Confidence in the Mortgage Market

Many of my friends have not yet paid off their mortgage, and so are concerned about what will happen with mortgages and reducing household debt. So this report shows that many of us are moving in the right direction to reduce our debt load.

Canadian homeowners are comfortable with their current mortgage, focusing on reducing their mortgage faster by making lump sum payments, reducing amortization periods and refinancing with lower interest rates, according to the Canadian Association of Accredited Mortgage Professional’s (CAAMP) most recent survey report released May 30th – Confidence in the Canadian Mortgage Market.

Following are just a few key highlights from the report:

• 74% of mortgage borrowers who renewed in the last year saw their new interest rate decrease. On average, the interest rate was reduced by one-half percentage point
• Borrowers are making significant efforts to accelerate mortgage repayment, such as voluntarily increasing their regular payments (23%) and making lump sum payments (19%), with some borrowers (10%) doing both Approximately 50% of borrowers pay $100 per month (or more) above their required payments
• Recent buyers indicate that their expected amortization period will be about 20% shorter than their contracted length
• Mortgage brokers account for 26% of all mortgages. For borrowers who took out a new mortgage in 2011, 31% obtained it from a mortgage broker
• 83% of Canadians have at least 25% equity in their home
• “Despite daily warnings in the media about mortgage indebtedness – or maybe because of them – Canadians are making responsible decisions about their mortgages and they’re exhibiting confidence in their own situations,” said Jim Murphy, AMP, President and CEO of CAAMP. “We should feel encouraged by this behaviour – it means Canadians are well positioned to weather a potential rise in interest rates”

Rather than move, many of us may decide to renovate.To help you make more informed decisions about doing this, Canada Mortgage and Housing Corporation (CMHC) offers a number of tips, tools and resources like the Before you Renovate: Renovation Guide. Consulting these resources before you begin can help you save time, money and a lot of frustration – resulting in a better overall renovation experience.

First, always take the time to thoroughly plan your renovation before you pick up a hammer (or the phone). Mistakes on paper are much easier and less expensive to fix than mistakes on the job. Taking the time upfront to identify your priorities and how you want to achieve them can save you a great deal of expense (and more than a few headaches) further down the road.

Next, decide whether your planned renovation is practical. For instance, that addition may look great, but can your home’s systems handle the additional heating, lighting and plumbing

Learn to draw the line between what would be nice and what’s really essential, and consider hiring a qualified professional early in the process to help guide you toward what’s practical for your home.

It’s also a good idea to think about the long-term impact of your renovations. For example, renovations that make your home more energy efficient could pay for themselves through years of lower monthly utility bills. In addition, think about your family’s future needs by making sure your design is flexible enough to adapt to changes as time goes by.

To avoid going over budget, have a clear idea in advance of how much your renovation will cost. CMHC’s Household Budget Calculator is designed to help you understand what you can afford. Get written estimates from at least two reputable local renovators, architectural firms or materials suppliers and, if they ask for a deposit, make sure it’s a nominal amount and request a signed receipt.