How much is it really worth anyway? 

I am asked often by clients 'How much do you think my home is worth".  The lenders ask the same question as they evaluate the value of the property for the purposes of financing.  There are various benchmarks used to determine the current value of a property but in the end - it is up to the lender to determine if they accept the value/price given.  Those bencharks include the BC Tax Assessed value which are available online at www.bcassessment.ca There is the general valuation system (GVS) provided by Canada Mortgage and Housing that lenders access.  This database is updated on a more regular basis than the tax assessment system.  Then there is the value presented by an appraiser (if required by the lender and typically paid for by the client) The appraisal value is determined by the

replacement cost of the land/building or the most recent comparable properties sold in the area.  If the appraisal is determined for a purchase and there is a bona-fide contract with an agreed upon purchase price the appraiser will typically confirm that purchase price as accurate. If the financing is required to refinance a property the appraiser will determine the value based on the comparable or replacement cost as there is no sale price.  Therefore, if there have been low sales in the area the appraised value could potentially come in below tax assessed value or well below market value if the property were actually sold.  This can be a bit of a surprise for clients.  However, the lender will consider the risk of lending and will not be prone to take a risk of over-valuing a property without something tangible to support the value.  So, it is always prudent to discuss the potential value of your property with your mortgage broker in the event of a refinance and your realtor for the purposes of selling.  

Lower fixed rates helping people shift from variable rate

Courtesy of the Financial Post 

Brokers are finally seeing a change in consumer appetite for risk after the second chop to fixed rates in two weeks.

"Up until a couple of weeks ago, we were still seeing 50 per cent of our clients coming in looking for fixed and the other 50 per cent looking for variable-rate mortgages," Dan Mass, owner of Verico Canada First Mortgage, told MortgageBrokerNews.ca. "But that's now changed, we're seeing 80 per cent now looking for fixed and only 20 per cent looking for variable since the fixed rates started dropping."

RBC set off another chain of falling rates last Friday by shaving 0.1 percentage points off its posted five-year fixed, taking it to 5.49 per cent. Over the weekend, TD Bank, Scotiabank, BMO and Laurentian followed suit, with most broker channel lenders having now effecting the changed. Their collective move follows another 10-basis-point chop last week, although the most recent price cut also applies to the posted and special rates on one-, two-, three- and four-year loans.

Lenders are now pointing to falling yields on government bonds across a range of terms as impetus for the rate decrease. The decline actually runs counter to what most economists had predicted for the remainder of 2011. It also comes as consumers react to media speculation about a possible hike in the Central Bank's key Overnight rate. That move won't come this week, said Central Bank Governor Mark Carney Tuesday. Still, the narrowing gap between fixed and variable rates is expected to send many homeowners to their lenders looking to lock in and join the more-than-60-per cent of Canadian homeowners who have opted for the security of a fixed-rate mortgage.

"I think there's still more room for lenders to drop their fixed rates before hitting the floor," said Corey Romyn, an agent and COO for Taurus Mortgages in the Toronto area. "We've seen that in the last few years, especially when volumes are down for most lenders, as they are this year."  

But there is a limiting factor at play. The buyers may be attracted by the rates, Romyn told MortgageBrokerNews.ca, but may ultimately find themselves frustrated by the dearth of houses for sale