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-] The

Central Mortgage and
Housing Corporation, the
Crown Corporation in which
all citizen tax payers are
shareholders, : introducted a
new Graduated Payment
Mortgage program in June,
1978.

The GPM Program, which
was applied only to moder-
ately-priced homes in the
same range of AHOP price
limits, was designed to
provide purchasers with a
flexible mortgage option that
could -be good for some
people under certain circum-

_ Stances.

Under GPM, taking the
example of a $35,000 mort-
‘gage with a 25-year amorti-
zation period and an interest
rate of 10% per cent, the
borrower’s payments could
be reduced by $2.25 per
$1,000 for a net monthly
payment in the first year of
$240 instead of $319 each
month throughout the life of
the mortgage.

Monthly payments would
rise under the GPM plan to
$373 in the tenth year, and
then remain constant at $382
for the remaining 15 years of

the life of the mortgage.

sunday news

SEW

Major lenders havé so far
been extremely luke-warm to
the concept of Graduated
Payment Mortgages, citing
concern over the build-up of
debt in the early years of the
mortgage. But some spokes-
men for banks and trust
companies have privately
admitted it is just a matter of

time before the option .is-~

offered by most lenders,

While most major sources
have not-yet offered GPM’s,
smaller lending organizations
in some ateas have become
very active in this type of
mortgage loan. CMHC, the
primary instigator, has
become very active in promo-
ting this type of loan to make
it available through major
sources.

The Canadian Real Estate
Association is now preparing
a brochure for distribution to
its member real cstate
boards across Canada so that
licensed _ real estate boards
across Canada so that licen-
sed real estate personnel will
be able to deal properly with
the application of GPM’s and
guide potential purchasers in
the right direction.

There is, however, some

care needed in ap plication of _

s ae!

the Graduated Payment
Mortgage ? the purchase of
your home./

- If present economic trends
continue, the borrower’s
income would rise as monthly
payments rose so that, in
effect, he would be paying no
greater proportion of income
‘on a percentage basis in the
25th year than in the first
year. In fact, it could be less.

However, in the early
years of the mortgage, the
borrower would not be
making high enough pay-
ments to cover the interest.
Therefore, the outstanding
balance would be _ higher
instead of lower up to the
sixth year, reaching a.peak of
$37,434.

Members of the Real
Estate Board of Greater
Vancouver still have some
reservations about wisddm of
the Graduated Payment
Mortgage plan, partly
because it is predicated on
inflationary trends and could,
indeed encourage inflation-
ary trends. And many real
estate professionals are also
aware that the first few years
of home ownership for
first-time buyers are not

TORR Romane pos omit Pen OO IRR nA NO ato:

necessarily _ the hardest

years.

Usually both partners are
working when the first home
is purchased so two incomes
can be appled to mortgage
payments: In a few years,
when children come along, it
may be necessary to one
partner to stop working for a
few years, leaving only one
income to cover costs which
at that time could be higher.

And in the 11th year of the

GPM, payments really jump,
and this sit he time when the
typical family has reached its
peak in number, perhaps
both parents are back work-
ing, but a great part of one
partner’s income goes for
daycare costs to allow the
second income to be earned.
Usually by the 11th year in a
conventional mortgage, the
couple is looking at a smaller
monthly payment than when

the home was first
purchased.
For the typical young

couple who want a home for
future children, a very
careful look at the Graduated
Payment Mortgage program
is advised.

vega:

It depends very much on
the couple’s hopeg and plans
for the future, prospects in
their working life, and the
security of thier professional
or trade training which
should determine whether
they wish to sacrifice more in
the earlier stages of mort-

Page 59, April 22, 1979 - Sunday News

a fa # o>

y

untouched waters of Capilano Lake reflect the beauty of the North Shore mountains. (Ellsworth Dickson photo) _ e

Graduated mortgages-boon or bust?

gaging while working
towards lower payments, or
get the advantages of lower
payments in the original
purchase, while promising to
pay higher payments in the
future, when their careers
have become more estab-
lished.

Newsstand
locations

Every Saturday mo:
Real
newsstands—includin

Vancouver
Richmond,
Burnaby

Surrey

Delta

New Westminster
Langley 7

tate Showcase will be on over 100
all North Shore real estate
offices, major hotels, shopping malls, retail
outlets in the following areas:

North and West Vancouver

2. the Sunday News

be

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