Archive for May 27, 2010

Laurin Jeffrey | May 29, 2010
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New rules cuff some mortgages to banks

Marcel Beaudry, vice-president of ING Direct, says there is no question the new rules will have an impact on consumers looking to switch banks

Garry Marr, Financial Post

A headlock would be the wrestling term to describe the hold Canadian banks will have on some consumers because of new, more strict mortgage rules.

We are already seeing the impact of the changes that came into effect on April 19, but were put in place well in advance by Canadian financial institutions. Consumers are increasingly selecting fixed-rate mortgages of five years or more because it’s easier to qualify for them.

On mortgages for terms of four years or less, including variable-rate mortgages, consumers must be able to pay based on the five-year fixed posted rate, which is now 6.1%. Go longer and you can use the rate on your contract, as low as 4.6%. No more than 32% of your gross income can cover principal and interest, property taxes and heat.

Peter Vukanovich, president of Genworth Financial Canada, the largest private provider of mortgage-default insurance, says only 5% of new high-ratio mortgages are going variable versus 15% just six months ago.

But there is another wrinkle to the new rules: Anybody shopping around for a better rate has to requalify based on their current credit situation. Stay with the same bank and there’s no check.

“It’s definitely a headlock and not a loophole because a loophole you can get out of,” says Vince Gaetano, a mortgage broker with Monster Mortgage.

There is a large percentage of Canadians who get a renewal notice from their bank and just sign on the dotted line. The Canadian Association of Accredited Mortgage Professional has found only 22% of Canadians switch banks at renewal time. A significant portion of the remaining 78% are sheep being led around by their financial institutions.

Those looking for some choice may find what was good enough to get into the market a month ago may not meet the test today.

Consider that as recently as two years ago, consumers were able to buy a house with no money down and a 40-year amortization schedule. If that consumer was making regular monthly payments, they would have paid down only 4.7% of their principal after five years. Today, that customer would still be high ratio and subject to requalifying if they switched banks.

“It’s not all of them, but a majority of first-time buyers with just 5% down or less won’t be able to qualify if they go to another bank,” Mr. Gaetano says. Many of those buyers were qualifying based on the three-year rate – about 200 basis points lower than the current qualification rate.

If house prices went down, something many in the real estate community have suggested could happen, that would be an even bigger blow for consumers. It would mean an even larger percentage of homeowners would still be considered high ratio upon renewal because they wouldn’t meet the test of having 20% equity in their home.

Martin Beaudry, vice-president of lending at ING Direct, says there is no question the new rules will have an impact on consumers looking to switch banks, but noted anyone who had a 40-year amortization and changed institutions also had to requalify and there hasn’t been a huge impact.

“There will be a segment of the population tied down by the new rules to their bank,” Mr. Beaudry says.

That’s a position nobody should be in.

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Contact the Jeffrey Team for more information  -  416-388-1960

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Category: Buying Real Estate, First Time Buyers, General Real Estate, Mortgages | Tags: , , , , , , , , , , , , , ,
Laurin Jeffrey | May 28, 2010
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Dislike of HST could fuel underground economy

By Chris Thompson, The Windsor Star

There is fear in the home renovation industry as the July 1 introduction of the HST looms, and many believe it will lead to more under-the-table cash only work by fly-by-night operators.

“It’s definitely going to put an impact on our renovation side because when you start charging people an additional eight per cent – the (old tax) they were balking at – but the 15 per cent total is definitely going to slow down our business enormously,” said Laura Visser, vice-president of Elora Contracting Ltd.

“The HST is definitely going to have a huge impact on us and I think you’re going to see the underground economy growing even larger.”

Renovators were riding a wave of wealth while the Home Renovation Tax Credit (HRTC) was in effect for the year leading up to Feb. 1.

Mike Dinchik, the executive officer of the Greater Windsor Homebuilders Association, said those in the renovation industry across the province are worried.

“The renovation industry in Ontario is a $20 billion industry and there’s a lot of fear that it’s going to shrink considerably,” said Dinchik.

“It’s going to drive people to the underground and look for cash deals. Nobody likes to pay that tax.”

Reputable renovation companies did a booming business while the HRTC was in effect because to get the credit, you required paperwork and proof of the work from a legitimate company.

With the HST many believe homeowners will turn to cash-only deals to save the eight per cent levy.

“I think the consumer has to be educated a bit better regarding somebody working for cash because for several years we’ve been having a get it in writing campaign in conjunction with the Canadian Homebuilders Association,” said Dinchik.

He said he received a phone call from a man last week who wanted to complain about cabinet work he had done, but it was a cash-only job and there was no receipt.

” I basically said well, you’re basically on your own,” said Dinchik.

One local renovator, Steve Lesperance of Lesperance Renovations, is trying to put a positive spin on the HST.

“I think it will actually give me an opportunity to pass on savings to my customers,” said Lesperance, a former Chrysler worker who started his company four years ago.

“I can do promotions and that. Offer HST free and that.”

Lesperance said he believes that in the long run the HST should lower his costs.

Renovators say business has dropped off since the end of the HRTC, but believe it may pick up as people realize the HST implementation is on the horizon.

Dinchik said there has been some lobbying of the government for some kind of rebate, to no avail.

According to a recent report by research firm Altus Group for the Canadian Home Builders Association, more than 22 per cent of all renovators in Ontario operate underground, meaning they work for cash and do not provide receipts or contracts guaranteeing their work.

Visser said when she gets call seeking estimates, she asks if the caller is making sure the competing bidders have proper insurance.

“Even if they do come in a little less expensive, if they do get hurt you are definitely going to feel some repercussions,” said Visser, noting that if an illegitimate uninsured contractor is injured while working on your home, they can sue you.

“Trying to be above board and legit makes it very difficult.”

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Contact the Jeffrey Team for more information  -  416-388-1960

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Category: Ajax Real Estate, General Real Estate, Miscellaneous, Pickering Real Estate, Renovation and Maintenance | Tags: , , , , , , , , , , , , ,
Laurin Jeffrey | May 27, 2010
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Energize this country

By getting behind renewable energy technology — we’ll reduce our dependence on large-scale energy suppliers and energy sources that produce a high level of greenhouse gas emissions (GHGs).

Mike Holmes, Canwest News Service

We all want to reduce our environmental footprint and be more responsible about how we live. I spec-in sustainable materials in all the houses I design and build, and whenever possible, make the better, greener choice.

It was a disappointment to have the federal ecoENERGY Retrofit program cancelled. I’m just a contractor, not a politician, but it seems that was a government program that was working. Homeowners were rewarded for putting in energy-saving appliances or spending their renovation dollars on a superior envelope that will improve energy efficiency.

If the federal budget was fully allocated that’s because the program was a success and it should be continued and expanded. So then let’s direct more money toward it – fast.

Incentives to shift to renewable energy sources are smart and long overdue.

One way to do that is to reduce our dependence on energy that comes from non-renewable sources. By getting behind renewable energy technology – we’ll reduce our dependence on large-scale energy suppliers and energy sources that produce a high level of greenhouse gas emissions (GHGs).

What’s renewable energy? Energy from such sources as solar, wind, water and biomass – they’re free. And most importantly, it’s available at a local level, unlike conventional fuels that typically are generated long distances from where it’s ultimately used.

If we can decentralize our dependence on big suppliers of energy, we’ll be less vulnerable. The big blackout of 2003 that took out millions of homes in North America wouldn’t have been such a big deal if we weren’t all dependant on the grid.

And if we start to create our own power through microgeneration from renewable sources we’ll also reduce GHGs. And the more people able to create energy means more energy available to use, and lower costs.

Solar energy is unlimited. It can be harnessed right where you use it – the roof of your home. The only drawback is the initial cost of investment, which can be expensive, and they can take a long time to pay back, so without some kind of break, homeowners often just can’t consider it. If there were some rebate program that helps people reduce the initial cost of installing a renewable energy microgeneration system into homes, we would all benefit.

Wouldn’t you love to control your source of energy? What about if you could even sell extra energy back to the grid, so instead of just paying, you could profit?

Let’s start moving in the right direction on this by making choices and by empowering people across the country to do the right thing.

Naydene Lewis is a town councillor in Okotoks, Alta., who’s putting forth a motion that makes a lot of sense to me. In fact, a lot of forward-thinking municipalities across the country – like Okotoks – have already endorsed it.

She’d like to see more incentives that encourage renewable energy installations by homeowners, who can tie into the grid and provide small-scale power generation.

This is the sort of grassroots movement that we should all get behind; individual homeowners, local municipalities – that’s where change happens. It’s not going to come from big government (though that would be nice to see). Sustainable energy projects and initiatives should be owned and developed by the residents of a community where the project is located.

If we invest in renewable energy, we’ll go a long way to making it right.

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Contact the Jeffrey Team for more information  -  416-388-1960

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Category: General Real Estate, Green Housing, Miscellaneous, Renovation and Maintenance | Tags: , , , , , , , , , , , , , ,
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