Ajax Pickering Real Estate Blog

By Kathy Flaxman - Globe and Mail

When 37-year-old Halcyon McIntosh bought her stylish two-bedroom, two-bathroom condo on St. Clair Avenue West, a half-minute walk from Yonge Street, she certainly knew the advantages of a 40-year mortgage. But she decided it wasn’t for her.

She opted for a 25-year amortization, which means, if she stays with that term, she’ll have her home paid off while she’s still young enough to read the numbers on her watch. Yet the 40-year period was tempting.

“If I were planning to sell my place in a year or two, I might have been interested in financing like that,” the accountant says. “Why pay more every month than you have to? But I don’t have that in mind. I want to stay here and see how I like condo life.”

A 40-year amortization is relatively new to the Canadian market. It’s designed to help people enter the real estate market and cope with high house prices. (Fifty-year amortizations are being offered by smaller lenders that don’t require mortgage insurance, such as that provided by Canada Mortgage and Housing Corp.)

Toronto financial planner Wayne Bryson points out that the smaller payments with a 40-year amortization give consumers more flexibility and choice.

These products make a home — or a larger home — more affordable, he adds. “These days, people live longer and they work longer and they want to afford different things. Depending on their cash flow, they can repay the mortgage more quickly as their income grows. Perhaps they will get a bonus or inherit [money]. This will be attractive to a younger market that does not have a lot of cash. Home prices are way up there.”

Using the TD Canada Trust mortgage calculator, a $300,000 mortgage at 7 per cent interest would cost about $260 less a month with a 40-year amortization than it would with a 25-year amortization ($1,842.56 compared with $2,101.25). To take a phrase from David Suzuki’s commercials on energy conservation, you could buy a lot of beer with that.

But the downside is the total interest paid over the life of the mortgage. Using the same mortgage as an example, the total interest with a 40-year amortization would be $385,038, compared with $257,868 with the 25-year amortization, a difference of $127,170.

Mortgages come up for renewal every few years, of course, and a homeowner may decide to opt for a less-expensive overall option when his or her financial situation changes.

John Caprara, who as Eastern Canada sales manager for TD Bank Financial Group deals with real estate and personal lending, points out that some people who may want to own homes may also be tied down to significant financial obligations that will be temporary. Their earning potential may, however, be excellent.

“A professional with a large student debt who is setting up a practice is a good example,” he says. “The 40-year amortization mortgage option will give them access to a home. But they do not necessarily have to carry the mortgage debt for that long. They can accelerate or increase their payments as the situation changes. The previous generation was focused on paying off debts as quickly as possible. This generation is accepting of this type of planning.”

But he stresses: “People need to do some homework when they are planning their finances.”

Ms. McIntosh agrees that a long amortization could be beneficial for some people. “There are a lot of aggressive and creative lending options in the [United] States,” she points out. “This type of product could help a young couple with a few kids. Say both the husband and wife work and they have three kids. It’s hard to bring up a family in an apartment. This could enable them to buy a home.”

But if the real estate market changes and house prices fall, this method of financing could spell bad news for that family.

Giles Osborne, Toronto manager with Parker Prins Seel Chartered Accountants, feels that because the family or individual who purchases a home with 40-or 50-year financing may have less available cash (which perhaps led to the decision in the first place), they will be more vulnerable should interest rates rise or house prices fall. The payments could rise, but the borrower might not have the funds to meet them.

“If house prices fall, and someone has to sell a house for less than they paid, that can be a very difficult situation,” Mr. Osborne says.

“If borrowers do not have sufficient financial resources, perhaps they shouldn’t be buying a home in the first place,” he adds. “Buying a home without a down payment, with a high-ratio mortgage or with an extended amortization period all expose the buyer, and are detrimental to the real estate market. What can happen is that buyers are purchasing homes that they really can’t afford.

“In the States, you can see the situation. Interest rates have gone up, investment has gone down along with consumer spending and there is unemployment. In this situation, people stop buying houses and there is a glut of unsold homes that builders have to get rid of.”

Circumstances alter cases, however. “Say you would save $200 a month with a 40-year mortgage,” Mr. Osborne says. “If you will get your foot in the door and in two years the house you are buying will be worth twice as much and you will be earning twice as much, this could be valid. You have to ask yourself why you need to save that money. Are you really stretched? Keep in mind though, tons and tons of people lose their houses by getting overextended.”

There don’t seem to any hard numbers, but industry sources say that the interest in 40-year mortgages has been higher than expected, and they don’t think there is a unacceptable risk in such products.

“The 40-year mortgages are quite popular,” says Steve Mennill, director of product and strategic direction for Canada Mortgage and Housing. “People get more cash flow to use at their discretion for a longer payment period [with the longer amortization periods]. We are very careful when we qualify a buyer. We check their credit history and their debt ratio. We would not view this as more risky for us or for the consumer.”

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CanWest News Service

Home sales in Canada’s major real estate markets during the third quarter of 2007 edged back 4.1% from the previous quarter’s record levels but remained strong, according to an industry report released Tuesday.

Seasonally adjusted figures show that 89,482 units were sold in the third quarter of 2007, the third highest quarterly figure on record, according to the Canadian Real Estate Association.

The report indicated that the quarterly decline was mainly due to fewer unit sales in Edmonton, Calgary and Montreal. Reductions in these major real estate markets more than off set the increase in sales activity in Vancouver.

“Resale housing activity remains strong, but it is beginning to ease back from its breakneck pace recorded in the first half of the year,” said the Canadian Real Estate Association chief economist Gregory Klump. “Sales activity remains on track to set a new annual record this year.”

The report said that on a year-to-date basis, sales activity is well ahead of levels recorded last year. There were 291,003 units of sales in Canada’s major real estate markets in the first nine months of 2007, an increase of 8.7 per cent from the same period in 2006. The Canadian Real Estate Association statistics indicated that year-to-date transactions remained above year-ago levels in almost all of the major markets surveyed.

The report authors argued that a substantial increase in new listings caused markets in Calgary, Edmonton, Saskatoon and Regina to become more balanced. By contrast, markets in Vancouver, Victoria, Winnipeg, Toronto, Kitchener-Waterloo, Ont., Ottawa and Saint John, N.B. have become tighter since the year began according to the report.

“The recent surge in new listings has quickly put major markets in Alberta into balanced territory,” Klump added. “Buyers in those markets will likely take shop, and remove some of the steam from price increases.”

Seasonally adjusted figures from the Canadian Real Estate Association show there were 148,022 new listed units in the third quarter, the second highest level on record. The marginal decline in new listings was less than the quarterly sales decline that, according to the Canadian Real Estate Association,led to a more balanced resale market in the third quarter.

“Over the long haul, a strong and stable market is good for both buyers and sellers” said Canadian Real Estate Association president Ann Bosley. “We have not seen any of the large adjustments that have affected markets in the United States.

“The underlying economic conditions in Canada that affect real estate are still very strong. The main reason for any market adjustment stems from volume of new listings.”

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Curb appeal — that mix of architecture, landscape and colour that grabs the eye of passersby — makes a big difference in how people react to a house

Pedro Arrais, Special to Times Colonist

When it comes to choosing a home, first impressions count. The decision whether to look inside a house is usually based on a quick drive-by assessment. If a house has curb appeal, say real estate agents, buyers are more likely to want a look inside the house.

Curb appeal, like personal taste, is not easily defined. In general, it is a blend of architecture, design elements, colour, landscaping and other features that make a house attractive at first glance. Curb appeal can mean the difference between a house selling in a few weeks or sitting for months.

Heather Wilde, a real estate agent with 30 years experience, sums up what curb appeal means to her: “When I see an attractive house I think, ‘Ah, there is somebody I would like to know!’ I want to get inside to get to know them better,” says Wilde.

Her advice on creating curb appeal? “Put on a little lipstick and shine your shoes,” says Wilde.

Christina Stevens, 31, and her partner Sylvain Perron, 36, had been looking for a house seriously for a month before they drove by a house on Pelican Drive in the Royal Bay development in Colwood.

According to Stevens, the house was still under construction and the landscaping had yet to be installed. Still she remembers thinking, “That’s the house I want to see.” Without even a For Sale sign outside, she was confident it was the house for them.

“I just knew,” says Stevens, “that if the inside was as nice as the outside, that was the house for us.”

So what do the experts say will add to a property’s curb appeal?

ARCHITECTURE

A house’s initial design serves as the base to all the other elements, says Steve Akers, an architect with Stuart Howard Architects Inc.. Akers says the heritage or Arts and Crafts style popular these days has a timeless appeal because it has been around for the last 100 years. He suggests homeowners choose the best materials — such as siding and trim boards — that they can afford.

“Finishes done poorly affect the visual appeal of a house,” says Akers.

He also suggests that, if you have the height above the front door, adding a transom — a window over a door — adds visual appeal.

A transom window over the front door will also improve the quality of light inside the house.

STYLE

“The style needs to flow,” says design consultant Mary Kehler. “It needs to flow in with the surroundings instead of standing out,” she says.

Kehler suggests that a house needs a sense of balance, both in the architectural style and with the landscape. Kehler is fond of blending rock faces into the house if she can because it creates a natural ambience. “The house can be too sterile without it,” she says.

LIGHTING

“Don’t make your home look like a landing strip,” warns Elaine Richardson of Illuminations Lighting Solutions. She is referring to houses with too many dim lights trying unsuccessfully to illuminate a pathway.

“A few well-placed lights are much more effective,” she says. According to Richardson, a simple way to give any house a “quiet wow” is the installation of a four-to-five inch pot light to highlight the front door.

“The idea is to highlight beauty without being garish,” says Richardson.

LANDSCAPING

Duane Ensing of Landscape Solutions in advises owners to incorporate “exterior architecture” elements into their new home.

“In the transition from landscape to home, it helps to create visual appeal by varying heights and introducing screening for the plants to be displayed against,” says Ensing.

If there is money in the budget, he advises that homeowners consider water features and rock in the garden. It is also important to take into account how big the plants you choose will become when they are mature.

PAINT

“Colour causes an emotional response,” says designer Robyn Bryson. She suggests that the colour of a house does not need to “shout” to be noticed.

“You can make a statement about grace and elegance with restraint and simplicity,” she says.

Kehler advises using contrasting colours to highlight exterior doors.

GARAGE DOOR/ENTRYWAY

Unless their house is situated in Oak Bay with a rear lane, most homeowners have to contend with a garage door facing the roadway.

Builder Gordon English of Jenco Construction says the best way to soften the appearance of the garage door is by painting it the same colour as the walls. Another strategy is to build a front verandah past the garage.

“The eye is drawn to the closest thing from the curb,” says English, “so the house becomes the focal point, not the garage door.”

He also advocates a curved walkway with steps to create some drama and interest.

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