Canadians purchase homes for a variety of reasons. Some want the stability of owning their own home, while others also look at home ownership as an investment vehicle. No matter what the reason, the truth is that home ownership has proven itself to be a good stable investment over time, and one which many Canadians are profiting from.

While many people have chosen to purchase their first home during these times of lower interest rates, there has also been a large movement to refinance home loans and pull out equity for home improvements, investments, college expenses, and even high interest debt consolidation. Canadians have been borrowing against their home’s equity in record numbers, taking out billions of dollars in cash each year.

In years past, many saw their homes as a shelter of safety, yet today, they are more than ever before willing to borrow against the equity owned in their homes to further their investment portfolios, get out of debt, send their children to university, make improvements to their home, or even boost their RRSP contributions. Where home equity was once sat upon, today it is something to be tapped out and used to one’s advantage.

While tapping the equity in your home can be a good idea, you should do so with caution and understand any of the possible consequences. The best thing you can do is contact me, a licensed mortgage professional and/and financial planner to discuss opportunities to make your home’s equity work for you.

The provincial and federal government have forced some Canadians into looking for real estate than they thought. Both have ushered in two different laws that will cost buyers money.

At the provincial level the government has implemented the HST (Harmonized Sales Tax), effect July 1, 2010. It is a 12% tax on new homes and condominiums priced to $525,000.00. Homes costing less than the stated amount will be eligible for a rebate, up to a maximum of $26,250.00. The rebate will only apply to primary residences, not second homes or investment properties. Check out this link for additional information, http://www.sbr.gov.bc.ca/documents_library/shared_documents/HST/new-housing-rebates.pdf

On April 19, 2010 the federal government is trying to brace the Canadian real estate buyers market for the increase in interest rates. The first adjustment has been made to the qualifying details. Mortgage insurers will have to ensure that all borrowers qualify using a 5 year fixed rate when calculating the debt servicing ratios. Secondly, borrowers seeking financial flexibility can currently refinance their mortgage and increase the amount they are borrowing on the security of their home up to a limit of 95% of the value of the property. The adjustment will lower the maximum amount of the mortgage loan in a refinancing of a government-backed high-ratio mortgage loan to 90% of the value of the property, consistent with the principle that home ownership is a tool for savings. Lastly, a minimum down payment of 20% is required for non-owner-occupied properties. At present, borrowers may purchase a residential property with a 5% down payment. The change will require a 20% down payment for small non-owner-occupied residential rental properties. Borrowers purchasing owner-occupied residential properties which also include some rental units (such as a duplex) will still be able to access government-backed mortgage insurance with a 5% down payment.

Contact me to find out how these changes in legislation will effect your real estate transaction.

DREAM TODAY. OWN TOMORROW.

Just because your mortgage term has not expired, doesn’t mean you cannot take advantage of the low interest rates. Let me show you some numbers, which might help you, think about your current mortgage and how I might be able to put more money into your pocket on a monthly basis.

Client ‘X’ current mortgage

Original Balance – $515,250.00

Outstanding Principal (after 1 yr of payments) – $510,500.00

Amortization – 40 yrs

Interest Rate – 5.02%

Term – 5 yrs

Mortgage – fixed

Payment Frequency – semi monthly

Payment – $1235.00 ($2470.00/month)

By switching to a modest 3.85% fixed 5 year rate client ‘X’ is saving $206,874.12 over 35 year amortization (Please note that 40 yr amortization schedules are no longer offered in Canada), $286.00 per month or $3,432.00 per annum or $17,160.00 over 5 years. There are countless things one could do with that money; pay your property taxes, take a vacation, small home renovation, RRSPs, etc… Remember by decrease the amortization period, even slightly, we allow you to put more of your hard earned money towards the principal and less into the bottomless pit of interest.

If you do consider switching lenders for a better rate and paying out your current mortgage before term maturity, there may be a penalty issued from you current lender and additional closing costs for the new mortgage.

Before you begin searching for a home, it’s always helpful to think about your needs both now and in the future. And if you have any questions about the home-buying process or different types of real estate, you can always ask me or your real estate agent for input.

Following are some things to consider when you’re deciding which type of home to buy:

Location. Do you want to live in a city, town or in the countryside? How long will your work commute be? Where will your children attend school and how will they get there? Are you close to amenities?

Size requirements. Do you need several bedrooms, more than one bathroom, space for a home office, a two-car garage?

Special features. Do you want air conditioning, storage or hobby space, a fireplace, a swimming pool? Do you have family members with special needs? Do you want special features to save energy, enhance indoor air quality and reduce environmental impact?

Lifestyles and stages. Do you plan to have children? Do you have teenagers who will be moving away soon? Are you close to retirement? Will you need a home that can accommodate different stages of life?

New Versus Resale Homes

When thinking about your ideal home, the first thing you should consider is whether you want a previously owned home (often called a resale) or a new home. Here are some characteristics that may help you decide:

New Home

Modern design. A new home has an up-to-date design that takes into account the latest trends, materials and features.

Personalized choices. You may be able to upgrade or choose certain items such as siding, flooring, cabinets, plumbing and electrical fixtures.

Up-to-date with the latest codes/standards. The latest building codes, electrical and energy-efficiency standards will be applied.

Maintenance costs. Maintenance costs will be lower because everything is new and many items are covered by a warranty. You should still set aside money every year for future maintenance costs.

Builder warranty. This is a warranty that may be provided by the builder of the home. Be sure to check all the conditions of the warranty. A homebuilder’s warranty can be important if a major system such as plumbing or heating breaks down.

Neighbourhood amenities. Schools, shopping malls and other services may not be complete for years.

Extra costs. You may have to pay extra if you want to add a fireplace, plant trees and sod or pave your driveway. Make sure you know exactly what’s included in the price of your home.

Resale Home

You can see what you are buying. Easy access to services. Probably established in a neighbourhood with schools, shopping malls and other services.

Landscaping is usually complete and fencing already installed. Previously owned homes may have extras like fireplaces, finished basements or swimming pools.

No GST. You don’t have to pay the GST unless the house has been substantially renovated, and then the taxes are applied as if it were a new house.

Possible redecorating and renovations. You may need to redecorate, renovate or do major repairs such as replacing the roof, windows and doors.

Deciding Which Type of Home to Buy

There are many types of homes to choose from and each has its advantages and disadvantages. Think about your needs before making a decision, and don’t forget to look beyond the interior walls. The environment surrounding your home can be as important as the environment within.

Following are some different types of homes from which to choose:

Single-Family Detached – A home containing one dwelling unit that stands alone and sits on its own lot, thereby offering a greater degree of privacy.

Semi-Detached – A single-family home that is joined to another one by a common wall. It can offer many of the advantages of a single-family detached home and is usually less expensive to buy and maintain.

Row House or Townhouse – Many similar single-family homes, side-by-side, separated by common walls. They can be freehold, condominiums or rental units. They offer less privacy than a single-family detached home but still provide a separate outdoor space. These homes can cost less to buy and maintain – but they can also be large, luxury units.

Link or Carriage Home – Houses joined by garages or carports, which provide access to the front and back yards. Builders sometimes join basement walls so that link houses appear to be single-family homes on small lots. These houses can be less expensive than single-family detached homes.

Condominiums or Stratas – A condo or strata is a form of ownership, not a type of construction. They can be high-rise residential buildings, townhouse complexes, individual houses and low-rise residential buildings.

In today’s economic climate of tighter credit requirements and increased unemployment rates taking their toll on some Canadians, there’s no doubt that many people may not fit into the traditional banks’ financing boxes as easily as they may have just a year ago. Your best solution is to consult with me first to help you get your credit repaired quickly or if you face a longer road to credit recovery. Either way, there are solutions to every problem.

If you have some equity built up in your home and still have a manageable credit score, for instance, you can often refinance your mortgage and use that money to pay off high-interest credit card debt. By clearing up this debt, you are freeing up more cash flow each month.

In the current lending environment, with interest rates at an all-time low, now is an ideal time for you to refinance your mortgage and possibly save thousands of dollars per year, enabling you to pay more money per month towards the principal on your mortgage as opposed to the interest – which, in turn, can help build equity quicker.

Following are five steps you can use to help attain a speedy credit score boost:

1. Pay down credit cards. The number one way to increase your credit score is to pay down your credit cards so you’re only using 30% of your limits. Revolving credit like credit cards have a more significant impact on credit scores than car loans, lines of credit, and so on.

2. Limit the use of credit cards. Racking up a large amount and then paying it off in monthly instalments can hurt your credit score. If there is a balance at the end of the month, this affects your score – credit formulas don’t take into account the fact that you may have paid the balance off the next month.

3. Check credit limits. If your lender is slower at reporting monthly transactions, this can have a significant impact on how other lenders may view your file. Ensure everything’s up to date as old bills that have been paid can come back to haunt you.

Some financial institutions don’t even report your maximum limits. As such, the credit bureau is left to only use the balance that’s on hand. The problem is, if you consistently charge the same amount each month – say $1,000 to $1,500 – it may appear to the credit-scoring agencies that you’re regularly maxing out your cards. The best bet is to pay your balances down or off before your statement periods close.

4. Keep old cards. Older credit is better credit. If you stop using older credit cards, the issuers may stop updating your accounts. As such, the cards can lose their weight in the credit formula and, therefore, may not be as valuable – even though you have had the cards for a long time. You should use these cards periodically and then pay them off.

5. Don’t let mistakes build up. You should always dispute any mistakes or situations that may harm your score. If, for instance, a mobile phone bill is incorrect and the company will not amend it, you can dispute this by making the credit bureau aware of the situation.

If, however, you have repeatedly missed payments on your credit cards, you may not be in a situation where refinancing or quickly boosting your credit score will be possible. Depending on the severity of your situation – and the reasons behind the delinquencies, including job loss, divorce, illness, and so on – I can help you address the concerns through a variety of means and even refer you to other professionals to help get your credit situation in check.  

Federal Finance Minister Jim Flaherty announced changes to mortgage insurance rules this morning, which are set to come into force on April 19th, 2010.

Hybrid mortgages – also known as 50/50 mortgage products – include an equal mix of fixed-rate and variable-rate components within your single mortgage. This means you get the best of both worlds – the security of fixed repayments with the flexibility of a variable rate.

Although there was a time in recent years when mortgage experts considered a variable-rate mortgage as the obvious choice to save mortgage consumers money over the long term, with fixed rates remaining near historic lows, a 50/50 mortgage may be a great alternative for you.

In essence, since it’s extremely difficult to accurately predict rates over the long term, a 50/50 mortgage offers interest rate diversification, which can help reduce your level of risk.

If you opt for a 50/50 product, half of your mortgage is locked into a five-year fixed rate and half is at a five-year variable rate. You can lock in your variable-rate portion at any time without paying a penalty. As well, each portion of the 50/50 mortgage operates independently – like two separate mortgages – yet the product is registered as only one collateral charge.

The 50/50 mortgage product is well-suited to a variety of borrowers, including those who:

– Would normally go fully variable but are afraid prime rate is at its bottom

– Aren’t comfortable being locked into a fully fixed rate

– Can’t decide between a fixed or variable mortgage

– Savvy first-time homebuyers

Some features of the 50/50 mortgage include:

– 20% annual lump-sum pre-payment privileges

– 20% annual payment increase ability

– Portability (the option to transfer your existing loan amount to a new property without penalty)

As the 50/50 option is a fairly new offering, according to a recent study by the Canadian Association of Accredited Mortgage Professionals (CAAMP), 5% of Canadian mortgage holders have 50/50 mortgages compared to 28% with variable-rate mortgages and 68% with fixed-rate mortgages. But many experts believe the 50/50 mortgage is quickly

There are two major credit reporting agencies in Canada, Equifax and TransUnion. An account with usually both these credit reporting agencies is created when a consumer applies for credit. The creditor (bank, Credit Card Company, department store, etc.) would report this transaction to the credit reporting agency, thus creating the consumer’s account, and continues to send reports as long as the consumer has credit with them. There are very few situations in which the extension of credit to a consumer does not result is a report going to the credit reporting agencies.

The credit reporting agencies then track all the credit information reported to them and thus create the consumer’s credit profile. The credit information collected reflects the amount of credit an individual has accumulated, minimum amount of payments, the regularity of payments, any missed payments, credit judgements against them, etc. The credit report also lists their employer, or if self employed,occupation, address, date of birth and social insurance number, who has extended the credit, to whom the consumer has requested credit from, and often any former names (aliases).

Beacon Score

The assessment of the consumer’s credit worthiness by the credit reporting agency is based on statistics and various calculations that are translated into a credit score. Equifax calls their score a “Beacon Score”, while TransUnion calls their score an “Impercia”. A credit score is a risk assessment. It is a prediction of the consumer’s probability or likeliness to default on a debt over a 2 year period. The lower the credit score, the higher the risk of default. Since Equifax is used most commonly, I will refer primarily to the Beacon score. A beacon score can range from 300 to 850. Creditors usually interpret the score as follows:

680 – 850 : good to superior credit

600 – 679: average to good credit

570 – 600: below average credit

Below 570: poor credit

There are 5 main factors that influence the beacon score:

1. Payment History: typically contributes 35% of the score;

2. Amount of credit outstanding: same as above, about 35% of the score;

3. Length of credit: approximately 15% of the weight in a score;

4. Number of new credit enquiries: approximately 10% of the score;

5. Types of credit sought: about 10% of the score.

It is important to note that a high beacon score and relatively new credit profile may not necessarily lead to a credit approval. The creditor may not view the short period of credit history as sufficient evidence of the consumer’s ability to handle debt repayment.

Remember this is a working document and you repair any bad credit over time. Don’t have too many credit cards or credit inquiries as this will work against your credit profile. When you’re in the process of purchasing a new home and applying for a mortgage it is vital to put most or all purchase ON HOLD, until after the funding date. If you have any doubts, please ask me!

VANCOUVER — Metro Vancouver house prices reached a new peak level in January while the overall pace of sales across the Lower Mainland eased off the torrid pace seen in December, according to reports from the region’s real estate boards. In Metro Vancouver, the benchmark price for a single-family home, the average price for typical homes sold, hit $788,499, some 20 per cent above January a year ago, when prices were still falling during the economic downturn, and two per cent above the previous peak of $771,250 in May of 2008.

In the rest of Metro Vancouver within the Real Estate Board of Greater Vancouver’s territory, house prices are still below their previous peaks. While the bounce-back has been rapid, Tsur Somerville, a real estate expert at the University of British Columbia, said the new highs are less concerning given that mortgage rates remain at near record lows. “That carrying cost and monthly mortgage payment is still down [from peak levels],” Somerville, director of the centre for urban economics and real estate at the Sauder School of Business at UBC, said in an interview. Somerville added that with overall sales cooling a bit in January compared with last December’s high level, the rate of price growth is likely to slow as well. Sales across the Lower Mainland in January eased off their December pace.

In Metro Vancouver, realtors recorded 1,923 sales through the Multiple Listing Service in January, which was more than double the number of sales in the same month a year ago, but off almost 24 per cent from the pace of sales in the previous month. In the Fraser Valley, realtors saw 981 sales through the Multiple Listing Service in January, off 22 per cent from December, but still more than double the number of sales from the same month a year ago when markets across the Lower Mainland had nearly ground to a halt. “Sales are not declining,” Somerville added. “But we’re slowing the rate of [sales] growth to something that makes more sense.” He said January’s sales, while below 2005 levels, the region’s peak year for transactions, the month was still on par with 2006 and 2007, which were busy years on the region’s historical scale.

Somerville guessed that some of this year’s reduction in sales may be Olympic-influenced. Condo owners who are renting their properties out for the Games are more reluctant to list them for sale until the event is over.

Homeowners put 5,147 properties on the market in January, which was 139 per cent more than were listed in December, and was 39 per cent higher than in January 2009. Sellers listed 2,941 properties for sale in January, a near doubling from the number of new listings put up for sale in December.

The benchmark price for a Fraser Valley single-family home, the average value of typical homes sold, hit $500,931 in January, up almost 11 per cent from the same month a year ago, but still slightly below peak levels.

Lower Mainland real estate markets saw prices jump again in January, in some locations beyond previous peak levels to new records. Below are some year-over-year examples of benchmark prices, which are average prices for typical homes sold.

Metro Vancouver Price Point

Single family: $$788,499 +20%

Townhouse: $482,478 +13%

Condominium: $385,487 +15%

Fraser Valley Price Point

Single family: $500,931 +11%

Townhouse: $317,719 +8%

Condominium: $243,470 +10%

Source: Real Estate Board of Greater Vancouver, Fraser Valley Real Estate Board