Archive for First Time Buyers

Laurin Jeffrey | January 31, 2012
No comments

10 ways to avoid buying the wrong house

By Mark Weisleder – Toronto Star MoneyVille

The most common mistake home buyers make is that they buy with their heart instead of their head. This often means they pay more than they should or are disappointed when they uncover defects in the home or find out the neighbourhood isn’t quite what they thought.

1. Visit the neighbourhood on foot.

Take a walk through the neighbourhood and talk to people. Drive by at 7:30 in the morning to see how many school buses are picking up children. You can also tell how long it may take you to commute to work during rush hour. By speaking to people, you can not only get a sense of the friendliness of the community, but also as to whether there are any surprises that no one is going to advertise, a local haunted house, vandalism, former grow houses, or the neighbour from hell.

2. Go to City Hall

Visit your local building department and find out if any new developments are planned. New development may increase property values but also increase traffic. Check to see how many owners have applied for minor variances, to either build homes or additions that are larger than the by-law permits. This gives an indication of the future direction of this neighbourhood.

Comment: Beware, though, that due to privacy laws, the planning department cannot really tell you anything. Not sure why the author included this, as it will be more of a waste of time than anything. Ask your Realtor, they should know what is going on in the neighbourhood and can always talk to the local planning department on your behalf.

3. Find the right real estate agent

Start by asking family and friends. Look for signs in the area that interest you, especially “Sold” signs. This is a good indication that the agent has the area’s pulse and knows what a home should sell for. They should also likely be aware of any problems, such as sewage backups, termites or vandalism; things that may only be known by locals. Also check the website of any agents that you may interview. Do they offer tips and explain what services they provide? Do they offer information about the neighbourhood including parks, religious institutions, demographics and schools? Ask about their success rate with bidding wars and do they know how to approach sellers who refuse to pay commission?

Comment: Beware going only by signs on lawns. Many times it is a friend of the owner, not even local, and someone who does not know the area. Most agent websites are cookie cutter templates from a certain company, I hear from them all the time. Look for an agent with their own custom site, someone who has taken the time to create an online presence, not just bought some $99 template. As for sellers who refuse to pay commission, there isn’t an agent in the world who would go near them. Why would we work for nothing? And in my experience, those refusing to pay or selling privately want WAY too much, have no idea of value and are very difficult to deal with.

4. How much can you afford?

When it comes to mortgages, it is not enough to know in advance how much you can safely borrow based on your income. Buyers should also realize that the lender will do an appraisal and if the lender believes you paid more than the house is worth, they will not give you the full amount of the loan that you expect. So, be very careful about stretching yourself to the limit when you make an offer on any home. 5. Title insurance is a must

Title insurance can be arranged through your lawyer. You will be protected against unpaid taxes or water bills by the seller, as well as problems that are not known at closing. This includes problems where part of the home or swimming pool is in fact on your neighbour’s property. However, it is a mistake to believe that title insurance will protect you against everything. For example, title insurance will not compensate you if you thought your lot was 50 feet and a later survey showed that it was only 48 feet.

6. Why a survey is important

A survey will reveal all boundary issues in advance, which will ensure that you do not have problems after closing, especially if you plan on making additions or other improvements.

7. Choose a home inspector carefully

The home inspection is a critical part of the process, so do your research. Make sure the company is registered before retaining them. The Ontario Association of Home Inspectors is a self-regulating body that defines qualifications for home inspectors, and grants the designation RHI, or Registered Home Inspector, to qualified practitioners in Ontario. Most inspection firms have a limitation of liability clause, which states that if they miss something that costs you money, they are not responsible. Ask the company if they have ever been sued by a buyer.

8. Ask the seller hard questions

Ask the sellers if they have had basement flooding problems, or mould or roof leaks, even if the leaks have been repaired. Watch how they answer. Most sellers will now refuse to sign property disclosure statements, but they are required to respond truthfully to these questions if you ask them directly. If the seller refuses to answer or acts suspiciously, then you need to discuss this with your home inspector and your real estate agent and either adjust your purchase offer or walk away.

9. Basement apartments must be legal

If the home contains a basement apartment and the income is important to you, make sure that it legally complies with zoning and the fire code by-laws. If it doesn’t, then all it takes is one complaint from a neighbour and you may be forced to spend thousands of dollars to make it comply after you buy.

10. Check about your insurance premium early

Find an insurance agent right away and if possible, check what it will cost to obtain insurance as soon as you sign your agreement and before you waive any conditions. An insurance agent can check the history of claims in the neighbourhood and can let you know about claims for sewage back-ups or vandalism. This is important information that any buyer should have before deciding to waive their conditions and complete the deal.

If you follow these simple steps and buy with your head instead of your heart, chances are you’ll get the house you want at a price you can afford, with no unwanted surprises later.

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

Laurin & Natalie Jeffrey are Toronto Realtors with Century 21 Regal Realty.
They did not write these articles, they just reproduce them here for people
who are interested in Toronto real estate. They do not work for any builders.
———————————————————————————————————————

Incoming search terms for the article:

Category: Ajax Real Estate, Buying Real Estate, First Time Buyers, General Real Estate, Pickering Real Estate | Tags: , , , , , , , , , , , , , , ,
Laurin Jeffrey | January 15, 2012
No comments

Do Canadians need 30-year mortgages?

By Ray Turchansky, For Postmedia News

Financial adviser Shawn Allen of Investors Friend Inc. has been prodding financial writers to lobby financial institutions to offer Canadians an “affordable” 30-year locked-in mortgage, insured and with minimum penalties for refinancing.

Allen argues that Americans can get 3.9% mortgages locked in for 30 years, and can refinance relatively painlessly.

The idea raises two questions: Could it be possible in Canada? And is it prudent?

On the one hand, getting people into homes is deemed good for the economy, spurring spending and creating jobs. But on the other hand, Bank of Canada governor Mark Carney, federal Finance Minister Jim Flaherty, the International Monetary Fund, and most recently the Canadian Mortgage and Housing Corp., have warned that Canadians are already on the verge of drowning in household debt.

Mortgage lending rules have been tightened three times in the last two years, and many people feel that banks should make it even tougher for people to get mortgages, rather than easier. People are advising many wannabe homeowners to rent instead, to avoid getting killed by either a bursting housing bubble that could make the value of their home less than what’s owed on the mortgage, or by higher interest rates.

Variable mortgage rates are tied to the prime lending rate, but discounts on variable rates have mostly vanished during the past month, and people renewing or getting first-time mortgages are now being advised to lock in.

Fixed mortgage rates are tied to long-term bond rates. During the past 11 years, five-year Government of Canada bond yields have fallen from 5.0 to 1.33 per cent, while five-year mortgage rates dropped from 8.0 to 5.39 per cent. Longer term, 30-year government bond rates are 2.56 per cent in Canada and 2.98 per cent in the United States. In Canada, adding just the current five-year spread of 3.96 per cent would make for a 30-year mortgage rate of 6.52 per cent.

Regardless, Allen notes the key is that a mortgage interest rate be “affordable,” and therein lies the rub. For some people, a mortgage at 10 per cent a year for 30 years would be affordable, while for others a mortgage at zero per cent interest for 30 years wouldn’t be.

In addition to interest, there’s also the mortgage principal, legal and real estate fees, property taxes, home renovations, maintenance, landscaping, utilities and insurance, or condo fees.

In a presentation, Richard Goatcher showed that the average local homeowner pays slightly more than $1,750 a month in mortgage principal and interest, down roughly $400 a month from 2007. In addition, a study by Sean Cooper shows that an older home requires you to spend 3-5% of its value on maintenance and renovations each year – $15,000 to $25,000 annually on a $500,000 house.

A Royal Bank of Canada housing affordability study showed that during the third quarter of 2011, annual home ownership costs of a standard two-storey house ranged from 36% of total household income in Alberta to 75.1% in British Columbia.

But mortgage principal and interest represent only 67% of household debt in Canada. There are also lines of credit, car loans, credit cards, perhaps student loans and maybe investment loans.

CMHC reports that from 2001 through 2010, consumer debt, mortgage debt and total debt each grew by an average of nearly 10% a year. It warns that personal lines of credit have increased at double-digit rates annually since 1986, and now make up 25% of household debt, compared with 3.0% in 1986.

David Chilton, author of The Wealthy Barber Returns, warned delegates at last year’s Canadian Pension and Benefits Institute western regional conference that the biggest danger facing Canadians is private debt.

“People cannot resist lines of credit,” Chilton said. “And the worst combination in the country is a line of credit and a home renovation – once they renovate one room, the other rooms pale by comparison, so they go on to the next room and it’s a never-ending cycle of renovation as they get deeper and deeper and deeper in debt. The four most expensive words in the English language are ‘while we’re at it.’ And the four most expensive letters are HGTV.”

Canadians’ ratio of debt-to-personal disposable income has grown to 152.96%, a measure that people deem irrelevant as long as home values are increasing. But TD Economics says Canadian houses are overvalued by 10 – 15%. Bank of America Merrill Lynch expects Canadian homes to fall 5% in value during the first six months of this year, and 10% if unemployment increases from the current 7.2% to 8.0%.

Indeed, Peter Norman, chief economist with the Altus Group, told BNN television that rising interest rates don’t affect home buyers as much as high unemployment rates do.

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

Laurin & Natalie Jeffrey are Toronto Realtors with Century 21 Regal Realty.
They did not write these articles, they just reproduce them here for people
who are interested in Toronto real estate. They do not work for any builders.
———————————————————————————————————————

Incoming search terms for the article:

Category: Buying Real Estate, First Time Buyers, Mortgages | Tags: , , , , , , , , , , , , , ,
Laurin Jeffrey | July 12, 2011
No comments

Don’t be afraid to leave your bank for a better rate

Garry Marr, Financial Post

Are the banks doing an incredible job of retaining customers or are Canadians just too lazy to shop around when renewing their mortgages?

One finding of a survey by Canada Mortgage and Housing Corp. released this week was that 89% of consumers renewing their mortgage stay with the same financial institution. And 68% stay when they are doing a refinancing.

“They stay with the lender because of rate and they leave the lender because of service,” says Pierre Serré, vice-president, insurance product and business development, with CMHC.

Consumers are more aggressive shoppers when they are seeking a mortgage to buy their first home than they are upon renewal. Only 57% of first-time buyers took out their mortgage with their existing financial institution.

Rob McLister, a mortgage broker and editor of Canadian Mortgage Trends, says the banks are doing more to retain customers but there is a pretty good chance you won’t get the best deal if you renew automatically.

“Most of the time people do some rudimentary research before they go back to their lender. Not so long ago people would just take the renewal letter, sign it and send it back. It still happens but not as much anymore,” he says.

Mr. McLister says the banks “are not as stupid” now and when they send out renewal rates they have special offers. The posted rate on a five-year fixed closed mortgage today is 5.39% but he’ll see clients get offers in the mail as low as 4.04% in a renewal letter. The problem is a broker could probably get you 3.59% — meaning you just left 45 basis points on the table.

On a $250,000 mortgage at 4.04% paid monthly and amortized over 25 years, the monthly payment would be $1,320.48, with the interest cost during a five-year term at $47,014.79. Chop the rate down to 3.59% and the monthly payment drops to $1,260.09 ,with the interest over the five years falling to $41,658.85.

If you were crazy enough, or lazy enough, to take the posted rate, you would pay $1,510.01 monthly for the same mortgage and your interest cost would jump to $63,201.92.

Let’s just say it pays to shop around. So why don’t more people do it?

There is a perception that it’s difficult to switch banks, plus it will cost you some money to switch. Yes, it’s a hassle but for $5,000-plus, count me in. As for the costs, the bank you are switching to will often cover your legal costs. Even if it doesn’t or say you face a discharge fee of $300, that’s small price to pay upfront.

Mr. McLister says if you change the terms of your mortgage and refinance, it could cost you as much $700 to switch, something you would have to do if you have a home-equity line of credit or have a collateral charge on your mortgage.

Elton Ash, regional executive vice-president with Re/Max of Western Canada and a long-time realtor, says for most people if the customer service is good, they stay.

“Unless the lender has really screwed up, they stay,” says Mr. Ash says. “It’s like realtors, not all of them charge the same fee. There are lots of discounters out there but it’s based on service levels more than costs and fees, if it’s relatively competitive.”

The banks are more competitive these days for existing customers. Part of the reason is it can cost a financial institution up to 30 basis points to attract a new customer, so why not just spend the money on retaining existing customers?

“We start calling customers in advance to remind them their mortgage is coming up,” says John Turner, director of mortgages at Bank of Montreal. “It is an increasingly competitive marketplace and customers are shopping. It’s in our interest to advise the customer of their options. That could include refinancing the mortgage overall.”

Farhaneh Haque, regional manager of mobile mortgage specialists with Toronto-Dominion Bank, says her bank starts calling customers as much as 120 days before renewal to discuss options.

“This all about relationships, they are not going to up and leave for a five-basis-point difference,” Ms. Haque says.

She’s right. A 0.05 percentage point is not a great reason to sever your relationship. But renewal time is a great time to test your relationship with your bank and get it to show you some love — or a better rate.

————————————————————————————————————–

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

————————————————————————————————————–

Category: First Time Buyers, Mortgages | Tags: , , , , , , , , , , , , , , , , , , , , , , , ,
« Older Entries   Recent Entries »