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Federal Government competition pushes up fixed term mortgage rates

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Your Federal government competes against your and that is what drives fixed term mortgage rates.

In a global economy, all borrowers including the Canadian government are risk assessed for not only the expected rate of return on an investment but also what is the guarantee the investment capital will be safe.

Cash Back or Free Down are the Boiler Makers of Mortgages

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Canadian default insurance requires 5% down payment for qualified purchasers.  Those without a down payment who have the income and credit to qualify may obtain their down payment from the lender with cash back or free down programs.

This allows home ownership sooner because the down payment funds comes from the lender.

Mortgage payment frequency can deceive- explained in beer math.

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Most are "sold" on weekly or bi-weekly payments because it will save money.  Thousands are saved just by dividing the payment in quarter (weekly) or half (bi-weekly) and paying more often.  There are 52 weeks in the year, or 26 bi-weekly payments in the year.

What they do not always tell you is by the end of the year, you will have made 13 monthly payments, not 12.  It is the paying of 13 monthly payments within the year that brings down your balance and interest costs.

Mortgage Qualifying- like pouring a beer!

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Mortgage Qualifying is like pouring a beer because it is about CAPACITY.

A beer glass holds only so much liquid, but for flavour there tends to be some foam.

The liquid is the ultimate goal: the mortgage liquid is the mortgage principal and interest payment, property tax, provision for home heating costs, and half condo fees, if a condo is bought.

Based on history are you at risk of more mortgage default insurance changes?

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Potential changes based on "back to the future, what mortgage qualification looked like in the not so distant past:

Amortization reduced from 35 years to 25 years

Self-employed qualified strictly on tax paid personal income

Housing debt service ratios reduced from maximum 44 to maximum 32% of income

No borrowed or "free down" down payments

10% down payments not current 5%

 

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