OTTAWA – Bank of Canada governor Mark Carney issued a caution toCanadians and the chartered banks Wednesday: interest rates are goingup and they should take care not to get caught out.
Expanding onprevious warnings, the bank governor told a business audience inToronto that the current low interest rate environment may be luringCanadians to borrow too much, and banks to extend loans they will laterregret.
Canadians have taken on more debt even during the recession, which is unusual, Carney said.
But while Canadians may be able to afford the added debt burden nowwhen interest rates are at historic lows, they may get caught shortwhen rates return to more normal levels.
"The combination ofsustained growth of household debt relative to income and a risinginterest rate environment could increase the vulnerability ofhouseholds to an adverse shock," he said in notes on the speechreleased by the central bank in Ottawa.
The bank governor didnot say when he expects interest rates to start rising, althougheconomists believe Carney will make his first move on his lower-bound0.25 per cent policy rate in mid-2010. That would be after the bank'sconditional commitment to stand still on the rate until the end of June.
It is not the first time Carney and the central bank have voiced suchconcerns, most recently last Thursday in the central bank's semi-annualFinancial Systems Review, which cited household debt as the number onerisk factor to Canada's economic well-being.
Since, there hasbeen more evidence that Canadians have not paid heed. The Canadian RealEstate Association reported Tuesday that Canadians continued to snap uphouses at near-record levels, increasing their purchases of resalehomes by 73 per cent in November.
Carney said there are already signs that Canadians are getting in over their heads.
He notes that personal bankruptcies jumped by 41 per cent in theJuly-to-September period from a year ago and are now at the highestlevel as a proportion of the population since 1991.
As well,delinquency rates are rising and the proportion of mortgage payments inarrears by three months or more have increased by 50 per cent in thepast year.
The Canadian economy is particularly vulnerable tohousehold defaults since consumers are expected to be the key driver ofeconomic recovery, the governor said.
But Carney added that while Canadian consumers have a responsibility to avoid credit risks, so do financial institutions.
"Financial institutions should actively monitor risk stemming fromhouseholds and not take comfort from mortgage insurance and pastperformance of household credit," he said.
"As our simulationssuggest, the overall credit profile of Canadian households could wellshift if debt continues to grow at current rates."
Carney noted that he still believes the Canadian economy is coming out of the recession and will grow in the next few years.
He said he expects Canada to outperform the other G7 countries with athree per cent advance in 2010, but said growth going forward will bemore modest than previous post-recession bounce-backs.
Thursday, December 17, 2009
Monday, December 7, 2009
Housing affordability breaks improving trend
In a report published November 25, 2009 RBC Economics Research revealed that the 18 month long improvement in Canadian housing affordability came to an end in the third quarter of 2009. Despite this reversal, homes are still much more affordable than they were a year ago and, nationally, affordability is in line with levels seen in 2006 when the housing market was shifting into high gear.
The deterioration in housing affordability was largely due to slight increases in key mortgage rates as well as gains in property values.
Sales reach historic high
By October 2009, the number of homes sold through the Multiple Listing Service in Canada had not only recovered the ground lost during the downturn, but had climbed an astonishing 74% since January to reach a historic high. As strong demand has outpaced the supply of homes for sale, market conditions have tightened.
In some metropolitan markets we are seeing evidence of bidding wars reappearing, however the rise in the cost of homeownership overall in Canada has been modest in the third quarter.
A sign to act?
What should this mean to Canadians? For people who have been timing their entry into the housing market, or for those looking to upgrade their homes, this reversal of trend may be a sign to act. With interest rates at near record lows, now more than ever, prospective homebuyers should speak to a Mortgage Specialist so they can feel confident about buying a home that they not only love, but one they can afford. In addition, by getting pre-approved, prospective homebuyers can shop with confidence when looking at homes that are within their budget.
RBC publishes free research information about housing, including pricing trends by province and city, in the RBC Economics Housing Trends and Affordability Report. It’s easy to stay informed. Register at www.rbc.com/economics for automatic email delivery of new reports.
Your new home doesn't come with mortgage advice. I do.
Contact me today:
Matthew Le Roy
Mobile Mortgage Specialist
RBC Royal Bank
(604) 612-9515
matthew.leroy@rbc.com
www.vancouvermortgagefinder.ca
The deterioration in housing affordability was largely due to slight increases in key mortgage rates as well as gains in property values.
Sales reach historic high
By October 2009, the number of homes sold through the Multiple Listing Service in Canada had not only recovered the ground lost during the downturn, but had climbed an astonishing 74% since January to reach a historic high. As strong demand has outpaced the supply of homes for sale, market conditions have tightened.
In some metropolitan markets we are seeing evidence of bidding wars reappearing, however the rise in the cost of homeownership overall in Canada has been modest in the third quarter.
A sign to act?
What should this mean to Canadians? For people who have been timing their entry into the housing market, or for those looking to upgrade their homes, this reversal of trend may be a sign to act. With interest rates at near record lows, now more than ever, prospective homebuyers should speak to a Mortgage Specialist so they can feel confident about buying a home that they not only love, but one they can afford. In addition, by getting pre-approved, prospective homebuyers can shop with confidence when looking at homes that are within their budget.
RBC publishes free research information about housing, including pricing trends by province and city, in the RBC Economics Housing Trends and Affordability Report. It’s easy to stay informed. Register at www.rbc.com/economics for automatic email delivery of new reports.
Your new home doesn't come with mortgage advice. I do.
Contact me today:
Matthew Le Roy
Mobile Mortgage Specialist
RBC Royal Bank
(604) 612-9515
matthew.leroy@rbc.com
www.vancouvermortgagefinder.ca
Thursday, December 3, 2009
Strong demand carries into late fall
Wednesday, December 2, 2009
VANCOUVER - Home values continued to edge upward in November as demand in the Greater Vancouver housing market remains well above seasonal norms.
Over the last 12 months, the MLSLink® Housing Price Index (HPI) benchmark price for all residential properties in Greater Vancouver increased 12.4 per cent to $557,384 from $495,704 in November 2008. This price, however, remains down 1.9 per cent from the most recent high point in the market in May 2008 when the residential benchmark price sat at $568,411.
“This unseasonably high level of demand can be attributed in large part to low interest rates, but it also speaks to the diverse range of housing options available in Greater Vancouver,” Scott Russell, Real Estate Board of Greater Vancouver (REBGV) president said. “Prospective homebuyers today have more options at different price levels than ever before."
The REBGV reports that residential property sales in November were the third highest volume ever recorded in Greater Vancouver for that month. Sales in the region totalled 3,083 in November 2009, an increase of 252.7 per cent compared to November 2008 when 874 sales were recorded and a 16.8 per cent decrease compared to the 3,704 sales recorded in October 2009.
“We are experiencing a brisker than normal market for this time of year, although we have begun to see a reduction in the number of homes listed for sale, which is normal as we head into the holiday season,” Russell said.
New listings for detached, attached and apartment properties in Greater Vancouver totalled 3,653 in November 2009. This represents a 21.3 per cent increase compared to November 2008 when 3,012 new units were listed, and a 26.6 per cent decline compared to October 2009 when 4,977 properties were listed on the Multiple Listing Service® (MLS®) in Greater Vancouver.
At 11,039, the total number of property listings on the MLS® decreased 8.6 per cent in November compared to last month and declined 39 per cent from this time last year.
In contrast to this year, note that November 2008 was the lowest selling November in Greater Vancouver in 27 years.
Sales of detached properties increased 261.5 per cent to 1,164 from the 322 detached sales recorded during the same period in 2008. The benchmark price, as calculated by the MLSLink Housing Price Index®, for detached properties increased 13.6 per cent from November 2008 to $757,209.
Sales of apartment properties in November 2009 increased 240.5 per cent to 1,396 compared to 410 sales in November 2008. The benchmark price of an apartment property increased 11.6 per cent from November 2008 to $381,945.
Attached property sales in November 2009 are up 268.3 per cent to 523, compared with the 142 sales in November 2008. The benchmark price of an attached unit increased 10.2 per cent between Novembers 2008 and 2009 to $469,686.
The Real Estate industry is a key economic driver in British Columbia. In 2008, 24,626 homes changed hands in the Board's area generating $1.03 billion in spin-offs. The Real Estate Board of Greater Vancouver is an association representing more than 9,400 REALTORS®. The Real Estate Board provides a variety of membership services, including the Multiple Listing Service®.
VANCOUVER - Home values continued to edge upward in November as demand in the Greater Vancouver housing market remains well above seasonal norms.
Over the last 12 months, the MLSLink® Housing Price Index (HPI) benchmark price for all residential properties in Greater Vancouver increased 12.4 per cent to $557,384 from $495,704 in November 2008. This price, however, remains down 1.9 per cent from the most recent high point in the market in May 2008 when the residential benchmark price sat at $568,411.
“This unseasonably high level of demand can be attributed in large part to low interest rates, but it also speaks to the diverse range of housing options available in Greater Vancouver,” Scott Russell, Real Estate Board of Greater Vancouver (REBGV) president said. “Prospective homebuyers today have more options at different price levels than ever before."
The REBGV reports that residential property sales in November were the third highest volume ever recorded in Greater Vancouver for that month. Sales in the region totalled 3,083 in November 2009, an increase of 252.7 per cent compared to November 2008 when 874 sales were recorded and a 16.8 per cent decrease compared to the 3,704 sales recorded in October 2009.
“We are experiencing a brisker than normal market for this time of year, although we have begun to see a reduction in the number of homes listed for sale, which is normal as we head into the holiday season,” Russell said.
New listings for detached, attached and apartment properties in Greater Vancouver totalled 3,653 in November 2009. This represents a 21.3 per cent increase compared to November 2008 when 3,012 new units were listed, and a 26.6 per cent decline compared to October 2009 when 4,977 properties were listed on the Multiple Listing Service® (MLS®) in Greater Vancouver.
At 11,039, the total number of property listings on the MLS® decreased 8.6 per cent in November compared to last month and declined 39 per cent from this time last year.
In contrast to this year, note that November 2008 was the lowest selling November in Greater Vancouver in 27 years.
Sales of detached properties increased 261.5 per cent to 1,164 from the 322 detached sales recorded during the same period in 2008. The benchmark price, as calculated by the MLSLink Housing Price Index®, for detached properties increased 13.6 per cent from November 2008 to $757,209.
Sales of apartment properties in November 2009 increased 240.5 per cent to 1,396 compared to 410 sales in November 2008. The benchmark price of an apartment property increased 11.6 per cent from November 2008 to $381,945.
Attached property sales in November 2009 are up 268.3 per cent to 523, compared with the 142 sales in November 2008. The benchmark price of an attached unit increased 10.2 per cent between Novembers 2008 and 2009 to $469,686.
The Real Estate industry is a key economic driver in British Columbia. In 2008, 24,626 homes changed hands in the Board's area generating $1.03 billion in spin-offs. The Real Estate Board of Greater Vancouver is an association representing more than 9,400 REALTORS®. The Real Estate Board provides a variety of membership services, including the Multiple Listing Service®.
Monday, November 30, 2009
Making sense of mortgage rates in today’s economy
Many prospective homebuyers are wondering what has happened to mortgage rates in 2009, and where they may go from here. RBC Economics Research recently updated its’ outlook, and here is what the group has to report.
Since hitting a low in January of 2009, longer-term interest rates have trended higher with the move accelerating in July. The prospect that the worst is over for the global economy is giving investors the confidence to venture out of low-return fixed income securities and seek higher risk investments. While we expect many bumps on the road to recovery we still see potential for a very modest decrease in long-term rates in the final quarter of this year.
Outlook for the future
Momentum in the global economy appears to be changing. Leading indicators currently point to the end of economic contraction for the industrialized world in the third quarter of 2009. Stimulus from central banks, combined with government fiscal stimulus packages, is expected to support a fledgling recovery that is forecast to build momentum in 2010.
Until this recovery is well underway, no changes to policy rates are likely. The Bank of Canada is expected to maintain the status quo until mid-2010. Once the recovery is well established, central banks will normalize their policy rates, and interest rates are likely to increase.
Fixed vs. variable rate mortgages
One of the biggest decisions homebuyers face is choosing between a fixed or variable rate mortgage. This is not a simple decision, which is why many people are looking for advice to help them decide which mortgage interest type is best for them, based on their personal circumstances. I can help homebuyers and homeowners decide which option best fits their situation and risk tolerance.
Mortgage rates continue to trend at historic lows, despite the fact that fixed rates have edged up recently. In this environment, people who are comfortable without a guaranteed rate are opting for a variable rate mortgage. Such a strategy could result in considerable interest savings.
What homebuyers choose should depend on how they feel about rate fluctuations and their cash flow. For example, a first time homebuyer may want assurance that the rate, payment and repayment schedule will not change, and may be wise to opt for a fixed term. A homebuyer who is not concerned about rate fluctuations may want to take advantage of today’s low variable rates in a bid to save more on mortgage interest over the long term.
Today’s flexible mortgage products let you bridge the gap between these strategies. For example, the RBC Homeline Plan lets homebuyers split their mortgages and enjoy the advantages of both variable and fixed rates within a credit limit of up to 80% of the value of the home. The variable portion offers potential long-term savings, while the fixed rate portion offers rate protection. The dividing line is entirely up to the homeowner.
RBC has many resources available:
· Fixed or variable rate – know your options
· Consider the security of a fixed rate mortgage
· The advantages of a variable rate mortgage
Get more information
RBC publishes free research information. It’s easy to stay informed. Register at www.rbc.com/economics for automatic email delivery of new reports.
Your new home doesn't come with mortgage advice. I do.
Contact me today:
Matthew Le Roy
Mobile Mortgage Specialist
RBC Royal Bank
(604) 612-9515
matthew.leroy@rbc.com
www.vancouvermortgagefinder.com
Since hitting a low in January of 2009, longer-term interest rates have trended higher with the move accelerating in July. The prospect that the worst is over for the global economy is giving investors the confidence to venture out of low-return fixed income securities and seek higher risk investments. While we expect many bumps on the road to recovery we still see potential for a very modest decrease in long-term rates in the final quarter of this year.
Outlook for the future
Momentum in the global economy appears to be changing. Leading indicators currently point to the end of economic contraction for the industrialized world in the third quarter of 2009. Stimulus from central banks, combined with government fiscal stimulus packages, is expected to support a fledgling recovery that is forecast to build momentum in 2010.
Until this recovery is well underway, no changes to policy rates are likely. The Bank of Canada is expected to maintain the status quo until mid-2010. Once the recovery is well established, central banks will normalize their policy rates, and interest rates are likely to increase.
Fixed vs. variable rate mortgages
One of the biggest decisions homebuyers face is choosing between a fixed or variable rate mortgage. This is not a simple decision, which is why many people are looking for advice to help them decide which mortgage interest type is best for them, based on their personal circumstances. I can help homebuyers and homeowners decide which option best fits their situation and risk tolerance.
Mortgage rates continue to trend at historic lows, despite the fact that fixed rates have edged up recently. In this environment, people who are comfortable without a guaranteed rate are opting for a variable rate mortgage. Such a strategy could result in considerable interest savings.
What homebuyers choose should depend on how they feel about rate fluctuations and their cash flow. For example, a first time homebuyer may want assurance that the rate, payment and repayment schedule will not change, and may be wise to opt for a fixed term. A homebuyer who is not concerned about rate fluctuations may want to take advantage of today’s low variable rates in a bid to save more on mortgage interest over the long term.
Today’s flexible mortgage products let you bridge the gap between these strategies. For example, the RBC Homeline Plan lets homebuyers split their mortgages and enjoy the advantages of both variable and fixed rates within a credit limit of up to 80% of the value of the home. The variable portion offers potential long-term savings, while the fixed rate portion offers rate protection. The dividing line is entirely up to the homeowner.
RBC has many resources available:
· Fixed or variable rate – know your options
· Consider the security of a fixed rate mortgage
· The advantages of a variable rate mortgage
Get more information
RBC publishes free research information. It’s easy to stay informed. Register at www.rbc.com/economics for automatic email delivery of new reports.
Your new home doesn't come with mortgage advice. I do.
Contact me today:
Matthew Le Roy
Mobile Mortgage Specialist
RBC Royal Bank
(604) 612-9515
matthew.leroy@rbc.com
www.vancouvermortgagefinder.com
Special rate on RBC Homeline Plan® lines of credit
On October 21st, 2009, RBC Royal Bank® announced a special rate on new RBC Homeline Plan lines of credit.
2.75 per cent RBC Prime + .50% (decrease of 0.40 per cent)
With the economic changes over the past year, this is a perfect time for Canadians to reassess their home financing arrangements and get advice that can help save them money.
Now more than ever, Canadians can use a break when it comes to financing what is often their largest purchase – their home. That’s why we are happy to be able to offer a reduced rate on the RBC Homeline Plan line of credit, giving Canadians access to the best priced credit line in the market today.
The RBC Homeline Plan lending product provides homeowners the flexibility to split their home financing into various mortgage segments to include both fixed and variable rate mortgages, coupled with one or more lines of credit. Homeowners can use the plan to help diversify their interest rates and lower their overall borrowing costs.
http://services.rbc.com/advice/video.html
Special Offer http://www.rbcroyalbank.com/products/mortgages/newsletter/RBC_MOR_9636C.pdf
Your new home doesn't come with mortgage advice. I do.
Contact me today:
Matthew Le Roy
Mobile Mortgage Specialist
RBC Royal Bank
(604) 612-9515
matthew.leroy@rbc.com
www.vancouvermortgagefinder.com
2.75 per cent RBC Prime + .50% (decrease of 0.40 per cent)
With the economic changes over the past year, this is a perfect time for Canadians to reassess their home financing arrangements and get advice that can help save them money.
Now more than ever, Canadians can use a break when it comes to financing what is often their largest purchase – their home. That’s why we are happy to be able to offer a reduced rate on the RBC Homeline Plan line of credit, giving Canadians access to the best priced credit line in the market today.
The RBC Homeline Plan lending product provides homeowners the flexibility to split their home financing into various mortgage segments to include both fixed and variable rate mortgages, coupled with one or more lines of credit. Homeowners can use the plan to help diversify their interest rates and lower their overall borrowing costs.
http://services.rbc.com/advice/video.html
Special Offer http://www.rbcroyalbank.com/products/mortgages/newsletter/RBC_MOR_9636C.pdf
Your new home doesn't come with mortgage advice. I do.
Contact me today:
Matthew Le Roy
Mobile Mortgage Specialist
RBC Royal Bank
(604) 612-9515
matthew.leroy@rbc.com
www.vancouvermortgagefinder.com
Thursday, August 20, 2009
Housing Sales Rocket In July
Canada’s housing market boomed in July as low interest rates and improving economic confidence sent sales of existing homes to a record for the month, despite generally weak economic conditions.
The remarkable turnaround from an almost frozen market at the start of the year has economists stunned, and while they predict activity will level out soon, the risk is continued low interest rates will begin to stoke a house price bubble.
“We can’t rule it out,” Douglas Porter, the deputy chief economist at BMO Capital Markets, said of the possibility of a bubble. However, he said the scenario was hard to fathom given the underlying weakness in the economy. Even so, that weakness to date has not prevented a strong rebound in the existing housing market, which declined steadily throughout 2008 and hit a decade low in January.
Home resales increased by 18.2% in July compared with a year earlier, to reach 50,270 units -- the highest July sales result on record, Canadian Real Estate Association figures showed yesterday. At this pace, the housing market is on track to be even hotter than it was in 2007, which was a record year. Seasonally adjusted sales have risen for six straight months to be up 61.2% since January and are now just 1.4% below the peak in May 2007.
But despite the spectacular gain, the level of activity in the first seven months of this year remains 6% lower than in 2008 when activity had already begun to decline. Mr. Porter said some of the rise in the month was a result of sales that had been held back from the start of the year because of the weak market conditions.
However, homebuyers have swarmed back into the market because of low interest rates and more affordable house prices.
“Homebuyers recognize that interest rates and prices have bottomed out, and are taking advantage of excellent affordability before prices and interest rates move higher,” said Dale Ripplinger, the president of CREA.
A five-year fixed rate mortgage, the most popular product among consumers, is still available for under 4% at some financial institutions. Variable rate mortgages, tied to prime, remain in the 3% range and are not expected to rise until June. The Bank of Canada has promised to keep the benchmark interest rate at a record low 0.25% until mid-2010, provided inflation does not begin to rise.
The strength in the market has been felt right across the country. Vancouver sales last were up 90% from a year ago, while sales climbed 28% in Toronto and 28% in Edmonton. The strong demand in the country’s highest-priced markets has to some degree skewed the average price higher. The average price of a home sold on the Multiple Listing Service last month rose 7.6% from a year earlier to $326,832.
The strength in the resales market has not been echoed in the price of new homes, which fell 3.3% in June compared to a year earlier, Statistics Canada figures showed Wednesday.
Part of the pressure on prices has come from a decline in supply, which has fallen for seven straight months. New listings in July were down 13% from a year earlier to 73,444.
Economists are skeptical the housing market will be able to continue to post such strong growth.
“After improving markedly, affordability will deteriorate in coming quarters, and unemployment will continue to rise,” said Pascal Gauthier, an economist at TD Bank Financial Group. “New listings might well start rising again too. Combined, a larger supply and a softening in demand should cool prices in a delayed fashion.”
The remarkable turnaround from an almost frozen market at the start of the year has economists stunned, and while they predict activity will level out soon, the risk is continued low interest rates will begin to stoke a house price bubble.
“We can’t rule it out,” Douglas Porter, the deputy chief economist at BMO Capital Markets, said of the possibility of a bubble. However, he said the scenario was hard to fathom given the underlying weakness in the economy. Even so, that weakness to date has not prevented a strong rebound in the existing housing market, which declined steadily throughout 2008 and hit a decade low in January.
Home resales increased by 18.2% in July compared with a year earlier, to reach 50,270 units -- the highest July sales result on record, Canadian Real Estate Association figures showed yesterday. At this pace, the housing market is on track to be even hotter than it was in 2007, which was a record year. Seasonally adjusted sales have risen for six straight months to be up 61.2% since January and are now just 1.4% below the peak in May 2007.
But despite the spectacular gain, the level of activity in the first seven months of this year remains 6% lower than in 2008 when activity had already begun to decline. Mr. Porter said some of the rise in the month was a result of sales that had been held back from the start of the year because of the weak market conditions.
However, homebuyers have swarmed back into the market because of low interest rates and more affordable house prices.
“Homebuyers recognize that interest rates and prices have bottomed out, and are taking advantage of excellent affordability before prices and interest rates move higher,” said Dale Ripplinger, the president of CREA.
A five-year fixed rate mortgage, the most popular product among consumers, is still available for under 4% at some financial institutions. Variable rate mortgages, tied to prime, remain in the 3% range and are not expected to rise until June. The Bank of Canada has promised to keep the benchmark interest rate at a record low 0.25% until mid-2010, provided inflation does not begin to rise.
The strength in the market has been felt right across the country. Vancouver sales last were up 90% from a year ago, while sales climbed 28% in Toronto and 28% in Edmonton. The strong demand in the country’s highest-priced markets has to some degree skewed the average price higher. The average price of a home sold on the Multiple Listing Service last month rose 7.6% from a year earlier to $326,832.
The strength in the resales market has not been echoed in the price of new homes, which fell 3.3% in June compared to a year earlier, Statistics Canada figures showed Wednesday.
Part of the pressure on prices has come from a decline in supply, which has fallen for seven straight months. New listings in July were down 13% from a year earlier to 73,444.
Economists are skeptical the housing market will be able to continue to post such strong growth.
“After improving markedly, affordability will deteriorate in coming quarters, and unemployment will continue to rise,” said Pascal Gauthier, an economist at TD Bank Financial Group. “New listings might well start rising again too. Combined, a larger supply and a softening in demand should cool prices in a delayed fashion.”
Tuesday, June 16, 2009
Get off the home owning fence
I’ve had the same rent-versus-own discussion with a close friend of mine for years. Every now and then she’ll see a new statistic from the Canadian Real Estate Association about where prices are headed and rethink the decision she made just months before.
My advice to her today is: it’s time to get off the fence. Although mortgage rates rose last week, money is still cheap right now. Given the slowdown in the housing market, which is also showing signs of picking up, there is a greater selection in housing stock and more time to make a decision and put an offer on a home, without the intense competition.
A combination of other factors means it is the perfect time for property virgins to make their move. The federal government’s 2009 operating budget has contributed two important ingredients to the mix: the option to withdraw as much as $25,000 from your RRSP (compared to $20,000 in 2008) and a First-Time Home Buyers’ Tax Credit that provides up to $750 in tax relief when buying a starter home.
If thinking about becoming a home owner for the first time makes you nauseous, don’t worry - that's natural. Getting into the market is a good idea, as long as you do your research, view it at a long-term investment and have the money to do so.
Let’s start with the most important element – getting the green stuff. The first step in the home-buying process is getting pre-approved by a mortgage broker.
Once you get the green light you may be compelled to open-house hop down the ritziest street in your hood. While test-driving your dreams is OK, touring too many homes beyond your budget is a waste of time. If you’re serious, search only in your approved price range and know that starting small and building equity will give you a chance to upgrade in the future.
If you’re trying to estimate how much you can reasonably afford, take this as a general rule: according to the Canada Mortgage and Housing Corporation your monthly housing costs – including mortgage principal and interest, taxes and heating expenses – shouldn't be more than 32 per cent of your gross household monthly income (for the math-weary: that’s your annual gross salary multiplied by 0.32 and divided by 12).
Equally – if not more – important is your credit score. Ranging from 300 to 900, it determines how much interest you’ll likely pay when you apply for a loan. The higher your score, the lower the risk creditors will consider you – and the less interest you'll pay. A low interest rate could translate into thousands in savings over the life of a loan.
According to myfico.com, a score of 720 or higher is ideal. You can review your score – which is calculated by a credit bureau based on personal financial information – at www.transunion.ca or www.equifax.ca for about $20.
It’s possible to buy a home for as little as 5 per cent down, but anything less than 20 per cent means you’ll need to have your mortgage insured by a third party. Insurance costs can be paid in a lump sum at the time of purchase or worked into the principal balance.
When you broach the subject of buying property with your broker or banker he or she will tell you what you can afford. Immediately aim to spend less. The last thing you need as a first-time buyer is to be house-poor. Remember, you’ll need money to pay closing fees (which can be 1.5 per cent to 4 per cent of a home’s value), as well as any unexpected costs that crop up (one leak in the roof could mean a flood of new expenses).
In terms of doing your research, don’t get wrapped up watching national housing averages or analyzing what the six o’clock news has to say about the market. The only market you should pick apart is the neighbourhood you want to move to. Using national stats to determine trends in your area is like comparing condos to townhouses. Real estate changes from district to district, sometimes from street to street.
A qualified realtor will help you with research and connect you to the right team (lawyer, inspector, mortgage broker). Always work with a realtor as a first-time buyer. There’s too much you don’t know to go it alone, plus you don’t pay commissions – the seller does. This doesn’t mean you should work with the first guy to flash his pearly whites and hand you a business card at an open house – the best place to start is with a referral. Check out www.howrealtorshelp.ca for more realtor realities.
Still hanging out on that fence? Click over to www.myhomeplanner.ca for a rent-versus-own calculator.
Emotion has no place in purchasing property, especially as a novice buyer. You’ll feel more confident in your decision if you simply stick to working the numbers, doing your research, gathering a good team.
Then you can do all the sitting around you want – as a home owner on your very own fence.
Angela Self will be writing for Globeinvestor.com weekly. She is one of the founders of the Smart Cookies, a group of five women who specialize in personal finance. They are hosts of a self-titled show on the W Network and the authors of The Smart Cookies' Guide to Making More Dough. Find out more about them at Smartcookies.com
My advice to her today is: it’s time to get off the fence. Although mortgage rates rose last week, money is still cheap right now. Given the slowdown in the housing market, which is also showing signs of picking up, there is a greater selection in housing stock and more time to make a decision and put an offer on a home, without the intense competition.
A combination of other factors means it is the perfect time for property virgins to make their move. The federal government’s 2009 operating budget has contributed two important ingredients to the mix: the option to withdraw as much as $25,000 from your RRSP (compared to $20,000 in 2008) and a First-Time Home Buyers’ Tax Credit that provides up to $750 in tax relief when buying a starter home.
If thinking about becoming a home owner for the first time makes you nauseous, don’t worry - that's natural. Getting into the market is a good idea, as long as you do your research, view it at a long-term investment and have the money to do so.
Let’s start with the most important element – getting the green stuff. The first step in the home-buying process is getting pre-approved by a mortgage broker.
Once you get the green light you may be compelled to open-house hop down the ritziest street in your hood. While test-driving your dreams is OK, touring too many homes beyond your budget is a waste of time. If you’re serious, search only in your approved price range and know that starting small and building equity will give you a chance to upgrade in the future.
If you’re trying to estimate how much you can reasonably afford, take this as a general rule: according to the Canada Mortgage and Housing Corporation your monthly housing costs – including mortgage principal and interest, taxes and heating expenses – shouldn't be more than 32 per cent of your gross household monthly income (for the math-weary: that’s your annual gross salary multiplied by 0.32 and divided by 12).
Equally – if not more – important is your credit score. Ranging from 300 to 900, it determines how much interest you’ll likely pay when you apply for a loan. The higher your score, the lower the risk creditors will consider you – and the less interest you'll pay. A low interest rate could translate into thousands in savings over the life of a loan.
According to myfico.com, a score of 720 or higher is ideal. You can review your score – which is calculated by a credit bureau based on personal financial information – at www.transunion.ca or www.equifax.ca for about $20.
It’s possible to buy a home for as little as 5 per cent down, but anything less than 20 per cent means you’ll need to have your mortgage insured by a third party. Insurance costs can be paid in a lump sum at the time of purchase or worked into the principal balance.
When you broach the subject of buying property with your broker or banker he or she will tell you what you can afford. Immediately aim to spend less. The last thing you need as a first-time buyer is to be house-poor. Remember, you’ll need money to pay closing fees (which can be 1.5 per cent to 4 per cent of a home’s value), as well as any unexpected costs that crop up (one leak in the roof could mean a flood of new expenses).
In terms of doing your research, don’t get wrapped up watching national housing averages or analyzing what the six o’clock news has to say about the market. The only market you should pick apart is the neighbourhood you want to move to. Using national stats to determine trends in your area is like comparing condos to townhouses. Real estate changes from district to district, sometimes from street to street.
A qualified realtor will help you with research and connect you to the right team (lawyer, inspector, mortgage broker). Always work with a realtor as a first-time buyer. There’s too much you don’t know to go it alone, plus you don’t pay commissions – the seller does. This doesn’t mean you should work with the first guy to flash his pearly whites and hand you a business card at an open house – the best place to start is with a referral. Check out www.howrealtorshelp.ca for more realtor realities.
Still hanging out on that fence? Click over to www.myhomeplanner.ca for a rent-versus-own calculator.
Emotion has no place in purchasing property, especially as a novice buyer. You’ll feel more confident in your decision if you simply stick to working the numbers, doing your research, gathering a good team.
Then you can do all the sitting around you want – as a home owner on your very own fence.
Angela Self will be writing for Globeinvestor.com weekly. She is one of the founders of the Smart Cookies, a group of five women who specialize in personal finance. They are hosts of a self-titled show on the W Network and the authors of The Smart Cookies' Guide to Making More Dough. Find out more about them at Smartcookies.com
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