The House Vs. Condo Debate

The age old house vs. condo debate and here to discuss it/debate it for you is RateHub Canada. So sit back with a glass of tea or wine, which ever is your preference, I won't judge and enjoy!

Living in, or close to, a major city like Toronto has both pros and cons – while it’s exciting to be in the center of the action, it can also be expensive to own your own property, especially if you’re looking at houses.  A condo, on the other hand, lands you in the heart of the city at a fraction of the cost; this can be appealing to many people, including first time home buyers.

“It’s easier to break into the housing market [with a condo],” said Mortgage Broker Dara Fahy, "and you're buying prime real estate in the heart of the city."

However, condominiums tend to depreciate in value long-term, whereas houses typically appreciate.

"There's a lot of value in buying a piece of property and land,” said Fahy, “especially in urban areas where land is at a premium — there's a very good chance for appreciation.”

It’s also important to think about the upkeep of your property long-term.  Condos are low-maintenance, as your condo board typically takes care of any and all repairs.  However, this does come at a cost through your monthly maintenance fees.  A house, on the other hand, doesn’t come with a monthly fee other than your mortgage payment, but you could get hit with a hefty bill should something go wrong.

You might pay $400 a month in maintenance fees for your condo, which adds up to about $5,000 a year, but a house could end up costing you much more.

“A condo will affect your monthly cash flow steadily as you're paying maintenance fees, but you won't be getting huge repair bills,” said Fahy.

When deciding whether a house or condo is right for you, it’s also a great idea to use a mortgage affordability calculator to determine what kind of budget you’re working within.  While you might dream of owning a house close to your downtown job, it might be more realistic to look at a house in the suburbs or a condo in the city.

In addition to the financial considerations, there are a number of other factors—including lifestyle tradeoffs—to consider when deciding which type of property best suits you.

Do you want a lot of control over your property when it comes to renovations and landscaping? Do you prefer to drive or walk to get where you’re going?  Do you value privacy or do you like being surrounded by people?

Choosing a condo might put you in the heart of the city, but you're giving up a certain amount of privacy and space for that prime location.  On the other hand, you could head into the suburbs where houses become more affordable, but you're trading the convenience of city life to get that price point.

In the end, it’s important to weigh the pros and cons of each property type and consider how these might affect your everyday life.

Are you more partial to houses or condos?  Do you currently live in the one you prefer? We would love to hear from you!

For more information make sure to follow RateHub on Twitter @RateHub_Canada and like them on Facebook.

Oh and just in case you missed our last guest post swap, no worries, just click here to find out 5 Questions You Should Ask Your Mortgage Broker and click here for a fun post about Coloured Kitchens.

See you next month!

5 Questions To Ask A Mortgage Broker

Brennan Valenzuela from RateHub is back this month for our monthly guest post swap. Last month Brennan answered our FAQ's on the new mortgage rules, if you missed his post, just click here. While I discussed the merits of choosing to live in a house vs condo, click here to read that post.

Today Brennan is discussing mortgage brokers. With the popularity of using mortgage brokers versus traditional banks on the rise, it's important to be informed and ask the right questions. Just like with any profession, there's good and bad, so it's important to be educated before sitting down with any mortgage specialist. Brennan gives us 5 questions to ask a mortgage broker to help us get started on our mortgage journey...

Are you using a mortgage broker? Because according to research conducted by the Bank of Canada, Canadians who use mortgage brokers pay lower mortgage interest rates by an average of 0.175%, compared to those who use banks. For example, if your bank advertises a 5-year fixed rate of 3.15%, then a broker will be able to get you 2.98%. How do you find the right mortgage broker? Here are five simple questions both experienced and first-time home buyers should ask to ensure they get the right mortgage broker by their side.

1.      What kind of education/licensing do you have?

You must ensure that your broker is fully licensed and has the proper training that meets mortgage practice standards. Most mortgage brokers in Canada require a license for their practice; however, licensing differs from one province to the next. For example, Ontario mortgage brokers must meet education and experience requirements outlined by the Financial Services Commission of Ontario (FSCO).

Although not mandatory, mortgage brokers can receive an Accredited Mortgage Professional (AMP) designation through the Canadian Association of Mortgage Professionals (CAAMP) which increases their credibility.

2.      What are your hours of availability and how can I reach you?

Unlike bank reps, mortgage brokers operate independently which affords them extended business hours for increased reachability. A good agent will also maintain communication with you even after you have closed your home to provide timely updates and mortgage news.

3.      Are you affiliated with any lenders?

It’s not a good sign if your broker is sourcing mortgage products from only one or two lenders because it limits the amount of options available to you. Ideally, you would like a mortgage broker with access to mortgage rates and products from multiple lenders for a greater diversity of selection.

4.      How long have you been a mortgage broker?

An experienced mortgage broker is a good mortgage broker. They are less likely to be caught ‘off-guard’ by a unique situation because they would have already dealt with it before. Ask them about their years of service and the number of deals they’ve closed. Most mortgage brokers wear their accomplishments like medals.

5. What do you love about your job?

Finally, you want to gauge the level of passion your mortgage broker has about their job. Is there fire in their eyes when you talk to them? Do they have strong opinions about the mortgage industry? Are they confident about how they can help you? A good mortgage broker will have all of the above.

Thanks Brennan, I think these are some solid questions that everyone should be asking! Which option is your top choice for arranging a mortgage, a bank or mortgage broker? Brennan and I would love to hear from you!

For more information make sure to follow RateHub on Twitter @RateHub_Canada and like them on Facebook. 

See you next month Brennan!

House vs. Condo

Before buying a property to live in, you have an important decision to make, do you buy a house or condo? There's no right or wrong answer, it depends on your preference, lifestyle, budget and future plans. Pop over to my guest post at Rate Hub to give you some food for thought before making the big decision, just click here!

What is your preference?

New Mortgage Rules FAQ's Answered

There's been a lot of talk about mortgages this week and my blog has been no different. Just in case you don't know why, I'll fill you in, the mortgage rules have changed once again and took effect at the beginning of this week. Brennan Valenzuela from RateHub is back this month to answer your FAQ's regarding the new mortgage rules. Brennan, the floor is all yours....

According to recent report from the Globe and Mail, only half of all Canadians are familiar with the new mortgage rules that took effect July 9^th, 2012. The new rules were announced by Jim Flaherty on June 21^st, which gave Canadians just over two weeks to fully absorb the new information. As a result, only 45 per cent of Canadians surveyed were aware that the maximum amortization for insured mortgages had been reduced by five years, from thirty to twenty-five. The reduction of the max amortization was only one of the four new rules introduced by Canada’s Finance Minister.

Below, we detailed answers for some common questions that average home owners have asked.

1.)    How will lowering the maximum amortization period again affect me?

Limiting the maximum amortization period will serve three major purposes:

·         Reduce the amount of interest Canadians pay on their mortgages

·         Help families build up equity in their homes faster

·         Help people pay off their mortgages sooner

2.)    What if I already have an insured mortgage beyond 25 years? How will this affect me?

Canadians who are renewing their insured mortgages will not be affected by the new changes. For example, if you acquired a mortgage three years ago with a 30-year amortization period and are looking to renew today (i.e. 27 years remaining on the mortgage), your current mortgage can be renewed with a 27-year amortization so long as no new funds are being added to the mortgage.

3.)     What if I bought a pre-construction condo that won’t be built for another three years?

The new mortgage rules would not apply if you purchased your condo and made a mortgage insurance application* on or before June 21^st. After that date, the new rules will apply if the mortgage loan is not funded by December 31, 2012.

4.)    What if I transfer my insured mortgage balance to a new home after selling my current home?

The new rules will not apply when the insured mortgage balance is transferred from one property to another provided the following: the outstanding balance of the insured mortgage loan, the LTV ratio and the remainder of the amortization period are NOT increased.

5.)    Will a purchase and sale agreement dated before July 9^th be considered binding if there are outstanding conditions yet to fulfilled prior to July 9^th?

YES, if the purchase and sale agreement and the mortgage insurance application are dated before July 9^th, the new rules will not apply, even if the conditions of the agreement have not been waived.

One major reason the Canadian government introduced the new mortgage rules was to help reduce housing risk in the Canadian economy. From the words of Jim Flaherty, “the adjustments we are making today will help [households] realize their goals, build on the previous measures we have introduced to keep the housing market strong, and help to ensure households do not become overextended.”

Regardless of the new rules, it is important to always do your homework when evaluating your affordability before purchasing a new home. Whether the housing market is red hot or ice cold, you still need to compare mortgage rates in Canada to reduce the interest payments on your mortgage loan. To calculate your mortgage costs with new rules, use Ratehub’s mortgage payment calculator.

* A mortgage insurance application is a document sent by a lender to a high-ratio mortgage insurance provider (CMHC, Genworth Financial, or Canada Guaranty Mortgage Insurance)

Did Brennan do a good job answering your questions? Do you have any other questions regarding the new mortgage rules?

Just in case you missed Brennan's post last month, no sweat, just click here, he discussed social media and mortgages.

For more information make sure to follow RateHub on Twitter @RateHub_Canada and stalk, I mean like them on Facebook.

Thanks and see you next month Brennan!

Realtor vs. DIY

When making the big decision to sell your home, do you hire a Realtor, a discount brokerage or do it yourself? Find out in my latest guest blog post for RateHub, all you have to do is click here. 
Also, just in case you missed RateHub's guest blog post about social media and mortgages, then all you have to do is click here.

It's that easy!

Social Media & Mortgages

Brennan Valenzuela from RateHub is back this month for his guest post. In case you're not up to speed, Brennan and I decided to swap articles once a month on each other's blogs. If you missed his last post, no worries, just click here and if you missed mine, just click here. Now that you're up to speed, Brennan will be discussing the importance of the internet and social media for mortgage shoppers, how appropriate!

Take it away Brennan........

The internet is one of the most important communication tools on the planet. It plays a large role in how we discover, research and share information.  And it’s usage is growing at a phenomenal rate. One “internet minute” yields:

·         6 million views on Facebook

·         2 million search queries on Google

·         1.3 million videos watched on YouTube

·         100,000 new Tweets on Twitter

Social media is increasing the rate at which information is shared and now more than ever, consumers are spending more time visiting and engaging on social networks. This is no different for the mortgage industry.

According to the annual CMHC Mortgage Consumer Survey, seven in ten mortgage consumers use online sources, with an astonishing one in three relying solely on the internet to source their mortgage information.

Facebook is the most popular social media platform among mortgage consumers. In fact, social media for first-time home buyers  is an important aspect of their mortgage process. Two years ago, only 3% of first-time buyers used social media for their mortgage needs; however, today the number of users increased to 20%, or one in five first-time home buyers. Even more interesting is that 43% of social media users engaged in interaction to solicit a mortgage opinion.

Home buyers are not only using the internet to feed their mortgage queries, but to also improve their financial literacy. About four in ten recent buyers did a financial self-assessment online. Even more impressive, over 80% of those people felt they had a better understanding of their affordability and the mortgage options available to them after taking the online assessment.

Examining what mortgage consumers search for reveals what’s truly important to them. It’s no coincidence that the most searched topic was current interest rates as consumers look to acquire the best mortgage rate. Other popular search topics included mortgage options, mortgage calculators and general mortgage information.

The mortgage industry can seem complex to the average home buyer, but by using the internet, mortgage education is only a few clicks away. As social media flourishes, its popularity as a resource will grow among Canadian home buyers too.

The following article was written by Brennan Valenzuela for Ratehub.ca, a mortgage rate comparison website that is dedicated to helping and educating first-time home buyers.
Thanks Brennan, that was really an eye opener! Are you surprised at the facts? Do you begin your mortgage search online first? Brennan and I would love to hear from you!

For more information make sure to follow RateHub on Twitter @RateHub_Canada and like them on Facebook. 

See you next month Brennan!

Source: http://www.intel.com/content/www/us/en/communications/internet-minute-infographic.html

5 Questions Before Selling

There are 5 questions you should ask yourself before even thinking about calling a Realtor to sell your home.
Want to know what they are?  Then click your way over to RateHub where I break it down for you. Or just click here, it's that easy!

Outlook On Canadian Housing Market

I have some exciting news to share. Brennan Valenzuela from RateHub and I will be swaping blog posts once a month! His posts will be featured here and mine will be featred on RateHub's blog. For those of you who don't know what RateHub is all about, I'll fill you in. It's an easy to use platform where they compare banks and broker rates as well as present mortgage information in a simple to understand way.

Take it away Brennan...........

The Canadian housing market is on edge. Open a newspaper. Click through a blog. Listen to a podcast. The amount of content debating a possible Canadian housing crash is as feverish to TMZ buzzing about Lady Gaga’s latest meat dress. So, why is everyone so concerned? Because a Canadian housing collapse would likely take the economy with it, as evidenced by the US sub-prime mortgage crisis that spurred the financial crash of 2008.

How safe is Canada’s housing market and are we doomed to repeat the same fate?

Ratehub has examined the data and fine print to determine the likeliness a US-style housing burst could occur in Canada. There are qualities of the 2007 US housing market that are present in our current Canadian housing market which should be a concern, however, Ratehub feels the Canadian housing market will cool, not crash due to some very fundamental differences between the two nations.

The similarities: Why we should be worried

Sky-rocketing residential home prices are the most obvious shared similarity between the two markets. During the peak of the US housing bubble, it required 473% of the median household income to purchase a median priced home (approx. $225,000). Currently, the average Canadian home price is $369,677 for a multiple of six times the Canadian family after-tax income of $60,000.

An ultra-low mortgage rate environment also helped fuel the US housing bubble by making it cheap for consumers to borrow money. During the early 2000s, highly favoured 30-year fixed rate mortgages reached record lows in the US. Current mortgage rates in Canada are also at historic lows. For example, 10-year fixed rates are available at an unprecedented rate of 3.79%.

The biggest red flag, which has caused Finance Minister Jim Flaherty and Bank of Canada Governor Mark Carney to express concern, is Canada’s rising level of household debt. Today, the average Canadian owes $1.56 for every $1.00 they make – a ratio the US hit during the height of their crash.

The differences: What helps shield us

Canadians are internationally known as conservative people. We’re polite. We say ‘thank you’ and ‘excuse me’. Canada maintains strict mortgage underwriting standards. A stated income mortgage is one where the borrower cannot verify their income through traditional methods. Without ‘hard-proof’ of income, stated income mortgages pose a serious risk to lenders. During the US housing bubble, almost half of subprime mortgages were made up of stated income mortgages as lenders began reducing the qualifications for proof of income. Back in the Great White North, stated income mortgages make up less than 5% of all mortgages.

Subprime mortgages accounted for one in every five mortgages in the market during the US housing crash. US lenders became riskier with their lending practices to increase their bottom line.
One of the most well-known consequences of the US housing bubble was home owners ‘walking away’ from their home because they could no longer afford their mortgage. In Canada, lenders can pursue defaulting borrowers for the full amount.

Finally, mortgage-backed securitization is not as prevalent in Canada as it was during the US mortgage crisis. Our lenders must keep 70% of the mortgages they originate on their balance sheets while only 30% are securitized (sold to investors). Lenders in the US securitized 60% of the mortgages they originated, or double the Canadian equivalent.

What will happen to the Canadian housing market?

The market is poised for a correction, but a soft correction. Although Canada shares many similarities with the housing market that fell apart 5 years ago in the US, there are some notable differences that shield us from the same fate. Canada maintains stricter mortgage practices including borrower qualifications and mortgage products that don’t rely on teaser rates and no-money down.

The following article was written by Brennan Valenzuela for Ratehub.ca, a mortgage rate comparison website that is dedicated to helping and educating first-time home buyers.

For more information make sure to follow Rate Hub on Twitter and like them on Facebook. Thanks Brennan and see you next month!