‘Tis the “mortgage season” and people have begun coming out of winter hibernation to begin the hunt for that perfect home. But affordability remains a challenge, especially considering that in January, the federal government made regulatory changes that have altered the playing field for Canadian home hunters.

Most notably, the maximum amortization on a Canada Mortgage Housing Corporation-insured mortgage decreased from 35 to 30 years. This means buyers hoping to minimize their regular payments by paying over a longer period will now have to manage larger payments over fewer years. Longer amortization periods reduce monthly payments, but increase the interest paid over the life of the mortgage, making it harder to build equity.

So, how do you afford a home now that your payments will be larger than for a 35-year mortgage? Here’s some simple financial help.

Track your budget

Knowing your monthly expenses and what you can give up to enable you to make your mortgage payments will paint a clear picture of the amount of mortgage debt you can handle. Be aware of what’s going out and coming in regularly, including debt obligations. A mortgage is a significant, long-term financial commitment and it’s important to first have your finances in order.

Talk to a good financial advisor

A good financial advisor will take time to understand your needs, wants and most importantly, your reality. As a neutral, third-party, they’ll draw on their expertise to analyse your financial landscape and determine what you can handle in terms of a mortgage, while ensuring you remain on track to meet your other financial goals.

Save, save, save

You may want to purchase that dream home today, but saving as much as you can towards your down payment will help you in the long run. The larger your down payment, the smaller your mortgage, which means less interest and smaller regular payments. Also, consider the Home Buyers’ Plan (HBP) if you’re a first-time buyer. The HBP lets you to withdraw up to $25,000 tax-free from your RRSP to purchase or build your first home. It allows you to benefit from tax sheltering while helping you with your down payment.

Hunt for the best rate

A lower interest rate will save you thousands of dollars over the long term. Crunch the numbers to ensure you can afford your payments based on current rates and future, potentially higher rates. This is particularly important in today’s market where rates are still low (and attractive) but may rise. Your credit score and debts affect your rate so work to keep the former up and the latter down so you’ll be in a strong position when rate hunting.

Sign up for what you can afford

Unless your uncle is Donald Trump, mortgages are a significant financial responsibility, even under the best of circumstances. Ultimately, it’s up to you to ensure this financial weight is manageable. Even if you qualify for an $800,000 mortgage over 30 years, you don’t need to use it all if the monthly payments are going to strain you. You may need to wait a little longer to buy that perfect home. But you would have made a smarter decision in the end.

Kathy McGarrigle serves as Chief Operating Officer for Coast Capital Savings.

A window closes today, March 18th, for people who want to increase their housing affordability by stretching the length of their mortgage. The 35-year amortization for CMHC-insured mortgages (those with less than 20 per cent down) expires today, two and a half years after the federal government eliminated the 40-year amortizations and zero downpayments.

In other mortgage news, the Bank of Montreal celebrated St Patrick’s Day by going green on an eco-mortgage offering. The bank is offering a 3.89 per cent five-year fixed rate for Canadians whose homes meet BMO’s energy-efficiency criteria. For more information, go to <a href=”http://www.bmo.com/home/personal/banking/mortgages-loans/mortgage/special-offers/green-mortgage” target=”_blank”>BMO/ecosmart</a>.

More Canadian banks cut mortgage rates

Written by Eric Lam, Financial Post

Toronto-Dominion Bank cut its four-, five-, seven- and 10-year fixed rate mortgages to 4.99% (-0.15%), 5.34% (-0.10%), 6.14% (-0.20%) and 6.50% (-0.15%) respectively.

More of Canada’s biggest banks slashed their residential mortgage rates Wednesday, a day after Royal Bank of Canada started the latest round of cuts.

Toronto-Dominion Bank cut its four-, five-, seven- and 10-year fixed rate mortgages to 4.99% (-0.15%), 5.34% (-0.10%), 6.14% (-0.20%) and 6.50% (-0.15%) respectively.

TD also cut its four-, five-, seven- and 10-year closed special fixed rate offers to 4.19% (-0.15%), 4.09% (-0.10%), 4.79% (-0.20%) and 4.99% (-0.20%) respectively.

Canadian Imperial Bank of Commerce cut its four-, five-, seven- and 10-year closed mortgages to 4.99% (-0.15%), 5.34% (-0.10%), 6.50% (-0.20%) and 6.60% (-0.15%).

National Bank adjusted its four- and five-year closed fixed-rate mortgages to 4.99% (-0.15%) and 5.34% (-0.10%). It also cut the 10-year closed mortgage to 6.40% (-0.25%) and the variable-rate closed capped mortgage to 5.34% (-0.10%).

Desjardins Group, which offers mortgages in Ontario and Quebec, cut its four-, five-, seven- and 10-year mortgages to 4.99% (-0.15%), 5.34% (-0.10%), 6.40% (-0.20%) and 6.60% (-0.15%).

RBC was the first bank to cut its mortgage rates on Tuesday.

“Mortgage rates are tied to the bank’s funding costs. Fixed mortgage rates follow bond yields. Over the last several days, bond yields have decreased and this change reflects the lower yields,” an RBC spokeswoman said.

According to reports by the REBGV and the vancouver-east-fraser-homes/” >fraser Valley real estate Board, demand for detached homes remains strong across the region, with particularly high sales volumes and price increases in richmond and vancouver’s west side.
 
Single detached homes in richmond and vancouver’s west side that are the most sought after properties in the marketplace. The following are the 15 most expensive richmond homes on the market.

Photograph by: Bill Keay, vancouver Sun files

The REBGV report indicated that February’s 3,097 homes sales outpaced the 2,742 home-sale average recorded in the region over the last 10 years.

But Moldowan said that it’s single detached homes in richmond and vancouver’s west side that are the most sought after properties in the marketplace.

The report noted that between November 2010 and February 2011, the benchmark price of a detached home in richmond increased $190,739 to $1,099,679; and in vancouver west side, detached home prices increased $222,185 to $1,850,072.

By comparison, detached home prices across Greater vancouver increased $51,762 between November 2010 and February 2011 to $848,645.

The report said that sales of all residential properties in Greater vancouver reached 3,097 in February 2011, an increase of 25.2 per cent from the 2,473 sales in February 2010.

Meanwhile, the FVREB processed 1,279 sales in February, an increase of six per cent compared with 1,204 sold during February 2010.

Board president Sukh Sidhu said the market is more active earlier than expected, with 659 homes sold last month compared to 398 in January.

In February, the benchmark price for vancouver-east-fraser-homes/” >fraser Valley detached homes was $514,161, an increase of 1.2 per cent from the February 2010 price of $508,136.

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