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How Brokers Operate – some stats -ask a Vancouver mortgage broker

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How Brokers Operate: Some Stats

POSTED IN: MORTGAGE INDUSTRY REPORTS SEPTEMBER 13, 2014 ROBERT MCLISTER 3 COMMENTS The vast majority of mortgage brokers recommend suitable mortgages, according to a new report from the Mortgage Broker Regulators’ Council of Canada (MBRCC). That’s vital because, as MBRCC Chair Kirk Bacon states, “Unsuitable mortgages can have a devastating financial impact on borrowers and their families.” To find out how brokers operate, regulators surveyed 1,113 of them in Ontario, Alberta and Newfoundland. They discovered practices that were mostly reassuring, with a few stats you may find surprising.

These were some key findings:

55% of Ontario brokers said brokering wasn’t their primary source of income Note: The number was only 11% in Alberta and 25% in Newfoundland It would be interesting to know how many consumers are willing to entrust their biggest debt to a part-timer 53% of brokers maintain records of why they make the recommendations they do That’s a problem, regulators say. “…There should be written records” of how the broker’s recommendation corresponds to his/her needs assessment of the borrower, notes the MBRCC 34% of brokers have been licensed for at least five years In other words, only about 1 in 3 brokers have had clients renew a 5-year mortgage This stat primarily includes Ontario brokers (Alberta was excluded from this question) Out of active Ontario brokers, only 1 in 3 do more than 25 mortgages per year 81% of brokers say they “always” search for suitable mortgages from the lenders available to them 69% of Ontario brokers use more than three lenders “on a regular basis” (76% in Alberta) 7% of Ontario brokers use only one lender on a regular basis (and they call themselves brokers?) 40% of brokers do independent research on mortgage products “daily” 2 in 3 Ontario brokers say they represent “both” the lender and borrower 30% say they represent only the borrower 4% say they represent only the lender (if only these brokers admitted that to clients) The MBRCC outlines three factors in recommending a suitable mortgage:

Appropriateness of the mortgage, given the borrower’s needs/circumstances Affordability of the mortgage, given the person’s ability to repay it Alternatives available to the broker Some consumers are under the misconception that brokers recommend mortgages from all lenders. Very few do. In fact, the majority (53%) of brokers say their role is only to educate clients on the mortgages they, the broker, can directly sell While regulators don’t expect brokers to know all products, they do, however, expect brokers to recommend the most appropriate mortgage that they have access to One other key takeaway from the report involves setting expectations. The MBRCC says it’s vital for brokers and customers to have “a common understanding” about the type of product(s) or advice being provided by the broker. You don’t want a situation where clients think they’re getting objective advice but the broker does 80% of his/her business with one lender. Disclosure is everything.

So, what can consumers draw from all this? Well, there are always exceptions and other criteria apply, but if you’re looking for the best possible service and advice, odds are you’ll get it from a broker who:

Makes brokering their full-time income source Has been in the business for at least five years (or is under the direction of a broker who has) Compares all of their lenders to see which offers the most suitable mortgage (or knows which do, without needing to compare) Documents why they make the recommendations they do Regularly uses more than 3 lenders Follows the rate and mortgage market daily Does a comprehensive assessment of the borrower’s needs and mortgage affordability Believes they represent the borrower, but recognizes their obligation for full disclosure to the lender

Sidebar: Here’s more on the report if you’re interested: Link

The MBRCC says it is also “currently working together to develop national licensing education standards and a harmonized course accreditation process.” That’s a sensible move that should eliminate untold overlap in the licensing process, as well as inefficiencies that prevent brokers from operating across the country.

Canada housing market shows no sign of slowing as prices rise for 9th month: Teranet

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TORONTO — Canadian home prices rose in August and the pace of 12-month home price appreciation accelerated, a report showed on Friday, suggesting robust demand for housing is carrying through to the second half of the year.

Foreign buyers are fuelling a seismic spike in Vancouver’s luxury housing market

The downside of this latest wave of Chinese cash is it’s also driving up costs elsewhere in a city which already ranks as North America’s least affordable markets. Read on The Teranet-National Bank Composite House Price Index, which measures price changes for repeat sales of single-family homes, showed national home prices rose 0.8% last month, exceeding the historical average for August.

Prices were up 5.0% from a year earlier, a pickup from July’s 4.9% price gain.

August was the ninth month in a row in which the composite index did not fall. The price increases, on top of robust housing starts data in the spring and summer, have surprised economists who have been calling for a slowdown in Canada’s long housing boom.

Related Bank of Montreal lowers five-year fixed mortgage to 2.99% Canada building permits soar to record on Toronto, Vancouver condos Thinking about a move-up buy? Forget it, new study says you can’t afford it David Tulk, chief Canada macro strategist at TD Securities, said the report suggests the momentum in the housing market has continued into the second half of the year.

“While a gradual drift higher in interest rates should limit the degree to which housing can continue to increase, a persistent low rate environment will prevent a more pronounced correction,” Tulk said in a research note.

“The housing market will also remain on the Bank of Canada’s radar and the strength we have seen buttresses the case to resume the withdrawal of stimulus once the improved international backdrop has provided a sufficient lift to net exports,” he added.

Canada’s central bank is not expected to raise rates until the second half of 2015.

Canada escaped the U.S. housing crash that accompanied the 2008-09 financial crisis, and home prices have risen sharply, if not steadily, over the past five years despite moves by the federal government to tighten mortgage lending rules.

The Teranet data showed prices rose in August from the month before in 10 out of 11 cities, led by a 1.8% gain in Winnipeg, a 1.5% gain in Ottawa and a 1.2% rise in Toronto.

Prices were down 0.7% in Montreal.

Year-over-year price gains were also seen in 10 of the 11 cities surveyed.

Compared with a year earlier, prices were up 7.9% in Calgary, 4.5% in Edmonton, 0.9% in Halifax, 6.7% in Hamilton, 1.1% in Montreal, 1.2% in Ottawa, 6.7% in Toronto, 6.1% in Vancouver, 2.1% in Victoria and 1.9% in Winnipeg.

Prices compared with a year earlier were down 0.1% in Quebec City.

© Thomson Reuters 2014

Home prices up, blame it on Toronto, Vancouver and Calgary

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Three of the country’s most expensive housing markets continue to drive the national average price for a home, according to a new report.

Thinking about a move-up buy? Forget it, new study says you can’t afford it

You’re likely stuck in your current home because of new tougher mortgage regulations and ever-rising prices in the Canadian real estate market. Read on The Canadian Real Estate Association said Monday the average sale price of a home in August reached $398,618, a 5.3% increase from a year ago.

“Although activity rose in fewer than half of local housing markets in August, the national tally was fuelled by monthly increases in Greater Vancouver, Calgary and Greater Toronto,” the Ottawa based group said in a release.

The big three continue to see prices rise while their sales continue to increase, both factors helping to drive national numbers. Year-to-date, Vancouver sales are up 18% year over year while Toronto and Calgary are up 4.2% and 13.% respectively.

Related Canada housing market shows no sign of slowing as prices rise for 9th month: Teranet Foreign buyers are fuelling a seismic spike in Vancouver’s luxury housing market, realtors say Added together, the three cities are responsible for 33% of all sales in the country this year. However, the dollar value of the trades year-to-date have so far been worth about 48% of all activity.

“Sales picked up in some of Canada’s most active and expensive real estate markets which fuelled another national increase,” said Beth Crosbie, president of CREA, in the release. “Even so, the national increase in sales does not reflect local trends in many markets across the country.”

Prices were down in August from a year ago in six of the markets surveyed. Another eight markets were near the rate of inflation, in terms of price increases.

For August, national sales were up 1.8% from July and 2.1% from a year ago. It was the seventh consecutive month sales have grown and the highest level for sale since January, 2010.

“Sale activity in recent months has remained stronger than was anticipated earlier this year,” said Gregory Klump, chief economist with CREA, in a statement. “Listings and sales this spring were deferred due to unseasonably harsh weather which subsequently supported activity once the delayed spring home buying season got into gear. This trend was reinforced by a decline in mortgage interest rates.”

Mr. Klump said the boost from deferred sales will not continue and noted sales were down from the previous month in a majority of Canadian markets.

Supply continues to be constrained led by Toronto where new listed homes were down 1.2% in August from July. New listings were down from a month ago in about 60% of the markets surveyed by CREA.

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Foreign buyers are fuelling a seismic spike in Vancouver’s luxury housing market, realtors say

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VANCOUVER — Chinese investors’ global hunt for prime real estate is helping drive Vancouver home prices to record highs and the city, long among top destinations for wealthy mainland buyers, is feeling the bonanza’s unwelcome side-effects.

Thinking about a move-up buy? Forget it, new study says you can’t afford it

You’re likely stuck in your current home because of new tougher mortgage regulations and ever-rising prices in the Canadian real estate market. Read on The latest wave of Chinese money, linked in part to Beijing’s anti-graft crackdown, is flowing into luxury hot spots. But it has also started driving up housing costs elsewhere in a city which already ranks as North America’s least affordable urban market.

For decades Vancouver, along with Hong Kong, Sydney and Singapore and more recently New York and London has been attracting Chinese and other Asian buyers.

And just like those other cities, Vancouver got caught in the most recent buying frenzy, which realtors say has intensified after President Xi Jinping announced his anti-corruption crusade in late 2012.

“In the last year there’s been the corruption crackdown in China and a lot of people have seen their wealth evaporate over there because of that,” said Dan Scarrow, a vice president at MacDonald Realty. “So they want to put it somewhere they perceive as safe and there’s nowhere safer than the west.”

Related Secret path revealed that allows wealthy Chinese to transfer billions overseas by buying pricey property in Vancouver, New York and Sydney Vancouver’s housing market is the second least affordable in the world, survey finds

Canadian PressThe impact of the latest inflow of foreign cash is particularly acute for Vancouver, its market already tight because of limited building space and a decade-long nationwide property bull run fuelled by low borrowing costs. Canada does not track foreign property buyers, but analysis of city assessment data carried out by a leading urban planner and made available to Reuters helped identify Vancouver’s hottest neighbourhoods. Interviews with realtors active in those areas confirmed the perception that Chinese buyers were largely behind the latest rally.

My market, the luxury real estate market, is primarily Asian buyers — mostly from mainland China Andy Yan of Bing Thom Architects found that values for detached homes in the $2-5 million range have risen by 49% since 2009, making it the fastest growing segment in Vancouver’s housing market. Home values in a handful of luxury enclaves in Vancouver’s west climbed more than 50% over that period, driving city-wide values up more than 35%.

Realtors are saying that more than half of buyers in prime markets are mainland Chinese.

“My market, the luxury real estate market, is primarily Asian buyers — mostly from mainland China,” said realtor Malcolm Hasman, a partner at Angell Hasman and Associates. Hasman said Asian buyers accounted for roughly 90% of sales of properties costing $5 million and more.

The impact of the latest inflow of foreign cash is particularly acute for Vancouver, its market already tight because of limited building space and a decade-long nationwide property bull run fuelled by low borrowing costs.

Condo towers are now built without a fourth floor, as that number is unlucky in Asian cultures, and wok kitchens are standard in most new homes

Getty ImagesAn Asian buyer visits a show apartment of the central luxury real estate complex in Vancouver, Canada. Condo towers are now built without a fourth floor, as that number is unlucky in Asian cultures, and wok kitchens — a second kitchen for cooking with a smoky wok — are standard in most new homes. However, its headaches might offer a glimpse of things to come for other world cities that attract global capital.

Sales volumes for detached luxury homes soared in Vancouver by 38% in the first half of 2014 compared with the year earlier period, led by properties valued at or above $2 million, according to a report by Sotheby’s International Realty Canada.

“Foreign investors are competing with other wealthy Canadians and there’s a lot of demand,” said Ross McCredie, chief executive of the luxury-focused realty firm.

Over the past 12 months, the benchmark price for a detached home in western Vancouver rose 10% to a record $2.28 million, according to the Real Estate Board of Greater Vancouver.

STATUS SYMBOLS

Getty ImagesA wealthy Chinese immigrant family inspect a villa in the high-class neighboorhood of West Vancouver. Realtors say Asian buyers accounted for roughly 90% of sales of properties costing $5 million and more. Nowhere is the China effect more apparent than at the top end of the market.

An English-style estate on a one-acre lot in Vancouver’s exclusive First Shaughnessy neighborhood is on sale for $17.9 million and all 10 offers it has attracted so far are from ethnic Chinese buyers. All are either newcomers or those who have arrived in the past decade, according to the listing agent.

“It’s all about status,” said Sherry Chen, a realtor with Rampf-Anderson Real Estate Group, who deals mainly with wealthy clients from mainland China.

In most cases, these are “astronaut families” where the husband keeps working in Asia flying back and forth, while the wife establishes an education base for the children in Canada.

Close correlation between high-end property prices and the discontinued “millionaire visa” program for wealthy individuals has raised concerns that its termination this year could hurt the market. But prices seem to have recovered after a temporary dip, McDonald Realty’s Scarrow said, adding that property investors had several other ways of accessing the market.

The money flow has transformed the DNA of the city. Condo towers are now built without a fourth floor, as that number is unlucky in Asian cultures, and wok kitchens — a second kitchen for cooking with a smoky wok — are standard in most new homes.

The influx is also having a trickledown effect as people sell out in prime locations and move to other neighborhoods driving up prices and widening the gap between housing costs and the condition of the local economy.

“We are in this unprecedented situation right now in terms of housing prices and how quickly they’ve escalated. They’ve become completely disconnected from local incomes,” said Geoff Meggs, a Vancouver city councillor.

Vancouver has ranked the second least affordable major city after Hong Kong for the past three years in an annual survey by think-tank Demographia which tracks housing costs and incomes in top markets such as New York, Sydney, Singapore and London.

That raises fears of brain drain and concerns about the markets excessive reliance on foreign money.

“I think Vancouver faces challenges a number of cities are facing in the world,” said Yan. “And that is what does one do in this new environment of global capital and money flows.”

© Thomson Reuters 2014

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Canada building permits soar to record on Toronto, Vancouver condos

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Canadian building permits jumped to a surprise record in July, led by Toronto and Vancouver condominiums and apartments, at a time when the central bank says high home prices and indebted consumers remain a key risk to the economy.

The value of municipal permits for multi-unit housing jumped 43.4% to $2.54 billion, Statistics Canada said Monday in Ottawa. Total permits in Toronto rose 29.6% to $1.65 billion while Vancouver surged 46.1% to C$718 million.

Nationwide, permits rose 11.8% to $9.16 billion in July, confounding economists in a Bloomberg survey who forecast a 5% decline. Residential and non-residential permits both reached records, rising 18.0% and 5.2% respectively.

Bank of Canada policy makers said last week that risks posed by “imbalances” in household finances remain, as they kept their key interest rate at 1%. Home sales and prices have shown unexpected strength this year as the lowest mortgage rates in decades spur demand. Policy makers including Finance Minister Joe Oliver have singled out the surge in condominium construction in Toronto and Vancouver for concern.

Municipalities approved 14,050 multi-family housing units in July, a gain of 35.2% from June and 23.8% from a year earlier. The number of units approved for single-family residences fell 0.6% on the month to 6,461 units and rose by 1.3% from 12 months earlier.

“The gain in Toronto was driven by higher construction intentions for multi-family dwellings and, to a lesser extent, institutional buildings,” Statistics Canada said Monday. “The increase in Vancouver came mainly from multi-family dwellings.”

The gain in non-residential activity was led by government spending, rather than the business investment Bank of Canada Governor Stephen Poloz said is needed to bring about a sustainable recovery. Institutional spending rose 28.4%, while commercial projects rose 2.6% and industrial buildings dropped by 32.6%.
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Canada housing starts cool in August, seen slowing further

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TORONTO — Canadian housing starts cooled more than expected in August, while the previous month was also revised slightly lower, data showed on Tuesday, setting the stage for what is widely expected to be a slowing housing market as 2014 draws to a close.

A report from the Canada Mortgage and Housing Corp showed the seasonally adjusted annualized rate of housing starts slipped to 192,368 last month from a downwardly revised 199,813 units in July.

That was shy of analysts’ forecasts for 195,000. July was originally reported as 200,098.

Related CMHC could force banks to pay deductibles on mortgage insurance Canada building permits soar to record on Toronto, Vancouver condos Thinking about a move-up buy? Forget it, new study says you can’t afford it The small drop brought the six-month moving average to 189,837, little changed in the last 12 months despite a big slowdown in the harsh winter months and a roaring bounce-back in the spring and early summer.

“The persistence of unsustainably lean mortgage rates has likely bolstered housing demand in recent months, and even with the dip in August, starts remain elevated relative to the rate of household formation,” Laura Cooper, an economist at Royal Bank of Canada, said in a research note.

Canada’s housing market has defied expectations for a slowdown or crash but most economists expect homebuilding and sales to slow when mortgage rates rise. Mortgage rates remain low and borrowers are taking on near record levels of household debt to get into the market.

“The Bank of Canada may be looking for a rotation away from housing and the consumer, but low rates continue to support residential investment,” CIBC World Markets economist Nick Exarhos said in a research note.

“But despite recent resiliency, we still expect housing’s contribution to growth to slowly wane as we progress through this business cycle, with affordability concerns and a weak labor market putting pressure on the building sector going forward.”

The drop was nearly across the board, as single-unit starts fell 3.3% and multiple units, typically condominiums, dipped 4.0%. Both rural and urban starts declined.

July’s softness was led by a big drop in starts in Ontario and the Atlantic, with a smaller decline in Quebec. Starts rose sharply in the Prairie provinces and in British Columbia.

Despite the small drop in August, economists are penciling in a strong year for home building in 2014.

“On account of the robust readings for housing starts so far this year, we have revised our forecast up to 188,000 units for 2014, a pace matching that of 2013, before underlying conditions shift and slow activity to 177,000 next year, with a similar moderating trend anticipated in the resale market,” Cooper said.

© Thomson Reuters 2014

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Canadians expect to be mortgage-free later than previously thought

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A new survey says Canadians, on average, expect to be mortgage-free by age 58, one year later than in a similar poll a year ago.

But the survey, conducted for CIBC by Angus Reid, found some big discrepancies across the country.

For example, homeowners in British Columbia thought they wouldn’t be able to pay off their mortgages until they hit 66, while those in Alberta expected to be mortgage-free more than a decade earlier at 55.

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CARRICK TALKS MONEY Video: Carrick Talks Money: Why variable mortgages are the way to go this spring The survey also found that just over half of those polled were taking advantage of the current low interest rate environment to pay down their mortgages faster.

Fifty-five per cent said they were putting in extra effort into repaying their mortgages, although that was down from 68 per cent last year.

Of those paying off their mortgages quicker than necessary, 32 per cent said they were making payments more often, 28 per cent were increasing the amount they pay while 18 per cent said they had made either an additional prepayment or a lump sump payment.

Beyond Alberta and British Columbia, the survey found the average age respondents expected to be mortgage-free ranged from 56 years in Quebec to 57 years in Atlantic Canada and Ontario and 58 years in Manitoba and Saskatchewan.

CIBC says even small efforts can lead to big savings for homeowners in the long run.

For example, someone paying 4.99 per cent interest on a $250,000 mortgage with 25-year amortization can expect to save nearly $35,000 of interest if they add $147 to their $1,453 monthly payments.

The same homeowner can save as much as $30,000 on interest if they make $726 payments every two weeks, instead of waiting until the end of the month to make a payment.

The bank pointed out that even making a lump sum payment every year – for instance, putting the average $1,600 tax refund towards the mortgage – would shave off $33,103 of interest.

“Employing one or more of these strategies does take some planning and discipline,” said Barry Gollom, vice-president of secured lending and product policy at CIBC.

“If becoming mortgage-free sooner is something you want to achieve, it’s important to look at your mortgage as part of your overall financial picture and to balance your mortgage payment plan against your other goals.”

The online poll was conducted by Angus Reid Forum with 1,509 Canadian adults between May 21 and May 22.

The polling industry’s professional body, the Marketing Research and Intelligence Association, says online surveys cannot be assigned a margin of error as they are not a random sample and therefore are not necessarily representative of the whole population.

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Paying off your mortgage faster can pay huge dividends

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Image Copyright – Darren Callabrese – https://nationalpost.com/author/darrencalabrese

Paying down your mortgage faster. It’s one of those boilerplate suggestions that financial advisers love to make to their clients. After all, throwing extra money at the biggest debt most Canadians have can result in big interest savings and being mortgage-free years sooner.

So why isn’t everyone doing that?

According to a spring analysis by the chief economist at the Canadian Association of Accredited Mortgage Professionals, only 35 per cent of Canadians with mortgages took some kind of action in the past year to speed up the date of their “burn the mortgage” party. That suggests that almost two-thirds of those mortgage holders paid off their mortgages as the contract dictated, at least over the previous year.

Mortgage debt growth slows, Statscan says Canadians carrying debt into retirement A recent survey (carried out on May 21-22) commissioned by CIBC and carried out by Angus Reid found that only 55 per cent of 1,509 online respondents with mortgages had taken some kind of action to repay their mortgages faster since they’d originally bought their homes.

Since mortgage payments are made with after-tax dollars, putting extra money down on a debt with an interest rate of 3.49% is equivalent to getting a guaranteed, risk-free return of over five per cent for most taxpayers. If your mortgage rate is higher, your return would be higher too.

Why not?

So why the seeming reluctance by many to do this?

Mortgage experts say personal circumstances are often at the top of the “why not” list.

“Young families or first-time buyers are in an expensive period of life and are unlikely to have much free cash to put towards their mortgage,” points out Jason Scott, a mortgage associate with TMG The Mortgage Group in Edmonton and author of Approved! Mortgage Advice for all Stages of Life.

Others, he says, may be sensibly tackling other debts first. “If they have more expensive debt, like credit cards, it’s better if they pay off the more expensive debt first,” Scott told CBC News.

Industry players say it’s also true that, in these days of lower mortgage rates, it may be a tougher sell to persuade consumers that it’s worth tackling mortgage debt at all.

You also won’t have to dig too deeply to find people who tell you that, regardless of today’s lower rates, they just don’t have the extra money to tackle their mortgage debt.

I owe, I owe…

After all, we’re repeatedly told we’re in hock up to our eyeballs. We’ve all seen the comments tut-tutting Canadians about their debt levels.

The governor of the Bank of Canada scolds us. Bankers, regulators and politicians wag their fingers in warning. We’ll be sorry, they say, when interest rates go up if we still have these big debts.

The debt stats do seem daunting: The level of household debt relative to disposable income was a near record 163.2 per cent in the first quarter of this year, Statistics Canada says. That means Canadians owe just over $1.63 for every $1 in disposable income they earn in a year.

That can make it tough to whittle away at the $1.1 trillion (that’s trillion, with a “t”), that we owe on our mortgages, especially when we have another $507 billion in higher-interest consumer credit debt on top of those mortgages.

Viewed against this backdrop, it may then be somewhat of a minor miracle that, in the midst of such a supposedly bleak financial landscape and the competing demands for our extra money (like saving for retirement and the kids’ education), many Canadians are actually taking steps to pay down their mortgage debt faster than their mortgage contracts dictate.

And make no mistake. Paying off your mortgage faster can pay big dividends.

How much money can you save? It depends on which strategy you use.

Here are four that can put a surprising amount of extra money in your pocket over time:

Strategy 1: Increase the amount of your payments

Throwing just $100 a month extra at your mortgage can result in formidable savings. Let’s assume a $250,000 mortgage at 3.49%, amortized over 25 years. Monthly payments would be $1,247.

Boost that payment by $100 to $1,347, and something magical happens. You’d save $15,400 in interest charges over the life of the mortgage (assuming a constant interest rate of 3.49%) and you’d pay it off three years sooner.

Strategy 2: When you renew, keep your monthly payments the same

Let’s assume you took out a $250,000, five-year fixed mortgage in 2009 at an interest rate of 5%. Your monthly payments have been $1,454. Now, it’s time to renew and your bank is offering you 2.99% for the next five years. As a result, your monthly payments would drop to $1,224.

Great! But what if you keep on with the $1,454 payments you’re used to? That extra $230 a month over the remaining life of the mortgage will allow you to pay off your mortgage four years sooner and you’ll save $15,700 in interest. Not bad for just maintaining the status quo.

Strategy 3: Choose an accelerated payment option

This is almost painless. Let’s use the example of the $250,000 mortgage described in strategy one. Your monthly mortgage payment is $1,247. Divide that by two, and you get $623.50. Now arrange to pay this amount every two weeks. Because a pay-every-two-weeks strategy results in 26 payments of a half-month’s mortgage payment, you end up paying the equivalent of 13 monthly payments a year – or an extra monthly payment every year.

This is what’s known as an accelerated bi-weekly payment. Don’t just opt for bi-weekly – you want the method that forces you to pay the equivalent of an extra monthly payment each year.

This strategy alone would save the borrower more than $16,300 in interest over the 25-year life of the mortgage. And that 25-year mortgage would also be paid off in a little more than 22 years.

Strategy 4: Make a lump-sum payment

Most closed mortgages (but not all) allow borrowers to pay off up to 10%, 15% or 20% of the original principal in each calendar year without penalty.

Thanks for nothing, you say. “I don’t have $50,000 to throw at my mortgage.” The good news is that you don’t need to pay down the entire 20 per cent. Throwing even a few hundred dollars at it here and there can make a big difference.

One popular suggestion is to put your tax refund to work this way. Assuming we have the $250,000 mortgage described in strategy one, and applying a $1,600 annual payment that the Canada Revenue Agency says is the size of the average refund, that manoeuvre alone would see that mortgage paid off three and a half years early and the mortgage holder would save $20,000 in interest.

TIP:

When using an online mortgage calculator, make sure it’s a Canadian one. American mortgages are calculated differently.

Combining two or more of these strategies would result in even bigger savings.

Fortunately, it’s easy to virtually play around with various payment scenarios. Most financial institutions, banks, and mortgage brokers have online mortgage calculators that can spit out the savings for you.

Here’s a particularly useful one.

And another one.

And here’s a good one from the federal government’s Financial Consumer Agency of Canada:

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Toronto home prices still growing, with more gains to come

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A lukewarm summer didn’t cool off Toronto’s red hot housing market which remains in sellers’ territory, according to the city’s realtors.

The average price of a home in the country’s largest market continued to rise, reaching $546,303 for the region — an 8.9% increase from a year ago. In the much sought-after detached home segment of the market, the average sale price reached $902,428 in the city of Toronto proper, a 14.7% increase from a year ago.

“The number of listings in August was down in comparison to last year while the number of sales increased. This means the sellers’ market conditions remained in place with a lot of competition between buyers, said Jason Mercer, director of market analysis with the Toronto Real Estate Board, in a release.

Mr. Mercer expects sales growth to continue to outpace listings growth which will lead to ongoing increases in year-over-year average sale prices.

For the first eight months of the year, sale prices across the GTA averaged $562,504, an 8.5% increase from a year ago.

New listings for August were 11,733, down from 12,103 a year earlier. Sales were up to 7,600 from 7,391 during the period.

Sales growth was experienced in all segment of the market and across the greater Toronto area. Condominiums experienced the weakest price growth but the average sale price in the GTA still climbed 4.4% from a year ago to $352,942.

Toronto’s stellar results come on top of data released from Vancouver and Calgary which show prices continue to rise in those cities, indicating national averages will likely climb when those numbers are released mid-month.

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Is it time to downsize your home, sweet home?

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The Globe and Mail Downsize Your Home Worksheet is designed to help people think through some of the financial considerations involved in selling the family home and moving to something smaller. Sure, there are lifestyle factors in deciding when to sell. But there’s also the state of the real estate market to consider. Should you lock in your gains, or wait and run the risk that the housing market could fall? To crunch the numbers, try the Downsize Your Home Worksheet.

THE GLOBE AND MAIL DOWNSIZE YOUR HOME WORKSHEET

Question: Should you wait to sell the family home, or should you take advantage of today’s high real estate prices and sell now?

Edit the values in the right column to reflect your scenario. The red values are calculated automatically.

I am hoping to have this much left over after I sell my house and move to something smaller 1) How much might my house grow in value if I stay? Estimated value of your house today. For illustration purposes, we’ve used a number close to the average national resale house price in summer 2014

Number of years until you sell Your expected annual house price gain (if you’re unsure, try using the long-term average inflation rate of 2.5%)

Bottom Line: Estimated value when you’re ready to sell 2) What if I stay and prices fall? Estimated value of your house today Your estimated percentage decline from current value Bottom Line: Projected value after decline Which scenario would you like to use to calculate the following questions? The current value of your house Estimate value when you’re ready to sell Projeced value after a decline 3) What will it cost me to move to a smaller house or condo? Value of your home or the bottom line home value from either parts one or two Percentage real estate commission for selling Real estate fees Legal fees + Reimbursements A default estimate of $2,500 could be used to cover a downsizer’s sale of the family home and purchase of a smaller dwelling.

Land transfer tax on purchase of your next home, if applicable Click here to calculate what you’ll owe, if anything

Mover Furnishings and upgrades for your new home Total 4) Net gain from selling The value of your home or the bottom line home value from either parts one or two Actual or anticipated balance owing on your line of credit (or remaining mortagage balance) Net gain after subtracting total moving costs in Part Three and LOC or mortgage balance Cost of new home (leave blank if you plan to rent)

Funds remaining after you buy your next home Surplus or shortfall compared to your targeted net gain after downsizing 5) What if I invest the gains from selling my house? Funds remaining after you buy your next home (from Part Four) Your expected annual investment return after fees (%) Your pre-tax annual gains Future plans: Part Two of the Downsize Your Home Worksheet will help you compare the month-to-month living costs at your family home against a condo, smaller house or rental.

Follow Rob Carrick on Twitter: @rcarrick

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