Mortgagesuccess’s Blog

With interest rates sitting at record lows, it’s never been more affordable to add a rental property to your investment portfolio. But is becoming a landlord right for you?

1. Are you entrepreneurial-minded?

While buying a rental property may seem like straight-forward endeavour, it is, in essence, a form of self-employment. As such, you will have to be able to do the math (to ensure your investment is profitable), know the tax implications, acquire appropriate tenants, and hire the right property manager (or manage the maintenance issues yourself). A lot more work than simply finding a tenant and collecting the rent!

2. Does it make financial sense?

In order for a rental property to be profitable, you have to make sure that it will generate a steady monthly income – after mortgage and operating costs – and eventually appreciate in value. That means buying in an expensive market like Toronto or Vancouver may not make as much sense as a smaller market such as Kitchener, Ontario where property costs are lower. The key is to look for an area that has increasing job and population growth.

3. Is it the right time to buy?

If you’re approaching retirement, an investment property may not be the best option for you. The same holds true if you’re just scraping by – and if your property will start losing money should interest rates rise. As with all real estate, you should view investment properties as long-term investments – giving them plenty of time to appreciate in value, and less vulnerable to interest rate hikes. To find out if now is the right time to by, it’s worth talking your decision over with me, or your financial advisor.

If you’re in a hot sellers’ market, it can be tempting for home buyers to put in more attractive offers by waiving the all-important home inspection.

While it’s a risky endeavour, many home buyers justify it by saying that home inspections can’t catch every problem anyway. There’s a bit of truth to this thinking – all one has to do is watch a couple episodes of Holmes on Homes to get an idea of some of the glaring problems home inspectors can sometimes miss.

That being said, it’s probably better to have a home inspection that misses a couple things rather than no home inspection at all. And while it’s true that home inspectors don’t have X-ray vision – and therefore can’t look behind walls and under floors – there are a number things that they can catch, including:

- Knob and tube wiring

- Old electrical systems

- Galvanized plumbing (that’s prone to rusting, leaking and plugging)

- Roofs in need of repair

- Crumbling foundations

- Windows in need of replacement

- Moisture

- Air leakage

- Insufficient insulation

In all likelihood, your real estate agent or mortgage broker probably has a home inspector that they can refer you to. It’s still a wise idea to do your research and potentially talk to past clients, just to find out what kind of service they provide. You might also want to see if they’ve been reviewed on HomeStars.com.

Protect your home investment by doing your research and finding a reputable home inspector. It will likely save you a lot of headaches down the road.

Here is a little article from the Edmonton Journal.
If you want to know more about cmhc check out:https://www.cmhc-schl.gc.ca/
Edmonton Journal February 14, 2012

Housing starts in the Prairies will increase almost 10 per cent this year, the Canada Mortgage and Housing Corp. predicted Monday. The CMHC said builders will begin construction on 43,000 housing units in 2012 in Alberta, Saskatchewan and Manitoba, up from roughly 39,000 in 2011. The corporation predicts the number will reach 43,450 in 2013.

Lai Sing Louie, the CMHC’s regional economist for the Prairies, credited the increase to economic activity. “Employment opportunities in the Prairies will continue to draw migrants, supporting new housing demand,” he said. Last week, Statistics Canada released its latest national population census. Population growth in Alberta and Saskatchewan ranked first and third, respectively, among the provinces.
© Copyright (c) The Edmonton Journal

If you’re looking for something that says “I love you” this Valentine’s Day, skip the flowers and chocolates and set up a time to talk to your partner about debt. Okay, okay – it’s probably not the most romantic strategy. And it could likely land you in the dog house. But it could also potentially save your relationship.

It’s a well-known fact that financial disagreements are one of the leading causes of divorce. The key is to get on the same page, take the emotion out of debt, and tackle it as a team. Below are a few tips to get the ball rolling:
1) See the whole picture.
Sit down and write down all your debt – not just your joint debt. Lay all your credit card bills on the table -along with lines of credit and any other debt you may have – so that it’s all out in the open. The worst thing you can do is keep money secrets from one another.
2) Come up with a budget.
Figure out how much money is coming in and how much is going out. If the latter column is greater than the former, you’ll have to make some cuts. Work as a team to figure out where you can comfortably trim spending and pay off debt. If that proves difficult, look for opportunities to add extra income as well.
3) Set a money-focused date night.
This can be once a week or once a month. It can be over a glass of wine on a Friday night or after the kids go to bed on a Tuesday. The key is to talk about it, note your progress, and encourage one another. Remember, it’s not just about the money – it’s about maintaining a healthy relationship, too.

Canadian banks continue to send out mixed messages to consumers and mortgage brokers alike.

The dust had barely settled from the recent rate war that saw the Big Banks offer historic low rates, when the head of TD Bank announced that his institution is tightening lending standards in a response to a “genuine concern” about the country’s housing boom and rising consumer debt levels.

“Household debt numbers are coming up to U.S. levels, so that is causing us a concern,” Toronto-Dominion Bank CEO Ed Clark told Bloomberg Television in New York on Thursday.

Canada’s banks are in talks with the federal government about ways to curb mortgage lending to ensure the country avoids a U.S.-style housing correction, he said. The banks have responded by restricting some lending and raising prices on higher-risk borrowers, Clark said.

“We are trying to have a national dialogue that changes people’s behaviour and a number of banks like us have said ‘ok, if we think people’s debt loads are getting high let’s start to crank up the pricing a little.”

For John Panagakos, principal broker at Dominion Lending Centres-Home Financial Inc. in Toronto, it’s all a little confusing.

“The banks can’t seem to make up their minds. Do they want low rates like we saw last month or are they concerned about low rates and increasing consumer debt?” he told MotgageBrokerNews.ca. “I don’t agree with direct government intervention. The market place should manage on its own.”

While he agrees consumer debt is high, Panagakos thinks we have to look at the situation more closely, because the Canadian market “is not the same as in the U.S. and maybe we can afford these debt levels.”

According to Clark, the Canadian government prefers that banks “tweak” their own lending standards rather than it imposing “major tightening” of mortgage-lending rules.

“They’re worried that the Canadian economy is slowing down right now and that’s taking out a bazooka,” Clark said. “We have seen the banks in a series of small moves say ok, ‘why we don’t tweak here and tweak there and see if we can tighten the rules.’”

Ahhh…February. With the holidays over with and winter in full swing, you’ve probably been cooped up in the house long enough (with few distractions) that the clutter is getting to you. If you’re looking for organizing inspiration, look no further! Here are a few helpful articles to get you on the path to inner tidiness:

Reduce kitchen clutter

This article from Real Simple discusses a number of tips to better organize your kitchen. The smartest? Arrange kitchen utensils according to usage – with the least-used items on those hard-to-reach shelves. http://www.realsimple.com/home-organizing/organizing/kitchen/smart-ideas-kitchen-00000000013845/index.html

Charge gadgets in one place

It can be challenging to find a special place to charge all the gadgets we use in our daily lives. This article teaches you how to install a wall outlet with USB ports attached to it.

http://www.apartmenttherapy.com/how-to-give-your-wall-outlet-a-usb-upgrade-165394

A few tips from Martha

The domestic diva herself has a number of tips to get your home in tip-top shape. http://www.marthastewart.com/274903/25-closet-storage-and-office-organizers/@center/276989/organizing#/308034

It gives the example of a 30-year-old individual with RRSPs valued at $30,000, earning 8% per annum on average. If there were no HBP withdrawal, the RRSP would grow to $139,829 by age 50 and $301,880 by age 60. But take $20,000 out and repay it over 15 years and the RRSP would be worth $92,215 at age 50 and $199,805 at 60.

Instead, the article suggests taking advantage of a TFSA and drawing a down payment out of this newer investment vehicle. While there are definite pros to using a TFSA, in most cases the government’s Home Buyers Plan is just the more logical option. Here’s why:

1) Tax savings when you need them.

Let’s face it - most people purchase their first home relatively early in their working life. When you’re not earning a lot, you’re not saving a lot either. Socking money away in an RRSP is great primarily because of the tax return you receive every spring – money you can either put back into your RRSP, or spend elsewhere. Either way, it’s a great incentive – and great motivation to choose the RRSP over the TFSA.

2) You can only save so much.

To go with the above point, early in your career, there’s only so much money to go around – and you can only save so much. While the article suggests using $20,000 from a TFSA and combining it with $25,000 in the HBP to put towards a new home, realistically most people just don’t have this type of cash.

3) Retirement is still a ways off.

While you will lose some of the advantages of compound interest by dipping into your retirement savings, there is nothing stopping you from increasing your RRSP contributions down the road to make up for the loss. You also aren’t obligated to take the full 15 years to pay back the funds you borrowed under the HBP. The quicker you pay it back, the quicker you can start saving again.

4) A home is an investment, too.

Yes, dipping into your RRSP to purchase a home will cost you in accumulated growth. But by using that money to purchase a home, you’re essentially diversifying your retirement nest egg. If your home is a good investment – that will either increase in value or, at the very least, keep its value over time – you’re in a good place. Come retirement, you’ll likely be mortgage free with a nice piece of equity on your hands.

Pulling your down payment from an RRSP versus a TFSA also has a lot to do with your personal financial situation. In many cases, a TFSA makes more sense. To find out what’s right for you, give us a call and we’ll be happy to help.

So which mortgage should you go for? Well, as always, it’s incredibly important to read the fine print. BMO’s mortgage offer expires on January 25, and, because it’s closed, it doesn’t offer the flexibility to pay the mortgage off early. The 4-year options, in most cases, offer the same early payment flexibility as a typical open mortgage.

Remember, when shopping for a mortgage, you have to think about so much more than just the rate. If you might be moving before the mortgage term is up, you’re going to require something portable. If you’d like the flexibility to put down a lump sum and pay the mortgage off at some point, an open mortgage is more favourable than a closed. And when it comes to term length, most people move before a 5-year term is up anyway – so a 4-year term could be just perfect for you. Or, if you’re pretty sure you’re not going to move in the next 10 years, you may want to consider a 10-year mortgage which is currently sitting at record lows under 4%.

If you’re in doubt, feel free to drop me a line. I’d love to help you find the mortgage that is perfect for your needs, at a rate that you can afford.

Attendees of a real estate investment seminar wanted to pass on these helpful tips:

1. Before purchasing a property, always get a survey. That two-dimensional drawing might bring to light information that you may have missed otherwise – such as the actual property line of a residence.

2. Take your tape measure to every viewing. You never know when certain measurements will come in handy – especially when you’re trying to visualize the property later.

3. When obtaining a mortgage, don’t be afraid to go for the going 4-year rate instead of the traditional 5-year. The rates are often lower, and many times a 4-year rate is all you need.

4. Don’t believe the stats – always think regionally. While Canada’s real estate market may be heating up, the regional pocket your interested in may be a buyer’s market – and, resultantly, may offer some great deals.

If you have a variable rate mortgage, you’re not alone. A new Bank of America/Merrill Lynch report reveals that 66% of Canadians now have mortgages that are floating with prime – up from the typical 30%

There’s absolutely nothing wrong with having a variable rate mortgage, but the Merrill Lynch report reiterates that these mortgages would be affected by an increase in the Bank of Canada’s overnight lending rate – something not all mortgage holders are prepared for.

While the Federal government changed the mortgage rules so that anyone applying for a variable rate must now be qualified on the five-year fixed, let’s be realistic – not everyone ends up paying that higher rate. To free up monthly cash flow, most mortgage holders prefer the lowest rate possible so they can afford additional expenses more comfortably. Judging by the Bank of Canada’s most recent announcement, it doesn’t look like it’s going to be raising interest rates anytime soon – but that doesn’t mean you shouldn’t get your finances in order now.

At one point, your household was approved on the going five-year fixed rate – so it might be a wise move to take a look at your budget, trim frivolous spending and increase your mortgage payment. That move will lessen the blow when rates eventually rise. Because they will rise – and when they do, they may increase quicker than you currently expect. As little as a 2% increase in the lending rate will erase any savings variable rate holders are currently experiencing. If the Bank of Canada increases its lending rate by increments of 0.5%, you’ll only have four months to adjust.