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Canada's New Mortgage Rules and How They Affect a Homebuyer
Posted on Thu, 15 Feb 2018, 10:30:00 AM  in Home buying tips
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Canada's New Mortgage Rules and How They Affect a Homebuyer

Canada’s new mortgage rules will cause hardship for some new and existing borrowers. These rules went into effect on January 1 and applied to all new or refinanced home loans. Anyone who applies for a new or refinance loan will have to pass a stress test to ensure they can afford the mortgage.

In January of 2017, applicants who did not put at least 20% down when buying a home are required to have mortgage insurance. With these new rules, applicants who put 20% down or more are required to still face a stress test. These rules make it seven times since 2008 that the mortgage market has seen new regulations to limit the amount of debt a Canadian can assume.

Canadas New Mortgage Rules and How They Affect a HomebuyerThese guidelines will affect people in a variety of ways. If an individual is purchasing a home with a down payment of at least 20% or more, he or she will need to pass a stress test. This stress test requires the financial institution to qualify the application by using a minimum qualifying rate.

This rate must be equal to the greater of the Bank of Canada’s five-year benchmark rate. This rate can also be the Bank of Canada’s contractual rate increased by two percentage points. This stress test may require the buyer to wait to purchase the home with a more substantial down payment or choose a less expensive home. The average reduction would be around $31,000 or approximately 6.8%.

If the individual is renewing a mortgage, he or she does not have to face a stress test. However, if he or she do not pass this stress test, it limits his or her choice in lenders. He or she will have to stay with the current financial institution and will not be able to look for a lower interest rate. It is even possible that individuals who do not pass the stress test will be forced to agree to the uncompetitive rates from their current loan providers.

If the person is refinancing a current mortgage, he or she will have to qualify at a higher stress-state rate than the current contractual mortgage rate. An example is a home purchased for $500,000 with only $50,000 is owed. A person wants to borrow $20,000 for home repairs and renovations. The current loan was financed at 5.0% and is a fixed rate mortgage.

The lending institution would evaluate this loan using the new mortgage rules. The investment would be for $70,000, but the individual would have to be able to pass the stress test at 7.0% instead of the 5.0%. If the person does not meet this requirement, he or she may not be able to get the loan, or he or she may have to decide on a smaller loan amount.

People who signed a purchase agreement before January 1, 2018, will not have to pass this stress test. This fact is true even if the mortgage is not applied for until after January 1, 2018. This loophole applies to new construction and pre-construction sales also.

If the individual was pre-approved before January 1, 2018, he or she might receive 120 days starting on January 1 to purchase a home without the new rules being applied. If a mortgage refinancing commitment was signed before the last day in December, the borrower might receive this same consideration. The only way to ensure a person gets the home of his or her dreams is by successfully passing the stress test which means he or she needs to be able to financially afford the loan or have a more substantial down payment.


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Real Estate Market Interest and Growth
Posted on Wed, 31 Jan 2018, 02:30:00 PM  in Marketing strategies
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The real estate market is seeing a very big surge in interest and growth. Many real estate investors as well as the general public are finding that there is a great deal of money to be made in the field and the growth that is being experienced may last for quite some time. Because of current market relations, acquiring one’s own home or staking a claim in the field of real estate can be very easy. The expansion of the market as well as people buying and selling rapidly allows for anyone to jump in and find the home that they are looking for.

 

Real Estate Market Interest and GrowthThe real estate market in North America hasn’t always been great. It is only until recently that we have seen an upturn from past years of recession and decline. Many people who choose to enter the field find that it can be welcoming and easy to pick up. However, the part that makes it challenging is that it can be very hard to master. Knowing the intricacies of the market can make a huge difference in turning a profit, no matter if you are someone who is new to the field or someone who is a seasoned veteran.

 

The market fluctuates and there is no surefire way to predict success. However, there are ways to ensure that you have a net to fall back on or ways to recover from any problems you run into. Networking is vital for creating not only your customer base but strong relationships with other people working in the field. Many people do not recognize the value and take for granted many of the connections that they make throughout their careers. However, nurturing these connections can create a safeguard against pitfalls that are common in the industry.

 

Many people in the industry find that without these safeguards, they fall into trouble. Luckily, it can be easy to acquire connections and make sure that they are there when you need them. Much like many other kinds of relationships, communication is key and it’s important to keep in mind that it is a two-way street. Much like many other types of social interaction, gravitating to places where lots of other like-minded people gather allows for networking to flourish. People can exchange information and call upon each other for favors or to work together to reach common goals.

 

It is important to maintain a professional relationship and make it clear that it is all about business. Having a number of these connections can be extremely helpful not only in growing your business, but helping others to grow theirs as well. A mutual relationship where everyone helps each other aids in market growth and can be a great way to foster even more potential for revenue and customer base building.

 

Getting ahead and being successful in the world of real estate can be very difficult. However, with the rising growth and popularity happening in the Canadian market, many people are seeing the potential to make a sizable profit and stake their claim. If you are someone who is interested in breaking into the real estate market or someone who is looking to sharpen their skills, now is a great time to take advantage. While the real estate market can fluctuate wildly, getting a foothold and making connections can be a surefire way to success.


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Foreign Investment and the Strength of Canadian Real Estate
Posted on Sun, 15 Oct 2017, 12:30:00 PM  in Home buying tips,  Home selling tips
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Foreign investment in Canadian Real Estate is important to the national economy because it potentially uncouples the domestic labour market from the domestic real estate market. This kind of disconnect, perhaps reminding one of London, UK suggests that citizens could be crowded out of the market and have to pay far more than they should for homeownership and rental services.

Foreign investment is a lively topic. Despite all the discussion, there has not been a lot of information, and some estimates suggest that foreign investment drives the phenomenal price and value history of Canadian Real Estate.

B.C. after the Foreign Investor TaxForeign Investment and the Strength of Canadian Real Estate

In response to the continuing rise in prices and high volumes of sales, the B.C. government imposed a foreign investment tax. The clear intention was to dampen the price and volume of home sales.

There was a backdrop of tremendous amounts of unused housing that belonged to nonresident owners. That high un-occupancy rate stood in the face of high local demand for housing and moderately priced housing.

Ontario after the Cool Down

On April 20, 2017, the Ontario Government imposes a levy on residential real estate transactions for buyers that were neither permanent residents nor citizens. The levy applied to a targeted zone- the Golden Horseshoe region. The levy had the desired effect; within sixty days, the sales volume and average price fell from the year to date comparables.

The government developed an estimate that approximately nine percent of residential transactions involved foreign buyers. Unlike B.C., many of those buyers were immigrants and intended to occupy the units. The GTA market has regained some of the lost action but has not resumed a steep upward climb, and the tax seems to have had the desired effect of slowing the market.

Is the Quebec Boom a Real Estate Novel?

In the movement of the market after Ontario and BC imposed foreign investor taxes, some news reports suggested that Quebec was a new focus for luxury purchases by foreign investors. In 2017, the rate of luxury purchases in Montreal was higher than the one-year comparable.

There is a question whether the numbers support the idea of a boom and particularly a boom fueled by foreign investment. Defining a luxury sale as $1 million or more, the Montreal comparable showed an increase but an overall level quite consistent with the rest of the nation outside of Ontario and B.C.

One commentator view seen in several publications suggest that real estate professionals perceive more than the facts support. They are driving an optimistic narrative and perhaps hoping that the market will follow.

The Underlying Strength

The strength of the Canadian economy is the key to understanding Canadian Real Estate. The contours of the luxury market have a steep foreign investment influence due to Ontario and British Columbia as magnets for foreign investors. The underlying value of Canadian real estate is in the robust and balanced economy.

Canada has managed to do something remarkable; the nation has driven market growth with low-interest mortgages and fully insured the riskier of them. The nation can withstand a complete meltdown of the real estate sector without an unusual level of national debt.

The Canadian government insures mortgages that have 20 percent or less in down payment or cash equity. They do this directly through the Canadian Mortgage and Housing Corporation, and indirectly through the guarantees, it provides to private insurance.

The total is about $500 billion, and if it all came due, Canada would stand tall in the aftermath with a debt to Gross Domestic Product ratio like advanced European nations. Estimates from Moody’s suggest it would rest at 1.05 slightly higher than the USA at .99.

Going Forward

Canadian Real Estate attracts foreign investment because of the strong fundamentals of the nation and its economy. While Canada has issues and social and economic challenges such as the First People’s calls for greater participation, it has a remarkable social and economic cohesion. Canadian Real Estate will likely continue as a bright star in the global market for a haven, investment, and immigration.


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Deciding if Home Refinancing is Right for You
Wednesday, 30 August 2017, 09:20:00 AM
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Buying a home in the first place is a major decision for any family. A given home can cost six-figures on average. Once the financing is in place, you're presumably happy with this payment for many years. However, changes in the marketplace make it tempting to refinance the loan after a decade or more. Refinancing isn't right for every property, but it's an option that should be explored before you make any permanent changes. Get to know the situations where refinancing is either good or bad so that you can make an educated decision.

 

Nearing the Mortgage's Final Payment Date

Your current mortgage is nearly paid off with only a few more months to go. In this situation, refinancing is the worst choice to make. You'll add extra costs to theright home for you loan while lengthening out its terms. The amortization process also starts the loan off again with paying mostly interest. Your ideal decision in this case is to finish paying off the original mortgage. Owning the property free and clear is an achievement that shouldn't be postponed. You can tap into the home's equity with a line of credit if extra funds are necessary now or later.

 

Exploring Lower Interest Rates

Homeowners with a fixed interest rate may have locked in their value at a higher point in the past. Current rates are now one or two points lower than your mortgage. Refinancing to drop the interest rate downward is a common reason to seek out this service. It's possible to change the monthly payment by several hundred dollars. For this reason alone, it's valuable to explore a refinance. Be honest about your credit so that you can receive the lowest rate possible.

 

Investing Back Into the Property

Refinancing is almost always a right choice when you're investing back into the home. You might pull several thousand dollars out of the home's equity in order to add an addition, remodel the kitchen or paint the exterior. Improvements to the property will only add value to it if you ever decide to sell. Your bank will often approve of certain withdrawals that might be declined otherwise. Investing in the home benefits you and the lender so make your intentions known during the application process.

 

Understanding Closing-Cost Calculations

Be aware that closing costs can negate the value of refinancing the home in the first place. These costs cover the paperwork fees and appraisal processes that must occur before loans can be transferred and repackaged. You might pay down the interest rate through points too, which can lead to thousands of dollars of extra costs. Carefully examine the costs associated with your home loan. If you have too many charges to make the refinance a bargain, you may want to keep your original loan.

 

Paying off Other Debt

You might have a lot of equity in your home, and credit-card bills are growing larger by the day. Consolidating debt is another way to approach home refinancing. Ideally, using your home to pay off unsecured debt isn't a financially sound idea. If you have a small balance, paying the card off may not be too detrimental to your financial livelihood. In most cases, you want to maintain as much equity in the home so that your loan amount isn't too inflated.

Refinancing any loan is serious business. Ask for several quotes from various lenders who have good reputations in the marketplace. Their quotes should be relatively similar as they offer their best plan. Select a lender that offers you a fair deal in the end. You'll be working with them for many years to come.


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5 Mistakes to Avoid When Shopping
Posted on Tue, 15 Aug 2017, 09:30:00 AM  in Home buying tips
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Purchasing a home is unlike any other experience you'll ever have. This is an investment that can provide considerable returns throughout the years. Whether you're buying a primary residence, a vacation home, or a rental property, however, there are five, critical mistakes that you should be sure to avoid.

 

1. Not Considering "Walkability"

"Walkability" is a relatively new term in the real estate industry that refers to the accessibility of essential businesses and community features. When looking for a5 mistakes to avoid primary home or a rental property, make sure that building residents will be able to access things like dog parks, hiking trails, a few good shops, and a decent restaurant or two by walking. A high score in this area means that buyers will have a higher likelihood of connecting with their neighbours, fully exploring their neighbourhoods, and remaining in their homes for a significant amount of time.

 

2. Failing to Account For Potential Changes in Household Dynamics

Be mindful of the fact that your household dynamics could change over time. This is an especially important consideration to make if buying a primary residence that you hope to retain throughout the remainder of your lifetime. Not only do you have to account for the possibility of kids, but you also have to consider the likelihood of having aging parents move in. There are a number of ways in which family dynamics can change and the best homes are sufficiently flexible for accommodating all of these changes. These houses might have attached, in-law units, extra bathrooms, guest bedrooms, or other large-sized spaces that are suitable for conversion. Some properties simply have enough unused space on the overall lot for expanding the primary building.

 

3. Making an Offer before Consulting With an Agent

With greatly increased access to timely and accurate market information, more consumers are using the web to sidestep the need for real estate agents altogether. Sadly, however, they often do this to their detriment. Not only can an agent guide you through this transaction from end to end, but this professionals is also capable of providing the most current market info and pricing data. As such, when you get ready to enter into negotiations, an agent can make sure that you're not offering too much for a property, or potentially offending a seller by offering far too little.

 

4. Meeting with Sellers before Lining up Your Funding

In tight markets or markets with fewer properties for sale and lots of qualified prospects who are eager to buy, you definitely want to have your funding lined up before actually pursuing homes. In fact, no matter what the local market conditions may be, consulting with lenders and getting loan approvals should always be among the very first steps that you take. After all, you won't really be able to submit a firm offer on any property until you actually have the funds to back it.

 

5. Buying before you’re Actually Ready

Another important step to take during the formative stages of the purchasing process is to consult with a financial adviser. You want to make sure that you're actually ready for this commitment, particularly if you've never purchased or owned a home before. An adviser can help you calculate the total costs of ownership. He or she may additionally be able to recommend the best loan types for meeting your long-term financial goals. If this is a decision that you're really ready to make, your financial adviser can even tell you how much you money you should spend, which may be far different from the amount that you're qualified to borrow.


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How to Set Your Cash Flow Goals
Saturday, 15 July 2017, 11:20:00 AM
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Cash flow is a common word mentioned in most real estate investing conversations, and it’s quite important to understand the term. 

If you are a landlord, if you charge a higher rent than your expense, the difference can accumulate some wealth and act as a potential cash cushion to prevent the punches that come with many vacancies or when something odd happens.cash flow

Eventually, something unexpected will occur, and it could just be anything from your property roof requiring repair and so forth. For some people, increasing cash flow is not a significant aspect compared to other investment goals. However, for someone with a passion for investing in real estate, it is important to set your cash flow targets. This guide will share some insights on how to do that.

Consider Your Investment Goals and Tax Implications

Investors who make a lot of money may be looking for losses and tax write-offs to offset earned income. From a taxation point of view, having more income may not help you in certain areas of your life: 

Before your next investment, it is important to seek local area information on aspects such as market trends and regulations. Also, you can ask your financial advisor how much money you can add without increasing your taxes. 

Some investors are focused on long-term capital appreciation and gains. However, the thing is, getting cash flow is not what every real estate investor wants.

 

Ways to Increase Cash Flow

i. Repairs and Improvements

One of the best ways to increase property rent is by making repairs and improvements on the property. If you want to invest in expensive properties with little improvement, it can be difficult. The more expensive the property, the more cash flow you require.

ii. Classic Arbitrage 

This is yet another classic approach: accessing your equity in your property and investing cash in other areas, getting higher returns than your interest rate.

iii. Design a Back-end Product or Service

If you know your original offer to potential customers won’t earn you any profit, look for ways to make higher price aspects on back-end products and services. For example, the first thirty minutes of catering is free, but later the price shoots up.

Or perhaps a lawyer may be inclined to adjust your will at a cheaper cost if she thinks you are a potential client for future consultation services.

iv. Know Your Expenses

Discounting through coupon websites or by yourself can attract new customers. On the other hand, selling your properties at a less than intended price won’t help you achieve a positive cash flow. You should never discount, but if you choose to do so, ensure you understand the costs and impact of your offers and get ready for the fallout. Also, you need to know the total cost basis—the amount you paid for something.

Also, you should be aware of the price you are willing to charge, the profit margin as well as the cost of your offer. Ensure that you are operating at a profit and not a loss.
The above tips are important and will come in handy if you want to improve your cash flow.

 


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