8 signs you’re ready to buy your first home

Is now the time to buy your own place? Here are the ways to know when it makes sense financially to purchase your first home.

By Kiplinger, MSN Real Estate

 

A cooling real-estate market is good news for buyers because it's easier for them to negotiate a deal. But it shouldn't be the main reason that pushes you into your first home. In fact, buying your first home is a personal decision that you should make independent of what the market may or may not be doing.

"Time means nothing," says Michael Eisenberg, a CPA and financial-planning specialist in West Los Angeles. You can't predict what will happen to home prices in your neighborhood in the next few months, let alone the next few years. But if you're looking to make the long-term commitment of homeownership, it helps to approach the decision like you would any business decision. You don't want to buy on emotion, or because everyone else is doing it.

"This is the biggest financial move a young person may ever make," Eisenberg says. "You should make the investment because it makes sense for your finances. You buy when you're ready."

So how, exactly, do you know when your finances are ready? We provide a checklist of eight things first-time homebuyers should have squared away before they consider a purchase — no matter where analysts say home prices are heading.

You are ready to buy when …

No. 1: You have a budget — and you know how to use it

Owning your own place comes with a slew of new expenses, so good money-management skills are a must-have. If you don't have a household budget right now, start one. (See "Build your budget" and "A simpler way to save: The 60% solution" to learn how.) You need to know where you are financially — where your money is coming from and where it goes every month — to know exactly how much you can afford to spend on a new home.

Once you have your current finances sorted out, draw up a mock budget for homeownership. Find out how much homes cost in your area and how much your mortgage payment will run. Then, factor in higher utility bills, homeowners insurance, property taxes, homeowners association fees, and maintenance and upkeep costs, as well as higher commuting costs if you're considering a neighborhood farther from work. If you simply cannot afford the increased expenses that come with a house, it's never a good time to buy — no matter what's happening in the real-estate market.

No. 2: You have a sizable down payment

Traditionally, to get your foot in the door, you'll need a down payment worth 20% of the home price. That means for a $250,000 home, you'll need $50,000 upfront. Sure, there are ways to get around that steep requirement with zero- or low-down loans, but those options will cost you. You may have to pay extra for private mortgage insurance or take out a piggyback loan with a much higher interest rate. With the slowing housing market, having that 20% down payment becomes even more important because you'll start off with some equity in case you have to move earlier than expected. "In the early years, you aren't building any equity with the mortgage payment," Eisenberg says. "If the market changes or your personal circumstances change and you're forced to sell, you could lose money" if you made little or no down payment. The equity in your home can also give you an extra source of cash in an emergency. (See "Why you need a home down payment" to learn more.)

No. 3: You have a reliable source of income

Buying a home is a long-term financial commitment, so you'll need consistent cash flow to cover those monthly payments — not to mention the little extra expenses that come with homeownership. If you're in school, plan to go back to school, have a less-than-reliable job or plan to start a family, you need to take a good look at your future cash-flow abilities. Will you be able to make your mortgage payment six months from now? How about six years from now? "Some couples can afford the house when they're both working, but if a kid comes along and one wants to stop working, then they have a problem," Eisenberg says.

No. 4: You have an emergency savings fund

If you have enough cash on hand to cover three to six months of your living expenses, you're one step closer to being prepared for homeownership. Just in case something happens to disrupt your steady income — say a serious illness, unexpected layoff or even a natural disaster that prevents you from working — you want to make sure you can still afford to make your mortgage payments until you can get out of your rough patch, says Bob Baldwin, a CPA in Charleston, S.C. Learn more about how and where to build your emergency stash.

No. 5: You have your debts under control

Call 'em crazy, but lenders like to make sure you'll have enough money each month to pay your obligations. So before they'll give you a mortgage, they take a look at your so-called debt-to-income ratio. Generally speaking, they want to make sure your monthly housing costs — including principal, interest, taxes and insurance — will consume no more than 33% of your monthly gross income; and that your total debt payments, including your mortgage, credit cards, student loans and auto loans, will remain below 38% of your total pay. So if you have large outstanding debts, it's a good idea to try to pay them down before applying for a mortgage to make sure you can qualify for as much money as you'll need. This also means you should avoid taking on any substantial new debt six months to one year prior to your purchase, or you may throw your ratio off. So, it may be best to drive that clunker for a little while longer, or put off charging that European vacation.

No. 6: Your credit report is in good shape

You don't have to have perfect credit to become a homeowner, but a decent history can help you get a lower interest rate on your mortgage and a lower monthly payment. The government allows you to check your credit history free once a year from each of the three main credit bureaus at AnnualCreditReport.com. So take a peek to find out what lenders see about you. If you see any errors, correct them now. If you see room for improvement, find out how you can boost your score.

"Don't be sloppy the year or two before you buy the house," Baldwin says. You don't want any missed payments or other black marks that could lower your estimation in the eyes of lenders.
Having bad credit, however, may not be your biggest concern. If you're just starting out, you need to make sure you have a credit history. If you hold a credit card or took out student loans, you're probably covered. If not, find out how you can build a stellar credit history from scratch, preferably one year or more before you plan to buy.

No. 7: You can make a long-term commitment

Are you ready to stay put for at least three to five years? Typically, that's how long you'll have to keep the house in order to recoup your buying and selling costs. If you sell before then, you may lose money on the deal. And if you do turn a profit, you'll have to pay capital gains taxes if you lived in the house less than two years. The length of your stay becomes even more important now that home appreciation has slowed from its previous pace. If you don't think you'd stay put for that long, you may be better off renting.

Don't fret: Renting can actually make better financial sense for some people at different times in their lives, Eisenberg says. If you think you may get a job transfer, go back to school or otherwise need to move within the next five years, renting gives you the flexibility you need and could possibly save you money.

No. 8: You are prepared to become your own landlord

Even if you can afford homeownership, don't buy simply because you can. You need to make sure you're ready to live the lifestyle. Owning a place comes with a fair share of new responsibilities, headaches and costs — not the least of which is becoming your own landlord. When you rent an apartment, you simply call the landlord if something breaks. With your own home, if it's broke, you fix it — or you'll have to pay someone else to fix it. You're also responsible for upkeep, including yard work and shoveling snow (unless, of course, you buy a condo without a yard). Will you have the time, energy or desire to maintain the property? How about the money for all those little extras, such as buying your own lawn mower and hiring the occasional plumber? Make sure you know what you're getting into.

This story was written by Erin Burt for Kiplinger’s.

Nearly half of baby boomers don’t plan to downsize: report

BERTRAND MAROTTE

The Globe and Mail

 

 

The suburban dream is alive and well.

Close to half of baby boomers – 43.5 per cent – planning to move to another primary residence said in a recent survey they’re seeking a home that is just as big or bigger than their current property.

That goes against the perception that the boomer generation would create an oversupply of single-family homes as they move into smaller residences, says a new Royal LePage Real Estate survey.

The poll also indicates that more than half of Generation Y members – 55.7 per cent – planning to buy their next abode have their eye on the suburbs, compared to 21.7 per cent targeting the downtown core.

“Baby boomers are the wealthiest generation in Canadian history. They live in large homes with ample space for their many possessions. They love their garages and their yards,” Phil Soper, chief executive officer of Royal LePage Real Estate, said in a news release Tuesday.

“The study clearly indicates that contrary to popular belief, most boomers do not intend to downsize anytime soon.”

According to the Royal LePage, 78 per cent of baby boomers currently own their own homes. In the survey, 40.6 per cent of boomers said they have plans to move.

A major factor in the desire to continue living in large, suburban homes is the fact that offspring are increasingly staying at home well into adulthood, according to the study.

The survey says a quarter of Generation Y lives rent-free in arrangements with family or friends. In the Prairies, that climbs to 33.4 per cent, in Quebec to 29.7 per cent and in Ontario to 27.2 per cent in Ontario.

“The adult children of baby boomers aren’t going anywhere fast. Good jobs have proven more difficult for them to find, they’re extending their studies and they’re living at home. It is no wonder the concept of swapping a family-sized home for a small retreat has lost its luster,” said Soper.

The online poll by Leger Marketing used the firm’s online panel, LegerWeb; it was conducted between Sept. 13 and Sept. 21, 2012, with a sample of 1,013 Canadians born between the years 1980 and 1994 (Generation Y) and 1,011 born between the years 1947 and 1966 (boomers). A probability sample of the same size would yield a margin of error of plus or minus 3.08 per cent, 19 times out of 20.

Get ready condo flippers, Canada Revenue Agency is hunting you

Garry Marr

Editor’s Note: This story has been altered to correct the identity of Robert Kepes, a Toronto tax lawyer at Morris Kepes Winters who was wrongly named in a previous version.
_____

You just sold your condo, you made a hefty profit and know you have to pay your taxes.

 

The bill might be more than you think.

 

If it’s your principal residence, there’s no tax, as long as you have the paperwork to prove it. The Canada Revenue Agency is taking a closer look at the condominium sector in what some in the industry have dubbed the “Condo Project.”

 

You might want to think very carefully about how you record that housing sale you made in 2012

Let’s say your gain is $100,000 and your tax bracket is 46%. Capital gains are taxed at 50% so you would only owe $23,000 on that profit.

 

Not so fast! If the CRA says you are in the business of flipping condominiums, get ready to pay based on the gain being counted as income for a tax bill of twice the amount at $46,000. And, it gets worse. You could also face a fine of up to 50% of the tax owed for making a false disclosure.

 

With the deadline for filing taxes coming up April 30, you might want to think very carefully about how you record that housing sale you made in 2012.

 

Sam Papadopoulous, senior public affairs advisor-manager with CRA’s Ontario region, acknowledges that the strength of the condo sector has attracted the attention of the taxman.

 

“We do from time to time target some sectors more closely than others,” he said. “We look at the real estate market in general. Of course, [there is more focus], it’s a hot market.”

 

People in the industry have a different view.

 

Some suggest it fits in with the recent budget when Jim Flaherty, the finance minister, announced his government was taking a closer look at loopholes and tax cheats — hoping to shrink its deficit in the process.

 

One of the issues attracting the attention of the CRA is assignment clauses, where one person agrees to purchase a condo before it is built but ultimately sells his or her right to buy that condo before the building is even registered.

 

Builders usually collect a fee for that privilege but ultimately when title is registered at the land registry office the original purchaser’s name is nowhere to be found.

 

While most builders are unlikely to voluntarily supply a list of properties in their building that were assigned, they could be forced to cough it up if they are audited by the CRA.

 

Those people who have assigned their units to another buyer are going to be hard pressed to prove they planned to use the unit as an investment property rather just flipping — meaning the CRA is highly unlikely to allow them to count money made at the lower capital gains rate.

 

“If you keep [assigning property] then it is not capital gains, that’s trade and that’s income,” said Mr. Papadopoulous, adding you do it a “couple of times” and it’s income. “Of course, that’s part of [what they are investigating].”

 

The warning to people flipping property and thinking they can get away without reporting the gain is pretty clear.

 

“We live in the information technology age,” said Mr. Papadopoulous, who wouldn’t get into how CRA is tracking down the tax evaders. “We are putting our resources to work and following the trail where we can.”

 

The tree is capital and it produces a fruit and the income is the profit that is derived when that fruit is sold

 

Robert Kepes, a Toronto tax lawyer at Morris Kepes Winters, said he’s seen the CRA go after people who have been living in a property and still question it as a principal residence.

 

CRA starts with a letter to a taxpayer asking them for details about when and why they sold their property and people often fill out the questionnaire without legal advice.

 

The issue goes all the way back to 1971 when there was no tax at all on capital gains so everybody tried to avoid counting gains as income.

 

Mr. Kepes says the distinction between income and capital is as simple as the difference between a tree and the fruit that it bears.

 

The tree is capital and it produces a fruit and the income is the profit that is derived when that fruit is sold,” he says.

 

If your condo is that tree and your rental income is the fruit and you make a profit from that rental income, that’s taxed as full income. You eventually sell the tree for more money and that’s just a capital gain, taxed at the 50% rate.

 

If your entire businesses is just trading trees and not producing fruit, that’s business income.

 

“The Income Tax Act asks what was your intention when you bought that condo,” said Mr. Kepes. “These principles are easy to describe but harder to prove in fact.”

 

If you never actually moved into the condo, it’s going to be tough to prove that it was principal residence

 

The law is like a civil case, a judge doesn’t have to believe you beyond a reasonable doubt, but a judge does have to conclude you are more believable than the CRA.

 

“We have to bring all kinds of intrinsic evidence,” says Mr. Kepes, noting some clients will produce something as simple as a change in address on their driver’s licence to show they were using their condo as a principal residence.

 

If you never actually moved into the condo, it’s going to be tough to prove that it was principal residence.

 

You may never have produced income from the profit but that’s not to say you didn’t plan to, so perhaps you could get the capital gains exemption.

 

“The question can be ‘how did they come to sell the property,’” said Mr. Kepes, adding the CRA might look at whether you were advertising the property for sale.

 

Brian Johnston, chief operating officer of Mattamy Corp., says the CRA has ways to get information on sales.

 

“They audit real estate companies, look at the name on the contract and look at the final deed and see a difference,” said Mr. Johnston. “They see Bill Smith bought it and Joe Blow is on the deed. They want to know how this happened and follow the paper trail.”

 

He has some sympathy for consumers confused about the whole process.

 

“I think the government should make it a little simpler in terms of filing for principle residence exemption,” said Mr. Johnston. “It’s a real gray area of the law. The government has not done a good job for Canadians trying to specifically identify all the rules around [selling homes and paying taxes]. People might have inadvertently made mistakes.”

 

Condominium developer Brad Lamb, who has been audited several times, said ultimately it’s better to be more conservative when you’re filing — meaning just count the gain as income if you are in doubt.

 

“If you are prolific buyer or seller of properties, whether it’s condos or not, you have to govern yourself accordingly. If you don’t, you’ll get caught and be fined,” said Mr. Lamb. “I decided many years ago when I started buying condominiums, after talking with my accountant, you can pay [lower tax] or you can fight 50 years with Revenue Canada.”

Home Improvements That Get Your House Sold

WalletPop Editor
Filed under: House & Home, Real Estate


It took James Peterson only six days to sell his house for the full asking price. He did it, says Dallas-Fort Worth real estate agent Geoff Walsh, by making some strategic improvements that were key to getting the house sold. Walsh -- Peterson's neighbor as well as his agent -- advised him to upgrade the appliances and countertops in the kitchen, replace worn carpet and tile, and add some simple landscaping.

In Peterson's neighborhood, where comparable homes sell in the $400,000 range, the investment paid off in a quick and profitable sale.

How much money a homeowner should put into enhancing a property for sale is a thorny issue. You don't want to spend too much, because you're unlikely to get it back. But you also need to make upgrades that will help your property compete in a crowded market.

When determining how much to spend, consider price range, region, and what comparable homes for sale in the neighborhood are offering. "You can overdo it for the neighborhood, and your home is not going to command a higher price as a result of [the home improvements]," says Matthew Coates, a Phoenix, Arizona agent with West USA Realty Revelation.

Coates suggests spending around 1 to 2 percent of your home's value for home improvement costs. That means, for a $200,000 condo, a seller would spend between $2,000 to $4,000 on pre-sale upgrades.

Sometimes the hardest part is knowing where to start, so here are eight home improvement ideas that can help get your home ready for the market for a minimal amount of money:

SLIDESHOW: Home Improvements That Help Sell Your Home

Transform unfinished space into storage: Walsh, an agent with Weichert Realtors, says that most buyers are looking for ample storage room that's also pleasant to use. If you have an unfinished attic or basement, consider installing some flooring to augment the amount of closet and storage space in your place.

Turn a closet into an office: Pat Conley, a Chicago-area home stager, says it's a fairly easy task to revamp closets into offices by adding an electrical outlet and installing shelves and a desk. (She's also turned closets into a wet bar, and remodeled unused open space for yoga and meditation.)

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Replace toilets and clean grout: A rusty toilet or black grout can give the appearance that your bathroom is dirty and old. Instead of footing the bill to remodel the entire bathroom, try some quick fixes for improvement, such as buying a new toilet, cleaning the grout, replacing the shower head, or installing a surface-mounted medicine cabinet or shelves for more storage.

Update light fixtures and ceiling fans: Brass light fixtures and '70s-era ceiling fans can make a place look dated. One cost-effective home improvement idea, Coates says, is to spend a few hundred dollars at a Lowe's or Home Depot, and replace old lights with either brushed nickel or bronze fixtures, track lighting or recessed lighting.

Paint your walls and consider moldings: "A good coat of paint can go a long way," says Brendon DeSimone, a real estate agent with Paragon Real Estate Group. Most buyers prefer neutral colors, such as off-white or beige (plain white is too stark, and dark colors can make the interior look smaller than its actual size). Another home improvement is base or crown moldings. If painted in the same color as the walls, they can visually elongate the height of the room.

Get new interior doors: Nothing screams cheap like featherweight doors, which are often plywood and hollow, so think about upgrading to heavier, solid doors made by manufacturers like Simpson, TruStile and Jeld-Wen.

Stain cabinets and upgrade the kitchen island countertop: Instead of ripping out cabinetry, a less expensive improvement is to change the appearance by stripping and re-staining the cabinets. Older, out-of-style oak cabinets can be concealed with white paint or an antiqued faux finish. For properties priced at $400,000 and above, granite is usually expected, Walsh says. That's an expensive upgrade, but you can reduce the cost by sourcing materials directly from a stone yard.

Match your kitchen appliances: If comparable homes in your price bracket and neighborhood don't have stainless steel and state-of-the-art appliances, then it might be a waste to upgrade, says Coates. However, he notes that buyers like appliances to be color-coordinated -- for example, all white or silver.

Invest in landscaping: Because curb appeal is what reels in potential buyers, it's important to make the outside of your home look attractive, too. A few low-cost ideas are to pull out weeds, mow the lawn, and cut back overgrown trees or shrubs. Other home improvements include adding fresh mulch, planting a couple of rose bushes in your front flower garden, or lining the entryway with a colorful assortment of flowers in pots.

Whether it's replacing the carpet or painting your walls, your home improvement strategy should be uniquely tailored to what your home needs to be competitive. To sell his home at the desired price, Peterson was advised to make some considerable enhancements to his property or resort to unloading it for less.

But some homeowners may find that no matter how much they invest, they will be unable to realize those gains in terms of a sale price. "You are going to reach a point of dimishing returns," says Walsh."If you spend $7,000, you may not get $7,000 back. But you have to put your best foot forward with the amount of inventory out there."

First-Time Home Buyers' Tax Credit

Through Canada’s Economic Action Plan, the federal government introduced the First-Time Home Buyers’ Tax Credit (HBTC) to help with the purchase of a first home.

About the Initiative

The HBTC assists first-time home buyers with the costs associated with the purchase of a home, such as legal fees, disbursements and land transfer taxes, which are a particular burden for first-time home buyers, who must also save for a down payment. The $5,000 non-refundable HBTC amount applies to qualifying homes acquired after January 27, 2009, and provides up to $750 in federal tax relief.

An individual is considered a first-time home buyer if neither the individual nor the individual’s spouse or common-law partner owned and lived in another home in the year of the home purchase or in any of the four preceding calendar years. Special rules apply for the purchase of homes that are more accessible or better suited to the personal needs and care of an individual who is eligible for the Disability Tax Credit. In these situations, the HBTC can be claimed, even if the first-time home buyer requirement is not met.

A qualifying home is generally considered to be a housing unit located in Canada that the individual or individual’s spouse or common-law partner intends to occupy as their principal place of residence no later than one year after its acquisition.

Any unused portion of an individual’s HBTC may be claimed by the individual’s spouse or common-law partner. When two or more eligible individuals jointly purchase a home, the credit may be shared but the total credit amount claimed cannot exceed $5,000.

Claimants should ensure that documentation supporting the purchase transaction is available if requested by the Canada Revenue Agency. Claimants are also responsible for making sure that all applicable eligibility conditions are met.

Who Will Benefit

First-time home buyers purchasing a home may claim the HBTC on their income tax returns, starting with the 2009 taxation year.

Initiative Update

Legislation to implement the HBTC received Royal Assent on December 15, 2009.
Canadians purchasing their first home after January 27, 2009 can claim the HBTC on their income tax return for the year in which they make their purchase.

Find Out More

For more information, please visit the Department of Finance Canada website or the Canada Revenue Agency website.

How an obscure budget change could raise mortgage rates

Robert McLister

Special to The Globe and Mail

 

 

The acronym “ABCP” doesn’t come to mind when people go mortgage shopping. But if you get a new mortgage in the next few years, it could very well affect your interest rate.

ABCP stands for asset backed commercial paper. It’s used by a handful of non-bank lenders to raise capital for mortgage lending. ABCP got a bad name when it froze up on investors during the credit crunch of 2007-2008. Today, it’s a safer and fully restructured market.

Having access to ABCP lets smaller lenders reduce their overall funding costs. That helps them offer better mortgage rates to you and me. In turn, those lower rates force the major banks to be more competitive.

The role of small “wholesale” lenders, which sell mortgages mainly through brokers, cannot be underestimated. When people see a broker offer a great rate from one of these lenders, they either choose that lender and rate – or they ask a big bank to match it. That ecosystem keeps mortgage costs significantly lower than if small lenders did not exist.

But the future of ABCP and other private mortgage securitization techniques is now in question, at least as a way to fund insured mortgages. The federal budget, released in March, plans to prohibit lenders from selling insured mortgages to investors through any securitization method that is not managed by federally-run Canada Mortgage and Housing Corp . (CMHC).

That bombshell came “without any warning and without any consultation,” said Stephen Smith, president of the largest non-bank lender, First National. Speaking at the National Bank Canadian Financial Services Conference, Mr. Smith said the “collateral damage” to ABCP and smaller lenders “was not fully considered” by government officials.

In the last few weeks, I’ve heard some interesting theories behind the Finance Department’s motives. Some speculate that the government wants to earn more guarantee fees (by forcing lenders to use more CMHC-run mortgage backed securities as opposed to using private Canadian or U.S.-based securitizers). Other conspiracy theorists suggest that Ottawa wants to strengthen banks’ competitive position relative to their non-federally regulated competitors. But these aren’t Ottawa’s primary motivations.

In a statement, a Department of Finance official explained the government’s reasoning as follows:
“The Government is making these changes to increase market discipline in residential lending and reduce taxpayer exposure to the housing sector. Funding channels that use taxpayer-backed insured mortgages should be subject to minimum standards and Canadian oversight in order to promote financial stability.”

In other words, Ottawa wants to reduce risk by controlling securitization and controlling the mortgage assets on banks’ balance sheets. That’s understandable from a regulator’s standpoint, except for one thing: the mortgages are already insured before they go into ABCP, so the main taxpayer risk is already taken. This policy won’t reduce mortgage insurance volumes to any significant degree. Moreover, it won’t improve the credit quality of the borrowers who are insured.

What the new rules really do is force lenders to sell their mortgages in the specific method dictated by Ottawa, as opposed to potentially lower cost private securitization. That’s a problem because, for technical reasons, many low-risk mortgages simply don’t qualify for standard CMHC-backed securitization programs. The net effect is that shutting off all private securitization options raises costs and makes millions of insured borrowers pay more.

Today, this isn’t a huge worry because only $6-billion of insured mortgages are funded using ABCP. That’s a drop in the bucket given that roughly $200-billion in mortgages close every year. But the market could feel the effects down the road.

In the last six months, $2.3-billion of new ABCP programs have come online, says rating agency DBRS. Moreover, whereas four years ago there were no issuers of insured mortgage-backed ABCP, today there are 11. So the market is slowly starting to catch its stride - or at least it was until this latest in a string of new mortgage regulations.

But there is some room for optimism. The Finance Department says “The Government will consult with industry stakeholders” before implementing new rules. So perhaps there’s a chance it will see the negative effects on mortgage competition and alter its decision.

In the meantime, one can argue that slightly higher mortgage rates aren’t a big sacrifice if it means keeping the Canadian housing market sound and stable. The question is whether the remote risks being targeted by Ottawa truly justify yet another new cost to mortgage consumers.

Robert McLister is the editor of CanadianMortgageTrends.com

Smaller cities share pain from new mortgage rules

TARA PERKINS - REAL ESTATE REPORTER

The Globe and Mail

 

 

Ottawa’s efforts to cool the housing market amid fears of rapid overheating in cities such as Toronto and Vancouver are causing steep sales declines in areas that had been relatively healthy, economists say.

The number of homes that changed hands in the Halifax-Dartmouth area during March was 36-per-cent lower than a year ago, sales in Sudbury fell 33.5 per cent, in downward pressure on savings accounts is starting to liftand in Regina 23.5 per cent.

“The government’s focus was on Toronto and Vancouver, and I would call it the unintended consequences,” said Canadian Imperial Bank of Commerce economist Benjamin Tal. “Cities like Winnipeg and Halifax are feeling the same pain, although they didn’t need to feel the same pain, and the eventual slowdown will be more than optimal.”

Finance Minister Jim Flaherty changed the country’s mortgage insurance rules last July, in an effort to stem the speedy rise of consumer debt levels and house prices, citing in particular concerns about pockets such as Toronto’s condo market. The changes included cutting the maximum length of an insured mortgage to 25 years from 30, and putting a halt to government-backed insurance for homes worth more than $1-million. While the latter move had a greater impact in Toronto and Vancouver, the change in amortization length had an impact on first-time buyers across the country.

“A lot of the cities that had been much better behaved in terms of pricing and overall activity have been hit as hard as Vancouver and Toronto,” said Bank of Montreal economist Douglas Porter. “Some cities are really taking it on the chin.”

On Monday, the Canadian Real Estate Association reported that sales of existing homes nationwide were 15.3-per-cent lower in March than a year ago. The MLS Home Price Index rose just 2.2 per cent in March, its smallest gain in over two years, said CREA, which represents the nation’s realtors.
More than 90 per cent of the local markets that it obtains data from posted year-over-year sales declines, while Edmonton once again showed an increase.

Economists generally estimate that national home prices are overvalued by as much as 10 to 20 per cent, but estimates have been heavily skewed by Toronto and Vancouver (even though prices in Vancouver have come down). “One of the challenges with mortgage regulations is that they are blanket policy instruments, so they affect everybody,” said Toronto-Dominion Bank economist Sonya Gulati.

Mr. Porter points to the sales decline in Winnipeg as particularly noteworthy. “Among the major cities, it’s got basically the lowest prices in the country,” he said. “I think by most metrics you wouldn’t consider Winnipeg to be overvalued.”

Winnipeg realtor Cliff King, at Re/Max Executives Realty, said sales in the city are spotty now. “Markets are so different and I think that was totally uncalled for,” he said of the mortgage insurance rule changes. “It definitely had a huge impact and they should have had a program that was customized to parts of Canada that required it.”

Mr. Porter said it will be a few years before it’s clear whether Mr. Flaherty took precisely the right steps or not. “I believe there was broad agreement that something was needed to at least partially cool down the market,” he said.

Mr. Tal noted that changing mortgage insurance rules is a relatively precise tool compared to an interest rate increase by the Bank of Canada, which would have cooled the housing market by pushing mortgage rates up but also would have affected sectors other than real estate.

“If you look at the overall situation, I think that Finance must be pleased by what they’re seeing today,” Mr. Tal added. “I don’t think they see the slowdown as excessive, I think it is exactly what they had in mind.”

Tips for paying off your mortgage faster

Audrey Wamboldt, The Burnside News

 

Mortgages in Canada are generally amortized over 25-year terms. While this seems a long time, it doesn’t have to take anyone that long to pay off their mortgage if they choose to do so in a shorter period of time.

With a little bit of thinking ahead and a small bit of sacrifice, most people can manage to pay off their mortgage in a much shorter period of time by taking positive steps such as:

• Making mortgage payments bi-weekly accelerated! This simple option will lower your interest paid over the term of your mortgage and results in the equivalent of an extra month’s mortgage payment each year. Paying your mortgage in this way can take your mortgage from 25 years down to just 21. Just make sure it’s accelerated bi-weekly to enjoy the savings benefit.

• When your income increases, increase the amount of your mortgage payments. Let’s say you get a five per cent raise each year at work. If you put that extra five per cent of your income into your mortgage, your mortgage balance will drop much faster without feeling like you’re changing your spending habits. We all live to our “cash ceilings” — the more we earn, the more we seem to spend! Being pro-active when you get that raise or bonus will ensure your mortgage is reduced considerably each year.

• Mortgage lenders will also allow you to make extra payments on your mortgage balance each year. Just about everyone finds themselves with money they weren’t expecting at some point or another. Maybe you inherited some money from a distant relative or you received a nice holiday bonus at work. Apply this money to your mortgage lender as a lump-sum payment towards your mortgage and watch the results.

• Round up the pennies. If your mortgage is online, each payday take a look at the remaining balance for that day. Whatever your balance is for that particular day, deposit the equal amount of just the end dollars and cents into your savings account. Once you have $100 saved, apply it as a pre-payment privilege. An example: today if my balance is $ 129,778.34, the extra payment would be $ 8.34 — just the end dollar and cents.

• One last word of caution: remember not to exceed your annual pre-payment privilege limit for increasing your payments or the lump sum privilege. Most lenders allow for an annual prepayment of anywhere between 10 and 20 per cent of the original mortgage balance and they will also allow an increase to your regular payments. Try not to exceed this amount or the savings you would have enjoyed may have to go into a bank penalty!

Contact your bank or mortgage provider to investigate the pre-pay privileges you have on your mortgage.

These simple tips might just help to make you richer than you think! The old adage of ‘save the pennies and the dollars will take care of themselves’ is even more of note in today’s world. By applying these strategies consistently over time, you’ll save money, pay less interest and pay off your mortgage years earlier. And maybe even be able to enjoy early retirement mortgage free!

 

Bank of Canada holds rate steady, but chops growth forecast

Gordon Isfeld, The Financial Post

OTTAWA — Canada’s economic fate could rest strongly on our neighbours to the south, just as long as the crisis in Europe remains contained.

The Bank of Canada is putting stock in a modest recovery in the United States to lift exports and investment in this country, which itself will see slower growth than previously thought.

In its quarterly Monetary Policy Report, released Wednesday, the bank said it now anticipates growth of 1.5% this year, down from 2% projected in the January MPR. In 2014, the economy is pegged to expand by 2.8%, compared with the previous estimate of 2.7%.

Overall, global growth is set at 3% this year, up from the earlier forecast of 2.9%, and 3.6% in 2014, also up slightly from the January estimate of 3.5%.

Tuesday’s outlook from the International Monetary Fund mirrored the bank’s prediction of 1.5% this year, while its estimate for 2014 came in at a slightly lower 2.4%. Globally, the IMF said output would reach 3.3 % in 2013 and 4% next year.

Elsewhere, the bank said the U.S. economy is continuing to expand “at a modest pace,” with the gradually strengthening private demand partly offset by accelerating fiscal conditions.” Policy-makers expect U.S. growth of 2% in 2013 and 3.1% next year.

Never in doubt was the decision by policy-makers to keep its trendsetting interest rate at its near-historic low of 1%, where it has stood since September 2010 as the bank encouraged spending to drive recovery from the 2008-09 recession.

At the same time, the bank is doggedly sticking to its theme that interest rates will eventually be going up, not down.

Significantly, there was no change Wednesday in the bank’s guidance on rates. Some economists had been looking for policy-makers to weaken their slant toward raising borrowing costs.

Instead, the bank’s statement reiterated that the current key rate “will likely remain appropriate for a period of time,” and again citing “continued slack in the Canadian economy, the muted outlook for inflation, and the constructive evolution of imbalances in the household sector.”

Growth in consumer spending, which has pushed household debt-to-income ratios to record highs, is likely to continue a recent slowing trend, the bank said, reflecting “moderate increases in consumption and further declines in residential investment.”

Still, the bank remains cautious about the residential housing market overall. “Despite the recent moderation in the rate of new housing construction, there are still signs of overbuilding, particularly of multi-unit dwellings in some urban areas.”

The Toronto and Vancouver condo markets have attracted the most attention from the policy-makers at the central bank, as well as Finance Minister Jim Flaherty — who in July tightened lending rules on government-insurance mortgages and, more recently, warned financial institution against encouraging consumers to plow into the housing market by offering record-low five-year fixed lending rates.

Business investment and exports, meanwhile, have been slow to kick in and take over as the drivers of the economy.

“Following a weak second half of 2012, growth in Canada is projected to regain some momentum through 2013 as net exports pick up and business investment returns to more solid growth,” the bank said.

“Despite the projected recovery in exports, they are likely to remain below their pre-recession peak until the second half of 2014 owing to restrained foreign demand and ongoing competitiveness challenges, including the persistent strength of the Canadian dollar.”

Help could be on the way, though, with the housing recovery in the United States “delivering important benefits to the Canadian economy.”

Growth in U.S. residential investment will “would be expected to boost Canadian export growth by an average of roughly 1% per year based on historical relationships,” the bank argues.

“The higher income and wealth in the United States generated by the housing recovery will also lead to higher U.S. consumption, further raising demand for Canadian exports. The most direct benefits to Canada will be felt by the forestry sector and other construction-related exports.”

As for inflation, the bank’s main policy target, the level of price increases is expected to remain “subdued in coming quarters” before reaching the optimum level of 2% by mid-2015.

Worst mistakes first-time home buyers make

DIANNE NICE

The Globe and Mail

 

 

When Chris Kiskuna bought her first house in 1985, she was so anxious to close the deal quickly, she skipped the home inspection - a decision she paid for the first time she turned on the tap in the bathroom sink.

"The water's running and I'm hearing it run everywhere and thinking, 'What's happening here?' And I look under the sink: no pipe."

Ms. Kiskuna, a regional sales manager at Royal Bank of Canada, says jumping into a deal is one of the most common mistakes first-time home buyers make. They fall in love with a property, worry about losing out, and throw caution to the wind or spend more than they should.

A house is one of the biggest investments most Canadians ever make, so it's important to plan ahead, to think about what you need in a home and what you can afford.

Getting pre-approved for a mortgage is a great way to budget for a home and signal that you're a serious buyer. However, keep in mind that the amount for which you are approved is the maximum amount the lender feels you can afford based on your income and projected property expenses. That figure doesn't account for other expenses you may face, such as renovations or emergency home repair, as well as regular household costs.

"You know best ... what your costs are, so my advice would be look at what your paycheque is net, line up all those costs, including what you're being told on the calculator is affordable for you, and see what is left at the end of the month," Ms. Kiskuna says. "The last thing you want to do is hang yourself out to dry with [mortgage]payments that are simply too high to carry."

Here are some other mistakes first-time buyers make, and how to avoid them:

Not knowing your credit score

A credit rating is a record of your credit history and current financial situation. A good credit rating can improve your ability to get loans, so if your score is low, you may want to work on improving it before you apply for a mortgage.

Not budgeting for the costs of home ownership

Being a homeowner brings new expenses, including property taxes, higher insurance costs, regular upkeep and an emergency fund for repairs. Don't forget to factor in the cost of any renovations your new home may need.

Not researching down payment choices

Lenders typically require CMHC mortgage loan insurance if you make a down payment of less than 20 per cent, and premiums for that insurance can be as high as 3.25 per cent of the value of the loan. Under the Home Buyers' Plan, first-time buyers can use up to $25,000 in RRSP savings ($50,000 for a couple) for a down payment. A higher down payment will save thousands of dollars in interest over the life of your mortgage.

Focusing too much on interest rates

First-time home buyers rush in to the market when interest rates are low. While rates are important, other things have a greater bearing on the overall cost of home ownership, including the cost of the house, the type of mortgage, the amortization period and payment options.

Not choosing your own payment schedule

Paying off your mortgage sooner saves you interest costs, while a longer amortization period reduces your regular payment and frees up cash flow. You can save thousands of dollars in interest by choosing a shorter amortization period, paying fortnightly instead of monthly, or increasing the amount of payments by even a small amount. Use an online mortgage calculator to run the numbers.

Forgetting about closing costs

When calculating closing costs, assume you will need an additional 1.5 to 2.5 per cent of the purchase price to cover such things as the home inspection, legal fees, land transfer tax, property tax, property insurance, utility hook-ups and moving costs.

Alberta first-time homebuyers expect to spend $406,000

Highest in Canada, ahead of B.C. and Ontario

By Mario Toneguzzi, Calgary Herald

 

 

CALGARY — First-time buyers in Alberta expect to spend $406,000 on a home, the highest average in the country, according to a report released Tuesday by BMO.

The First-Time Home Buyer’s report said the average amount Canadians planning to buy their first home in the next five years plan to spend is approximately $300,000, with an average down payment amount of $48,000 (16 per cent).

First-time buyers in B.C. expect to spend on average $384,000 and it was $326,000 in Ontario.
The report also found: on average, first-time home buyers expect to be mortgage free in 20 years, with 20 per cent estimating it will take between 10-19 years; those planning to enter the real estate market for the first time are twice as likely to choose a fixed rate over a variable rate mortgage (46 per cent versus 20 per cent); and first-timers who expect interest rates to stay the same or decrease over the next five years still prefer fixed rate over variable rate mortgages (39 per cent versus 23 per cent).

“Buying a home is one of the most important financial decisions one can make. It’s crucial that those planning to enter the market are well prepared — not only to manage their costs, but also to pay off their mortgage as soon as possible,” said Laura Parsons, Mortgage Expert, BMO Bank of Montreal. “Determining what your mortgage payments and overall costs of home ownership will look like, and then living in that financial reality for a year before entering the market, can be an effective strategy.”

According to the report, two-thirds of first-time buyers (66 per cent) say the latest changes to mortgage regulations — which included reducing the maximum amortization for government-insured mortgages to 25 years from 30 years — have not affected their buying timeline, while 19 per cent say they will have to wait longer before buying as a result.

The report also found: 63 per cent of first-time buyers have made cutbacks to their lifestyle to save for their first home, with 27 per cent expecting their parents or other family members to help them pay for their first home; 59 per cent have had to hold off buying their first home because of increasing housing prices; and 59 per cent wish they had bought their first home five years ago.

mtoneguzzi@calgaryherald.com

Homebuyers expect to spend $300,000 on first property, poll shows

Linda Nguyen, Canadian Press, as reported in The Financial Post


TORONTO — The average first-time homebuyer in Canada is 29 years old and expects to be able to put down a down payment of $48,000 on $300,000 home, according to a recent poll by the Bank of Montreal.

But the study, released Tuesday, also found that price expectations vary widely, depending on where the homebuyer lives in.

Those in Atlantic Canada say they expect to spend an average of $224,000 on a first home, while those in British Columbia anticipate to pay an average of $454,000.

Vancouver topped the survey as the most expensive city, with buyers there saying they’re going to shell out an average of $539,000 for a home, followed by Calgary at $474,000 and Toronto at $446,000.

BMO mortgage expert Laura Parsons says like with any major purchase, it’s important for people be realistic and prepared.

“What we tend to do is jump in the market when we’re ready, instead of starting a plan now,” she said from Calgary.

“Let’s start getting ready for it so we can start giving you good advice all along the way. Don’t be afraid to get things going.”

And while a large down payment is impressive, it does not necessarily mean that young people are diligently saving for their first home. Instead, many may be getting help from their Baby Boomer parents or friends, said Parsons.

Forty-six per cent of those surveyed also they’ll choose a fixed mortgage rate when they buy, versus 20% who will choose a variable rate.

The study also found that the average first-time homebuyer plans on paying off the mortgage on their home within two decades, with 20% anticipating they’ll be mortgage-free even earlier than that.

Twenty-three per cent of those surveyed say they will still have a mortgage within 25 years; 16% say within 20 to 24 years and 20% say within 10 to 19 years.

On the opposite end of the spectrum, seven per cent say it’ll take them more than 25 years to fully own their home, while 3% say it’ll take them between 1 year to 9 years to pay it off.

The survey also found that 31% admit they really don’t know when they’ll be able to stop making mortgage payments.

The Bank of Montreal (TSX:BMO) report surveyed a random online sample of 2,000 Canadians between Feb. 25 to March 5.

The polling industry’s professional body, the Marketing Research and Intelligence Association, says online surveys cannot be assigned a margin of error because they do not randomly sample the population.

Canadian Press

The West is driving new home price gains in Canada

National Post Wire Services, as reported in The Financial Post


OTTAWA — New home prices in Canada rose by 0.2% in February, the 23rd consecutive month-on-month increase, pushed up by a buoyant market in Calgary, Statistics Canada said on Thursday.

The advance matched analysts’ expectations. Calgary prices rose 1.0% from January — the largest month-over-month increase since May 2007 — on higher material and labor costs. Calgary is the center of Canada’s booming energy industry.

Overall, prices rose in 10 cities, stayed unchanged in nine and fell in two. On a year-over-year basis new housing prices in Canada rose by 2.1% in February, down from 2.2% in January.

The Canadian government, which imposed tighter mortgage rules last July, and the Bank of Canada have long expressed concerns the housing market might overheat.

The new housing price index excludes condominiums, which the government says are a particular cause for concern.

The largest monthly price advances in February came in Regina, where prices were up 1.4%, and in Halifax, where prices were up 0.9% from January.

The Regina increase was largely the result of higher operating costs for builders and a shortage of developed land, while builders cited higher costs for materials, labour and developed land as the primary reasons for the Halifax increase.

Monthly prices declined 0.2% in Ottawa—Gatineau for the second month in a row, while prices fell 0.1% in St. John’s.

Prices remained unchanged in the combined metropolitan region of Toronto and Oshawa following six consecutive months of increases.

Prices were also unchanged in eight other metropolitan regions surveyed.

4 Homebuying Mistakes New Canadians Make

Avoiding common homebuying mistakes can make your transition to Canada that much easier

by Jennifer Goldberg

When Charles Waterman was finally able to purchase his first home in Canada, he was thrilled. “It was a feeling of accomplishment and satisfaction,” says the native Barbadian. “It gave me a sense of pride to live among other homeowners in Toronto.”
Now a real estate agent with Royal LePage, Waterman helps other new Canadians become homeowners. In his line of work, he’s seen immigrants make the same errors as they search for their first property. Here’s his advice on how to avoid common mistakes new Canadians make when entering the real estate market.

Relying on outdated information

It’s a great idea to ask friends and family living in Canada for advice on the homebuying process, but keep in mind their knowledge may be out of date. “Many new Canadians rely on information from friends and family that have lived here a long time, not current information,” says Waterman. “Several years ago, new immigrants had to put down 35 per cent on a home, but today mortgage insurance allows new Canadians to put down as little as 5 per cent.”
Familiarize yourself with current mortgage regulations by contacting a local mortgage professional before starting your home search. Citizenship and Immigration Canada’s website is also a good source of up-to-date information for new homebuyers.

Overlooking benefits to new Canadian homebuyers

There are several assistance programs available to new Canadian homebuyers. For example, the federal Home Buyers’ Plan allows first-timers to withdraw up to $25,000 per year from a Registered Retirement Savings Plan (RRSP) to put towards the purchase of a home. “A new Canadian homebuyer can deposit funds into an RRSP for 90 days before buying a home and receive a tax benefit,” Waterman says.
Newcomers may also be also eligible for the First-Time Home Buyer’s Tax Credit, as well as other assistance programs that make buying a home more accessible.

Thinking it’s too hard to build credit history

“You can find a house you love and even if you have the money to put towards a down payment, you need to have established credit in Canada in order to qualify for a mortgage,” says Waterman. Some financial institutions don’t acknowledge international credit reports, which can make it difficult for newcomers to secure a Canadian credit card when they arrive. However, there are steps you can take to build your credit history in Canada. Demonstrate your financial reliability by opening a Canadian bank account and using it regularly. Paying down department store credit cards, car leases and other small loans also help show lenders that you’re able to make consistent payments.

Assuming a Canadian mortgage is out of reach

“New immigrants may believe that they’re unable to get a mortgage at all because they haven’t worked long enough in Canada,” Waterman says. But that’s not always the case. According to research conducted by Genworth Canada, more than half of new immigrants polled had successfully purchased a home within three years of arriving in Canada. If you have proof of a steady job, you moved because of a job transfer, or you’re working in the same field as you did in your home country, you may be eligible for a mortgage sooner than you think. Contact a local mortgage professional to discuss your options.

Are You Average? This is What First-Time Home Buyers Look Like in Canada

Linda Nguyen – The Canadian Press

 

 

The average first-time home buyer in Canada is 29 years old and expects to be able to put down a down payment of $48,000 on a $300,000 home, according to a recent poll by the Bank of Montreal.

 

But the study, released Tuesday, also found that price expectations vary widely, depending on where the home buyer lives.

 

Buyers in Atlantic Canada say they expect to spend the lowest in the country with an average of $202,000 on a first home, followed by Quebec with $224,000, Ontario with $326,000, British Columbia with $384,000 and Alberta with $406,000. The sample size used in the Prairies was too low to be included in the survey.

 

Meanwhile, the data also found Vancouver to be the most expensive city, with first-time home buyers there saying they plan to shell out an average of $443,000 for a home, followed by Toronto at $347,000.

 

BMO mortgage expert Laura Parsons says that as with any major purchase, it’s important for people be realistic and prepared.

 

“What we tend to do is jump in the market when we’re ready, instead of starting a plan now,” she said from Calgary.

 

“Let’s start getting ready for it so we can start giving you good advice all along the way. Don’t be afraid to get things going.”

 

And while a large down payment is impressive, it does not necessarily mean that young people are diligently saving for their first home. Instead, many may be getting help from their Baby Boomer parents or friends, said Ms. Parsons.

 

Forty-six per cent of those surveyed also they’ll choose a fixed mortgage rate when they buy, against 20 per cent who will choose a variable rate.

 

The study also found that the average first-time home buyer plans on paying off the mortgage on their home within two decades, with 20 per cent anticipating they’ll be mortgage-free even earlier than that.

 

Twenty-three per cent of those surveyed say they will still have a mortgage within 25 years; 16 per cent say within 20 to 24 years and 20 per cent say within 10 to 19 years.

 

On the opposite end of the spectrum, seven per cent say it’ll take them more than 25 years to fully own their home, while three per cent say it’ll take them between one year and nine years to pay it off.

The survey also found that 31 per cent concede they really don’t know when they’ll be able to stop making mortgage payments.

 

The Bank of Montreal report surveyed a random online sample of 2,000 Canadians between Feb. 25 to March 5.

 

The polling industry’s professional body, the Marketing Research and Intelligence Association, says online surveys cannot be assigned a margin of error because they do not randomly sample the population.

When will the housing market rebound?

From TMG The Mortgage Group


This has been a week of reports – all confirming a cooler housing market. On Tuesday April 9, the Canada Mortgage and Housing Corporation (CMHC) reported housing starts were weaker than expected, although edging higher in March. A Statistics Canada report showed the value of Canadian building permits rose a weaker-than-expected 1.7% in February.

BMO Capital Markets senior economist Robert Kavcic sees the housing starts report as a “soft landing” he said in a Globe and Mail interview, noting that, “starts have receded to just above levels seen two years ago.”

In a Royal Bank poll, 15% of those surveyed say they’re likely to buy in the next two years, a drop from 27% from the previous year. Analysts suggest the reason for the delay is that Canadians are paying down other non-mortgage debts. This was proven correct in yet another report, this time from CIBC, that found homeowners are tackling other debts and don’t think they’ll be mortgage-free until they’re 57, which is two years longer than what they expected last year.

A year ago Canada was in the midst of a hot real estate market. Now the Canadian Real Estate Association (CREA) is reporting that actual activity has declined as much as 15.8% below last year’s levels.
We’re also seeing a wide variation in housing prices across Canada. A report by Royal LePage found that prices were up year-over-year nationally, with the exception of Vancouver, Victoria and Saint John, N.B., which had year-over-year price declines.

The once booming real estate sector has turned into a deep housing slump. Even the Spring market has not rebounded as expected. The International Monetary Fund still believes the market is somewhat overvalued, as do many economists. The new mortgage-insurance rules have indeed impacted the market, especially for the first time home buyers. Many analysts suggest the market was correcting itself,that the government’s rule changes were perhaps unnecessary, and may have been the tipping point.

There is no arguing that the market has cooled down. Any hopes of a big rebound this year seems unlikely. So the big question is how long this slowdown will last. For that answer we need to look at both the Canadian and U.S. economies.

Both countries are showing signs of weakness in job creation. Consumer confidence is down; manufacturing is weak. Both economies are expected to grow a sluggish pace of under 2% this year. The Canadian government and the Bank of Canada have consistently lowered their growth prediction as reports are released. The trade gap in Canada has widened and will likely get worse, given the weaker U.S economy – Canada’s major trading partner. There is, however, a bright light –new home construction in the U.S.is increasing -- which is good for our exports.

According to Benjamin Tal, Deputy Chief Economist with CIBC in a weekly Market Insight Report, the economy will remain sluggish until the end of 2013. Given that, like a big ship trying to turn in the middle of the ocean, we think it’s safe to say that it will take until well into 2014 for the economy and the housing market to come alive again.

Canadian housing market ‘in a highly unusual place’

Susan Pigg, Business Reporter, TheStar.com

An unusual combination of factors is fueling house price increases despite a downturn in sales, a new housing survey finds.

Toronto house prices are likely to continue to soften into next year, but will avoid a hotly anticipated major downturn, as “2013 finds the Canadian housing industry in a highly unusual place,” according to a new quarterly housing survey by Royal LePage.
 

The rare combination of low interest rates, flattening house prices and an improving economy “is not something we’ve seen before,” says Royal LePage president Phil Soper.
 

“Typically, one of these variables is moving hard in an opposite direction.”
 

That unusual combination of factors should give buyers some breathing space, as prices flatline and sellers gain some confidence that house values will hold strong, according to the quarterly survey, which shows that despite a significant slowdown in sales since last summer, the average price of a home in Canada increased between 1.2 and 2.4 per cent in the first quarter of this year over the same time last year.
 

“While some have spoken loudly about impending market volatility and dramatic downward pressure on home prices, we are simply not seeing evidence of this,” said Soper, whose company has a network of 14,000 realtors across Canada.
 

“The current environment is very supportive for housing. Those waiting for big declines in home prices will likely be disappointed.”
 

While such optimism is unsurprising from a real estate company, despite the fact sales have plummeted across the country since last summer — especially in the condo sector — the survey of Canadian house prices in the first quarter does provide hopeful signs.
 

Only the once superhot Vancouver and Victoria housing markets, along with Saint John, N.B., have seen significant downturns in house and condo prices, according the annual survey, which looks at seven types of housing in over 250 Canadian communities.
 

Vancouver bungalows, for instance, which still average just over $1 million, saw price declines of 5.1 per cent while condo prices were down almost 6 per cent in the first quarter of 2013, year over year.

Saint John’s declines are largely because an influx of new jobs and consumer confidence, which started four years ago, is starting to peter out, noted Soper.
 

St. John’s, N.L., on the other hand, saw some of the biggest price gains in the country, with two-storey houses up an average 10.6 per cent year over year, largely buoyed by move-up and executives buying pricier homes.
 

While Toronto saw a double-digit downturn in buying activity in the first quarter of this year over last, it has yet to seriously impact prices, the survey shows.
 

The average price of a bungalow was up almost 4 per cent in the first quarter over the same time last year, to $565,700. Even condo prices were up almost 2 per cent year over year to an average $359,671, according to the survey.
 

But Soper noted that those gains are unlikely going forward, even if sales do start to pick up, as Royal LePage expects, later this year.
 

Soper predicts prices gains could slip, possibly into negative territory, by the end of 2013 and would be unlikely to pick up again until into 2015, driving the Toronto market into serious buyers’ territory for the first time since the 2008 recession.

How to get a Mortgage Started with Bad Credit

From Syndicate Mortgages


One out of eight Canadians will file for bankruptcy or settle with creditors. Needless to say Canada mortgage has seen its fair share of potential homeowners who have bad credit.
It will be difficult for you to acquire a mortgage loan if you have a bad credit history. Fortunately there are still ways through which you can have a roof over your heads nonetheless.

Non Traditional Sources

Banks do not lend to people who have a bad credit history. If you happen to be one of them you have your work cut out for you. In cases such as these turning to non traditional lenders will be your best course of action.

Down Payment Requirements for Bad Credit

Lenders will be more willing to oblige you if you put down a 20% down payment of the total value of the property. The reason why is simple. Such an amount would reassure them that there is less risk involved. You would be able to acquire the mortgage since a lender will be able to issue it at the lowest possible rate.
Your down payments, credit and job history will have an equal impact on whether you will be able to apply for a mortgage loan in the country.
However, potential homeowners who have a bad credit history seldom have the cash to put down such an exorbitant sum of money upfront. In fact such a feat is also problematic for the most qualified buyers.
Mortgage with down payments that come up to less than the property’s value (less than 20%) involve high ration loans. Such loans also require the approval of the Canadian Mortgage and Housing Corporation (CMHC).
Lenders also charge higher interest to applicants that are granted BC (bad credit) mortgages since the latter are considered to be high risk. An experienced mortgage broker will work with you to ensure that the interest rate your lender charges is a low as possible.
However it is better to settle for a down payment that is more than 20% of the property’s actual value since doing so will help you achieve preferable rates. You can also achieve payments that are less than 20% if you have a steady income.

Bankruptcy

You will still be eligible for a mortgage loan after bankruptcy if you have a reasonable explanation for your lack of funds. For example, a lender will sympathize with you more if your bankruptcy was caused by a medical emergency. In other words, if your funds were depleted because you spent too much time shopping no lender would oblige you.
A bankruptcy proposal requires that you earn a lender’s trust by having at least two credit accounts. Both of them also need to have a two year track record. For instance in order for lenders to take you seriously you might need to have a $1000 or $2000 credit limit.
It may be possible to apply for a Canada mortgage with a bad credit history, however since your options are limited it is best that you do your research before proceeding any further.