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Quick tips for first-time homebuyers

Quick tips for first-time homebuyers How will someone know when it’s “the proper moment” to buy a house? maybe a question you have if you’ve been considering it. Is it still ok to think about buying if you don’t have a 20% down payment saved up? Like any major undertaking, the secret to a smooth home purchase is to pay attention to every last detail. You can navigate the procedure, save money, and complete the transaction with the aid of these first-time house purchase recommendations. Determine the cost of your home Before you start looking, determine how much you can afford to spend on a house. The house affordability calculator can assist you in determining a price range based on your income, debt, down payment, credit score, and the location of your intended residence. Examine and improve your credit If you are eligible for a mortgage, your credit score will help lenders decide what interest rate to give you. Generally speaking, a better score will result in a lower interest rate, so follow these recommendations to improve your credit score in order to purchase a home. Get free copies of your credit reports from Experian, Equifax, and TransUnion, the three credit bureaus, and challenge any errors that could lower your score. Maintain the lowest possible credit card balances while paying all of your bills on time. Keep your active credit cards active. Closing a card will increase the amount of credit you are already using, which could harm your credit score. Monitor your credit rating. Research for first-time home buyers programmes First-time home buyer programmes are available in many states, some cities, and counties, and frequently include low-interest mortgages, down payment help, and closing cost aid. Additionally, tax benefits are offered by several first-time home buyer programmes. Costs and rates of mortgages To compare costs, including interest rates and potential origination fees, the Consumer Financial Protection Bureau advises receiving loan estimates for the same type of mortgage from many lenders. Discount points, which the borrower pays up in advance to reduce the interest rate, may be available from lenders. If you have the cash on hand and intend to live in the house for a long time, buying points may make sense. To make your choice, use a discount point calculator. Get a letter of pre-approval An offer from a lender to lend you money up front and on particular terms is known as a mortgage preapproval. A pre-approval letter can provide you with an advantage over other home shoppers who haven’t taken this step yet by demonstrating to home sellers and real estate agents that you’re a serious buyer. When you’re ready to begin looking for a home, submit an application for preapproval. To confirm your income, assets, and debt, a lender will check your credit and look over your paperwork. If you apply for a preapproval from multiple lenders to compare rates, as long as you do it within a set time period, such as 30 days, it shouldn’t adversely affect your credit score.

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Mortgage broker or Lender: which is the best?

Mortgage broker or Lender: which is the best? Because they are already familiar with the bank and do business there, some first-time house buyers decide to apply for a mortgage there. There is nothing wrong with this strategy. Some people or couples like to keep all of their financial connections, so to speak, under one roof. However, if you check prices online and/or engage with a broker, you will undoubtedly have more options and can save money. A mortgage broker is a specialist who can connect you to a network of lenders. They can assist you in finding the best mortgage for your requirements. Both brokers and lenders can help you obtain the funds you require for your real estate loan, but they each employ different strategies to do so. Who is a mortgage broker? A mortgage broker is a real estate industry professional, much like your real estate agent and real estate attorney. He may access a network of lenders. They provide the best mortgage and rate for your unique needs while a bank only offers its own range of products and services. That behaviour would be comparable to a bank going to its rivals to get a better offer. It would simply not occur. Who are lenders? The direct lenders, such as banks or credit unions, work with you directly to authorise and fund the loan. Once you’ve found that lender, you may start the application procedure with them. How does a mortgage broker work? A broker acts as a go-between for the lender, you, and the borrower. Remember that the broker does not directly provide loans; instead, they assist you in comparing potential lenders who are suitable for your financial condition. The fact that a broker is such an appealing choice for borrowers is due to the last sentence. In the initial meeting, the broker goes over the client’s needs with regard to the desired amount and the borrower’s financial situation. The borrower’s income, tax returns, pay stubs, credit reports, investments, and all other factors that give a clearer picture of their finances. These are all gathered by the mortgage broker along with all necessary information and documentation. How does a lender work? A bank or credit union is a direct lender. The application and approval processes, as well as everything else related thereto, are all handled directly by the borrower and one of the lender’s loan officials. Since there is no middleman involved, this certainly streamlines the process of obtaining the necessary funding. The borrower’s financial status continues to be scrutinised to the same extent. If denied, the process must be started over with a different lender. Although there are many loan programmes given by direct lenders. These may be limited in terms of the kind of loan that best suits the applicant and his or her circumstances. The lender will determine the borrower’s eligibility for the available programmes. They will explain which meets the lender’s requirements. This implies that a borrower may be eligible for one or more of the lender’s programmes. They may even be eligible for other, more advantageous loan programmes that are available on the market but that the lender does not provide. Which one suits is the most suitable? A bank is probably your best option if you have strong credit and your finances are in order. This is applicable especially if you have been a client in good standing with that institution for a long time. They may want to reward your company with favourable loan terms and rates because they know you and you know them. A broker, on the other hand, can be the best option if you are having trouble providing a complete and accurate picture of your financial condition due to poor credit or other issues. There are more considerations besides only your financial status. The kind of property you want to buy is similar. Some lenders won’t work with customers who want to buy apartment buildings or co-ops. They’ll only work with people who want to buy single-family houses. A broker will already be aware of which lenders collaborate with borrowers to buy particular kinds of properties. This contributes to the fact that brokers occasionally charge more for their services. Before choosing a broker or a direct lender for your loan, it is up to you, the borrower, to assess all of these possibilities. The advantages and disadvantages of each, the expenses and fees to be expected, as well as the desire to do more of the work yourself should be assessed.

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Mortgage pre-approval and its requirements

Mortgage pre-approval and its requirements To get pre-approved simply implies that all of the necessary paperwork has been completed. Basically, you need to organise your financial documents (credit report, proof of income, and a calculation of how much of your salary will go toward paying off debt) before you can even begin to shop for a mortgage. It also specifies that the down payment funds must have a 90-day history in order to prevent money laundering Mortgage pre-approval helps you look for a home within your financial means. House hunting can be a waste of time if you keep looking at homes that are $900,000 when you only have $750,000 to spend. Pre-approval for a mortgage simply entails taking the necessary steps to ensure that you are focusing on the right kinds of homes. This will also demonstrate to the seller that you are a serious buyer and can afford the property, two factors that can make or break an offer in today’s hot real estate market. To get pre-approved for a mortgage, a buyer must fill out an application and supply supporting evidence, such as bank statements, pay stubs, letters from employers, and tax returns. Requirement for pre-approval of mortgage The buyer’s FICO credit score and debt-to-income ratio (DTI), among other things, will be considered for pre-approval. Income Verification Homebuyers need to show two years’ worth of tax returns and W-2 statements, as well as recent pay stubs and year-to-date earnings, as well as evidence of any supplemental income received, like alimony or bonuses. The Documentation of Property Statements from the borrower’s checking, savings, and investment accounts demonstrate the borrower’s ability to make the down payment, closing charges, and other associated fees. This is because the down payment, stated as a percentage of the purchase price, differs from one financing programme to the next. If the buyer is not putting down at least 20% of the buying price, private mortgage insurance (PMI) is often required. Superior Credit The standard minimum credit score for a conventional loan approval is 620, while the minimum for an FHA loan is 580. Customers with credit scores of 760 or higher often qualify for the best rates offered by lenders. Verification of Employment In addition to checking a borrower’s pay stubs, lenders may also contact the employer over the phone to confirm the borrower’s employment and salary. Buyers who are self-employed must supply additional documentation, including information about the borrower’s income stability, the business’s location and nature, the company’s financial strength, and its projected ability to continue generating and dispersing sufficient income to allow the borrower to continue making the mortgage payments. Is There Any Plan If You Don’t Get Pre-Approved? Lenders will either pre-approve, refuse, or conditionally pre-approve a mortgage after assessing the application. To fulfil these requirements, the borrower may need to furnish more paperwork or lower existing debt. If a borrower’s application is turned down, the lender should explain why and provide suggestions for how to increase their chances of approval

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What is mortgage affordability?

What is mortgage affordability? After saving up for a sizable down payment, you should then determine how much of a mortgage you can afford, which is the amount you will pay back to the lender each month along with interest. Your mortgage will equal the purchase price of your property minus the amount you have already put down as a down payment. Lenders calculate a borrower’s maximum mortgage amount based on their gross debt service (GDS) ratio and total debt service (TDS) ratio when evaluating a mortgage application. The mortgage amount you are offered will be based on these figures, which are essentially a test of your income in relation to your debt and anticipated housing expenses. The distribution share (TDS) is the ratio of your gross annual family income to the total cost of owning and maintaining your home. This includes your mortgage, utilities, property taxes, and condo fees, if any. The debt service ratio (DCR) is calculated by adding all of your monthly debt payments (including mortgage, automobile, and revolving credit card payments) and then dividing that number by your monthly gross income. If your gross debt service (GDS) and total debt service (TDS) are less than 39% and 44% of your gross income, respectively, then a home is considered affordable by the Canada Mortgage and Housing Corporation (CMHC), Canada’s national housing agency. If your GDS or TDS is more than 32% or 40%, respectively, the Financial Consumer Agency of Canada will require you to take corrective action. How to calculate mortgage affordability Let’s begin by discussing what it means to have an affordable mortgage. Although it is sometimes used to describe the ratio of a city’s cost of living to the average income of its residents, the term is better understood as the maximum loan amount from which you can expect to be approved by a financial institution, taking into account your income, debt, and living expenses. When determining whether or not you qualify for a mortgage, lenders look at: Your pretax yearly income Credit card, loan, and auto payments all add up to your monthly debt payments. Included in this are mortgage payments, utilities, and half of your condo or HOA fees (if applicable). Because condo fees might include expenses like property maintenance, insurance, and some utilities, which are not used in debt-service calculations for other types of properties, only half of the latter figure is used. A mortgage is considered affordable by the Canadian Mortgage and Housing Corporation if the borrower’s gross debt service (GDS) ratio, which includes housing costs, does not exceed 39%. Total debt service (TDS) ratios, which include mortgage payments and other debt payments, cannot exceed 44% to be considered affordable.

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Fixed mortgage rate vs. Variable mortgage rate: How do they work?

Fixed mortgage rate vs. Variable mortgage rate: How do they work? Canadian mortgage applicants can select either a fixed or variable interest rate. The overall interest cost of a mortgage will be affected by the interest rate structure chosen. Your interest rate will either be locked in (called “fixed”) for the duration of your mortgage or it will be variable (called “floating”). We can show you how the differences between fixed and adjustable mortgage rates over the course of five years stack up. Five-year fixed mortgage rates Five-year fixed mortgage rates guarantee that your interest rate and monthly payment won’t change for the length of your contract. Fixed rates are more stable than variable ones, but they also tend to be more expensive. Your mortgage contract will be in place for the whole five years, as suggested by the name, with a five-year fixed-rate mortgage. Mortgages in Canada typically run for five years, but can be taken out for as little as six months. Mortgage interest rates are fixed for the duration of a fixed-rate mortgage loan. This means that your mortgage payments will remain stable until your current mortgage contract expires and you need to negotiate a new one. This is why many people prefer fixed-rate mortgages over adjustable-rate mortgages for peace of mind. Mortgages with a variable interest rate have interest rates that may change periodically over the course of the loan’s duration. As the overnight rate set by the Bank of Canada fluctuates, so too do prime rates set by individual banks. Right now, the prime rate stands at 5.45%. Mortgages with a fixed interest rate can, at long last, be open or closed. When a mortgage is open, extra payments can be made on a regular basis or in a lump sum without incurring any fees or penalties. A general rule of thumb is that closed mortgage terms have lower interest rates than open mortgage terms since they limit the borrower’s options Five-year variable rate mortgage When market interest rates are low, as they have been for the last several years, five-year variable-rate mortgages in Canada are a great option. Variable-rate mortgages, which have historically been less common in Canada than fixed-rate mortgages, might save money for borrowers who are willing to deal with some interest rate volatility over the course of a five-year loan. A five-year variable-rate mortgage, as the name implies, is issued for a period of five years. You can get a mortgage for anything from six months to ten years in Canada, with the average being five years. Your interest rate on a variable-rate mortgage will change throughout the course of your loan’s term in response to fluctuations in the prime rate set by your lender. Contrast this with fixed-rate mortgages, which don’t fluctuate throughout the course of the loan’s initial five years. For instance, if you have a mortgage with a variable interest rate, you might see a phrase like “prime plus” or “prime minus” followed by a percentage. With a “prime plus 0.5%” mortgage, your interest rate will be 3% if the lender’s prime rate is 2.5%. Your interest rate is currently 3.5%, but it would be 3.75% if the prime rate were to climb to 3%. How this affects your mortgage payments is conditional on the specifics of your variable-rate mortgage. In the case of some mortgages with a variable interest rate, the monthly payment won’t vary even if the rate does. Instead, it calculates the interest and principal components of each payment. When the interest rate on a loan drops, more of each payment goes toward paying down the loan’s principal. As the percentage used to calculate interest on your balance changes, the impact of an increase in the variable rate grows. Even if your monthly payment remains the same, the length of time it takes to pay off your mortgage increases as interest rates raise. Other types of mortgages, known as variable rate mortgages, feature payment adjustments (these are sometimes called adjustable-rate mortgages). If you have a mortgage with a variable interest rate, your monthly payments will fluctuate as the interest rate does. The amount you owe is calculated by multiplying the lender’s prime rate by the margin you agreed to in your mortgage contract (often a percentage point or two)

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Essential facts about mortgage

Essential facts about mortgage A mortgage, at its most basic, is a debt taken out to finance the purchase of real estate. A mortgage, like any other loan, has parameters such as an interest rate and an amortisation (payment) schedule. Mortgages are secured by the collateral of the home itself. This means that the mortgage lender has the right to take back the home if the mortgage holder defaults on payments. It is important to understand the following ideas before applying for a mortgage. That will help you receive the best mortgage possible: Term- During the term of your mortgage agreement, you are obligated to make monthly mortgage payments. Rental periods might be as short as six months or as long as five years. Rate of interest- the cost of carrying a mortgage. A portion of each monthly mortgage payment goes toward reducing the loan’s principle balance, while the rest covers interest accrued. Open or closed mortgage- How much leeway you have in determining when and how much of your mortgage payment you make each month determines whether your mortgage is open or closed. You’ll need an open mortgage if you ever want to modify the loan in any way, including renegotiation, refinancing, or repayment. A closed mortgage will limit your options. But the interest rate is usually lower on these types of loans. Mortgage amortization- It is the time it will take to pay off your loan in full. For mortgages, the standard amortisation time offered by the country’s major lenders in Canada is from five to twenty-five years, with a maximum of thirty years available with a twenty percent down payment. In most cases, borrowers will need to wait until the end of many mortgage periods before making the final payment. Fixed or variable mortgage- Mortgage interest can be either fixed (staying the same for the duration of the loan) or variable (changing periodically). Rates of interest on variable-rate loans can rise and fall in response to fluctuations in the market.is How long will it take to pay off your mortgage The length of your mortgage is different from the time it takes to pay it off. The length of time during which you make payments on your mortgage is known as its amortisation period. With a 20% down payment, the standard amortisation length offered by most Canadian lenders is 25 years; with a larger down payment, this number can rise to 30 years. In general, the lower the amortisation term, the lower your interest payments will be over the life of your loan, but the larger your regular mortgage payments will be. should I go for the highest possible amount? For first-time buyers, it’s also vital to consider how much of a mortgage they can comfortably make each month. There are practical matters to think about in your house search regardless of the size of the loan you can afford. First and foremost is the reality that variable interest rates will almost certainly increase in 2022 due to a likely rate hike by the Bank of Canada sometime in the first quarter, maybe in April. The uptrend in fixed rates is expected to continue. Not only should you be aware of the growing rates, but you should also be aware of the fact that many experts advocate setting aside at least 10% of your gross pay for retirement (and some even propose as much as 30%). When borrowing money, it’s best not to borrow more than you can comfortably repay in a single payment. Mortgage affordability calculators can be helpful if you’re not sure how much house you can afford. You should always double-check the results of these tools with a broker who is familiar with the nuances of your financial situation, as they are only meant to provide estimates. How can I determine whether I need adaptability or stability? The choice between a fixed or variable interest rate, a longer or shorter term, a shorter or longer amortisation period, and a larger or smaller mortgage balance all comes down to personal preference and tolerance for risk. If you want to stay within your financial means and at the same time feel at ease, you need to be practical. And fortunately, you can rely on others to help you get the best mortgage for first-time buyers. A mortgage broker can help a first-time buyer get the best mortgage rate and lender for their situation by comparing products from numerous sources.

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New data reveals Canadian rentals exceed $2K for the first time

New data reveals Canadian rentals exceed $2K for the first time In November, the average rental price in Canada topped $2,000 per month, according to a survey issued on Wednesday. Based on the numbers provided, it appears that renters in Canada are forking over an average of $2,024 monthly to cover their housing costs. This number includes anything from studio units to mansions. That’s a 12.4% increase from the same month a year ago, which is far higher than Canada’s inflation average of 6.9%. Vancouver has the most expensive one and two-bedroom rents in the country, at $2,633 and $3,598 per month. It was the second most expensive to rent in Toronto. The median monthly rent for a one-bedroom in the city is now $2,532, up 23% from the same period last year. According to the data, the median monthly rent for a two-bedroom unit is $3,347. Rental costs rose dramatically in other GTA municipalities as well. The cost of living increased by 28% in Brampton and by 19.2% in Mississauga compared to the previous year. Monthly rents in smaller areas west of the GTA also rose, by as much as 27.9% in London and 24.1% in Kitchener. Only one Canadian city, Halifax, had a higher median rent than the cities of British Columbia and Ontario combined. In Burnaby, British Columbia, tenants paid a whopping 32% more for a one-bedroom flat in October 2018 than they did in October 2021. The survey found that rising rental prices have shown no signs of slowing down. Since May, year-over-year increases have been in the double digits, with November’s increase being the largest yet. In a press statement, Urbanation president Shaun Hildebrand said, “Rents in Canada are rising at an extraordinarily fast speed, which is having a dramatic effect on housing affordability as interest rates continue to rise.” “Demand is shifting to more inexpensive locales in regions with rapid population growth,” the article states, because “the most costly cities are experiencing very low supply and the quickest rates of rent increase.” Nova Scotia, Newfoundland and Labrador, New Brunswick, and Prince Edward Island had the fastest annual rate of increase in rental prices, at a combined 31.8%, out of all of Canada’s provinces and territories. There was an average monthly cost of $1,716 for a one-bedroom apartment in Atlantic Canada in the month of November, while $2,032 was the average for a two-bedroom. The survey found that rent rises were slowest in Montreal, despite the fact that it is Canada’s largest rental market. Builders are cancelling ventures, and investors are afraid to put money into future real estate projects because of the high costs of borrowing. “Investment in real estate, especially in the condo area, loses some of its appeal as interest rates rise,” Tal added. So, “if you don’t have those units, that’s another factor pushing up the cost of renting what’s left.” The rising cost of rent is “becoming unaffordable” “We’re getting near to the point when rents are just becoming prohibitive for tenants,” said, Hildebrand. “It appears that a downturn in economic activity may begin sometime in the coming year. It follows that rentals may see a temporary lull in 2023 “the head of Urbania remarked. However, it is very evident that rents will continue to grow higher in the medium to long term due to strong immigration targets and rental building that has been halting recently due to high costs. When the weather turns cold, Hildebrand says renters should start looking elsewhere. There are fewer potential tenants, therefore landlords are often willing to negotiate a lower monthly payment in exchange for your business. Hildebrand argues that governments might introduce incentives to develop purpose-built apartments and make new rental projects more economically feasible, although this won’t help in the immediate term. Rentals.ca’s head of content, Paul Danison, has said that governments need to be more innovative with their zoning policies. One possible use for these buildings is as lofts with amenities like cafes, shops, and galleries. Alternatives he suggests are inclusionary zoning, laneway suites, and infill construction. There are responses to this problem, but governments are moving too slowly.

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Mortgage rates to rise with latest interest rate hike, but the end of raising cycle near

Mortgage rates to rise with latest interest rate hike, but the end of raising cycle near The increase in interest rates by a half per cent that was implemented by the Bank of Canada on Wednesday signals greater hardship for indebted homeowners and those who are trying to enter the property market because they will now have to fight with even higher mortgage rates and borrowing costs. After the Fed increased interest rates, the Royal Bank of Canada was the first of the Big Six banks to hike their prime rate, taking it from 5.95 per cent to 6.45 per cent. On Wednesday afternoon, the lending rates of the Toronto-Dominion Bank, the Bank of Montreal, Scotiabank, National Bank of Canada, CIBC, Equitable Bank, and Laurentian Bank were all raised to 6.45 per cent, with the increase taking effect on December 8. Economists, on the other hand, have pointed out a potential silver lining in the fact that the most recent massive rate increase — which raised the central bank’s trend-setting policy rate up to 4.25 per cent — could indicate the end of the cycle of rate hikes. While the majority of real estate markets are beginning to feel the consequences of rising interest rates, which have now increased by 400 basis points this year, the real estate markets in Toronto and Vancouver have been affected the worst. The number of properties that changed hands in Toronto dropped by 49 per cent year over year in November, which contributed to the price of a home falling by almost seven per cent to approximately one million dollars. The housing market in Vancouver did not fare any better, with sales decreasing by more than 50 per cent in November and the benchmark price of a home falling from October. Even while home sales and prices are falling, homes are not becoming more affordable for people who are considering purchasing one. According to Victor Tran, an expert on mortgages and real estate at Ratesdotca, the most recent action taken by the central bank will most likely result in the prime lending rate being given by the major banks increasing to 6.45%. Tran also stated that a homeowner with a variable-rate mortgage can anticipate an increase in monthly payments of around $28 per $100,000 of mortgage balance for every increase of 50 basis points in the interest rate. “Previous rate hikes significantly cooled the housing market while rising rates pushed many homebuyers, including first-time homebuyers and investors, to the sidelines to wait out the instability in the market,” Tran said, adding that Wednesday’s hike will have the same effect. “Rising rates pushed many homebuyers, including first-time homebuyers and investors, to the sidelines to wait out the instability in the market,” Tran said. Before purchasers start returning to the market in the spring of 2023, we may be witnessing the bottom of the trough that the housing market has been in. Mortgage holders are already feeling the effects of higher interest rates, which the Bank of Canada is beginning to notice. According to the most recent data provided by the central bank, approximately half of all variable-rate mortgages with fixed payments and nearly one-fifth of the entire Canadian mortgage pool have already hit their “trigger rates.” This refers to the point at which monthly mortgage payments are only covering the interest and are not making any progress on the principal. Those looking for a new place to call home will be pleased to hear this. Clay Jarvis, an expert on mortgages and real estate who works for the personal finance website NerdWallet Canada, stated that despite the fact that the path to homeownership may have become a little more difficult as a result of this announcement, this fact should not be a deal-breaker for prospective buyers. According to Jarvis, prospective purchasers of homes should be encouraged by the possibility that the Bank of Canada is getting close to the conclusion of its cycle of interest rate hikes. If the central bank truly believes that inflation will be back down to around three percent by the end of 2023, then they must also believe that the rate hikes they’ve been making will start having a noticeable effect in the early to middle stages of next year. “The overnight rate could rise further in January and March, but if the bank truly believes that inflation will be back down around three percent by the end of 2023, then they must also believe that the rate hikes they’ve been making will start having a If inflation begins to fall, there should be a halt to interest rate increases. The economics team at the Royal Bank of Canada made the observation that the policy statement issued by the Bank of Canada in conjunction with the interest rate increase was not as hawkish as the increase itself. In today’s guidelines, rather than stating that “the policy interest rate will need to rise further,” RBC Economics senior economist Josh Nye noted that “Governing Council will be examining whether the policy interest rate needs to rise further.” That unquestionably leaves the door open for a pause as soon as the next meeting in January, and from our point of view, that decision can be framed somewhere between 0 and 25 (basis points).

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How does a home warranty differ from an insurance policy?

How does a home warranty differ from an insurance policy? During a storm, a large tree topples down onto your brand-new house, severely damaging the roof. Do you have a new house warranty or homeowners insurance that would cover this? But what if you discover a leak in your skylight when you get up in the morning? Do I contact my home warranty provider or submit a claim to my homeowner’s insurance? Your peace of mind in your new house or apartment can be greatly bolstered by purchasing both a new home warranty and homeowners insurance. They all cover different things, have different payment structures, and are handled differently. The following are some of the primary distinctions between the new Ontario home warranty plan and homeowner’s insurance. WHAT EXACTLY IS ONTARIO’S NEW HOME WARRANTY GOOD FOR? A new home warranty in Ontario is effective on the day of occupancy of a single-family dwelling or a condominium. Protection against faults in the home, including those caused by noncompliance with the Ontario Building Code and prohibited material replacements, begins on the date of closing. Your home’s plumbing, electrical, and HVAC systems, as well as any damage caused by water seeping in through the foundation, are all covered by your two-year warranty. Major structural faults that endanger the home’s integrity or significantly reduce its use are covered by your warranty for seven years. WHAT DOES STANDARD HOMEOWNER’S INSURANCE COVER? A builder in Ontario must give and pay for a new house warranty, but they can charge you for it if they want to. A seven-year policy with a single payment costs between $375 and $1900, based on the value of the home. WHEN A PROBLEM ARISES, WHO IS RESPONSIBLE FOR THE COST OF WARRANTY REPAIRS? Private homeowner’s insurance must be procured by the homeowner. In Ontario, a homeowner should expect to pay about $1,250 (two hands hovering over a laptop) annually for home insurance. It’s worth noting that many Canadian mortgage lenders insist on seeing proof of home insurance before approving a loan. HOW DO NEW HOUSE WARRANTY CLAIMS GET PAID? If a problem arises with a warranty-eligible component, you should contact your builder. If, however, your builder does not fix the problem within the specified time frame for repairs, you have the option of hiring outside help. TO WHOM AND HOW ARE HOMEOWNERS’ INSURANCE CLAIMS PAID? Call your insurance agent or company as soon as possible if you have an emergency that is covered by your homeowner’s policy. They will likely dispatch an adjuster to assess the loss or damage before moving forward with your claim. You will be reimbursed for the cost of the repairs or replacement once the claim has been processed. So, the tree fell and damaged your roof, huh? Your homeowner’s policy should cover that. A dripping skylight? The two-year water-penetration warranty should cover that. The Ontario New Home Warranty and your home insurance policy are designed to work together to safeguard your investment. Related posts. How does a home warranty differ from an insurance policy? Read More Deposit Protection Eases Homebuying Stress Read More Importance of the performance audit Read More How can Home Warranty Guard You Against Unexpected Expenses Read More Canada hopes to welcome half a million immigrants by 2025, but can the country keep up? Read More Canadian Real Estate Prices Fall 30%, Recession Starts: Ox Econ Read More

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FACTS TO KNOW WHEN SHIFTING FROM VARIABLE MORTGAGE TO FIXED RATE

Facts to know when shifting from variable mortgage to a fixed rate Some homeowners may be asking if they should lock in their variable mortgage rate now before it gets even higher later on, given that rates for variable mortgages are on the rise. It’s not a “foregone conclusion that everyone should be switching to fixed,” as mentioned by James Laird, co-founder of the website RateHub.ca, in an interview, despite the fact that variable rates are rising. 53% of Canadians picked a variable-rate mortgage in the second half of last year, according to a report published by Canada Mortgage and Housing Corporation in the spring. This is a significant increase from the 34% who opted for a variable rate in the first half of 2021. The survey said that while the tendency carried over into 2018, it appears to have levelled down in the context of increased interest rates. The great news is that there is no fee for homeowners to switch from a variable to a fixed rate. But the homeowner is obligated to stay with their current lender and accept the prevailing fixed rate. You simply won’t have time to look around. To switch to a fixed interest rate, you need to make a phone call to your lender. Laird stated, “They tell you, ‘Okay, our current set rate is this,’ and you’re kind of stuck with it.” Homeowners can only do a fixed-rate mortgage conversion if they choose a new term length that is longer than the one they are currently in the midst of paying off. A homeowner would have to move to a new mortgage term of at least three years if there are still three years left on the current term. Alternatively, you could choose to enter into a new five-year fixed-rate term. The one and only rule are that the mortgage term cannot be reduced by making the transition to a fixed rate. CMHC data shows that as mortgage rates have increased, the spread between them has widened. According to Ratehub.ca, five-year variable rates can be anywhere from around 2.50 percent to 3.35 percent, while five-year fixed rates can be anywhere from about 4.14 percent to as high as 6.04 percent. It’s great news that homeowners who wish to move from a variable to a fixed rate will incur no additional costs in doing so. However, the homeowner must remain with their current lender and accept the fixed rate now in effect. There won’t be any time for exploring. You must contact your lender over the phone in order to change to a fixed interest rate. As Laird put it, “They tell you, ‘Okay, our current set rate is this,’ and you’re kind of stuck with it.” A fixed-rate mortgage conversion can only be done if the new term length is longer than the one the homeowner is currently in the midst of paying down. If there are still three years left on the present mortgage term, the homeowner would be required to switch to a new mortgage term of at least that long. You may also renew your loan for an additional five years at a fixed interest rate. You can’t shorten your mortgage by switching to a fixed rate, that’s the only regulation. According to CMHC’s numbers, the disparity between mortgage rates has grown in recent years. Ratehub.ca reports that the range for five-year variable rates is roughly 2.50–3.35%, while the range for five-year fixed rates is roughly 4.14–6.04%. When it comes to homeowners, both experts agree that the decision between a fixed and variable rate should be based on individual risk preferences. Laird recommended a fixed-rate mortgage for anyone who doesn’t have a high risk tolerance. Also, if their monthly income is low and they don’t have much room in the budget to absorb any payment increases, a fixed rate is the better option. He also said that homeowners with a lesser home loan debt or who might need to break their mortgage contract might be better off with a variable rate. Laird explains that “if you’re paying down your mortgage quickly, the rate today is the most relevant because your amount is bigger today and is going to decline swiftly by next year,” making a variable rate mortgage a better option for people in these situations or who have a tiny residual balance. Another consideration is whether or not you plan to refinance your home in the near future; if so, you should keep your mortgage rate variable. The penalty for leaving a variable rate mortgage is far less than leaving a fixed rate mortgage if you plan on selling your home and relocating. According to Laird, variable interest rates have consistently saved customers money over fixed ones. Borrowers concerned about their ability to keep up with their mortgage payments if they select a variable interest rate may find it helpful to calculate what their payments would be with a fixed interest rate and then make their mortgage payments based on this higher amount, as suggested by Larock. That way, he explained, the homeowner can put all of the extra money toward the principal in one lump amount, and he or she will already have a safety net in place in case interest rates go up. Related posts. FACTS TO KNOW WHEN SHIFTING FROM VARIABLE MORTGAGE TO FIXED RATE by admin123 A transformation of Danforth Village neighbourhood by admin123 CIBC: Housing deficiencies linked to undercounted demand by admin123 April witnessed an increase of 8% in Canada’s housing starts by admin123 The Finalization of 10Block Studio’s Plans for Luxury Condo by admin123 A 69-Storey Stacked Tower is being proposed by Capital Developments by admin123

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An increase in fixed rates by lenders, brings them closer to 4.5%

An increase in fixed rates by lenders, brings them closer to 4.5%

An increase in fixed rates by lenders, brings them closer to 4.5% The previous week saw a rise in bond yields, which led to an increase in the variable and fixed mortgage rates offered by lenders across the country. Rates on 5-year fixed mortgages have been increased by 20 to 25 basis points at major financial institutions such as RBC, TD, and BMO, which all currently offer uninsured rates of 4.39 percent. This change comes after a nearly 10-bps increase in the yield on the Government of Canada’s 5-year bond, which is the benchmark for 5-year fixed rates. On Friday, the yield on a 5-year bond reached a new 11-year high when it closed at 2.88 percent. Bond yields have increased by more than 165 basis points since the beginning of the year. According to the data tracked by Rob McLister, rate analyst and editor of Mortgage Logic, the average uninsured 5-year fixed-rate among national lenders is now 4.37 percent. This represents an increase from the rate of 3.92 percent a month ago. The rate on an insured, fixed-rate mortgage for five years with a down payment of less than twenty percent has increased to 4.14 percent, from 3.78 percent one month ago. This represents an increase from the previous rate. That means that fixed interest rates have increased by approximately 40 basis points in the space of just one month. To put this into perspective, an increase in the rate of 50 basis points results in a roughly $25 higher monthly payment for every $100,000 of debt when amortised over a period of 25 years. New borrowers and those renewing a mortgage are facing significantly higher rates compared to just a few months ago and potentially double for those renewing a mortgage. While this does not affect the majority of borrowers with fixed rates, it does impact new borrowers and those renewing a mortgage. Following the Bank of Canada’s next rate decision meeting on June 1, at which it is anticipated that it will raise interest rates by another 50 basis points (bps), variable interest rates are likely to surge once more in the wake of this development. This may cause the prime rate, which is the rate used to price variable-rate mortgages and lines of credit, to rise to 3.70 percent. Impact of rising rates on mortgage borrowers “As interest rates march higher—we expect the overnight rate to hit 2% by October, a projection that increasingly looks conservative—borrowing costs for Canadians will also rise, leaving the average Canadian household to spend almost $2,000 more in debt payments in 2023,” say economists from RBC Economics. “This will erode spending power, especially for the lowest-earning fifth of households which spend 22% of their after-tax income on debt servicing (including mortgage principal and interest payments),” they add. On the other hand, RBC reports that the pandemic contributed to an increase in the amount of savings made by households in Canada. According to what the RBC economists wrote, the pandemic may have increased debt, but it also left Canadian households with an estimated savings balance of $300 billion. That is an enormous safety net, sufficient to cover approximately one and a half years’ worth of payments on the total Canadian household debt. Impact of rising rates on home prices The most recent housing data showed a significant decrease in home sales during the month of April; however, house prices have remained stable across the majority of the country, with the exception of Ontario. In the Greater Toronto Area, home prices have decreased by approximately 6 percent on average, but they have decreased by as much as 22 percent depending on the type of property and the particular region. Since benchmark prices are frequently a lagging indicator, it is likely that there will be additional price decreases in the months to come. In a recent post on move smartly, real estate analyst John Pasalis, president of Realosophy Realty, wrote that”…tomorrow’s homebuyers are going to have a much harder time paying today’s prices if they were paying 5% on their mortgage compared to the low 2% range just a few months ago, and the high 1% range a year ago.” Pasalis pointed out that some people have argued that this isn’t a concern because many borrowers have been qualifying at a stress test rate of at least 5.25 percent, but he suggests that this is an oversimplification of the situation. The mortgage stress test is currently used to qualify borrowers at a rate that is either the buyer’s actual mortgage rate plus 2 percentage points or the benchmark rate, which is currently 5.25 percentage points.According to what Pasalis has written, as these are dynamic measures that will change as rates do, the stress test will also increase, which will result in a reduction in the amount of debt a buyer can take on. He goes on to say that the contract rate influences how much mortgage debt the borrower is willing to take on. “A buyer who qualifies for a $1M mortgage may be willing to take on that much debt when interest rates are 1.75%, but less so when rates are 4% because under the higher rate their actual mortgage payment would be roughly $1,100 per month higher,” he wrote. As a result, if interest rates continue to trend higher, Pasalis says he “would not be surprised if we see some downward pressure on home prices over the next 9 to 18 months due to homebuyers being unwilling or unable to pay today’s prices at tomorrow’s higher interest rates.” Although, he adds that any price decline would “likely be a temporary one due to long-term fundamental factors that have been contributing to rising home prices in the Toronto area.”   Related posts. Expert’s Reaction to the increasing rates by the Bank of Canada by admin123 Living in Main Floors- A Great matter of importance for Aging Canadians who want a Pleasant Life Ahead by admin123 National home prices historically higher, listings terribly

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Canada's housing affordability declines the most in 27 years.

Canada’s housing affordability declines the most in 27 years.

Canada’s housing affordability declines the most in 27 years. A mortgage for the average home in Canada will cost Canadians more than half of their household income for the first time since the mid-1990s. The National Bank of Canada (NBC) noted in its latest Housing Affordability Monitor report that housing affordability in Canada has worsened for the fifth consecutive quarter. In comparison to the previous quarter, the MPPI (mortgage payment as a proportion of income) for a typical home increased by 4.9 percentage points. This is the worst quarter in more than 27 years of declines in the stock market. All ten major markets studied by NBC were found to have decreased in affordability, with the exception of Victoria, Toronto, and Vancouver. “Over the last 12 months, the worsening in affordability was the nastiest in 40 years,” said the report. “For the first time since 1994, it would take more than 50 percent of income for a representative household to service the mortgage on a representative home in Canada’s main urban centres.” “Headwinds will continue to blow against Canada’s real estate market in the months ahead with the Bank of Canada pursuing its monetary policy normalization process through higher policy rates and quantitative tightening,” further said the report. In Q1-2022, rising property prices and rising interest rates were cited as the two key factors that contributed to Canada’s deteriorating housing affordability. Since Q3-2013, NBC’s 5-year benchmark mortgage rate has jumped 46 bps in Q4-2021, the highest one-quarter change since that period. By choosing variable-rate mortgages in recent months, most homebuyers have been able to escape large price rises, but the terms of these mortgages are becoming less attractive. Because of this, the resale market has been affected. The worst losses in affordability have struck Canada’s major cities the hardest. The most severe drops in affordability were seen in the largest and most costly cities in Canada during the first quarter of 2002. For the third quarter in a row, Victoria recorded the highest annual decline in its MPPI, which rose by 19.6 percentage points. As a direct consequence of this, Victoria’s MPPI reached 80%, which represents the highest level for the city since the second quarter of 2008. The MPPI in Victoria experienced an increase of 8.5 percentage points on a quarterly basis. The MPPI increased to 85.7 percent for non-condos and to 44.2 percent for condos, representing respective increases of 9.3 percent and 4.1 percent from the previous quarter. At the moment, the yearly household income required to afford a non-condo in Victoria is $204,078 whereas the annual household income required to afford a condo in Victoria is $123,747. At an annual savings rate of 10%, it would take 382 months (31.8 years) to save up enough money for a downpayment on a house that is not a condo, while it would only take 58 months (4.8 years) to save up enough money for a condo. In the same province, the city of Vancouver had a significant decline in its affordability as a result of the MPPI’s seven-point increase during the first quarter of 2018, an acceleration that hasn’t been seen in the records since the year 1994. The typical monthly mortgage payment in Vancouver now takes up 81.4 percent of the city’s median salary, making it the most expensive city in Canada in which to purchase a property. The Vancouver Multiple Property Index (MPPI) surged by nine percent quarterly to reach 101.5 percent for properties that were not condos. Meanwhile, the MPPI for condos rose by 3.2 percent to reach 43.4 percent. If you want to buy a house that isn’t a condo in the largest city in British Columbia, you’ll need an annual income of at least $285,078; if you want to buy a condo, you’ll need an annual income of at least $142,357. In the event that you intend to save up for a down payment, it will take you approximately 452 months (37.6 years) and 63 months (5.25 years) of savings at a rate of 10% to be able to afford a non-condo or condo residence, respectively. In Toronto, the situation is not significantly better than it was before. The city saw the largest quarterly decline in affordability since 1994 during the first quarter of 2012, as the MPPI increased by 8.1 percentage points to reach its highest level since 1990. The median price per square foot index (MPPI) for non-condo properties rose by 8.9 percent quarterly to 81.5 percent, while the same gauge increased by 4.2 percent for condo properties to an MPPI of 44.2 percent. Homebuyers in Toronto need an annual income of $228,100 to be able to afford the typical house that is not a condo. This figure is significantly more than the required amount of finances, which is only $144,644 for a condo. It would take around 363 months (30.2 years) to save up enough money for a down payment on a house that is not a condo, while it would only take 64 months (5.3 years) to save up enough money for a down payment on a condo in the city.   Related posts. 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