November 30, 2007
Greater Toronto Real Estate
Homebuyers across greater Toronto area went on a buying frenzy this year, setting a new record for housing sales, according to figures released yesterday. Maureen O’Neill, president of the Toronto Real Estate Board, said that may just be a taste of what is to come as home and condominium buyers rush to close deals ahead of the city of Toronto’s new land transfer tax, which comes into effect early in the new year.
“January or February is when we’ll really see the effects of the taxes,” she said. “After Feb. 1, everyone will have to pay the tax … [and] the months leading up to that is when we’ll see a real bump in people trying to get in before that deadline.”
The real estate board’s figures showed a 15% increase in sales across the Greater Toronto Area over last October, bettering the previous record for the traditionally mediocre sales month set in 2003 by 10%.
The board said there were a total of 7,915 single family homes sold last month, driving the overall figures for the year to 12% above those of last year and setting up 2007 as a potentially “banner year,” said Ms. O’Neill.
The North York neighbourhood of Willowdale saw a 67% bump in sales over the same period last year, while condominium sales in Etobicoke’s south Humber area pushed its overall sales to 60% above last October’s.
Bijan Baniasadi, a realtor with ReMax Metro Inc., has been selling homes in the Willowdale area for 11 years and said yesterday that he has not seen a market this overheated in a long time. “People are buying as fast as they can put the bricks one on top of the other,” he said. “A real rush is being created and the prices just keep jacking up.”
According to the real estate board, prices rose in October across the GTA to an average of $394,646, a 4% increase over the previous month. Mr. Baniasadi said in his area, bidding wars are becoming commonplace and prices are increasing because there are far more buyers than there are properties for sale. “Houses are selling for $700,000 that three years ago you could’ve gotten for $300,000,” he said.
But he has not heard buyers express concern about Toronto’s land transfer tax, passed by city council on Oct. 22 — at least not yet. “The tax is too new … it only happened a couple of weeks ago,” he said. “But it’s going to settle the market in the coming year, I think.”
Ms. O’Neill agreed. “I think it was a marginal effect on the October figures,” she said. “If I had to put a number on it I’d say maybe 5%.”
But she said the new tax, which includes an exemption for first-time homebuyers purchasing properties up to $400,000, ranges from 0.5% to 2%, depending on the price of the residential property, will eventually act as a major drag on Toronto home sales.
“I think it’s going to be a disaster for the city,” said Ms. O’Neill. “If buyers move just outside the Toronto boundaries, that will save them thousands of dollars and people buying homes watch those costs: they watch them very closely.”
The tax will add $3,725 to the price of a $400,000 home. The real estate board was one of the most vocal critics of the tax, which Mayor David Miller has said is necessary to cover a looming shortfall in the city’s budget next year.
Pickering had the strongest overall showing of GTA communities last month with a 34% increase in overall sales, including a doubling of the number of condominium sales.
November 29, 2007
Your many mortgage options
With so many new mortgage features being introduced in the Canadian marketplace, the choices for the consumer are immense. Perhaps the most anxiety-ridden part of house hunting is figuring out how much you can afford. Your real estate Agent or a specialized Mortgage Consultant offers the expert, impartial mortgage advice you need, and can educate you on the range of mortgage types which are now available.
The formula used to be simple. For decades, the thinking was that your monthly mortgage payment, including taxes and insurance, should not exceed 28 percent of your gross pay, and that all your loans, mortgage included, should not exceed 36 percent. Lenders used that formula to qualify people for loans, and people relied on lenders to tell them what they could afford.
Today, lenders rarely use this cookie-cutter method. Some focus more on how much of a person’s monthly income goes toward paying off debt. Some do not use ratios at all. But whatever method lenders use, borrowers should play it safe and stick to the old formula, even if it means scaling back expectations.
You may need to start with a condominium or a small house, look at your purchase as the first investment, and then move up. Do not assume that because a lender is willing to loan you a certain amount of money, you should take all of it. Instead, assess your financial situation, make a budget and decide how much you can afford to sink into a mortgage each month.
Start by figuring out how much you now pay for housing. Do you have to pay the same amount on a home loan? Can you afford to pay more? If so, how much?
Below is some of the Mortgage options currently available in the Canadian Market:
Fixed Rate vs. Variable Rate Mortgages
With a fixed rate mortgage, the interest rate stays the same throughout the term of the loan, providing a measure of stability that some prefer. A variable rate mortgage can allow the borrower to take advantage of low rates as it typically has an interest rate that is calculated on an ongoing basis at the Bank of Canada prime lending rate minus a set percentage.
An Open or Closed Mortgage?
Open mortgages allow the borrower to pre-pay, renew or refinance at any time before maturity without penalties. A “closed” mortgage, on the other hand, usually allows for a set percentage of the principal to be prepaid without penalty. A “closed” mortgage may also be renegotiated or refinanced in most cases with the payment of a penalty which varies from lender to lender.
High-Ratio Mortgages
While a conventional mortgage is a loan for up to 80% of the purchase price of a property, a high-ratio mortgage allows you to borrow up to 95–100% of the purchase price. This type of mortgage must be insured.
The above-mentioned options are just a starting point – there are numerous other mortgage features to be explored, a specialized Mortgage Consultant will work with you to determine which mortgage best meets your individual needs and objectives.
November 26, 2007
How much should we spend?
For just about everyone, your home will be the cornerstone of your financial future. So it’s no great surprise that, with its barrage of reality television shows devoted to house hunting and home renovation, HGTV has made home ownership into something of a recreational sport. Of course, the cameras conveniently turn off when it comes time for the daunting decisions that seal the deal. Figuring out exactly how much house you can afford, and finding a mortgage that won’t crush you, might be the most important financial decisions you’ll ever make.