So you got ultra lucky and managed to secure a 3.29% fixed 5 year mortgage on your recent home purchase. This incredibly low rate is a consequence of our recent years of economic uncertainty and it is bound to increase in the years to come.
A great way to avoid the shock of the rate change later on is to use the low rate as a double benefit in paying down your mortgage.
Act as if you had a higher rate today and save yourself thousands of dollars in interest costs.
An example: Using a $400,000 mortgage with 30 year amortization and comparing a 3.29% to a 4.29% rate. This would be a common scenario for an average single family home purchase in Calgary. The difference in payment is about 13% or $224 per month. Monthly payments based on 3.29% are $1745 vs a payment of $1968 if the rate was 4.29%.
If you prepare yourself now by opting to raise your regular payments by 13% (using the privileges within the mortgage contract) to $1968 per month you will actually save $21,000 in interest costs which equate to 5.5 years off the mortgage amortization.
Not sure if you can make the change? Add the extra $224 per month into a savings account and put down the lump sum payment on your mortgage once you are comfortable with the payments. If the extra $224 is a challenge, then you know now that you will need to make financial adjustments when your mortgage term expires if rates are higher.
If you want to know all of your options in paying down your mortgage faster, speak to your mortgage advisor.
Numbers supplied by Allan Bowerman, Senior Mortgage Planner, The Mortgage Alliance Company of Canada-S&R Mortgage Group
If you are self employed and reviewing a future home purchase, you need to speak to your mortgage broker to get the ball rolling before you fall in love with a property.
The previous methods for qualifying look to be changing and 'stated income' may no longer be possible. You may be required to provide much more information about your income especially if your T4's do not reflect it.
What does this mean to you? Paperwork and a potentially longer qualification time if you have to get the assistance of your accountant.
2011 is the first year that that over 400,000 baby boomers a year turn 65. The impact of this shift will be far reaching. Although Calgary is a young city in comparison to others we will also see an impact.
I am already working with a few folks reaching retirement that are looking to downsize from large family homes to something that suits their future needs. The hard part is defining what that looks like. Not everyone is ready to go from 2400+ sq feet in a private residence to a 900 sq ft condo. In fact, many are actively looking to keep a private residence, but maybe one where the snow is cleared or there is a greater sense of community and access to amenities. Commute to work is no longer a priority, but a short trip to visit grandchildren is now high on the list. Homes need to be of quality construction as that is what these folks are used to and would accept nothing less. Homes also have to be designed for being home all day and provide the light, appropriate layout and access to make day to day living comfortable. This package in the right price point is not something that is in vast numbers on market.
The other side of the coin is that I am seeing more families looking for homes that can accommodate both their children as well as their own parent(s). Whether due to health reasons, childcare or economics, more families are looking at options as they begin to care both for their children and their parents. The sandwich generation is growing too.
While some folks are looking to specialize in working with an older demographic, I don't see it all too different. It is still providing exceptional service to help folks figure out what they need and introduce them to what is available on market. It is being honest about the current value of their home so they can make productive decisions and working with them to prepare in a way that makes the transition easier. Whether it is taking the time to downsize belongings first, identifying required upgrades, finding just the right new home or even working with family to connect folks with the right experts to manage family affairs, it is all part of the process.
A thought to builders and designers: If you are building beautiful bungalows and villas, consider parking and stairs. I have had a number of folks turn their backs on new construction because access wasn't well considered. This is Calgary after all. And don't forget that these folks may have downsized, but they now have their family and grandchildren to host for dinner. While many folks no longer prize a large dining room, many baby boomers focus on family and hosting those they love. They want to enjoy a meal without seeing the dishes. :)
If you or your family are looking for your new home, give me a call. I am happy to help.
It is -16 celcius outside right now and overnight it is expected to go down to -23. It is the start of winter in Calgary.
This morning we woke up in our home to find our windows completely frosted over with ice and condensation. The source, drying mudding from drywall work in our basement, resulted in much higher than normal humidity levels. After a few hours of cleaning, a trip to the store to buy a dehumidifier was in order.
If you find your windows regularly do this in cold weather, some investigation is required to keep your home healthy and to avoid potentially costly repairs. During home inspections, I've often heard inspectors note water damage to window frames and surrounding drywall. Often this may have been caused by humidity rather than a leaking window. The danger of high humidity is also that mould can result.
If the cause is a humidifier set too high or too many plants in a particular area, that is easy to fix, but it may also be an indicator of water issues in your home.
A resource on the City website is the Guide to Developing Secondary Suites. This document outlines the process and requirements. For example, people sometimes see an R2 zoning designation and think a property can have a rentable basement suite. The property must also be reviewed for zoning, setbacks, parking, parcel width/depth/area, building code and many other considerations so careful review is necessary.
The Secondary Suites Grant Program is currently scheduled to end in May 2012. It offers a grant of up to $25,000 to cover 70 per cent of the costs of developing or upgrading a legal secondary suite. Participants must commit to having the suite available to rent for at least five years at no more than average market rent for secondary suites.
On Sept 1, 2011, new rules come into effect for home inspectors in Alberta. The new rules will change expectations, guidelines, contracts and in some cases, who remains working as a home inspector. If you are purchasing a home during this time, give yourself some extra time to book an inspector and understand the new terms of service.
Share your photos and videos with Royal LePage and you could win one of three prizes: $1,500 for 3rd prize, $3,500 for 2nd prize and $20,000 for the Grand Prize!!!!
The double-up advantage allows you to make an extra payment usually equal to your normal monthly payment. Depending on your financial institution, you can make anywhere from 1 to 12 double up payments annually.
Each double-up payment is applied directly to the principle on your mortgage. This means you save thousands each and every time you make one of these double-up payments. Even one double-up payment per year can make a difference.
Example:
Based on a $100,000 mortgage at 6.00% interest for a 5-year term amortized over 25 years. Your montly payment would be $639.81. You would pay $28,225.07 in interest over the first 5 years. You would pay $10,163.50 in principle over the same 5 years.
Implementing Double-Up Payment If you make one double-up payment each year during the average 5 year term you would save the following (monthly payments remain the same): Total Interest padi during the 5-year term: $27,810.89 Total Principle paid during the 5-year term: $13,777.26 Principle Balance left owing after 5 years: $86,222,74
What You will Save: If you paid one extra double-up payment each year for 5 years you would save in the following ways: You would save $414.18 in interest You would pay the principle down by $3613.73 If you continued this process every year you would save 21 months worth of payments; that's almost 2 year's worth of mortgage payments. At $639.81 per mortgage payment that means a savings of $15,355,44 (based on 6.00% interest over the full term.)
It can be hard for folks to save an entire mortgage payment to put down every year. If you can, consider this option to save on the long term cost of your mortgage. If not, consider some of the other tips such as rounding up your payments or switching to biweekly rather than monthly payments.
Courtesy of Daryl Marsden, President, Maximum Mortgages
One of the first conversations folks usually have when they are preparing to purchase a new home is financing. Sometimes people are very focused on the interest rate but don't always ask questions about payment options, payout penalties, admin fees and other terms of their mortgage. Life happens so even though you may think 5 years is a short time, you may need to pay out your mortgage early.
I highly recommend the read and to ask all the questions outlined when researching your mortgage options. I often suggest people speak to their current bank where they have an established history as well as a great mortgage broker to determine their best options.
If you need some help planning your purchase, give me a call. I am happy to help.
When most folks hear 'condo' they think 'apartment', but a condominium is actually a type of ownership rather than a type of construction. There are condo properties that are apartments, townhouses, villas and single family detached homes. Condos have common property that is shared and managed by the condo board and monthly fees that pay for the maintenance of common property. Common property may be a roof or just an access road.
It is important to understand how a particular condo complex functions, what maintenance fees cover and what funds are set aside in the 'reserve fund' for future expenses. When buying a condo, you are purchasing the unit but also a share of the condo corporation. Reviewing all available documents is essential to reviewing the health (and value) of the complex.
A reserve fund is basically money set aside to cover the costs of budeted expenses over the coming years. A reserve fund study is completed by a 'qualified person' and requested and reviewed by the condo board. There is not a government body that reviews the reserve fund study/plan. The study and plan outline future maintenance items and expected costs and then this is used to determine the maintenance fees. If the reserve fund is not sufficient to cover costs or an unexpected issue arises a special assessment may be issued. For example, a building may encounter a large maintenance issue that was unexpected and not budgeted in the reserve fund. This cost will be divided among the owners based on their share of ownership (unit factor) and a special assesssment will be levied.
Another thing to consider when purchasing a condo are the bylaws which determine how the condo is run and the rules enforced in the complex. If you have a pet, you need to check the bylaws to determine if pets are allowed and any restrictions associated. Condo living comes with some rules so depending on your lifestyle that may be good or inconvenient.
The most important thing in purchasing a condo is to do your homework. The Purchase Contract outlines the list of documents you should receive as part of the purchase. Go through the list and ensure you have everything you need. I highly suggest all of my clients get the condominium documents reviewed by a condo review company. The documents can be confusing and a professional opinion can give you the information you need to make sure you are paying the right price for your new home. Also, don't be surprised if your lender/bank want to review the documents as well. They are often reviewing these documents for purchases with less than 20% down so ensure your contract is well written to protect your interests.
If you are looking for a new condo and you haven't heard the above information from your Realtor or don't have a Realtor, be sure to contact some of the great folks in this city to help you. I am happy to help as well, but most importantly I want you to be well informed so you can feel confident in your decision and purchase of your new home.
One of my clients took possession of their new condo downtown yesterday. Check out the view! This unit has sweeping views from every room. Absolutely beautiful!
Some recent clients have provided some great testimonials that have now been posted. Thank you all for your trust and ongoing referrals. I have great clients!
Outstanding and professional service was provided to Marco and I from Monika. Punctual, knowledgeable, reliable and courteous! We love our new home and appreciate everything Monika has done for us. I would recommend Monika to family and friends for any residential real estate services.
- Anna
We've used Monika's services to both buy and sell homes. Monika is an outstanding realtor who provides extraordinary services. She knows the real estate market well and goes the extra mile to ensure her clients experience the results they seek in an efficient and timely manner. I would highly recommend Monika to others desiring a professional, personable, effective realtor who gets the job done.
- Leslie
Excellent all around!
- Tim
Monika, you are fantastic! Chris and I could not have asked for a more professional, caring Realtor. Thank you so much.
This morning the federal government announced mortgage rule changes. The reason? This measure is intended to rein in consumer debt and protect the housing market and the broader economy of our marketplace.
The new measures:
Reduce the maximum amortization period to 30 years from 35 years for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent. This will significantly reduce the total interest payments Canadian families make on their mortgages, allow Canadian families to build up equity in their homes more quickly, and help Canadians pay off their mortgages before they retire.
Lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes. This will promote saving through home ownership and limit the repackaging of consumer debt into mortgages guaranteed by taxpayers.
Withdraw government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs. This will ensure that risks associated with consumer debt products used to borrow funds unrelated to house purchases are managed by the financial institutions and not borne by taxpayers.
The adjustments to the mortgage insurance guarantee framework will come into force on March 18, 2011. The withdrawal of government insurance backing on lines of credit secured by homes will come into force on April 18, 2011.
If you have been prequalified for a mortgage and these rules impact you please contact your mortgage broker. If you are considering a purchase this year, it is best to first contact your mortgage broker to get a good understanding of your qualifications and how the various new rules may impact you. If you need help getting started or don't already have a mortgage broker or financial advise please contact me and I will direct you to the information you need.
Using this method you make an extra payment towards your principle every regular payment. Depending on whether you choose to make your payments monthly, bi-weekly or weekly you can choose to pay a little bit extra on your principle with every payment.
Many people use this method when on a restricted budget. It is easier to pay $50 to $100 each month than one lump sum. How much money and time can we save using this method?
Example: Based on a $100,000 mortgage at 6.00% interest for a 5-year term amortized over 25 years. Your montly payment would be $639.81. You would pay $28,225.07 in interest over the first 5 years. You would pay $10,163.50 in principle over the same 5 years. Principle Balance left owing after 5 years: $89,836.47
What You will Save by Adding $50 per month: If you paid an extra $50 per month, each month for 5 years. You would save $388.34 in interest You would pay the principle down by $3,388.34 If you continued this process every year you would save 18 months worth of payments; 1 1/2 year's worth of mortgage payments. At $639.81 per mortage payment that means a savings of $11,516.58
This method makes it easier for many people to budget and save.
Courtesy of Daryl Marsden, VERICO Canada Mortgage Direct. Contact Daryl at 403-605-5711.
p.s. Another idea to consider is to round up your payments. Sometimes for a budget it is easier to remember that your monthly mortgage payment is $900 than $865.81. If you can afford to pay the $900 then talk to your financial institution about rounding up your payments.
Whether buying or selling a home, it is important to know what to expect from a home inspection.
A home inspection is a standard condition of sale typically requested by most home buyers and is sometimes now even a requirement by a lender as part of financing. A home inspection is completed by a licensed home inspector and is generally paid for by the buyer. (Interview your home inspector and find out their background as not all inspectors are created equal.)
When a home inspection is scheduled, the seller is most often not at the property. Typically the buyer's Realtor will be at the home during the inspection. I highly recommend the buyer attend at least part of the inspection. Often the inspector will point out items of interest giving the buyer an opportunity to ask questions and become more familiar with the property. Often the buyer will learn important things about the home such as locations of shut off valves, ongoing maintenance requirements and the like.
A home inspection usually takes 3 hours for a typical mid sized home and the main purpose is to review major items in the home such as the structure, electrical, plumbing, foundation, roof, etc. The appliances will also be inspected as all are required to be in working order as per the Purchase Contract. The inspection is not intended to review cosmetic issues, wear and tear or by-law compliance.
The Standards of Practice document provided by Greg Romp of the Home Inspection Company I have worked with Greg on numerous transactions and highly recommend him.
Today you can get 25 or 35 year mortgages. Some folks choose a longer amortizaton period to manage payments, but sometimes people have a small mortgage compared to their williness or ability to pay it down and don't realize they can shorter the amortization period on their mortgage to save themselves significant amounts of money.
This tip can be a bit more painful in the wallet, but it can also have dramatic effects on how much money you save in interest and payments. By reducing your amortization period by just 5 years you can save thousands of dollars.
You can instruct your bank to do this on anniversary dates or when your current term expires. Some institutions will allow you to change this at any time but may charge a penalty for doing so. Some banks will offer it as an incentive to attract new business.
Example: Based on a $100,000 mortgage at 6.00% interest for a 5-year term amortized over 25 years. Your montly payment would be $639.81. You would pay $28,225.07 in interest over the first 5 years. You would pay $10,163.50 in principle over the same 5 years.
Implementing a Shorter Amortization Period: Based upon the same $100,000 at 6.00% interest for a 5-year term amortized over 20 years. Your monthly payment would be $712.19 Your total interest paid in 5 years amortized over 20 years would be $27,527.47. You would have paid a total of $15,203.93 in principle over the first 5 years.
What You Will Save: Once again you save $697.60 in interest and save 5 years of payments. You also pay an additional $5,040.43 in principle over 5 years.
This method could cost you $72.38 more each month, but look at the savings. Could you spare $72.38 extra to save you that much money and be debt free on your home 5 years sooner?
Courtesy of Daryl Marsden, VERICO Canada Mortgage Direct
p.s. If your mortgage is higher than this example and the 5 year adjustment would be too much, then consider just rounding up your payments by whatever is comfortable to you. For example, round up a biweekly payment of $532.99 to $550.00 or even $580.00. Small changes can make a big difference over the life of a mortgage.
I've been working with a few folks lately that are considering this time in the market as an opportunity to trade up to a larger home. The numbers make sense.
If home prices dropped by 5%, here is what it would look like if you decided to trade up:
Home Price: $200,000 Home Price: $400,000
Sell at $190,000 Buy at $380.000
Loss = $10,000 Savings = $20,000
The smaller loss at sale will be compensated for by greater savings at purchase, resulting in a significant net gain.
If you have been considering a trade up to a large home, consider your numbers and if this is the right time for you.
I've talked to a few folks recently that are kinda sitting on the fence regarding the purchase of a new home.
One of the most important considerations in waiting is to consider mortgage rates. Today, someone with good credit can get a 3.69% fixed 5 year mortgage. Lets compare that to a 6% mortgage which is what folks saw in 2006/2007.
The Jones family wants to buy a home around $400,000 with 5% down ($20,000). Lets estimate heating costs at $100 per month, property taxes at $1850 per month and monthly debts of approx $300. We will also calculate on a 35 year ammortization and include CMHC premiums.
At a 6.0% interest rate, the family income required to qualify would be $92,616.94. Monthly payments would be approximately $2770. At a 3.69% interest rate, the family income required to qualify would be $71,667.56. Monthly payments would be approximately $2211.
Did you expect such a big difference?
If you have locked in a low mortgage rate, talk to your financial advisor/mortgage broker to understand your qualifications and payments should you let the rate go. While some folks believe the market will decline a bit more, others believe it is already on its way up so prepare yourself with the information you need to make your best decision.
As always, don't hesitate to contact me with questions. I'm happy to help early in the buying process to help you find your new home on your terms.
Cheers,
Monika
Numbers provided by Daryl Marsden, VERICO Canada Mortgage Direct
Many of my clients have children. The baby boom in Calgary in recent years has resulted in many little munchkins and those munchkins will soon be or are just starting school.
With some schools at capacity, parents are working hard to choose homes in catchment for the schools they prefer. When consulting with buyers as they search for a new home one of the items on their list is often 'close to a good school'. The difficulty for me is what does 'good school' mean to you? With many different options regarding schools including public, catholic, charter, francophone and private and with the Calgary School Board working hard to provide options to parents, I find this one just plain hard to answer for folks.
Instead, what I can do is provide buyers with the information to make the best choice for them. Below are a few resource to help you decide the best school for your little munchkins.
