Friday, November 23, 2012

Canadian homes are getting more affordable


TORONTO — Royal Bank says the cost of home ownership became more affordable in the most recent quarter due to a modest decline in home prices and gains in Canadian household incomes.

RBC’s affordability index for a detached bungalow stood at 42% of income nationally in the second quarter.

That means an owner would need to spend 42% of pre-tax annual income to pay for mortgage payments, utilities and property taxes — one percentage point lower than in the third quarter of 2011.

The index fell even more for two-storey homes, by 1.2 percentage points to 47.8% and eased 0.6 percentage points to 28% for condos.

The bank, which publishes the index on a quarterly basis, says ultra low interest rates have been the key factor in keeping affordability levels from reaching dangerous levels in recent years.

Despite the recent improvement in affordability, RBC said the amount of income to service home ownership costs continues to be higher than long-term averages.

RBC notes that Canada’s housing market cooled further in the third quarter, partially because of the effects of a fourth round of rule changes to government-backed mortgage insurance.

The bank expects the negative effect of the changes on home sales will ease by the end of the year and that resale activity will stabilize next year.

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The July-September quarter fully reversed the mild erosion in affordability that occurred during the first half of 2012, said RBC chief economist Craig Wright.

“The broad affordability picture has been somewhat stationary over the last two years, alternating between periods of improvement and deterioration, resulting in an affordability trend that is, on net, essentially flat,” Wright said.

Wright expects the Bank of Canada to begin raising its overnight lending rate for banks — which affects bank’s prime lending rates — from the current 1% in the second half of next year, assuming the euro crisis remains in check and U.S fiscal issues are addressed.

“This, along with the expected continued growth in household income, will lessen the risk of marked erosion in affordability,” he said.


Despite the recent improvement in affordability, RBC said the amount of income to service home ownership costs continues to be higher than long-term averages,

As is often the case, Vancouver’s extremely expensive real-estate skewed the national figures.

“The cost of owning a home took a smaller bite out of household pocketbooks in the third quarter as home prices fell — most notably in the Vancouver area, though it remains the least affordable market in Canada by a wide margin,” explained Wright.

The index in Vancouver stood at 83.2% of income, followed by Toronto at 52.4%, Montreal 40.2%, Ottawa at 38.7%, Calgary at 38.3% and Edmonton at 31.1%.

Monday, November 5, 2012

A quote I like to run my business and life by!


Goals give us a target and bring meaning to our mission. Without goals, life simply happens. But when we have a target, we can move with purpose, helping us achieve more. “People often complain about lack of time, when lack of direction is the real problem,” Ziglar says. “Time can be an ally or an enemy. What it becomes depends entirely upon you, your goals and your determination to use every available minute.”

Amy Wilson
Verico Brokers For Life
780-919-0475
yourmortgagegirl@gmail.com or amy@brokersforlife,ca
www.yourmortgagegirl.ca

Thursday, November 1, 2012

Home Buying Step by Step - Step Four

Step 4: The Buying Process

Step 4: The Buying Process


Starting Your Search

Here are some ways to begin looking for your new home:  The best option is to contact Amy  Wilson and we can work on this together. 780-919-0475 - yourmortgageggirl@gmail.com
  • Word-of-mouth
    Tell everyone you know that you are looking for a new home. Surprising things sometimes happen. For example, you might hear about a home that is just becoming available on the market.
  • Newspapers and real estate magazines
    Check the new homes section in daily newspapers. Look for the free real estate magazines available at newsstands, convenience stores and other outlets. These publications are free and give pictures and short descriptions of homes for sale.
  • The Internet
    Check out real estate websites, such as realtor.ca. These websites give information and pictures of a wide range of properties. Most sites let you search by location, price, number of bedrooms, and other features.
  • “For Sale” signs
    Drive, bike or walk around a neighbourhood that interests you and look for “For Sale” signs. This is a good way to find homes that are being sold by the owner and are not listed with an agent.
  • Visit new development sites
    If you are looking for a newly built home, you can see available models and get information from builders.
  • Work with a realtor
    For most buyers, a realtor is key to finding the right home.

Useful Tips for Your Search

  • Keep records
    Whether you have a realtor or are looking by yourself, visit lots of homes before choosing one. Some things to compare are the home’s energy rating, utility costs, property taxes and major repairs. These will affect your monthly housing expenses. You can ask to see copies of utility and other bills. Use the CMHC Home Hunting Comparison Worksheet to make sure you get all the information you need to compare homes.
  • Check out the property’s current financing
    If the existing mortgage on the home is favourable, it may be possible to take it over from the vendor. It may even be possible to get a vendor take back mortgage, to help close the deal.
  • Think twice
    Even if a home seems perfect, go back and take a closer, more critical look at it. Visit it on different days and different times of the day. Chat with the neighbours. Look deeper — don’t be distracted by attractive surface details.
  • Energy Rating
    Some houses and most new homes in Canada have an Energy Rating that describes the energy efficiency of the home. An energy-rated home usually has a sticker with the rating on the electrical panel. The energy rating is on a 0 – 100 scale. The higher the rating, the more energy-efficient is the home, and the less it costs to operate.
  • CMHC statistics and analysis
    CMHC has the latest statistical information and analysis of housing trends. Our Market Analysis Centre tracks information for local, provincial and national markets.

Making an Offer to Purchase

After you have found the home you want to buy, you need to give the vendor an Offer to Purchase (sometimes called an Agreement of Purchase and Sale). It is very helpful to work with a realtor (and/or a lawyer/notary) to prepare your offer. The Offer to Purchase is a legal document and should be carefully prepared.
These items are typically included:
  • Names
    Your legal name, the name of the vendor and the legal civic address of the property.
  • Price
    The price you are offering to pay.
  • Things included
    Any items in or around the home that you think are included in the sale should be specifically stated in your offer. Some examples might be window coverings and appliances.
  • Amount of your deposit
  • The closing day
    The closing day is the date you take possession of the home. It is usually 30 – 60 days after the date of agreement. But, it can be 90 days, or even longer.
  • Request for a current land survey of the property.
  • Date the offer expires
    After this date the offer becomes null and void — that means it’s no longer valid.
  • Other conditions
    Other conditions may include a satisfactory home inspection report, a property appraisal, and lender approval of mortgage financing. This means that the contract will become final only when the conditions are met.

What Happens After You Make an Offer to Purchase?

Imagine that your realtor has helped you prepare an Offer to Purchase. This offer includes all the details of the sale. To be extra cautious (since you know an Offer to Purchase is legally binding) ask your lawyer to look at it before showing it to the vendor. The realtor presents the offer to the vendor. What can you expect to happen next? There are three possible responses.
  • Response 1
    The vendor accepts your offer. The deal is concluded and you move on to the next steps in the buying process.
  • Response 2
    The vendor makes a counter-offer. The counter-offer might ask for a higher price, or different terms. You can sign the offer back to the vendor, offering a higher price than your original offer, but lower than the vendor’s counter-offer. If the vender accepts this counter-offer, the deal is concluded.
  • Response 3
    The vendor makes a counter-offer, asking for a higher price or different terms. If a counter-offer is returned to you at a higher price, ensure that you know exactly how much you can afford before you start negotiating. You don’t want to get caught up in the heat of the moment with costs you can’t afford. You reject the counter-offer because the price is still too high, or you can’t agree to the conditions. The sale doesn’t go through, and your deposit is returned.

Rita: A Homeowner’s Experience

Rita made an Offer to Purchase on an older property. Her real estate agent, Nissa, suggested that a home inspection should be done and that approval of mortgage financing be a condition of the offer. The inspection showed repairs that would have cost more than Rita could afford.

Getting a Mortgage

Once your Offer to Purchase has been accepted, go to see your lender. Your lender will verify (and update, if necessary) your financial information and put together what’s needed to complete the mortgage application. Your lender may ask you to get a property appraisal, a land survey, or both. You may also be asked to get title insurance. Your lender will tell you about the various types of mortgages, terms, interest rates, amortization periods and, payment schedules available.
Depending on your down payment, you may have a conventional mortgage or a high-ratio mortgage.

Types of Mortgages

Conventional Mortgage

A conventional mortgage is a mortgage loan that is equal to, or less than, 80% of the lending value of the property. The lending value is the property’s purchase price or market value — whichever is less. For a conventional mortgage, the down payment is at least 20% of the purchase price or market value.

High-ratio Mortgage

If your down payment is less than 20% of the home price, you will typically need a high-ratio mortgage. A high-ratio mortgage usually requires mortgage loan insurance. CMHC is a major provider of mortgage loan insurance. Your lender may add the mortgage loan insurance premium to your mortgage or ask you to pay it in full upon closing.

Mortgage Term

Your lender will tell you about the term options for the mortgage. The term is the length of time that the mortgage contract conditions, including interest rate, will be fixed. The term can be from six months up to ten years. A longer term (for example, five years) lets you plan ahead. It also protects you from interest rate increases. Think carefully about the term that you want, and don’t be afraid to ask your lender to figure out the differences between a one, two, five-year (or longer) term mortgage.

Mortgage Interest Rates

Mortgage interest rates are fixed, variable or adjustable.

Fixed Mortgage Interest Rate

A fixed mortgage interest rate is a locked-in rate that will not increase for the term of the mortgage.

Variable Mortgage Interest Rate

A variable rate fluctuates based on market conditions. The mortgage payment remains unchanged.

Adjustable Mortgage Interest Rate

With an adjustable rate, both the interest rate and the mortgage payment vary, based on market conditions.

Open or Closed Mortgage

Closed Mortgage

A closed mortgage cannot be paid off, in whole or in part, before the end of its term. With a closed mortgage you must make only your monthly payments — you cannot pay more than the agreed payment. A closed mortgage is a good choice if you’d like to have a fixed monthly payment. With it you can carefully plan your monthly expenses. But, a closed mortgage is not flexible. There are often penalties, or restrictive conditions, if you want to pay an additional amount. A closed mortgage may be a poor choice if you decide to move before the end of the term, or if you want to benefit from a decrease of interest rates.

Open Mortgage

An open mortgage is flexible. That means that you can usually pay off part of it, or the entire amount at any time without penalty. An open mortgage can be a good choice if you plan to sell your home in the near future. It can also be a good choice if you want to pay off a large sum of your mortgage loan. Most lenders let you convert an open mortgage to a closed mortgage at any time, although you may have to pay a small fee.

Amortization

Amortization is the length of time the entire mortgage debt will be repaid. Many mortgages are amortized over 25 years, but longer periods are available. The longer the amortization, the lower your scheduled mortgage payments, but the more interest you pay in the long run. If each mortgage term is five years, and the mortgage is amortized over 20 years, you will have to renegotiate the mortgage four times (every five years).

Payment Schedule

A mortgage loan is repaid in regular payments — monthly, biweekly or weekly. More frequent payment schedules (for example weekly) can save some interest costs by reducing the outstanding principal balance more quickly. The more payments you make in a year, the lower the overall interest you have to pay on your mortgage.

New Home Warranty Programs

Each province has new home warranty programs.
British Columbia
See the Homeowner Protection Office at www.hpo.bc.ca for the most up-to-date list of warranty programs. These include:
Lombard Canada New Home Warranty Program: www.lombard.ca
Travelers Guarantee Company of Canada (formerly London Guarantee Insurance Company): www.travelersguarantee.com
National Warranty Program Ltd.: (includes Royal and Sun Alliance) www.nationalhomewarranty.com
Pacific Home Warranty Insurance Services Inc. (Echelon General Insurance Company): www.pacificwarranty.com
Willis Canada Ltd (Commonwealth Insurance): www.williswarranty.com
Alberta
Progressive New Home Warranty Program (Echelon General Insurance Company): www.progressivewarranty.com
National Home Warranty Program Ltd.: www.nationalhomewarranty.com
New Home Warranty Program of Alberta: www.anhwp.com
Blanket Home Warranty Ltd.: www.blankethomewarranty.ca
Saskatchewan
Progressive New Home Warranty Program (Echelon General Insurance Company): www.progressivewarranty.com
National Home Warranty Program Ltd.: www.nationalhomewarranty.com
New Home Warranty Program of Saskatchewan: www.nhwp.org
Blanket Home Warranty Ltd.: www.blankethomewarranty.ca
Manitoba
Progressive New Home Warranty Program (Echelon General Insurance Company): www.progressivewarranty.com
National Home Warranty Program Ltd.: www.nationalhomewarranty.com
New Home Warranty Program of Manitoba: www.mbnhwp.com
Blanket Home Warranty Ltd.: www.blankethomewarranty.ca
Ontario
Tarion Warranty Corporation: www.tarion.com
Quebec
Garantie des maisons neuves de l ’APCHQ: www.gomaison.com
Garantie des maisons neuves de l’ACQ: www.acq.org
La garantie des maîtres bâtisseur: www.maitresbatisseurs.com
New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador
Atlantic Home Warranty Program: www.ahwp.org
Lux Residential Warranty Program: www.luxrwp.com
Progressive New Home Warranty Program (Echelon General Insurance Co.): www.progressivewarranty.com

Closing Day

Closing day is the day when you finally take legal possession and get to call the house your home. The final signing usually happens at the lawyer or notary’s office.
These are the things that happen on closing day:
  • Your lender will give the mortgage money to your lawyer/notary.
  • You must give the down payment (minus the deposit) to your lawyer/notary. You must also give the remaining closing costs.
  • Your lawyer/notary
    • Pays the vendor
    • Registers the home in your name
    • Gives you the deed and the keys to your new home

Moving

Hiring a Mover

When planning your move, friends or relatives may be able to recommend a professional moving company. Don’t forget to ask the mover for references. Ask the mover for an estimate and outline of fees (Do they charge a flat rate or hourly fee?). Once you’ve chosen a mover, ask them to come to your home to see what will be moved in case the estimate needs to be changed.
You’ll want to ensure that your belongings are insured during the move. Your home or property insurance may cover goods in transit. Call your broker or insurance company to be sure. Ask if you are fully covered. Many moving companies offer additional insurance coverage. Be aware that professional movers are not responsible for items such as jewellery, money, or important papers. Move these yourself to keep them safe.
If you decide to do your own packing, keep in mind that you will need the proper materials, and that packing can take up a lot of time.

Moving Day

On moving day, go through the house with the van supervisor and give him (or her) any special instructions. The supervisor will note the condition of your goods on an inventory list. Go through the house with the supervisor to make sure the list is complete and accurate. When the van arrives at your new home, mark off the items on the mover’s list as they are unloaded. If you paid for the movers to unpack boxes and remove packing materials, remember that they will not put dishes or linens into cupboards.
Moving day is almost always tiring. But, planning ahead will make the transition as smooth as possible.

Moving Costs

The amount you spend depends on your decisions about many things. Here are some to think about:
  • Do you want to hire professional movers?
  • If so, will it be a large company, or a smaller local moving company?
  • Will you need to buy insurance to protect your items in transit?
  • If you plan to move yourself, will you rent a vehicle?
  • Will your current auto or home insurance policy cover your items during the move?
  • Will you have to pay utility companies a fee to connect their services in your new home? Are there other utility charges (such as a deposit)?

Post-Closing Costs

Changing the Locks

When you move into your new home you’ll want to change the exterior door locks for security. After all, you want only the people you choose to have the key to your new home. You can change the locks yourself, or call a locksmith to do the job.

Cleaning

Both your old home and your new home should be given a thorough cleaning at moving time. Whether you’re buying cleaning supplies and doing it yourself, or hiring someone to clean for you, the costs can really add up. Plan for this expense.

Decorating

You might want to re-paint, replace some light fixtures, refinish the floor, re-carpet, or do any number of other re-decorating tasks. Plan your budget, and consider postponing some projects for a period of time.

Appliances

If your offer to purchase didn’t include appliances, and if you don’t have your own, you will have to buy them when you move into your new home. Some appliances might have installation charges.

Tools and Equipment

When you own your own home, you can no longer call the landlord to do repairs. You’ll need to own some basic hand tools and possibly some gardening and snow clearing equipment.