Real Estate Frenzy of 2007: A Tragedy For Some in 2012???

It's January 9, 2012 and the fallout of 2007's real estate market frenzy is already peering it's ugly head!  Remember the bidding wars that almost always resulted in prospective home purchasers offering tens of thousands of dollars over the asking price just to outbid the other guy?  It was an exciting, but terrifying time for real estate clients who just wanted to get into the house of their dreams.

I met with a lovely couple this evening who, like so many others, purchased in 2007 at the height of the market. Their 5 year term is set to end in a few short months, and what they have discovered is that their mortgage balance now exceeds their 2011 assessed property value.  What now?  Refinancing and re-qualifying with a new lender may be out of the question. You may need to stay put (with your present lender) for another term and ride the wave.  Let's hope our economy proves to be more resilient than the United States' and that property values recover by summer.

Are you a victim of the "Frenzy of 2007-Tragedy of 2012"? What do you plan to do in the months to come?

Stricter Mortgage Lending Rules in Canada?

In the middle of December TD Bank CEO, Ed Clark, expressed his belief that mortgage rules for home
loans should be even more stringent than they already are (http://bit.ly/vbIcqD).  He would like to see federally insured mortgages go from a maximum of 30 years down to 25 years. 

What would that change mean for you, the consumer?  You would need to have very good credit and
would need to have 20% or more for a down-payment (on a purchase) or 20%+ home equity to
efinance if you wanted an amortization period of more than 25 years.  At present the maximum is 30
years amortization with less than 20% down.  Here is an example of what a change of this nature
would do on your monthly payments:


Loan Amt.           Interest Rate           Amort. Period         Term        Monthly Payment

$400,000                   3.29%                        30 yrs                 5 yrs          $1,744.71

$400,000                   3.29%                        25 yrs                 5 yrs          $1,953.00

With this scenario, you are paying approximately $208.29 more per month, $2,499.50 more per year
and a whopping $12,497.49 more for the term of your mortgage loan.

In January, 2011 the Canadian government, in an attempt to curb consumer debt/spending, decreased federally insured mortgages from a 35 year maximum to 30 years.  Do you feel even stricter home loan
rules would improve or hinder the overall state of the Canadian economy?