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22 Feb

First Time Buyer Tax Break – Home Prices Stable, Harder Qualification – Hottest Investor Market

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Posted by: Gerry Gillan

Builders welcome tax credit for first-time homebuyers

 A new BC tax break for first-time buyers of new homes will help stimulate the construction industry and create plenty of new jobs, an industry executive said of Tuesday’s 2012 provincial budget.

 “This is welcome,” Greater Vancouver Home Builders’ Association President and CEO Peter Simpson said of a temporary bonus for first-time homebuyers that will be effective until March 31st, 2013, and is worth up to $10,000.

 “They have a difficult time getting into the market and typically get assistance from the bank of Mom and Dad. So this helps property virgins get on the first rung of homeownership and helps stimulate construction.

 “For every home start, there are approximately three full-time jobs each year.”

 Click here for more from the Vancouver Sun.

 It will be tougher to get a mortgage in future, survey of economists predicts

 The federal government will make it tougher for many homebuyers to get mortgages this year as it grapples with an overheated property market, according to analysts in a Reuters poll, who also ruled out the prospect that prices could suddenly crash.

 Ten of 14 economists and strategists surveyed last week in Reuters’ first poll on the Canadian housing sector answered “yes” when asked if they thought Ottawa would tighten mortgage rules within the next 12 months.

 They expect home prices to climb just 0.1% in the year to December 2012, and the same in 2013. That is down from a 0.9% year-on-year increase in December 2011.

 If Finance Minister Jim Flaherty tightens requirements for government-backed insured mortgages, it would be his fourth intervention in the real estate market since 2008.

 Click here for the full Vancouver Sun story.

Bank report reveals hottest investor markets

 A new report on varying provincial fortunes hints at where to make that next real estate investment. Psst, there’s oil there.

 “Strength in the energy sector has rekindled in-migration and helped firm up the labour market,” writes Economist Robert Kavcic, touching on Alberta in the new edition of the BMO Blue Book. “With the recent growth spurt, measures of cost pressure and capacity constraints are picking up, but remain far from the extremes of the last boom.”

 The guide, which digests employment, manufacturing and other commercial activity stats for each province in order to develop a snapshot of local economies, appears just as bullish on Saskatchewan and, to a lesser extent, Newfoundland & Labrador, which led the country last year with its 3.8% growth in real GDP.

 While acceleration is expected to slow this year as investment levels off and oil production dips, both Alberta and its neighbour to the east are expected to lead this year’s GDP growth with 3.0% and 2.9% increases, respectively.

 Click here to read the Canadian Real Estate Wealth article

Paying off your mortgage early can cost you

 Paying off your mortgage early seems like great financial planning since you’re freeing up money that can be put towards savings.

 But discharging a mortgage early can mean a prepayment penalty because the bank loses money. If you had a two-year term and paid the mortgage in full after 16 months, the bank is out eight months of interest. They charge the difference so they don’t lose out. The closer you are to the end of the mortgage, the smaller the penalty, but it’s money out of your pocket.

For those lucky enough to be near the end of their mortgages and ready to hold a mortgage burning party, they need to keep an eye on the mortgage statement that shows the principal/interest mix if they want to avoid penalties. This is particularly true for those with a variable rate.

 People with variable mortgages pay fixed amounts, but the amount going towards principal and interest fluctuates depending on prime. If the prime rate decreases, more of the payment goes to the principal and less to interest. While decreasing principal is great, you’ll be hit with a penalty if the mortgage ends before the term does because the bank loses interest payments.

 Click here for more in The Star.

 Mortgage fraud on the rise

  Consumer credit company Equifax uncovered roughly $400 million worth of mortgage fraud in Canada last year, an “eye opening” number industry experts estimate represents only a fraction of the cheating taking place in the country’s real estate market.

 Atlanta-based Equifax says many financial institutions are tightening lending and, as a result, deceit in the property market is rising. A report the company released Tuesday says two-thirds of all the fraud it sniffed out last year was related to real estate.

 “Mortgages are the biggest bang for the buck,” said John Russo, Vice President and legal counsel for Equifax Canada Inc. “So when credit gets tougher to get, that leads to more people falsifying documents, giving false pay stubs, inflating their income, kind of fudging things to get a home.”

 The $400 million in mortgage fraud represents only a sliver of the roughly $1 trillion in total residential mortgage credit outstanding at the moment in Canada. But it rose sharply in 2011 from 2010 in dollar terms, increasing 150%, Equifax data suggests.

 Click here to read the full Financial Post article.