Doors open to home buyers

House hunting this spring? You've never had it so good. Interest rates are heading down and choices abound on the mortgage front, with new lenders competing with the banks and brokers for your business.

The range of options has seldom been so great. Those determined to get the mortgage paid down as fast as possible have a slew of choices to accelerate their payments. Those who want to take the slow-and- steady route can amortize their repayments over 40 years, an option that didn't exist until 18 months ago.

Residential-mortgage credit is growing by leaps and bounds. It is now a $77-billion-a-year industry. Canadians currently have $800 billion invested in mortgage credit and it is forecast to grow by 11.7 per cent this year and surpass $1 trillion in 2010.

Jim Murphy, president and CEO of the Canadian Association of Accredited Mortgage Professionals, which has 11,500 members, says the industry's "enormous growth" is a reflection of Canadians' desire to own their own homes, but also the relaxation of regulations and arrival of new companies with new products, all of which has benefitted buyers. A decent economy, good employment numbers and historically low interest rates haven't hurt either, he points out.

"The mortgage industry in Canada over the past 10 to 15 years has matured and grown enormously. Fifteen years ago the mortgage brokers had about five per cent of the market. Today they have around 30 per cent. We've seen the arrival of new lenders like trust companies and mortgage banks like First National, MCPA and Maple Trust, all of them working through the brokerage channel.

"We have not only more lenders, but also more insurers. It used to be just [Canada Mortgage and Housing Corp.] issuing mortgage insurance needed by buyers putting down less than 20 per cent of the price of the home, but then GM Capital, now Genworth Financial, a private mortgage insurance provider, arrived and they've been followed by a number of others.

"There's a lot more of everything. More lenders, more insurers, more brokers and more options for

consumers in terms of mortgage product."

One of the biggest changes was extending the amortization period to 40 years from 25. That raised the bar on affordability and opened the door to thousands of buyers, a move Murphy heartily endorsed.

"Last year, of all mortgages taken out in Canada, 37 per cent had an amortization longer than 25 years. That's been a tremendously successful product and it really speaks to affordability. In some of the larger urban centres, average home prices are more than a quarter of a million dollars, and to put down 20 per cent -- $50,000 -- is a lot for a first- time buyer, who may have university costs, debts and other financial responsibilities.

"Critics will say that you pay more in interest, but on the other hand your upfront costs are less and you're in the market sooner and everybody deserves that. Consumers have really taken advantage of that opportunity."

Another significant influence has been the Internet.

It is possible to apply online for a mortgage, but not many are using that feature, says Joan Dal Bianco, vice-president of real-estate secured lending at TD Canada Trust in Toronto.

But most buyers are turning to the Internet to find out how much they can afford for a home and to use the online calculators to work out repayment costs.

"They basically know when they come into the bank what they can afford to pay, and that's when they sign up for a pre-approved mortgage and go house hunting."

The pre-approved mortgage locks in a rate for 120 days and is a win-win situation for a buyer. If the rate goes down during the lock-in period, the lower rate applies.

If the rate goes up, the locked-in rate applies. Dal Bianco urges everyone, "even those just contemplating getting into the property market to get pre-approval. It doesn't cost anything, you've got nothing to lose and everything to gain."

Pay weekly, bi-monthly or monthly, if you so choose. Put the mortgage term over three years or five. Spread the amortization period over 20 years or 40. Take a fixed-rate mortgage or a floating rate or a mix of the two. Make the mortgage closed or open. The choice is yours.

"It depends on an individual's comfort zone," says Dal Bianco. "Buying a home is an extremely emotional event and, from what our clients have told us, it ranks with marriage and childbirth. The worst thing that can happen is that you find a house that you fall in love with -- and this often happens -- and then discover that you can't afford it because you don't have enough down payment or you haven't made sure in advance that it is something you can comfortably afford.

"So do your homework."

(prepared by Keith Woolhouse/Vancouver Province)