TD Economics brought to you by Dina Ignjatovic, Economist
Data Release: Housing starts kick off the year on strong footing
- Canadian housing starts kicked off the year on a strong note, with homebuilders breaking ground on 207k units (annualized) in January. This extends December's sharp gain, and pushes the 6-month moving average up just shy of the 200k unit mark.
- The strength in January stemmed from the multi-family sector, which was up 4.2% following a 14% gain in December. Meanwhile, single family construction was down 4.6% on the month, reversing some of December's gains.
- Regionally, Ontario remained the key driver of growth, with starts up by a whopping 25% in January. Homebuilding in the Atlantic Provinces was also up during the month while the remaining regions recorded declines. B.C. experienced the largest pullback, as home starts slid 33% from the month prior.
Key Implications
- Overall, housing starts have been hovering around the 200k mark annualized (on a trend basis) for the last six quarters, or just slightly above the current rate of household formation. However, homebuilding construction should begin to slow over the course of the year, consistent with a cooling in overall housing market activity.
- Still, the recent strength in multi-unit projects could have further room to run given the surge in building permit approvals seen over the second half of last year. This could be partly offset by single-family construction, which is already at relatively lofty levels.
- The regional story will continue to reverberate across the housing markets, with central Canada leading the way, while B.C. and the oil-rich provinces lagging behind.
Understanding Collateral versus Standard Charge Mortgages
March 1 2016 Posted by Jennifer Gaudet
Understanding Collateral versus Standard Charge Mortgages
It’s important to understand the differences between a collateral and standard charge mortgage because they are suited to different needs, and if you make the wrong choice it could cost you. Standard charge mortgages are offered by the majority of lenders, although some offer both – standard charge mortgages and HELOCs, which are a collateral charge. You choose the option that best meets your needs. So what’s the difference, and which is better for you?
They both have advantages and disadvantages; the one that is right for you depends on your preferences, future needs, and long-term goals. The primary difference is that a collateral charge mortgage registers the mortgage for up to 125 per cent of the value of the home at closing, instead of the amount you need to close your transaction. The advantage behind this is that it makes it easier to tap into your equity for debt consolidation, renovations or to invest in property or investments easily and cost effectively, since you don’t need to visit a lawyer and pay legal fees. This flexibility is one of the primary advantages of collateral charge mortgages.
The downside comes at renewal. For consumers who want to keep their options open at maturity and have negotiating power with their lender, this isn’t the best product feature because collateral charge mortgages are difficult to transfer to another lender. That means if someone wants to change lenders for a better rate or product feature, they need to start from the beginning and pay new legal fees, which range from $500 to $1,000. Technically they can be assigned but lenders don’t always accept the transfer. With regular standard charge mortgages, you can switch for free, although certain minor charges may apply. In addition, with a collateral charge, it could be difficult to get a second mortgage unless your home significantly appreciates in value.
The ability to take out equity is one of the primary features of Home Equity Lines of Credit, which are collateral charges for this reason. In these cases, clients want the ability to extract equity when they need it or as it becomes available. If you feel that there is a very good chance you will refinance to consolidate debt or to extract equity for a renovation or to invest, then a collateral charge mortgage may be a wise decision.
If you don’t believe that you’ll need to refinance or extract equity, then a regular standard charge mortgage will suit you fine, and it will give you the ability to move to another lender at renewal should you want to without incurring legal fees. In other words, it’s easier for you to keep your options open. If you need to borrow more with a standard charge mortgage, you have the option of a second mortgage or line of credit.
Determining whether to get a standard or collateral charge mortgage adds another layer of complication for many homebuyers and owners. Speak to an experienced mortgage broker who is only focused on mortgages and knows what each of the over 50 lender partners have to offer. Your broker will analyze your situation and help you determine what’s right for you, and what’s not.
Jennifer Gaudet
Associate Mortgage Broker - Military Mortgage Specialist
- 902-824-2906
- jennifer@jennifergaudet.ca
- Licence # 2024-3000814
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