Here are some important considerations when you enter the housing market in Winnipeg:
1) You will face competitive offers. No matter how much you say you won’t bid large or write unconditional offers, many still do. The supply of homes in the first time home buyer range up to $250,000 are in demand so be prepared. No matter how much you prepare, when you are out there looking and have missed out on offers on other homes all logic and rationale will go out the window unless you are very patient. Having the right realtor is something that you have control over so take the time in the selection. Here are some great questions you can ask your realtor.
2) Land Transfer Tax, the hidden surprise. Imagine buying your first home for $250,000 only to find out when you meet with the lawyer a week before your possesion date that you need $2720. for land transfer tax. This money goes directly to the Province of Manitoba to transfer the title from one name(s) to another. If this seems like a bit of a tax grab, you are right!
3) While we are on taxes, in 2012 the Province of Manitoba introduced provincial sales tax on any mortgage default insurance premium. On a $250,000 home with a 5% down payment you can expect to pay $452.38 in sales tax. So first time buyers, the province is your pocket for $3172.38 and you haven’t even moved in yet. We continue to be one of the most heavily taxed provinces when it comes to purchasing a home, how are you feeling now?
4) Property Disclosure Statements. If you don’t feel that you need to know more about the property, here is an example of a home owner in Winnipeg who had a major surprise. This happened on Christie Road in Winnipeg so it can happen anywhere. Here is an example of a homeowner in Saskatoon who was able to legally go after losses relating to a basement that had water. The Property Disclosure Statements were brought in to protect would be homeowners on any potential known problems with a home.
In the end, get professional well qualified advice to help make your first home buying experience the best possible.
CBC has weighed in on the Housing Market bubble debate now. Some excellent points for home owners and would be homeowners are in the discussion. If any of this is important to you, please contact me anytime and we can discuss your situation.
Since interest rates are at historic lows many consumers are asking questions about 10 year mortgage rates. This short video gives you an understanding of what you need to understand to ensure you get the best odds on your bet, a 10 year mortgage is like placing a bet.
Here are few other keys points about 10 year mortgages:
1) After the first 5 years of a 10 year mortgage, Canadian law states that the maximum penalty is 3 months interest payment and not Interest Rate Differential (IRD) like 1 – 5 year mortgages.
2) Before you commit, have an Accredited Mortgage Professional assist you in the calculation in the video. This will help you understand what your break even interest rate is in 5 years time.
3) 10 year mortgage rates are not very competitive in today’s environment, a mortgage broker can be a huge advantage for you, your bank or credit union may not be able to be very competitive.
Back after a hectic summer, and after spending parts of weeks in 2 U.S. markets and learning more about the U.S. real estate market, I am extremely thankful for what we have. You may have heard about recent comments relating to a housing bubble in Canada, but many experts do not agree. With talk of this it allows me to reflect on my recent conversations with US citizens, many of whom have been affected. With home equity being wiped out and negative equity positions, many Americans are faced with challenging decisions. A short sale stays on your record for 2 years and a foreclosure 5 years in the US. With those decisions in front of you, many are forced to make tough decisions. Could this happen in Canada? In this world anything is possible but how likely is it? Speculation was rampant in the US during the height of the boom, there was an assumption that housing values would keep increasing even though people didn’t qualify.
Ahhhh, there’s a word of importance, qualify. The definition of qualify is: to be or make someone suitable . This is where the U.S. market suffered one of it’s mistakes. How could someone who doesn’t qualify to make payments on a mortgage actually get a mortgage. For those that took advantage of this situation, they were able to buy big homes and other toys while those who knew better sat back and were patient. Those are the Americans now in default and in most cases owing more than their homes are worth.
This is where I find the story turns to humorous. Take a look at this article written by the NY Times where a client applied for a mortgage with Wells Fargo, a lender that used to be in Canada! http://bucks.blogs.nytimes.com/2010/08/23/wells-fargos-odd-mortgage-essay-question/?scp=5&sq=TARA%20SIEGEL%20BERNARD&st=cse The poor couple was treated like 3rd rate citizens and asked to complete an essay in order to obtain a mortgage, even being requested to ask for their “family plans”. Based on the past indescretions of lenders they have swung the pendulum in the other direction to the point of hilarity. Please read this article and let me know what you think.
At a glance in the Winnipeg Free Press on July 8 is an article titled, “Manitoban’s vulnerable to mortgage-rate increase, poll finds”. Now I know newspapers have to sell copies and they use blood and guts to do it, but really! They quoted 82% of consumers in the most affordable major market in Canada would have a “problem” if rates increased by 1.5%. What a bunch of hooey from a flawed survey sponsored by the same newspaper. Did they define what the “PROBLEM” would be? NO Did they find out what their existing rate is? NO
At first glance I thought why would people feel this way because I don’t see that type of concern when I am talking to clients. Off I go to Probe Research who conducted the survey, to find out more. The first thing I see is most Manitobans would face financial distress with a 1.5% rise in rates. Here is the definition of distress: to afflict with great pain, anxiety, or sorrow; trouble; worry; bother. If households feel they have a minor problem (49%) with rates increasing, that does not seem like it equals distress!
Although semantics might seem rather picky, the reality is most consumers do not have an interest rate that will be 1.5% higher than their existing rates for another 3.5 years. For the last 1 1/2 years we have seen rates fall and most consumers are aware of this. They purchase knowing very well that their interest rate is on sale and there won’t be any sale prices when their mortgage renews. Almost all consumers in Manitoba I have dealt with know this and are very prudent in their decisions. I have not seen many at maximum debt service ratios and those that do, usually have a much higher earning potential in the near future. For those that have elected to take a Variable Rate Mortgage, they have factored in the rate they are willing to accept without causing any distress in their financial situation.
If you want to see a much more detailed and thorough report of the impact of interest rates on Canadians and Manitoban’s, just check out the report produced by CAAMP Economist Will Dunning , pages 35 – 37 and you will get a different story of tolerance in risk for mortgage holders.
Give Manitobans more credit than this survey would contend. The headline should read, “Most Manitobans Prudent in their Mortgage Decisions”, but that doesn’t sell papers!
There are a lot of rumours out there with a lot of consumers and I feel it is important to share the information direct from the source “The Government of Canada” on the new mortgage rule changes. First time home buyers expressing confusion if it affects them shouldn’t be concerned unless they are looking at shorter term mortgages or variable rate mortgages. If you are considering a 5 year fixed term, you are unaffected! If you are purchasing a rental property or refinancing your home for most of your equity beware of the rule changes. If you require clarification of these rules please contact me to discuss. They come into effect April 19, 2010.
FIXED OR VARIABLE? This is a question that comes up increasingly in conversations with new or existing homeowners. My answer is always that it depends on their circumstances. There are 4 main factors to consider:
1. What is my risk tolerance? If you don’t like to take risk and want the sure thing, fixed rates offer you the comfort and security of knowing your payments for the next 3-10 years. Sometimes I refer to this as the sleep factor, does it keep me awake at night, if it does consider a fixed rate.
2. What is my current debt load? If you have tight cash flow and are concerned where you might be able to squeeze out more money for higher payments, you may want to consider a fixed rate. The other factor that can affect your debt load is job loss, reduced income, adding children to your family plus other factors. The opposite can be true if you are well educated and the prospects for your career and profession has a good future. Variable rate mortgages can save you money now if you are in this situation.
3. Do I know what is happening with rates? If you read the business section of the paper daily chances are that you know what is going on with interest rates. If you have a mortgage broker that communicates with you regularly, you have the advantage of being on top of this. I provide regular emails with rate updates and Bank of Canada announcements to keep consumers informed. Ultimately, it is their decision if and when they decide to lock in if they so choose.
4. Consumers with equity in their home may feel more comfortable in choosing a variable rate mortgage. If you have less equity and you get caught with rates increasing, you may end up with less equity. This will be explained in a later post.
If you have been in a variable rate mortgage over the last century, you have fared better than someone in a fixed rate mortgage with your savings in interest. At some point this economic cycle will end and those with fixed rates below 5% will be seen and having made a good decision. The question is when is this time. In the investment world, market timing has never been viewed as a strategy to live by, the same is true in mortgages. If you wish to receive rate updates regularly, please let me know.