TREB President's message - New mortgage rules have affected home sales

December 14, 2012
A moderate number of resale home transactions took place throughout the Greater Toronto Area (GTA) in November, with 5,793 homes changing hands. This represented a 16 per cent decrease from 6,908 sales in November 2011.
In Toronto 2,308 transactions took place last month compared to 2,952 sales a year ago - a decline of nearly 28 per cent. Meanwhile 3,485 homes changed hands in the 905 Regions, a decrease of more than 13 per cent from 3,956 sales in November 2011.
A key factor that has influenced the dip in sales experienced in recent months relates to the changes in mortgage lending guidelines that came into effect in July. The changes reduced the maximum amortization period from 30 years to 25 years and set a purchase price ceiling for government backed insured mortgages at one million dollars. These regulations have resulted in some households putting their decision to purchase on hold while they save up more money for a down payment and/or experience an increase in their income. Adding to this situation in the City of Toronto is the additional upfront Land Transfer Tax, which takes money from home buyers that could otherwise be used to offset the high costs of home ownership.
While sales decreased year-over-year in November, a modest overall price increase was reported, with the average price of a GTA home reaching $485,328. This represented an increase of 1.6 per cent compared to a year ago.
The 905 Region, with an average price of $463,779, showed a price increase of four per cent compared to a half-percent decrease in the City of Toronto average home price, which was $517,866.
The pace of average price growth in November was slower than what was experienced for much of 2012, especially in the low-rise segment of the market. This was largely due to the fact that the mix of single detached homes sold in the City of Toronto this past November changed relative to last year. Specifically, the share of homes that sold for over one million dollars was down considerably.
While the mix of home types sold may have changed, market conditions remained tight for low-rise home types. This is evident when we consider the MLS® Home Price Index (HPI) for the GTA. The MLS® HPI tracks the price change for benchmark homes – in other words: a home with the same attributes over time. When we look at price through this lens, we find that the benchmark price for major home types was up by 4.6 per cent in the GTA as a whole and 3.9 per cent for the City of Toronto.
News on the employment front was positive in November, as the Toronto seasonally adjusted unemployment rate decreased to 8.2 per cent, from 8.6 per cent the previous month. Interest rates remain largely unchanged, with a five year fixed mortgage rate of just over three per cent continuing to be available.
At this time of year I am often asked whether it is prudent to list one’s home for sale over the holidays, and there are in fact, many benefits to doing so. Consider that those viewing homes at this time of year are more likely to be serious buyers. As well, homes often look their best when they are decorated for the holidays, and a favourable emotional response to a property often prompts an offer.
I encourage you to talk to a Greater Toronto REALTOR® about the many other factors you should consider before choosing to make your next move and in the meantime, be sure to visit www.TorontoRealEstateBoard.com for all of the latest updates on the market.
Ann Hannah is President of the Toronto Real Estate Board, a professional association that represents 35,000 REALTORS® in the Greater Toronto Area.

Article can be read here: http://communications3.torontomls.net/media_centre/star_column/index.htm

Mortgage Pre-Approvals... Not what they used to be.

I received an interesting email today from a Mortgage Broker, Darlene Hinton. Usually I disregard the bombardment of emails I get from Mortgage Brokers, but the first line really caught my attention since I have one property which I have now sold three times because the Buyers financing on the first two deals fell apart before the removal of the financing condition.

Mortgage Pre-approvals are not what they used to be. In times past, a client could depend on a bank's word when they gave them preapproval to start shopping. That's just not the case anymore. I see it all the time. . . clients happily shopping (and putting in an offer to purchase) confident they were golden with their bank. . . only to find there was some glitch. There are too many to list, but it could be something as inane as the address of the property the client wants to buy or an issue with the source of a client's downpayment. Maybe the clients credit rating drops between Pre-approval and Offer to Purchase. It could be anything.

Many of these issues can be avoided by using a Broker who takes the time to establish a personal relationship with their client. I try to gather every fact I can so as to avoid unneccesary stress and disappointment. But perhaps even more importantly. . . I have access to a plethora of Lenders that would be happy to step in should a Lender get cold feet.

Do you want to save both yourself and your client precious time? Call me for your homebuyers financng. . .and let's close more deals. . faster and more efficiently.    :)

Call me. I can help.

--

DARLENE HINTON
 

Mortgage Agent

Touch Residential Capital

note2darlene@gmail.com

License #M10001367

Phone: 705-331-6774

Fax: 1-866-716-7038

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/

The past week in Newmarket Real Estate (March 22, 2012 - March 29, 2012)

It's amazing what is happening here and hard to keep up with it.
In the past 7 days*, there have been 32 reported sales in Newmarket, ranging from $296,000 to $872,000, with an average of $504,522.

What I consider to be the most amazing sales figure is the percentage of list price. The average of the 32 homes sold in the past 7 days was 101.47% of asking! In one case, a property in the Leslie Valley/Huron heights area sold for 116% of asking @ $497,000, which was $68k over asking.

With the rapid sales, and what some are considering outrageous prices for homes in areas that do not normally achieve such premiums, I am a little concerned about buyers purchasing homes that have less than 25% down, because a more thorough appraisal might have to be done and if the banks loan-value ratios don't match what the buyer offered to pay, then, the buyers will be required to come up with more money to close the deal... As a Realtor working for sellers, I will be ensuring I get a hefty deposit so that the buyers have no option to not close.

I want to close though with this. Newmarket/Aurora is a fantastic place to live and the buyers seem to be coming from the south, likely due to the prices being cheaper than Toronto/Richmond Hill/Vaughan, and as long as the immigration and population figures continue to grow, I'm not sure we will see a drastic drop in the prices... The demand seems to be there, and the option of renting just doesn't seem to be a better choice right now.

*as reported at 12:05pm March 29, 2012

December 2011 Market Stats - Annual Recap

New Mortgage Rules from the Department of Finance

The Harper Government Takes Prudent Action to Support the Long-Term Stability of Canada's Housing Market

The Honourable Jim Flaherty, Minister of Finance, and the Honourable Christian Paradis, Minister of Natural Resources, today announced prudent adjustments to the rules for government-backed insured mortgages to support the long-term stability of Canada’s housing market and support hard-working Canadian families saving through home ownership.

“Canada’s well-regulated housing sector has been an important strength that allowed us to avoid the mistakes of other countries and helped protect us from the worst of the recent global recession,” said Minister Flaherty. “The prudent measures announced today build on that advantage by encouraging hard-working Canadian families to save by investing in their homes and future.”

“The economy continues to be our Government’s top priority,” continued Minister Paradis. “Our Government will continue to take the necessary actions to ensure stability and economic certainty in Canada’s housing market.”

The new measures:

1. 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.

2. 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.

3. 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.

Our Government’s ongoing monitoring and sound underlying supervisory regime, along with the traditionally cautious approach taken by Canadian financial institutions to mortgage lending, have allowed Canada to maintain strong and secure housing and mortgage markets.

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.

The Full Article can be read at: http://www.fin.gc.ca/n11/11-003-eng.asp

Real estate market heads into 2011 with stronger than expected momentum - Winnipeg Free Press

Real estate market heads into 2011 with stronger than expected momentum - Winnipeg Free Press

Home ownership costs soar across Canada

The Canadian Press

Date: Monday Sep. 27, 2010 8:43 AM ET

TORONTO — The cost of owning a home continues to rise, according to a quarterly report on housing affordability by Canada's largest banking group.

The latest housing report by RBC Economics Research says the costs of owning a home increased the most in Ontario and British Columbia.

The higher monthly costs for owning a home were driven by increased mortgage rates and further appreciation in home prices, the report said.

The report said home ownership costs in B.C. neared the all-time highs reached in 2008.

The RBC report also says it expects a temporary easing in housing affordability because of the recent drop in mortgage rates and signs that home prices are stabilizing in many markets.

Click here to read the Report

HST and how is will effect the Real Etstae Market

HST Transition Rules

The provincial government has provided rules/guidance on how it will transition to the implementation of the proposed Harmonized Sales Tax.

Background

The provincial government has passed legislation to combine the eight percent Provincial Sales Tax with the five percent federal Goods and Services Tax, creating a 13 percent Harmonized Sales Tax (HST).

- The HST is NOT YET IN EFFECT. The HST will come into effect beginning on July 1, 2010; however, note transition rules below.
- HST will not apply on the purchase price of re-sale homes.
- HST would apply to services such as moving cost, legal fees, home inspection fees, and REALTOR® commissions.
- HST will apply to the purchase price of newly constructed homes. However, the Province is proposing a rebate so that new homes across all price ranges would receive a 75 per cent rebate of the provincial portion of the single sales tax on the first $400,000. For new homes under $400,000, this would mean, on average, no additional tax amount compared to the current system.

Transitional Rules for New Housing

Generally, sales of new homes under written agreements of purchase and sale entered into on or before June 18, 2009 would not be subject to the provincial portion of the single sales tax, even if both ownership and possession are transferred on or after July 1, 2010.
The tax would also not apply to sales of new homes under written agreements of purchase and sale entered into after June 18, 2009 where ownership or possession is transferred before July 1, 2010.

Additional Transitional Rules

Where services straddle the HST implementation date of July 1, 2010, the tax charged for the service may have to be split between the pre-July 2010 and post-June 2010 periods. However, the HST will generally not apply to a service if all or substantially all (90% or more) of the service is performed before July 2010.
Four key timelines are important (see below). All are based on the earlier of the time the consideration is either due (In general, an amount is due on the date of the invoice or the day required to be paid pursuant to a written agreement), or is paid without having become due. If consideration is due or paid,
Before October 15, 2009, HST will generally not apply (however, see above transition rules for new housing).
From October 15, 2009 to April 30, 2010, certain business that are not entitled to recover all of their GST/HST paid as input tax credit may be required to self-assess the provincial component of the HST with respect to goods or services supplied after June 30, 2010.
From May 1, 2010 to June 30, 2010, HST will generally apply for services supplied after June 30, 2010.
After June 30, 2010, HST will generally apply. An exception to this rule would be where ownership of the property is transferred before July 2010 or the invoice relates to services provided before July 2010.
With regard to the lease or license of goods, including non-residential real property, HST will generally apply to lease intervals or payment periods on or after July 1, 2010 and the general rules noted above will apply. However, where a lease interval begins before July 2010 and ends before July 31, 2010, it is not subject to HST.
With regard to the sale of non-residential property, HST is due where both possession and ownership of non-residential property occurs on or after July 1, 2010.


More Detail

Additional detail on the transition rules is available at the provincial government web site here or by calling the provincial government enquiry line at 1-800-337-7222.

Department of Finance Mortgage Measures

The Honorable Jim Flaherty, Minister of Finance, today announced a number of measured steps to support the long-term stability of Canada's housing market and continue to encourage home ownership for Canadians.

"Canada's housing market is healthy, stable and supported by our country's solid economic fundamentals," said Minister Flaherty. "However, a key lesson of the global financial crisis is that early policy action can help prevent negative trends from developing."

The Government will therefore adjust the rules for government-backed insured mortgages as follows:

QUALIFYING AT A FIVE-YEAR RATE

Current interest rates are at record low levels, which has improved the affordability of housing for Canadians. It is important that Canadians borrow prudently and are able to manage their debt loads when interest rates rise.

Lender and mortgage insurers look at two key ratios when assessing the ability of a borrower to make payments on a mortgage loan:

Gross Debt Service (GDS) ratio—the ratio of the carrying costs of the home, including the mortgage payment, taxes and heating costs, to the borrower's income.
Total Debt Service (TDS) ratio—the ratio of the carrying costs of the home and all other debt payments to the borrower's total income.
Currently, the interest rate used to determine the mortgage payment for these calculations is either the rate fixed for the term of the mortgage or, in the case of a variable-rate mortgage and mortgages with terms of less than three years, the greater of the contract rate and the prevailing three-year fixed rate.

The adjustments to the mortgage framework will require mortgage insurers to ensure that borrowers qualify for their mortgage amount using the greater of the contract rate or the interest rate for a five-year fixed rate mortgage when calculating the GDS and TDS ratios.

This measure is intended to protect Canadians by providing them with additional flexibility to support mortgage payments at higher interest rates in the future.

LIMIT THE MAXIMUM REFINANCING AMOUNT TO 90 PER CENT OF THE LOAN-TO-VALUE RATIO

Borrowers seeking financial flexibility can currently refinance their mortgage and increase the amount they are borrowing on the security of their home up to a limit of 95 per cent of the value of the property. This type of refinancing lowers the borrower's equity in their home. The adjustments today will lower the maximum amount of the mortgage loan in a refinancing of a government-backed high ratio mortgage loan to 90 per cent of the value of the property, consistent with the principle that home ownership is a tool for savings.

DISCOURAGING SPECULATION BY REQUIRING A MINIMUM DOWN PAYMENT OF 20 PER CENT FOR NON-OWNER-OCCUPIED PROPERTIES

This measure will require a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner-occupied properties purchased for speculation. Currently, borrowers may purchase a residential property with a 5 per cent down payment. Today's change will require a 20 per cent down payment for small (i.e., 1- to 4-unit) non-owner-occupied residential rental properties. Borrowers purchasing owner-occupied residential properties which also include some rental units (e.g., borrowers purchasing a duplex to live in one unit and rent out the other) will still be able to access government-backed mortgage insurance with a 5 per cent down payment.

Moving to the new framework:

These adjustments to the mortgage insurance guarantee framework are intended to come into force on April 19, 2010. Exceptions would be allowed after April 19 where they are needed to satisfy a binding purchase and sale, financing, or refinancing agreement entered into before April 19, 2010.

"There's no clear evidence of a housing bubble, but we're taking proactive, prudent and cautious steps today to help prevent one. Our Government is acting to help prevent Canadian households from getting overextended, and acting to help prevent some lenders from facilitating it," said Minister Flaherty. "If some lenders aren't willing to act themselves, we will act. These measures demonstrate the Government is committed to taking action when necessary to support the long-term stability of a sector that is so vital to our economy and the financial well-being of Canadian families." The Honorable Jim Flaherty, Minister of Finance

My Take:

Qualifying at a Five Year rate: this is good for the stability of our Real Estate Market, but will discourage rapid growth in prices as those looking to enter into the market will find it a little more difficult to qualify. Those who can afford to buy will be the ones buying.

Refinancing Limit of 90% Loan-to-Value(LTV): I also see this as positive. In the past few years I have seen a number of people refinance to the point that they then owed more than their home is worth. Thus, in most cases, leading to forclosure by the lender. It is important for people to have equity in their home and by lowering the refinancing limit from 95% LTV to 90% LTV it will protect a lot of people from being forclosed on and maintaining equity on thier home.

20% minimum down payment for non-owner occuppied: I'm a little torn with this one as I have a goal of owning many rental investment properties, so this make it a little harder to grow a large portfolio since I will be required to have more money into the property. I see this really as a way for the government to protect their insurance premiums they recieve from CMHC. With more money down by speculators, and investors, it lessens the probabblility of the lenders who are financing these types of deals from having to make insurance claims when there is a deficit from what is owed and what a property is worth... I can see this part changing down the road to say 15% down required.

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.

a "New" way to search for homes

August 14, 2009 -- Torontonians’ passion for property has been re-ignited.

Nearly 10,000 Greater Toronto Area homeowners made the decision to move to their next residence in July, which represents a record for that month. Specifically, 9,967 homes changed hands, an increase of 28 per cent from July 2008.

After making a decision to move, many of these buyers likely began a preliminary search for their next home by using the Canadian Real Estate Association’s public website REALTOR.ca.

Unlike the Multiple Listing Service®, which is a sophisticated computer database of sold, expired and active listings accessed only by REALTORS®, CREA’s REALTOR.ca website advertises general information about resale homes available on the market.

With respect to newly built homes, an equivalent marketing vehicle doesn’t exist, prompting some buyers to approach their search of this segment of the market by compiling newspaper clippings, website addresses and trade magazine advertisements.

Searching for a new home using this strategy though means that many options are left unidentified.

Fortunately, there is a simple and comprehensive alternative to searching for newly constructed homes. Greater Toronto REALTORS® have access to a database of new home listings through RealNet Canada Inc. Founded in 1995, RealNet provides coverage in both the commercial real estate investment and residential development markets.

In the Greater Toronto Area, RealNet reports on 99 per cent of all developments greater than 15 units in size. Its database includes more than 35,000 current records, which are updated on a monthly basis.

This means that regardless of whether you’re looking for a detached home in the suburbs, a high rise condo unit in the city, or anything in between, your REALTOR® can provide you with complete details on all of your new home construction options.

Like a typical MLS® inquiry, a search of the RealNet database can be conducted by housing type, location and price range. Once you have refined your criteria, even more information can be found like builder names, number of bedrooms, lot sizes and quantity of available units. You’ll be able to learn about condo fees, occupancy dates, and the availability of parking and storage lockers as well.

Even if you already have a specific development in mind, your REALTOR’s® access to RealNet information can help you measure your preferred builder’s value proposition by offering a broader perspective of all available options. It will also help you to carefully weigh your decision with respect to choosing new versus resale housing.

As well, REALTORS® can obtain detailed statistical reports on the new home market through RealNet. Key information is highlighted including the number of product offerings, the previous month's sales, remaining inventory, average size, average price and average 12-month absorption by housing type.

Regardless of whether you’re searching for a home with the latest design features or old-world charm, be sure to identify all of your options by talking to a REALTOR®. They can advise you on government programs for homebuyers, provide information on local amenities and negotiate a solid agreement on your behalf.

For more information about buying or selling a home, updates on the market and neighbourhood profiles 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.

Is it Time to "MOVE UP"???

Chances are when you bought your first home you were thinking of it as a "starter home" and dreamed of owning a larger and better home one day.

With today's mortgage rates in the lowest range they've been for almost 30 years, you might be pleasantly surprised that you can afford that "move up" house now. Using the equity you've built up in your current home, your carrying charges may not be much larger than what you've been used to paying. If you're curious to find out, ask a REALTOR® to help you calculate carrying costs on a "move up" home.

There are many reasons why you may wish to have a larger home including a growing family, the desire to have more bedrooms so the kids can have their own space. Or maybe you want a larger yard, a garage or a home with a private driveway. Whatever your reasons, moving up to a new home can be very satisfying.

It's also a smart move because the equity in your home will continue to grow and the value of a bigger and better home will be ultimately greater over time. As well, the pride of ownership in a bigger house will probably be even greater than you had when you bought your first home.
When you decide that moving up is the way to go, be sure to enlist the services of a REALTOR®. Your options can be confusing at times, but a REALTOR® can help you make the right choices.

He or she will help you determine the market value of your current home and therefore the price range you should be considering in a move up home. You'll need to determine where you want to move. Do you want to stay in the same neighbourhood or move on? There are almost as many individual choices on location as there are homes. A REALTOR® is skilled and knowledgeable in all aspects of a real estate transaction and can ensure you make a smooth move.

Moving up to meet your changing lifestyle and needs can be an exhilarating experience. Your home is probably the best investment you'll ever make so why not take advantage of current market conditions and enhance your investment today.

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