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Archive for the ‘Buying a Home’ Category

Know Thy HELOC

Tuesday, March 28th, 2017

Know Thy HELOC

What makes Home Equity Lines of Credit (HELOC) so attractive for so many is that these credit lines are so abundant, so cheap and so easy to get.

As house prices continue to rise, a HELOC can be a great option for cheap and easy money to fund home renovations, consolidate debt or pay for pricey post-secondary educations. But don’t approach these loans carelessly. There are still things to consider when borrowing against the equity in your home.

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According to the Globe and Mail, for many Canadians, HELOCs have replaced credit cards as their number one source for borrowing. Outstanding balances on lines of credit hit $266-billion in March of 2015. According to Statistics Canada, they were just $35-billion in 2000 and $100-billion in 2005. Today, HELOCs comprise 59 per cent of Canadians’ non-mortgage personal debt.

Major banks generally offer home equity lines of up to 80 per cent of the equity in a home. And some lending thresholds automatically increase with each mortgage payment creating a growing credit source potential.

Credit counsellors caution that home equity lines of credit allow people to borrow sums far greater than ever before. And since most financial institutions require payment only on the interest of the credit lines, the principal can grow quickly over time.

They worry what will happen to debt-ridden Canadians should interest rates rise or if the economy goes south. Some say events far less catastrophic such as an illness or decline in the housing market could ruin highly indebted Canadians.

According to the CBC, homeowners could face big problems with interest rate hikes as the increases would apply to variable-rate lines of credit and mortgages. If interest rates jumped by two or three per cent, those who pay only interest on their lines of credit would see payments jump by a whopping 50 per cent.

More Pros of HELOCs:

  • The money is cheap cheap.
  • The money is flexible as you can borrow as much or as little of what you need up to your limit.
  • ou can pay off any time in full without penalty
  • – HELOCs offer the lowest possible payment and flexible payment plans, including an interest-only option.

Cons:

  • It’s easy to borrow more than you initially intended.
  • It’s much harder to switch a HELOC to another lender without paying legal fees.
  • HELOC rates are not fixed. They can always be arbitrarily increased by the lender, even if the prime rate doesn’t change.
  • Lenders can reduce your HELOC borrowing limit for any reason, even if you have a perfect repayment history. This may happen when you carry a large balance and continually rack up debt and/or make only small payments. It may happen more if home prices start falling or unemployment starts rising notably.
  • Title insurance fees can be higher on a HELOC than on a regular mortgage.
  • HELOCs are more difficult to transfer to a new property. It’s common to have to discharge or pay them off completely.
  • There can be a negative impact on your credit score if you borrow a large percentage of your approved HELOC limit.

 

 

Vacant Homes Hit All-Time High

Thursday, March 16th, 2017

You may have read the story about that vacant home in the city’s west end that’s been empty for more than 25 years. Neglect and suffering centre on that tale of woe but that’s not the kind of unoccupied homes we’re talking about here.

Newly released 2016 Census numbers from Statistics Canada show that 99,236 homes in Toronto are not regularly occupied. Again, that’s nearly 100,000 dwellings in the city that are left empty for the most part. These numbers are identified by the owners of the residences.

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According to Better Dwelling, this represents 4.5 per cent of all homes in the city, and a 10.5 per cent change over the past 5 years. The general population grew by 4.5 per cent during the same period, which means this trend appears to be accelerating.

A large part of the city comes in with dwelling vacancies under five per cent. However, a few concentrated areas skewed up the numbers such as the Concord area of Vaughan, which showed unoccupied dwellings at 35.27 per cent.

The downtown averaged higher than the rest of the city. South of Bloor Street, east of Roncesvalles Ave. and west of Yonge Street showed an average of 8.79 per cent unoccupied. King St. West, also known as the fashion district, showed 21.81 per cent or 3,316 units not regularly occupied, while the stretch going up Yonge Street also had a higher than normal concentration compared to the rest of the city.

While you might think foreign buyers are responsible for the vacancies, remember that the numbers comes from census takers, who are Canadian residents and not offshore investors. Some believe owners are using their properties for short-term rental uses such as the type you might list with Airbnb or a pied-a-terre. Still others believe they are owned by speculators who are waiting for the right time to sell.

According to the Census released in February, Canada is home to 1.3 million temporarily unoccupied residences. That’s enough to house 3.2 million people. The Toronto numbers have tripled since the 2001 census. They are followed by Montreal and Vancouver.

But it is smaller cities, towns and rural areas that lay claim to having the most empty homes percentage-wise with St. John’s, Saskatoon, Halifax and St. Catharines leading the pack.

In 2015, Paris implemented a tax that has since tripled to 60 per cent on vacant dwellings. And last year, Vancouver issued an empty home tax aimed at making properties available for lease in a city that has near-zero vacancy rentals.

 

Foreign Ownership in the GTA

Monday, March 13th, 2017

Throughout history when a scapegoat can be conveniently blamed for something negative it’s human nature to point a finger. When that scapegoat is foreign, even better goes the thinking. Far-off culprits are much easier targets thanks to distance and unfamiliarity.

Could that thinking be behind the GTA’s high house prices?

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It depends who you talk to. For some time, foreign investment in real estate has been blamed for the rising cost of housing in the Toronto real estate market. Fuelled in large part by the Vancouver market, offshore investors were slapped there last year with a 15 per cent tax. The result of which has been a big drop in foreign buying.

So the question is, is the same true of the GTA market? The Toronto Real Estate Board (TREB) recently released new research refuting that theory. The TREB information showed that fewer than five per cent of the 113,133 residential real estate transactions in 2016 involved foreign buyers. The data showed that more than half were buying homes for themselves or family members. According to a November Ipsos survey of TREB agents, about 25 per cent of the homes purchased by non-Canadians were rental investments.

Despite calls for a foreign buyer tax like the one in Vancouver, TREB believes such a move would be misguided. Should a 15 per cent foreign buyer tax be implemented in the GTA, TREB fears the move may hike real estate prices outside of the GTA, where the tax doesn’t exist. It also warns that such a tax could reduce the already limited supply of rental housing and discourage immigration to the GTA.

But not everyone buys the TREB findings. Some say the TREB figures are not a true picture of foreign ownership in the GTA because the numbers don’t account for new construction sales, which could up the figure from TREB’s estimate of 4.9 per cent by another five to 10 per cent.

The Vancouver tax seems to have worked. In January, sales were down about 40 per cent from the same time last year. But Ontario Premier Kathleen Wynne has said that the province will not follow British Columbia’s move to introduce a tax on foreign homebuyers.

Meanwhile, don’t look for price relief in the near future. TREB reported that the average home price in the GTA skyrocketed at the end of 2016. The average home price hit $730,472 in December, which is a 20 per cent increase compared to December 2015. Prices are estimated to rise again substantially in 2017 with hikes in the neighbourhood of 10 to 16 per cent.

 

5 Reasons Why Selling Early Means you’re a Wise Owl

Friday, February 10th, 2017
  1. Inventory, what inventory?

Your home will be the belle of the ball in the current market which is crying for stock. It’s pretty simple economics: when supply is low, with high demand, you are in the most enviable driver’s seat imaginable. Given the bevy of buyers on the market, competition for your house will be fierce. So worries about keeping your home ship-shape for weeks or months on end while strangers roam through need not concern you.

  1. Mortgage rates

Too bad there wasn’t a crystal ball that could tell us what was coming. For years, forecasters have been crying about a rise in interest rates and rightly so. They really don’t have much room to go the other way so up seems a likely option. The question is when? When rates rise it will impact consumers’ buying power. Putting your house on the market while rates are low is a smart move as more buyers will be attracted to your property than if rates rise a point or two. More interest means more competition and more competition usually always means more money for you.

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  1. It’s urgent

You could say that about buyers in February and March. Who else wants to trudge through snow, ice and cold, bundling up and unbundling with each new viewing? Those are some determined purchasers. Maybe they’re the result of a job transfer or an inheritance. Who knows? Just know that they’re more motivated.

  1. It’s speedier

In wintertime, many of those who support the housing industry are not nearly as busy as at other times of the year. We’re talking about banks and lending institutions, mortgage brokers, lawyers, home inspectors, contractors, realtors, surveyors, architects. Finding the professional for the task or service you need will be easier and quicker now as, quite simply, they’re not as swamped.

  1. House prices go up, up and away

High demand and low inventory add up to one thing: higher housing prices. That’s good news if you’re selling. Since you likely plan to buy another home, though, it may be best to sell now so that you aren’t affected by rising house prices or mortgage rates. Waiting could cost you more.

 

Keep Home Safe While Soaking Up the Sun

Wednesday, January 18th, 2017

Many of us spend January, February and March somewhere decidedly warmer than the GTA if only for a week or two of heat, sunshine and flip flops.

The rigmarole of preparing for a trip can be exhausting so don’t forget about the home you’re leaving behind. Many people simply lock their front door and hope for the best when leaving their houses for extended periods of time. But there are better ways. Here’s how:

Get to Know Thy Neighbour

Since they’re right there and can easily view anything that’s gone awry, it’s best to let them know you will be on vacation. Ask them to keep an eye on your house and clear away evidence (newspapers or dropped-off packages, for example) that show you’re not home. Get them to put out a garbage or recycling bin on garbage day so your place looks lived in. Give them your contact info so they can reach you should an emergency occur. If you’re not comfortable asking this of your neighbour, ask a friend or relative to stop by a few times a week to ensure your house looks occupied.

Shovel the Snow

If you’re the only house on the block with a snowy driveway, that’s a sure giveaway that someone isn’t home. Find a neighbour kid, family member, friend, or landscaping company to clear your drive and sidewalks of snow. Naturally you will need to offer to pay them for their time and trouble, but that beats coming home to find your door ajar.

Stop Mail

Overflowing mail on your porch and heaps of unread newspapers are a clear sign that you’re away. Be sure to cancel the newspaper and postpone mail delivery. Flyers and freebie newspapers should be disposed of by a neighbour or friend who’s checking in on your home every few days.

Keys and Locks

That spare key you have hidden in a fake rock by your garage should be brought inside while you’re on holidays. Burglars know where to find keys no matter how good a hiding spot. Locking your garage door is a good idea even though those doors that have an automatic garage door opener are quite secure. Still, thieves have figured out ways to get in so security experts recommend installing a deadbolt-style lock on your garage door.

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Careful with the GPS

Don’t stash your portable GPS inside your vehicle that is parked at the airport. Thieves can break in and discover where your home is easily. Whether your unit is portable or built-in, you’re best to set home for a spot near your home, good enough to get you to familiar territory, while sending a potential burglar off course.

Install Timers

Your lights and electronics should be wired to turn on a certain random times of the day and evening because a dark, quiet house for a week straight is a sure sign you’re not there.  Install timers not just on lighting but also on your radio and TV. The noise and flickering light associated with radio and television will detract would-be robbers.

Say No to Social Media

Tempting as it may be, bragging about your fun in the sun on social media is not wise as it broadcasts the fact that you’re currently not home. Even though all of your accounts are private, you’re best to wait to share photos and word of your vacation until you get home.

Hire a House Sitter

It’s ideal if you have a friend or relative who doesn’t mind leaving his or her home for a week or two for a mini vacation at your house. This option is pricier than others as you will need to compensate well for the inconvenience. But the price will be worth it, knowing that everything is being looked after. There are also professional companies that offer this service, which is likely even pricier. You will need to spend time inquiring about a service’s reputation, though. Check references, read reviews and background checks.

It is Possible First-time Home Buyers

Thursday, January 12th, 2017

Being a first-time home buyer in Toronto can be a challenge with detached homes going for close to $1 million. To get in the market at that level, your household income needs to top six figures and you’ll need a sizable chunk for a down payment and your closing costs.

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If you’re just entering the real estate market for the first time those costs can seem impossible but there are ways to get a piece of the rock as a first timer. For starters, why not consider a condo? This more economical choice gets you into the market and lets you build equity while your property value increases as you pay down the mortgage. As your income also increases over time you will be in a position to trade up and move into, say, a semi-detached home.

As for how to calculate how much you can afford, the Canada Mortgage and Housing Corporation (CMHC) suggests that your monthly housing costs not exceed more than 32 per cent of your gross monthly income. The CMHC deems housing costs as your mortgage payment, interest, property taxes and heating costs, also known by the acronym PITH. So if you and your spouse make $120,000 per year, your total monthly housing costs (PITH) should not exceed $3,200 per month.

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The CMHC’s other rule is that your entire monthly debt load should not exceed more than 40 per cent of your gross monthly income. So if with other loans and credit card debt plus your housing costs, your debt load exceeds, in this scenario, more than $4,000 each month lending institutions may look upon your file unfavourably.

Know that help is available. If you are looking to buy in Toronto, there are four first-time home buyer programs available thanks to federal, provincial and municipal governments:

  1. The federal Home Buyers’ Plan is a program that lets you withdraw up to $25,000 per year in RRSPs to buy or build a home. With your partner, that could be as much as $50,000.
  2. The federal First-Time Home Buyers’ Tax Credit is a rebate of approximately $750 to help first-time home purchasers with costs such as legal fees and land transfer taxes.
  3. The Ontario land transfer tax rebate is a new program instituted by the province to assist first-time buyers with a refund on all or part of the tax.
  4. The Toronto Municipal Land Transfer Tax Rebate is a reimbursement program of up to $3,725 that applies to first-time purchasers of both new and existing homes.

Before you begin visiting open houses you probably should get pre-approved for a mortgage. The reason this is important is that it will help guide you when house hunting. There is nothing worse than thinking you can afford a certain price and then finding out that that is not the case. Based on monthly income, your down payment and the mortgage interest rate, you can figure out what you can afford thanks to mortgage affordability calculators, which are available online. Also, don’t forget to account for the other costs associated with buying a home. These include property insurance, condo fees, home inspections, appraisal fees, legal fees and moving expenses.

Finally, if you don’t have a second income to rely on or if your total household income isn’t enough and you still really want to purchase a home consider doing so with a friend or another family. While this would clearly pose numerous challenges and you’d need a real estate lawyer to manage all the scenarios (how are home maintenance expenses divided and what if one side decides to sell?), this set-up is one way to get your foot in the door. Remember it doesn’t have to be forever and it may be your first step toward financial independence.

Buying and Selling in January? Why not

Friday, December 9th, 2016

January is the month of new beginnings, warm-weather winter holidays, winter sports and cutting back just a little on those items that aren’t so good for us.

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January is also a good month for real estate activity, despite what you’ve heard. If you’re thinking of selling or buying a home in 2017, you may want to give January a try.  In markets like Toronto and Vancouver virtually any month is a good month to buy or sell. Real estate activity naturally slows in late December and very early January. But by the end of January’s first week it’s back to business as usual.

One big reason you want to sell your house in January is because you will have less competition. What does that mean? You can likely command a higher sale price thanks to fewer homes on the market.

On the flip side, for buyers, your odds of getting into a bidding war with multiple buyers are reduced because many purchasers are dealing with post-holiday debt.

Gone are the days when buyers waited for warmer temperatures because that’s the time when the majority of homes became available. Buyers today are more tech savvy than ever and as a result they can view real estate around the clock on their phones, devices and computers. Why wait for spring?

Keep in mind, too, that as a buyer your realtor will be able to really focus in on your needs, compared to the spring market when the market is saturated with buyers looking to purchase a home and real estate agents are juggling a heavy load.

If you’re selling, you know those buyers trotting through your house and yard are serious. No one braves the bitter cold and snow, donning boots and parkas as they schlep from house to house as a fun winter pastime.

Try to keep your exterior tidy and, if possible, decorate with outdoor arrangements and seasonal greenery. Clear ice and snow off walkways and steps and make sure your property is well lit. Also be sure to provide pool reports and try to provide photos of what your house looks like in spring and summer.

While it may be counterintuitive, it’s said that homes actually sell quicker in winter. Low inventory may be the reason. In addition, buyers tend to be more motivated and not as willing to slog from home to home to home.

Tough New Mortgage Rules

Monday, November 7th, 2016

New lending rules definitely make it tougher for mortgage borrowers, especially first-time home buyers.

The sweeping changes introduced by the federal government last month are intended to stem the debt load of Canadians, some of whom have taken on sizable mortgages thanks to low interest rates.

The new rules centre on a kind of stress test to see if the borrower could afford a mortgage should interest rates jump up. Under the new plan, borrowers are assessed on a five-year standard rate of 4.64 per cent for a five-year loan, despite the fact that most lenders currently offer rates far below that number.

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The stress test also includes other requirements such as stipulating that homeowners spend no more than 39 per cent of their income on home-related expenses such as mortgage payments, heat and taxes. Total debt must not exceed 44 per cent under the new rules.

The new rules apply to any insured mortgage in which the buyer puts down less than 20 per cent of the home up front.

By making it more difficult to obtain a mortgage, the hope is it will temper housing demand, prompting prices to fall or not rise so quickly.  The Bank of Canada announced that the rules will reduce the risk of Canada’s financial system becoming unstable.

According to Ratehub.ca, what this means generally speaking, is a family with a $100,000 income that saved $40,000 for a down payment could previously afford a home valued at $665,000. But under the new rules, that same family can only afford a home priced at $505,000.

The new policy makes it tougher for first-time home buyers, whose savings and incomes are generally limited. So if you’re buying a home in Toronto at $700,000, the minimum down payment jumps from $35,000 to $45,000. Homes under $500,000 require a down payment of five per cent, while those over $1 million need 20 per cent down.

The new plan also takes aim at foreign ownership of Canadian real estate. Homeowners are still eligible for a capital gains exemption on their principal residence but are now required to report the sale of their property to the Canada Revenue Agency. Exemptions will only be granted to Canadian residents and not apply to foreign buyers.

Also, as of Nov. 30, the federal government will require portfolio-insured mortgages to meet criteria that previously only applied to high-ratio insured mortgages.  The new requirements include a maximum amortization of 25 years, a maximum purchase price of less than $1 million, having a minimum credit score of 600 and the property must be owner occupied.

Should I Buy or Should I Sell First?

Friday, October 21st, 2016

The real estate market offers consumers a laundry list of questions, decisions and quandaries, some large, some small. Perhaps one of the first such that springs to mind for the home buyer is the not-so-simple question of should you sell first or buy first.

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How you approach this issue depends on a number of factors. Should you buy before selling, your main consideration has to be whether or not you can afford to carry two properties should your existing house sit on the market for an extended period.

A second, though equally compelling factor, centres on how active the real estate market is in the area in which you’re buying and selling. The GTA’s very active market has prompted something of a reversal in the traditional approach which dictated that you sell your home first before shopping for another. This turnaround has occurred thanks to the speed with which homes are being sold.

Naturally, there are pros and cons to either choice. Let’s take a look at both options:

Buy First:

There’s nothing like shopping for a new home. Each dwelling offers endless possibilities and it’s important to hold out for those must-haves on your list. Without a closing date hanging over your head, this makes the house-hunting process all the more enjoyable. If your offer is unsuccessful, you can wait it out until the next perfect home comes along.

But the downside to buying first is that you could end up with two homes. Can you swing two mortgage payments in addition to the other expenses associated with owning two homes? That is a consideration you need to address before shopping for a new house.

While you can protect yourself by making your offer conditional on the sale of your current home that would be a tough sell especially in Toronto’s overheated market.

The final consideration is that buying first may force you to sell below true market value because you feel pressured to meet the closing date on the house you bought.

Sell First:

As mentioned, this was the traditional approach, when homes sat on the market for weeks and sometimes months.

Perhaps one of the biggest pluses to selling first is that it gives you a better idea of what you can afford for your next home. It also automatically removes any risk of you owning two homes at the same time.

The disadvantage, of course, is that you may feel under the gun to buy a house in order to accommodate your closing date. That’s never a good strategy and can result in you paying more than you should have for a home you’re not crazy about. One way around this is to seek a closing date that is longer than the usual 60 or 90 days. That way, you have more time to find your dream home. Another less desirable option is to rent until you find your dream house.

Either way, it’s wise to always have a plan in place should you find yourself with two houses or needing to bunk temporarily with family or friends.

How to Stay Cool in an Overheated Real Estate Market

Friday, October 14th, 2016

With the average price of a detached home in Toronto pushing well past the million-dollar mark it’s understandable how we all might get a little frenzied when buying and selling our homes.

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Low housing supply mixed with high demand means you have houses selling for more than their asking price, a phenomenon driven by multiple buyers attempting to outbid each other.

If you’ve ever been involved in a bidding war, you’ll appreciate the emotional roller coaster consumers experience on either side. Whether you are trying to make financial gains for retirement or simply hoping to get your family situated in a neighborhood with good schools, today’s highly competitive real estate market is not for the faint hearted.

But are consumers able to keep their cool when everyone else is getting swept up in the commotion? A recent study by the Real Estate Council of Ontario (RECO) suggests not. In fact, 57 per cent of GTA respondents told RECO they would think about offering 10 per cent over their budget for the right home, while 38 per cent said they’d up their numbers by 10 to 20 per cent. The numbers were only slightly more conservative in the rest of Ontario with 47 per cent indicating they would consider paying 10 per cent more while 31 per cent said they would look at offering 10 to 20 per cent more to outbid the competition.

To help consumers overcome the challenges of a hot market, RECO has launched the Be Home Smart Tour, a community outreach campaign that will travel to 13 locations across Ontario this fall and into 2017. The campaign includes an interactive display booth targeting those in the buying and/or selling stage of their lives – engaged/newly married couples, new parents and downsizing boomers.

“Buying or selling a home can be a rollercoaster of emotions,” says Joe Richer of RECO. “People tend to let their heart rule their heads, especially first-time buyers.”

The RECO survey found that 35 per cent of homebuyers said they let their emotions sway them more than they should have when they last bought a home. For millennials, that number jumped to 42 per cent.

Here’s a quick look at RECO’s five tips for consumers:

  1. Leave your emotions at the door
  2. Read and understand everything before signing on the dotted line
  3. Be sure you and your representative are on the same page
  4. Know your tolerance risk
  5. Be flexible and have a back-up plan in place

Other upcoming stops in the RECO Be Home Smart Tour include the Zoomer Show in Toronto at the Enercare Centre on October 29 and 30 and the BabyTime Show in Toronto at the Metro Convention Centre from November 11 to 13.  More shows will be added in 2017.

The data included on this website is deemed to be reliable, but is not guaranteed to be accurate by the Toronto Real Estate Board. The trademarks REALTOR®, REALTORS® and the REALTOR® logo are controlled by The Canadian Real Estate Association (CREA) and identify real estate professionals who are members of CREA. Used under license.