Written by  Vernon Clement Jones | Canadian Real Estate Magazine


The majority of property investors are already licking their chops, anticipating tighter mortgage rules will allow

them to bump up rents, suggests a new CREW poll.


Just under 60 per cent of those responding to an online survey this week answered “yes,” they will indeed raise

the rent because of the new mortgage rules. That, of course, is only where the law permits, most likely with empty

units and not sitting tenants.


The anticipation is based on an expected bump-up in the number of Canadians -- in particular, first-time buyers --

who'll now find themselves shut out of the housing market.


Such a development would be pegged to Ottawa’s decision to limit maximum amortizations to 25 years for

insured mortgages.


For first-timers in pricey markets such as Toronto and Vancouver, that may effectively block them from purchasing

even starter condos, which already strain affordability.


While economists expect some price declines because of the tighter mortgage rules that may not come soon

enough to encourage young Canadians to buy instead of rent.


Since the new rules were announced last week, investors have also been grappling with them, trying to decide

whether they afford a net negative or benefit to landlords, already enjoying relatively low vacancy rates in most



“Since rental properties require 20% down, therefore not a CMHC insured mortgage, the rule will have no effect on

most investors in terms of obtaining financing,” writes “shaune,” in responding to the CREW poll question. “The

upside is that less people can afford homes therefore more renters. The downside is that it may reduce prices if

the demand softens.”


The following article is from Canadian Real Estate Wealth Magazine.

Landlords and homeowners alike have long sought to improve the use and aesthetics of their properties through




Carrying out a home extension or addition, however, takes that commitment to the next level: the project timeline is

longer, the resources involved much more complex, and the funds required can reach six figures. For the

inexperienced renovator, this can create plenty of opportunities for costly mistakes.


But that doesn’t mean you should be dissuaded from taking on your own addition project. As professional

renovator Todd Senft explains, “The returns can be very rewarding – if the project is planned out well.”


“An addition to your home can be a very good way to add value, depending on what your home may be lacking. To

clarify the word ‘value’, I imagine the word to mean not only resale value, but also the existing homeowner’s

enjoyment of the added space,” says Mr. Senft, president of ReVision Home Custom Renovations Inc. in



“Working with a real estate agent who knows your neighbourhood is always a good idea, as they can tell you

where the best area would be to add space to your home.”


For instance, they may be able to tell you that many of your neighbours’ homes have four bedrooms, and that four-

bedders are most frequently sought out by the families that populate the suburb.


“If your home only has three bedrooms then adding a master bedroom and ensuite may be the best value addition

you can add to your home. You have to keep in mind what types of buyers and renters live in your neighbourhood.

Are they young couples looking to raise a family, people getting into a ‘step-up home,’ or is it investors? That

information will have an impact on your decision,” he says.


The agent may also be able to tell you about recent sales of four-bedroom homes, which would give you an

indication of how much you should spend to stay within the price parameters of your neighbourhood.


This was the case for a condo project Mr. Senft oversaw in 2011, in the centre of Vancouver, near Granville and

12th Ave. Neighbouring high-end condos were selling for upwards of $700,000, so when Mr. Senft’s client was

able to secure a rundown condo for $480,000, he knew they were on to a winner.


“The client invested $150,000 into their home with a full renovation, right down to the framing,” Mr. Senft says.


“After the reno was complete, their real estate agent came over and indicated that they could put the condo back

on the market for $725,000 to $750,000. That was a rough profit of $95,000 to $120,000, less the usual expenses

that transpire when selling a property. It just shows you what you can achieve with a well-planned renovation in the

right neighbourhood.”


Why not just upgrade?

Whether you feel like you need more space at home to cope with the needs of your growing family, or you’re

looking for ways to maximize the returns on your investment property, there is an easy way to avoid taking on a

huge renovation and extension project: just upgrade.


From a financial perspective, you could sell your current property and take the proceeds of the sale, plus the cash

you’ve earmarked to cover the costs of your addition, and use to it to fund the purchase of bigger, more expensive

home. But as designer and renovator Paul Denys from Denys Builds Designs explains, there’s more to consider

than simply purchase and sales prices.


Mr. Denys estimates that the cost of moving for an average home in equates to roughly 10 per cent of a property’s

purchase price, once you consider all of the costs involved in buying and selling.


“The average house price in Ottawa is around $340,000, and if the cost of moving is about 10 per cent of that

value, you’re spending $34,000 – and you don’t recover an of that,” he says.


“As an alternative, you could spend that 10 per cent on your property and make it more enjoyable to use and live in.

With $34,000 to spend, it would roughly cover the cost of a medium to higher-end bathroom, an ensuite bath or a

very small kitchen.”


The cost of moving

Average 2011 home sale price in Ottawa *


Land transfer tax (


Real estate commissions and fees (5-6 per cent)

$17,165 – $20,600


$600 – $1,000

Legal fees and disbursements

$1,000 – $1,500


$250 – $275

Home inspection

$350 – $450

CMHC insurance premium, if using less than 20 per cent deposit

$6,980 (assume 10 per cent deposit)


$2,200 – $3,500

TOTAL – approx. 10 per cent the cost of the home

$32,170 – $37,930

Source: Paul Denys,* Figure obtained from Ottawa Real Estate Board MLS Residential Sales

Where do you start?


If you’re keen to proceed with an addition to your home, you first need to carefully define what you want to

accomplish with your project, says Maribel Pelka, president and owner of Avant-Garde Properties.


“It may even be worth spending the money to have a basic blueprint of your idea created,” she says.


Mr. Denys, a licensed carpenter who has been in the industry for over 22 years, has overseen his fair share of

addition projects over the years and he has come up with one simple question to help you define your needs:

“What is your commitment to the property?”


“I’m told that in Europe, commitment to property is about five generations, as family homes get passed down.

Here, it is about seven to 10 years, and that is going to have a bearing on what you do and how you do it,” he



In other words, you need to consider your future plans before you get started. If you’re upgrading your dream

home, which you plan to live in for the next 20 years, then investing in a high-quality addition would increase your

home’s value, both financially and in terms of your enjoyment.


Alternatively, if you’re likely to move in the next few years, or you’re adding a room to your investment property in an

effort to boost your returns, you need to focus on the numbers to ensure your proposed addition makes financial



Upgraded kitchens and additional bathrooms are usually the best place to add value, Mr. Denys adds, even

though they are often the most expensive projects to execute, “because of materials involved, including tiles,

fixtures and appliances that drive costs up.”


“But, they are something we touch and use every day,” he says, “and they enhance our daily enjoyment.”



Budgeting for a new home can be tricky.  Not only are there mortgage installments and the down payment to

consider, there are a host of other—sometimes unexpected—expenses to add to the equation.  The last thing you

want is to be caught financially unprepared, blindsided by taxes and other hidden costs on closing day.


These expenses vary:  some of them are one-time costs, while others will take the form of monthly or yearly

installments.  Some may not even apply to your particular case.  But it’s best to educate yourself about all the

possibilities, so you will be prepared for any situation, armed with the knowledge to budget accordingly for your

move.  Use the following list to determine which costs will apply to your situation prior to structuring your budget:


  1. Purchase offer deposit.


  1. Inspection by certified building inspector.


  1. Appraisal fee: 

               Your lending institution may request an appraisal of the property.  The cost of this appraisal is your



  1. Survey fee: 

               If the home you’re purchasing is a resale (as opposed to a newly built home), your lending institution may

               request an updated property survey.  The cost for this survey will be your responsibility and will range from

               $700 to $1000. 


  1. Mortgage application at your lending institution.


  1. 5% GST:  this fee applies to newly built homes only, or existing homes that have recently undergone extensive renovations. 


  1. Legal fees: 

               A lawyer should be involved in every real estate transaction to review all paperwork.  Experience and rates

              offered by lawyers range quite a bit, so shop around before you hire.


  1. Homeowner’s insurance: 

               Your home will serve as security against your loan for your financial institution.  You will be required to buy

               insurance in an amount equal to or greater than the mortgage loan.


  1. Land transfer (purchase) tax: 

               This tax applies in any situation in which a property changes owners and can vary greatly. First time home      

               buyers are exempt.


  1. Moving expenses.


  1. Service charges: 

               Any utilities you arrange for at your new home, such as cable or telephone, may come with an installation



  1. Interest adjustments.


  1. Renovation of new home: 

               In order to “make it their own,” many new homeowners like to paint or invest in other renovations prior to

               or upon moving in to their new home.  If this is your plan, budget accordingly.


  1. Maintenance fees: 

               If you are moving to a new condominium, you will likely be charged a monthly condo fee which covers the

              costs of common area maintenance.


The Mark at 1372 Seymour Street;Vancouver;BC V6Z 2P7;corner of Pacific & Seymour is a proposed development by Onni;one of numerous condo projects either underway or in the works. Billed as the tallest tower in Yaletwon It will have 41 levels with 300 suites.

The Mark at 1372 Seymour Street;Vancouver;BC V6Z 2P7;corner of Pacific & Seymour is a proposed development by Onni;one of numerous condo projects either underway or in the works. Billed as the tallest tower in Yaletwon It will have 41 levels with 300 suites.

By Cheryl Chan, The Province

Vancouver is building on its reputation as a city of glass and steel.

Look around the skyline and you’ll see it dotted by cranes, and everywhere there seems to be another hole in the

ground making way for another apartment building.

Sixteen condo towers are under construction, according to a database by and another 67

proposed high-rises are in the works.

Amid newly-tightened mortgage rules and concerns of an over-supply in the Toronto condo market that prompted

financial authorities including Bank of Canada governor Mark Carney to sound an alarm this week, we think we’ve

earned the right to ask: Is Vancouver oversaturated with condos?

Here’s some sobering figures.

Housing starts in Vancouver are up in the first five months of 2012 compared to the same period last year, driven

largely by multiple-unit dwelling construction – which is up by about 50 per cent from last year.

According to the Canada Mortgage and Housing Corporation, 5,503 condo units are under construction in

Vancouver in April, adding to the existing 230,000 units already in the city.

B.C. Real Estate Board economist Cameron Muir says the short answer to our question is no.

“Prices have been pretty flat since 2009,” Muir said. “There’s ample supply in the market place, but we are seeing

prices at a steady pace.”

The fact more condos than single-detached homes are being built in Greater Vancouver is nothing new, said Muir,

as condo starts have consistently made up about 75 per cent of all housing starts in the last several years. “It’s a

function of land supply.”

Consumer demand during the last several months is trending on a 10 to 15 year average, he added.

One indicator, says Muir, of the demand-and-supply balance in the marketplace is the sales-to-new-listings ratio.

In Vancouver last month, the ratio, at 15.3 per cent, inched closer to a buyer’s market — but sits within the

balanced range of between 15 to 20 per cent.

There hasn’t been a sustained buyer’s market since the recession hit, between late 2008 to early 2009.

As of April, 504 recently-completed units remain unsold. Overall, 3,017 units are listed on MLS.

Is Vancouver over-supplied with condos? The market will let us know.

Take a look for yourself at the condos currently under construction in Vancouver.


1 Wall Centre False Creek I, II, III, IV

100 W. 1st Avenue

• 556 units in four towers

• Completion: Early to mid-2014

2 Maynards

1901 Wylie Street

• 253 units

• Completion: Fall 2012

3 James Living

289 W. 2nd Avenue

• 155 units

• Completion: August 2012

4 The Mark

1372 Seymour Street (at Pacific Boulevard)

• 300 units

• At 41 storeys, it is billed as the tallest tower in Yaletown

• Completion: Summer 2013

5 Salt

1308 Hornby Street

• 199 units

• Completion: June 2014

6 Cosmo

161 W. Georgia Street

• 253 units

• Status: Move-in ready

7 The Rolston

1300 Granville Street (site of the old Cecil Hotel)

• 187 units

• Completion: June 2013

8 Maddox

1304 Howe Street

• 214 units

• Completion: December 2013

9 Uptown

2788 Prince Edward

• 100 units

• Completion: Fall 2012

10 TELUS Garden

775 Richards Street

• 428 units in a 53-storey tower, which will be the second-tallest in the city after the Shangri-La

• Completion: 2015

11 Marine Gateway

8400 Cambie Street

• 415 units in two towers

• Completion: 2015

12 1153 West Georgia Formerly the Ritz Carlton

• 290 units (but should be confirmed independently, based on CBC report)

• Completion: XXX

13 Wall Centre Central Park Boundary Road and Vanness Avenue

1,114 units in three towers

Status: Rezoning application approved. Completion date: XX

TOTAL: 4,464


14 Rize Mount Pleasant

Kingsway and Broadway

241 units

Status: Rezoning proposal approved by city council in April. If approved, completion date of XX.

15 Burrard Gateway

1290 Burrard Street (and 1281 Hornby Street)

About 589 units in two towers

Status: Proposed, awaiting rezoning approval. If approved, completion date of 2015 to 2016



Before you put your home on the market, take heed of these 10 valuable tips from the producers of HGTV's Buy Me.


1. Interview several agents before making your final choice.


2. Know your rights and obligations. Have your realtor explain the contract in detail or have a lawyer look at it with you.


3. Always base your price on market value rather than needs or emotions.


4. If the agent suggests your home needs some TLC, do the required fix-ups.


5. Make sure the agent is taking out advertisements to promote your property.


6. First impressions are important. Use attractive photos to advertise the listing.


7. Your house must have curb appeal. Make sure the outside is as attractive as the inside.


8. Keep your house clean and de-clutter before every open house and visit.


9. If the house isn't selling, think about lowering the price. A house that sits too long on the market raises suspicion

for buyers.


10. Take the first offer seriously. It's often the best.


Ottawa's moves to rein in housing since 2008 have saved the average mortgagee $150,000 over the life of the loan, Finance Minister Jim Flaherty said Thursday.


By Pete Evans, CBC News 


Finance Minister Jim Flaherty outlined new rules aimed at reining in a hot housing market today and ensuring

Canadians aren't taking on more debt than they can afford.


Flaherty outlined a series of changes to the rules that govern the Canada Mortgage and Housing Corporation, the

crown corporation that effectively oversees the housing market by insuring the vast majority of Canadian



The most important new change is that the maximum amortization period to 25 years, down from 30. The longer a

mortgage is spread out, the lower the monthly mortgage payments are — but the more the borrower ends up

paying overall over time.

The impact of the change is likely to be significant. It's about the same as a 0.9 percentage point increase on a

typical mortgage, Bank of Montreal economist Robert Kavcic noted.


Indeed, the numbers add up. A $300,000 mortgage spread over 30 years at 4 per cent would cost $1,426 a month

to pay back. That same mortgage amortized over only 25 years increases the monthly payment by $152 or 10 per

cent to $1,578 a month.


Ultimately though, the higher monthly payment saves the borrower money in the long run. The total interest

payments are $213,558.91 on the 30-year mortgage, but only $173,416.20 on the 25-year one.


The shortened amortization is also likely to affect a huge segment of the market, as about 40 per cent of all new

mortgages were amortized over 30 years last year, the Canadian Association of Accredited Mortgage

Professionals estimates.


Anyone who needed or wanted a 30-year mortgage before is going to have to qualify under tougher 25-year

requirements now.


Ottawa has now moved three times to rein in the maximum mortgage term, since the CMHC briefly started

insuring mortgages with 40-year terms in 2006. The limit was brought down to 35 years, then 30 and now the

more traditional 25.


"The reductions to the maximum amortization period since 2008 would save a typical Canadian family with a

$350,000 mortgage about $150,000 in borrowing costs over the life of that mortgage," Flaherty said.


"Our government has encouraged Canadians to borrow responsibly," Flaherty said. "Most Canadians have done



At 25 years, the maximum amortization period for CMHC-backed loans is now back to where it had historically

been before the Harper government began raising the period after taking office in 2006.

Refinancing limit set at 80%

Flaherty also outlined a few other measures Thursday.


The government has lowered the total amount that Canadians can withdraw when refinancing their homes to 80

per cent of the home's value, from 85 per cent.


"This will promote saving through home ownership and encourage homeowners to prudently manage borrowings

against their homes," Flaherty said.


Flaherty also moved to cap the maximum gross debt service ratio at 39 per cent and the maximum total debt

service ratio at 44 per cent in order to get CMHC insurance. Banks calculate the former by adding up mortgage

payments and property taxes on a home loan, and dividing by the borrower's income. The latter adds in other debt

payments such as lines of credit and credit cards to the top side of the ledger.


Although they both have obscure, technical names, they're both effectively just limits on how much debt a borrower

is allowed to take on as a percentage of their overall income. That move, too, is aimed at making sure a borrower

can't bite off more than he or she can chew.


The final change was to limit CMHC insurance to homes priced under $1 million. "Wealthy people can borrow

whatever they want from banks, and they can work that out from banks," Flaherty said. "That is not my concern."

July deadline

That effectively means that if a homebuyer wants to buy a home for more than $1 million, they can't get insurance

on it — which in turn means they'll have to come up with the 20 per cent down payment requirement in order to get

an uninsured mortgage.


So under any circumstance, any new borrower wanting to buy a home of $1 million or more is going to have to

have $200,000 down at a minimum. That's also likely to have a major impact on a comparatively small segment of

the market.


All of the changes will be in effect as of July 9, 2012. In the interim, the action in hot Canadian housing markets is

likely to get even hotter, experts say, as borrowers scramble to get in ahead of the more stringent rules.


"As we’ve observed around prior mortgage rule changes, some housing market activity will likely be pulled forward

ahead of the implementation date," Kavcic noted.


But there's likely to be a subsequent pullback, too, he says. The last time Ottawa tinkered with CMHC rules, home

sales fell by three per cent in the two months following the implementation date.


A glossary of crucial terms for first-time buyers and homeowners in Canada.

By Diane Jermyn | Yahoo! Finance Canada

What’s a mortgage broker?

A mortgage broker is a licensed mortgage specialist who can tell you what’s available in the marketplace from

banks and lenders across Canada and can guide you through the mortgage process. Mortgage brokers are also

able to pass volume discounts directly on to you because of the high quantities of mortgage products they acquire. 

Tom Hogg, a mortgage agent at The Mortgage Centre, in Mississauga, Ont., describes his job as educating the

consumer on exactly what they’re signing. “My role is to create a buffet of products and help them choose,” says

Mr. Hogg. “We do a needs assessment and make sure the clients clearly understand the flexibility and features of

the mortgage that will enable them to get rid of this albatross as soon as possible.”

Mortgage brokers are an origination service. That means that the  mortgage broker originates your mortgage

financing for you, but a bank or financial institution provides the money and services your mortgage after the


What’s the difference between a mortgage broker and a mortgage agent? 

Mortgage brokers can have agents working underneath them. Each agent has to work under the license of a

mortgage broker. The brokerage is accountable for the agents’ work. 
How are mortgage brokers paid?

Their commission is paid by the bank or lender providing the mortgage product based on how much money the

consumer borrows. Mortgage brokers aren’t compensated on the interest the bank makes, so they don’t receive a

higher commission if the client chooses a higher rate. It varies a bit, but the commission generally works out to an

average of $80 per $10,000 of the consumer’s loan.  

What’s a fixed mortgage rate?

‘Fixed’ means your interest rate and regular payments will be the same for the duration of your mortgage term,

whether rates rise or fall. It offers you stability and the least financial anxiety. But if interest rates drop significantly,

you may be stuck paying a higher rate for the duration of your term, depending on the flexibility and features of your


What’s a variable mortgage rate? 

Your mortgage payments will go up or down with the fluctuations in the ‘prime rate’, which is the market interest

rate. The danger here is that a significant increase in the ‘prime rate’ increases your interest payable as well. But if

it decreases, you’ll pay less.
What‘s better? Fixed or variable?

While over 60 percent of Canadians opted for a fixed mortgage rate in 2011, variable rates tend to be cheaper over

time. Conversely, you may sleep better knowing you’re not subject to interest rate fluctuations. Making the right

choice depends largely on the current rates at the time you’re taking out your mortgage. When interest rates are

low and aren’t expected to drop further, locking into a fixed rate may be your best option. However, if experts are

projecting that interest rates may fall, you’re probably better off with a variable rate, especially if there’s a significant

difference between the fixed and variable rates.  

What’s a closed mortgage rate? 

A closed mortgage can be fixed or variable. Closed mortgage rates are popular because they’re lower than open

mortgages rates but unlike an open mortgage, you’re restricted on how much principal you can pay down annually

and there will be a penalty to pay a closed mortgage out early. Terms range from six months to 10 years. Despite

their low rates and relative stability, there are disadvantages so read the fine print before signing.

“Some banks have introduced fully closed mortgages where during the term, other than an arms-length sale

[meaning the sale can’t be to a friend or relative] of the home, you can’t get out of the contract,” warns Tom Hogg, a

mortgage agent at The Mortgage Centre in Mississauga, Ont. “Even if you win the lottery and want to pay them out,

you can’t. A product like that is mortgage jail.”

What’s an open mortgage rate?

An open mortgage can also be fixed or variable. The interest rate will be higher than for a closed mortgage but it’s

more flexible. Generally, you can pay an open mortgage off anytime or make additional payments without

penalties. Terms range from six months to five years so you can’t lock in for as long as a closed mortgage. If you

want to get rid of your mortgage quickly, or think you may be selling or moving in the near future, this is a good


Why are mortgage rates so different? 

Rates vary according to institutions. All of the banks have completely different products which is why their pricing is

different, explains Tom Hogg, a mortgage agent at The Mortgage Centre in Mississauga, Ont. 

“The price you pay depends on what features you want on that mortgage,” says Mr. Hogg. “Prepayment features

are huge. The ability to give additional lump sums of money as often as you can is important because it all goes to

the principal. You can get a 2.99 five-year fixed but it’s only available on a 25 year max amortization, has limited

prepayment privileges, it’s closed to term so there are issues with it. The highest is going to have all the bells and

whistles but you may not need all those features. Once you understand each rate and each product, you’ll choose

what’s best for you – probably somewhere in the middle.”

What is CMHC?

Canada Mortgage and Housing Corporation (CMHC) is a Crown corporation that mainly provides mortgage loan

insurance to residential home buyers. It was originally set up in 1946 to arrange post-war housing for veterans.

Today it helps Canadians who can’t easily afford buying a house through their mortgage default insurance


What is mortgage default insurance? 

It’s a type of mortgage insurance that’s mandatory in Canada if your down payment for a residential property is

less than 20 per cent. The major provider of this insurance is the Canada Mortgage and Housing Corporation. 

The insurance costs you between 1.75 per cent to  2.95 per cent of your mortgage amount and you have to buy

and pay for this insurance on top of your mortgage. It protects the banks and the money lenders if a home owner

defaults on their mortgage but doesn’t protect the homeowner. However, lenders do offer lower mortgage rates

because their risk is decreased.


Vancouver Canada News Luxury Designer Outlet Mall Confirmed Near Vancouver International Airport

Posted by Vancity Buzz | Speak Up

A couple months back we told you about the High End Premium outlet mall plans near YVR. Today, Vancouver

Airport Authority announced that it is planning to develop a luxury designer outlet centre on Vancouver International

Airport (YVR) land in partnership with London-based developer McArthurGlen Group, Europe’s leading owner,

developer and manager of designer outlets.


“This is an exciting project that will increase the region’s destination appeal for visiting travellers and encourage

local shoppers to spend within their own community,” said Larry Berg, President and CEO, Vancouver Airport

Authority. “Later this summer, you’ll start to see the lands on Russ Baker Way near BCIT being prepared for

eventual construction; evidence of some of the jobs that will be added to the more than 23,600 already in place at



The project reinforces the Airport Authority’s role in the economic development of the region with the creation of an

estimated 1,000 new jobs. YVR currently generates $11.7 billion in total economic output to the Canadian



“We are delighted to have this opportunity to create a premium retail destination in Vancouver, our first location in

North America. Already we are seeing very strong interest from our brand partners to open at the centre,” said Gary

Bond, McArthurGlen’s CEO of Development. “Vancouver combines location excellence, economic strength,

tourism potential and a strong partner – all elements that guarantee success when opening luxury shopping



The proposed new centre would open in phases, beginning in the fall of 2014, and feature European and North

American luxury, designer and mainstream brands. The company’s outlets in Europe are known for brands such

as Prada, Armani, Burberry, Gucci, Hugo Boss, Ralph Lauren, Salvatore Ferragamo, Ermenegildo Zegna and

Michael Kors.


Vancouver Airport Authority and McArthurGlen are committed to the proposed project being built and operated to

ensure environmental compatibility with the local area. Areas of the Fraser River that border the outlet centre

would be protected and environmental enhancement plans include the installation of foot and cycling paths that fit

into existing regional trail networks.


By Gail Johnson | Insight


Allison Bell is on a mission. The 29-year-old Surrey, B.C., resident is looking for a place to call her own. She's

determined topurchase a condo solo, but she has a big hurdle to jump to get there: scraping together enough

cash for a down payment.


"I'm at a place in my life where I'm ready to get into the market," Bell says.  "I really want to do this on my own,

without having to go to my parents for help. But it's hard to save up this big lump sum."


Like so many Canadians entering the housing market for the first time, Bell is faced with a tough question: With

interest rates currently so low, do you get into the market at five-per cent down or wait and save for the conservative

20 per cent knowing rates can only go up?


How much do you need for a down payment?

Although you can break into the market with as little as five per cent down, the amount you put down determines

whether you'll have a conventional mortgage or an insured, high-ratio mortgage.


With at least 20 per cent of the home's purchase price as a down payment, you get a conventional mortgage.


A down payment that's less than 20 per cent, meanwhile, requires a high-ratio mortgage and has to be insured by

a third party (such as the Canada Mortgage and Housing CorporationGenworth Financial Canada, or Canada

Guaranty) and involves you paying an insurance premium, which could run you thousands of dollars.


According to CIBC, the mortgage-default insurance premium you'll have to pay depends on how much you're

borrowing and the percentage of your down payment, but premiums typically range between 0.5 per cent and 2.75

per cent of your total mortgage amount.


This fee can be added to the principal balance and paid off as part of your mortgage or paid in a lump same when

you buy the home.


Do the math

en Gibbard is pictured in a handout photo.Vancouver independent mortgage broker Karen Gibbard, ofGibbard

Hoffart Financial Group, shares an example of the costs of getting into the market now with a high-ratio mortgage

and waiting to save a 20 per cent down payment to avoid that insurance premium.


She's assumed a 25 year amortization period with a five-year fixed term and a purchase price of $300,000. "I think

that's probably close to what first-time buyers are experiencing as average entry level purchase prices across

Canada," Gibbard says.


Take Scenario A, with a five-percent down payment:


Purchase price: $300,000

Less five percent down payment: - 15,000

= base mortgage: $285,000

+ high-ratio fee: + 7,837.50 (2.75 per cent of the loan amount)

= total mortgage: $292,837.50


"At today's near-historical low interest rate of 3.09 per cent for a five-year fixed term and 25-year amortization, the

monthly payment for this would be approximately $1,399.40 per month," Gibbard says.


And Scenario B, with a 20-per cent down payment:


Purchase price: $300,000

less 20 per cent down payment: - 60,000

= base mortgage: $240,000


"If the interest rates were six per cent by the time they could save up the money, their payments would jump up to

$1,535.54, approximately $136 per month more than in that first scenario with five per cent down.


"Over five years the difference adds up to about $8,168 which is just a little bit more than what the high-ratio fee

was in that first scenario, with five-per cent down [$7,837.50].


"Factoring the rise in potential home values and the possibility of higher rates in the future, there is a case to be

made to look at purchasing now," Gibbard says. "Can first-time buyers really save $60,000 after-tax dollars in a

few years or will it take even longer?"


She points to the projections of Canadian wealth advisor Gordon Pape, who, like most financial experts, says that

with interest rates so low, they can only go up.


"I have always believed that home ownership is one of the four pillars of financial security," Pape writes in his newsletter. "So I would never discourage anyone from buying a primary residence as long as

they can afford it.


"When mortgage rates move higher, as they inevitably will, the market price of houses will fall. That is an historic

fact because affordability is a combination of house price and mortgage interest rates. As carrying costs go up,

fewer people can afford the payments.


"So if you are buying a residence now ... be sure you can afford an increase in payments when rates move higher,"

he states.


Potential home owners are always advised to sit down with a financial advisor — whether it's an independent

planner, someone through their bank, or a credit counsellor — to pore over their budget with an eye to the future.



You’ve been saving for awhile, weighing your options, looking around casually.  Now you’ve finally decided to do it

—you’re ready to buy a house.  The process of buying a new home can be incredibly exciting, yet stressful, all at

once.  Where do you start?


It is essential you do your homework before you begin.  Learn from the experiences of others, do some research.  Of course, with so many details involved, slip-ups are inevitable.  But be careful:  learning from your mistakes may

prove costly.  Use the following list of pitfalls as a guide to help you avoid the most common mistakes.


  1. Searching for houses without getting pre-approved by a lender:


Do not mistake pre-approval by a lender with pre-qualification.  Pre-qualification, the first step toward being pre-

approved, will point you in the right direction, giving you an idea of the price range of houses you can comfortably

afford.  Pre-approval, however, means you become a cash buyer, making negotiations with the seller much



  1. Allowing “first impressions” to overly influence your decision:


The first impression of a home has been cited as the single most influential factor guiding many purchasers’

choice to buy.  Make a conscious decision beforehand to examine a home as objectively as you can.  Don’t let the

current owners’ style or lifestyle sway your judgment.  Beneath the bad décor or messy rooms, these homes may

actually suit your needs and offer you a structurally sound base with which to work.  Likewise, don’t jump at a

home simply because the walls are painted your favourite colour!  Make sure you thoroughly the investigate the

structure beneath the paint before you come to any serious decisions. 


  1. Failing to have the home inspected before you buy:


Buying a home is a major financial decision that is often made after having spent very little time on the property

itself.  A home inspection performed by a competent company will help you enter the negotiation process with

eyes wide open, offering you added reassurance that the choice you’re making is a sound one, or alerting you to

underlying problems that could cost you significant money in both the short and long-run.  Your Realtor can

suggest reputable home inspection companies for you to consider and will ensure the appropriate clause is

entered into your contract.


  1. Not knowing and understanding your rights and obligations as listed in the Offer to Purchase:


Make it a priority to know your rights and obligations inside and out.  A lack of understanding about your

obligations may, at the very least, cause friction between yourself and the people with whom you are about to enter

the contract.  Wrong assumptions, poorly written/ incomprehensible/ missing clauses, or a lack of awareness of

how the clauses apply to the purchase, could also contribute to increased costs.  These problems may even lead

to a void contract.  So, take the time to go through the contract with a fine-tooth comb, making use of the resources

and knowledge offered by your Realtor and lawyer.  With their assistance, ensure you thoroughly understand every

component of the contract, and are able to fulfill your contractual obligations.


  1. Making an offer based on the asking price, not the market value:


Ask your Realtor for a current Comparative Market Analysis.  This will provide you with the information necessary to

gauge the market value of a home, and will help you avoid over-paying.  What have other similar homes sold for in

the area and how long were they on the market?  What is the difference between their asking and selling prices? 

Is the home you’re looking at under-priced, over-priced, or fair value?  The seller receives a Comparative Market

Analysis before deciding upon an asking price, so make sure you have all the same information at your fingertips.


  1. Failing to familiarize yourself with the neighbourhood before buying:


Check out the neighbourhood you’re considering, and ask around.  What amenities does the area have to offer? 

Are there schools, churches, parks, or grocery stores within reach?  Consider visiting schools in the area if you

have children.  How will you be affected by a new commute to work?  Are there infrastructure projects in

development?  All of these factors will influence the way you experience your new home, so ensure you’re well-

acquainted with the surrounding area before purchasing.


  1. Not looking for home insurance until you are about to move:


If you wait until the last minute, you’ll be rushed to find an insurance policy that’s the ideal fit for you.  Make sure

you give yourself enough time to shop around in order to get the best deal.


  1. Not recognizing different styles and strategies of negotiation:


Many buyers think that the way to negotiate their way to a fair price is by offering low.  However, in reality this

strategy may actually result in the seller becoming more inflexible, polarizing negotiations.  Employ the knowledge

and skills of an experienced realtor.  S/he will know what strategies of negotiation will prove most effective for your

particular situation. 



The thousands of dollars in rent you’ve already paid to your landlord may be a staggering figure—one you don’t

even want to think about.  Buying a house just isn’t possible for you right now.  And it isn’t in your financial cards for

the foreseeable future.  Or is it?  The situation is common and widespread:  countless people feel trapped in

home rental, pouring thousands of dollars into a place that will never be their own—yet they think they’re unable to

produce a down payment for a home in order to escape this rental cycle.  However, putting the buying process into

motion isn’t nearly as impossible as it may seem.  No matter how dire you believe your financial situation to be,

there are several little-known facts that may be key to helping you step from a renter’s rut to home-owning



Initially, of course, the most daunting factor involved in buying a house is the down payment.  You know you’ll be

able to handle the monthly payments—you’ve done this for years as a renter.  The hurdle, instead, seems to be

accumulating the capital needed to put money down.  However, this hurdle may be smaller than you think.  Take a

look at the following points and explore whether any of these scenarios may be possible for you:

Find a lender to assist you with your down payment and closing costs.

If you’re free of debt, and own an asset outright, your lending institution may lend you the money for a down

payment by securing it against your asset.  In this case, you won’t need to have accumulated capital for a down


Buy a home even if your credit isn’t top-notch.

If you have saved more than the minimum for a down payment, or can secure the loan against other equity, many

lending institutions will still consider you for a mortgage, despite a poor credit rating.

Find a seller to assist you in buying and financing the home.

Some sellers may be willing to bear a second mortgage as a seller take-back.  The seller then assumes the role

of the lending institution, and you pay him/her the monthly payments, rather than paying the price of the home in a

lump sum.  This is an additional option if you have a poor credit rating. 

Buy a home with much less down than you’d think.

Investigate local and federal programs, such as first-time buyer programs, that are designed to help people like

you break into the housing market.  An experienced real estate agent will be equipped to give you all the

information you need about these programs, and counsel you on which options are best for you.


Create a cash down payment without going into debt.

By borrowing money for specific investments, you may be able to produce a large income tax return that you can

use as a down payment.  Technically, the money borrowed for these investments is considered a loan, but the

monthly payments can be low, and the money you put into both the home and the investments will ultimately be



So, you know there are options out there.  The next step is to educate yourself on what your own personal

possibilities might be, and how to follow through with the means to achieve these goals.  Keep in mind, too, that

you can get pre-approved for a mortgage before you begin searching for a home.  In fact, you should get pre-

approved—the process is free and doesn’t place you under any obligation.  You can be pre-approved over the

phone.  Or, take the next step and complete a credit application.  Once a credit application is submitted, you’ll

receive a written pre-approval, which will guarantee you a mortgage to a specified level.  When you have a

concrete price range, you’ll know where to begin looking.  Make a commitment to yourself to break out of the

renting rut.  Start today!



Mortgage lenders are chiefly concerned with your ability to repay the mortgage. To determine if you qualify for

a loan, they will consider your credit history, your monthly gross income and how much cash you'll be able to

accumulate for a down payment. So how much house can you afford? To know that, you need to understand a

concept called "debt-to-income ratios."

Debt-to-income ratios

The standard debt-to-income ratios are the housing expense, or front-end, ratio; and the total debt-to-income, or

back-end, ratio.

Front-end ratio: The housing expense, or front-end, ratio shows how much of your gross (pretax) monthly income

would go toward the mortgage payment. As a general guideline, your monthly mortgage payment, including

principal, interest, real estate taxes and homeowners insurance, should not exceed 28 percent of your gross

monthly income. To calculate your housing expense ratio, multiply your annual salary by 0.28, then divide by 12

(months). The answer is your maximum housing expense ratio.


Front-end ratio
Maximum housing expense ratio = annual salary x 0.28 / 12 (months)

Back-end ratio: The total debt-to-income, or back-end, ratio, shows how much of your gross income would go

toward all of your debt obligations, including mortgage, car loans, child support and alimony, credit card bills,

student loans and condominium fees. In general, your total monthly debt obligation should not exceed 36 percent

of your gross income. To calculate your debt-to-income ratio, multiply your annual salary by 0.36, then divide by 12

(months). The answer is your maximum allowable debt-to-income ratio.


Back-end ratio
Maximum allowable debt-to-income ratio = annual salary x 0.36 / 12 (months)


Take a homebuyer who makes $40,000 a year. The maximum amount for monthly mortgage-related payments at

28 percent of gross income is $933. ($40,000 times 0.28 equals $11,200, and $11,200 divided by 12 months

equals $933.33.)


Furthermore, the lender says the total debt payments each month should not exceed 36 percent, which comes to

$1,200. ($40,000 times 0.36 equals $14,400, and $14,400 divided by 12 months equals $1,200.)


The following chart shows your maximum monthly payment and maximum allowable debt load based on your

gross annual income (remember, gross income is pretax income):

Debt-to-income ratio examples
Gross income 28% of monthly 36% of monthly
$20,000 $467 $600
$30,000 $700 $900
$40,000 $933 $1,200
$50,000 $1,167 $1,500
$60,000 $1,400 $1,800
$80,000 $1,867 $2,400
$100,000 $2,333 $3,000
$150,000 $3,500 $4,500

Here's a look at typical debt ratio requirements by loan type:


  • Conventional loans:
    Housing costs: 26 percent to 28 percent of monthly gross income.
    Housing plus debt costs: 33 percent to 36 percent of monthly gross income.
  • FHA loans:
    Housing costs: 29 percent of monthly gross income.
    Housing plus debt costs: 41 percent of monthly gross income.

Taxes and insurance

In addition, lenders include the cost of taxes and insurance when calculating how much house you can afford:

  • Real estate taxes: Because property taxes are part of your monthly mortgage payment, it is important to get an estimate of what yours would be. Ask your real estate agent or tax office for the rates that apply in the area you want to buy.
  • Homeowners insurance: You must insure your property to obtain a mortgage. You can get an estimate of insurance costs from an insurance agent or insurance company. Be sure to inquire about special requirements for hazard insurance, such as mandatory coverage for floods, earthquakes or wind (in coastal areas). If you put down less than 20 percent of your home's value, you also will have to obtain mortgage insurance or take out a second loan, called a piggyback loan, to bring the first mortgage down to 80 percent of the purchase price. Both alternatives will raise your monthly payment.
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