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Former Goldman Sachs investment banker appointed to head CMHC

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canada-cmhcCanada named Evan Siddall, a former official with Goldman Sachs Group Inc., as chief executive officer of the country’s government-owned housing agency.

Siddall, who has been a special adviser to the Bank of Canada Governor for the past two years, will serve a five-year term at Canada Mortgage & Housing Corp. starting Jan. 1, the government said today in a statement.

Toronto-native Siddall holds a law degree from that city’s York University. He worked as a partner for Lazard Freres & Co. LLC and was managing director at the firm’s Canadian operations for six years, according to a biography on the Bank of Canada’s website. He has also held positions with Fort Reliance Co. and Bank of Montreal.

“I look forward to working with its dedicated staff, clients and stakeholders to ensure that Canadians continue to benefit from CMHC’s key role in providing affordable and accessible housing, as well as in promoting a strong financial system,” Siddall said in the statement.

At the central bank’s Toronto office, Siddal led projects that aimed to promote stability of the Canadian financial system.

In a Dec. 10 report, the central bank said “there is a risk of a correction in prices and construction activity” if the supply of new condo units in major cities such as Toronto isn’t absorbed. The housing market is also more vulnerable if demand has been inflated by investors who are more likely to get out of the market if it weakens, the bank said in the report.

“Mr. Siddall brings to the position extensive leadership and senior management experience,” Employment Minister Jason Kenney said in the statement. “His proven financial and capital markets expertise will be of tremendous value to CMHC.”

Bloomberg.com

How Home Maintenance Can Help You Pass a Home Inspection – Consult with Bruce Coleman, Vancouver Mortgage Broker

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From ClosingCosts.ca

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Is your home in tip-top shape? At first glance, your home might seem like it’s in good condition, but when it comes time to sell your home, a home inspector could reveal a plethora of home maintenance issues – some of which could affect your ability to sell. Most problems start out small, but if left unaddressed could result in costly repairs down the road.

Fortunately, home maintenance doesn’t have to be a hassle – or expensive. In fact, it can be easy and fairly inexpensive, if done frequently and thoroughly. There are three basic areas of home maintenance to consider:

1. Check Your Home for Drafts or Leaks

Checking your home’s window and door seals for drafts or leaks is a great first step to ensuring your home is maintained and not headed for trouble. Cold air drafts can result in higher heating bills, and water leaks can lead to water damage and even mold. A small repair job, if caught early, can often be done quickly and cost-effectively. A larger problem that has been overlooked for a long period of time, however, could be expensive to repair.

Once you’ve checked for internal issues, step outside to check your roof, vents, skylights and screens for spots where cold air or water might penetrate. When you go back inside, you can also check your refrigerator and freezer doors for air leaks, as well as your faucets for drips. In the basement, check for dampness that could indicate moisture is penetrating your home’s envelope. All of these spot checks should be performed at least annually, if not seasonally.

2. Check Your Home for Expiry Dates

It’s important to make sure the safety mechanisms that are supposed to be protecting your home are in proper working order. For starters, check the expiry dates on fire extinguishers to ensure they’ll work if you need them to. Make sure the batteries in your smoke detectors and carbon monoxide detectors are fully charged, or replace their batteries twice a year to be sure.

There are other items in your home that expire, even if they don’t have a “best before” date on them. Air filters need to be changed regularly, including the filters in your heating, ventilation and air conditioning (HVAC) system, your range hood and your clothes dryer. Change these filters at regular intervals to avoid having a potential fire hazard, and to make sure they’re performing as efficiently as possible.

3. Clean Your Home

Cleaning is one of the least fun home maintenance tasks, however, a little elbow grease is proven to go a long way towards preventing damage to your home. For example, mopping and vacuuming may not seem like home maintenance, but keeping your flooring clean not only helps it last longer but removes some of the dust that’s in the air and in your HVAC system.

During your monthly cleans, consider adding a few unusual tasks to your checklist, such as cleaning the air coils on your refrigerator to improve its energy efficiency and cleaning your hot water heater to remove the sediment that would accumulate at the bottom of your tank. If you have a fireplace, have it professionally cleaned at least once each year. And never, ever forget to clean out your gutters and downspouts.

Home maintenance is an integral part of homeownership. And while your home may look like it’s in good shape, there could still be problems you don’t notice on a daily basis that need be taken care of. It’s important not to skip any of these home maintenance tasks, so when it comes time to sell, you pass your home inspection with flying colours.

How does your home maintenance schedule compare to this list? Are you a home maintenance guru or do you need to adjust your schedule to make sure your home is physically fit?

The top 10 mistakes new home buyers make – Ask Bruce Coleman, Vancouver Mortgage Broker

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The top 10 mistakes new home buyers make – from MoneySense Magazine

Vancouver Mortgage BrokerWhy you should be wary of show homes, what to do if your place isn’t ready on time and much more

When Karen Somerville and her husband Alan Greenberg showed up for the pre-delivery inspection of their brand new luxury home in Ottawa they were horrified. Electricians, drywallers, plumbers and a variety of other tradespeople were still busy constructing their home and, despite assurances from the builder, the couple seriously doubted their $443,000 new build would be ready for possession in 14 days. Electrical wires hung from ceilings and stuck out from unfinished walls, appliances and cabinets were stacked in the kitchen, and only a portion of the hardwood floors had been installed. They immediately hired an independent contractor to examine the home. The result was a deficiency report citing 130 problems, including an undersized furnace and ductwork, poor ventilation and improper roof installation.

At first, Karen, then a university professor, and her husband Alan, an account manager with Sun Microsystems, tried to negotiate with the builder to resolve the problems. When this proved futile, the couple turned to Tarion—the private corporation that regulates Ontario builders and provides warranties on new houses and condos. Tarion sent its own inspector who confirmed that there were 85 defects in the home—but only 39 were considered to be under warranty.

Karen and Alan would be on the hook to fix the other defects themselves, which would cost the 40-something couple $4,000 or more. “This is the largest purchase we, as consumers, make,” says Karen, “and Tarion is supposed to be there to help.” Instead, she found herself having to document and defend an appeal against the provincial warranty program’s decision—despite paying a $650 fee for her new home warranty.

Buying a new home directly from the builder, whether a condo, townhouse or detached, is a popular choice. Almost one third of all homes sold in Canada each year are brand new. In Ontario alone, more than 52,500 buyers opted for a new build last year, and a forecast by the Canada Mortgage and Housing Corporation (CMHC) predicts that number will only climb. Despite the problems Karen and Alan encountered, it’s easy to see the appeal: Buying direct from the builder means you can customize your dream home to your exact tastes. It means higher energy efficiency ratings than older homes, and often higher quality building materials. New homes also have lower maintenance costs and are less likely to surprise you with a serious issues such as a cracking or tilting foundation, severe plumbing problems, asbestos or knob-and-tube wiring that needs replacing.

But as Karen and Alan discovered, there are some pitfalls specific to a new home purchase too—pitfalls that we don’t want you to run into. To help out, we’ve compiled the top 10 mistakes that new home buyers make, so you can be sure to avoid them. Read on to find out why you should be wary of the show home, what to do if your new place isn’t ready on time, how to save big money on upgrades, and most importantly, how to make sure that the dream home you’re expecting is the one you actually end up getting.

Mistake #1: They fall in love with the show home

When Jason Saxon and his wife Emily set out to find a builder in the quaint Edmonton suburb of Spruce Grove, they were surprised to find only two builders operating in the area. “Only one of them offered the separate dining room that we wanted,” says Jason, which made their choice easy. The deal was clinched when they toured the builder’s magnificent show home. “It had everything we needed,” gushed the systems analyst. The couple (whose names have been changed to protect their privacy) was so impressed by the show home they booked an appointment with a salesperson on the spot. Within days they had a signed purchase agreement and were busily designing their dream home.

That, of course, is the result every builder is aiming for, explains Stan Garrison, an industry insider with more than 20 years experience (we’ve changed his name to protect his privacy). “Most people fall in love with the show home, but you have to realize that everything you see in that model home is an upgrade,” he says. “And upgrades are a major portion of a builder’s 10% to 20% profit margin.”

Upgrades are so profitable for the builder because the industry standard is to charge double the sub-trade’s fee—a cost that is passed directly to the buyer, Garrison says. “That means the $8,000 granite countertops you ordered really cost your builder $4,000. Now multiply that by 25 buyers and you can see how builders make a profit.”

That doesn’t mean you should never order an upgrade, but you do need to be clear on what is an upgrade and what isn’t—and do a little bargaining so you don’t get taken for a ride. “With new builds there is no room for negotiation on the base sale price,” explains Max Wynter, a realtor with Re/Max Realtron Brokerage in Markham, Ont. “But there is room to negotiate the price of your upgrades.”

The rule of thumb is the more upgrades you spring for, the bigger the discount you should angle for. “If you purchase $5,000 in upgrades the builder may only give you a 10% discount,” says Garrison. “But purchase $50,000 in upgrades and you can start asking for $10,000 to $15,000 off the final price.”

Mistake #2: They trust the floor plan

Ken Grunber, who works at a video production house in Toronto, found out too late that the new condo unit he bought in 2007 wasn’t nearly as large as advertised. When he and his partner moved in and measured the area, they discovered it wasn’t 700 square feet after all. The condo was actually 560 square feet—if you don’t count the balcony and bathroom.

“That’s not unusual,” says Martin Rumack, a real estate lawyer with over three decades experience in new build construction. “Condo sales staff will often include balcony or terrace measurements as part of the total square footage. New home sales staff will provide square footage based on measurements of external walls. You can’t rely on their verbal assurances, on the floor models, or on the sale pitch or brochure.”

Unfortunately, many new home decisions are based solely on brochures or artist renditions. For instance, a sales brochure sold the Saxons on upgrading to French doors for the entrance to their walkout patio. “We’d originally seen the sliding doors in the show home, but a brochure highlighted the double French doors and we loved the look,” says Jason. They quickly paid the upgrade fee, but when they moved in they were surprised to find the doors didn’t have the little window panes with wooden slats between them that they had seen in the photo. Instead there was just one huge pane of glass in each door. “The price quoted by the builder’s sales rep didn’t include window slats, just clear glass. It would cost us more to get slats,” Jason says. “Now I know: get every detail in writing.”

In fact, the builder has the discretion to change an image, or floor plan, or layout and “you have no say,” says Rumack. He suggests asking for a breakdown of room sizes and plan details, and to “get it in writing.” Then, if there’s a substantial difference between what you’re sold and what you get you can either negotiate a price reduction or try and get out of the deal.

Mistake #3: They don’t get their contract lawyered

Whether you’re buying a new detached home or a condo, the purchase agreement is the legally binding document that spells out what you’re getting and the conditions of the sale. It’s full of fine print and legal-speak, and if you sign without legal representation, you risk being bound to terms you don’t understand or don’t want. More importantly, says Rumack, it destroys any chance of re-negotiating the terms of the sale.

“Skip legal advice and you could end up with an electrical utility box on your front lawn that you can’t do anything about, or no side door on your garage, regardless of what the plans looked like,” he says. “You could find yourself stuck with any manner of substitutions, exclusions or inclusions that could detract from your home’s future value.”

When you’re buying a condo, depending on the province you live in, you may have a cooling off period of up to 10 days. This gives you a chance to pay $800 to $1,600 and hire a lawyer to go through your contract after it’s signed. If you don’t like what they find, you can back out of the deal.

Unfortunately, there’s no such period for freehold homes, and many home builders demand that you sign a contract on the spot to secure your sale price or lot selection. Try to avoid this situation if possible, but if you must, at the very least insist on adding a clause that makes the deal conditional upon approval by your solicitor. “These days more and more builders are offering buyers a two-day period where they can seek legal advice before the contract becomes binding,” explains real estate lawyer Sheldon Silverman.

Mistake #4: They don’t bother with an inspection

During the home buying process there are two specific times when it’s important to have your house inspected. The first is the pre-delivery inspection, a mandatory walk-through for all new homes under warranty. This inspection takes place with your builder shortly before you officially take possession of your home. The second inspection should be scheduled for about one month before your home warranty expires. In Ontario the first and broadest portion of your warranty expires 12 months after your possession date, in B.C. it’s 24 months after possession.

During the pre-delivery inspection, you probably don’t need to pay for a professional inspector, but you might want to “take along a friend who’s wise about construction,” says Silverman, “because if you don’t write down the deficiency then the builder isn’t obligated to fix the problem.”

However, hiring a professional home inspector to do a second walkthrough before your warranty expires is a must. This will allow your home to go through all four seasons, which is enough time for major defects to start showing up, and you’ll still be able to get them fixed under the first stage of the standard provincial warranty, which covers against material and labour defects.

Mistake #5: They accept delays without a fight

Believe it or not, until quite recently, if your new house wasn’t ready on time, it was your problem. “Builders were not required to provide reasons or to limit their delays,” says Rumack. But that all changed when Toronto condo buyer Keith Markey challenged a Tarion decision five years ago.

In 2001, Markey bought a unit in a soon-to-be constructed condominium tower in downtown Toronto. His initial possession date was Nov. 30, 2002. But as the date approached, the builders kept sending letters announcing delays. Markey’s possession date was moved back six different times—he wasn’t able to move in until eight full months after the initial possession date.

He requested $5,000 from the builder to compensate him for the delays. The builder refused, the case went before a tribunal, and Markey won. Tarion appealed the case, but in 2006, Markey was vindicated: Not only did he receive almost $5,000 in compensation but close to $9,000 in damages. The case changed how Tarion and other provincial warranty programs handle builder delays.

“The law is now clear and critical dates are now included as part of the purchase agreement and contract,” says Silverman. “If a builder misses these critical dates and requires an extension, a buyer can either agree, and seek compensation, or simply get out of the deal.” Either way, Silverman suggests seeking legal advice whenever you’re presented with a request to delay a critical date.

Mistake #6: They forget they are moving into a construction zone

Anyone considering a new condo or home purchase should take into consideration the impact of ongoing developments. As one reader, who bought into the first phase of a three-phase condo development, recalls: “It’s noisy, everything is dusty and the air quality is just plain horrible—not even the best furnace filter could catch this dust. Combine that with the fact that the whole area is ugly for quite a long time and that access points can open and close, depending on the phase, and you have a recipe for long-term aggravation.”

Still, others, such as Jason Saxon, were mentally prepared for living in a construction site, and actually found it kind of fun—at times anyway. “You take the dust and dirt and noise with a grain of salt,” he says. “And it’s actually nice watching the homes go up.” In fact, there were only two days out of that first construction year when the Saxons and their neighbours felt truly inconvenienced. “When the builders put the final grading on our road no one could drive or park on our street,” Jason recalls. “For many of our neighbours that meant a hike through muddy and overgrown fields just to get home.”

Mistake #7: They think they have a warranty—but they don’t

Most buyers assume that all new-build lofts, condos and homes are covered by a provincial warranty, but this isn’t the case. Only three provinces—B.C., Quebec and Ontario—make warranty coverage mandatory. In fact, those are the only provinces that require new home builders to register with their respective provincial regulator at all.

“In Ontario, it’s illegal to build without being registered,” says Janice Mandel, vice president of corporate affairs at Tarion. But in other provinces, where the warranty program isn’t mandatory, builders can simply opt-out of coverage. Often they’ll try to convince home owners that they’re saving them the registration costs.

Buyers should be proactive and get their new home warranty in writing, says Mandel. They should also go online to determine if their builder is registered with a provincial regulator as a new home builder. This is particularly important for loft or condo conversions—residential units constructed inside an existing building shell. In such situations, new-build warranties often don’t apply.

Mistake #8: They’re not speedy with their warranty claims

When the Saxons first moved into their dream home near Edmonton, they were delighted. But they soon found themselves caught in a bureaucratic nightmare. During that first winter in their new home, they noticed a large crack in the cement-block floor of their garage. So they called the builder, who told them that when the ground thawed in the spring the problem would be fixed. A few months later, when the ground started to thaw, they noticed even more cracks stretching from their garage down their driveway. “We phoned, spoke to the site super, and even flagged down a builder’s representative, who promised us a new driveway.”

But weeks went by and nothing happened. “What was frustrating was coming home to see that our neighbour had a newly poured driveway and ours was still pock-marked and cracked.” That’s when Jason started sending emails. “You have to hound the builder, who seems willing to fix anything, but just needs a lot of motivation.” After weeks of sending emails and making calls the Saxons finally got a new driveway and garage floor.

The Saxons were able to get the problem fixed because they were proactive and understood that there are strict time limits on making claims. To ensure you understand how long you have, carefully read the package you get during the pre-inspection, as there are different deadlines for different types of warranty claims. “My advice: get a calendar and mark down those deadlines, and then make sure you get the claim in at least five days before the deadline,” says Peter Balasubramanian, vice president of claims for Tarion.

While you’re reading your new home package, you should also familiarize yourself with the maintenance you have to do to ensure your warranty remains valid. For instance, if you forget to change your furnace filters or fail to clean out your gutters you could find a claim regarding deficient heating or water penetration into your basement is deemed to be invalid.

Mistake #9: They’re ambushed by hidden closing costs

When you sign the purchase agreement for your new place, many of the closing costs are estimates. These costs often escalate as you approach your possession date, and both Rumack and Silverman have seen their fair share of “absurd” adjustments tacked on to a buyer’s purchase contract. For instance, you may find large charges that suddenly materialize for hooking up gas and electricity meters, plus mortgage discharge fees, development fees, deposit verification fees—Rumack has even seen a fee for “public art contributions” to cover the cost of a sculpture by a building’s entrance. “That’s why I pay close attention to the adjustments and try and get a cap on certain items and remove others,” Silverman says.

Mistake #10: They buy at the wrong time

If you’re buying a new condo or townhouse as an investment, the key is to get in as early as possible. In order to get the financing to start a new project, builders will often raise initial funding through pre-sales. These pre-sales often kick off with invitation-only VIP events, says Wynter. Usually, only high-volume realtors who specialize in the type of building on offer are invited. “If you see a line-up at a sales office, it’s often because a VIP event has been scheduled.” Once the VIP event is over, the builder will open sales up to all interested realtors, then finally they’ll open the project up to the public. “By the time a builder throws a grand opening for the general public, often 50% of the units have already been sold and the price has gone up three or four times,” explains Wynter.

It’s easy to get in on these VIP pre-sales, but you’ll need to work with a realtor who specializes in new developments and be ready to move quickly. For instance, the Paintbox development—the second phase of condos in the newly revitalized Regent Park area of Toronto—gave VIP realtors a week to register their clients for the pre-sale. Four days after registration closed clients were required to sign the paperwork.

Despite the potential savings on purchase price, this can be a risky way of buying real estate. When the Vancouver condo market turned in 2008 many pre-sale buyers found themselves with a contract price that was much higher than the current value of the unit. The builders refused to renegotiate the purchase contracts, and their banks refused to grant pre-arranged mortgages for the original purchase price. Many buyers were forced to either default—and lose their money—or find additional funding elsewhere, at significantly higher interest rates.

If you’re purchasing a freehold home, keep in mind that purchasing at the right time of year can also save you tens of thousands. For instance, in the Greater Toronto Area, the summer is the best time to shop for a new development, says Garrison. “People are on vacation in July and August and don’t have time to look for houses. When things slow down for a builder you have more bargaining power as a buyer.” Another good time to look is in December and January, but by mid-February activity starts to pick-up, says Garrison, and deals are taken off the table.

In Vancouver’s Lower Mainland the opposite is true: real estate and new home purchases are typically hot in the summer and slow down significantly over the rainy months of November and December. Each local market has its own cycle, so it’s best to talk to an experienced realtor.

Consumer Protection for New Vancouver Home Buyers – Consult with Bruce Coleman, Vancouver Mortgage Broker

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Consumer Protection for New Vancouver Home Buyers

Vancouver Mortgage BrokerWhether you are buying a re-sale home, new home or a strata property such as a condominium or a co-operative in the Vancouver area, you might be wondering what kind of protection exists for the consumer.

For example, what do you do when you buy a new home and encounter a structural defect because of a design flaw or shoddy materials or workmanship? And, what about older homes – what kinds of protection can you expect there if you encounter a similar problem?

The B.C. Home Protection Office

Also known as the HPO, the Home Protection Office is a branch of B.C. Housing. The legislative regulations are covered under the Homeowner Protection Act. Some of their primary duties of the HPO include the following:

  • Issuing licenses to residential builders and building envelope renovators throughout the province
  • Owner-builder authorization administration
  • Mandatory mediation of warranty insurance disputes between homeowners and warranty insurance providers

The province of B.C. has the strongest construction defect protection system for buyers of new homes in Canada. Legislation came into effect on July 1, 1999. It covers any new homes which were being sold, built and states that any new homes after this date must adhere to the following:

  • The home must be constructed by a builder who was licensed by the HPO
  • Any new home built after this date must have warranty insurance provided by a third party

What Does Warranty Insurance Cover?

Warranty insurance follows the 2-5-10 concept in that it must cover the following:

  • 2 years protection for any defects in design , labour or materials used
  • 5 years protection for any defects in the envelope of the building
  • 10 years protection which means that if a home covered under the legislation is sold within 10 years, the remaining home warranty insurance is passed on to the new owners

However, you should be aware that this may not completely apply to an owner-builder.

Older homes which were built before this July 1, 1999 will not have warranty insurance, so the consumer must be very proactive in having the home thoroughly inspected before they invest in older homes. You should always ask your realtor about warranty insurance and whether it applies to the home or condo you are buying.

If you are buying a condo or a coop, then you should also know that there are specific regulations which cover you as well. You are best advised to visit the website to obtain more information so that you understand your rights and to know what is covered and what is not covered.

You can also find valuable information when you’re buying a custom built home versus a home spec and what you should know about the contracts involved so you are properly protected. These types of contracts should be reviewed by an experience real estate lawyer before you sign on the dotted line.

You should also be aware that City of Vancouver has its own Building Code requirements and you should ask if the home requires inspection by city inspectors especially if you are thinking of buying a home built before July 1, 1999.

If you do uncover a problem then you should also visit the HPO website which will explain the dispute resolution process which may be resolved through either mediation, arbitration or whether litigation will have to be considered.

New Homes Registry

For those buying a new home you can also check out the New Homes Registry which can be found at the HPO website. This registry allows you to check out both the licensing of the builder and the status on warranty insurance. You can also obtain information of the warranty insurance claims history from the current home owner of the house you are thinking of buying

 

Home Series: Using Solar Power For Your Vancouver Home- Consult with Bruce Coleman, Vancouver Mortgage Broker

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Using Solar Power For Your Vancouver Home

Vancouver Mortgage BrokerGoing green and doing everything you can to help save energy and preserve the environment is a hot topic issues these days. The cost of heating a home in the winter months is enough to make any every Canadian grimace.

The good news is that there are alternatives and one popular approach is to go solar. More and more you are seeing solar panels being installed on the roofs of homes, apartments and businesses throughout the City of Vancouver.

But, is solar power the right investment for you? The answer to this question depends on a number of variables because using solar power may not be suitable for everyone.

How Do Solar Power Systems Operate?

Systems are either stand alone systems which separate you from the power grid or are grid connected. The proper name for solar heating is called Solar Photovoltaic’s of PV for short. Solar panels are either a series or parallel connected modules and the number depends on the power requirements.

The size of the system, the battery bank and the AC inverter depends on how much power you require and how you intend to use the solar system, the amount of sunlight available and the number of days you require without back up.

The panels are generally oriented to face in a southerly direction. You might be interested to know that solar systems actually work more efficiently in colder weather and are very suitable for northern climates. Systems can provide anything for smaller needs such as watts (W), kilowatts (KW) per or larger power needs such as megawatts (MW).

The Canadian Electrical Code has made it very convenient for you to provide power to yourself or to feed any excess power back to the utility company.

Solar System Uses

A solar system can be used with two approaches in mind including:

  • Solar Water Heating
  • Solar Air Heating

Solar Water Heating

Heating your water with solar power can be used in several different ways such as for all your drinking and washing needs, radiant floor heating or simply to heat your swimming pool.

Solar Air Heating

The purpose of solar panels used in this application is to simply heat the air that is coming into your home.

For most people, solar water heating may be a more economic and practical approach because these systems are fairly expensive and can take up to seven or more years before you can recover your investment.

Buying A Solar Power System

If you’re thinking of going this route then you need to really do some research first. You might want to first start with the Canadian Solar Industries Association. They also have a convenient to use checklist to help you get started. A good installer will research your household energy consumption in detail.

Just remember that not every house is going to be a good candidate for solar power. You also want to look for any available government rebates and to find out how you might be able to offset the costs as most provincial hydro companies will buy excess power your system generates from you.

In B.C. this operates on a net metering system where you can be reimbursed by B.C. hydro which will credit your account once per year. You will have to check with B.C. hydro to apply and to ensure that your system qualifies. Currently, B.C. hydro is paying $9.99 per kWh.

 

3 Reasons to Refinance Your Mortgage – Consult with Bruce Coleman, Vancouver Mortgage Broker

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Refinancing your mortgage – it sounds scary at first! But having the option to refinance can actually be a good thing. In fact, refinancing your mortgage can be a great financial tool – one that helps you accomplish financial goals at a low interest rate – but be careful! A refinance leaves you on the hook to pay an expensive prepayment penalty, meaning that it might cost you more money than you’d save.

three-reasons-refinance-mortgage

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Let’s take a look at three examples where refinancing is the right option, with our test subject Molly and her $350,000 home.

1. Taking Advantage of Low Interest Rates

Refinancing to take advantage of low interest rates might be a great way to save money, but it’s extremely important to be aware of the prepayment penalty you’ll have to pay upfront to get that rate. For example, Molly has a $225,000 mortgage on a home that is valued at $350,000. She’s 3 years into a 5-year fixed rate term at 5.00%. Molly is considering refinancing another 5-year term at a lower interest rate of 3.50%.

At first glance, this seems like a great idea! Saving 1.50% on a $225,000 mortgage means Molly would save $6,750 in interest (1.50% x $225,000 x 2 years). However, by using thismortgage refinance calculator and factoring in her prepayment penalty of $2,813, we can see that Molly would only save $3,937 after she pays the penalty to break her mortgage term early. Refinancing will still save Molly money, but the savings aren’t nearly as good as she first anticipated.

2. Accessing Equity in Your Home

Refinancing your mortgage can allow you to access up to 80% of your home’s value. By refinancing, you can access your equity and use those funds to renovate your home, send a child to post-secondary or buy a second property, without having to sell your home or take on a second loan at a higher interest rate.

For example, if Molly wanted to access the equity in her home to renovate her kitchen, she could access 80% of the value of her home, minus the value of her outstanding mortgage, for a total of $55,000 ($350,000 x 80% – $225,000). Her new mortgage would be $280,000 ($225,000 + $55,000), and her payments would decrease from $1,745 to $1,398 due to the new term and lower interest rate. She’d still have to pay a refinancing penalty fee of $2,813, which would cut into that $55,000, but she’d have access to that equity at a much lower interest rate than if she’d taken out a traditional loan.

3. Consolidating Debt

Finally, one of the most popular reasons to refinance a mortgage is to consolidate debt. Mortgages are one of the least costly forms of debt available, with lower interest rates than a credit card or even a personal line of credit.

For example, if Molly wanted to pay off $20,000 of credit card debt that had an interest rate of 19.00%, she could refinance and use the equity in her home to do so, shifting her high interest consumer debt over to her much lower interest mortgage debt. Don’t forget that Molly would still have to pay a prepayment penalty of $2,813. Her total mortgage amount would also increase to $245,000 ($225,000 + $20,000), but she would save thousands in credit card interest charges.

Costs of Refinancing Your Mortgage

Before you refinance your mortgage, it’s important to calculate the closing costs involved to see if it’s the right choice for you. For starters, you’ll have to pay a prepayment penalty. If you have a fixed rate mortgage, it’s the greater of three months’ interest or the interest rate differential (IRD). If you have a variable rate mortgage, the penalty is just three months’ interest. Either fee could outweigh the savings you would get through a refinance, so it’s important to calculate the penalty before you go through with the refinance.

You may also have to pay a real estate lawyer to conduct another title search, as well as review all documents, register the new mortgage and facilitate the financial transaction. If you have more than $200,000 left on your mortgage, many lenders and brokers will cover this legal expense for you.

From ClosingCosts.ca

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Design Tips For Your Kitchen

Vancouver Mortgage BrokerYour home’s kitchen is in many ways an important focal point. Great meals and good times evoke lots of fond memories about kitchens for many people. And, if you plan to sell your home sometime in the near, keep in mind that the kitchen is often one of the most scrutinized areas and can affect whether a potential buyer will make an offer or move on.

However, if you’ve lived in your home for awhile or just bought an older home, then now might be the perfect time to consider upgrading your kitchen. It’s an expensive project which means you have to take the time to plan carefully.

If you have sufficient equity then you might want to consider using a HELOC (Home Equity Line of Credit) to pay for the renovations. Kitchen renovations have a great ROI, especially if you’re preparing to sell so it’s very possible you will add more value to the home and recuperate a big chuck of this expense.

First Steps of Kitchen Re-Design

First, step back and look at your kitchen and ask yourself how you might want the kitchen to look like if you were a prospective buyer. Ask yourself what the kitchen lacks and look at it from the ceiling down to and including the floor itself.

Of course, it all depends on the amount of space that you have to work with and how much you are prepared to spend because there are a broad range of materials to consider. You also have to consider the age and style of your home. You can do anything from a rustic approach to ultra modern, but consider that the style of the kitchen should mesh with the style of your home.

Should you go too far in upgrading the kitchen and the rest of the house looks a bit “tired” it could dissuade a buyer because they might think they will have to upgrade the rest of the home.

Consider such ideas for lighting, the availability of wall sockets, the type of floor and how the kitchen might be re-designed to be more functional and take better advantage of the available space.

There are many design ideas out there to consider, but start with the basic precept used by most kitchen designers which use a triangle concept which takes into account the accessibility between the two main appliances being the fridge and the stove and your food preparation space which are your counters.

You also have to consider how much counter space might be taken up by other appliances such as the coffee maker, toaster, microwave and other kitchen gadgets. This is one of the reasons why you also have to consider the electrical needs of the kitchen before you start filling in space with new cabinets and counters.

The Basic Kitchen Floor Plan Concepts

Getting the floor plan just right is vital for an efficient kitchen design because there is a natural pathway between the two main appliances in relation to the sink. The shape of and size of your kitchen doesn’t really affect the floor plan because designers have pretty much seen it all.

Here are some of the basic floor plans to consider.

U-Shape Design

A design such as this is comprised of 2 legs of equal length which has the fridge and stove opposite to each other. Often, there is also a third appliance such as a dishwasher which is situated to be equidistant from the other two appliances.

L-Shape Design

In this design scenario, which usually applies to rectangular sized kitchen, the two main appliances or two of the three appliances are situated along the longer leg of a the rectangular kitchen and the third appliance is situated at the shorter end.

G-Shape Design

Here you have a bit more flexibility because you either of the plans described above. This type of space usually has a peninsula which separates your kitchen work space from either the formal dining room or your living area. It is something like an area which is used as a breakfast nook for example.

Galley Style Design

Some kitchens are especially small and generally use this design where the stove and sink are situated directly opposite from each other and can often be found in a condominium or rental apartment.

Final Steps

You will want someone who specializes in kitchen design and remodelling to help guide through the process and in selecting materials. This is not a typical DIY project nor should it be contracted out to general contractor who has limited experience in this area.

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Vancouver Mortgage BrokerTORONTO — New homebuilding in Canada slowed slightly in November, coming in below economists’ expectations and suggesting some stabilization for the country’s robust housing market, data released on Monday showed.

The seasonally adjusted annualized rate of housing starts was 192,235 units last month from a downwardly revised 198,161 in October, the Canada Mortgage and Housing Corp said.

That was short of analysts’ expectations for 195,000. Housing starts in October were initially reported as 198,282.

fp1210_housingstarts_c_jr

Still, the longer-term trend fared better, with the six-month moving average of seasonally adjusted starts dipping only slightly to 194,014 units from 195,274.

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Canada’s housing market has shown resilience this year after a slowdown in the second half of 2012 when the federal government tightened mortgage rules due to concern consumers are taking on too much debt.

Policymakers have kept a close eye on the housing market, which boomed following the financial crisis due to record low borrowing costs. Some fear this could lead to a U.S.-style crash, though the Bank of Canada said last week it still expects a soft landing.

“Canadian homebuilding activity might be a touch on the warm side, but builders still look pretty well behaved overall,” Robert Kavcic, senior economist at BMO Capital Markets, wrote.

While starts are somewhat ahead of the amount needed to account for household formation at about 180,000, they are comfortably below levels seen during the pre-recession period, Kavcic said.

Many analysts expect mortgage rates, largely set off of bond yields, to push higher next year, which should also prevent the sector from becoming overheated.

“The momentum in the market does lay to rest any fears of a sharper retrenchment, but we expect that the gradual grind higher in yields in 2014 and beyond will drive a more sustained pullback in construction,” David Tulk, chief Canada macro strategist at TD Securities wrote in a note.

Multiple housing unit starts in urban areas decreased by 3.5% to 111,036 units last month, while single-detached urban starts also fell by 3.1% to 60,311.

“Overall, housing starts have been following a trend similar to sales on the existing home market. As sales rise relative to listings of existing homes, buyers are increasingly meeting their needs in the new home market,” Mathieu Laberge, deputy chief economist at CMHC, said in a statement.

The seasonally adjusted annual rate of urban starts slowed in Ontario and the Atlantic provinces, while picking up in Quebec, the Prairies and British Columbia.

© Thomson Reuters 2013

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Abnormally low inflation is keeping Stephen Poloz awake at night. The Bank of Canada (BoC) admitted as muchon Wednesday.

6a00d8341c74cb53ef019b023c93e5970dAnalysts took the BoC’s headline comment (“downside risks to inflation appear to be greater”) as a sign that rate hikes will be a 2015 story.

But, for now, there is one key indicator that trumps Canadian CPI inflation, and this is it:

What you’re looking at is a chart of the U.S. benchmark bond yield. In early 2014 it will likely influence Canadian fixed mortgage rates more than any other factor (as it often does).

Economically speaking, we’re in bed with our neighbours below. Their recovery is our recovery. Despite temporary divergences, U.S. and Canadian bond yields should remain tightly correlated. (This is relevant because bond yields lead fixed mortgage rates.)

For that reason, we must keep at least one eyeball on U.S. rates, despite the fact that Canadian inflation is below target.

If U.S. yields continue uptrending, so should Canadian fixed mortgage rates. That could hold true even if the Bank of Canada kept short-term Canadian rates as-is for the time being.

Speaking of short-term rates, financial markets have been pricing in greater odds of a rate cut than a rate hike through mid-2014. While no one truly expects a cut, this probability is nonetheless positive for existing variable-rate mortgagors.

6a00d8341c74cb53ef019b023c17f6970bAnd new variable-borrowers could be happier yet. That’s because lower short-term funding costs may very well improve variable-rate discounts. The improvement would be slight, but noticeable. Just this week we saw the first prime – 0.70% rate since 2011. (It was from an online mortgage broker in B.C. and is not market-representative…yet).

So how do new borrowers plan around all of this? One sensible option for many is the 50/50 hybrid mortgage. Some call it the mortgage for people who can’t make up their mind. But it’s actually a mortgage for people wise enough not to pretend they’re smarter than the market.

A 50/50 hybrid (half-variable/half fixed) can now be found for 2.95% or less. For that price, you’ll enjoy:

  1. 50% less rate hike exposure (versus a variable rate)
  2. A chance to benefit if deflation threats or unemployment keeps the BoC sidelined past 2014 (Bay Street consensus is for the first hike in mid-2015).

The next BoC rate meeting is slated for January 22. That day will be must-watch TV because, by then, we will have:

  • Two more inflation reports under our belt
  • Two more employment reports
  • Knowledge of whether national housing prices make another record high (housing imbalance is the second thing keeping BoC chief Poloz up at night)
  • Clarity on the risk of another U.S. government shutdown (current U.S. government funding expires January 15)
  • More hints on whether incoming Fed chairYellen will trim rate-friendly quantitative easing.

That last point could chart the course of bond yields more than anything else.

By Robert McLister, Editor, CanadianMortgageTrends.com

Consumer confidence nears year high as Canadians put faith in rising house prices- Ask Bruce Coleman, Vancouver Mortgage Broker

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Vancouver Mortgage BrokerThe share of respondents who think real-estate prices will increase over the next six months rose to 40.3 from 40.0 the previous week, reaching the highest level since March 2012

Canada’s economic mood rebounded last week as consumers head into the holiday season buoyed by rising house prices, according to the Bloomberg Nanos Canadian Confidence Index.

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The weekly sentiment measure increased to 59.3 in the period ended Dec. 6, up from 58.9 the week before. The index has climbed from 54.8 at the end of May and is approaching a one-year high of 59.8. The share of respondents who think real-estate prices will increase over the next six months rose to 40.3 from 40.0 the previous week, reaching the highest level since March 2012.

“Canadians are poised to finish 2013 with more buoyant consumer confidence which is more likely to be fuelled by increasingly positive views on the value of real estate,” said Nik Nanos, head of Ottawa-based Nanos Research Group.

Canada’s housing market remains strong even as policy makers take steps to cool growth. Canada Mortgage & Housing Corporation, a government-owned agency, said Nov. 29 the government will charge it a “risk fee” of 3.25% starting Jan. 1 on the mortgage insurance it writes.

Housing starts slipped 3% in November to a seasonally adjusted annual rate of 192,235, CMHC reported Monday. Building permits rose a second month in October as residential projects approached the highest ever, Statistics Canada said Dec. 5. Residential permits increased 6.4% to $4.41 billion, close to the $4.55 billion record posted in May.

Pocketbook, Expectations

The average sales price of a Canadian home rose 12.3% in November from a year earlier to $551,820, according to data compiled by Bloomberg from regional real estate boards.

Bloomberg Nanos’s confidence index has two sub-indexes: the Pocketbook Index, based on survey responses to questions about personal finances and job security, and the Expectations Index, based on surveys about the outlook for the economy and real- estate prices.

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The Pocketbook Index rose to 60.8 from 60.3, while the Expectations Index increased to 57.8 from 57.5, according to the Nanos report.

Confidence in the first week of December increased across all age groups, according to the Nanos survey data, except for respondents between 40 and 49 years old. Sentiment improved in the Atlantic provinces, Quebec and British Columbia while declining in Ontario and the prairie provinces.

The Bank of Canada is weighing evidence of a sluggish economic recovery against concerns low interest rates may overheat the nation’s housing market.

Stronger Housing

Housing has been stronger than expected, central bank policy makers said Dec. 4 as they kept the benchmark lending rate at 1%, where it’s been for more than three years.

Governor Stephen Poloz said the risks of inflation staying below the central bank’s target “appear to be greater” in an economy that’s two years away from reaching full output.

The Teranet-National Bank Composite House Price Index will be published Dec. 12. Statistics Canada will report household debt levels for the three months ended Sept. 30 on Dec. 13.

“Gains in hourly wages and a modest acceleration in hiring likely bolstered Canadian consumer sentiment,” said Joseph Brusuelas, senior economist at Bloomberg LP in New York. “While the tone to Canadian macroeconomic data has turned somewhat positive, household imbalances and mild disinflation will continue to weigh heavily on policy makers at the Bank of Canada and consumers alike.”

Part-Time Work

Canada’s jobless rate held at 6.9% in November, the lowest since 2008, as employers added part-time workers, Statistics Canada reported Dec. 6. Average hourly wages of permanent employees rose 2.3% last month from a year earlier.

The Nanos data are based on phone interviews with 1,000 people, using a four-week rolling average of 250 respondents. The results are accurate within 3.1 percentage points.

The share of Canadians who say they’re better off financially over the last year fell to 21.2 from 21.5% the previous week, while those who say the Canadian economy will improve in the next six months rose to 24.4% from 23.5%.

Canadian household credit grew at the slowest pace in 30 years in October as consumers seek to pare record debt levels. Total household credit expanded by 3.7% from the same month in 2012, according to the Bank of Canada’s household and business credit indicators report.

The proportion of respondents who say they feel their jobs are secure rose to 67.2 from 66.6 from the previous week, according to the Nanos report.

Bloomberg.com


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