Episode 40 Transcript – Canadian foreclosure levels

You are live with Jessi Johnson. My point of the day today is when I was driving to work this morning I noticed on the radio they were talking about higher levels of foreclosure in Canada. Now not to be confused with what’s happening in the States. The sub prime market is significantly worse in America. What’s happening now here is foreclosures have come up a little bit higher. The reason for this is you have people who took a short term mortgage, for example two years ago, when our markets where at their highest point and even in the past 4 or 5 years so to speak where the markets been very, very hot and the rates have come down a bit. Sorry I meant to say the actual totals of the property values have come down. Where you’re seeing this as more of a problem is properties with decreases in value but the properties are over leveraged. It’s where you might have a bit of an issue and everyone’s scared because their mortgage perhaps could exceed the value of their home, especially if you put zero down. Where you don’t need to be too concerned on that is there is a number of solutions before being worried about this becoming a problem for you if this is exactly your circumstance. Your first bet, essentially speaking, your current lender whoever that may be, you can go back to them and generally what they’ll do is when your mortgage runs out they’ll offer you an extension. You can go ahead and request an extension on your mortgage. They’ll generally send you a letter and offer you a rate. In most cases when this happens when your term runs out they don’t ask for an appraisal or ask for more documents. You basically sign a document and you can go ahead. The only problem is they don’t generally offer you the best rates. Which is where your broker will take you to new banks. They can get you the same deal somewhere else. That’s probably your first bet. Unfortunately you don’t have the biggest leverage with rates. You could do a switch transfer which is what I just spoke to you about where your broker will take you from one bank to another bank and generally you can get your appraisal and solicitor covered so there’s no actual costs. It’s just the same as if you were refinancing at your existing bank but we can generally get a better rate. Now as long as they don’t require an appraisal we should be ok. In most cases if it’s high ratio it’s Genworth or CMHC and they don’t require an appraisal. Another option is that after your term runs out you’re able to jump into a 6 month open, pretty much every lender does that. It’s a bit higher rate but it gives you 6 months of playing with the market if you really choose to do so. Double check with your lender to make sure that luxury is actually available. The next point I was going to suggest was you can also do zero down on your mortgage. You can do zero down, believe it or not you can still access this. It’s generally 1.5% higher than an existing mortgage rate. I think it’s 7.25% right now. So if you’re stuck, it bails you out essentially is what it does. My name is Jessi Johnson. You can reach me at www.firsthomeinfo.ca. Have a good day, bye!