As of October 15, 2008, home buyers will have fewer options when obtaining a mortgage. That’s because starting October 15, the Canada Mortgage and Housing Corporation (CMHC) – the government-owned housing agency that provides mortgage insurance – will no longer accept mortgage insurance applications for mortgages amortized over 40 years, 100 per cent financing or interest-only mortgages.

These changes have been implemented as a result of the international credit crisis, and to avoid a potential U.S.-style meltdown in the Canadian real estate market. However, these changes to not affect all potential home buyers: it will primarily affect those who do not have a minimum of 20 per cent of the purchase price available for a down payment. In addition, for many home buyers, other mortgage products are available that will meet their needs.

Mortgage insurance is available through CMHC, AIG and Genworth. These companies make home ownership possible for individuals who do not have a minimum down payment of 20 per cent available. Since the announcement that CMHC will eliminate these mortgage products, both Genworth and AIG have also decided to follow suit. However, lenders may still decide to offer 40 year amortizations and interest only mortgages to individuals with down payments of 20 per cent or greater.

While such properties can often be had at a bargain, and more than a few that I’ve dealt with personally have yielded a high level of appreciation for their new owner, the full story shows that power of sale is not for everyone. Allow me to elaborate.

The first thing to remember is, almost without a doubt, the place will be in need of renovation. The walls, floors, carpets, maybe even the electrical/plumbing and yard, will all likely need some overhaul. Those who cash in best on power of sale are those who can handle some, or all of that renovation personally.

Another thing to understand is that power of sale properties are sold “as is”. It’s not a matter of negotiation, as the vendor’s necessary attachment to accompany any offer will indicate. Also, the seller will not make any guarantees as to the chattels or fixtures. The window coverings, the shelves in the garage, even the appliances, are not guaranteed in the sale.

Other things to consider are that the seller will reserve the right to postpone your closing up to 60 days with next to no notice. So if Gloria’s power of sale was closing on August 1st, on July 31st she could find out that her closing has been pushed to October 1st. Even after she moves in, Gloria is not guaranteed, for example, the appliances – the previous owner has a specific period of time to attempt to reclaim those possessions.

All of these “non-guarantees”, on a legal level, are to allow the defaulting time to come up with the money to reclaim lost assets. Banks and other lending institutions will not make improvements to a property that may revert back tot he original owner. So what does all this mean? It means that if you’re considering a power of sale you must take into account the additional expenses (renovations, possibly appliances, and potential rental costs). Remember, since the closing can be pushed, not everyone is in a position to take advantage of power of sale properties. Most people would shy away from 60 days of renting.

Having said all of that, I have yet to see appliances be seized, the closing to be pushed, or a buyer dissatisfied with a power of sale. While much of that can be attributed to proper research and analysis, the fact remains that while the darker scenarios can be classified as unlikely they remain, nevertheless, possible.

If you’d like more info on power of sale properties feel free to contact me at peter@hendershot.ca

2009 is off to a good start. The holidays are over and it looks like things are starting to pick up. Buyers are taking advantage of some good deals that are still available on the market and sellers are taking notice. Listings are way up this week.

If you are looking to buy, I would

Here’s an interesting article about the importance of location when it comes to finding a good home. According to author Juhlin Youlien a good location is measured by (among other things) the people who live there.

Accessibility and security are also important, along with being removed from the chance of natural disasters. Being child friendly is also a good feature of a quality location.

As the author says “Location is very important in terms of finding a house. After all, you will be staying there for a long time. What is important is that you find a place that addresses your needs.”

This is great advice for anywhere, but especially for a home in Kitchener-Waterloo.

Forget the headlines for now! Do what’s right for you and your family when you’re deciding whether to buy or sell your home. Consider what you want, your finances and employment status, look at the economy and then ponder what you really need and can truly afford.

What you need, what you can realistically afford and your employment circumstances are the factors that should have the greatest impact on your home buying and selling decisions.

OTTAWA – The Bank of Canada today announced that it is lowering its target for the overnight rate by three-quarters of a percentage point to 1 1/2 per cent. The operating band for the overnight rate is correspondingly lowered, and the Bank Rate is now 1 3/4 per cent.

The outlook for the world economy has deteriorated significantly and the global recession will be broader and deeper than previously anticipated. Global financial markets remain severely strained. Measures taken by major governments are beginning to encourage credit flows, although it will take some time before conditions in financial markets normalize. In addition, a series of recently announced monetary and fiscal policy actions will also support global economic growth.

While Canada’s economy evolved largely as expected during the summer and early autumn, it is now entering a recession as a result of the weakness in global economic activity. The recent declines in terms of trade, real income growth, and confidence are prompting more cautious behaviour by households and businesses.

(more…)

Are you planning to buy a house or condo, or refinancing your mortgage? If the answer is “yes” you should be aware of recent changes governing mortgage lending in Canada.

Starting October 15, 2008, new government-backed, insured mortgages will be subject to a series of changes, designed to keep Canada’s housing market strong. The changes include:

Buying your first home can be overwhelming. Most first-time buyers have never been exposed to the real estate market, and face unfamiliar terminology, financing options, and legal procedures. There can be many unexpected costs associated with buying property; Potential home buyers need to be prepared to pay much more than just the down payment and mortgage payments. I advise first-time home buyer clients to calculate the carrying costs and be realistic about budget, making sure it’s within their comfort zone. It’s a good idea to consult a mortgage specialist who will assess your current financial situation.

Fortunately the government has a few programs in place to help Canadians buy their first home.

RRSP Home Buyers Plan

Under the Home Buyer’s Plan, first time home buyers can withdraw up to $20,000 in RRSP savings to buy or build a qualifying home. Unlike a regular RRSP withdrawal, when you withdraw money under the HBP, you do not need to pay taxes. In essence, this is an interest-free loan from yourself that you pay back over 15 years.

These funds also do not need to be included in your reported income. You will start repaying the money in the second calendar year after you withdraw the money, and you will need to make annual payments over a 15 year period. If you do not make the scheduled payment, the outstanding amount will be taxed the following year. To qualify, the property must be your principal residence and you cannot have owned a principal residence in the past five years. In addition, the money must be in your RRSP for at least 90 days before closing. If your spouse is also a first-time buyer, you can withdraw up to $40,000 in total.

Land Transfer Tax

Fortunately, for us in Kitchener-Waterloo, we only have to pay the provincial Land Transfer Tax. Since February 1, 2008, home buyers in Toronto have faced a new municipal Land Transfer Tax. However first-time home buyers of both new and resale homes may be eligible for a refund of both taxes. The maximum Provincial LTT rebate for a first-time home buyer is $2000 and the maximum Toronto LTT rebate for first-time home buyers is $3,725.

To be eligible for the provincial and Toronto LTT rebates for first-time buyers you:

- Must be at least 18 years old

- Must occupy the home as a principal residence within nine months of purchase

- Must be buying a home for the first time (including countries outside Canada)

- If married, the buyer’s spouse cannot have owned a home (including outside Canada) while married

Peter Hendershot – Re/Max Twin City Realty Inc. 519.885.0200

Most of us consider both of these options when buying a house.

Is buying a new home a better value than buying an older home? Perhaps you have been wondering the same thing.

By the time you finish reading this, you’ll will have learned how easy it is to answer these questions. Let’s compare new home buying with buying an older home.

A word of caution, there are many decisions to make when it comes to finding the best home for you and your family. There are questions regarding location, affordability, and space. But when it comes to the question of buying a newer home versus an older home, taste has a lot to do with your decision.

All in all your tastes are neither right nor wrong. You can’t put a value on perception and it can’t be measured. You develop these preferences through experience over time.

Here is a case in point. A newly built home may appear ideal to one person and to another person less than perfect. You may love the architecture of older homes and somebody else loves the modern conveniences of a new home. Pay close attention to what catches your eye.

The bottom line then is this. When choosing between buying an older home or a new home, let your taste rule.

For instance older homes offer distinct advantages and disadvantages. Some of the advantages may include neighborhoods that are better established. They have stood the test of time. The residents may have lived there a long time and turnover is less likely. An established neighborhood often leads to a stable community environment.

Again some older homes offer architectural and landscaping character that new homes don’t provide. Certainly, these qualities are again a matter of taste according to the eye of the beholder. Ask yourself this question, how does this neighborhood make you feel? Many people surprise themselves when they answer this self-imposed question.

Another feature of older homes is that taxes are often lower than a new home. Although taxes are not a matter of taste they are an important consideration. Have you discovered yet that your Realtor can find tax information quickly for new construction and resale homes.

Are you caught up with the thought of owning a vintage house full of character. This being the case, the obvious upkeep and repairs will not deter you.

We have all heard of The Money Pit, right. Services of an electrician are required. The harvest green oven and stove date back to the 1960s. Plumbing is older. Siding, fencing and windows may be worse for wear.

Be sure, when you are going to buy an older home insist your Realtor request a Home Inspection by a qualified and licensed home inspection service before closing. Prepare yourself for deferred maintenance. The price of a home inspection is small compared to the confidence it instills.

Selecting a new home offers obvious and clear advantages over older homes too. Most new homes are now required to be built according to higher efficiency standards than older homes were. So utility bills could be significantly lower than the utilities of an older residence. However, watch out for taxes on new construction as they may not have been determined yet. This may be a trade off.

Put simply, if you like more modern architecture you will prefer the look of a new home more than an older one. Again taste is the all-important deciding factor here. Do you like the look and feel of a newer home? If so follow your preferences.

One clear advantage that most new homes offer versus older ones is up-to-date heating, air conditioning, electrical, and plumbing systems. In addition, most home builders are likely to provide a warranty on these systems for a specified period of time. If a warranty is not offered or the warranty period is too short you can ask the builder to pay for a better one.

When it comes to older versus newer, taste is the all-important qualifier. The easiest way to decide about buying a house is to get out and compare. Ask a Realtor to recommend neighborhoods for older homes and new homes.

After shopping for homes a bit, you may even discover something new about your taste.

Kate Ford, author of the entertaining and informative Get Your Best Mortgage Rate knows how confusing it can be to shop for a home loan. Do you wish you understood how to get the best deal for your mortgage? Now you can learn how to compare mortgage interest rates and save money.

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