STABILITY IN THE CANADIAN MORTGAGE MARKET

May 2011 Significant Statistics-Report Completed by the Canadian Association of Accredited Mortgage Professionals  (CAAMP)
There is currently $855 billion in mortgages on principal residences and $215 billion in Home Equity Lines of Credit (HELOC)
 Individuals with HELOCs only have an average 65 per cent equity in their homes
 HELOC prevalence is highest among middle age homeowners
 Equity takeouts amount to $26 billion annually, with most funds used for renovations ($9.4 billion), followed by investments ($5.0 billion)
 The average down payment for a home purchased in the last 12 months was 30%, up from 26% for homes purchased two years ago
 Among all borrowers, 63 per cent have fixed rate mortgages, 30 per cent have variable rate mortgages and 6 per cent have a combination of both
 Less than a quarter (22 per cent) of all borrowers have amortization periods longer than 25 years
 34 per cent of those who most recently renewed or renegotiated their mortgages did so before their term expired. The average time to pay off a mortgage is 7.4 years less than the original amortization
 200,000 homeowners paid off their mortgages in the last 12 months
 The average mortgage interest rate discount is 1.44 per cent for those who chose a five year fixed rate mortgage in the last twelve months with the average mortgage rate being 4.04%
 Of those who renewed their mortgages in the last twelve months, 65 per cent are paying lower rates than previously
 66 per cent of all mortgage borrowers can tolerate a monthly mortgage increase of $300 or more
 Among borrowers who took out a new mortgage in the last 12 months, 27% obtained it from a mortgage broker. Overall mortgage broker share stands at 23%
 Canadian appetite for home buying has returned to pre-recession levels, following a slide over the past three surveys. Almost 60 per cent respondents thought that now was a good time to buy
 Optimism is returning to the market with almost half (46 per cent) of those questioned saying that they expect prices to rise

For Sale

Commercial Building for Sale in Rimbey. Asking $225000. For video presentation visit www.rimbeyrealestate.ca.
Business is negotiable but not necessary. Rental income from apartments and Purolator. Additional large storage area as well in basement. Showroom measures just over 3000 sq ft.

New Low Rate

Our best 5 year fixed rate is now only 3.99%.

My best variable is still available at 2.25%.

Possible Costs When Selling or Buying a Home

Home inspection -- A house inspection or property inspection can cost in the $350-500 range for most single-family homes. Home inspections are recommended to identify if there are any other potentially costly expenses – issues not visible to the naked eye – that may impact the costs and upkeep of the home.

Property survey  A land surveyor carrries this out. They measure the property and hopefully obtains a stamp of compliance from the municipality in which the home is located.   With a RPR or Survey, the buyer will precisely know the boundaries. Sellers if one is not in place will in most cases pay for this. It is a requirement when selling a home and if one is not in place then some sellers will provide and pay for title insurance.

Water testing -- for properties not on a municipal water system, most - if not all - financing institutions require the water source to be tested to ensure it meets standards for human consumption.  If I am representing a buyer and helping them purchase an acreage I  will pay for the water testing. The water test is often a "condition" on the Offer to Purchase.

Status certificate fee -- When making an offer to purchase a condominium, it’s a good idea to ensure an offer is conditional upon obtaining and having time to review an Status certificate. This fee (not applicable in Quebec) applies when buying a condominium or strata unit and could cost up to $100.

Land transfer tax- Alberta has no land transfer tax.

Legal Fees --  Legal costs will depend on the complexity of the transaction and the lawyer’s experience.

Prepaid property tax or utility bills- Buyers should be prepared to reimburse the seller for prepaid property taxes and utility bills if say they were taking possession mid year or month depending on the circumstances.

Average Price Per Province for the Month of March 2010 & 2011

Mar 2010 to March 2011 Average Prices for Various Cities

Mortgage Intelligence in the News

The Toronto Star

Thursday, April 28, 2011

Variable-rate mortgages can save a lot

Long-term savings entice, but consider your risk-tolerance

Leanna Mamatis and her husband Rick knew exactly what they were after when they sold their home in North York and bought a new one in Markham. 

They wanted more space, but not too much, and a swimming pool in the back yard. 

Mamatis also knew what she was looking for on the mortgage. Even though interest rates are poised to increase, the couple decided to go with a variable-rate mortgage for a three-year term. 

"It's lower than the fixed rate," Mamatis said. "I'm not a financial expert, but it seems to me that interest rates are not going to go up too fast too soon. I just wanted to make the payments as minimal as possible in terms of the interest." 

With other pressing expenses, such as tuition and fees and lessons in music, karate, hockey and baseball for their four teenagers, making extra mortgage payments is not a priority right now, Mamatis added. "But if we can put a chunk of money down on the principal, then we will."

Research shows that homeowners who take a variable-rate mortgage can save much more over the life of a mortgage than those who stick with a fixed rate.

But even those experts caution that variable mortgages, which go up and down with the prime rate, aren't necessarily right for everyone. What looks best on paper may not be what fits your life.

If you opt for a fixed rate, you know that your payments will not change over the mortgage term. You'll pay a higher interest rate in exchange for that peace of mind.

A quick glance at RateSupermarket.ca shows the great divide between fixed and variable.

For a $200,000 mortgage at a five-year fixed rate of 5.69 per cent, you'll have a monthly payment of $1,243. Over the 25-year life of the mortgage, you'll pay a total of $372,898, of which $172,898 is interest.

On a variable rate of 2.85 per cent, your payments on a similar mortgage are just $931 per month. You'll pay total interest of $79,350 over the life of the mortgage.

Of course, that assumes your variable rate stays the same, and that's an assumption you just can't make.

That's why homebuyers must give a lot of thought to their tolerance of risk and the state of their personal finances when they decide on a rate and a term. Ask yourself: if you choose a variable rate and rates go up, will you be able to afford the higher monthly payments?

In 2001, Moshe Milevsky, a finance professor at York University, released a detailed statistical study showing that variable-rate mortgages saved borrowers money 88.6 per cent of the time over fixed rates.

An update in 2008 also came down on the side of variable rates.

"That study has to be taken with caution. It is a probability argument," Milevsky said.

"It's a lot like buying stocks and bonds. While overwhelming research shows that stocks outperform bonds most of the time, there will be prolonged periods of time when bonds do better.

"That's why we always tell people with investments, if you can't take the chance of losing money and you don't have the risk appetite, don't put all your money in stocks."

The Bank of Canada, which kept interest rates at historic low levels to support the economy through the recession, is expected to begin raising rates later this year.

Mortgage broker Jeff Mayer of Mortgage Intelligence has clients with variable mortgages asking if they should lock in before rates rise.

"I tell them you have to look at the trends and the past history.  The rates will go up in time, but the Bank of Canada usually only changes rates by 25 basis points (one-quarter of a percentage point) at a time," he said.

The difference between a variable and fixed rate right now is one percentage point or, in some cases, even more.

Broker Paula Roberts urges clients to think about the term of the mortgage.

"Most people automatically go to the five-year term. Sometimes they don't even realize they have other options," said Roberts, a broker with Mortgage Intelligence.

"People need to think about their plans for the next three to five years. If you know you're going to be moving or having kids, you can take a shorter term. If you want the certainty of the fixed rate, you can choose a longer one."

She also suggests that borrowers with a variable rate set their monthly payments at a higher amount, closer to the fixed rate. The excess will go directly to the mortgage principal and if your rates go up and you lock in, there won't be any payment shock.

"Start with your own financial goals and work backwards from there," said Colette Delaney, senior vice-president at CIBC Mortgages, Lending and Insurance.

"Interest rates can change, but so can things in your life, particularly for younger people. You may be changing jobs and moving away or starting a family in the next couple of years," Delaney said.

For instance, you probably have other financial goals, such as saving for retirement or your children's education.

"Just because you take out a mortgage doesn't mean you forget about all your other goals or saving a little bit each month. If rates move up, are you still going to be able to put money away in that RESP or take a holiday?

"It's not just about looking at the interest rates today and choosing the lowest one; it's about looking at the years to come and having a mortgage that will allow you to adapt."

Newest Testimonial

Dawna Providenti is a very accomodating agent. Her pleasing personality knowledge and business expertise is impressive. She is very considerate realtor and aware of all circumstances pertaining to making a sale. Her consistency and follow up was much appreciated.
Winston & Arlene Edwards

Bert Bruinsma, RHI Home Inspector Homealyze

What does your inspection cover?

It is designed to produce a report that includes a visual assessment of the house as a system including the foundation, structure, exterior, heating system, ventilation, plumbing, electrical system, interior, insulation, roof and other components that are found in homes.

How long have you been practicing in the home inspection profession and how many inspections have you completed?

I have been inspecting homes for many years. I purchased my Home-Alyze franchise in 2001 and chose Home-Alyze because they have been inspecting homes since 1978, and have an excellent reporting system. I personally have inspected more than 3000 homes in the past 10 years. 

How long will the inspection take?

An inspection typically takes about 3 hours, but it could be longer depending on the age, size and features of the house.

Will I be able to attend the inspection?

You can and should plan to be present for the inspection and feel free to ask any questions that may come to mind along the way. We enjoy our work and love to share what we know.

Also, be sure to allow time for your inspector go through the inspection report with you at the conclusion of the inspection. This provides another opportunity for you to ask questions and to clarify any concerns, adding significant value to the inspection process for you.

Do you maintain membership in a professional home inspector association? If not is your industry going to become a licensed industry where home inspectors must maintain it with education requirements?

I have the following professional credentials, all of which require annual proof of continuing education:

• Registered Home inspector (RHI) with the Canadian Association of Home and Properly Inspections. (CAHPI)
• Certified Inspector with the American society of Home Inspectors (ASHI)
• National accreditation through National Certification Authority. (NCA)

In Alberta, there is currently no licensing for home inspectors. So anyone can become a home inspector. It is therefore important to ask about credentials when you are hiring a home inspector. Also, your realtor may be able to help you with the names of home inspectors they have worked with in the past.

What kinds of qualifications should someone be looking for in a home inspector

Your home inspector should have several years of construction and/or technical experience. At Home-Alyze, we view a home as a system with many components in it that need to work together. We attend regular technical meetings and/or courses through Association Membership.

Why Get A Home Inspection?

A home is one of the most important investments we all make, and home inspections help us to maintain and protect that investment while at the same time ensuring that the home environment is safe and secure.

Should a Home Inspection be performed on a newly constructed house?

Inspection of a new home (while the new home warranty is still available) can sometimes help to identify things that still need to be completed that the homeowner might miss. It is more important to use a professional Home Inspector just before your “primary” warranty period expires so you can notify both the Warranty Company and the Builder of apparent deficiencies that may still be covered by the warranty.

What are some common things found wrong with a property?

Every house is unique, but the following are often found during the inspection process:

• Leaks (roof, flashings, basements, plumbing).
• Unprofessional electrical work
• Cracked heat exchangers
• Deficiencies around ceramic tile that lead to mould and rot behind the walls.

How can such things be prevented?

As part of the inspection process, we provide our customers with a schedule for when maintenance and repairs need to be done.  Doing these things before problems occur and on a regular basis where necessary will help to prevent unexpected costs as well as promote efficiency and safety. Also as part of our service to our clients, and since we have a file on their house, they’re free to call us with questions anytime as long as they own the house. Without re-inspecting the home, we will answer questions for them, even if they are developing the basement or adding an addition.

Any words of advice for sellers so that a property inspection goes smoothly?

Consider a ‘pre-listing’ inspection’ of your home. It has many benefits and can often give you better leverage on the price of your home. It will give you a good idea of what the purchaser may find, avoiding surprises and allowing you to make any necessary repairs before listing your home. Sellers are provided with signs to let potential buyers know that their home has been pre-inspected.

When a buyer chooses to have a home inspection, the seller can make the process smoother by ensuring that:

• There is no clutter, boxes, clothing, etc. on the floor impeding access to areas that need to be inspected.
• There is access to all areas of the home and garage.
• Any hazards such as loose wiring, wet floors, etc. are eliminated or if that is not possible, that the inspector is aware of the hazard prior to the inspection
• The inspector is aware if you have pets that are free in the house and not allowed outside.
• There is clear access to the attic access panels. If the attic panel is in a closet, remove any stored items that may impede access.
• All electrical panels are unobstructed and easily accessible.
• All utilities are turned on (water, gas, electrical) if the property is vacant, so that those systems can be properly inspected.
• The inspector is aware of any special considerations or concerns that require extra care during the inspection process.

Any words of advice for a buyer so that a property inspection goes smoothly?

The more you know – The easier and better the process will be for you:

• Gather as much information as possible about the process of buying a home and about the home you are considering.
• Attend seminars and ask questions if this is the purchase of your first home.
• Make the sale conditional, subject to a Home Inspection.
• Hire an experienced and qualified home inspection expert.
• Plan to attend the inspection if at all possible, and be sure to have plenty of time to review the inspection report and to ask questions after it has been completed.