Thursday, August 23, 2012

60% of 1st time home buyers surprised by costs - Survey

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Today , TD Canada Trust issued a customer survey. The item that caught my eye was that 60% of home buyers did not know all the costs associated with the purchase of their home.

“From being more thorough in their budget to exploring their mortgage options carefully, many first time buyers think they could have prepared better for their house-hunt,” says Farhaneh Haque, Director of Mortgage Advice, TD Canada Trust. “Prospective buyers can learn from other buyers’ mistakes. If you think you’re ready for home ownership, do your research and make sure you know as much as you can about the process and on-going commitment.”
    I was shocked by this figure. I know that when I have a first time buyer, I always go over the costs with them. I've put together a info letter on all the steps from pre-approval up to possession. Some people have rented their whole lives and don't know anything about buying a home and the costs involved. In addition, Canada and the United States are countries that attract large numbers of immigrants. The home buying process is very different in other countries and these people need to be educated in order to make proper decisions.
   You may think of legal costs, appraisals and surveys as being common knowledge but it really isn't. Many people are in the dark about the whole home buying process. I find the hardest thing for first time homebuyers to get their heads around is reconciliation of the property taxes. They don't quite get the part about the sellers having paid next years' taxes and that they have to re-pay the seller for this.
  How niave are people? I had a lady contact me 4 years ago. She said she wanted to buy a home and she had 3 children and a well behaved dog. I wondered why she would include this information in her email to me. Then the penny dropped, this woman has always rented and having a well behaved dog is important to landlords.
   I responded to her and asked her where she was going to live and what sort of a budget did she have. She asked me what houses I had available. I then realized that this lady thought that a mortgage broker and a realtor were the same thing. I wrote her back and suggested she contact a realtor and that I would only be able to help her with the financial side of the home buying process.
    If 60% of first time homebuyers in Canada feel that there were hidden costs that they had not budgeted for then banks and mortgage brokers are not doing their jobs properly. By asking just one more question;-Do you know all the costs involved in buying a home? - 60% of home buyers would be feeling satisfied now.
  If you have any questions about the TD Survey
contact me via my website

My question for you, my readers , is - What did a first time home buyers say or do that surprised you, even though you are a real estate professional?

Tuesday, August 14, 2012

Don’t put off getting your line of credit set up

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In June 2012, the Minister of Finance announced that mortgage amortizations would be shortened once again. This time the maximum amortization would be down to 25 years from 30 years.  This would not affect existing mortgage but only affect those making new purchases. However, in the same week the OSFI , the Office of the Superintendent of Financial Institutions Canada, a division of the government of Canada also announced changes that could affect Canadians even more.

    The OSFI announced that effective October 31st , the maximum amount that you could finance your home using a Home Equity Line of Credit (HELOC) would drop from 80% of the house value to 65%.
 How will this affect your average Canadian? If you were thinking about opening a line of credit to give you funds for finishing the basement, re-doing the roof , paying for a wedding or even buying a car, you will be limited in how much cash you can pull out of your home’s equity as of October 31st.  If you have ever made a large purchase you know that paying cash gets you a better price. HELOC’s give you the option to pay cash and then pay the amount down over time when you have extra cash, while having an interest rate at or near bank prime rate. This is one of the cheapest forms of credit and it will be limited  soon.
   My advice is to establish a line of credit now even if you are not planning on using it right away. The reason being, that all lines of credit up to 80% will be grandfathered and you will have the freedom down the road of having re-advance able credit using 15% more of your house equity.
    Here’s another fact you should be aware of, Eco-rebates from CMHC and Genworth. When you purchased your home you paid a premium to CMHC or Genworth to insure your home. This may have been over $10,000 . Did you know that if you make your home more energy efficient you can get 10% of your premiums returned to you?  Did you know that there’s no DEADLINE on how long after your home purchase you can claim this rebate? $1000 could pay almost half of the cost of new furnace, or for a new window. You can find out more about this program by visiting CMHC’s website here If your home was insured with Genworth, they have a similar program
    Why do you have to act now if there’s an October 31st deadline? Experience has taught me that when these restrictions are announced the banks tend to react quickly and they won’t wait until October to implement the changes. I would think that by Labour Day we will see all the banks using the new guidelines. Now is the time to act. Call or email me at and we can discuss whether this is a good option for you.

Thursday, August 2, 2012

Mortgage Wars 2012

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July 9th , Canada's finance minister changed the rules for getting and renewing mortgages for the 4th time in 4 years. We are now back to where we were before he changed the rules in 2006. What has happened each time he changed the rules was he cut out more potential home buyers and this resulted in a dip in mortgage applications. Moving from a 30 year amortization to a 25 year amortization made the monthly payments for a $300,000 home go up by $157. per month. It's not a huge amount but it took some buyers out of the market and meant that other buyers could not afford as much house as they could have bought in June.

   As Europe looks like its going to be suffering for some time to come, and China's economy is slowing down as well, the world economy looks like it will take some time to recover. Canada's mortgage lenders are responding to the economic slowdown and the mortgage rule changes by lowering mortgage rates again.. Will this mean another mortgage rate war?

 As of this week, the 5 year fixed rate mortgage has dropped with some lenders from 3.09% to 2.99%. This means that a mortgage for $300,000 with a 25 year amortization would have monthly payments of $1418. instead of $1433. What is even more interesting is the variable rate mortgage.
For the past year, rates have been at prime or slightly above it. Many lenders are at Prime + .20% or 3.20% . As of yesterday one lender has dropped their 5 year variable rate mortgage to Prime - .35% !
 This translates into a 2.65% rate which is amazing.
These are not big changes but they may result in lenders competing for market share . The one to benefit from mortgage wars will be you, the borrower. If you want to discuss how these  changes affect you, contact me through my website or call me at 403-836-1201.