Thursday, September 07, 2006
Royal Bank of Canada, the biggest bank, announced Tuesday it is reducing the posted rate on three-year to 10-year loans by a tenth of a point. The reductions are effective Wednesday.
The rate on a three-year closed term loan falls to 6.5 per cent, to 6.75 per cent on a five-year loan and to 7.25 per cent on a seven-year loan.
The Bank of Montreal also made changes to its residential mortgage rates, lowering the three-year to 18-year rates a tenth of a point.
Effective Wednesday, the two-year rate falls by a fifth of a point, down to 6.40 per cent.
TD Canada Trust brought its three-year to six-year closed mortgage rates down by a tenth of a point — to 6.55 per cent and 6.85 per cent — while National Bank of Canada reduced its three-year to 10-year rates by 0.10 per cent.
Desjardins Group also reduced its three-year to 10-year rate by a tenth of a point for branches in Quebec and Ontario, bringing its three-year rate to 6.50 per cent, its seven-year rate to 7.25 per cent and the 10-year rate to 7.50 per cent.
The cuts reflect the lower cost of borrowing in the bond market, where banks finance their mortgage loans.
Friday, August 04, 2006
The per diem is in addition to a $25 daily accommodation allowance MPs receive year-round if they own a second house or condominium in the capital, and using it to buy a home is allowed despite a rule forbidding mortgage payments from a separate $24,000 expense allowance.
Combined, the per diem and the accommodation allowance could add up to $17,225 a year for house costs and mortgage payments if an MP spends only four days a week in Ottawa while Parliament is sitting.
The $25 daily accommodation allowance is available without receipts throughout the year as long as the MP does not rent out the residence.
The move outraged John Williamson, head of the Canadian Taxpayers Federation, who noted parliamentarians last week defended a $4,000 hike to the general expense allowance for all MPs by saying it was transparent compared to earlier expense payments.
"MPs insist their expenses are completely transparent and now we're discovering a meal per diem can be used to pay off a housing mortgage? This is the height of arrogance, this is beyond the pale," said a clearly upset Mr. Williamson.
A surprised Conservative MP Garth Turner said he was unaware of any option for using per diems to help pay down mortgages and added he lost money on a house he purchased during his first term as an MP from 1988 to 1993.
He argued the per diem and accommodation allowance could help an MP turn a profit by selling a house or condominium in a seller's housing market
"I didn't claim a nickel when I owned that house," Mr. Turner said. "If it looks like it subsidizes real estate purchases through a back door, it's wrong. Average Canadians have to pay their mortgages out of their after-tax dollars."
Condo living requires flexibility, co-operation and compromise... words you don't see often in developers' ads.
It's not the right place for you if you want to be left alone to follow your own desires.
Moving into a condominium development means obeying its rules, even if you disagree with them.
You may have to leave your cat or dog behind.
You may be restricted from putting decorations on your front door.
You may be prohibited from renting out your unit for short periods.
These rules make sense in terms of avoiding conflicts among people trying to live closely and peacefully together.
Short-term rentals, for example, can be disruptive to long-term owners.
'If tenancies of under six months are permissible, you risk buying into a building that is really just a disguised hotel,' says Keith Bricknell, a condo owner in downtown Toronto.
'You will never really get to know or trust your neighbours, because some of them will be changing, as often as daily.
'Unfortunately, that has implications for things like security and the care that residents take in avoiding damage to the common elements.'
This is an extra dimension you rarely hear about when you move into a condo. You learn about it through experience.
You will be governed by a condo corporation, which can pass bylaws of all kinds. It has the power to raise your monthly fees and levy a special assessment for upgrades.
Never having owned a summer home, but having enjoyed many visits to cottages owned by friends and relatives, I didn't realize all the possible pitfalls. This book explains them.
Heavy emphasis is placed on the income tax aspects for both buyers and sellers.
If the book has a flaw, it is that author Douglas Hunter is Canadian and he constantly over-emphasizes the Canadian taxation and ownership laws. However, most of the book applies to buyers and sellers of virtually all vacation cottages.
Approximately half of the book is devoted to locating a suitable area for acquiring a cottage. After the search narrows, Hunter explains details of what to look for because buying such a property is much different than purchasing an urban house or condominium.
Unique methods of financing the purchase of a vacation cottage are explained, but without great detail. Hunter suggests contacting local mortgage lenders. He explains the tax consequences of deducting mortgage interest on a second home.
Unexpected in this book are the very complete discussions of sharing cottage ownership with friends or relatives and possible pitfalls to anticipate and resolve."
Attitudes to debt have changed over the generations as real estate prices have skyrocketed in Greater Vancouver and the rest of B.C. While survivors of the Great Depression worked to be mortgage-free, many younger people have been anything but reluctant to borrow money to finance the home they have always dreamed about.
Lindsey McDonald bought her first real estate in Cloverdale two years ago when she was 22. The ambitious student sees her mortgage as an opportunity to build wealth and expects to sign up for more and bigger loans in the years to come.
In contrast, John and Joan Ross bought their first home in 1959 and 'survived and sufficed' to become the mortgage-free owners of a bigger home on Vancouver's west side by the end of the 1970s. As children of the Great Depression, the two seniors have avoided significant debt ever since.
In the middle are baby boomers such as Bill and Marlene McLean who bought their first property in the early '70s, worked like the dickens to pay off the mortgage within eight years, and have repeatedly refinanced their home to renovate or build 40 houses for sale. With retirement on the horizon, most of their contemporaries can only wish they had been so bold.
Attitudes to debt have changed over the generations as real estate prices have skyrocketed. At the same time, mortgages have evolved to do much more than simply sustain the great Canadian dream of home ownership.
CMHC is offering mortgage insurance for interest-only loans and on amortizations up to 35 years, while also scrapping the typical $165 application fee on high-ratio loan products for people with less than 25-per-cent down payment.
With an interest-only loan, a borrower can pay interest only for the first 10 years, then pay both interest and principal. Payments are initially low, but since the entire loan must still be paid off within the original amortization period, payments balloon as the principal starts being paid down, and again if interest rates rise.
The first issue is whether a government agency like CMHC should be competing with private companies like Genworth Financial in the business of offering mortgage insurance on interest-only loans.
If CMHC has to pay out a rash of defaults, the money will come out of Canadian taxpayers' pockets. The argument has also been made that mortgage insurance protects the money lender, not the homeowner.
A recent report by CIBC World Markets noted that outstanding residential mortgages rose by 10.9 per cent during the year ending this past April, adding that "the current wave of growth in mortgage outstanding is of a higher risk," and that the moves by CMHC imply that "we will see increased default risk in the mortgage market."
The second issue is the wisdom of making mortgages easier to get by Canadians who are already in a massive hole of debt, with a savings rate that has fallen from 16 per cent in 1985 to negative 0.5 per cent in 2005, meaning they are now spending more money than their current disposable income.
Buying for investment purposes in the Toronto market has been 'far in excess of market needs' and buyers face 'very high risks,' said economist Will Dunning in his most strongly worded analysis yet of the Toronto market, released yesterday.
Nearly a decade into a robust housing cycle, high-rise sales remain extremely strong, with second quarter sales at an annual rate of 20,800, a record high, said Dunning."
While other housing economists have expressed concern over what they see as a potentially frothy condo market, Dunning, a former Canada Mortgage and Housing Corp. economist, has been among the most conservative.
Price appreciation for condos continues at a good clip — 5.9 per cent year over year — and the average condo rent has increased 2.1 per cent.
But this won't last long, according to the gloomy forecast.
"An onslaught of condo completions is just beginning and I expect that rents will start to fall late in the year with the possibility of price weakness to follow," said Dunning.
It happened to Susan Lawrence. While going through proceedings to sell her home earlier this year, the area woman learned that she had become the victim of fraud, joining a growing number of Canadians who have been victimized by real estate title fraud.
"I went to the bank to discuss my mortgage because of the pending sale," says Lawrence, who has lived in her home for almost 30 years. "I found out my mortgage had been discharged and a new fraudulent mortgage assigned to my house at another bank without my knowledge. I couldn't believe it. I had heard of mortgage and real estate fraud, but never thought it could happen to me."
The scam occurred as follows: someone unknown to her forged her signature, discharged her existing mortgage, took out a new mortgage for almost $300,000, pocketed the money, then defaulted on the mortgage and disappeared.
Ms. Lawrence believes her nightmare started when a For Sale sign went up on her front lawn, giving fraudsters an opportunity to consult the MLS listing for the property and gather information they needed. Then they simply posed as her to fraudulently sell her house, discharge her small mortgage and take out a new one.
After several sleepless nights and endless hours spent with her lawyer, her bank finally withdrew a possession lawsuit, which meant she did not have to move out of her home. Good news under normal circumstances, except that now she is faced with having to restore her title, even though the new mortgage on her home was obtained fraudulently by a third party.
Susan Leslie, vice president of claims and underwriting at First Canadian Title, estimates the average case of real estate fraud to be $300,000, compared to estimates of $1,200 by the RCMP for cases involving credit card fraud. Meanwhile, industry insiders estimate that real estate fraud costs Canadians between $300 million and $1.5 billion a year.
"The onus is on homeowners to prove the crime and it can be very costly - financially and emotionally - to clear your name," said Leslie. "Unlike traditional forms of insurance, for a one-time premium, title insurance is an effective and inexpensive way to ensure title to your property is protected. Title insurance covers legal expenses related to restoring title and is available to existing home owners even if they have owned their property a long time."
Ms. Lawrence's troubles are the latest in a string of real estate title fraud cases across Canada. The Law Society of British Columbia, after four years of investigations, recently approved $32.5 million in payments to cover a multi-million-dollar real estate fraud case involving Vancouver lawyer Martin Wirick. The high-profile case involved transactions between 1998 and 2002 and affected hundreds of victims in the scheme. Other cases across the province include:
* A Mississauga man tried to sell his parent's home last year and discovered that someone had fraudulently sold the home for $400,000. The case was resolved after $11,000 in legal fees, but the fraudster is still at large.
* A Brantford woman received a call from a mortgage collector saying she was three months behind on her mortgage payments for a home she didn't know she owned. Later that night she also discovered that two other properties had been mortgaged in her name, leaving her on the hook for more than $400,000.
Visit www.ProtectYourTitle.com to learn how to protect yourself.
Wednesday, June 21, 2006
Thursday, June 15, 2006
Like a scene out of the 1986 comedy, The Money Pit, the beautiful house you were excited to move has now become a financial burden.
This is the case for some new home buyers who don't cover all their bases by doing research before moving into a new home.
Hiring a home inspector is a part of the home buying process that is optional, but may save numerous headaches down the road.
"Steady job and wage gains continue to support Canadians who want to make the move from renting to owning," said Adrienne Warren, Senior Economist, Scotia Economics. "Many potential new homeowners, however, will look to less expensive housing options such as townhomes and condominiums due to some erosion in overall affordability."
Despite the optimistic view of homeownership, current renters who are not planning to buy, outlined a number of deterrents to purchasing a home. The study found the most commonly cited reasons include: commitment of ownership (37%), high cost of real estate (17%), living paycheque to paycheque (12%), poor credit (7%), and student loans (5%).
The short-term outlook for inflation and interest rates in Canada is a whole lot less clear since Friday's jobs report that signalled the economy is hotter than expected, but the long view is that borrowing costs and the pace of price increases are approaching their apex.
After Friday's report that Canada created almost 100,000 jobs last month, the Canadian dollar has shot up almost US2 cents to US91 cents in the past two trading days on bets the Bank of Canada is not done raising interest rates to corral inflation, and probably has one more quarter-percentage-point increase to go. That's a change from earlier last week, when the expectation was that the central bank's trend-setting target for overnight interest rates wasn't going any higher than the 4.25% it is now.
"If we are not done watching the Bank of Canada raise interest rates, we're 25 basis points from it, so the end's not far away," said Craig Wright, chief economist at Royal Bank of Canada.
The report that changed the view, and that has people calling mortgage brokers again on concern they should lock in before rates rise further, showed the economy created almost four times as many jobs as economists had expected. The unemployment rate dropped to 6.1%, the lowest since 1974.
Many Ontarians have jumped into the busy real estate market without fully appreciating the legal dimensions of home buying.
Homebuyers put a great deal of time and energy into finding their dream home. Real estate lawyers put the same careful attention into investigating the legal issues related to the property and closing the sale," says Kathleen Waters, an experienced real estate lawyer and Vice President, TitlePLUS. "That's where your real estate lawyer becomes an invaluable resource: he or she navigates you through the major legal implications of home purchase, and can help prevent a dream home from turning into a nightmare."
Will Dunning said that increase might take a little of the heat out of the real estate market, but he doubts it would be enough to cause prices to fall.
New home sales are strong, prices are continuing to rise and the new housing starts are either growing slightly or remain flat in most parts of the country, he said.
Speaking at a mortgage symposium in Halifax Monday, Mr. Dunning said fixed rates remain the most popular mortgage choice for homeowners, but the heavily promoted combination fixed rate/variable rate mortgages are gaining in acceptance as people looking at the uncertainty in the marketplace see them as a way of managing the risk.
Drawing on the results of a survey he carried out in March, he said most people renewing their mortgages are happy with their situation, generally because their payments on a five-year mortgage are less today than they were when they last renewed. People who took out a one-year mortgage might not be as happy as their payments are likely going up.
The survey also found that 66 per cent of people believe mortgage rates will continue to climb, but only 25 per cent believe the increases will negatively impact their standard of living.
With increasing rates, Mr. Dunning said mortgage holders will likely shop around more, a practice he encourages.
"Negotiate, negotiate, negotiate. The gap between the posted rates and the discount rates is as large as I’ve ever seen."
The posted rate at many major banks is around 6.75 per cent, while the discount rate is as low as 5.3 per cent, he said.
At least part of the reason for the gap is the tremendous growth in the number of companies getting into the mortgage business over the past few years and with an increasing number of players comes heightened competition.
Tuesday, June 13, 2006
With the right knowledge, research and professional team backing you up, there are some great deals to be had, says Douglas Gray, president of National Real Estate Institute Inc, and author of Mortgages Made Easy: The All-Canadian Guide to Home Financing.
And it all starts with proper preparation, including doing an online credit check to make sure your financial affairs are as they should be, and knowing how much a lender will potentially grant you, Gray says.
His No. 1 piece of mortgage advice: Don't deal directly with lenders, but work with a mortgage broker who can seek out the best deals from up to 100 different lenders.
'They know all the big players, and who's hungry - and you don't pay a penny to the mortgage broker,' says Gray, who also advises homebuyers to do a little comparison-shopping, and talk with at least three different brokers.
But with affordability rates in Vancouver at an all-time low, sometimes the best deal is still out of financial reach - and that's where parents come in.
More and more often, 'parents are giving their children a leg up, maybe because they've got a lot of equity in their own homes,' says Gray.
But don't expect them to hand over a down payment or co-sign a mortgage at the snap of your fingers - if you want your parents' help, impress them with your research and 'plant the seed' early, he says.
KNOW YOUR OPTIONS
When it comes to mortgages, getting the best deal almost always comes down to preparation and research. Here are 10 key questions to ask yourself before you sign on the dotted line:
1. Is your income secure? Will it increase or decrease in the future?
2. Are you planning on increasing the size of your family, and therefore your living expenses?
3. Can you afford to put aside a financial buffer for unexpected expenses or emergencies?
4. Are you planning to purchase the property with someone else?
5. If so, can you depend on their financial contribution?
6. Have you determined the amount of mortgage you'll be eligible for?
7. Have you determined all the expenses you will incur relating to the purchase transaction?
8. If you're relying on income from renting out part or all of your newly acquired property, do you know the city and strata bylaws?
9. Have you researched mortgage brokers and companies on the Internet?
10. Have you run a credit check on yourself to see what lenders will see?
Source: Mortgages Made Easy: The All-Canadian Guide to Home Financing, Douglas Gray (John Wiley & Sons Canada, Ltd, 2006).
Bankruptcies, on average over the past three months, fell 7.6 per cent from last year but – like most economic reports of late – the headline number masked regional discrepancies. In Alberta, they tumbled 17.5 per cent, while bankruptcies in Quebec and Atlantic Canada rose 3.6 per cent and 1.8 per cent, respectively, CIBC said in its bankruptcy report.
At the same time, Ontario bankruptcies are falling as strength in Ottawa, Toronto and Kitchener offsets higher rates in Sudbury and Windsor, cities more vulnerable to the strong Canadian dollar.
“Looking at development in the pipelines, it appears that there is little risk of any significant deterioration in the bankruptcy situation in the near future,” CIBC economist Benjamin Tal said in the report.
In one barometer that shows fewer people are likely going belly up, the delinquency rate in credit cards has stabilized at about 4.6 per cent — lower than its long-term average. Mortgage arrears, meantime, remain well below their long-term average and are “unlikely to rise strongly in the near future,” the report said.
CIBC forecasts little change in the number of bankruptcies this year and a 3 per cent-5 per cent increase next year as economic activity weakens.
Business bankruptcies, meantime, have fallen more than 18 per cent, on average over the past three months, from last year — a rate not seen since late 2002.
The largest decline in business bankruptcies was in Alberta where the number of bankruptcy filings plunged by almost 40 per cent during the year ending April.
Ontario was the only province that saw an increase in the number of business bankruptcies in the period, weighed down by difficulties in the manufacturing sector.
The number of business bankruptcies is expected to fall by 7 or 8 per cent this year be little changed in 2007, CIBC said.
“At the same time, we expect the regional divergence to widen with bankruptcies in the manufacturing sector in Ontario and Quebec continuing to rise, reflecting the impact of a strong dollar and some softening in demand from south of the border.”
Thursday, June 08, 2006
The CMHC has passed down $762,000 in funding for the 67-unit rental apartment at 1 Homewood Ave. and $528,000 for a 44-unit rooming house at 7 and 9 Homewood Ave. The money is part of an initiative to help ensure that Toronto maintains a certain number of affordable housing units.
"Part of the review we do before giving out funding is to determine if, in fact, the tenants are lower-income earners and if, in fact, the rents are kept below a certain level," said CMHC spokesperson Mark Salerno. "We want to ensure that the buildings remain safe to live in and that we retain an affordable housing stock in the city."
While the funding comes in the form of a loan, Salerno said that the CMHC will forgive the loan provided certain conditions are met. First, the money must be used for repairs and maintenance to keep the building safe. Second, the landlord must keep rents at an affordable level.
"The system is predicated on the landlord agreeing to place a ceiling on the rent after the repairs," he said. "It's deemed fully forgivable over a period, so they have to earn that forgiveness. Over that given period, if the landlord decides to put the rent up above the agreed level, they have to pay back a prorated amount of the loan."
The money for the Homewood Mansions has been used to redo plumbing and electrical infrastructure in the buildings, as well as some more visible renovations.
"(Tenants) have new kitchens, new bathrooms, everything's new," said Homewood Mansions co-owner Mary Campisi. "With things like the plumbing and electrical, it was important to get everything up to safety code, and before it wasn't. It's an ongoing thing where we want to keep these buildings safe for our tenants."
The funding dollars are especially welcome since, with landlords of lower-income housing developments taking in less in terms of rent dollars, repair and maintenance costs often must come out of the developers' pockets. In other cases, landlords will raise rent to cover the cost of such work.
"It's important because we can make sure everything is up to par without having to take money from tenants in our building," Campisi said. "Some of them would have a hard time making ends meet if we raised the rent."
In addition to the Homewood Mansions, the CMHC also gave forgivable loans to rental apartments in North York and Bloor West Village. The Homewood Mansions were by far the largest of the buildings and received the bulk of the $1.6 million in total funding doled out by the CMHC at the end of May.
"Our main concern is when some buildings are in a poor state of repair or when there are (safety) code deficiencies," Salerno said. "It's an issue of life safety and a way to help both the landlords and the tenants."
Sunday, May 28, 2006
Among the changes, CIBC's one-year closed rate slips to 6.25 per cent from 6.30 per cent, while the three-, five- and 10-year rates each decline by one-fifth of a percentage point, to 6.45 per cent, 6.75 per cent and 7.55 per cent.
The bank's move followed Wednesday's quarter-point increase in the prime lending rate to six per cent at all the major commercial banks, after the Bank of Canada raised its overnight rate to 4.25 per cent from four per cent.
While it increased the cost of short-term money for the seventh time since last autumn, the central bank also signalled that its series of hikes is likely over.
On bond markets, where banks fund their mortgage obligations, the Canadian yield curve flattened this week, as would be expected after the central bank's increase at the short end.
'Interestingly, though, the flattening came through entirely in the long end, where yields declined four basis points,' a commentary from the Bank of Nova Scotia (TSX: BNS) observed.
'For both the Canadian and U.S. curves, yields between the target policy rate all the way to the long end are now nearly flat.'"
Monday, May 22, 2006
Stateside, it's one of the three key issues gripping the U.S. mid-term elections (illegal immigrants and Iraq being the others) and threatening to oust the Republicans from the House and Senate, ruining George W. Bush's final two years in office.
It may be resting peacefully in the minds of the politicians here, but Canadians are wide awake on how they are getting hosed at the pumps.
According to a damning - if you are an oil company or elected official - Ipsos-Reid poll released yesterday, there's a serious mood of discontent out there. That's even true in Alberta, where high energy prices bring mega-millions into the provincial treasury and have touched off the largest energy boom in the province's history.
Albertans seriously resent the high cost of gas and diesel. So much so that only 40% of Albertans polled in late April and early May feel that gas prices are set 'fairly.'
In Ontario the number who feel that gouging is going on rises to 70%. In Quebec the distrust level hits 82%.
Poll respondents also have an inkling where the extra cash is going. Overall, 71% feel that energy company prices are excessive and the feds should bring in a 'special tax on windfall profits' that are made from gas.
Maritimers were the real cost-control hawks at 79%. In Alberta, only 37% "disagreed" with going after the pump pirates. Not an overwhelming endorsement of the leaderless Alberta Tories, especially considering oilsands outfits are getting their bitumen virtually royalty-free until payout in these times of record world oil prices.
Prime Minister Stephen Harper's bold plan to roll back the hated GST by 1% apparently didn't impress Canadian gasoline consumers either.
Asked if the 1% token gesture was an "appropriate" response, seven in 10 Canadians gave Stevo the thumbs-down.
But the most distressing response to the poll - if you're a politician - was what Canadians answered when asked if the government should step in and regulate gasoline prices.
Across the country, 72% back the government getting involved in setting gasoline prices. In Atlantic Canada the support was greatest at 87%. That makes sense because some provinces already regulate pump prices, and the Nova Scotia election is being fought over throwing a noose around gas companies.
But the most telling number comes from free-enterprising, redneck Alberta, where only 39% said no to government intervention at the pump.
The inflationary effect of high gasoline prices may be about to have repercussions in other parts of the economy. It's the old ripple effect.
The C.D. Howe Institute circled the wagons this week and asked a panel of economic experts what Bank of Canada governor Dave Dodge should do on May 24 when he sets Canada's trendsetting interest rate again. It was a six-to-five split decision. But the slim majority recommended Dodge nudge up the rate by another 25 basis points to 4.25%.
Some even said the country's top money man must continue jacking up rates "significantly above the current level" to keep inflation at 2%.
Higher mortgage rates
If this translates into higher mortgage rates - which it inevitably will - then it could put even more pressure on Alberta consumers.
Yesterday, the Royal Bank of Canada revealed that we face the second-worst affordability in the country when it comes to buying a house.
"The good times for the Alberta economy have come at a cost to homeowners," the RBC Financial Group gloomed. House prices may be up 25% over a year ago, and income and employment growth may be the envy of the country.
"However the price of appreciation and higher mortgage rates outpaced this growth."
Remember what happened the last time Canadians were seriously stung with high gasoline prices and a roaring Alberta economy? Pierre Trudeau was able to muster enough political clout to bring in the national energy program to skim excessive windfall profits.
Stephen Harper is no Trudeau. But the Ipsos- Reid poll shows there's serious hurt across Canada - and right here in Oilberta - over gasoline prices.
Klein and Harper have been warned.
Out of all my buyers this month, 50 per cent were Canadian, says Paul Rush of the Points National Real Estate, via telephone.
Ive had an increase in Canadian buyers in the last two to three months, prior to that it was mostly US buyers. Canadians are strictly going by the exchange rate and they know (Point Roberts) is close.
Waterfront properties, after all, may seem more affordable in the U.S. as the going price is about $10,000 per foot (measured along the shore). Small beach-front properties are selling for US $550,000 to $600,000 although at least one luxurious home is selling for US $1.6 million.
In Tsawwassen, however, RE/MAX manager Bob Cooke could find only two listings for waterfront homes and the cheapest was $1.7 million for 3,500 square feet and a 35-foot shoreline frontage, looking west.
Views are anywhere from $1 million to $2 million, Cooke says. Waterfront starts at about $1.8 million. I think theres a shortage of waterfront properties and prices are only going to rise.
But before you sell your home or drain that bank account to join the migration, Canadian buyers need to know a few things about purchasing American land.
First off, a Canadian without a Green Card may only reside across the border for 182 days per year and must have a home in Canada. The purchase must be for recreational use or pleasure.
Rush notes there’s no guarantee you’ll be able to access your property when you want to, either.
“It’s really up to US Immigration whether they let you in at all. It’s very strict; you need a permanent residence in Canada, not just an address, and you may have to show your mortgage payments or utilities as proof. It’s a delicate thing – I’ve known them to not let people in.”
As a result, Rush has found that most of the Canadians appearing at his office have dual citizenship, like him.
“They’re taking advantage of the high prices of Canadian real estate, selling out and moving here.”
Point Roberts realtor Jim Julius says most of his Canadian buyers are grandparents who are shopping for recreational property for their grandchildren.
“What we have now is a baby boomer demand for properties. They’re looking for places for their grandchildren so their children’s children have a chance to get out of the city—that’s a big deal.”
May 20, 2006. 01:00 AM
More than 380,000 households in major Canadian cities indicated they were ready to buy a home this year, according to a survey released this week by the Canada Mortgage and Housing Corp.
The results of the CMHC's Consumer Intentions to Buy or Renovate a Home survey represents an average of 8 per cent of households in Halifax, Montreal, Toronto, Calgary, and Vancouver.
While 8 per cent declared that they have a high chance of buying a home and could be considered as 'ready to buy' within the next 12 months, 5 per cent indicated that they have a 50-50 chance of buying. The survey is conducted using a sample of about 4,000 households in each centre surveyed.
'Intentions to buy are up from 2005 when 5 per cent of households were ready to buy a home. This year, strong intentions to buy are consistent with continued high levels of housing starts and sales of existing homes.
Favourable economic conditions, such as low mortgage rates and a healthy labour market are contributing factors to home-buying intentions,' said Bob Dugan, chief economist at the CMHC.
'Home-buying intentions are strongest in Calgary and Halifax, where 10 per cent of households reported that they are ready to buy a home. Purchase intentions are also strong in Vancouver and Toronto where 8 per cent of households are ready to buy, while the share is slightly lower in Montreal (7 per cent).
"Home renovations will remain strong this year, with 13 per cent of surveyed homeowners reporting they were ready to undertake renovations this year, costing $1,000 or more," said Dugan.
"The share of serious renovators is down compared to 2005 when 17 per cent of homeowners were ready to renovate. While the share of homeowners who intend to renovate decreased in 2006, the total dollar amount that will be spent on renovations is expected to increase."
Meanwhile, increases in Canadian house prices over the past five years — dramatic in Alberta and British Columbia and strong in the rest of the country — are the result of a robust economy that also provided a dramatic rise in key economic indicators and popular lifestyle and consumer items, according to a report released this week by Century 21 Canada.
Price increases over five years for typical homes across the country in a selection of markets surveyed by Century 21 range from as high as 129 per cent in Vernon, B.C. to as low as 12 per cent in Thunder Bay.
In Vernon, a 1,200-square-foot bungalow with three bedrooms and two bathrooms on a 55-foot by 100-foot lot increased in value to $355,000 this year (2006) from $155,000 in 2001.
The hottest housing markets in Ontario include Peterborough and Kitchener-Waterloo, Century 21 reported.
In Peterbourgh, the price of a typical home — 1,050-square-foot bungalow with three bedrooms and 1 1/2 baths — increased to $202,000 in 2006 from $131,000 in 2001, an increase of 54 per cent.
In Kitchener-Waterloo, a typical home — 1,200 square foot two-storey home with three bedrooms and two bathrooms — rose to $245,500 in 2006 from $163,000 in 2001, an increase of 51 per cent.
Monday, May 15, 2006
Eye-popping increases of 29.6 per cent in Calgary and 14.3 per cent in Edmonton helped to increase the national average rise in houses prices to an annualized 7.6 per cent in March � an increase not seen since at least January 1990.
More moderate price increases were seen in Vancouver, with a 6.9 per cent rise, while Quebec saw a 6.6 per cent increase.
The average price for a residential property in the Halifax area was $279,748, a 4.8 per cent increase last year. Toronto reported a 4.3 per cent annualized increase while in Montreal, home prices rose by 3.3 per cent.
The only monthly drop was in St. John�s, Nfld., where prices slipped 0.1 per cent from February. But if you haven�t bought your home yet, don�t panic � the federal housing agency says the market should begin to soften in 2006.
Rising mortgage prices and market saturation will begin to cool demand, at least a bit this year, says Canada Mortgage and Housing Corp.
Home construction starts will slip to 222,200 units this year, down from the 225,481 units that were built last year, the Ottawa-based agency said. 'Higher mortgage carrying costs and rising house prices will temper housing demand this year,' Bob Dugan, CMHC�s chief economist, said in a statement.
But that still represents a higher rate this year than previously forecast by CMHC.
Booming demand in Alberta and British Columbia led the agency to increase its outlook for this year’s construction to 208,700. Still, a gradual cool is coming, says CMHC.
"Over the medium term, housing starts will continue to slow gradually, reaching 184,400 units by 2010," Dugan said.
The resilient housing market is one more factor that will likely convince the Bank of Canada to raise short-term interest rates in late May, said Marc Levesque, chief fixed income strategist with TD Securities.
"This is just one more tick mark in the tightening column," for the central bank, which has already boosted its key interest rate on six consecutive opportunities to four per cent. "This is one sector of the economy that is being supported pretty well by low interest rates."
Record low unemployment and a flourishing resource sector all threaten to push up inflation, something the central bank desperately aims to avoid. Its next chance to raise rates comes on May 24 and many analysts have forecast another quarter-point rate hike as the central bank aims to hold the consumer price index to about two per cent.
Monday, May 08, 2006
Monday, May 01, 2006
Published: Saturday, April 29, 2006
OTTAWA - Home sales and prices hit all-time highs in the first quarter of this year, according to a report Friday which will add to puzzlement, and possibly more inflation worries, at the Bank of Canada.
There were 125,142 existing homes sold from January through March, up 2.4 per cent from the fourth quarter of last year, and 0.2 per cent above the previous record high set in the third quarter of last year, the Canadian Real Estate Association said.
Earlier in the week, Bank of Canada governor David Dodge said ``we're a little bit surprised'' at the strength of the housing market considering the steady climb in interest rates and prices since last summer.
And real estate association chief economist Gregory Klump agreed it was a surprise that sales hit new record highs.
``Rising household incomes and upbeat consumer confidence are keeping resale housing activity on a tear, even with rising home prices and interest rates,'' Klump said.
The industry association reported sales reached their highest level of any quarter on record for both the number of units sold and the total dollar volume. The value of sales reached $33.4 billion, a 5.8 per cent increase from the final quarter of 2005, and the highest level ever, with records set in most provinces.
New quarterly sales records were set in Alberta, Nova Scotia, Prince Edward Island and Newfoundland and Labrador.
The quarterly surge in sales was despite a decline in March, when sales slipped 1.4 per cent from February, which was the second highest month of sales on record. British Columbia, Alberta and Ontario led the decline in sales, while sales rose in Quebec, New Brunswick, and in Nova Scotia where sales hit a record for the month of March.
While sales slipped in March, the average home price continued to rise to reach a record $274,163, up 12.4 per cent from a year earlier. The average price in the quarter was up 12.1 per cent from the same quarter in 2005, which was the steepest increase since the 1980s housing boom, which eventually went bust.
In March, the average price of a home was at an all-time high in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, and Prince Edward Island. And during the quarter, the average price was at an all-time high in every province except Quebec.
The average price of a home sold in March was highest in British Columbia at $383,712, up nearly 20 per cent from a year earlier. The steepest increase in the average price was in Alberta at 24.7 per cent to $267,641.
While most analysts continue to predict housing sales should eventually slow this year and price increases moderate, they say that unlike during the 1980s, there is no housing bubble to burst.
``Interest rates are widely expected to be near their peak,'' Klump noted. ``The continued ability to negotiate rates is also helping to keep sales activity high by keeping monthly payments down and affordability reasonable.''
The posted five-year closed mortgage rate is now 6.6 per cent, which is up less than a full percentage point from a low of 5.7 per cent last July, before the Bank of Canada resumed raising rates.
``It's not a substantial increase,'' Klump said, noting a recent survey by mortgage brokers found even with the higher rates, families are finding their housing payments manageable.
Thursday, April 27, 2006
TORONTO (CP) - Base and precious metals stock helped lift the Toronto stock market slightly higher Wednesday afternoon as investors took in another slew of positive earnings reports.
The Canadian dollar was up 0.29 of a cent at a 14 1/2-year high of 88.65 cents US, a day after the Bank of Canada raised interest rates and said another hike is likely.
'There is certainly not a lot of inducement to buy (stocks) right now,' said Julie Brough, assistant vice-president at Morgan, Meighen and Associates. 'It does look a little bit tired and the valuations, in my mind, are not anything to get excited about.'
U.S. indexes were higher on some better-than-expected corporate earnings reports, a broker upgrade for General Motors Corp. (NYSE:GM) and positive economic data.
Toronto's S&P/TSX composite index was 21.67 points higher at 12,351.46, held back by declines in tech stocks and energy stocks as oil continued to move away from last week's record highs.
The TSX Venture Exchange moved down 3.38 points to 3,091.61.
Wall Street's Dow Jones industrial average gained 62.44 points to 11,345.69, with GM jumping $1.31 to $22.72 US after Merrill Lynch upgraded the automaker one notch to 'neutral' from 'sell,' citing beliefs that its restructuring plan is moving in the right direction.
The Nasdaq rose 3.15 points to 2,333.45 while the S&P 500 was up 4.44 points at 1,306.18.
In economic news, the U.S. Commerce Department said orders of durable goods jumped 6.1 per cent in March, more than triple the 1.8 per cent economists predicted. The department also said new home sales climbed 14 per cent to 1.21 million for the month, handily beating estimates for 1.1 million despite the rebound in mortgage rates.
The base-metals sector climbed one per cent, with AUR Resources Inc. (TSX:AUR) ahead 55 cents at $16.55.
Ivanhoe Mines Ltd. (TSX:IVN) has agreed to exchange its Mongolian coal interests to Asia Gold Corp. (TSXV:ASG) for a majority stake in the junior miner. Ivanhoe shares advanced 19 cents to $10.97 while Asia Gold shares surged 29 per cent to $2.70.
The June contract for bullion on the Nymex was up $7.80 to $642 US an ounce, taking the TSX gold sector ahead 0.95 per cent. Kinross Gold Corp. (TSX:K) added 14 cents to $13.62.
Elsewhere in the materials sector, Alcan Inc. (TSX:AL) moved up $1.39 to $59.75 and Gerdau Ameristeel (TSX:GNA) rose 35 cents to $12.35.
The TSX energy sector fell 0.3 per cent as the June contract for light sweet crude on the New York Mercantile Exchange was down 63 cents at $72.25 US a barrel.
Prices headed lower as the U.S. Energy Department said gasoline inventories fell 1.9 million barrels last week while crude stocks fell 200,000 barrels.
Shares in EnCana Corp. (TSX:ECA) were 63 cents higher to $58.23 after the company said it is boosting its quarterly dividend as first-quarter profit jumped to $1.47 billion US on a huge accounting gain, while operating profit rose 14 per cent to $694 million US.
After its first reporting period as an income trust, Precision Drilling Trust (TSX:PD.UN) said its first-quarter profit rose to $224.2 million, from a year-earlier $138.5 million, and it will boost its distributions to unitholders by 15 per cent to 31 cents a unit. The company's units were up 50 cents to $41.60.
Information technology stocks losing ground included Nortel Networks Corp., (TSX:NT), down four cents to $2.97.
Potash Corp. of Saskatchewan Inc. (TSX:POT) shares fell 79 cents to $103.89 after the company reported a net profit of $125.5 million US, down from $131.3 million US for the same period last year as a pricing dispute cut fertilizer shipments to China.
Newsprint giant Abitibi-Consolidated Inc. (TSX:A) is cutting jobs and has narrowed its first-quarter loss to $33 million from $51 million a year ago as rising prices and tighter inventories helped the company improve its finances. Its shares fell 16 cents to $4.87.
Nova Chemicals shares (TSX:NCX) declined 19 cents to $34.03 as the firm swung to a first-quarter loss of $5 million US from a year-earlier profit of $94 million US.
Maple Leaf Foods Inc. (TSX:MFI) earned a $17.3-million profit in the first quarter of 2006, compared with $12.7 million in the year-ago period. Its shares edged seven cents higher to $12.90.
Fuel cell maker Ballard Power Systems (TSX:BLD) has cut its first-quarter loss to $17.2 million US from a year-earlier $32.4 million and revenues rose 14 per cent to $12.5 million US. Its shares gained 52 cents to $11.68 Cdn.
In the U.S., Boeing Co. (NYSE:BA) shares added 32 cents to $85.43 US as the company reported a better-than-expected 29 per cent jump in first-quarter profits.
Shares in PepsiCo Inc. (NYSE:PEP), the world's No. 2 soft-drink maker and owner of snacks maker Frito-Lay, were up 35 cents to $57.85 US after it said first-quarter profit jumped almost 12 per cent to $1.02 billion US.
Amazon.com (Nasdaq:AMZN) reported earnings dropped 35 per cent after a hefty gain boosted last year's profit. The online retailer's results still met Wall Street targets and its shares gained 26 cents to $35.81.
Published: Wednesday, April 26, 2006
Homeowners with variable mortgages will see their interest rates increase in response to a boost in the Bank of Canada's trendsetting overnight rate on Tuesday.
BMO Bank of Montreal and Scotiabank both announced rate increases of 0.25 percentage points, raising their three-year open rate to 5.75 per cent after the Bank of Canada said it was increasing its overnight rate by 25 basis points. All major banks also increased their prime lending rates to 5.75 per cent.
But fixed mortgage rates have remained unchanged, at least for now.
Rob Hafer, regional sales manager for Invis on Vancouver Island, said variable rates are attached to prime rates, so anyone with a variable mortgage will see rates rise. But even though fixed rate mortgages depend on a number of factors other than the prime rate, those rates have also been going up recently.
'So the costs of borrowing for all consumers is going up unless you are already locked into a [mortgage] term,' Hafer said.
And while rates go up, consumers should shop around to make sure they are getting the best deal, he said. Over the last few years, the number of lenders have steadily increased, making the market more competitive. As posted rates go up, lenders are getting more aggressive with the discounts they will offer from those posted rates, he said."
TORONTO (CP) - Tuesday's rise in variable mortgage rates will have some homeowners looking to lock in their rates, but experts say not to be hasty. It could be just a blip.
The cost of a variable mortgage has risen for the sixth time since the summer, after the Bank of Canada announced Tuesday it is hiking its benchmark interest rates by a quarter-point. About 22 per cent of Canadian mortgages are now variable, moving in step with the bank's prime lending rate, says CIBC World Markets (TSX:CM) senior economist Benjamin Tal.
Andrew Moor, CEO of mortgage brokerage firm Invis, says more customers have been opting for fixed-rate mortgages over the last few months as interest rates have risen.
But, he adds, the carrying costs on a variable mortgage are still less than those on a fixed-rate mortgage.
After Tuesday's rate hikes, a competitive variable mortgage rate will be about 4.85 per cent, up from 3.45 per cent at the beginning of September, according to Invis.
As a result, the payments on a $150,000 mortgage will have risen from about $745 a month to about $860.
A five-year fixed mortgage could be obtained at 4.5 per cent in September. That would cost about $830 a month on a $150,000, 25-year mortgage.
Today the rate is more like 5.25 per cent, costing $894, Invis said.
Within hours of the Bank of Canada's announcement Tuesday, mortgage lenders were already posting new variable mortgage rates that were up by a quarter of a percentage point.
"Every time something happens with the rates, there are people who decide, instead of going variable, to go fixed," said Jim Rawson, a regional sales manager for Invis working in downtown Toronto.
But he said economists don't expect the Bank of Canada to continue its credit-tightening policy for much longer.
"It may be a blip in the market and, therefore, you may not need to worry about going into a fixed term if you're used to playing the variable game," he said.
"There's really no need to panic. For those who are finding that it may be a bit of a pinch, there are things like longer amortizations."
He said stretching mortgage payments over a 30-or 35-year window may be a good temporary solution for young homeowners who need to reduce their monthly payments in the short term but know they can increase them in a few years when their salaries are higher.
"It comes down to your risk tolerance," Rawson said of the final decision on fixed-versus-variable mortgages.
"If you're the type of person who is going to lose sleep worrying about rates ... take a fixed-rate mortgage. It's not worth it if you're going to be worrying about it every day. But there are savings to be had with a variable-rate product."
Moor added that steep competition in the Canadian mortgage market has been good news for consumers.
"The pricing of variable-rate mortgages in Canada is becoming very competitive, and in fact Invis has witnessed mortgage lenders battling for market share by offering variable-rate mortgage rates well below prime - discounts not previously seen in the Canadian market," Moor said.
CTV.ca News Staff
The Bank of Canada boosted its trend-setting overnight rate by a quarter of a percentage point to four per cent on Tuesday.
The latest hike will impact the prime interest rate charged by commercial banks, affecting variable mortgage rates, as well as the cost of car loans and lines of credit.
This marks the sixth consecutive rate increase by the Bank of Canada since last summer -- when it was 2.5 per cent -- and some are wondering how many more rate hikes could be on the way.
In its statement today, central bankers said 'some modest further increase in the policy interest rate may be required to keep aggregate supply and demand in balance and inflation on target over the medium term.'
The Bank of Canada said the global economy is strong. 'At the same time, global competition and the past appreciation of the Canadian dollar continue to pose challenges for a number of sectors of the economy.'
Meanwhile, the core inflation rate appears to be staying within the central bank's target band of one to three per cent. Data released last week shows core inflation held steady at 1.7 per cent in March.
Canada's annual inflation rate remained unchanged at 2.2 per cent in March as higher gasoline prices were offset by lower prices for computer gear and clothing.
'Against this backdrop, the Bank decided to raise its target for the overnight rate,' said central bankers.
CTV's business editor Linda Sims said this probably means at least one rate hike is likely on the way. However, the rate is still quite low, compared to historic levels.
'We have got good job growth and decent economic growth in this country," Sims told CTV Newsnet.
"It will not put much of a crimp on the economy, including the housing market, going forward."
The next announcement on the overnight rate is scheduled for May 24.
Looking forward, the Bank of Canada predicts the Canadian economy will grow by 3.1 per cent in 2006, 3.0 per cent in 2007, and 2.9 per cent in 2008.
VANCOUVER � Runaway housing prices and a highly competitive mortgage industry are contributing to a growing problem with mortgage fraud across the country, experts say.
But it�s a complex issue and one lenders don�t really want to talk about.
'Mortgage fraud is a problem, and I don�t think anybody can deny it,' said Ken Fraser, executive director of investigations for B.C.�s Financial Institutions Commission, which investigates fraud complaints involving mortgage brokers and real-estate agents.
'A lot of figures have been bandied back and forth over the years about the degree of it, but I don�t think anybody has a figure on it. It is definitely escalating.'
Mortgage fraud is any act that convinces a lender to grant a mortgage that would have been rejected if the truth were known. For instance, providing a letter of employment listing an inflated salary, or a note from a relative confirming a gift toward the down payment on a purchase when the money is really a loan.
This is known as 'shelter fraud.' It happens when borrowers are trying to buy a home for which they don�t qualify.
In a hot real-estate market, these frauds are rarely detected and don�t result in a loss to lenders because the mortgages are repaid.
It�s 'fraud for profit' that is a growing concern for lenders � and in some cases, innocent property owners are the victims.
In these instances, unscrupulous mortgage brokers, bankers, real-estate agents, lawyers or appraisers may use false appraisals to increase the value of a property.
They are able to sell it a few times through fake documents and get a mortgage for a far higher amount than the real value of the property, leaving the ultimate purchaser to pay the bills.
Or false documents or identities may be used to mortgage homes for marijuana grow-ops or crystal meth labs.
Criminals also can use identity theft to pose as the owner of a property at the provincial land-title office. They then are able take out a mortgage on the home or sell it to an innocent purchaser and make off with the proceeds.
Earlier this month, a Surrey, B.C. woman pleaded guilty to mortgage fraud after posing as the owner of a vacant lot and taking out a $170,000 mortgage on the property.
The mortgage was arranged through a mortgage broker but another broker figured out the scam and alerted police.
The fraudster was ordered to repay the Royal Bank for the mortgage as well as $2,500 to cover the costs of the elderly Vancouver woman who owned the land and had to fight to clear her title. Two other suspects are still before the courts.
"The problem with mortgage fraud is you’re dealing with identity theft," said Barry Elliott, Ontario-based creator and coordinator of Phonebusters, a national police-sponsored call centre that tracks fraud.
"You can be victimized with a mortgage on your property and not be aware of it, or have property purchased in your name and not even know about it," he said.
Friday, April 21, 2006
The finance company plans to sell mortgages through independent brokers across Canada by year-end, and is trying to hit its market share target in three years, he said. GE Money started selling mortgages in Ontario last year, and has since become licensed in Alberta and British Columbia.
``We're on a pretty significant growth trajectory, but growing from zero,'' Motta, 43, said in a telephone interview. ``It is a longer-term vision we have for the Canadian market, rather than bursting on the scene, making some noise, and not being here three years from now.''
GE Money, a unit of the world's No. 2 company by market value, is competing with firms such as Toronto-based Xceed Mortgage Corp. Xceed estimates the so-called ``near prime'' market that GE Money is targeting may grow to about C$60 billion, or 10 percent of Canada's overall mortgage market.
Canada's mortgage business is growing as job and wage increases fuel expansion in the economy, which the Bank of Canada predicts will grow 3.1 percent in 2006, the fastest in six years. New home construction during the first three months of the year was the highest in more than 18 years, according to the Canada Mortgage and Housing Corp.
GE Money and Xceed offer loans at higher interest rates than standard mortgages because their clients are typically self-employed, new to the country or don't have a credit history. GE is focusing on"
Monday, April 17, 2006
A portfolio with the right mix of cash, fixed income and equity investments suited for your goals and risk level. Getting the right mix of mutual funds may generate higher potential returns while at the same time effectively manage risk.
Enhanced returns while minimizing risk
Selecting investments that tend to react differently to the economic climate helps to make it more likely that at least a portion of the investments will be performing well at any point in time. The highs and lows of any single investment should be partially offset by the performance of the other investments in the portfolio. Foreign investments will help to reduce risk and increase your potential returns.
Automatic portfolio rebalancing to keep your portfolio on track with your objectives
You get the freedom from monitoring your investments because your Strategic Portfolio will be reviewed on a quarterly basis and automatically rebalanced to your original asset mix.
Getting Started: Determine Your Investor Profile
Most banks will offer an easy-to-follow questionnaire that helps you understand your investment preferences. Based on this information, they will match you with an investment portfolio that is right for you.
The Conservative investor is looking for safe financial products. Your risk tolerance level is low, and you are most comfortable investing in products where the interest rate, maturity dates, and payout schedule of interest earnings are predetermined.
The Moderate investor is looking for significant investment income and a high level of security. However, you are willing to invest a portion of your funds in classic financial products carrying a certain level of risk.
The Audacious investor is ready to tolerate a little more risk to achieve long-term capital growth. While remaining cautious in your strategy, you invest close to half of your portfolio in the stock market.
The Ambitious investor is looking for high-growth potential over the long term. Since you are aiming for a higher return, you accept a higher level of risk for up to two-thirds of your portfolio, which is invested in the stock market.
The Dynamic investor has a high tolerance for risk and is looking for high-growth investments, opting for the potential for capital appreciation in the stock market. Your portfolio is mostly made up of stock securities.
Go to the questionnaire to find out what category you fall under
Saturday, April 15, 2006
What do tax tips and spring flowers have in common? They pop up in April.
I've gone through my garden of money-saving tax advice and picked some of the prettiest blooms for your inspection"
Don't pay interest on top of interest.
If you owe money, the government will charge daily compound interest on your debt. This means you pay interest not only on the original amount you owe, but also on the interest that starts adding up.
"If you can't pay the amount that's due, talk to your financial institution about a loan or a line of credit that charges a lesser interest rate than the Canada Revenue Agency," says lawyer Stanley Kershman, author of Put Your Debt on a Diet (Wiley).
Ottawa can also charge you a late-filing penalty — and interest on the penalty. So, you should file your return on time to avoid penalties, even if you can't pay the amount due.
Work out your tax factor.
This is important to know when you're making financial decisions, says Dale Ennis, editor of Canadian Moneysaver magazine.
Let's take Joe, an Ontario taxpayer with $35,596 in employment income. His marginal tax rate — what he pays on the last dollar of income earned — is 31.15 per cent.
If you divide 100 by 100 minus 31.15, you get 1.45. This is Joe's tax factor. It means he must earn about $1.45 in before-tax dollars to have $1 for his personal use.
Joe carries personal debt at 10 per cent interest. Multiply by 1.45 and you find his after-tax interest rate is 14.5 per cent.
Now let's take Sally, an Ontario taxpayer with $71,191 in income. She has a marginal tax rate of 37.16 per cent and her tax factor is 1.59.
Sally has to earn $1.59 in before-tax income to have $1 for her personal use. And a 10 per cent loan actually costs her 15.9 per cent after tax.
Know your break-even formula for investments.
You should try to come out ahead after taxes and inflation when investing your money outside a tax-sheltered retirement account.
Ennis has done some calculations on the break-even rate when inflation is running at a rate of 4 per cent.
Divide 4 by 100 minus your marginal tax rate. This will give you the break-even formula for an interest investment.
Joe has a marginal tax rate of 31.15 per cent. So, he needs to earn 5.81 per cent. to break even on his interest investments.
Sally has a marginal tax rate of 37.16 per cent. Her break-even rate for interest investments is 6.37 per cent.
Dividends are taxed at a lower rate than interest. Joe needs to earn 4.75 per cent to break even on dividends, while Sally's break-even rate for dividends is 5.52 per cent.
Capital gains have the lowest tax rate. Joe needs 4.74 per cent to break even on stocks and equity funds, while the rate Sally needs for capital gains is 5.11 per cent.
Claim tax credits for disabled family members.
Substantial tax credits are available for anyone with a severe or prolonged disability that is expected to last for a continuous period of at least 12 months.
To claim the disability amount, you have to get a medical practitioner to sign form T2201 (the disability tax credit certificate).
The tax credit can be transferred to a family member if the disabled person has no tax to pay.
"This is possibly one of the most lucrative, yet most missed, provisions on the tax return," says author Evelyn Jacks in her self-published book, Essential Tax Facts.
"Note that if a person was diagnosed with cancer in September and the condition of the disease became debilitating by the end of the year, the amount would be claimable for the whole year."
Claim tax credits for post-secondary students.
If you have children going to college or university, you can use any tax credits the children can't use.
Students are allowed to claim their tuition and $400 for each month they're enrolled full-time (or $120 a month for a part-time student).
Any unused credits can be carried forward indefinitely by the student. Or the credits can be transferred to a parent, grandparent, spouse or common-law partner. The maximum tax credit available to transfer is $800.
To claim the fees, you have to get form T2022A (tuition and education amounts certificate).
This tax form is provided by the educational institution, but not necessarily in the mail. You may have to go online, using the student's user name and password, and print out a copy.
Tuesday, April 11, 2006
Wasn't the real estate market supposed to slow down this year? Apparently not. And it's not just Vancouver that's experiencing double-digit price increases so far this year. Canadian Real Estate Association (CREA) figures show the average home price from February 2005 to February 2006 rose 26% in Calgary and 15.5% in Edmonton, both economic boomtowns of late. But even relatively moribund Toronto saw an increase of nearly 6%, for an average price of almost $354,000. That's a lot of money to put on the line if you're thinking of investing in the real estate market--let alone looking for a place to live.
No wonder people are talking about another housing bubble in the making. Prices continue to soar. Interest rates are on the rise. Vacancy rates are comparatively higher, making renting an attractive option once again. But let's get one thing clear: there isn't a housing bubble."
Monday, April 10, 2006
Senior homeowners can access up to $500,000 tax-free with no payments required on the loan until the home is sold or owners move out.
The amount available to the homeowners is based on the appraised value of the home, the age and gender of the homeowners, marital status, property type, and location. CHIP Reverse Mortgages are available in most areas across Canada, on most types of homes. Leaseholds, co-ops, manufactured homes and large rural acreages are not eligible.
The proceeds from the reverse mortgage are received as a cash lump sum. Homeowners are initially approved for a maximum sum, but may choose to receive a lesser amount initially and then request subsequent advances on the remaining available proceeds.
As part of a well-balanced financial plan, a CHIP Reverse Mortgage can add new flexibility to a senior’s finances and is an effective way to:
Create new and tax-efficient sources of income;
Preserve existing investments for continued growth and income generation opportunities;
Reduce personal income tax; Provide cash resources to fund a large project, purchase a vacation property, fund medical home care, start a new business or hobby, make cash gifts to children and grandchildren, and more.
Unique Protections and GuaranteesAlone among home equity borrowing options, the CHIP Reverse Mortgage offers these unique protections and guarantees:
No repayment is required while the homeowners continue living in the home.
The homeowners have complete freedom to sell or move at any time.
Homeowners will never be asked to move or sell to repay the loan.
As with other mortgages, up-to-date payment of property taxes, fire insurance, condominium/ maintenance fees, and maintenance of the property is required.
The loan amount to be repaid is guaranteed not to exceed the fair market value of the home at the time it is sold, protecting the balance of the senior’s estate.
Tax-savings OpportunitiesA CHIP Reverse Mortgage may also assist seniors in their tax-savings strategies. Proceeds from the reverse mortgage are received tax-free and are not added to taxable income. When the proceeds are used to purchase new investments, the interest expense of the loan may be used to offset tax on the new investment income and reduce the overall tax payable.
Terms of RepaymentBecause no payments are required on the reverse mortgage while the homeowners are living in their home, interest is added to the outstanding balance and is compounded semi-annually. The full amount only becomes due upon the death of the last surviving spouse, when the home is sold, or when the last surviving spouse moves out. The homeowner may leave the home for up to 12 months before the loan in considered payable, accommodating situations where a senior requires institutionalized medical/nursing home care for a short term.
All or a portion of the accrued interest may be paid once every calendar year, which can reduce the accumulation of interest on the outstanding balance and help preserve greater equity in the home.
The reverse mortgage may be repaid in full at any time. If payment is made within 36 months of the advance of funds, a pre-payment amount will apply. An interest rate differential payment may also be required. This will be waived if the reverse mortgage is repaid as a result of the death of the last surviving spouse or reduced if the reverse mortgage is repaid as a result of the long-term medical care institutionalization of the last surviving spouse.
A serious commitment to seniors.As Canada’s only national provider of reverse mortgages, CHIP’s commitment to seniors is at the core of the way the company does business. At every stage of their relationship with clients, CHIP ascertains that the senior is fully-informed and comfortable with the decision they are making. Seniors are encouraged to involve their family and their personal financial advisor. CHIP also requires the senior to seek an independent legal review of their contract. (CHIP offers a referral to a list of lawyers across Canada who have experience with reverse mortgages.)
If CHIP believes that a reverse mortgage is not in the best interests of a client, or that the senior is being pressured by outside influences, they will discuss that situation frankly and, if necessary, decline to proceed.
The CHIP Reverse Mortgage is available directly from CHIP by calling toll-free 1-800-563-2447 or by visiting the CHIP website. A do-it-yourself estimate is available on the CHIP website. Alternatively, seniors can request a CHIP Reverse Mortgage estimate through most of Canada’s major banks or with the assistance of their personal financial planner.
The best way to save time is to find out what is stopping you from getting approved and if there are some problems, how to fix them.
You can get your credit report from one of the following two credit bureaus in Canada
Equifax or Tranunion
You can pay for a copy of your credit report and see it immediately at the Equifax web site or you can fill out an application and get a copy mailed to you for FREE.
You can visit Equifax to view your Credit Report online now or
Request a FREE copy of your Equifax Credit Report here
After you have obtained a copy you can refer to the Credit Report Guide, this will explain how to read your Report.
If you have any questions please feel free to contact me and I would be happy to explain it to you.
Mortgage and Finance Specialist
Sunday, April 09, 2006
place during the month of March than during the same month a year ago, Toronto
Real Estate Board President John Meehan announced today. The March total of
8,707 sales was the second-highest ever, bringing the total for the first
quarter of 2006 to 19,831 sales, a record first quarter result.
"There is a lot to be positive about in this market," Mr. Meehan said.
"The year has started very strongly and it shows no signs of slowing as the
peak spring market approaches."
According to Jason Mercer, Senior Market Analyst for the Canada Mortgage
and Housing Corporation, strong economic fundamentals are helping to maintain
"Consumers remain upbeat about home ownership," he said. "Tight labour
market conditions with low unemployment and rising real wages, along with very
low borrowing costs have kept potential buyers confident in their ability to
purchase and pay for a home."
A number of areas across the city of Toronto showed high March sales
totals in comparison to totals recorded in March 2005:
Condominium sales represented the majority of sales as the Scarborough
Centre / Woburn area saw 57 per cent more overall transactions compared to
Condominium sales continued to fuel the Downtown / Harbourfront area as
it experienced an overall increase in sales of 34 per cent compared to March
of last year.
Further west, the Junction / High Park area of Toronto experienced
63 per cent more overall transactions compared to the same timeframe a year
"The housing market is in good shape overall," Mr. Meehan added. "There
are strong fundamentals in place and we are seeing that translate into steady
performances month after month. It is still a great time to be in the market."
Toronto REALTORS are passionate about their work. They adhere to a strict
code of ethics and share a state-of-the-art Multiple Listing Service. Its
22,765 listings resulted in March's 8,707 sales. Serving over 23,000 Members
in the Greater Toronto Area, the Toronto Real Estate Board is Canada's largest
real estate board.
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CMHC - Home Buying - Step By Step
Saturday, April 08, 2006
The information, gathered by Canadian public opinion firm Pollara in a phone survey in February, indicates 42 per cent of Canadian residential mortgage holders polled have not seen their overall standard of living significantly affected by recent mortgage rate increases.
'As the spring home buying season begins, interest rates remain at a historic low and mortgage holders continue to be satisfied with their rates,' said Ron Swift, president of the mortgage brokers institute.
'Our latest survey reveals that Canadians find their current mortgage rates manageable, despite increases over the past eight months. In addition, although mortgage holders anticipate further rises, the study suggests that a majority will be able to tolerate an increase of up to 1 per cent. That's great news for the marketplace.'
Mortgages now held by Canadians have an average interest rate of 4.9 per cent. Sixty-six per cent of consumers said they expect rate increases in the near future.
In anticipation of a rise in interest rates, consumers are more likely to renew their mortgages early to lock in to current rates.
The survey firm contacted 1,015 residential mortgage holders in Canada. The sampling is considered accurate within 3.1 percentage points, 19 times out of 20.
For a copy of the survey, visit http://www.cimbl.ca. "
Wednesday, April 05, 2006
Borrowing against this equity is currently a very popular method of getting a big chunk of credit, primarily because of low interest rates. Add to that the fact that the interest on most home equity loans is tax deductible and they become an appealing option if you need to make a major purchase.
Home equity loans are typically used for consolidating consumer debt or covering a large expense such as a big wedding, college tuition, or home renovations.
However, because your home is collateral for the loan, you should be very careful about using home equity loans. The problem is that if you default on the loan, the bank will foreclose on your home.
Types of Home Equity Loans
There are two types of home equity loans. A traditional home equity loan is also called a second mortgage and is when a bank lends you a lump sum of money that must then be paid back over time. With this type of home equity loan, interest begins building as soon as the bank issues you the money.
A newer type is a home equity line of credit, where a bank gives you a checkbook or credit card to make purchases, which then accrue against your home's equity. With this type of home equity loan, interest does not begin building until you actually make a purchase.
There are also several ways to repay a home equity loan. The most common option is to make regular payments toward both the interest and the principal.
However, some loans also give you the option of only paying the interest at the beginning of the loan and gradually paying more of the loan and gradually paying more of the principal. Finally, you may have the choice to pay both principal and interest, but to make extra payments in order to pay off the principal sooner. You should check with your lender about this, as some loans have penalties for paying ahead."
ANSWER: A reverse mortgage could pay off your existing mortgage and eliminate the monthly mortgage payments you are currently paying. This could free up some income for you to play with each month.
Here's essentially how it would work. A reverse mortgage would pay off your existing mortgage balance of $145,000. Then, rather than having to make monthly interest and principal payments, the interest charged on the loan would simply add to the balance of the loan.
Let's assume your home will appreciate by 4 percent in the coming years, and the reverse mortgage interest rate averages 6 percent. Ten years from now, your home is worth $703,000 and the balance on the reverse mortgage is $260,000. In 20 years, your home is worth $1,040,000 and the loan balance is $465,000.
When you move from the home, sell the home or pass away, the loan becomes due, and any equity in the home goes to you or your heirs. In the event the mortgage balance is greater than the value of the home, you can walk away from the loan without paying a dime.
In addition to using a reverse mortgage to pay off your existing mortgage, you could also pull out extra cash, secure a line of credit or receive monthly income. Obviously, the more money you pull out, the less equity you'll have in your home.
Unlike a traditional mortgage, the startup costs are high, so you wouldn't want to use a reverse mortgage if you plan to move soon.
A reverse mortgage can be a great option, but for those who want to leave a truckload of money to their kids, paying off a home loan out of retirement income would be a better option."
Thursday, March 30, 2006
That deterioration is coming at the end of ten years of generally 'excellent' affordability conditions, the report by the bank's economics department noted.
And, while affordability will likely continue to slide in the first half of this year, rising incomes and steady interest rates and house prices should stop the declines in 2007, economists said.
RBC Financial Group's (TSX: RY) latest housing affordability index, measures the proportion of pre-tax household income needed to service the costs of owning a home.
Such surveys are a popular promotional tool for Canada's banks and mutual fund companies. Many use public opinion polls to gauge demand for financial products and services, promote specific brand names and learn more about the public's financial management habits.
All the banks are focused on the housing market since mortgage lending is one of their key sources of profit and the average mortgage borrowed by homebuyers has been growing in recent years as house prices have soared.
Last year ended on a 'mildly sour note' after three quarters of improvement, the bank said, with housing affordability deteriorating across the country.
The worst-hit cities were Vancouver and Calgary, where house prices escalated rapidly as the economies in those energy- and mineral-rich western provinces grew faster than than the Canadian average.
While the markets in British Columbia and Alberta "continue to power forward," Royal Bank expects the pace of demand for new and existing homes in the rest of the country to slow moderately over the next two years because of the decline in affordability.
It will be "a controlled slowdown, with both new supply and demand expected to cool down simultaneously," the report said.
Much of the drop in affordability stems from slower growth in household income, said Derek Holt, the Royal Bank's assistant chief economist.
"This was unable to offset increases in mortgage rates, house prices and utilities costs," he said.
Benjamin Tal, senior economist at CIBC World Markets, expects affordability to get worse before getting better.
"Income growth in Canada is starting to accelerate, wages are rising," Tal said. "But the increase in house prices has been faster. Add to it higher interest rates, and the overall size of mortgages is rising, so affordability is going down."
The impact of rising interest rates has been more pronounced, Tal said, because about 22 per cent of mortgages are now variable-rate — moving with the bank's prime lending rate — rather than being fixed at long-term rates.
"With interest rates rising by maybe another (quarter to half point), we probably will see affordability continue to deteriorate, at least for the next few months," he said.
Beyond that, he expects it to stabilize because interest rates will stop rising, house prices will level off, and Tal predicts that incomes will be stronger than expected.
"So, I think affordability will not be much worse a year from now. It might even be better."
The housing market's soft landing will be supported by growth in home renovation spending, the Royal Bank report said.
Canada's renovation spending has grown by more than 50 per cent since 2000, to over $26 billion in 2005.
"While the recent takeoff in renovation spending is taken by some to be a sign of a bubble, our view is that homes built in the 1980s boom will continue to enter their prime renovation years, such that growth in renovation spending will partly offset weaker new home construction," the report said.
Ontario, in the meantime, is seeing new home construction decline as construction workers flock to Alberta.
Last year, housing starts in Ontario pulled back 7.4 per cent while residential building permits dropped for the first time in a decade.
"Migration and housing starts tend to move closely together in Ontario," Holt said. "Labour-hungry western provinces, most notably Alberta and British Columbia, continue to pull workers from other provinces, putting downward pressure on new home construction in Ontario, which still remains at elevated levels."
Wednesday's report suggests that condominiums were the most affordable Canadian housing type during the fourth quarter, with an index of 25.7 per cent. A standard townhouse is next at 30.1 per cent, followed by a detached bungalow at 37 per cent.
A two-storey home remains the least affordable type with an index reading of 43 per cent.
Wednesday, March 29, 2006
mortgage choices and perceptions in a changing market
TORONTO, March 28 /CNW/ - A majority of Canadians believe their current
mortgage interest rates are manageable, despite recent hikes, according to a
report released today by the Canadian Institute for Mortgage Brokers and
Lenders (CIMBL). The information, gathered by Pollara in a phone survey in
February and analyzed in conjunction with Canadian housing analyst and CIMBL
economist Will Dunning, indicates that 42 per cent of Canadian residential
mortgage holders polled have not seen their overall standard of living
significantly affected by the recent mortgage rate increases.
'As the spring home buying season begins, interest rates remain at a
historic low and mortgage holders continue to be satisfied with their rates,'
said Ron Swift, President of the Canadian Institute for Mortgage Brokers and
Lenders. 'Our latest survey reveals that Canadians find their current mortgage
rates manageable, despite increases over the past eight months. In addition,
although mortgage holders anticipate further rises, the study suggests that a
majority will be able to tolerate an increase of up to 1 percent. That's great
news for the marketplace.'
For the mortgages currently held by Canadians, the average mortgage
interest rate is 4.9 per cent. Consumers are in tune with what the Bank of
Canada and economist are forecasting - 66 per cent of consumers say they
expect mortgage rate increases in the near future.
CIMBL's research shows that current mortgage holders have a surprisingly
high tolerance for potential interest rate increases. The study suggests thatif rates remain at current levels, 62 per cent of Canadians would faceincreased interest rates at their next renewal. Yet, only 21 per cent ofmortgage holders would see a significant impact on their standard of livingfor a monthly mortgage rate increase of $100; 53 per cent would see an impactwith an increase of $200. Sequentially, a further increase of one-half of a percent wouldnegatively impact 20 per cent of Canadian mortgage holder's overall standardof living. An increase of one-half of a percent from current rates wouldresult in an average monthly increase of $50 in interest ($72 up from $22).Total interest costs for Canadian mortgage holders would jump by more than$2.7 billion ($3.9 billion up from $1.2 billion). An increase of one percentage point from current rates would negativelyimpact the overall standard of living of 29 per cent of mortgage holderspolled. Such an increase in rates would cause an average monthly interestpayment increase of $123, bringing the total interest costs for Canadianmortgage holders to $6.7 billion, up $5.5 billion from current costs. In anticipation of a rise in interest rates, consumers are more likely torenew their mortgages early to lock into current rates. For the 15 per cent ofconsumers scheduled to renew their mortgages in the next twelve months,relatively small increases are expected - an average of $6 per month. Forthose renewing during the next one to six years, average costs will rise andpeak in about four years. "As always, there is uncertainty about future changes in interest rates,"Swift added. "CIMBL's report demonstrates that although mortgage rates are onthe rise, Canadians continue to borrow - whether they are taking out a newmortgage, renewing or refinancing an existing one. There is still a strongreal estate demand in Canada." The survey, "Consumer Mortgage Choices in a Changing Market", contains awealth of additional industry data including the age distribution of mortgageholders in Canada, popularity and rates of different mortgage types andmortgage terms, and the amount of remaining principal on existing mortgages.For a full copy of the survey, please visit: www.cimbl.ca."