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Teri Lynn & Norm Hilson

The Canadian Mortgage Myth

It is all over the news - That Canadians have debt levels that are skyrocketing, particularly when it come to home ownership and mortgages.  

If you listen to what a lot of the pundits are saying it means that in the event of a softening of the real estate market most home owners will find themselves in a negative equity situation.  That constant barrage of negative news is a burden on the average Canadian who has a limited understanding of credit, and in particular mortgages.

For most of us our day to day concern is how much money is coming out of our pocket each month.  We pay a rather significant portion of our incomes each month to tax and what is left over seems to slip through our fingers before we realize it is gone.  Living in Canada is an expensive proposition, albeit in most people's opinion very worth it.  We have one of the highest standards of living in the world and for the most part the economy is stable and even robust.  When the media prints a story they know that bad news sells, and so very often we see a doom and gloom approach to reporting.  What is interesting is that government officials are also quick to ring the alarm bells.

In Canada we have an amazingly robust housing market despite what is happening around the world or what is being reported to us in the media.  As of March 2013 CMHC (Canadian Mortgage and Housing Corporation) reported that the average Canadian home owner has 45% equity in their homes and that delinquency rates on mortgages are at less than half a percent.  You can view CMHC's report HERE.  This would indicate that Canadians, although they may have larger mortgages than 20 years ago, are successfully building equity in their homes and they are making their payments on time.

Based on the information provided in the report we also have to consider that the possible "crash" of property values would have to be very significant, by at least 45%, before the average Canadian would be in a negative equity situation.  A 45% slide in the value of homes would also mean that other aspects of the Canadian economy would have to tumble, like the energy sector, stock market, resource market, and unemployment would have to suddenly skyrocket.

Could all of this happen?  Of course it could, but given that the United States economy is growing (our largest trade partner) and much of the rest of world is recovering, it is not likely.  If we factor in the recent strict changes to mortgage lending in Canada, we can only expect that equity in homes will continue to climb enhancing the personal wealth of home owners.  True the reduced amortization and stricter guidelines have created challenges for some Canadians when they attempt to purchase a home.  If these challenges are understood and a careful plan is put into place however, home ownership is not as far out of reach as some believe.

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Roman Erdman said:

Great Article and thank you so much for sharing! Mortgage penalties are presumably detested about as much as duties—however ten times. Especially when those punishments venture into the five figures.

November 7, 2017 10:16 PM

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About Norm, Teri Lynn & Courtney Hilson Broker Sales

Born and raised in Milton, with complete knowledge of the surrounding areas. Our success is because of our commitment to service. We look forward to helping all our present, and future clients.