May
23

Prepared For Higher Rates? OECD says they should rise, soon.

OECD is a Paris-based body that is urging the Bank of Canada to raise interest rates. The question is, are you ready for higher rates? I mean, the writing is on the wall, higher rates are going to come sooner OR later. The fact that they haven’t come by now is a bit of a surprise, and has been the #1 reason why the housing market is continuing to see such high level of activity in Toronto. Even as more listings come up, the prices seem to maintain an upwards trajectory, and buyers are continuously participating in bidding wars. The question that people need to ask themselves is how ready are they for higher interest rates?.

In the past 6 months I have facilitated one single variable-rate mortgage, and the deal hasn’t even closed yet. I am willing to bet my client will change his tune once we do our sign-up meeting, but for now he’s adamant about going with variable. Otherwise everyone is getting on the fixed-rate train, and for good reason. As I posted about in a previous blog post, higher interest rates will definitely mean higher payments unless you pay down your principal over the next five years, by more than the minimum amount. Look, I know how expensive life can be. I just had a son a year ago, caregiver expenses surely eat up a lot of my budget (not to mention RESPs, daily life, mortgage payments etc etc). And even if I didn’t have a child lately, the rising cost of simple day-to-day things is eating up a LOT of people’s budgets. So how about higher interest rates? How much higher would they need to go in order to have a drastic impact on your day-to-day life?…

May
09

How Does Bank Of Canada Set Its Monetary Policy?

Ever wondered how the Bank of Canada sets its monetary policy? I found this presentation to be an excellent read and hope you will also. The presentation was made by the Deputy Governor of the Bank of Canada to a British-Columbia Mortgage Brokers Association meeting. Click here to find it.

Perhaps most interesting to note is the second misconception that although the BoC’s main goal is to maintain a 2% inflation rate, if all else is going well then it does not mean that the BoC will not raise or lower rates. Because of the length of time to actually see any effects of a rate change (usually 2 years), and the effect of “headwinds and tailwinds”, the BoC needs to act quickly and aggressively to not only keep things in check but make sure they don’t spin out of control in the future.

 

May
07

Financing an Assignment

Recently I had a client come to me who wished to purchase a condo as an “assignment”.I also met with Keith Graham of http://www.thetorontocondos.com and we discussed assignments in general. He told me about a new site that helped him out and is revolutionizing the assingment industry assignt-it.ca helping to bring buyers (assignees) and sellers (assignors) together. It got me thinking: why don’t I see more assignment deals nowadays? Probably because, as we discussed, the banks, the lawyers, and the general public does not really know how to finance an assignment let alone is kind of scared of them, period. I will hope to clear up some misconceptions in this posting, of how to finance an assignment.

Using my example but changing the names to protect the privacy of the buyers and sellers, here’s what happened. Billy Jean King bought a condominum unit in 2008 from the builder for $279, 900. She was promised that the property would close by 2011 but the builder delayed it until August 1st 2012. Billy Jean King is living in the property already but does no longer want to close on her unit because of a work opportunity abroad, and the costs of closing. SHe finds a buyer of her condo unit, Maria Sharapova. Ms. Sharapova and Ms. King both agree (through their Realtors), that the current market price would be $335, 000 and closing date would be August 1st 2012 - the same date as registration. As such, here’s what I did for Ms. Sharapova:

Found her a mortgage at 95% of the new asking price of $335, 000 plus CMHC, since she would owner-occupy the property and it would be (finally) registered on that day. The lender agrees that the $335,000 is a current market price by way of…

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