Real Estate Insider: July 2018 News Report

Welcome back everyone! With more than a few hot topics this month, we've made sure to scope out the best reads you won't want to pass up. Do you agree with condos banning smoking with the legalization of marijuana? What is the issue with having Kitec plumbing on your property? How can you save money on your flooring renovation? We'd love to hear your feedback on these topics plus more in this edition of the Real Estate Insider!

Everyone knows the phrase “Location! Location! Location!” when buying a home or business. There are many factors that can increase, or decrease the value! Which do you think living next to a cemetery will do? Find out here! >>

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Building your dream home? Congratulations! While this is an exciting time, we want to make sure you are getting the best tax return on your current home as possible! This can be a tricky situation, read this article to get started! >>

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You don’t have to start with a lot to become a successful real estate investor. Read how at 27, Paula Pant was paying $400 a month in rent to share a kitchen and bathroom with roommates, and at 34, she now has 8 homes!  >>

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Don’t let your ego get in the way of your financial strength! Read here for various reasons why you should put your ego aside when thinking about buying a home. >>

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Ahead of the legalization of recreational marijuana, some condos are taking pre-emptive steps to make sure they ban smoking on their properties. Do you agree or disagree with this move? Read more here. >>

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The age-old question of “fixed vs. variable” mortgage rates continues in this article following the rumours of another rate increase before the end of 2018! Read here. >>

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A deceased person could have assets not controlled by their executor. Who is entitled to these assets? Read here for some insight on the different parts of an “Estate Pie” and who all gets a slice! >>

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Kitec plumbing could be an issue when buying or selling a property that contains it. Watch this video for 5 things to know about Kitec plumbing! >>

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Pooling resources can be a great idea when buying or renting a home to get more for your money, as long as everyone is protected! Read here for tips to avoid costly or ugly scenarios down the road! >>

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Floors are often the last things to go into a renovation project, so make sure to finish strong! Here are 5 ways to save money on flooring. >>

Real Estate Insider: February 2018 News Report

Welcome back to the Real Estate Insider, readers! This past month, we came across a variety of hot topics you'll want to invest some reading time in, including how marijuana may boost the value of your home, why you should know your credit score, and why you shouldn't chase the lowest mortgage rate!

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There are a lot of factors to consider when deciding on either a fixed or variable rate mortgage, and everyone is different. Luckily, ‘RateSpy.com’ has compiled a checklist to make your decision easier! Check it out: >>

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Mortgage rates are seeing a steady increase for the first time since the early 1990’s, and that trend isn’t stopping next renewal term! Are you prepared for a rate increase? Read more about current trends here. >>

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DON’T GET TRICKED BY CHASING THE LOWEST MORTGAGE RATE! There are so many other factors that could save you so much more money in the long run! Read about them all here. >>

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There are a lot of expected benefits from the legalization of marijuana, and a boost in housing prices may be one of them! A Study in America found homes close to recreational ‘pot shops’ saw an increase in value by about 8%. Read more here. >>

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Are you aware of you Debt-To-Income ratio? It may be time to take a look! Learn what it is and why it is so important when qualifying for a mortgage or line of credit! >>

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With the recent real estate “Boom” in Toronto, we have seen the number of people getting their real estate license do an equally impressive “Boom”, but how many of these new agents are successful? How many Toronto realtors are doing less than 1 deal per year? The number will almost certainly shock you, and they are all laid out for you here. >>

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While young adults living with their parents give them the ability to save money, study has shown that it may be draining the parent’s retirement funds by more than 24%! Read more about the increasing trend here. >>

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Do you want to invest in Real Estate but maybe aren’t ready buy an investment property? Here are 6 ways to passively invest in the growing real estate market! >>

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Capital Gains tax has been a hot topic in recent months; especially since house flipping and income properties have increased in popularity. But what about when you are about to inherit some real estate from a relative? How does the taxation work? Read this article to find out the best way to approach these situations. >>

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Knowing your credit score is important! Get your credit score and report for free here! >>

Review: Bank of Canada Raises Interest Rates

Unless you were on vacation last week, you probably saw the news that the Bank of Canada increased interest rates.  A lot of commentary has followed the move with everyone sharing their opinion on the matter and what it means for the real estate market.  Today we are going to share our take ☺

What should I know about what the Bank of Canada did last week?

The Bank of Canada raised its overnight lending rate from 0.5% to 0.75% last week.  This overnight rate determines the rate at which banks lend money to each other on a regular basis.  This affects the bank’s cost of funds and since the banks lend to consumers based on a spread, this would lead to increased borrowing costs.  This is the first interest rate increase in seven years.

Why did the Bank of Canada raise interest rates?

The bank has 2 mandates:

1. To ensure the economy is operating as close as possible to full employment.

2. To ensure inflation is operating within an acceptable range (generally 1-3% annually).

The bank cited a strengthening economy and expectations for higher inflation as two primary reasons for the increase.  Another reason is that the Bank of Canada acts mindfully based on how the U.S. Federal Reserve acts. The U.S. has increased interest rates three times already this year!  Lastly, the Bank of Canada is concerned about runaway house prices in large markets such as Toronto and Vancouver; they want to reign in speculation and increased borrowing.

What does the interest rate increase mean for me?

The Big Banks in Canada set a prime lending rate based on their cost of funds.  For the last few years, this rate has been set at 2.7%.  Lots of borrowing products, including variable rate mortgages and home equity lines of credit, are based on a discount or premium based on the prime rate (ie. prime -0.50%).  Therefore, rates on variable rate mortgages and other products tied to prime rates will increase as a result.  In fact, the big banks had all increased their prime rate from 2.7% to 2.95% within 24 hours of Bank of Canada decision.  Fixed rate mortgages or loans (being fixed) will not see a change.

How will this interest rate increase affect the real estate market?

When looking at the big picture, this interest rate increase is very small.  Lets use an example to illustrate:

• The current average home price in Canada is approximately $500,000
• Suppose your mortgage is based on 80% loan to value or $400,000
• Let's say your variable mortgage is based on the previous prime rate of 2.7%
• Now your prime rate is set to increase to 2.95%
• The amortization period is 25 years
• Your previous payment was $1831.95/mth.  Your new payment is $1882.73/mth.  An increase of approximately $50/mth.

While $50 extra isn’t fun, we don’t see it breaking the bank in the big picture.  When people think about interest rate increases, they think about rates rising to historical averages of 7-10%.  We are nowhere near this.  It would take a long succession of interest rate increases for interest rates to really affect the market.

Before the rate increase, sales in markets like Toronto were pulling back on the heels of a proposed 15% foreign buyers tax.  Add chatter of increasing rates and all of the sudden people are sitting on the sidelines.  This seems to be more of a perception issue with people reading the headline news.  Prices were already sky high and speculators are pulling back.  It's doubtful that the extra 0.25% on borrowing costs is suddenly making it unaffordable for qualified buyers who were in the market looking already.

In our home market of Windsor, Ontario, with an average price of $267,000, the affordability is very good and therefore this interest rate increase shouldn’t affect demand too much.  Using the same example above, adjusted for our lower prices, we are talking about an increased payment of $27/mth.  Interest rates are still bouncing off a historical bottom and have a long way to go before affecting affordability.

What are your thoughts on this interest rate increase?