Durham Region Real Estate Blog

How come everyone wants a piece of my pie and I can’t ever seem to get a piece of theirs? I’m sure plenty of us feel that way. Years ago I knew a girl who moved to northern British Columbia with her boyfriend. Nature freaks – both of them! (Good thing too, or they might not have survived!) Now I’m not talking northern B.C. like Prince George or Prince Rupert, but Atlin. And not even Atlin, they lived way outside of Atlin, just south of the Yukon border…..in a TEEPEE!! They bathed in a hot spring and got a great deal of food from the local indians!! Now if that is the way to keep a piece of your own pie, then I say, “You can have my pie”!

There is a better way. At 1.85%, a variable-rate product today may look as attractive as ever, but the five-year fixed-rate closed mortgage is falling fast. Brad Vokins, Mobile Mortgage Specialist with RBC Royal Bank is quoting a five-year-fixed-rate at 3.64%. What if the banks reduce the long-term rates even more!

In the past variable rate mortgages have benefited the consumer far better than fixed-rate mortgages, but the time may be turning. the central bank has raised rates a couple of times now and will likely continue to raise rates. No one expects that the next five years will follow the past five years, so you may be able to argue that it is a good idea to lock in now.

Bank of Montreal is forecasting another 25 basis point move in September and says rates will climb another 1.5 percentage points by the end of 2011. If this is correct, by 2012, the variable-rate products out today would come in at just above 3.75%, if the discounting remains the same. And some banks are forcasting that the variable-rate product you can get today will end up at 6% by 2015. Fears of such a scenario are driving people into fixed-rate products again. That, plus new mortgage rules that make it easier to qualify for a mortgage if you go for a fixed-rate product with a term of five years or longer.

The Bank of Canada is doing what it said and increasing rates. The prediction is that the increases will continue, so now is a good time to consider locking in for a term. It makes sense, but with variable rate still under 2%, it’s easy to see why people wouldn’t want to lock in. If you are secure in your financial situation, you might just want to keep riding the variable wave.

There just never seems to be a clear answer on whether to lock in or stay variable, but this much is clear. Mortgage rates are low. Really low. And with them so low, it’s a great way for you to increase your piece of the pie. Take advantage, negotiate the lowest rate possible, then keep your payments a little higher and watch the principal amount of your mortgage decrease every month. You’ll be mortgage free in no time!  Then throw a big party and eat your own pie!

As Realtors® we often forget how intimitating it can be to buy or sell a home. We do transactions and discuss the industry daily and forget that not everyone lives and breathes real estate. So this blog is hopefully a refresher course for those who need it and a few helpful tips for those new to the exciting world of home ownership.

It’s all over the papers that the market is cooling (and it is, but the sky is not falling….but that’s another blog!) and with a cooling  market it is that much more important to create a plan before jumping into the market.

Our neighbours to the south have experienced a housing burst but thankfully, we have not. More conservative regulations helped to prevent people from getting in over their heads. Yet another reason to be glad to be a Canadian!

But the market is different now than it was so anyone buying a house needs to be extra careful they have all their ducks in a row. Here are six things to remember to ensure you end up with the house of your dreams.

1. Build your team – You need a knowledgeable real estate agent, lawyer and mortgage broker. (Hopefully this is where you decide to call me! But really, just make sure you choose someone you can trust to help you make the decision that is right for you at this time in your life.)

2. Get a pre-approval – Having a great mortgage broker on your side can give you great peace of mind. They will lock in your mortgage rate for up to 120 days. Keep in mink that pre-approvals are almost always subject to certain conditions that you will need to meet before financing is confirmed. To protect and ensure that you can afford to buy the house of your dreams, it is a good idea to have a condition for financing on any offers to purchase a house.

3. Set a budget and stick to it – It’s hard not to let emotions take over during the home buying process. Your pre-approval amount is what the bank is willing to lend you and may not necessarily be an amount you can comfortably afford to pay, after taking into consideration your lifestyle needs. Do you have an active social life? Do you enjoy eating out? Are you planning on having kids? Are you saving for your RRSPs? When a bank provides an approval, they are based on CMHC guidelines, not the costs associated with your lifestyle.

For example, your financial institution will examine your gross debt servicing. Your monthly housing costs should not exceed 32% of your gross monthly household income. Housing costs include monthly mortgage payments, taxes, heating expenses and half of monthly condominium fees (if you are buying a condo). Your mortgage lender will also examine your total debt servicing ratio. This is your entire monthly debt load and it should not exceed 40% of your gross monthly income. This includes housing costs such as property taxes, heating costs and condo fees and other debts such as car payments, personal loans and credit card payments.

4. Factor in closing costs -  Far too often people are surprised when they get the final statement of adjustments from their lawyers and are left scrambling to come up with thousands of dollars to cover the shortfall. On top of the purchase price, there are also land transfer tax and legal fees. For example you must pay the Provincial Land Transfer Tax (first time buyers are eligible for a rebate), lawyer fees, maybe land taxes and an oil tank fill up. If you are buying in a new development, you may also be responsible for development charges, such as education levies and fees for enrolment in Tarion Warranty Corporation and installation of hydro meters. My advice? When negotiating the purchase of a new home, you should put a cap on all these extra charges. For example, if you capped all your developments charges and levies at $3,000, this is the maximum the builder could charge you at closing time, regardless of what the actual fees should be.

5. Title Insuance – Title insurance and identity theft coverage offer peace o fmind and protection. Although real estate title fraud is far less frequent than other forms of identity theft, it is a violation that can have devastating and long lasting effect on its victims.

And finally, once you are happy and settled in your new home, the journey is not over, it is just beginning. The goal is to pay off your mortgage as soon as comfortably possible. Try this:

6.  Bump up frequency of your payments – To save substantially on your interest costs and pay off your mortgage faster, set your payments to rapid weekly or bi-weekly mortgage payments options instead of monthly. The total outlay is only slightly greater than if you coose to pay monthly, but the impact on the bottom line is amazing. For instance, if you started with a 25 year amortization, by making rapid bi-weekly payments you would pay off your mortgage in 21. 4 years instead of 25. This saves tens of thousands of dollars in interest costs!

Regardless of where we are in the economic cycle or how robust the real estate market is, we all need a home, Finding the right home to suit your budget, your lifestyle and your aspirations is always a challenge. But with the right team, the right tools, a little patience and a little luck, you may be moving into the house of your dreams sooner than you ever imagined!

The Durham Region is a great place to live, pick a large city, Oshawa, or choose a smaller hamlet, Hampton and settle right in. Plenty to do and see and home in all price ranges. If you are a first time home buyer, you are eligible to receive a provincial tax rebate. The maximum rebate for you is $2,000.

Provincial Land Transfer Tax is payable anywhere in Ontario, so even if you choose to purchase your home outside the Durham Region, you are still eligible for the rebate. (Though Blair and I hope you choose to live here ….. we need more friends!) The maximum rebate of $2,000 is equivalent to the provincial tax payable on a $227,500 property.

Of course, just like anything else, there are some eligibility requirements. The buyer must be at least 18 years old and occupy the house as his or her principal residence. The buyer cannot have previously owned a home, anywhere in the world, at any time. And finally, if the buyer has a spouse, the spouse cannot have owned a home, or had any ownership interest in a home, anywhere in the world while he or she was the purchaser’s spouse. If this is the case, no refund is available to either spouse. There is a chance you can get the rebate if the buyer’s spouse owned an interest in a home before becoming the buyer’s spouse but not while the buyer spouse.

There is more information available by calling the Ontario Ministry of Finance: 1-800-263-7965.

So there you have it. A little tax break for you as a first time home buyer. And maybe the rebate won’t pay for all the tax you put out, but it’s a start. With interest rates still so low, plenty of listings on the market and a little incentive from the tax-man, maybe now is just the right time for you to get into the market and start paying yourself instead of your landlord! As always, feel free to ask questions and post your comments.