Increasing your payment by a small amount can yield huge savings.

As you know, you're paying interest every day you have a mortgage. So the sooner you reduce the amount you owe, the less interest you pay. One relatively painless way to do this is by increasing your payment by a small amount. Then all you have to do is sit back and let time work it's magic—before you know it, you'll have chipped thousands of dollars off your mortgage! 

Let's say you have a $200,000 mortgage at 4.5% with a 30 year amortization, and you're in year 3. If you increase your monthly payment by $100—roughly the cost of one premium coffee per day—that reduces your amortization by 51 months and saves you $24,622 in interest over the life of the mortgage! Now, I'm not suggesting you give up all of life's pleasures to pay off your mortgage faster. But it's obvious that doing something small can make a BIG difference. 


Information is compliments of:
Mike Havery AMP, Mortgage Planner
http://www.themortgagearchitect.ca/

As this graph shows, March was the best month for sales volume in 4 years.

The supply levels are significantly higher now than in the spring, which is causing the market to balance out a bit more than we witnessed in the winter months. If supply outweighs demand, prices drop.

The sales-listings ratio is actually down from february, which isn't that uncommon, but a big contrast to what happened the same time last year.

Becuase of the large unbalance of demand outweighing demand over the winter months, average prices skyrocketed over those of the past 4 years.

YOu can see the large disparity of available homes for sale over the course of 2009 from the above graph which I believe helped fuel the demand as the signs of economic recovery appeared.

February Market Graphs - GTA

GTA REALTORS® REPORTING JANUARY MID-MONTH HOUSING STATISTICS

TORONTO, January 18, 2010 - Greater Toronto REALTORS® reported 1,749 existing home sales on the Multiple Listing Service (MLS®) during the first two weeks of January. This resultwas almost double the 888 sales reported for the same period in 2009,when sales had dipped to a recessionary low.

“We have had a strong start to 2010,” said Toronto Real Estate Board President Tom Lebour. “Widespread sales growth in terms of geography and housing type indicates that many households remain confident in their ability to purchase and pay for a home over the long-term.”

The average price for transactions in the first two weeks of January was $395,307, compared to an average of $332,495 for the same period in 2009.

“Double-digit average annual price growth will continue through the first quarter of 2010 as sales remain high relative to listings and we continue to make comparisons to last year’s winter downturn,” said Jason Mercer, TREB’s Senior Manager of Market Analysis.

Signs of Recovery for 2010: More Listings

January 9, 2010 -- I would like to take this opportunity to wish you all a Happy New Year. We have just crossed the threshold into 2010 and I think it is important to look back on the events that impacted the GTA housing market in 2009 and also consider what the future holds.

Last Thursday, the Toronto Real Estate Board (TREB) released MLS® figures for December resale home transactions in the GTA. There were 5,541 total transactions, with an average price of $411,931. The December results capped off what turned out to be a very impressive year. Sales increased 17 per cent annually to 87,308 – the second highest level of sales under the current TREB boundaries (the record of 93,193 was reached in 2007). Average price for the year climbed to $395,460 – a four per cent increase over 2008. However, simply looking at these numbers on their own masks the interesting ride we took over the last year.

In the first quarter of 2009, Canada was in a recession and existing home sales and prices suffered. In fact, sales had been dropping throughout 2008. According to Jason Mercer, TREB’s Senior Manager of Market Analysis, the balance of the housing downturn in the GTA actually took place in 2008:
“The housing market was and is a leading indicator of changing economic conditions. As we moved through 2008, Canadian consumers were hearing more and more bad news regarding the deteriorating state of the US economy and the problems this would pose for Canada. Households, unsure of what the future would hold in terms of employment and income, put their home purchasing plans on hold well in advance of reported GDP and employment declines. Essentially, downward trending home sales reflected eroding consumer confidence,” said Mercer.

With this back-drop, many people were surprised to see a strong rebound in resale housing demand commence in the late spring of 2009 when unemployment was still rising. Mercer further suggests that the quick recovery made a lot of sense and, in fact, was a key driver to broader economic recovery:
“The Bank of Canada reduced interest rates to record lows in response to the economic downturn. This monetary stimulus had the desired effect. Households that were confident in their employment situation moved quickly to take advantage of the affordable housing market in the GTA. The spin-off consumer spending on housing-related items like furniture, home improvement products and renovation services certainly helped economic recovery,” continued Mercer.

With broader economic recovery seemingly in place, what will the future hold for residential real estate in 2010? I asked Jason Mercer to comment both on the short-term and the long-term prospects in the Toronto area. Here is what he had to say: “The big story in 2010 will be listings. Homes available for sale were in short supply during much of 2009. As home owners react to strong sales and price increases seen in 2009, listings will increase over the next year. With more choice in the market, annual average price growth should moderate into the single digits,” said Mercer.

“Long-term prospects remain positive. Sustained demand for ownership housing is based on population growth, which in Canada comes from immigration. The GTA remains Canada’s single greatest beneficiary of immigration. With Toronto’s ethnic, cultural and labour market diversity, this should continue. Many newcomers will eventually find their way into the home ownership market, helping sustain long-term growth in sales and prices,” continued Mercer.

I know we will all be watching the economic situation closely in the coming year, including changes in the housing market. I look forward to discussing housing market trends with you throughout 2010.

Tom Lebour is President of the Toronto Real Estate Board, a professional association that represents 28,000 REALTORS® in the Greater Toronto Area.

December Housing Market Charts

Making the jump to home ownership

If one of your long-term aspirations is to become a homeowner you’ll be happy to know that your dream may well be within reach.

To begin planning for your transition from renter to homeowner, it’s essential to have a clear idea of what you can afford by getting pre-approved for a mortgage.

To do so, you need to provide pertinent details like proof of income, to a mortgage broker or financial institution. They will perform a credit check and thereafter, advise you of the maximum mortgage amount for which you qualify. Be sure to obtain a number of quotes to get the most competitive rate.

While as a general rule your monthly housing costs shouldn't exceed 32 per cent of your gross monthly income, there are a number of different mortgage payment options that can make carrying costs more manageable.

Conventional mortgages require a down payment equivalent to 20 per cent of the purchase price however; you can take advantage of a program that offers homebuyers who have a down payment of at least five per cent, access to mortgage insurance, the cost of which can be added to your mortgage.

One option to come up with your down payment is to utilize the Homebuyers’ Plan, which allows homebuyers to make a tax-free withdrawal of up to $25,000 from RRSPs that have been owned for at least 90 days, provided the funds are repaid into an RRSP within 15 years.

If you’re a first time homebuyer, a number of other incentives are available as well. The First Time Home Buyers’ Credit provides a 15 per cent credit on up to $5,000 of closing costs, translating to maximum tax relief of $750.

You are also eligible to receive rebates of the provincial and Toronto land transfer taxes. The maximum provincial land transfer tax (LTT) rebate for first time buyers is $2,000 and the maximum Toronto LTT rebate for first time buyers is $3,725.

Additional benefits are available to all homebuyers. All resale homes for example, are exempt from the GST and all primary residences are exempt from the capital gains tax, which relieves you of paying tax on profit achieved from the sale your home.

Be sure to consult a REALTOR® who can fully explain the provisions of government programs and help you identify homes suited to your budget.

One interesting opportunity for example, is currently being offered through the non-profit organization Options for Homes, which sells condominiums at cost before construction. Units can be reserved for $100 and a loan of up to 15 per cent of the suite’s price can be provided. It’s essentially a second mortgage that, along with a pro-rated share of any price appreciation, only has to be repaid when you sell or lease the unit.

Given that there are so many options to help you go from renting to buying, you can make this year the year you become a homeowner. For more information talk to a REALTOR® and visit www.TorontoRealEstateBoard.com

Tom Lebour is President of the Toronto Real Estate Board, a professional association that represents 28,000 REALTORS® in the Greater Toronto Area.

Home away from Home - President's Message

August 7, 2009 -- Statistics show that Greater Toronto Area residents are excited about real estate again. July’s 9,967 sales set a best monthly record, up 28 per cent year over year. The previous month also set a record for June, up 27 per cent from the year prior.

We’re even seeing signs of life in the United States resale housing market. In July, the National Association of REALTORS® reported that pending home sales rose for the fourth consecutive month. Existing home sales also increased, for the third consecutive month, with available inventory easing and prices remaining low.

This means that if you’re comfortable with your residence here at home, now is an opportune time to invest in a vacation property south of the border.

Florida alone welcomes hundreds of thousands of Canadians each year, with many snowbirds taking advantage of United States government provisions that allow us to spend up to six months a year there without having to fulfill visa requirements. That’s plenty of time to enjoy homeownership in a warmer climate.

While current market conditions are favourable to making a foreign investment, a number of other factors should also be taken into consideration.

The exchange rate is another important detail. The value of the Canadian dollar against other currencies changes daily. Whether you’re planning to buy in the United States or further abroad, look for places where the currency is weak or on par with our dollar to achieve optimal purchasing power.

Healthcare is also a consideration. If you stay away longer than six months you could lose access to medical coverage here at home. As well, our healthcare system will only cover part of out-of-country expenses for accidents and illness. Short-term travel insurance is inexpensive but long-term coverage can be costly.

Depending on the structure of your home, property insurance could also be less accessible, which is a significant issue given that some locales routinely experience severe weather.

In certain places abroad, property can come with inherited debt, so it’s important to ensure that you clearly understand all agreements, particularly if they are in a foreign language. Be aware as well, that depending on where you choose to buy, you may pay higher property taxes than local residents. These are just two examples of why it’s important to research the regulatory aspects of the region in which you choose to buy.

It’s important to build a team of professionals to guide you through the process, beginning with a REALTOR®. A Greater Toronto REALTOR® can help you begin the process by providing a referral to a local expert. It’s also important to enlist the services of a lawyer and a surveyor, to be clear on your property rights, and a tax expert, to take full advantage of government programs for homebuyers.

Establishing these important contacts will also help you to gauge other key characteristics like the cost of living, attitude toward foreigners and the crime rate.

Once your transaction is complete, be sure to set up automatic withdrawal processes in your foreign bank account so that oversights don’t jeopardize your home ownership.

Despite the financial planning and awareness of regulatory issues required, buying a vacation property abroad has its share of rewards.

Even taking into account the capital gains tax that is payable when you sell your home away from home, buying a foreign property can bring a healthy return on investment and years of enjoyment to your life. To find out more, talk to a REALTOR® and visit http://www.torontorealestateboard.com/.

Tom Lebour is President of the Toronto Real Estate Board, a professional association that represents 28,000 REALTORS® in the Greater Toronto Area.

Mid Year Report

Press Release from the Toronto Real Estate Board President, Tom Lebour:

July 10, 2009 -- Throughout the next year, I will be bringing you news on the Greater Toronto Area resale housing market and there couldn’t be a more exciting time to be taking the reins as President of the Toronto Real Estate Board.

Greater Toronto REALTORS® reported 10,955 sales last month, making it the best June on record. Compared to June 2008 when 8,600 homes changed hands, last month’s sales increased an incredible 27 per cent.

The news with respect to house prices is also favourable. The average price of a home in the GTA was $403,972 last month, up two per cent from a year ago when the average price was $395,866.

In the City of Toronto there were 4,362 sales compared to 3,481 transactions a year ago. The average price meanwhile, was $441,703 compared to $433,082 last June.

In the 905 Region there were 6,593 transactions in contrast to 5,119 sales a year ago, while the average price was $379,008, up from $370,559 a year ago.

With 18,704 properties available for sale, June’s active listings were down 30 per cent from a year ago when 26,697 properties were on the market.Limited availability can have a positive effect on the market but it is only one factor in the equation. Most significantly, low borrowing rates continue to make home ownership more affordable. Currently the five-year fixed rate remains at about five per cent.

As we move into the autumn months, we may see some seasonal moderation however; June’s numbers demonstrate the GTA resale housing market has weathered the global economic climate with remarkable resiliency.

From a broader perspective the news is also encouraging. In Ottawa the province’s second biggest city, housing sales increased 12.5 per cent in June and the average price grew three per cent compared to a year ago.

On the national front, the Canadian Real Estate Association reported 49,521 sales in May, within one per cent of last May’s total. The average house price in Canada meanwhile, peaked to a monthly record of $319,757 in May. The Organization for Economic Co-operation and Development, a British based think tank, also expressed cautious optimism with respect to the world economy recently. Its latest report, which covers more than 80 per cent of the world economy, is the first in two years to see previous projections for economic growth revised upwards rather than downwards. After the deepest decline since WWII, global economic activity is showing signs of stabilization and in fact, Gross Domestic Product is expected to increase moderately in all of the G7 nations in 2010.

One key concern at home and abroad is employment. Canada’s unemployment rate in May was 8.4 per cent - the highest rate in 11 years, and some forecasts project it to rise to 9.3 per cent by the end of the year. This is favourable though, compared to estimates of a 10 per cent global unemployment rate at the year’s close. Given that we’re all inextricably linked, the most significant factor from a global perspective will be the timing that world leaders choose to scale back economy fuelling measures; doing so too soon could cut off growth while leaving it too late could cause government deficits to skyrocket.

From nearly every perspective, the road ahead won’t be completely free of bumps but it can be stated with relative certainty that we can look forward to a much brighter picture in real estate and the economy in general in the months ahead.

Tom Lebour is President of the Toronto Real Estate Board, a professional association that represents 28,000 REALTORS® in the Greater Toronto Area.

Canadian Real Estate Prices

All this talk of recession has a lot of people thinking about what their property may be worth in today's economy. To shed some light on things, I present you with the Canadian Real Estate Accosication's (CREA) National statistics on the housing market, presented by way of average prices from across the country. It might surprise you that some provinces have seen average price increases from a year ago.

The National Average price in April 2009 was $306,366, while in 2008 it was $316,438. Although this doesn't look overly great to start with, the national average price drop is largely due to the falling prices in cities that were considered overinflated, such as Calgary, Vancouver and Victoria.

Other notables that saw a decline in the average price were Edmonton, down nearly $29,000; and Toronto, down over $13,000. Surprisingly though, Hamilton, Ontario (Steel Town), which is located 30 minutes West of Toronto witnessed an average increase of nearly $3,000. It's hard to read into the macroeconomics of it, but that increase in price could likely be due to a few factors, such as the revitalization of the city as well as the New GoTrain line that now services Toronto Commuters.

But it's not bad news for the rest of the country. Provinces such as, Saskatchewan, Manitoba, Quebec, Nova Scotia, New Brunswick, PEI, and Newfoundland have all seen increases in the average sale prices. (See http://www.crea.ca/public/news_stats/statistics.htm for more details on each).

Overall, the Canadian Real Estate Market appears to be healthy, although making some adjustments in some markets, which we largely feel is due to the strong financial condition of our Big Five Banks. Please visit http://en.wikipedia.org/wiki/Big_Five_(banks) for more details on the Big Five.

Should I pay down my mortgage or invest in my RRSP?

This question is a common one, especially when extra cash becomes available and you need to make decisions about how to best allocate your dollars for long term benefit. There is no easy answer and the decision can be a very personal one.

Here are a few tips that can help you make the right choice for your personal circumstances.
Pay off all non-tax deductible high interest rate debt first, such as credit card balances or consumer loans. Then consider using the extra cash for mortgage pre-payment or RRSP contributions.

If you have an uneasy relationship with debt, then eliminating all your debt including your mortgage should be your priority. In other words, if you cannot sleep at night because you worry about your debt load, pay it off as fast as possible. After the debt is brought to a level at which you feel comfortable, then your priorities can more comfortably shift to building your savings. After all, paying off your mortgage is the least risky of all strategies and for highly risk-averse investors; this may be the best choice.

When deciding whether to put extra cash towards your mortgage or towards your RRSP take into consideration the rate of interest paid on the mortgage versus the expected rate of return earned on your RRSP. If you expect to pay a consistently higher rate of return on your mortgage than you expect to earn on your RRSP then it’s likely a good strategy to pay down the mortgage as fast as possible. You can then shift your strategy to savings when the debt is paid off. This is a good rule of thumb in many cases.

Rates on most mortgage debt in recent years are relatively low. As a result, many investors are looking for a way to lower their debt load, but not exclusively. They also want to take advantage of tax-efficient investing in their RRSP to grow their nest egg.

Many investors use a common two-step strategy for using extra cash which can simultaneously achieve the goal of paying down their mortgage faster while also building their RRSP.

1. The first step in the strategy is to invest the extra available cash in the RRSP.
2. The second step in the strategy is to use the tax refund generated by the extra RRSP contribution to pay down the principle of the mortgage.

In certain situations, this strategy can result in the maximum financial benefit over the long term.

The term and interest rate on the mortgage along with the expected return on your RRSP savings are all relevant when making the decision about where to allocate extra cash. Each situation is different. In order to see how all the variables interact, it’s often useful to use a financial calculator specifically designed to assess the impact of various strategies on your long-term financial picture. These types of calculators are available on the Internet and through your financial advisor.

Talk to your Dundee Financial Advisor when extra cash becomes available. Together you can determine the best way to generate maximum benefit from your dollars in a way that suits your personal situation.

This article comes courtesy of:

Scott Munro Financial Advisor
Dundee Wealth Management