Wednesday, June 21, 2006

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Thursday, June 15, 2006

Home inspectors save future headaches

It looks like your dream house on the outside, but a few weeks after you move in, you discover mice, electrical problems or asbestos.

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.


30 per cent of Canadian renters plan to purchase a home within three years,

Canadians continue to favour home ownership over renting despite rising home prices and modestly higher interest rates, according to the results of a study released today by Scotiabank, which indicates that 30 per cent of Canadian renters plan to purchase a home within three years.

"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%).


Mortgage rate peak near

Mortgage rate peak near economists: 'The end's not far away'

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.


Ontarians Eager to Buy Homes but Lack Understanding of Legal Risks

Only 10% Understand Real Estate Lawyer's Role

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."


Homeowners can expect more interest rate hikes

Homeowners can expect to another half percentage point interest rate hike over the next year, says the chief economist with the Canadian Institute of Mortgage Brokers and Lenders.

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

Navigating the mortgage maze

Going crossed-eyed over the myriad mortgage options these days? Don't despair, says a local real estate expert and author.

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.


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 keep falling

Personal bankruptcies have fallen to the lowest level in seven years, cushioned by a strong labour market, Canadian Imperial Bank of Commerce said Monday.

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

Lower-income housing units get leg up

A recent forgivable loan from the Canadian Mortgage and Housing Corporation (CMHC) will ensure that residents of the Homewood Mansions near Carlton and Jarvis streets can continue to live in safe buildings.

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."