Monthly Archives: March 2011

10 uncommon things to consider when buying a condo

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Our friend Shadi Nasseri, a driven and energetic young real estate lawyer, is guest blogging this week for RateHub. As an expert in the field, Shadi has formulated a list of commonly overlooked criteria to be mindful of when buying a condo.

Neighbors - consider the general population of the condominium. A condominium may have 100s if not 1000s of residents all living in a relatively small corner of the earth and forming a community. Visit the condominium more than once at different times of the day and different days of the week. Are there numerous units with music and parties on a given Saturday night? Examine the demographics of the residents (i.e. average age, whether residents are students, professionals, or retirees, etc.) and ask yourself whether it’s a community you want to be a part of?

Distance to your parking spot - time how long it takes to get from the unit you are considering to the assigned parking spot, and consider yourself carrying bags of groceries for the entire distance!

Distance to the garbage chute/elevators – make sure your unit is not too close to the elevator or the garbage chute – both can be quite noisy and disturbing.

Height - consider how comfortable you are with heights; higher isn’t necessarily better for everyone. Make sure you’re okay walking outside on the balcony. Also consider if you’re able to take the stairs should the elevators ever stop functioning in times of emergency.

The condo board – ask to visit a meeting if possible. If not, request a copy of the meeting minutes, and consider the topics in questions and the position taken by each board member.

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4 reasons Canada will avoid a housing bubble

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Canada Housing Bubble just finished a report outlining four arguments supporting the position Canadians are protected to a housing bubble similar to the one experienced South of the border. The full article is here, but we summarized it below, highlighting four key differences from the United States:

1. Mortgage Default Insurance. Unlike in the US, all Canadian mortgages with a loan-to-value ratio of 80% or more are backed by mandatory default insurance provided by CMHC, Genworth or Canada Guarranty.

2. Homebuyers in Canada are on the line. In America, if you woke up to find your house had depreciated in value and you, in fact, owed more on your mortgage than your house was worth, you could simply hand over the keys and walk away. In Canada we have something quite different. If you walk away from your home, and the bank sells it for less than your mortgage, you are still on the hook for the remainder. So, Canadians are effectively less motivated to default on their homes.

3. About 30% of the mortgage market has a federal government guarantee. This was introduced in the height of the North American credit crisis, which kept the market functioning as lenders continued to loan money in Canada.

4. Though many Canadians have opted for riskier variable rate mortgages, Canada shied away from sub-prime lending.

One point regularly cited but not included in this article is the number of speculative houses bought in the US. Many Americans were buying second homes in states like Florida and Arizona as investment properties, assuming values would always appreciate. In Canada, the number of homes per person has not followed the same growth in home prices.

Top Tweets of the Week: 03/21 – 03/25

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Sometimes educational, often enlightening, and never boring, reading the musings of our industry partners and acquaintances is probably the best part of our day. Should you have missed out on the most important news of the week, lucky for you, our weekly Twitter feed has been edited to keep you ‘in-the-know’ on the real estate community.

Shout-out to our Tweeps!

03/21

@AndrewLaFleur Andrew LaFleur

Twitter allows for `conversation creeping`. Currently creeping the convo between @bduff54 and @BrianPersaud about Toronto RE

[And they say Facebook is intrusive! :) ]

@jenwilsonTO Jennifer Wilson

@gilliangigs I actually think I`d be a killer stillettoed crime fighter. I just need a cool outfit and superhero alias. And some baddies …

[We agree, and are confident you can find some ‘baddies’ in the likes of SavelSells and iSlutsky]

03/22

@GTAMortgageNews John Shearer

@ratehub_canada Thanks so much! Too bad Ratehub`s inevitable foray into world domination doesn’t extend to party planning

[Actually, we throw a mean party]

03/23

@BuzzBuzzHome BuzzBuzzHome

Leonard the Bee turned fancy pants… thoughts on our new avatar??

[Leonard, ever the little trendsetter, has us guessing what he’ll wear]

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5 Toronto condo launches to watch this spring

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Today we have a special contribution from our friends over at BuzzBuzzHome.com, the ‘up-to-the-minute’ real estate listing site for new residential properties in Canada. If you’re in the pre-construction market, spring is the time to search and BuzzBuzz is your search engine.

Birds are singing and the bees, at least here at the BuzzBuzzHive, are buzzing. It must be spring, which means, you guessed it, condominium launches! Unsurprisingly for a market quickly becoming one of the condo capitals of the world, Toronto is going to see a full slate of projects launching in the next few months – many of which look tremendously exciting. A full list of new condos launching in Toronto can be found in our forum (where we`ve counted at least 30 projects soon to launch), but we thought we`d pass along some crib notes on a handful of our favourites.

King + Condos is due to launch soon and promises to further enliven a neighbourhood of Toronto that is quickly becoming a big draw for those who know the city well: King East. This baby`s going to rise to 17-storeys at the corner of King Street East and Sherbourne Street and sounds like it`ll attract a design-savvy, downtown set that wants to capitalize on the myriad neighbourhood amenities without paying the King Street West sticker prices.

Staying on the east side of Yonge Street for a moment, Oxygen Maisonettes and Flats has us very intrigued. The `boutique` building will be 14-storeys and 50-units at George and Shuter Streets and will reportedly feature 2-storey layouts full of Italian-imported finishes and cutting-edge kitchen design. Stay tuned for details on this project in the weeks ahead.

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Avoid land transfer tax in Toronto

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GTA

As if Toronto weren’t expensive enough – after all, UBS ranked it the 8th most expensive city in the world in terms of purchasing power[1] – it also is the only city in Canada to mandate a municipal land transfer tax on top of provincial taxes. Land transfer tax, as the name suggests, is due when land is purchased, and is typically calculated as a % of property value at the provincial level.

Toronto land transfer tax rates are broken down in the chart below.

Purchase price of home Marginal Tax rate
First $55,000 0.5%
On $55,000 to $400,000 1.0%
Over $400,000 2.0%[2]

First-time home buyers in Toronto, however, are eligible to receive a refund up to a maximum of $3,275. Based on the rates above, this means first-time buyers with homes of $400,000 or less can avoid the tax altogether.

Another way to avoid the tax, for those with home purchases exceeding $400,000 or who are repeat buyers, is to simply sidestep the land transfer tax borders! The borders are as follows: Steeles Avenue as the North border, Etobicoke as the West border, Scarborough as the East border, and Lake Ontario as the South border. So Vaughan, Richmond Hill, Markham, and Mississauga are all metropolitan surroundings in the Greater Toronto Area (GTA) where you can settle without this added expense.

To calculate your applicable land transfer taxes, you can use RateHub’s Land Transfer Tax Calculator.

Dara Fahy: meet the man behind the mortgage rate

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RateHub consolidates a myriad of mortgage rates in Canada sourced from major banks and mortgage brokers, but we are very selective with our partners. We select our brokers not only on the competitiveness of their rates, but the depth of their knowledge and quality of their service.

Dara Fahy, is a mortgage broker in British Columbia, that offers such all of the above. He guides our customers with assurance and ease, and regularly collaborates with RateHub as well. He’s bright, friendly, and he knows his mortgages!

Let’s get to know him a little better.

Dara FahyName: Dara Fahy

Brokerage: The Mortgage Centre, BC

Q.     When you take a break from helping clients, where can we find you?

A.      On the golf course or taking long hikes with Sarah and our beagle, Bailey.

Q.     What did you do before you were in the mortgage business? Any odd jobs?

A.      Sold shoes and worked at KFC to pay the bills in my college days.

Q.     Fill in the blank. ‘If I weren’t in the mortgage business _____.’

A.      If I weren’t in the mortgage business, I’d be probably involved in sports in some way. I am a huge sports fanatic. Not much of an athlete so it would probably be on the business side.

Q.     What’s your ‘mortgage motto’?

A.      ‘How can we get you mortgage-free sooner?’ There are many strategies to do so: for example, getting the client the lowest rate possible and setting their payments as high as they can afford.  Really, I want to see them achieve financial freedom as soon as possible (but still live comfortably along the way, of course).

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Top Tweets of the Week: 03/14 – 03/18

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Mortgages can make for quite serious subject matter, so we are lucky here at RateHub to have such entertaining industry partners and acquaintances to divert our attention once in awhile. Hence, we’ve decided to do a weekly roundup of the most amusing commentary in our little Twitterverse.

Shout-out to our Tweeps!

03/14

@TalkCondo Amit & Roy Bhandari

Willing to trade: one extra hour of sunlight for an additional hour of sleep

[Eek! Daylight Savings Time!]

@BrianPersaud Brian Persaud

Peter Freed`s mom think he`s a player…That`s a really awesome comment to put in the Globe LOL

[King West King Peter Freed profiled in the Globe & Mail]

@BankGuru Bank Nerd

I really think @BMO has found out how to properly use Twitter. This should be interesting. The other banks should be worried!

[If the banks have caught on, it’s official!]

03/15

@DavidPylyp David Pylyp

Closed my eyes and I`m still having flashbacks from #thebachelor EMILY! EMILY!

[Can’t quite figure out if David is scared by Bachelor nice-girl Emily or just pining for her?]

@LorenaRomano Lorena Romano

@SavelSells don`t text/tweet while in car. Otherwise u will get an officer on bike tap your window. Not like it’s happened to me or anything!

[Ms. Romano’s everyday tips]

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Homeownership and mortgage trends across countries

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We recently came across the report entitled International Comparison of Mortgage Product Offerings, which compares housing and mortgage features across countries. Canada is included in the mix, so it is interesting to see how we stack up.

Some of the results are consistent with population trends, like Switzerland’s low rate of homeownership, in line with its high housing costs and transient population, but others, like the distribution of mortgage rate types are less obvious.

With the exception of Germany and Switzerland, the remaining countries under study have similar rates of homeownership. See the chart below for a further breakdown.

Homeownership by country

The most divergent subject under study is mortgage rate types, which are categorized by term length and variable or fixed classes. Australia, Ireland, Korea, Spain and the United Kingdom are dominated by variable-rate mortgages often with short-term fixed rates, while the United States has an unusually high proportion of long-term fixed-rate mortgages. Canada and the US, close neighbours, could not be further apart in mortgage type selection as well.

Types of mortgages by country

Finally, it was interesting to see which countries offer ‘interest-only’ mortgages, which, excluding Home Equity Lines of Credit, do not exist in Canada.

Countries with interest only mortgages

Source: International Comparison of Mortgage Product Offerings. Research Institute for Housing America September 2010. Dr. Michael Lea.

Reduced amortization period not for everyone; 35-year and 40-year mortgage amortizations still available

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The new mortgage regulations take effect in a week’s time on March 18th, reducing the amortization period to 30 years from 35 years on high-ratio mortgages (mortgages with down payments of less than 20%). However, extended amortization periods of 35 and 40 years are still available to home buyers who are able to put 20% or more down (a ‘conventional mortgage’).

We recently spoke with Drew Donaldson, a broker with Safebridge Financial, to understand the different options available to home buyers seeking longer amortization periods. Merix financial, for instance, has a 40-year amortization product and it is expected most of the major banks will continue to offer 35-year amortizations on conventional mortgages. Drew highly recommends Merix’s product as it has flexible prepayment options (20% lump sum and 100% monthly) and a comparable mortgage rate.

Some home buyers are wary of longer amortization periods because 1) it’s a lengthy commitment and 2) it equates to higher interest paid over the life of the mortgage. However, if the mortgage product has good prepayment options, say 15-20%, you can exercise them to shorten the amortization period and cut the interest down considerably.

Still, Drew reminds us that to qualify for the longer amortization period home buyers need to put down the 20%. This is of particular interest to those who have good cash flow but smaller incomes. If you have the funds to make the required down payment, the longer amortization steps up the affordability potential. What’s more, once you put 20% or more down, you avoid the extra 1.75% – 3.15% CMHC insurance surcharge.

To contact Drew, call 1-888-629-0685