Prime rate went up again.

Economists and Market Watchers are predicting 2 more rate hikes by years end. We’ll be at 3.25% then. After that, it is said because of the unexpected slowdown both nationally and internationally, the Bank of Canada will sit back and wait for the other central banks to react. This could mean the new Prime will be 3.25% while the US, Greece etc. get out of their slumps. The housing market in the US is almost back to where it has started. New mortgage applications are down, starts are weak, and foreclosures are still at record highs. In Canada, comparatively, our foreclosure rate is less than 1%.

At the current level of 2.75, your best prime rate mortgage is still 2.05%. When it “jumps” to 3.25, by years end, we’re still BELOW 3% on a variable rate mortgage. So really, at the end of the day, it’s not such a big deal. I have read some people asking if it’s a good time to lock in. ABSOLUTELY NOT. The bond market (which determines the 5 year fixed rates) has been trending sideways, and a best 5 year fixed today ranges from 3.99% for new purchases to 4.34%. Why lock in? Ideally when the spread between fixed and variable is less than 1%, or the fixed is in the mid 3%s, it’s good long-term to lock in. We’re not there, yet.


The beauty of a Refinance: a case study.

Let me show you how I saved one couple thousands in payments, interest, and most of all sleepless nights.

The case of Margaret and Ted

My clients came to me after much deliberation and thought. They finally decided to try a mortgage broker after a very negative experience at their local bank.  They were dealing with someone who did not have the knowledge or stamina to complete this difficult transaction, as is usually the case when a salaried bank employee is dealing with a complex finance transaction. This out-of-the-box thinking is why they seeked my help.

My clients have a gorgeous property north of the city, with loads of equity. Roughly half of it was paid off, which is a great start. They had debt. Lots of it. Their monthly payments exceeded their mortgage payments. They also had another major problem: the husband was bankrupt, but the wife’s credit was A1.

The numbers were like so:

Their 1st mortgage was $220,000 for which their payment was $1250.
Their debt totals, including all the evil store cards (HBC, Zellers etc, 28%+), Line of Credit, Car Loan, and Credit Cards were at $110,000. Their 3% minimum balance payment was an astonishing $3300, and they continued to pay this for years, and continued to drive their debt up while dealing with the bankruptcy situation from the past.

I proposed them that we could roll all the debts into one payment, include the 1st mortgage, pay the paltry penalty to the first lender, and they would have a greater increased cash flow.

My suggestion included a 1st new mortgage at $330,000, with payments of $1381. $181 more than their payment, all debt cleared, no new amortization taken. Furthermore, with bi-weekly payments and the 15% per payment increase, they were able to…


HST and how it affects you, the homebuyer.

HST And Real Estate

Do I have to pay Tax?

The harmonized sales tax introduced by the Liberal Government in Ontario put into effect in July 2010. Although tax is collected at a rate of 13% on the sale price of good and services, it doesn’t apply to every type of home or every type or real estate.

New Home purchases are subject to HST but may qualify for an HST rebate.  Resale homes are sold without HST.  Land may be exempt from tax, but realtors and other professionals must charge HST on the purchase price.  However, if the home ids going to be your primary place of residence, it may qualify for a partial HST rebate, depending on sale price.

You can get the HST Rebate application here.

You do not have to pay HST on the purchase price of a used residential home.  Revenue Canada defines “used residential property” to include a previously occupied house, condominium, summer cottage, vacation property or non-commercial hobby farm.

HST applies to most of the services provided in completing the real estate transaction.  For example, 13% HST is applied to the commission a realtor charges for facilitating a sale.  The tax is paid by the person responsible for paying the commission - generally the seller.  HST also applies to many of the other services involved in the real estate transaction, including appraisal feed, referrals, surveys and legal assistance.  HST is charge on these fees regardless of whether the house purchase is itself HST exempt or not.

One exception is that mortgage broker fees are HST exempt if the fees are charged separately from any taxable real estate commissions.  As well, mortgages and interest on mortgages are HST exempt.

HST is not normally due and payable when the real estate transaction is…


Is Toronto Life Magazine right? Or just trying to sell issues?

.... Good evening!

The answer to the question above could be a little of this, and a little of that.

In this month’s issue, they discuss the bubble we are “in” and a brief synopsis of certain Toronto neighbourhoods and their risk factors..

First off, the bubble conundrum:

As I have continued to say, the recent CMHC changes have impacted our market primarily with the increased qualifying rate used. However, I’m not entirely sure we are in a bubble and when I think of that word, I recall the nasdaq bubble. For me, a bubble is something that when popped, things change drastically. I am of the belief we will see stables prices, rates rising moderately, and a steady stream of increasingly savvy consumers.

Second, a neighbourhood breakdown:

again.. difficult to say if they are right however it’s hard not to make these predictions especially in areas such as Yorkville and Bloor West.. still some good bits of info in there..


Rates, again.

This week a slew of big 5 Banks came out with rate predictions, in anticipation of a July rate hike by Bank of Canada.

Here is a rundown of each bank’s point of view:

1.  Bank of Montreal predicts that a 25 point hike is necessary but a double-dip recession isn’t out of the question.

2.  CIBC’s research calls for rate hikes in the next 2-3 quarters, then a steady approach.

3.  Royal Bank of Canada feels we will see “gradual increases”.

4.  Scotia Bank see 75 poin increase by year end 2010.

and finally, 5. TD Bank also see a steady rate increase environment.

All banks note that the GDP is flat since April, our economy is slowing down somewhat, and we should approach the second half of the year cautiously. From my perspective, while shopping in the middle of the week at Yorkdale, cars and people packed the stores. Perhaps that is not as good an indicator on such a micro scale, but it was nice to see people spending money.

Fixed Rates

If you prefer to examine the fixed rate market, lenders are finally dropping their rates midsummer. One rate I saw was at 3.99% 5 year closed, surely a good option for investors or people who can’t sleep at night worrying about a rising Prime market. Expect the rates to stay low as we progress into the hot and humid days.

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