CMHC Calls Out Real Estate Markets for Signs of Overvaluation

Devin Cristo and Wes Will are Trusted Saskatoon Licensed Mortgage Associates with Your Mortgage Link, Brokerage License #315794. Your Mortgage Link is a Saskatchewan based brokerage operation, with offices in Saskatoon and Regina, competing in the wholesale mortgage market Canada wide. Our goal is to offer clients a broad range of mortgage products, and create competition between many of Canada’s top lenders.Real Estate Overvaluation

CMHC

The Crown Corporation, which monitors the housing market in the country, is coming around to the view that there may be some overvaluation and overbuilding in some Canadian cities.

Canada Mortgage and Housing Corp. said Wednesday that overvaluation cReal Estate Overvaluationan be “detected” in nine of the 15 cities it monitors with overbuilding recorded in seven.

“While we see weak evidence of problematic conditions for Canada, we do detect moderate evidence of overvaluation. This means that house prices are higher than levels that can be supported by fundamental factors such as income growth and population growth,” said Bob Dugan, chief economist with CMHC.

CMHC’s valuation is part of its quarterly Housing Market Assessment, something the Crown Corporation calls an early warning system, alerting Canadians to areas of concern developing in our housing markets so that they may take action in a way that promotes market stability.

Real Estate OvervaluationSince its last assessment, CMHC added Vancouver, Hamilton, and Saskatoon to cities where housing prices may be overvalued. The averaged detached home in metro Vancouver is almost $1.8 million today and prices are rising about 23 per cent year over year in Canada’s most expensive city for home ownership.

The Crown Corporation says there “strong evidence of problematic conditions” in the overall market for Toronto, Calgary, Saskatoon and Regina. Toronto’s issues are price acceleration and overvaluation. In Calgary, Saskatoon and Regina, the issue is a combination of overvaluation and overbuilding.

CMHC defines problematic conditions as imbalances in the housing market that occur when overbuilding, overvaluation, overheating and price acceleration, or combinations of those issues exceed historical norms.

Investment Property Purchasing With Rental Income in Mind

SHOPPING FOR AN INVESTMENT PROPERTY?

Purchasing With Rental Income in Mind

investment property

The purchase of your first home is a large investment and one that involves a significant financial commitment. Homes with legal suites are a great option for the first-time homebuyer seeking a home to both live in and build equity from, plus gain some revenue from a basement suite renter.

First-time homebuyers can request their real estate agent to do a search for properties that possess a ready-built suite or have the potential in which to build one. A property that already has a separate entry and two separate kitchens, or water hook-ups in an area where appliances could be installed, would be optimal. Kitchens are one of the more expensive rooms of a house to finish oneself.

Alternatively, first-time home buyers may seek out newer homes with unfinished basements at a lesser home cost, and attain a mortgage that allows cash for improvements, a home renovation loan or line of credit secured on the home to finish the basement into a suite. Simply request to seek properties with walk-out basements or homes wherein a separate entrance could be developed easily.

Income from a basement apartment can help first-time buyers carry the costs of their home. But it’s not as simple as placing an online ad; homeowners must take due diligence to ensure their basement apartment is legal and that their tenants are trustworthy.

The legalities of basement apartments

If the apartment doesn’t comply with local zoning bylaws and fire codes, the apartment isn’t legal.

You need to check with the City of Saskatoon to see if your basement apartment is registered as a second unit. If it is, then it is legal and compliant with the fire code. If it’s not registered, then you have to conduct further research. A city’s zoning bylaw will tell you if your area permits a basement apartment.

If you want to apply for a new unit, you will need a building permit that satisfies the provisions of the fire code in your province.

When looking at a property, if the basement apartment is being advertised as a “nanny suite” or “in-law apartment,” be wary — this unit is most likely illegal. If a neighbour complains about your unit to the city and an inspection occurs, you will be required to pay to upgrade your unit to proper standards.

You must advise your insurance company if you intend to rent out your basement apartment. By not disclosing this information, it may refuse to pay a claim if, for example, a fire occurs later.

Finding a good tenant

Besides advertising in a local newspaper, consider posting a listing on Kijii.ca or Craigslist.ca.

You must be very careful when interviewing any potential tenant that you do not inadvertently violate any sections of the Human Rights Code by asking any inappropriate questions.

You are permitted to ask prospective tenants on a rental application if they smoke, whether they have pets and how many people will be living with them in the apartment. You can also ask for references and their rental history. You cannot ask about their ethnic background, religious or sexual preference, or marital status.

It’s important to conduct the proper research in advance before renting your basement to a residential tenant. Be sure to ask for a current pay stub from where they work and call previous landlords for references.

Basement apartments, if created and rented out properly, can give you peace of mind and additional income to assist you in carrying the costs of your home and increasing its long-term value.

Apply for a mortgage pre-approval and make use of the free and easy online mortgage calculator to formulate your budget and know what you truly can afford.

Devin Cristo Mortgage Broker Wes Will Mortgage Broker

Devin Cristo & Wes Will are Trusted Saskatoon Mortgage Associates of YourMortgageNow.ca

Closed vs Open Mortgages explained by Mortgage brokers

The various types of mortgages can seem bewildering to the first time homebuyer, but understanding all your mortgage options will help you make the best financial decision when choosing your mortgage. This article explains the difference between a closed mortgage and an open mortgage.

Closed vs Open Mortgages explained

Closed vs Open Mortgages the skinny!

What is a closed mortgage?

A closed mortgage agreement is a mortgage which can not be renegotiated, repaid, or refinanced for the duration of the mortgage (i.e., until the mortgage reaches maturity). If you wanted to make any changes to your mortgage, you would be subject to a prepayment charge.

What is an open mortgage?

An open mortgage agreement is much more flexible than a closed mortgage. You will be able to make prepayments at any time, and in some cases may be able to pay off the mortgage before the end of the mortgage term, with no prepayment charges.

The interest rate for open mortgages is usually higher than the rate for a closed mortgage with comparable terms. Open mortgages are often only available for short terms (6 months to 1 year are common).

Advantages and disadvantages of a closed mortgage

The main advantage of a closed mortgage is the (usually) lower interest rates, compared to an open mortgage. If you think the interest rate you are offered is good, a closed mortgage would give you the stability of knowing your rate would not increase for the duration of your term.

Closed mortgages are also a good choice if you plan to have your mortgage for the long term. You will save on interest costs, as your rates will be lower than an open mortgage. In the long run, this saving may help you pay your mortgage off faster.

The disadvantage is the lack of flexibility. If, for example, you wanted to change your mortgage agreement to take advantage of lower interest rates, you will have to pay a fee. Similarly, if you wanted to pay a lump sum towards your mortgage, you may only be permitted to pay down a certain percentage, such as 10%.

Advantages and disadvantages of an open mortgage

The main advantage of an open mortgage is the flexibility you will have. If you save or inherit a lump sum and want to put it towards your mortgage, you can do so! Open mortgages are best if you plan to pay off your mortgage in the near future. They are also best if you plan to sell your home soon.

The disadvantage of an open mortgage is that if rates go up, when your mortgage term ends you will be faced with a higher mortgage.

If you have questions regarding the type of mortgage you need, please give us a call at (306) 244-7755. Devin Cristo & Wes Will are Trusted Saskatoon Mortgage Associates of YourMortgageNow.ca

We answered your Saskatoon mortgage questions on Talk to the Experts!

Saskatoon mortgage questions

This latest show we are featuring is the TRUSTED SASKATOON PERSONAL FINANCE SHOW
All of the questions on the show have been submitted by our wonderful Trusted Saskatoon Facebook Fans and one lucky fans question was chosen by Brent to win the Prize package submitted by the 3 Trusted Businesses worth over $350

Your Mortgage Now : $100.00 gift certificate that can be used at any of the Trusted Saskatoon Partners!

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We had the opportunity to answer your mortgage questions on 650 CKOM Trusted Saskatoon’s Finance Show. Make sure to listen to our show below as we covered topics on Mortgage Renewals, Fixed VS Variable Rates, Mortgage Broker VS The Bank, Home Equity and Rental Properties. Those who asked us the questions were also drawn for some great prizes!

To read our answers, you may also visited the Trusted Saskatoon Blog.

We’d like to hear from you! Please feel free to contact us today about your home mortgage questions.

Devin Cristo & Wes Will are Trusted Saskatoon Mortgage Associates of YourMortgageNow.ca

Mortgage Advice Buy a Home Sooner to Build Equity

It can be very beneficial to buy a home you can afford sooner rather than later. A home allows you to build equity and with every mortgage payment you make each month, you are building equity in a place of your own – unlike a rent payment.

Mortgage Advice Buy a Home Sooner to Build Equity Equity is the difference between the value of a home and your outstanding mortgage balance. The longer you stay in your home (and the more mortgage payments you make), the more equity you’ll have. Unlike most things you buy, a home will almost certainly increase in value over time – which builds even more equity.

Once you’re a homeowner, the payoff can be great. As the equity in your home grows, your financial flexibility also increases. Think of it as an extra source of financing for when the unexpected happens. An added benefit of borrowing money against the equity in your home, is it usually comes with a lower interest rate than other forms of credit, such as consumer loans, lines of credit and credit cards.

Here are some ways you can use the equity in your home:

  • Pay off other debts with higher interest rates (like credit card debt)
  • Renovate or repair your home – build a new room or put in a swimming pool
  • For important life events – a wedding, dream vacation or university tuition
  • Purchase a second home or vacation property
  • Emergencies – like a serious illness

Investing in a home can have a significant payoff over time. And the sooner you begin, the sooner you’ll start building equity.

 

Devin Cristo & Wes Will are Trusted Saskatoon Mortgage Associates of YourMortgageNow.ca

Are you a first-time homebuyer?

Purchasing your first home is one of the most exciting experiences you will have in your life, and is one of the largest purchases you will ever make. The act of homebuying involves considerable sacrifice in order to save up for the deposit and finding a home to suit your needs. While everyone is generally on a different path, knowing what the average first-time homebuyer in Canada looks like can certainly help in knowing whether you are ahead of the game or slightly behind.

The Average First-Time Homebuyer in Canada

If you are in your twenties, thinking about homeownership should definitely be something on your mind. While it may not be something you can afford to do for a number of years, starting to plan immediately will help you. The average first-time homebuyer in Canada has three unique characteristics:

  1. They are generally in their late 20s. In a study conducted by BMO in 2013, which surveyed 2000 first-time homebuyers, the average homebuyer was determined to be about 29 years old.
  2. They buy a home valued at $316,100 on average. This number is different in major cities, such as Vancouver where the average is $506,500, Toronto at $408,300, Calgary at $363,400 and in Montreal where the cost is less than the national average at $237,900.
  3. On average, a first-time homebuyer in Canada has $50,576 to put towards their down payment. This means that the average homebuyer has about 16% of the cost of the home, meaning they need to insure their mortgages with an insurer like Genworth (as mortgage insurance is required when a buyer has less than a 20% down payment).

The Average First-Time Homebuyer by Province

Homebuyers are vastly different based on the province they live in. The average home prices compared to the average amount spent by first-time homebuyers in a province helps to illustrate the cost of living and affordability in each of Canada’s provincial regions.

  • The average home in Atlantic Canada is $212,622, while the average first-time homebuyer spends $204,400.
  • The average home in Quebec is $263,661 while the average first-time homebuyer spends $222,300.
  • The average home in Ontario is $423,691, while the average first-time homebuyer spends $358,400.
  • The average home in Manitoba and Saskatchewan is $275,104 while the average first-time homebuyer spends $226,100.
  • The average home in Alberta is $407,540, while the average first-time homebuyer spends $364,700.
  • The average home in British Columbia is $611,688 while the average first-time homebuyer spends $430,300.

Other First-Time Homebuyer Statistics

The study also found out some interesting statistics related to first-time homebuyers.

  • About one third (30%) of all first-time homebuyers are expecting some assistance from their parents or other members of their family with their purchase. In both Montreal and Vancouver, these numbers are significantly higher at about 40%.
  • 60 per cent of potential first-time homebuyers have had to delay their plans to buy, with close to 40 per cent of those people saying that the increasing cost of real estate has been the main reason for the delay.
  • Most first-time homebuyers (60%) set a fixed budget with a maximum amount they would want to spend on their home, but a third of them would be willing to spend more if they found a dream house outside of their set budget.

The question you need to pose to yourself is – how prepared are you? If you already have a larger deposit saved, perhaps you can invest in a slightly better property. If you are behind the average, consider services like Genworth’s down payment options.

Source: Genworth. Statistics for this post derived from BMO First-time Homebuyers Report unless otherwise stated. The poll was conducted by Pollara between January 24th and March 6th, 2014. 513 first-time Canadian homebuyers 18 years of age and older were polled. As a guideline, a probability sample of this size would yield results accurate to ± 4.3%, 19 times out of 20.

 

Devin Cristo & Wes Will are Trusted Saskatoon Mortgage Associates of YourMortgageNow.ca

 

Buying a House With a Friend is Becoming the New Trend!

With house prices rising, it can difficult to afford a home on your own. You and a friend might be in the same situation and feel that if you pool your resources, you can invest in a home instead of throwing your money away by paying rent. What all parties have to realize is that this is a business partnership and should be treated as such.

What is involved with Buying a House With a Friend

Before you buy, it is important to look at the big picture and answer these questions:

  • Are my friends in a stable financial situation? Can they afford to split mortgage payments, utilities and come up with their share of a down payment? Ask them straight out, to avoid any issues in the future.
  • Do we share the same values? Are you both neat freaks? Couch potatoes? This can lead to tension as unlike a traditional business you are living with each other. People are used to doing things a certain way, are you ready to compromise?
  • Does everyone agree that this is an investment? Eventually, people’s lives change, they meet someone, relocate for a job. Have you talked about what will happen to the property when one person inevitably needs to sell their share?

Now that you have decided that this deal is going to work, you have to look at getting a mortgage. Is everyone involved going to be listed on the mortgage? All parties will have their credit ratings looked at and generally the person with the lowest credit rating will set the bar as to what a mortgage will be approved for.

After all of these questions have been answered and you have decided to go forward it is recommended that you find a lawyer. Once again, treat this investment as a business arrangement. Sit down with legal council and have a written agreement compiled that includes things such as:

  • Who will cover the down payment, property taxes, bills, and repairs when they are needed.
  • What will happen to the home if one of the owners is killed or incapacitated.
  • When can someone sell or leave the partnership? Do they need to give notice? Can the other partners buy out their share?

Sitting down with a lawyer will make sure that everyone fully understands how situations will be handled as they come up.

The last thing you may want to talk to your new business partner about are the house rules. Set out guidelines regarding pets, parties, noise and guests.

Purchasing a home with a friend can be an excellent way to start building your equity. As long as all of the people involved have been upfront with each other, there should be no surprises along the way to jeopardize the partnership. Let us help you when it is time to apply for that mortgage. We are here to answer any other questions that you may have when planning on buying a home with friends.

Devin Cristo & Wes Will are Trusted Saskatoon Mortgage Associates of YourMortgageNow.ca

How Much is Enough to Save for a Mortgage?

When should you start to save for a mortgage?

The challenge today is saving for a sizable deposit for a down payment and closing costs. Credit scores are critical, but so are income and assets when you are applying for a mortgage.

Home buyers are required to have at least 5% deposit of the home purchase price, although if you don’t want to purchase default insurance, then you’ll need at least 20% for a conventional mortgage.

There are several benefits to waiting until you have enough for a down payment of 20% or more before you purchase a home.

  1. Reduced mortgage payments
    The more you put down on your home upfront, the smaller your mortgage payments will be. That could help your monthly budget. More important, you could save thousands of dollars in interest in the long run. For example, on a 30-year mortgage at 5% interest, putting an extra $10,000 into the down payment will save you $9,325 in interest payments over the life of the loan.
  2. Lower interest rate
    Lenders often offer better interest rates to borrowers with a lower loan-to-value ratio, or the percentage of the purchase price that you’re financing. An increase in your down payment lowers the ratio and reduces the risk to the lender that you will be unable to pay your full loan balance. Lower interest rates can also save you money over the life of the mortgage.
  3. No mortgage-insurance fees
    If you want to contribute a smaller down payment than the traditional 20%, most lenders require that you take out mortgage insurance. This insurance protects the lender in case you cannot pay your mortgage.
  4. Instant Equity Building
    A significant down payment builds instant equity in your home. A 20%t down payment immediately puts equity into a property when you purchase it.

So, if you’re a first-time home buyer, how do you save for a down payment?

As a first-time buyer, you’ve got other things to consider, including:

  • Your rental costs. (Are they higher or lower than your potential ownership costs?)
  • Alternative uses for your down payment money. (Can you get a better return by investing down payment funds elsewhere?)
  • The size of your emergency fund. (Home ownership comes with a laundry list of unexpected expenses.)
  • Your economic stability and future earning power.

There are several ways to piece together a bigger down payment. You can:

  • Cut your spending and reduce your credit card limits. You might want to consider asking your credit card company to reduce your overall limit as this will help boost the overall amount lenders will be willing to offer you.
  • Get rid of debit! Carrying high levels of debt will reduce the overall amount lenders will be willing to offer you for a mortgage. Demonstrate to the lenders that you have responsibly made repayments on your credit cards.
  • Sell old, unwanted items.
  • Tap into the bank of mom and dad. Gifts from parents get a lot of young people started as home owners.
  • Borrow from your RRSP under the Home Buyers’ Plan (HBP).
  • Apply tax refunds and bonuses.
  • Get rid of one car in a two-car household.
  • Postpone a vacation for 18 months or more.
  • Get a second job. Working a couple nights a week at a part-time job only puts extra cash in your account. It also decreases time and opportunity for you to go out and spend unnecessary money.
  • Use municipal first-time home buyer grants when applicable (like this one in Saskatoon).

There are ways we can help you plan your down payment. Give us a call today at (306) 244-7755 or visit www.www.yourmortgagenow.ca

What Comes First the Mortgage or the House?

Many people get it backwards. They shop for a home, and then make an emotional decision without knowing what they are able to afford. And then are surprised and disappointed to find out that they cannot get the financing. Thankfully, mortgage brokers do the homework for the applicant to see whether they have the ability to repay the loan while in the lifestyle they are accustomed to.

Something’s to consider about your lifestyle:

  • Are you single or a family of six? Costs for food and clothing alone are very different.
  • Do you take annual vacations?
  • How often do you like to eat out?
  • Are you involved in costly sporting activities?
  • Would you be willing to sacrifice these things for a bigger or nicer home?

Also take into consideration the following:

  • Do you have car payments?
  • Do you have to repay student loans?
  • How much do you owe on your credit cards?
  • Do you have bad debts?

Falling in love with a home without considering the REAL impact on your lifestyle is a recipe for unhappiness….either in re-adjusting to a “lesser” home or disappointment over the lack of vacations or entertainment.

Our advice is to focus on your financing. Find out what you can afford from a lender’s perspective, but then, spend some time considering the cash flow realities of your choice.

Additionally, we can advise you on ways to properly represent and transfer your assets, how to explain and document your income, as well as, assist you to get your optimum credit score. This process will help smooth out some of the bumps during the mortgage process, giving you the best change to the best mortgage rates available. All your prep-work will pay off in the end.

The choice is clear get the mortgage before the house!