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harris Jan 16th 2011 3:19 am
Buying a house in Canada
 
In the UK, to secure equal ownership of property, the deeds are made out to "Tenants in Common". Is there any such/similar phrase that should be inserted in Canadian house deeds to do just this as two people are paying equal shares? Sad to have to think along these lines, but it does give peace of mind at the start.

JonboyE Jan 16th 2011 5:20 am
Re: Buying a house in Canada
 
Originally Posted by harris (Post 9105596)
In the UK, to secure equal ownership of property, the deeds are made out to "Tenants in Common". Is there any such/similar phrase that should be inserted in Canadian house deeds to do just this as two people are paying equal shares? Sad to have to think along these lines, but it does give peace of mind at the start.
Just the same here. There are two types of joint ownership:

Tenants in common own a specified share of the property that can be sold without affecting the other tenant's interest. When a tenant in common dies their share of the property becomes part of their estate.

Joint tenants share the whole ownership of the property. They cannot trade their share and when one joint tenant dies the surviving tenant(s) automatically assume ownership.

Auld Yin Jan 16th 2011 8:01 am
Re: Buying a house in Canada
 
There could be mortgaging issues with the Tenants in Common registration.

edwinslad Jan 16th 2011 10:46 pm
Re: Buying a house in Canada
 
Changes to mortgage rules are being announced today.

http://www.cbc.ca/canada/story/2011/...e-changes.html

JonboyE Jan 17th 2011 3:51 am
Re: Buying a house in Canada
 
Seems sensible to me.

Alan2005 Jan 17th 2011 4:14 am
Re: Buying a house in Canada
 
Originally Posted by JonboyE (Post 9108060)
Seems sensible to me.
Flaherty unveiled three main changes:

* The maximum amortization period for a government-insured mortgage was lowered from 35 to 30 years.
* The upper limit that Canadians can borrow against their home equity was lowered from 90 per cent to 85 per cent.
* Government insurance backing on home equity lines of credit, or HELOCs, has been removed.
Am I missing something about how the Canadian housing market works - but doesn't the second change potentially knock 50% off the maximum price that a mortgagor can afford. Particularly those who are first time buyers struggling to get a deposit together - i.e. those at the bottom of the pyramid holding it all up.

(I like that the CBC news doesn't even bother with the pretence of CHMC and just comes out and says it's government insurance.)

JonboyE Jan 17th 2011 4:25 am
Re: Buying a house in Canada
 
Originally Posted by Alan2005 (Post 9108106)
Am I missing something about how the Canadian housing market works - but doesn't the second change potentially knock 50% off the maximum price that a mortgagor can afford. Particularly those who are first time buyers struggling to get a deposit together - i.e. those at the bottom of the pyramid holding it all up.
I don't think the second one will affect home buyers, where a 5% down payment is the minimum necessary. AFAIK it is aimed at people refinancing to release cash or create a line of credit.

Alan2005 Jan 17th 2011 4:34 am
Re: Buying a house in Canada
 
Originally Posted by JonboyE (Post 9108138)
I don't think the second one will affect home buyers, where a 5% down payment is the minimum necessary. AFAIK it is aimed at people refinancing to release cash or create a line of credit.
Ah, yes. I missed that bit - apologies.

So it looks like new buyers can be in debt to 95% LTV, but home owners are limited to 85% LTV. Allowing one group arbitrarily to able to incur a higher debt loading than another doesn't make a lot of sense to me - but then I never follow the logic of what these people do.

jimf Jan 17th 2011 4:36 am
Re: Buying a house in Canada
 
Originally Posted by Alan2005 (Post 9108106)
Am I missing something about how the Canadian housing market works - but doesn't the second change potentially knock 50% off the maximum price that a mortgagor can afford. Particularly those who are first time buyers struggling to get a deposit together - i.e. those at the bottom of the pyramid holding it all up.

(I like that the CBC news doesn't even bother with the pretence of CHMC and just comes out and says it's government insurance.)
What does the government insurance cover?

Alan2005 Jan 17th 2011 4:39 am
Re: Buying a house in Canada
 
Originally Posted by jimf (Post 9108163)
What does the government insurance cover?
It protects the banks from the debtor defaulting (this is my understanding at least).

jimf Jan 17th 2011 4:43 am
Re: Buying a house in Canada
 
Originally Posted by Alan2005 (Post 9108170)
It protects the banks from the debtor defaulting.
So the borrower pays the premium and the government (or their insurance company) pays the bank if the borrower defaults? Does the government then come after the borrower for the money?

Sounds like mortgage indemnity guarantee insurance which used to exist in the UK?

Also sounds like risk free business for the Canadian banks.

Auld Yin Jan 17th 2011 4:46 am
Re: Buying a house in Canada
 
Originally Posted by Alan2005 (Post 9108170)
It protects the banks from the debtor defaulting (this is my understanding at least).
That is correct. If the house is repossessed and sold by the lender then any shortage between sold price and outstanding mortgage is paid off by the insurance.

Auld Yin Jan 17th 2011 4:52 am
Re: Buying a house in Canada
 
Originally Posted by jimf (Post 9108175)
So the borrower pays the premium and the government (or their insurance company) pays the bank if the borrower defaults? Does the government then come after the borrower for the money?

Sounds like mortgage indemnity guarrantee insurance which used to exist in the UK?

Also sounds like risk free business for the Canadian banks.
The Government does not look to the defaulter for the shortfall. The borrower/defaulter has purchased the insurance to deal with that.

The purchasing of the insurance by qualifying borrowers is a Government requirement. Banks are not permitted to lend more than 80% LTV without such insurance, so yes, it is virtually risk free lending for the Banks.

jimf Jan 17th 2011 5:02 am
Re: Buying a house in Canada
 
Originally Posted by Auld Yin (Post 9108193)
The Government does not look to the defaulter for the shortfall. The borrower/defaulter has purchased the insurance to deal with that.
The purchasing of the insurance by qualifying borrowers is a Government requirement. Banks are not permitted to lend more than 80% LTV without such insurance, so yes, it is virtually risk free lending for the Banks.
Are you sure about that? It seems to leave the lender and the borrower off the hook with the state carrying the liability.

Alan2005 Jan 17th 2011 5:11 am
Re: Buying a house in Canada
 
Originally Posted by jimf (Post 9108206)
Are you sure about that? It seems to leave the lender and the borrower off the hook with the state carrying the liability.
I think most mortgages are classified as non-recourse debt in Canada. I assume (but don't know for sure) that when the borrower defaults, the house is sold and the bank then goes to CHMC for the difference.

jimf Jan 17th 2011 5:38 am
Re: Buying a house in Canada
 
Originally Posted by Alan2005 (Post 9108222)
I think most mortgages are classified as non-recourse debt in Canada. I assume (but don't know for sure) that when the borrower defaults, the house is sold and the bank then goes to CHMC for the difference.
Okay - I suppose the borrower will already have lost the first 10% comprising their deposit if that is the minimum a borrower has to put down so they aren't getting off scot free.

mattieuk Jan 17th 2011 9:11 am
Re: Buying a house in Canada
 
Originally Posted by JonboyE (Post 9108060)
Seems sensible to me.
Yup, makes no difference to me. Property around the Lower Mainland is just a bit more unaffordable to me as it was before! :D

This isn't going to help many first time buyers at all (at especially around this area) - it should just give foreign money more of a free run at the property here, as more people bow out of the market.

Auld Yin Jan 17th 2011 9:58 am
Re: Buying a house in Canada
 
Originally Posted by jimf (Post 9108206)
Are you sure about that? It seems to leave the lender and the borrower off the hook with the state carrying the liability.
The borrower purchases insurance costing many thousands of dollars in most instances. Would you expect to pay for some occurrence you are insured against. The State (taxpayer) would, IMO, only be on the hook if there was a mass default situation such as that in the USA.

ann m Jan 19th 2011 6:39 am
Re: Buying a house in Canada
 
Originally Posted by jimf (Post 9108281)
so they aren't getting off scot free.

No - they are paying insurance along the way :)

Alan2005 Jan 19th 2011 7:28 am
Re: Buying a house in Canada
 
Originally Posted by ann m (Post 9113875)
No - they are paying insurance along the way :)
And, more to the point; the banks gets the house. The house which they must have agreed was good enough security at the time of making the loan.

Auld Yin Jan 19th 2011 8:21 am
Re: Buying a house in Canada
 
Originally Posted by Alan2005 (Post 9113981)
And, more to the point; the banks gets the house. The house which they must have agreed was good enough security at the time of making the loan.
And why not? The bank holds the property as collateral against a loan which it would not have been permitted by law to make without the buyer insuring the bank against any shortfall. At the time such a loan was made, default insurance was what made the house good enough security. Banks manage risk the best ways possible.
If the mortgage is in default and the bank forecloses, any excess over outstanding balance would be returned to the mortgagor, although the bank has no legal obligation to do so.

Alan2005 Jan 19th 2011 8:27 am
Re: Buying a house in Canada
 
Originally Posted by Auld Yin (Post 9114126)
And why not? The bank holds the property as collateral against a loan which it would not have been permitted by law to make without the buyer insuring the bank against any shortfall. At the time such a loan was made, default insurance was what made the house good enough security.
That was my point. The mortgagor isn't getting away scott free as they don't just lose their deposit; they lose the security for the loan as well. If that security (the house) doesn't cover the loan it's not the mortgagors problem - it's the banks and the insurers for accepting it in the first place.

Originally Posted by Auld Yin (Post 9114126)
Banks manage risk the best ways possible
Ho ho

Originally Posted by Auld Yin (Post 9114126)
If the mortgage is in default and the bank forecloses, any excess over outstanding balance would be returned to the mortgagor, although the bank has no legal obligation to do so.
Probably unlikely - if the house had equity then presumable the mortgagor could just sell it, pay off the loan and pocket the difference.

jimf Jan 21st 2011 8:02 am
Re: Buying a house in Canada
 
Originally Posted by Alan2005 (Post 9114150)
That was my point. The mortgagor isn't getting away scott free as they don't just lose their deposit; they lose the security for the loan as well. If that security (the house) doesn't cover the loan it's not the mortgagors problem - it's the banks and the insurers for accepting it in the first place.


Ho ho


Probably unlikely - if the house had equity then presumable the mortgagor could just sell it, pay off the loan and pocket the difference.
With this arrangement the mortgagor seems to hold nearly all the risks. The banks appear to take virtually zero risk. In which case why is the mortgage interest rate charged so high? Where a genuine risk is taken it is reasonable for an interest rate to be charged appropriate to that risk. However in Canada it seems that the banks charge the interest without actually taking any genuine risk.

Pretty Flowers Jan 21st 2011 8:07 am
Re: Buying a house in Canada
 
I worked in mortgages after my first degree. Houses that are repossessed lose value very quickly. Even when house prices are rising.

Alan2005 Jan 21st 2011 9:40 am
Re: Buying a house in Canada
 
Originally Posted by jimf (Post 9119230)
With this arrangement the mortgagor seems to hold nearly all the risks. The banks appear to take virtually zero risk. In which case why is the mortgage interest rate charged so high? Where a genuine risk is taken it is reasonable for an interest rate to be charged appropriate to that risk. However in Canada it seems that the banks charge the interest without actually taking any genuine risk.
The banks have zero risk. The risk is borne entirely by tax payers. Some people argue that it's CMHC that takes on the risk - but they are wrong; logically CMHC actually has no risk. It can't go bankrupt - it can either pay the claims out of premiums or it can't. The reason banks can act like this is because they own the government (and also we let them get away with it).

Originally Posted by Pretty Flowers (Post 9119246)
I worked in mortgages after my first degree. Houses that are repossessed lose value very quickly. Even when house prices are rising.
Repossession doesn't stigmatize a house like that. They don't lose value because they are repossessed; it's more that they do not attain the maximum price possible because the vendor wants to sell quickly. Banks don't like to wait for the "greater fool" for months on end like home owners. If you absolutely had to sell your house in the next six weeks then you would find it's price reducing pretty sharpish too.

Auld Yin Jan 21st 2011 11:28 am
Re: Buying a house in Canada
 
Originally Posted by jimf (Post 9119230)
With this arrangement the mortgagor seems to hold nearly all the risks. The banks appear to take virtually zero risk. In which case why is the mortgage interest rate charged so high? Where a genuine risk is taken it is reasonable for an interest rate to be charged appropriate to that risk. However in Canada it seems that the banks charge the interest without actually taking any genuine risk.
Risk is not the only factor determining interest rates.

Alan2005 Jan 21st 2011 11:54 am
Re: Buying a house in Canada
 
Originally Posted by Auld Yin (Post 9119624)
Risk is not the only factor determining interest rates.
No, there is also competition:rofl:


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