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Cameron Miller Q&A

There’s no question the pandemic has changed the real estate market in the Greater Toronto Area.

 

We’ve asked some of our real estate partners how the market has adapted in the past 15 months, and what advice they might have for homebuyers and sellers in this new normal.

 

Who: Cameron Miller

 

Title: Sales Representative, property.ca Realty Inc.; cameronmiller.ca

 

Area: Downtown Toronto

 

Specialty: Condos, pre-construction and re-sale

 

What are some of the changes or precautions we’re seeing taken in the home-buying and selling process right now at this point in the pandemic?

 

Something that has changed is virtual showings. So when sellers are showcasing their property online, they need to have those virtual tours with their listing. A lot of my clients have bought apartments off of a 3-D tour. It’s nothing that’s going to disappear anytime soon. Buyers need to get comfortable with buying virtually because that’s just the world we live in with COVID.

 

What do you need to keep in mind when doing these virtual tours? For sellers, how do you have a really great virtual tour?

 

We need to make the space look as optimal as possible. How do the buyers envision their living room? They want to know where their TV is; they want to know where their couch is. They want those ideas. So a property that’s a one-bedroom condo that’s catered to a guy that’s going to live downtown, you want to stage the property to attract that type of buyer. And in the virtual tour, it’ll show.

 

So on the flip side, when you’re a buyer, any tips or things to pay attention to, especially if a property doesn’t translate well to a virtual tour?

 

Virtual tours don’t usually tour the building. So I think if you’re speaking about a condo, doing research on the building is very important. What amenities do they have? How many people are in the building? Who is the property manager? What’s the track record of the property manager? Things like that. It’s important.

 

In the news, we often hear the terms seller’s market or a buyer’s market. Can you tell us what those mean?

 

A seller’s market is when there’s more demand than listings, so there are fewer sellers than buyers. That means buyers are competing. A buyer’s market is the complete opposite. It’s when there are more sellers than buyers. We saw that in the rental market last year. The rental market was not plummeting, but doing sort of a nosedive. And it was very much a buyer’s market, or a tenant’s market.

 

Has there been one type of market in particular that’s dominated during the pandemic?

The cottage market has dominated during the pandemic. It seems like people want more space and appreciate sanctuary living rather than high-density living in the city. Areas like Muskoka, Collingwood, Blue mountain, etc., have experienced tremendous growth in the past year.

 

Is that still the case or has it switched at all?

I’m noticing in the rental market, it’s definitely stabilized. Buying and selling, there was a time where it was more of a buyer’s market than a seller’s market. It was a very brief time last year that that happened but it went back to a seller’s market very fast. Listings started disappearing very quickly, especially January to March of this year.

 

The cottage market continues to boom as people’s needs for a home away from the city continues to grow.

 

Where are things at right now?

Right now it’s an interesting time. Things have cooled down since the first quarter of the year. But maybe buyer fatigue has set in, where buyers are tired of going over asking (price). In the condo market, Listings have increased, demand has slightly dropped but prices have stayed, so we’ll see what happens.

 

What are some words of wisdom or advice you have for a first time home buyer?

Understand the process because the market — and I’m specifically speaking about the downtown condo market — it’s competitive. That means they would need their ducks in a row beforehand. They need to get pre-approved (for a mortgage). They need to understand the process, and they need to have a deposit check in hand. They need to review the status certificate beforehand, know who their real estate agent is, and know who their lawyer is.

 

What are your thoughts on the post pandemic real estate market? We often hear about pent-up demand. Is there going to be a correction or will it be full steam ahead?

Nobody has a crystal ball with these things but Toronto Real Estate Board Chief Market Analyst Jason Mercer said prices will probably continue to trend upwards as the city starts to grow and things start to open up. We didn’t really have a big population growth last year. But the population continues to grow and the supply continues to shrink when the people who come here absorb it, so prices are probably going to grow.

 

blog, Home Ownership, Mortgage Education, Mortgage News

The Property Shop Q&A

The real estate market is nothing if not fascinating to watch right now.

 

But for those wanting to be more than a spectator, we’ve asked some of our real estate partners how the market has adapted in the past 15 months, and what advice they might have for homebuyers and sellers in this new normal.

 

Who: Vanessa Jeffery and Joe Baglieri

 

Where: Re/Max Property Shop

 

Area: Eastern Greater Toronto Area (Scarborough to Durham Region and north to Markham)

 

Specialty: A high-level, client-centred experience developed through a combined four decades in real estate.

 

What are some of the changes or precautions that we’re seeing taken in the home-buying and selling process at this point in the pandemic?

 

Vanessa: We were well prepared to pivot to virtual consultations as we were doing them for the last year with many clients who were not able to meet in person. For buyers, our preliminary consultations were done by video, to determine their needs, their criteria, and talking about the buying whole process. For our sellers, we gave them the option of taking a walk through their home virtually and being able to have that initial meeting (virtually), including the consultation with our stager to get a head start. With showing homes, because we were an essential service from the beginning of the pandemic, we were still allowed to do in-person visits. A lot of our clients still opted to do in-person showings but we had a COVID screening protocol. We also encouraged our buyers to explore options like virtual and 3D tours to make sure that it was a right fit before we actually went and met in person.

 

In the news we often hear the term “seller’s market” or “buyer’s market.” Can you tell us a little bit what that means?

 

Joe: When they refer to buyer’s market or seller’s market, one thing they’re missing is a balanced market.

 

We are basically looking at the rate that homes are selling, or months of inventory (MOI). This ratio represents the number of months it would take to completely sell all the homes that are currently for sale, based on the area’s current rate of sales activity, assuming no new listings were added.

 

A seller’s market occurs when the MOI falls at or below four months; in a balanced market it falls between four and six months, and a buyer’s market is when the MOI is more than six months, where buyers can have more selection and negotiation power because there’s this constant supply of properties coming on the market.

 

Has one type of market in particular dominated during the pandemic?

 

Joe: It’s been a seller’s market for a while now. In the pandemic, a lot of people squatted in the real estate market at first to see what would happen. However, there was a lot of necessity purchase and sales — people that sold and had to buy, or people that were just given notice from their landlord and needed to buy. Inventory levels were at an all-time low, and there were many people that needed to buy. It’s been like that until now.

 

Vanessa: Another major factor why there’s been a seller’s market is that interest rates have been record-breaking low. People have realized instead of us renting, it’s time for us to jump into home ownership. So from the beginning of the pandemic to now, we’ve been in a seller’s market.

 

What are some words of wisdom or advice that you have for a first time home buyer?

 

Joe: Finding a good realtor and finding a good mortgage broker is really imperative to having a smooth transaction. For many years, people didn’t use the same realtor twice because of the overall experience and feeling at the end of it all. The Property Shop’s mission is to give an exceptional experience from start to finish. It’s about getting them where they need to go and getting a proper informative session together where they can calculate budget, closing costs, comfort zone attributes, and tapering to a neighbourhood. And then, more importantly is, ‘Do I like the person that I’m talking to right now? Am I going to enjoy spending 30-40 minutes in 10 homes (with them) today.’

 

Vanessa: Joe and I are very much about the planning process of it. So get a good handle on your finances. You can get pre-qualified for a much higher amount than where your comfort level is. Budget and understand what your monthlies look like. Does that work for your lifestyle? Do you still want to have a restaurant and social budget? Do you want to be able to travel and still have that extra flex money there?

 

The other thing is to help manage expectations. A lot of buyers can easily get discouraged in a seller’s market. So we always try to put our clients in the frame of mind of knowing and understanding the market conditions, how competitive it is, and how to really be resilient in it. I’ve had many times where buyers have come to us and said, I was looking before for like six months, I decided to put it on hold, and I’ve seen how much house prices have increased from when we started looking to now. And we wish we had found the right fit of a realtor beforehand, because it would have saved a lot of money and heartache.

 

What are your thoughts on the post pandemic real estate market?

Because we often hear about pent-up demand. So are we going to see a correction, or will it be full steam ahead with what’s happening now?

 

Joe: Real estate’s a game you stay in. And as long as you’re in it, you’ll be OK. Real estate appreciates. It always goes up. Over-leveraging, going outside of your comfort zone, not falling within the ratios that are allotted by the banks and financial institutions is never a safe bet when it comes to real estate. Be smart with your money and get into investments that you can sustain. The government doing their stress testing is positive because the sale on money at X per cent right now is not something that’s sustainable long-term.

 

As long as you can stay in the real estate game, a correction is something that may or may not happen, but it’s not as relevant over that 10-20-year period that you’re going to be in that home.

 

blog, Home Ownership, Mortgage Education, Mortgage News, Uncategorized

Taking Another Look at the First-Time Home Buyer Incentive

Taking another look at the First-Time Home Buyer Incentive

 

What if someone offered you five to 10 per cent toward your down payment on your first home? It might just be enough to make owning property a reality, even if one day you do have to pay back that hand up at market value. Now, what if that someone was the federal government?

 

The idea of the government having a stake in your home, even if it is as little as five to 10 per cent, might make some squeamish. But Matt Imhoff, a Mortgage Broker with Mortgages.ca, suggests giving some serious thought to what that financial assistance can do for you, especially right now.

 

What is the First-Time Home Buyer Incentive

 

Ottawa unveiled the First-Time Home Buyer Incentive about a year ago with the intention of making home ownership more affordable for those just entering the market. It’s a shared-equity mortgage with the Government of Canada offering first-time buyers five to 10 per cent toward the purchase of a newly constructed home; five per cent toward the purchase of a resale or existing home; or five per cent toward the purchase of a new or resale mobile or manufactured home.

 

The buyer needs at least five per cent of their own money to qualify, but personal and federal contributions can’t add up to a down payment of more than 19.9 per cent. The intention is to help first-time buyers reduce their mortgage payments rather than add to the financial burden that can come with home ownership and, now, the uncertainty of a pandemic.

 

It’s not a forgivable loan, however. Anyone tapping into the program has to pay back the government based on the property’s fair market value at the time of repayment. That’s either when the homeowner decides to sell or after 25 years — whichever comes first.

 

Doing the Math on the First-Time Home Buyer Incentive

 

“For me, the benefits I really see are that it does reduce what your mortgage payment is,” Imhoff says. “So if someone is buying with five per cent down and not using the program and someone is buying with 10 per cent with program, it means a lower payment.”

 

That’s a particularly helpful scenario for growing families, he notes. Parental leave and the reduced income it brings can be less stressful with lower mortgage payments, for example. The savings on mortgage payments could also be used to pay off other debt or go into a vacation (when things open up), education or retirement account. But the biggest selling point might just be the fact you can pay off your mortgage quicker.

 

Let’s look at the numbers:

 

Not using the First-Time Home Buyer Incentive

 

Purchase price: $500,000
Down payment (5%): $25,000
Mortgage loan insurance premium (4%): $19,000
Total mortgage: $494,000

 

Payments (five-year fixed at 2.09%): $2,113/month

 

Balance after five years: $414,608
Payments over five years: $126,802

 

Using the First-Time Home Buyer Incentive (5%) – Existing Property/Resale Home

 

Purchase price: $500,000
Down payment (5%): $25,000
First-time Home Buyer Incentive (5%): $25,000
Mortgage loan insurance premium (3.1%): $13,950
Total mortgage: $463,950

 

Payments (five-year-fixed at 2.09%): $1,985/month

 

Balance after five years: $389,387
Payments over five years: $119,089

 

Note: The government shares in five per cent of the value of your property. This is paid either in 25 years, when you sell the property or if you decide to refinance.

 

Using the First-Time Home Buyer Incentive (10%) – New Construction

 

Purchase price: $500,000
Down payment (5%): $25,000
First-Time Home Buyer Incentive (10%): $50,000
Mortgage loan Insurance premium (2.8%): $11.900
Total mortgage: $436,900

 

Payments (five-year fixed at 2.09%): $1,869/month

 

Balance after five years: $366,685
Payments over five years: $112,145

 

Note: The government shares in 10 per cent of the value of your property. This is paid either in 25 years, when you sell the property or if you decide to refinance.

 

In short, paying $128 or $244 less a month on your mortgage, depending on whether you choose the five or 10 per cent incentive, means having $7,700 or $14,600 more in your pocket over the next five years while still coming out ahead on your mortgage balance.

 

Not convinced yet? Imhoff is happy to go through the pros and cons with clients, and discuss payback scenarios. “If a property goes up in value and the government gets five to 10 per cent of that, you still have 90 to 95 per cent,” he says. “I can look at the numbers to show people. I’m sure anyone who takes advantage of the program isn’t going to be kicking themselves if their property goes up significantly and they have to pay back the government.”

 

Expanded Program Now Live!

 

First-time home buyers purchasing a home in the Toronto, Vancouver, or Victoria Census Metropolitan Areas are now eligible for a qualifying annual income of $150,000 versus $120,000 previously, and an increased total borrowing amount of 4.5 times their qualifying income, up from four times previously.

 

For more information, please visit the following link:

 

https://www.placetocallhome.ca/fthbi/first-time-homebuyer-incentive

 

Written by Matt Imhoff

 

blog, Home Ownership, Mortgage Education, Mortgage News, Uncategorized

Change to the Stress Test

 

A New Stress: What the new mortgage stress test really means

 

There’s a reason it’s called a mortgage stress test. And as of June 1, it’s about to get a little more stressful.

 

That’s when homebuyers applying for an uninsured mortgage — typically, those with at least 20 per cent down — will need to show they can withstand a contract with an interest rate of 5.25 per cent or two per cent more than their actual mortgage rate, depending which is higher. That’s up from the current qualifying rate of 4.79 per cent.

 

Homeowners looking to renew their mortgage, tap into the equity in their home by refinancing to take on additional debt, or expand their real estate portfolio by purchasing additional property will also need to prove they can handle can navigate rising interest rates, especially if they’re forgoing mortgage insurance.

 

What does the new mortgage stress test rate mean?

 

Put in context, the new qualifying rate of 5.25 per cent is about four times the average mortgage interest rate at the moment. It was determined based on the average five-year rate posted by Canada’s Top 5 banks.

 

The change is meant to insulate homeowners when the ultra-low interest rates ushered in by the economic travails of the pandemic start to return to normal, pre-pandemic levels.

 

It appears to be only a slight increase over the previous stress test rate at a glance. But that 46-point difference translates to a five per cent reduction in affordability or purchasing power, explained Scott Nazareth, a mortgage specialist with Mortgages.ca. “At face value, it’s something to indicate to the market that it’s being consistently monitored and these changes are a reactive approach to the rise in property values, especially in the Great Toronto Area and Vancouver area.”

 

How to avoid the stress of the new mortgage stress test

 

If the new stress test is a concern, Nazareth encourages homebuyers and homeowners with uninsured mortgages to get their financing in order now.

 

There is a workaround for those who aren’t yet at that point, however: Credit unions are provincially regulated, so they don’t fall under the purview of federal mortgage stress tests.
But Nazareth suggests the most foolproof hack of them all: “Don’t let the stress test stress you out,” he says. “Feel free to reach out to a mortgage professional to help navigate the rules.”

 

 

Home Ownership, Mortgage Education

The Reverse Mortgage: Why It May or May Not Work For You

Popular opinion says reverse mortgages are bad for borrowers, but that’s one of many misconceptions about these loans.

What is a Reverse Mortgage

A 71-year-old with limited income came up with a plan to better her financial fortunes.

She decided to convert her basement into a rental suite. The money she’d make each month from taking on a tenant would supplement her CPP and Old Age Security payments.

Knowing that a bank loan wasn’t an option at her age and with her income, she decided to take out a reverse mortgage for 25 per cent of her home’s value. The renovation got done, a tenant moved in, and now she’s earning an income that boosts her financial security. The best part is she gets to stay in her home.

What is a reverse mortgage?

A reverse mortgage is a loan secured against the value of a home. Unlike a regular mortgage, borrowers aren’t required to make regular payments. In fact, they don’t have to pay it back at all until they sell their home. 

The money is tax-free and can be used however homeowners want. Anyone over 55 can apply for a reverse mortgage, with the eligible amount calculated by age and other factors.

Reverse mortgages really come in handy in situations like that of the 71-year-old who put the money back into her home, says James Harrison, president of Mortgages.ca

“She still owns her home and her home’s still going to appreciate in value, so it’s great,” he says. 

A reverse mortgage is also an ideal option for older pensioners who want to continue living independently as they age, Harrison adds. 

“If they can set this up, they can have full-time care and be able to stay in their home, and that’s a big thing.”

Why do reverse mortgages get a bad rap?

Depending on the reverse mortgage, there can be high or hidden fees. But Harrison says the benefits of a reverse mortgage outweigh any disadvantages, especially if borrowers consider a private loan as an alternative.

For starters, the entire value of a reverse mortgage can be taken in one lump sum, or in monthly or quarterly installments. 

Interest rates are also reasonable compared to private loans, Harrison notes. The 71-year-old who converted her basement to a rental suite secured a variable rate of prime plus 1.75 percent, or 4.20 per cent as of May 2020. Private loans can clock 10-12 percent interest plus high fees just to get set up.

“There’s a lot of flexibility in a reverse mortgage,” Harrison says. “You can do a three-year variable, five-year variable or fixed and when you want to sell and move, you pay it back and keep the rest.”

blog, Home Ownership, Mortgage Education

Should I Set Up a Home Equity Line of Credit?

Home equity lines of credit can be a financial lifeline when emergencies happen.

But waiting until retirement to set one up can throw homeowners a real curve-ball.

An older adult couple living in a million-dollar home called it quits on their careers after their mortgage was paid off.

They considered applying for a $600,000 home equity line of credit before retiring but decided against it in the end. They figured if they ever needed to access a large amount of cash, they could easily get it because of the equity they had in their home. A year later, they decided they wanted to spend less time in the city and more time enjoying the peace and quiet of lake life. They wanted to buy a cottage. 

Bad news came when they applied for a mortgage: their retirement income wasn’t enough to qualify. Had they secured that home equity line of credit before retiring, however, they could have used that to pay for their slice of heaven by the water.

Whether retirement is on the horizon or you have dreams of giving up corporate life for self-employment, it’s important to have the conversation with a professional about shoring up financial safety nets, including a home equity line of credit, before making the leap.

How does a home equity line of credit work?

A home equity line of credit is secured against the value of your home but approval is based on your income at the time you apply for it. 

You may never need to tap into it, but if you do, the interest rate with a home equity line of credit is better than with any credit card or unsecured line of credit. It really is the cheapest line of credit on the planet.

Paying off a home equity line of credit also comes with greater flexibility. The balance can be paid in full, unlike a mortgage, or you can choose to pay the interest only.

Home equity lines of credit also remain in place as long as you own your home.

When should you get a home equity line of credit?

Most people are never offered a home equity line of credit by their bank, but they should speak to a mortgage professional about applying for one as soon as they’ve built up equity in their home — and while they’re still earning a secure and stable salary.

The key is to be prepared for whatever life might throw your way, and that includes getting a home equity line of credit in place sooner than later regardless of career ambitions or retirement plans.