Leanna Hoskins

29 Nov

2013

Alycia

Home Series: Don’t Neglect Your Vancouver Roof – Consult with Bruce Coleman, Vancouver Mortgage Broker

A roof is one of the areas that many home owners and prospective home buyers often neglect. As a buyer, you might ask some vague questions about it when buying a home, and leave it up to the home inspector to provide you with an assessment. Or, as a homeowner, you might not bother with it too much until it’s too late.

Roofs come in many different building materials and are constantly subject to the wear and tear of the elements. All roofing materials used have a shelf life, but generally this is only for around 10 to 15 years. Even the sturdier metal roofs should not be overlooked and should be regularly inspected.

The roof is the primary cap on your home. Once you start to see or notice a leak or problem, it might be far worse than you think. Water may be seeping behind the drywall and getting absorbed into the insulation which can often happen with a slow leak. The result could be that the insulation could be starting to rot and mould can quietly grow and spread.

Leaks can be a challenge to locate because water can find some weird paths as water simply follows the path of least resistance. You might think your leak is right above you when it fact the actual area of the roof which has been compromised is actually at the opposite end of the structure.

You really should inspect your roof at least once a year. Looking at it from the yard isn’t necessarily going to reveal too much. If you know how to safely set up a ladder and have some idea of what to look for when examining a roof, that would be very helpful in identifying problems before they occur.

One thing you should always do in both spring and fall is to ensure that your gutters are free of leaves and check to see that water will flow down the troughs. This is especially important before winter comes because you don’t want water backing up under the roof and freezing, because this will cause expansion and gradual damage.

Other things to look for when checking the roof include the following:

Check for missing shingles
Check for shingles which are curling at the edges, have blisters or cracks or appear excessively weathered such as signs of extreme fading
Check the attic, if you have one, with a good flashlight and this means the entire crawlspace if handy to look for water stains, mould or a mildew smell
Check your ceiling and look for signs of water staining
Check the metal flashing for signs of rust
Check the shingles for signs of moss or algae
Check for roof sag and examine all roof ridges
Check flat areas of the roof and look for water pooling

Should you spot any of these signs then you need to take immediate action because the worst thing you can do is to allow the condition to do nothing. The longer you let it go, the more damage you are going to have in the interior of your home.

Some roofing problems might only require some quality patchwork. If you have the skills then you could do it yourself. If not, then you will need as experienced contractor to perform the repairs or replacement for you.

When hiring a roofer, make sure you have checked them out and don’t settle on using just any roofing contractor that you pick from the yellow pages. Ask for references and make sure you call those references.

Tags: Bruce Coleman, Entrepreneurs, self-employed, Vancouver Mortgage Broker

28 Nov

2013

Alycia

What Does a Vancouver Real Estate Lawyer Do? – Ask Bruce Coleman Vancouver Mortgage Broker

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What Does a Vancouver Real Estate Lawyer Do?

It’s a common practice and a wise move that any Vancouver home buyer uses the service of a Vancouver real restate lawyer when buying a house or condo. Given the average price of both types of properties this city, this is a major investment and the last thing you want to happen is get hit with an unexpected expensive or nasty surprise such an easement issue or outstanding property taxes.

Most people usually don’t involve a real estate lawyer until the transaction is about to be completed and after we have signed the purchase agreement. At that point, all we expect the lawyer to do is to perform a title search, register the deed and arrange to complete the money transfer.

However, some real estate experts suggest that it might even more prudent to bring a real estate lawyer earlier into the process to review the purchase agreement beforehand. Although we like to think that everything is going to be on the up-and-up, this is not always the case.

One example where the term “easement” is used instead of the word “encroachment” which can make a big difference when it comes property title insurance and additional legal costs.

When buying a condo, many developers have “special” incentives to entice a buyer into buying. You could be dealing with a condo agreement that can have up to 50 pages of legalise which might appear straightforward but can mean all whole different thing wrought with expensive surprises such as unexpected condo fees after you have already completed the deal and moved into the condo.

An area where getting a lawyer involved early in the process can be save you money is involves the financing of a property. A simple turn of the phrase such as the deal being “conditional on financing” is actually quite different to having it read as “conditional based obtaining the financing that the buyer actually wants.”

That’s the problem with contracts. The complexities of legalise means a contract can phrase things in a variety of subtle ways that can end up causing you grief and hefty out- of- pocket expenses down the road.

As buyers we expect that things will be fully explained to us and that any fine print will also be covered in the explanation, but this not always the case. Whether you read the contract, purchase agreement, financing documents in full or not yourself, the simple truth is that if you’re not a real estate lawyer, you could easily overlook something vital when reading through the paperwork.

A new home or condo buyer might also not realize that these additional fees can be added onto the purchase price such as installing your meters for hydro and water, landscaping, structural defects, charges for development and other expensive costs for example.

Finally, whatever you do, make sure you can an experienced real estate lawyer and this means one who specializes in real estate and not just occasionally dabbles in it as part of their overall legal practice. Do some research and check them out with the bar association.

You should also get a written quote and ask whether that includes all costs and expenses, and make sure that they will be accessible when you need to either talk to them or meet with them

Tags: Bruce Coleman, Entrepreneurs, self-employed, Vancouver Mortgage Broker

27 Nov

2013

Alycia

How Do Vancouver Property Disclosures Work? – Ask Bruce Coleman, Vancouver Mortgage Broker

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How Do Vancouver Property Disclosures Work?

Every home or condo has its own distinct traits. Some home owners spend a lot of time in keeping up on their home maintenance with an attention to detail. Other home owners aren’t so fussy and let home maintenance slide. As a prospective home buyer, you don’t always get the full picture of what you might be buying.

Even though it is a requirement in B.C. that a home seller is required to disclose vital information about defects in their home such as leaks, mould, major repairs, foundation, and other issues, to their own realtor, or to you and your realtor, not everybody is as forthcoming and truthful as we would like to think.

Another problem that can happen is that even though the seller is being truthful about what they disclose, potential problems might exist which they are not even aware about.

In B.C. there is a quasi regulation that exists which does require that any maintenance or repair issues should be disclosed to all prospective home buyers. And, don’t forget that when you go to sell a home, these regulations also apply to you as well.

The biggest thing to remember is that any disclosure you receive should only be one part of the process because there is more you have to do to protect your interests.

B.C. Disclosure Laws Explained

First, you should know that the regulations that have put into pace will only provide you with limited protection. It always boils down to “caveat emptor” which means “buyer beware.”

The disclosure regulations is called the PDS which is an acronym for “Property Disclosure Statement” and was first introduced in 1991 through the efforts of the B.C. Real Estate Association. For condominiums it is also known as SPDS which means “Strata Property Disclosure Statement”, and for rural properties it is referred to as the RPDS or “Rural Property Disclosure Statement.”

In 2004, the B.C. Real Estate Association did amend the statement to specifically ask whether the home has been ever used as a marijuana grow-op or as an illegal drug lab.

How Useful is a Property Disclosure Statement?

The first thing to know is that a PDS is neither obligatory nor is it necessarily legally enforceable. The form is simply given to the seller to complete by their realtor. If the seller isn’t willing to complete one, then any prospective buyer might be wise to consider its absence as a “red flag” and be very wary about proceeding further.

Second, the property owner cannot necessarily be legally bound by what they disclose or include in the statement as it is simply designed for them to complete as best they can. There is no guarantee about the accuracy or the veracity of what a prospective buyer may or may not include.

The bottom line is that a PDS may actually not be as helpful as you think if you believe you have been deceived and want to take legal action against the previous owner. You may end shelling out a lot of legal expenses and end up having nothing to show for it except a big legal bill and expensive renovation or repair costs.

A PDS should only be used a guide and you need to check out the home further. Unless you are an experience contractor yourself, your best bet is to take the time and use an experienced home inspector to poke into the recesses of the home and uncover any potential problems they have found.

Tags: Bruce Coleman, self-employed, Vancouver Mortgage Broker

18 Nov

2013

Alycia

What is the “Best Mortgage Rate” ? – Consult with Bruce Coleman, Vancouver Mortgage Broker

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It’s not synonymous with the “lowest mortgage rate.”

The best mortgage ratecorresponds to the mortgage and advice that saves (and in some cases makes) you the most amount of money long-term.

Mortgage professionals routinely advise, “It’s not all about the rate.” To some, that sounds like evil sales-speak meant to boost commissions. The reality is that mortgage flexibility, contract restrictions and advice all have a definitive impact on borrowing costs. And most people don’t discover how much impact until after their mortgage closes.

That said, consumers are obliged to negotiate the very best deal they can. Three years ago, we asked ourselves, what kind of mortgage comparison website would we want if we were shopping for a mortgage ourselves? We thought up RateSpy.com.

RateSpy’s edge is data, lots and lots of rate data — more so than most other Canadian rate comparison sites combined.

Now, why on earth would someone need access to 3,000 mortgage rates and 300+ lenders, you ask? It boils down to probability.

At any given time, different mortgage providers are motivated to offer more heavily discounted rates. They may have:

Surplus liquidity (e.g., a credit union with excess deposits),
A need to replace assets in securitization programs (which is why we see big discounts on mortgages with odd terms, like 3.4 years), or
Internal volume targets that haven’t been met, thus encouraging more competitive pricing.

By definition, the more lenders and brokers one has to compare, the higher the probability of finding a lender motivated to discount below the market.

Of course, once you find a low-rate provider, that doesn’t mean its rate entails the lowest borrowing costs. Asking the right questions is mandatory to ensure the mortgage balances renewal risk with interest savings, and lets you make changes down the road—penalty free. This mortgage rate & features checklist can serve as a guide in that respect.

For these reasons, the interest rate alone can be a misleading number. If your lender or mortgage broker is quoting you a rate 10-15 basis points higher than what you’ve found online, it means nothing until you compare the features, restrictions and speed/quality of service from both providers

Our responsibility

Mortgage shoppers are, and will continue, flocking to rate comparison websites. But the information on these sites is vastly inadequate at the moment. Why, for example, don’t rate comparison sites speak to the penalty facing consumers if they break the mortgage early? Variations in penalty calculations can, and do, cost borrowers thousands more than small rate differences.

We have a responsibility to help consumers find the best overall deal, not just the best rate. The best deal factors in things like term selection, penalty cost, refinance restrictions, porting flexibility, advice on properly structuring an application, advice on building equity and so on.

Every Canadian rate comparison site I’ve seen underperforms in these areas. Even ours…for now. Our mission is to address these information deficiencies so consumers can identify the right combination of rate savings, flexibility and advice in an objective forum with no sales pressure.

Thereafter, we have to make it easier for folks to find competent mortgage professionals for a second opinion. Think about it. If you don’t have a trusted referral, where do you look to find a great broker or banker? How do you know the person you’re calling has the tenure, experience, qualifications and competitiveness to serve you best? Most existing advisor directories help you screen by little more than company, province or city.

Expect mortgage comparison sites to significantly evolve along these lines in 2014.

Sidebar: Rate comparison sites, in their present form, cater only to AAA fully-qualifying clients. Subprime,business-for-self and investor clients are a whole different conversation. There is currently no good mortgage comparison site for these customers, making knowledgeable mortgage advisors even more essential.

By Robert McLister, Editor, CanadianMortgageTrends.com”

Tags: Bruce Coleman, Entrepreneurs, self-employed, Vancouver Mortgage Broker

17 Nov

2013

Alycia

Better off renting? The new economics for young adults – Consult with Bruce Coleman Vancouver Mortgage Broker

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ROB CARRICK – The Globe and Mail

The math of home ownership simply doesn’t work for some young people.

Take a young man we’ll call Neil, for example. He’s a single, 31-year-old journalist in Toronto who makes a middling five-figure salary, rents a cheap apartment in a nice part of town and has $20,000 parked in a bank account. Should Neil buy a house?

He certainly doesn’t think he’s in a position to do so in a city where the average home goes for almost $534,000. “Home ownership – fine, condo ownership – is not on my radar,” he wrote in an e-mail in which he sought help in deciding what to do with his $20,000. “How can it be?”

Let’s understand something about the housing market and the economy. Incomes, particularly for people trying to get into the workforce or establish their careers, are not rising anywhere near fast enough to keep up with housing prices. As a result, we are heading toward a generational split in housing affordability. If you’re already in the market, you’re good. If you’re young and just starting out, you might well question the financial commitment required.

A few weeks back, I wrote a column about a man who was balking at moving his young family from a small condo to a house because of the massive mortgage debt he’d need to take on (read that column here). Neil sees a home as not only a giant debt, but also a disruption of a lifestyle in which he’s achieved a good balance of saving and spending.

While living debt-free, he’s managed to save that $20,000 and taken trips to Antigua and New Orleans. “I don’t live extravagantly and I don’t live beyond my means – I think the fact that I have no debt shows that. Also, I’m able to save right now. My fear is that if I were to buy right now, that ability is gone.”

Standard guidance for someone in Neil’s position would be to put his $20,000 toward a home down payment. This would be based on the usual reasoning about homes being an investment, a forced savings plan and a much better use of money than paying rent.

All of this was true five years ago, when houses were more affordable. Now, it’s time to stop foisting this advice on young people like Neil. He’s better off renting.

For one thing, he’s in a great rental situation. He pays $1,000 per month for a spacious one-bedroom apartment, including parking. The apartment is located above street-level retail in midtown Toronto. Neil has checked out condos in his neighbourhood and he thinks he could get a one-bedroom unit smaller than his apartment for about $350,000.

A 5-per-cent down payment on that condo would be $17,500, which would leave some of his $20,000 to help cover closing costs and moving. With a five-year mortgage at 3.5 per cent, his monthly payments would be $1,724. Add a few hundred dollars per month in condo fees and you end up at double the fixed monthly costs of renting.

Let’s assume Neil would qualify for a mortgage. If he went ahead and bought, he’d be giving up both financial flexibility and mobility. In a tight job market, being able to relocate to another city without the hassle of selling a house is a huge advantage.

It’s settled, then. Neil’s $20,000 shouldn’t be his ticket into the condo market. But what should he do with the money? Readers are invited to offer their ideas on my Facebook personal finance page. My suggestion: Invest the money conservatively in a tax-free savings account and review things five years from now (read here about why I prefer TFSAs over RRSPs as a way to save for a house down payment).

Why five years? That’s a good span of time for Neil to assess where he’s at in his life. If his income has soared, or if he’s married or co-habiting, he may be able to carry a mortgage comfortably. Having kids may also influence his thinking. Some parents will always prefer a house, but it’s not hard to imagine a lot more kids being raised in high-rise condos and apartments in expensive real estate markets like Toronto.

Neil may also decide that the renter’s life suits him fine. By investing his $20,000 and adding to it regularly, he’ll be building wealth in a similar way to the homeowner who gradually pays off his mortgage.

Don’t pity the young adults like Neil who can’t or won’t be able to afford a house. Fact is, they may be the most rational players in our never-say-die housing market right now.

Follow me on Twitter: @rcarrick

———–

Young Adults and the Housing Market

Can a single young adult afford a condo in Toronto? Let’s see how the numbers shake out.

Costs to buy

Condo cost	$350,000
5% downpayment	$17,500

Costs to own

Monthly mortgage payment*	$1,724
Estimated monthly condo fee	$350
Estimated monthly property tax amount	$200
Basic monthly home ownership costs	$2,274

Percentage of gross income eaten by basic home ownership costs

Income	Percentage to basic costs	Feasibility
At $40,000 per year	68%	No go
At $50,000 per year	55%	No go
At $60,000 per year	45%	No go
At $70,000 per year	39%	No go
At $80,000 per year	34%	Borderline

Assumptions

* 3.6% rate for five years, with CMHC mortgage insurance fees included

Tags: Bruce Coleman, Entrepreneurs, self-employed, Vancouver Mortgage Broker

16 Nov

2013

Alycia

Find out if your spouse is holding you back financially – Consult with Bruce Coleman, Vancouver Mortgage Broker

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Nov 11, 2013 Caroline Cakebread

Find out if your spouse is holding you back financially

November is Financial Literacy Month! Make sure to have an honest conversation conversation with your spouse about your financial goals.

It was our first big fight and it happened the day after we got engaged. He casually let me in on his dream: to own a house in the country. I laughed — to me, buying a vacation property seemed like a needless extravagance and one we certainly couldn’t afford. A big argument ensued, after all, I was dissing one of his life goals.

No big surprise, couples fight about money all the time. I think the reason it’s such a hot topic is because cash is often tied to our dreams, whether it’s the perfect handbag to make us feel great, a dream vacation, or a buying a cottage. Fighting from time to time is a heck of a lot better than not having an honest conversation about money, which happens all too often. And since November is Financial Literacy Month, see how you measure up to the rest of Canadians in relationships.

Here are the stats according to a survey by Credit Canada Debt Solutions and Capital One Canada:

– 82 percent of Canadians in relationships say they speak openly and honestly with their partners about finances.

– One third say their partner’s spending habits have hurt them when it comes to achieving financial goals.

– One in four Canadians believe their significant other hides expenses.

– Nearly half feel they are more in control of their finances than their partner.

– A third have argued with their significant other over their spending habits in the past year.

It’s not healthy to feel you have to hide your purchases, and it’s definitely not OK if you think your spouse is holding you back financially. If you’re worried that your spouse is dragging you down financially, here are a few steps to help get you back on track:

1. Talk about your goals

Where do you see yourselves in 10, 20, even 30 years? When do you want to retire? How much of your kids’ education do you think you should pay for? These are just a few questions you and your spouse should sit down and discuss together to see if you’re on the same page financially.

2. Don’t freak out if your goals are different

So he wants to spend your savings on a cottage and you want to sock it away in investments. Your different goals doesn’t have to equal disaster — but it does involve an honest discussion and willingness on the part of both of you to compromise. If you’re having trouble working it out on your own, then consider getting a financial advisor to help you balance both of your goals realistically.

3. Give yourselves some fun money

Everyone needs a bit of independence when it comes to spending. If your budget can handle it, make sure each of you has some money every month to spend on what you want — no questions asked. A little financial breathing room can take the pressure off and hopefully cut out the impulse to hide purchases.

Tags: Bruce Coleman, Entrepreneurs, self-employed, Vancouver Mortgage Broker

15 Nov

2013

Alycia

Vancouver Grow-Ops – The Costs Involved in Renovating a Home Used as a Grow-Op – Consult with a Vancouver Mortgage Broker

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Vancouver Grow-Ops

The indoor marijuana grow-op business is a multi-billion dollar illegal business. These grow-ops can be found in almost every neighbourhood in Vancouver. From one bedroom apartments to multi-million dollar homes they are thriving throughout the city.

How prolific is the problem? Well, B.C. Hydro estimates there may be as many as 18,000 grow-ops that operate off their grid.

Some people think they might be getting a deal on a home if it was disclosed that it had been used a former pot grow-op. And, other people might be buying a home that they think is a bargain and weren’t provided disclosure that the home had been used as a grow-op.

Although property disclosure statements are required, a real estate agent can only disclose what has been revealed to them and not all sellers are necessarily completely upfront about what they disclose. A worst case scenario is where the owner actually ran the grow-op and then spent a bit of cash to camouflage the alterations they made so they can more readily flip the house and move on.

Either way, any home which has been used as a grow-op is going to cost you more headaches then they are worth. In fact, there are a number of lenders out there that simply won’t even approve a mortgage application if the home has a history of being a grow-op.

What Dangers Can Be Found in a Home used as a Grow-Op?

To grow marijuana, both minor and major renovations may have been carried out by the growers. The idea is to create an internal atmosphere which is conducive to create optimal growing conditions.

This means that pesticides or other chemicals could have been used and which are detrimental to human health.

The use of water and localized vapour barriers can considerably raise the humidity in the home. This can result in the growth of mould which is not always readily visible to the naked eye as it can exist under carpets, behind drywall and extend elsewhere throughout the building.

Additional concerns involve plumbing, heating modifications and electrical wiring which could have been jury-rigged in an unsafe manner and pose a potential threat in the form of flooding or an electrical fire.

The Costs Involved in Renovating a Home Used as a Grow-Op

An air quality and mould inspection analysis performed by a home inspector can run as high as $1,500. And, once the City of Vancouver has been notified that the home has been used as a former grow-op, they can order you to vacate the home, and will have to send in inspectors to determine what repairs have to be carried out to make the home liveable again.

You will then have to likely spend anywhere up to several thousand dollars or more in performing some major renovations to comply with the city’ requirements. The inspectors will only readmit you to the home when you have made all the modifications that meet their requirements. Permits and fees that you shell out and which you will have to pay to the city could run you as high as $1,250.

Finally, there is the ongoing stigma which will be permanently attached to the house as you will have to disclose to the next potential owners that the home was a previously used as a grow-op which can turn away a lot of potential buyers.

Always make sure you have a home inspector do a thorough investigation of the home you are thinking of buying because your dream home could easily turn into a nightmare.

Tags: Bruce Coleman, Entrepreneurs, self-employed, Vancouver Mortgage Broker

14 Nov

2013

Alycia

What is a Reverse Mortgage? – Ask Bruce Coleman, Vancouver Mortgage Broker

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What is a Reverse Mortgage?

A reverse mortgage is properly known as the CHIP (Canadian Home Income Plan). It is another way that people living in Vancouver can access the equity that they have built up in their homes over the years.

The plan allows you to receive as much as 50% of the current equivalent value of you home, and you can receive this money as non-taxable funds to use in any manner you require.

Reverse mortgage are provided by a variety of lenders such as banks, other institutions or forms of lenders.

Advantages of a Reverse Mortgage

Unlike a HELOC (Home Equity Line of Credit),other comparable mortgage loans, or personal loans, you do not have to provide any income qualifications to be approved. The loan can not be recalled.

Also, you do not have to be concerned about making monthly payments nor do have to worry about being approved for the loan because of a poor credit rating.

The loan is only payable as principal or interest when you either sell or move from the home. However, you also have the option of repaying the loan while you are still living in the home and most lenders will even lower the interest rate on the loan if you go that route.

Another benefit of a CHIP reverse mortgage is that you also have choices and flexibility in how you receive your money. You can choose between a lump sum payment, monthly payments or both.

Does the CHIP Reverse Mortgage Have Any Qualifications?

Yes, the plan does contain some qualifications.

First, and most importantly you must be 55 years of age or older before you will be considered for a reverse mortgage.

The amount of money you eligible to receive depends on your age, the age of your spouse, the current appraised value of the home, the type of home you own and where it is located.

Will I Lose Control Over My Home?

No, because you cannot be forced to sell or move from the home until you decide to do so.

How Does the Repayment Process Work?

The amount of money you owe, both principal and interest is repaid from the proceeds of the sale of the house and any money which is outstanding is payable to you.

Should you or your spouse pass away, the money will be paid to the survivor. If both of you should pass away, any outstanding funds will go to your estate.

What About Interest Rates?

The interest rates charged on a Reverse Mortgages are very similar and in line with what you might be charged on a Home Equity Line of Credit loan. They are generally slightly higher because no payments occur until the home is sold.

Should I Get a Reverse Mortgage?

You should always speak with you financial or tax advisor before you consider this type of loan so you are fully aware of both the advantages and the potential disadvantages. You also should shop around to find the best rates so it’s always a good idea to talk to an independent broker such as myself to find the best terms and rates.

Tags: Bruce Coleman, Entrepreneurs, self-employed, Vancouver Mortgage Broker

13 Nov

2013

Alycia

Mortgage rates today are way below normal. Or are they- Consult with Bruce Coleman, Vancouver Mortgage Broker

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With the fixed five-year mortgage rate up roughly two-thirds of a percentage point or more, the costs of buying a home are rising out of reach for a generation of first-time buyers.
(Gloria Nieto/The Globe and Mail)

Finance Minister Jim Flaherty called Canada’s low interest rates an “anomaly” last week, echoing warnings that other government officials have been making since 2009. But one of the country’s best-known economists believes today’s rates are closer to normal than many think.

Benjamin Tal, deputy chief economist at CIBC, caught viewers off guard in a recent webcast with a mortgage company TMG The Mortgage Group. Whereas most economists have been calling for the Bank of Canada to lift its 1 per cent key lending rate back to a more normal 3 per cent, Mr. Tal thinks that these days, “normal” is significantly less.

“The speed limit of the economy has been permanently reduced,” Tal said. Inflation, the key rate threat, is extraordinarily low at 1.1 per cent. And the pace of economic growth is in a long-run downtrend, with few signs of bucking that trend.

Consequently, “The new normal is much lower interest rates than there used to be…The new normal would be maybe another 100-125 basis points (above today), not more than that.”

If true, this would suggest that prime rate – the basis for variable mortgage rates – will average just 4 to 4.25 per cent over the long term, a big departure from the roughly 5 per cent prime rate that most economists forecast as “normal.”

Saving ¾ of a percentage point, over the long-term, would have enormous impact on the finances of regular Canadians. Over five years alone, it would put $11,000 of interest back in people’s pockets on the average home purchase, with 20 per cent down. If you’re financially secure, that makes shorter-term and variable-rate mortgages worth a close look.

In an email with Mr. Tal about his call, he was careful to point out that “the new normal is a theoretical rate.”

“There is a big difference between the actual and theoretical rate,” he said. “In practice, rates tend to overshoot or undershoot. So it is possible that rates will rise by more than that, possibly to 3 per cent.”

Presumably, if his model is correct, rates would then revert back down to the mean and cycle around that 4.25 per cent prime rate number.

Regardless of how accurate Mr. Tal’s forecast proves to be, the odds are decent that the prime rate will remain almost two percentage points below its 6.89 per cent 30-year average. That’s in keeping with the Bay Street consensus. But more importantly, it’s reflective of Canada’s new realities: contained inflation and modest economic growth.

“Variable will probably do better in this environment…if you have a five-year time horizon.” But long-term interest rates will be “permanently higher” five years from now, Tal predicts.

If Mr. Tal’s estimate of a 4 to 4.25 per cent prime rate does pan out, variable rates could save people more than fixed rates over the long-run, as they have for decades. And even if “normal” turns out to be a 5 per cent prime rate (which is closer to most economic forecasts), variables should still come out on top over the long term.

The question is, what happens between now and the time that rates “normalize.”

Today you can find variable rates at prime – 0.5 per cent (i.e., 2.5 per cent) and five-year fixed rates at 3.49 per cent. Let’s assume that rates shoot up in 2015 as economists expect (an expectation that changes with the wind) and that they increase two percentage points over the two years that follow.

In the hypothetical scenario laid out above, those of you shopping for a mortgage may find extra value in two particular terms:

A three-year fixed mortgage: If you can find one in the 2.75 per cent range or better, it’s a compelling option. It gives you meaningful savings for three years (when compared to terms of four years or more). It also provides insulation from rate increases for three years. Compared to a five-year fixed mortgage, rates would have to be 2.25 percentage points higher at renewal for you to lose on this strategy. That assumes you make equal payments in all cases and renew into a two-year fixed (which adds up to five years total). Betting against a 225 basis point hike in three years is a wager that most strong borrowers should make.

A hybrid (50/50) mortgage: Despite our personal beliefs, rates are impossible to foretell with accuracy. A hybrid mortgage removes the guesswork, cuts your risk of rising rates in half and lets you participate in today’s low variable rates. This strategy involves putting 50 per cent of your mortgage in a five-year variable and 50 per cent in a five-year fixed, netting you a starting rate under 3 per cent. It also gives you more flexibility than a five-year fixed by letting you refinance early with a lower potential penalty, and letting you lock in the variable rate at any time.

Keep in mind, these strategies are primarily based on hypothetical interest cost. They’re also suited mainly to well-qualified borrowers with sound finances, stable employment and a five-year time horizon. Your situation may be different so as always, make sure to do your own research on what works best for you.

Robert McLister is the editor of CanadianMortgageTrends.com and a mortgage planner at VERICO intelliMortgage, a mortgage brokerage. You can also follow him on twitter at @CdnMortgageNews.

Tags: Bruce Coleman, Entrepreneurs, self-employed, Vancouver Mortgage Broker

12 Nov

2013

Alycia

Where are the Best Buys for Homes in the City of Vancouver? – Consult with Bruce Coleman, Mortgage Broker Vancouver

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Where are the Best Buys for Homes in the City of Vancouver?

Vancouver real estate is still a hot market for both detached homes and condos. It’s becoming harder and harder to find neighbourhoods which are seeing a revitalization which helps improve the value of homes in those areas.

While doing a little research, it was discovered that Moneysense.ca had approached and contacted a number of local realtors to find out which areas of Vancouver might see an increase in value and where you still might uncover an undervalued gem that might be just right for you and your budget.

Even though the following areas offer some promise for those who want to enter the market or who are looking for a good buy, it doesn’t mean that home prices will continue to rise. Like any investment, you want to be cautious because what is true now may not necessarily be the case three years down the road.

The economy could tank into another recession again or a planned development in a particular neighbourhood may not proceed, or some other variable pop up and damper the local real estate market.

Currently, things appear to have relatively bright economic outlook in the city. The unemployment rate nationally is at around 7% while in Vancouver it stands at around 4.5% which is much better than the national average.

What Are the Potential Real Estate Hot Spots in Vancouver?

Some of the communities in Greater Vancouver which show that they will likely continue to grow in value area are:

Burnaby
New Westminster
Coquitlam

The 4 neighbourhoods which show the biggest potential and which some of the local experts feel are most likely to grow are allocated in the greater Vancouver area and include:

West Mount Pleasant

Although homes which are located west of Ontario St range average over $1.3 million dollars, the neighbourhood is expected to have room further room for price increases because it has close proximity to the SkyTrain’s Canada Line. You can get to the downtown area fairly easily no matter your mode of preferred transportation. It is also a stylish and eclectic neighbourhood because of the interesting and varied shops and a popular location for many local artists.

East Mount Pleasant

This neighbourhood has several advantages. The main advanatge being is that homes located on the east side of Ontario Street are generally almost between 20 – 30 percent cheaper than those on the west side and the average price range of a home in this location is around $800,000.

Main

Main is a residential area which is typically situated several blocks both east and west of Main Street itself. Homes located on the east side of the strip generally sell for between $300,000 to $400,000 less than their counterpart homes on the west side. There are also other advantages such as the abundance of good schools and plenty of local shops and eateries.

Fairview

This is an older area which means the homes are older and some may require renovations. However, you can get the advantage of being able to access the beach and not have to pay home prices that you would pay for houses located in Kitsilano or Point Grey. Homes in this area are typically as much as 36% cheaper than what other homes are going for and located west of that area.

If you’re willing to look there are still some potential great buys available in Greater Vancouver but it always helps to consult and use the services of an experience real estate agent who knows and understands the market.

Tags: Entrepreneurs, self-employed, Vancouver Mortgage Broker