TheGlobeandMail.com reports low interest rates and easy mortgage terms are creating higher prices in Canada’s housing market. Marnie Bennett, millionaire real estate investor and wealth coach educates Canadians to help find the kind of home they need and can afford while avoiding the type of problems the housing market has caused many uniformed buyers in America.
Canada Mortgage and Housing Corporation (CMHC) is a gatekeeper of sorts, deciding who gets to buy a home and who doesn’t based on its standards. It used to be strict about its rules by making sure that there were down payments and forcing people to pay off homes in no longer than 25 years.
A few years ago, however, CMHC changed its rules and started allowing what home purchasers in America were used to when it came to buying a home. Canadians could pay off their mortgage’s interest first and pay back their principal over 35 years. This gave purchasers greater financial ability to buy bigger homes, but at the same time, it left mortgagees with more debt down the road.
These changes did not really come about because CMHC wanted to lower its standards as much as it did. Instead, according to TheGlobeandMail.com, the crown corporation didn’t have a choice as it was faced with a lot of competition and needed to bring in more business.
And, financially, CMHC did very well from the relaxed standards it had implemented by increasing its earnings from $375 billion in profit in the year 2000, to nearly triple that in 2006 when it made over $1 billion in profit.
In addition and for a variety of reasons, in the last few years, home prices have risen much faster than income has in Canada, and Canadians now collectively owe more than $1 trillion – almost three times the amount they held in mortgage debt in 2000.
This “short-term gain for long-term pain” sort of debt (that resulted from the relaxation of the CMHC rules) is the exact type of ill-considered or unwise debt that Marnie Bennett can help prospective buyers to clients avoid.
Marnie Bennett acknowledges the spike in housing costs that has been greatly aided by such bad mortgage decisions and, advises and educates the general public as to how to avoid such pit-falls and instead educates consumers on how to find the perfect deal for their family. Real Estate values relate to local market conditions and not global conditions. So finding the perfect investment or home is a matter of knowing socio economics of the city, the demographics, trends and employment rates.
Intelligently, last year the Canadian government cut the maximum length of a mortgage back to 25 years, so now fewer people will be lured pre-maturely into the housing market and will end up struggling to afford over-priced houses for longer periods of indebtedness.
Far-sighted financial commentators and observers are now calling for specific benchmarks to be created and adhered to in order to keep such damaging mortgage rules changes from happening again, and in order to prevent political goals from unwisely impacting upon the long-term financial structure of the economy.
Although some realtors claim that the government panicked and needlessly intruded into this marketplace and unnecessarily cooled or slowed down sales, Ms. Bennett was glad to see responsible actions were undertaken and has found that these betterments have not harmed her ability to continue to find wise real estate opportunities for her clients.
Marnie Bennett is a self-made millionaire real estate investor, an award -winning businesswoman, real estate wealth coach, international speaker and a radio show host.