

"This is what I call a lifestyle fund," says Brox, adding that part of the interest cost on the mortgage would be tax deductible. "It's a win-win situation, but you've got to be really disciplined."

That means using their increased tax return to pay down the principal on the mortgage, thereby helping compensate for the interest cost of carrying the additional $35,000. The other bonus is that within five years (or so), the $25,000 registered retirement savings plan, or RRSP, will have grown to about $40,000. She stresses this is a long-term plan and people have to realize that the market is going to rise and fall.

"It's all based on comfort level," says Brox, adding that the biggest mistake she sees with people who reposition debt is that they don't have a long-term plan and, as Campbell, pointed out, go back to old spending habits. "People need to have their whole financial picture analyzed. It's something to consider, but you need to work with a planner or bank manager."

Lines of credit

There's a whole school of thinkers that shudder at the thought of increasing one's mortgage. At the core of this is that you're trading unsecured debt for secured debt and paying interest on that debt for the entire life of your mortgage, which can dramatically increase the cost of borrowing. In addition, refinancing also involves added legal costs (in most cases a minimum of $500). An alternative is consolidating debt onto a line of credit or home equity loan, which have higher interest rates than a mortgage, but can be paid off more quickly.

This works in theory, say our experts, but rarely in real life. "A lot of people just make the minimum payment and never get it cleaned up," says Brox.

"I'm wary of open lines of credit because they can easily stay at $50,000 forever," says Campbell, adding that an increased mortgage payment forces people to be more disciplined in paying down debt.

As for paying the debt for the entire length of your mortgage, all the experts stress that the way to combat this is by channelling extra funds back into the mortgage and paying off the mortgage early. This could mean accelerated payments, using tax returns or bumping up the payments. "We're putting all the money back into the principal of the mortgage," says Majthenyi, who points out that an extra $10,000 on a mortgage costs about $50 a month, while a $10,000 loan requires minimum payments of $300.

In the Stewart's case, it's costing them about $1,000 a month to cover $40,000 debt. If it's part of their mortgage, it translates into about $200. Ideally they'd direct the bulk of that money back into their mortgage through an annual lump payment or by increasing individual payments by a few hundred dollars.

Repositioning debt into one's mortgage is a sound option for people who are committed to changing bad habits and/or taking a long-term approach to getting their finances in order.

When it comes to money, Brox says that people need a big-picture plan, not a band-aid solution: "A lot of times it's not what you make but how you manage it."

Michelle Warren is a freelance writer in Toronto.

Record home sales capping 2009 due to supply and demand, not bubble


TORONTO — Record home sales last month are based on low supply and high demand and are more likely to drop off this year than inflate a housing bubble that could threaten a fragile recovery, economists say.

A Canadian Real Estate Association report released Friday said December and the 2009 fourth quarter were the best periods on record for home resales, while prices also rose sharply from their year-earlier levels.

Meanwhile, strong demand continued to deplete the number of homes for sale and the estimated 5.6 months it would take to sell a house through the Multiple Listing Service in December was less than half the 12.3 months it would have taken a year earlier.

The number of total listings fell 22 per cent in December from the same 2008 period and 12.6 per cent for the year.

The imbalance in supply and demand drove the national average price of homes to
$337,410 in December, 19 per cent higher than in December 2008, but slightly lower than the 2009 average of $348,840.

Douglas Porter, deputy chief economist at BMO Capital Markets said while high prices caused by strong demand and weak supply could pose a risk to the fragile recovery, he is not willing to jump on the “bubble bandwagon” yet.

A bubble occurs when prices increase without any sound underlying fundamentals, he explained, and that’s not the case in Canada’s housing market, which is closely tied to changing interest rates and economic fundamentals.

“We still do have a relatively tight supply situation and exceptionally low interest rates and a mild recovery in the economy, so there are a lot of good reasons why home prices are rising.”

“What we’re seeing is almost textbook recovery,” he said. “The speed of the recovery is mind-boggling, the fact that housing is leading the recovery is really not a surprise... it’s exactly what you’d expect to happen.”

Finance Minister Jim Flaherty said Friday he does not see a housing bubble yet, but
he noted the government has many tools at its disposal — from raising down payment requirements on insured mortgages, to lowering amortization periods and urging the banks to be more cautious in their lending — to prevent such a thing from happening.

“We don’t want to have a group of house purchasers who purchased houses now at insured mortgages at relatively low rates who would not be able to manage them if rates were to increase later on,” Flaherty said in an interview with Business News Network, a cable TV business channel in Toronto.

“I’ve looked at the numbers with CMHC,” he added. “We’re monitoring it. I do not see evidence of a bubble right now, but we’re going to keep watching it. There are some steps we can take that we will take if it’s necessary.”

The association said 27,744 units were sold across Canada in December, up 72 per cent from the same month in 2008. The year-earlier period saw the lowest sales in a decade in the wake of a global credit crunch and the start of the recession in Canada.

The Kitchener-Waterloo Real Estate Board set a record in December with 356 sales. The Real Estate Board of Cambridge recorded 150 sales, up 60 per cent from the same month a year earlier.

December also marked the end of the strongest quarterly sales volume ever measured by CREA, with 137,957 homes sold over three months on a seasonally adjusted basis — up 2.6 per cent from the previous record set in the first quarter of 2007.

“CREA’s latest statistics will no doubt spark further bubble talk amongst the usual suspects,” said the association’s chief economist Gregory Klump. “(But) cooler heads recognize that many of the recent gains reflect temporary factors that could fade by summer.”

The 59 per cent year-over-year fourth quarter gain drove last year’s annual sales volume above 2008 levels, but the number of transactions last year was 10.7 per cent below the peak reached in 2007.

“The extraordinary decline in activity one year ago and subsequent rebound, particularly for higher-priced real estate, is stretching current year-over-year comparisons,” said Klump.

Klump believes the market will balance out in 2010 because consumer demand will be met with a supply side rise as the number of new homes increases and cautious homeowners become confident about selling, which will add more homes on the market and help drive prices down.

Porter said Friday’s report signals that Canadians have regained their confidence in the economy and the surge in demand is beginning to be met with a serious supply response, citing a notable uptick in December housing starts.

“Builders had been very cautious and they’re only now starting to crank up their output again, but even so, the comeback in new housing starts has been much more modest than the rebound we’ve seen in sales,” he said. “And people who own homes have also been a little reluctant to put their house up for sale because of the broader uncertainty that we’ve seen.”

He said that the demand in housing was most pronounced in B.C. and Ontario, where home buyers might be hoping to beat the introduction of the HST, the harmonized sales tax which is set to replace provincial taxes in those provinces later this year.

The Bank of Canada indicated last week that it was premature to be talking about a housing bubble in Canada and said recent house price increases are in line with supply and demand fundamentals.

The bank considers the current hot market to be a phenomenon based on temporary factors, such as pent-up demand from the recession, and low mortgage rates.

A CIBC forecast released Thursday indicated that the hot housing market will continue to drive economic growth during the first half of 2010, but will come to a screeching halt in the second half of the year, when interest rates are expected to rise.

The Canadian Press

December job losses reality check

8.5% unemployed
Paul Vieira, Financial Post Jan 11/10

OTTAWA - Financial markets were dealt a reality check yesterday with disappointing December jobs data from Canada and, more notably, the United States signalling an uneven and choppy recovery, and prompting U.S. analysts to scale back expectations on rate hikes.

Analysts noted, however, that an improving trend is definitely emerging in both countries. Furthermore, some reckon unemployment levels in Canada may have peaked.
Statistics Canada said the economy lost 2,600 jobs last month, but the unemployment rate remained unchanged at 8.5%. Markets expected 20,000 new jobs in December, after an off-the-chart 79,000 gain in November.

"It's looking more believable by the day that the 8.7% jobless rate in August will mark the peak for the cycle, far below past recession highs -- 13% in 1982 and 12.1% in 1992 -- and no worse than the average unemployment rate in Canada over the past 30 years," said Douglas Porter, deputy chief economist at BMO Capital Markets.

Stewart Hall, economist at HSBC Securities Canada, said there was "palatable" disappointment given the big gain in November. But the fact the economy held onto most of those jobs "is in and of itself fairly significant," he said.

With the December figures in hand, they suggest the Canadian economy shed 240,000 jobs in 2009 -- the bulk of which occurred in the first half of the year. In the last five months of the year, the economy generated an average of 20,000 new jobs per month.

Mr. Hall said average monthly gains of 20,000 are likely in the offing, as this recovery is likely to mirror the one following the recession of the early 1990s. "One characterized by some jobs growth followed by consolidation. Not terrific, but infinitely preferable to the experience of the previous year."

The Canadian recession ended in the third quarter with meagre annualized growth of 0.4%, as domestic strength was offset by a weak export sector that was hampered by a strong Canadian dollar and weak U.S. demand. Economists estimate growth in the final three months of 2009 to register between 3% and 4%.

The Bank of Canada is expected to begin raising its benchmark lending rate in the third quarter. There is less confidence about near-term tightening from the U.S. Federal Reserve Board.

The U.S. Bureau of Labor Statistics said non-farm employment in December fell 85,000, compared to expectations for no change. The unemployment rate was unchanged at 10%, although analysts note it was due to a plunge in the labour force, as people stopped looking for work.

"Firms are still bent on boosting productivity and remain cautious about hiring,"
analysts from London-based Capital Economics said of the U.S. data.

The yield on the two-year U.S. Treasury note -- a market gauge of interest rate expectations -- dropped yesterday below 1%, indicating analysts believe the likelihood of a Fed rate hike has been "pushed out for a few more months," Ajay Rajadhyaksha, head of U.S. fixed-income strategy at Barclays PLC in New York, told Bloomberg News.

The U.S. bureau noted, however, that during 2009 monthly job losses moderated, from an average 691,000 in the first quarter to 69,000 in the fourth quarter. Also, the bureau revised data for November indicating the U.S. economy created 4,000 jobs -- the first monthly gain in more than two years.

Still, Avery Shenfeld, chief economist at CIBC World Markets, said the 10% U.S. jobless rate masks the "true extent" of labour slack, "as it ignores those working part-time involuntarily [and] those who gave up looking for work."
As a result, the Fed is unlikely to raise rates for some time.

How to Lock Out Crime: Home Security — Common Sense

If you are like most Canadians, you are concerned about the safety of your home and your community. One particular type of crime that worries Canadians is breaking and entering or burglary. Recent statistics show that burglary accounts for 22 per cent of all property crime.

The How To Lock Out Crime series, jointly prepared by Canada Mortgage and Housing Corporation (CMHC) and the Royal Canadian Mounted Police (RCMP), will make you more aware of burglary and its dynamics and show you how to minimize the likelihood that this crime will happen to you.

The How To Lock Out Crime series promotes a proactive approach to safety and security. By knowing the conditions favourable to burglars and taking steps to eliminate those conditions, you can greatly reduce the chances that your home will be burgled. Being proactive and implementing a well-thought-out plan can:

• significantly reduce the opportunity for a crime to be committed; and
• minimize the consequences — both personal and property damages — if a crime does occur.

In Home Security 101, you were asked to do a visual assessment of your yard and home. Even if all the required bolts, hinges, latches and alarms have been installed, good home security cannot be achieved without first adopting the commonsense precautions outlined in Home Security — Common Sense.

Before You Move…

If you are considering moving, the time to start thinking about security is before you rent or buy your new home, not after. Survey the neighbourhood to ensure that it offers the level of security you desire. When viewing a home, make note of its surroundings and check for lighting and visibility. Check the quality of doors and windows, including the frames. If the locks are sturdy and in good repair, then security might be improved simply by installing auxiliary locks. If locks are of poor quality or have deteriorated with age, you might have to replace them.
Look for possible signs of forced entry, such as a new pane of glass set among older ones, scratches around locks or hinges, or chipped wood around windows and latches. These could be indications that the home has a history of burglaries. Ask police about the frequency of crime in the neighbourhood.

Neighbourhood/Block Watch

Figure 1 You can make a simple area plan like this, showing surrounding houses and streets, and giving neighbours’ names and phone numbers.
Neighbours working together are their own best defence against residential crime. You can help yourself and others by joining a Neighbourhood Watch or Block Watch program in your area. The program coordinates the efforts of concerned citizens and community police to build a safe neighbourhood. Members watch out for each other’s homes and report suspicious activities to the police and to each other.
Other key elements of the program include improving residential security, giving residences a “lived in” look all year-round, and registering valuable personal possessions through Operation Identification.
Through mutual alertness and cooperation, neighbours reduce the likelihood that burglary and other crimes will occur on their street.
If no program exists in your neighbourhood, you can start one. Your local police can provide advice on getting organized and trained.

Benefits of a Neighbourhood Watch or Block Watch program include:

• friendlier neighbours;
• greater community spirit;
• improved community-police relations; and
• in most instances, a significant reduction in crime.

Operation Identification

Operation Identification is a program that gives people the opportunity to mark or identify valuables as a proactive measure against theft. Stolen articles that are marked are difficult for a thief to sell and much easier for police to trace.
Your local police force or your home insurance agent can supply you with an electric engraving pen. Engrave your driver’s licence number on all your portable possessions that could be sold — such as stereo equipment, cameras, computers, appliances, TVs and home electronics.

Figure 2 Record serial and model numbers of electronic items.

Figure 3 Operation Identification decals warn potential burglars that your valuables are marked for easy identification by the police.

This makes your property traceable and therefore difficult to sell and less attractive to steal. Engraving will also help police identify any of your stolen property they recover as belonging to you. Operation Identification provides a decal for your window to show that your property is identifiable.


Figure 4 Keep visual records of valuables.
Avoid keeping valuables (coin and stamp collections, bonds, jewellery, large amounts of cash) at home. Use a safety deposit box. If you must keep valuables at home, list them on a piece of paper together with a full description of each item. If possible, photograph or videotape each item, as well as each room of your home, from several angles. Keep these photographs or videos in a fireproof safe or safety deposit box1. A few inexpensive but richlooking pieces kept in a jewellery box used as a decoy may deter unnecessary ransacking of your home in search of valuables.


Common sense security means taking proper care of your keys. Never tag your house keys with your name, address, licence plate number or telephone number. If you lose them, they could lead a burglar straight to your home. Tag them only with a War Amps key tag, which identifies your keys with a special code2. Never entrust your house keys to auto mechanics or other service people.
Make only as many copies of your keys as is absolutely necessary, and keep track of all copies. High security keys should have the name of the locksmith and “do not duplicate” stamped on the key.

Never keep keys in your jacket or purse. They can easily be stolen and returned without your knowledge.

Educate all members of your household about good key security. Stress the importance of not giving keys to anyone, even briefly (it takes less than a minute to make an impression of a key; the actual key can then be cut at the burglar’s leisure). If you cannot be sure your children will follow your advice, arrange for them to stay at a neighbour’s home when they return from school, rather than giving them a key.
Do not keep a spare key under the front door mat, above the door, in a flowerpot or anywhere else near your front entrance. These are the first places a burglar will look. If you lose your keys or move into a new residence, you should have all exterior locks re-keyed. It is usually possible to re-key cylinders without actually changing locks.


Figure 5 Cane bolts on a hinged garage door.
Locks on most garage doors are inadequate and can be easily pried off. Overhead garage doors (that is, those that swing out and up) should be fitted with a sliding bolt lock. Hinged doors can be secured by a pair of cane bolts at the top and bottom. Horizontal-panelled doors that slide along a track can be fitted with a pin that inserts into a hole drilled in the track to prevent the door from opening, even if the lock is broken.

Be especially careful to secure the garage if it provides access to the house. Put a deadbolt lock on the door leading from the garage into the house. Similarly, any door leading into the house from an attached greenhouse, solarium or addition should be treated as an exterior door and provided with a deadbolt lock.

Figure 6 A sliding bolt for a garage door that swings out and up.

Figure 7 “Pinning” the door track prevents it from being opened.

Avoid wooden garage doors with thin, easy-to-break panels. If your garage door is of this type, you might be able to reinforce the panels with wood or metal braces. If the garage has a side door, make sure it is of solid-core construction, is equipped with a good lock and the hinges and frame are well-fastened and in good repair. Paint over the windows or cover them with a dark curtain or blinds. Keep the area well lit at night.

Figure 8 For extra security, drill a hole through the end of a garage door bolt and insert a padlock.

Figure 9 Keep the garage door closed and locked.

Never leave the garage door open. Burglars can simply drive in and close the door. Concealed from view they can take their time loading up with your possessions. A well-equipped garage not only contains valuable items, but also tools and ladders that can be used to break into your home.
If your garage has an automatic door opener, be sure it is designed not to respond to stray signals. Disconnect the unit from the power supply if you will be away for a long time.

Everyday Security

Figure 10 Use contrasting colours and keep street numbers visible at both the front and rear of your house.

• Use large, easy-to-read street numbers on your home. Be sure they are illuminated and visible at night. Pedestrians and neighbours who see someone lurking in your yard can’t notify the police if they don’t know your address. Do not display your family’s name outside the home as this allows a burglar to look up your phone number and call to see if you are home.

• Ask to see identification before allowing service people (meter readers, inspectors, repair people) into your home. Call the company they claim to represent, but look up the telephone number yourself. If someone comes to your door asking to use the phone to call for assistance, offer to place the call yourself.

• Don’t give information about your household to telephone surveys.

• If you have an alarm, use it.

• Lock all doors and windows when leaving home for the day or evening (or even a short time). Ensure that every family member adopts this habit. Engage the deadbolt locks, not just the key-in-knob locks. Never put a note on the door saying when you will be back. At night, use timers to turn on lights, radios and TVs in a pattern that corresponds to your normal activities.

• Be sure the babysitter knows where you can be reached in an emergency and what to do in the event of a fire. Instruct the sitter never to admit anyone unless an adult is present. If a caller persists, the sitter should call police. All phone calls should be answered; an unanswered call may suggest to a potential burglar that the house is unoccupied.

• Store lawn mowers, barbecues, bicycles and snowblowers out of sight. Lock exterior basement doors and doors to cabanas, garden sheds and enclosed patios and porches. Keep ladders stored out of reach under lock and key.

• Check that windows and doors are secured before retiring for the night. Pay particular attention to basement windows and sliding patio doors. In hot weather, patio doors are used so often that the last person using them will often leave them unlocked.

• Avoid advertising when you will be away (either in person, in print, or through a message on your answering machine). An advertisement in the paper that requests respondents to call after 5 p.m. suggests that the house is unoccupied during the day.

• Don’t include the address of a deceased person in a newspaper obituary — a burglar would be almost guaranteed of finding the deceased’s house empty during visitation hours and the funeral. The same holds true for newspaper wedding announcements giving addresses, dates and times of unoccupied homes.

Figure 11 Many police departments are willing to help homeowners make a security check of their property.


Planning a vacation? Here are a few do’s and don’ts:

• All family members, including children, should avoid advertising your vacation plans in advance. Load your car or trailer in the garage rather than in the driveway. The fewer people who know you will be away, the better.

Figure 12 Arrange for a neighbour to collect your mail while you are away.

• Arrange for a trusted neighbour to collect your mail, mow and water the lawn, or shovel the walk, and do anything else that helps give the home the appearance of being occupied; alternatively, hire someone to perform these services. If you have a burglar alarm that does not shut off automatically, you will have to entrust someone with a key and instructions on how to turn the alarm off. This person should also know your itinerary and where you can be reached in an emergency.

• As an inexpensive security measure, use timers that will turn lights on and off in several rooms in a pattern that corresponds with your normal activities. Exterior lights should be wired to a photoelectric switch that will turn them on at dusk and off at dawn.

• If your drapes are normally open when you are home, leave them that way. If you have a second car, leave it parked in the driveway.

• Leave a radio playing to indicate that someone is home.

• If you will be away for several months, consider getting a house sitter.

Figure 13 Use a timer to turn on lights, radios and TVs when you are away.

Advice for Victims of Burglary
If you return to your home and find signs of forced entry, do not go inside. Call police from a neighbour’s phone.
If you encounter burglars in your home, stay calm. Do not attempt heroic measures. Let the intruders know you will not try to stop them and that they can take what they want. Try to observe and remember their height, dress and other identifying features. Call the police as soon as they leave.
Do not touch anything or clean up until police have investigated. You may, however, make a list of missing items.
If you cannot see how the burglars got in, consider the possibility that they may have obtained a duplicate key. Re-key your locks. If the locks are inadequate, use the opportunity to install better ones.


Once you have completed your security analysis and have made improvements to weak areas, take another look at the checklist in Home Security 101. Go back through the list and re-evaluate your residence.
Home security is a matter of being alert, aware of your surroundings, and proactive. It is not necessary to build a bunker to protect your home, but it is necessary to use common sense and take precautions. Remember that no system is 100 per cent effective, but you can take steps to considerably reduce your chances of being a target.

We hope that the ideas and alternatives presented in this publication will assist you in developing an effective security program. True security is a partnership between you, your family, your community and public agencies. It is only by working together that we can make our communities safer places to live.

1 Some household insurance policies require special premiums and protection measures to safeguard coin collections, stamp collections, jewellery and other
valuable items. Check with your insurance agent about the specific terms and limitations of your policy.

2 For more information about the War Amps Key Tag and Address Label Service, go to the War Amps website at

Bilingual, retrieved February, 2007.
Related CMHC Information
• Home Security 101
• Home Security — Exteriors
• Home Security — Alarms
• Home Security — Doors
• Home Security — Windows
• Home Security — Patio Doors
• Hiring a Contractor
• Before You Start Your Renovation — Windows and Doors
• About Your Apartment: Improving Your Security and Safety

Canada Mortgage Bonds grow under the radar

Friday, 29 January 2010

The CMHC-backed Canada Housing Trust issued $47 billion worth of mortgage bonds in 2009 - the biggest issuance in the Canadian marketplace last year, according to a story in The Financial Post.

The growth is another sign of success for the Canada Mortgage Bonds program, which was launched in 2001 as a way for financial institutions to sell some of their mortgages to the government for liquidity and to lower borrowing costs. The program has proved popular among both financial institutions and investors, the Post said.

"Investors have responded extremely well to the safety and security of Canada's mortgage market as well as the AAA backing from the Canadian government," Doug Bartlett, managing director and head of government finance for CIBC World Markets, told the Post.

The five-year bonds are still the most popular product in the CMB program, but the 10-year bonds have also done well since being introduced to the market in November 2008, with a total of $9.2 billion being sold as of December. Despite the high numbers, CIBC executive director Warren Lovely told the Post the program is "very mature" after the explosive growth it has experienced in the past few years.

An interest rate hike this summer?

Don't count on it. For the Bank of Canada to raise rates before the middle part of 2011 would be totally inconsistent with its current forecast

David Rosenberg Published on Wednesday, Jan. 27, 2010

David Rosenberg is chief strategist for Gluskin Sheff + Associates Inc. and a guest columnist for Report on Business
Canadian market watchers will get some good news this week. The predictions for a "blowout" reading on fourth-quarter GDP are already out there and it is likely to be an abnormally strong number. But for anyone who thinks a big number is likely to help lock in a rate hike this summer, I would suggest that is not going to happen.

In fact, my view is that the Bank of Canada will not be raising rates until mid-2011 - at the earliest.

This is critical to the outlook for Canadian money market and bond yields since futures have priced in nearly 100 per cent odds of a 25 basis point rate hike this June, and another 25 basis points by September. (A basis point is 1/100th of a percentage point.) The central bank has already told us that its base case is for 2.9 per cent real GDP growth this year and 3.5 per cent next year, with the starting point on the "output gap" being 3.7 per cent ("output gap" is the gap between the actual level of real GDP and where real GDP would be if the economy were at full capacity). Remember that an output gap that big in any given quarter classifies as a 1-in-20 event. Moreover, baselining these expected growth rates against the latest estimates of potential growth puts the output gap at a smaller level of 1.55 per cent this year, narrowing further to 0.25 per cent in 2011.

The history of the Bank of Canada is such that - outside of when it had to defend the Canadian dollar - it typically does not embark on its tightening phase until the output gap is close to closing. Even during the aggressive John Crow era, the bank's modus operandi was to time the first rate hike just as spare capacity was being eliminated, and not much before. On average, the first central bank rate hike following a recession takes place one quarter before the output gap closes (there is still a gap, but it is small at 20 basis points). If such a strategy is replicated this time around - and the cause for being on pause longer in the context of a historic deleveraging cycle is certainly quite strong - then the very earliest the bank will move is the second quarter of 2011.

Under this scenario, based on some back-of-the envelope calculations I just did, the unemployment rate at no time declines below 7.5 per cent through to the end of 2011. The peak in the jobless rate was 8.7 per cent in August, 2009. Going back to prior recessions, the central bank does not begin to tighten rates until the jobless rate is down an average of 150 basis points with a range of 130 basis points to 170 basis points.

Unless the bank wants to be pre-emptive - highly unlikely when it acknowledges in its economic outlook last week that "the recovery continues to depend on exceptional monetary and fiscal stimulus" and that "the overall risks to its inflation projection are tilted slightly to the downside" - then to raise rates before the middle part of 2011 would be totally inconsistent with its current forecast. More to the point, while bored Bay Street economists analyze every word to see if the bank is more or less "hawkish" than in its previous outlook, what is important for investors is to assess the bank forecast and decide what it means for the degree of excess capacity in the economy and what that implies for the future inflation rate.
The bottom line is that even with the fragile recovery, the bank sees more downside than upside risk to its inflation projection, and, to reiterate, for it to start tightening policy until the jobless rate falls below 7.5 per cent would be a break from past post-recession actions.

And whatever future "policy tightening" is needed could also come via the overextended loonie, limiting any need for an interest rate adjustment in the time horizon that the markets have discounted. This is a source of debate on Bay Street, but the bank is still sensitive to the growth-dampening impact of an exchange rate too firm for its own good. To wit: "The persistent strength of the Canadian dollar and the low absolute level of U.S. demand continue to act as significant drags on economic activity in Canada," the bank says.

In a nutshell, the Canadian market is already braced for 50 basis points of tightening from the Bank of Canada by September. With that in mind, it is difficult to believe that there is any significant rate risk here; if anything, the surprise will be that the bank is on hold for longer. If that proves to be true, then there is actually more downside than upside potential to Canadian bond yields, particularly at the front end of the coupon curve.

The reason the markets think the bank may pull the trigger is because of this one sentence that shows up in every press statement: "Conditional on the outlook for inflation, the target overnight rate can be expected to remain at its current level until the end of the second quarter of 2010 in order to achieve the inflation target."

So the central bank has really only given a pledge to keep rates where they are until mid-year. But June is only five months away and so one would have to think that at one of the next three meetings, the Bank is going to have to update this particular sentence or cut it entirely and leave the market without a de facto time commitment. Either way, the moment the bank changes this sentence is the moment the market will put on hold its expectations of a new rate-hiking cycle coming our way.
Until then, homeowners opting for variable rate mortgage financing will likely not have to face the interest rate music.

Mortgage brokers handling growing number of deals

By James Pasternak, Financial PostJanuary 21, 2010 8:06
AMBe the first to post a comment

When Hamilton, Ont., residents and partners Kathy Funke and Dan Perryman wanted to purchase an investment residential property in 2000, they did what most Canadians do when it's time to borrow. They headed to the bank branches in their area.
They shopped around a bit, made lots of phone calls, compared mortgage conditions and rates and then signed.

“That was our first experience. We didn’t really know where to start. And I didn’t know anything about mortgage brokers at that time. The bank seemed like the obvious place to start,” said Ms. Funke, 45.
But in retrospect, they found the whole experience exhausting.

“During our first experience we tried to shop around. The banks discouraged that. They gave us some story that because we had a mortgage being approved and when another bank does the same thing it shows that another mortgage is being approved,” said Ms. Funke.

Three years later when they were shopping for another house, they had a different strategy.

“We didn’t even go to the bank then…We were just so frustrated from the last experience that we didn’t want to run around to the banks. We figured we couldn’t do any worse so we just put ourselves in the broker’s hands and let her do the shopping around for us. We use insurance brokers for insurance, why wouldn’t we use a mortgage broker?” said Ms. Funke.

Dan and Kathy are part of a growing number of Canadians foregoing the traditional walk into the bank branch and instead sitting down with the local mortgage broker.
In their case they used Grimsby, Ont.-based Verico One Mortgage Corporation.
This growth is a core finding of Maritz Research Canada, which studied the broker industry on behalf of the Canadian Association of Accredited Mortgage Professionals (CAAMP)

“In the past, the first or only place a person would go when looking for a mortgage was to their local bank, however more and more Canadians are now seeking out the services of Mortgage Brokers to help them navigate the biggest purchase of their lives,” concludes study author Rob Daniel, managing director, Maritz Research Canada.

The Maritz Research concluded that the mortgage brokerage channel handled 23% of all mortgage activity in 2008. The broker channel is particularly strong in Western Canada (34% of all activity in Alberta, 27% in British Columbia). In addition, women are more likely than men to deal with mortgage brokers. (26% vs. 20%).
Young Canadians are much more likely to consult with and deal with brokers than their older counterparts; Brokers represent 28% of mortgage activity among 18-34 year olds, 24% among 35-54 year olds, and just 17% among those 55 and older.

A mortgage broker works as a conduit between the buyer and the lender. In many cases, the mortgage broker is informally representing lending institutions. The banks have used brokers to outsource the job of finding and qualifying borrowers.
Dan and Kathy felt they got a better interest rate than the banks offered and there were no brokerage fees. And they wanted a mortgage that offered an annual paydown of 20% with no penalty on the balance outstanding.

Maritz Research Canada concluded that the average Canadian who renewed or renegotiated through a broker saw their interest rate reduced by an average of 125 points, compared with 114 among those who dealt directly with a bank or credit union.
For Toronto resident Leanne Bernardo, the mortgage broker not only represented a one-stop shop, it provided a number of “add ons.” These included a line of credit, a life insurnace option, annual and monthly lump sum payment options without penalty and weekly interest rate alerts. The variable interest rate selected was comparable to what the banks offered.

“We just wanted to have a number of different options presented to us and we felt that going through a broker would give us an unbiased opinion of different options. Otherwise we would have gone to three or four different banks to get our options. It was great for us in terms of time efficiency,” says Ms. Bernardo.

And then there is the personal service. James Bell, of Toronto-based Ultimate Mortgage Corporation, has been arranging mortgages since 1989. He’s been dealing with some of his customers for 15 years.

“People get very frustrated when they are dealing with banks because there’s such a turnover of staff, it's very difficult to build a relationship with a mortgage officer. Even if they are successful in establishing a relationship now it's not likely that person will be in the same branch in the same position five years down the road,” says Mr. Bell.

The broker is ideal for those who would have difficulty or would not normally qualify for a conventional bank mortgage.

When Karl Klos was co-purchasing a house with a friend in 2006, his friend was working but he wasn’t. They were having trouble getting approved. They were offered $250,000 in private financing at just under 6%. When that didn’t work out they ended up being referred to Toronto-based The Mortgage Centre ( which found them a mortgage at 4.35%

And then there are those who are seeking second mortgages to save their homes.
“The idea is to solve their problems and not to put them into more problems. And I would say we’re very successful at that. There are always situations that go wrong. But by far the highest percentage of them work,” says Jeff Atlin, a mortgage broker and president of the Independent Mortgage Brokers Association of Ontario.

But one thing consumers might end up doing is shopping for a mortgage broker. Unlike a bank, depending on the complexity of the deal and level of risk, mortgage brokers will charge fees. In one case, a low risk $240,000 mortgage on a $320,000 home in Toronto brought $3,200 in fees.

“It really is on a per deal basis. I wouldn’t say it's what the broker feels they can get away with. I would hope that people would have higher standards than that. There are some deals that are quite time-consuming and perhaps a higher fee would be reflective of the time that’s necessary to put it together so the borrower ends up with a mortgage that they are really satisfied with," says James Bell.
According to one banking insider, the banks are chilly about mortgage brokers because they make it a more competitive market in which interest rate competition takes away the ability of the local branch to hold firm on posted rates.

As for Dan Perryman and Kathy Funke, they’re making it a habit. They currently have two rental properties and live in a third house. But it doesn’t look like they are going to stop there. They have another home purchase going through in April. And they only plan one stop and that is to Verico One Mortgage Corporation.

“We wouldn’t even consider anybody else. If it isn’t broke you don’t fix it,” says

Kathy Funke.
Have a great day!

Introducing Matt McJannet

Hello to all our clients!

Well, about 4 years ago, while working as a broker, in my office at The Mortgage Centre, and not having a vacation for 2 years, feeling stressed, my Dad whom had just returned from Thailand suggested that I go. I quickly agreed and headed to Asia with nothing but a back pack. While traveling for the month I did some scuba diving and fell in love with the sport. When I came home I heard of a diving college in Kelowna and handed my dad my notice. A just reward for him, letting me go on vacation!

It was time to see some of the world that I now know can be very different from home, but far more entertaining! I spent a very exciting three years diving in Costa Rica, Australia and then finally got a job for a cruise line teaching scuba throughout the Caribbean. Sounds great right? It was almost all “ups” but of course there were some “downs”.

After working in Costa Rica for a month, my employer decided he didn’t want to pay me what we had agreed upon anymore. And being that I was way up north, literally in the middle of no where, he figured I would accept it, as I was pretty much stuck.

Little did he know how determined I was to leave after this incident. The only plane coming for the next 3 weeks was at 4:00am the next day. Well, thanks to the “Mortgage Man's” credit card I was able to get a flight on that dirt runway at 4:00am in the morning.

After this I decided that Australia would be my next destination. It was an absolute blast with some of the best diving I’ve ever seen. I spent almost my whole year in a little beach town in Queensland called Airlie beach. I had an awesome time and would have stayed longer if my working visa allowed. Mom and Dad even made it out to visit me for Christmas one year.

Working for the cruise line was great. I first was sent to work on a private island in the Bahamas, sunshine all day, turquoise waters, paradise! Then had my rotation to one of the cruise ships, which was the biggest one in the world at the time, where I taught scuba to the guests.

After 2 months I was rotated to another private destination, this time Haiti. This was such an experience for me. I met a young boy who would help me work at my station when there was no ship in. He spoke no English at that time but was always smiling and ready to help me do what ever cleaning or maintenance I was doing that day. Over the course of a few months I found out that he was an orphan who slept on the floor of a little brick hut in the village, which eventually he took me to see. I spent many months coming and going to Haiti over the next couple years. Before I left after my first 6 months I spent $150.00 to buy a school uniform, shoes and books for this boy. Education was free if you had these 3 things. Next time I arrived he was practicing his English with me and smiling even bigger.

Now I feel I have done the traveling that I needed to do and am back with my father's business and ready to make a different kind of splash, one in the mortgage industry. I look forward to talking to each of my fathers clients over the next year and believe I can follow and eventually fill his foot steps.
Matt McJannet

Home prices see first annual rise in 10 months

Financial Post Decemebr 31/09

OTTAWA -- Resale prices for Canadian homes rose for a sixth consecutive month in October -- and were up on an annual basis for the first time in nearly a year -- as the country's real estate market continued to recover from recessionary lows, according to a report released Wednesday.

The Teranet-National Bank resale house price index of major markets increased 1.27% during the month from September. Year-over-year, prices were up 0.57% -- marking the first rise in 10 months.

"Prices have now risen 1% or more for five months in a row," said Marc Pinsonneault, senior economist at National Bank Financial. "In October, however, the monthly rise varied significantly among the six metropolitan markets surveyed."
The biggest monthly price gains were recorded in Toronto (1.6%), Vancouver (1.8%) and Calgary (0.8%), the index showed.

More modest increases were noted in Halifax (0.4%), Ottawa (0.3%) and Montreal (0.3%). "In each of these three cities, the monthly appreciation was the smallest since market bottom -- except for one monthly decline each in Montreal and Halifax," said Mr. Pinsonneault.

Vancouver prices, however, remain 4.1% below their peak of June 2008, while Calgary is still down 11.3% from the high reached in August 2007.
Millan Mulraine, economics strategist at TD Securities, said that "while the pickup in this indicator is not entirely surprising, the slow turnaround in the indicator appears to be at odds with the other Canadian home price measures (which show a more profound uptick in Canadian home prices) and the recent sharp upswing in housing market activity."

The Teranet-National Bank price index is based on homes that have sold at least twice. The survey does not provide specific sales figures.

Thursday, January 21, 2010

Days of low-interest borrowing may soon end in Canada, economic leaders say

By Mark Bourrie

OTTAWA, Dec. 28 (Xinhua) -- Canada's economic leaders are worried that low interest rates are luring consumers into amassing huge amounts of debt that they may not be able to pay back when interest rates rise from their historic low levels.

Canada's central bank lending rate is 0.25 percent. Mortgage rates are about 4.5 percent, while five-year consumer loan rates for items such as automobiles are about 8 percent.

Recently, Canada's Finance Minister Jim Flaherty and the governor of the country's central bank, Mark Carney, have sent warning signals that the days of low-interest borrowing may soon end.

Their statements show that the Canadian government is afraid that Canadians will default on the loans that are used to buy homes. About 70 percent of Canadian families own their houses, and real estate makes up the bulk of the assets of typical Canadian families.

Besides, Canadians, especially those who have not saved for their retirement or do not have a workplace pension, see home ownership as a way of locking away money until their retirement, using the money from their house sales to top up their small government pensions.

Still, most Canadians must borrow the bulk of the money they use for home purchases. Most are content to assume this large debt if the cost of the monthly payments is comparable to rent charges, and if house prices continue to rise.

In the past decade, the government has allowed the term of mortgages to be extended from a maximum of 25 years to 35 years, and has permitted its home loan insurance agency, Canada Mortgage and Housing Corporation, to sell insurance on loans with a down payment of only a 5-percent.

The system has worked to stimulate house construction, but analysts worry that it has created a speculative bubble that may burst, allowing house prices to settle back to a level that will leave many families owing more than their homes are worth. If that happens, the national government, already running a massive annual deficit, would be stuck with the loans of Canadians who defaulted.

Last year, Canadian resale house prices rose by more than six times the rate of inflation. Interest rates have also been kept low to stimulate borrowing for capital investment.

However, the rates will probably have to rise if Canada's national government, its provinces and cities hope to sell bonds in a market already flooded with U.S. government debt.

In an interview broadcast this week on the country's largest private television network, Finance Minister Jim Flaherty warned Canadian families that the days of easy home ownership debt may becoming to an end.

"If we see further evidence that there is excessive demand in the housing market or that there's an indication that people are taking on obligations that they will not be able to handle in the future when interest rates rise, then we will take some action," Flaherty said on CTV television.

"The likely action we will take is to increase the size of the down payment from 5 percent to a higher number, reduce the amortization -- bring it down from 35 years to something less," he said.

Canadian families traditionally saw home ownership as a sign of financial security. Prices have rarely fallen in the past century. When they have, the values quickly recovered. Last year, house prices rose an average of about 20 percent, while the official inflation rate is less than 3 percent.

The average Canadians have increased their personal debt by more than 1,000 Canadian dollars (about 955 U.S. dollars) in the first half of 2009, driving up the nation's personal debt by 44 billion Canadian dollars (42 U.S. dollars).

However, Canadians gamble on interest rates. In the early 1960s,a time of low inflation, interest rates were comparable to today's. In the fall of 1981, with inflation near 15 percent, mortgage rates reached 20 percent.

On a 300,000 Canadian dollars (287,000 U.S. dollars) debt, which is not unusual in a major urban market, a 20 percent interest payment would amount to more than a typical Canadian family earns, after taxes, in a year. Even a 12 percent rate, which was typical of the 1980s, would generate a monthly payment of more than 3,000 Canadian dollars (2,865 U.S. dollars).

On top of those charges, Canadians must pay property taxes and most mortgage companies require the house to be insured for its full value.

Flaherty said recent price increases for homes in Canada are due to a "confluence" of factors including low interest rates, an improving economic outlook and a stabilizing job market.

On Dec. 10, Mark Carney, the governor of Canada's central bank, warned that Canadian families were becoming more vulnerable to interest rate fluctuations because they have added debt this year while other countries such as the United States and Britain have seen reductions in personal debt-to-income ratios. The bank echoed the warnings of several non-government economists who warn that the Canadian rush to indebtedness is unsustainable.

In the Bank of Canada's semi-annual report, Carney wrote: "Households need to assess their ability to service these debt obligations over their entire maturity, taking into account likely changes in both income and interest rates.

"Financial institutions need to carefully consider the aggregate risk to their entire portfolio of household exposures when evaluating even an insured mortgage, since a household defaulting on an insured mortgage would likely be unable to meet its other debt obligations."

Carney warned that the risk to Canadian banks is relatively low, but up to 10 percent of households would face serious problems meeting their house payments if interest rates rise.

However, Benjamin Tal, an economist with the Canadian Imperial Bank of Commerce, a major mortgage lender, said Canadians find ways of hanging onto their houses when interest rates fluctuate, and tend to default only when they have lost their jobs.

Still, Tal said, "It is time for both borrowers and lenders to exercise prudence in continuing to build up household debt loads to the point where they are overly reliant on today's low rates."