15 Sep

Another Record-Setting Month For Canadian Housing

General

Posted by: David Cooke

 

Canadian Housing Market Sets Record Highs in August

Toy house in a clearing with flowers and the impending virus COVID-19. Home Quarantine and Pandemic Protection Concept

Today’s release of August housing data by the Canadian Real Estate Association (CREA) showed a blockbuster August with both sales and new listings hitting their highest levels in 40 years of data–exceeding the record July activity levels. This continues the rebound in housing that began four months ago.

National home sales rose a further 6.2% on a month-over-month (m-o-m) basis in August, raising them to another new all-time monthly record (see chart below).

Unlike the previous two months in which activity was up right across the country, sales in August were up in about 60% of local markets. Gains were led by the Greater Toronto Area (GTA) and British Columbia’s Lower Mainland. With ongoing supply shortages in so many parts of Canada, it is interesting to note that the GTA and Lower Mainland also saw a considerable amount of new supply become available in August.

Actual (not seasonally adjusted) sales activity posted a 33.5% y-o-y gain in August. It was a new record for the month of August, and the sixth-highest monthly sales figure of any month on record. Transactions were up compared to last August in almost all Canadian housing markets.

So far this year, over 340,000 homes have traded hands over the Canadian MLS Systems, which was up 0.8% from the same period in 2019 despite the COVID-19 pandemic-induced recession.

“It has been a record-setting summer in many housing markets across Canada as REALTORS® and their clients play catch up following the loss of so much of the 2020 spring market,” stated Costa Poulopoulos, Chair of CREA. “Many markets dealing with inventory shortages have been seeing fierce competition among buyers this summer; although, that was something that had been anticipated for 2020 prior to COVID-19. It really does seem that the spring market shifted into the summer”.

According to Shaun Cathcart, CREA’s Senior Economist, “Activity shows signs of moderating in September”.

New Listings

The number of newly listed homes posted a further 10.6% gain in August compared to July. New supply was up in close to three-quarters of local markets, led by gains in the Lower Mainland, GTA and Ottawa.

With the August increase in new supply outpacing the rise in sales for the first time since the rebound began in May, the national sales-to-new listings ratio eased to 69.4% in August compared to 72.3% posted in July. That said, it was still among the highest levels on record for this measure.

Based on a comparison of sales-to-new listings ratio with long-term averages, only about a third of all local markets were in balanced market territory, measured as being within one standard deviation of their long-term average. The other two-thirds of markets were above long-term norms, in many cases well above.

The number of months of inventory is another important measure of the balance between sales and the supply of listings. It represents how long it would take to liquidate current inventories at the current rate of sales activity.

There were just 2.6 months of inventory on a national basis at the end of August 2020 – the lowest reading on record for this measure. At the local market level, a number of Ontario markets are now into weeks of inventory rather than months. So supply constraints are still prevalent in many parts of the country, especially in Ontario.

Home Prices

The Aggregate Composite MLS® Home Price Index (MLS® HPI) rose by 1.7% m-o-m in August 2020 (see chart and table below). This compares to a 2.3% m-o-m jump in July 2020 – the second largest increase on record (after March 2017) going back 15 years. Of the 21 markets currently tracked by the index, m-o-m gains were posted everywhere but Victoria and elsewhere on Vancouver Island.

The non-seasonally adjusted Aggregate Composite MLS® HPI was up 9.4% on a y-o-y basis in August – the biggest gain since late 2017.

The largest y-o-y gains were recorded in Ottawa (+19.9%) and Montreal (+16.4%), followed by increases in the 10% – 15% range in the GTA and surrounding Greater Golden Horseshoe markets. Moncton prices were also up in that range in August.

Prices were fairly flat on a y-o-y basis in Calgary, Edmonton and St. John’s, while climbing in the 3.5% – 5.5% range across B.C.

The MLS® HPI provides the best way to gauge price trends because averages are strongly distorted by changes in the mix of sales activity from one month to the next.

The actual (not seasonally adjusted) national average home price set another record in August 2020 at more than $586,000, up 18.5% from the same month last year.

Bottom Line

CMHC forecasted back in May that the national average sales prices will fall 9%-to-18% in 2020 and not return to yearend-2019 levels until as late as 2022. Instead, the national average sales price as of August has posted a 18.5% gain.

Housing strength is largely attributable to pent-up demand by households that have maintained their level of income during the pandemic. The hardest-hit households are low-wage earners in the accommodation, food services, and travel sectors. These are the folks that can least afford it and typically are not homeowners.

The good news is that the housing market is contributing to the recovery in economic activity.  

CMHC Annual Residential Mortgage Industry Report

The Residential Mortgage Industry report provides an in-depth view of the residential mortgage market in Canada: from mortgage origination to funding, covering insured and uninsured mortgages, and encompasses activity from all mortgage lender types. It is based on data available at the end of the second quarter of 2020. The following are key highlights:

Mortgage lender type trends

  • The report shows that in 2019, Canada’s big six banks maintained their strong foothold in the housing finance market, with a 67% market share of newly extended mortgages (see chart below).
  • Mortgage Finance Companies (MFCs) hold 20% of the insured mortgage space and credit unions stand at 12%.
  • Mortgage delinquencies of 90 days or more remained at low levels for all mortgage lender types, which suggests that a steady share of mortgage holders continued to be able to make their payments or were able to defer their mortgage payments.
  • MICs continued to represent 1% in nationwide outstanding mortgages, valued at approximately between $14 billion and $15 billion in mortgage debt.
  • Some MICs offered mortgage deferrals and other types of accommodations to financially strained mortgage consumers. An estimated 10% of mortgage consumers asked for a mortgage deferral.

Mortgage Funding Trends

  • Deposits continued to be the primary source of mortgage funding for the big six banks (66%) and credit unions (77%).
  • Covered bonds made up 17% of total mortgage funding for Canada’s big six banks at the end of the first quarter of 2020, representing an increase of 4% from 2019.
  • Private securitization continued to account for a very small share of the mortgage funding mix in Canada, with just 1.1%. However, the residential mortgage-backed securities market appears to be expanding
  • .

 

Dr. Sherry Cooper

Chief Economist, Dominion Lending Centres
Sherry is an award-winning authority on finance and economics with over 30 years of bringing economic insights and clarity to Canadians.

 

8 Sep

Great New Mortgage Products for Calgary Home Buyers

General

Posted by: David Cooke

Great New Mortgage Products

 

2020 has been a challenging year for us all. Housing sales were going well pre-pandemic with modest price increases in many areas of the country. March arrived and the start of the spring housing market with people feeling optimistic until the country shut down March 15th.

Housing prognosticators predicted that housing would drop and take a couple of years to recover. While sales did drop by over 50% in April, no one expected house sales or prices to increase so quickly. In July CREA (Canadian Real Estate Association) announced that housing sales had increased by 26% up by 14% over last year. Prices in some areas increased by up to 10%.

   “What a difference three months makes, from some of the lowest housing numbers ever back in April to the multiple monthly records logged in July,” CREA’s chief economist Shaun Cathcart said of the numbers.

While we were in the doldrums of April and May, mortgage lenders were hard at work trying to find ways to make it easier for borrowers and to encourage them to get back into the housing market when the lockdown was over.

As a result, several new mortgage products were introduced.

 

CASH BACK –  Cash back mortgages have been around for many years . The idea is that after you have put down your savings as a down payment , many people are cash poor and can’t afford to buy window coverings, build fences or do things to improved their properties. They have to wait for their cash flow to build up again. Cash back offers a percentage of 1%- 3% back at the time of signing which can be used for closing costs, or any of the items mentioned above,  A new twist on this was that you could get a $2000 cash back with a slightly higher interest rate but no claw back if you break the mortgage. . It should be noted that if you sell your home before the 5 year term is up on the 1-3% cash backs, you will have to pay back a portion of the cash back. For instance, if you sell the home after 3 years, you would have to pay back 2/5’s of the cash back for the 2 remaining years of the term.

PRINCIPAL ONLY TERM – Another interesting mortgage product that was introduced was the Interest Only Mortgage. For the first 3 months , the lender will allow you to pay the principle on the mortgage. As new mortgages are mostly interest payments this would save the average buyer of a $300,000 home, about $700 a month or $2100 for the 3 months. Once again, there’s a couple of thousand to pay down debts, or pay for window coverings

Finally, one lender spotted the problem with Purchase Plus Improvement mortgages. People find the perfect house but there isn’t a garage or perhaps the basement hasn’t been developed. They want to do this so they get a Purchase Plus Improvements mortgage which pays for the house with one cheque and then a second cheque is issued when the improvements have been made. The only problem is that most purchasers put all their money down on the down payment and don’t have anything for a deposit on the building project. Large companies understand the PPI program but small contractors can’t afford to carry the costs for a 4 week project. Now we have Purchase Plus Improvements WITH a Cash Back. Now you can plan to get the garage or basement done right away because you have the funds for the deposit.

This is great news for home buyers to get the home of their dreams. If you have any questions contact me at 403-836-1201

18 Aug

Is it worth it to break your mortgage early for today’s record low rates?

General

Posted by: David Cooke

Is it worth it to break your mortgage early for today’s record low rates? In a word, yes. In many cases, getting out of a mortgage where you are paying more than 3% for a mortgage rate of 1.89% today is often worth it.

A recent piece by Rates.ca gives an example of a client who had mortgage at 3.39%. He now could get 1.99%. The penalty was high’ over $32,000 but his broker showed him that by making a penalty free 20% prepayment and then re-investing his savings in prepayments over the next 5 years,  he saved an additional $19,248.

This strategy doesn’t work for everyone but it’s worth checking out your options. Call me if you want to crunch the numbers. Maybe we can save you thousands on your mortgage today.

15 Jul

Housing Market Continued Its Rebound in June and Early July

General

Posted by: David Cooke


Dr Sherry Cooper, chief economist at Dominion Lending Centres punished this article this morning. Of interest to my readers is that housing was up by almost 55% in Calgary

There was more good news today on the housing front. Home sales rebounded by a further 63% in June, returning them to normal levels for the month–150% above where they were in April when the pandemic-induced lockdown paralyzed the economy (see chart below). Data released this morning from the Canadian Real Estate Association (CREA) showed that for Canada’s largest housing markets, activity was strong. Sales rose 83.8% (month-over-month) in the Greater Toronto Area (GTA), 75.1% in Montreal, 60.3% in Greater Vancouver, 99.7% in the Fraser Valley, 54.9% in Calgary, 59% in Edmonton, 22.5% in Winnipeg, 34.8% in Hamilton-Burlington, 67.9% in London and St. Thomas, 55.6% in Ottawa and 43.6% in Quebec City. These m-o-m gains reflect the pent-up demand from what would have been a stellar spring housing season.

On a year-over-year basis, national home sales were up 15.2% in June.

Anecdotal evidence suggests that home sales continued to be robust in the first weeks of July. Daily tracking thus far this month indicates that activity has strengthened further in July.  According to Costa Poulopoulos, Chair of CREA, “realtors across Canada are increasingly seeing business pick back up”.

New Listings

The number of newly listed homes shot up by another 49.5% in June compared to the prior month with gains recorded across the country.

The national sales-to-new listings ratio tightened to 63.7% in June compared to 58.5% posted in May. There were only 3.6 months of inventory on a national basis at the end of June 2020 – a 16-year low for this measure.

Home Prices

The Aggregate Composite MLS® Home Price Index (MLS® HPI) climbed 0.5% in June 2020 compared to May (see Table below). Of the 20 markets currently tracked by the index, 17 posted m-o-m gains.

Generally speaking, prices are re-accelerating east of Manitoba, except Toronto for now. B.C. prices are also picking up except for Vancouver. Home prices are declining in Calgary, while elsewhere on the Prairies, prices are either flat or rising.

As usual, the price movements announced by the local real estate associations (for example, TREB in Toronto) were misleading because they are greatly affected by the types and sizes of housing sold during any month. The MLS® HPI provides a more accurate way to gauge price trends because it corrects for the changes in the mix of sales activity from one month to the next.The actual (not seasonally adjusted) national average price for homes sold in June 2020 was almost $539,000, up 6.5% from the same month the previous year.

The national average price is heavily influenced by sales in the Greater Vancouver and the GTA, two of Canada’s most active and expensive housing markets. Excluding these two markets from calculations cuts more than $107,000 from the national average price. In the months ahead, the extent to which sales fluctuate in these two markets relative to others could have significant compositional effects on the national average price, both up and down.

Bottom Line

CMHC has recently forecast that national average sales prices will fall 9%-to-18% in 2020 and not return to yearend-2019 levels until as late as 2022. I continue to believe that this forecast is overly pessimistic. Here we are in the second half of 2020, and the national average sales price has risen 6.5% year-over-year.

The good news is that the housing market is contributing to the recovery in economic activity. While the course of the virus is uncertain, Canada’s government has handled the COVID-19 situation very well from both a public health and a fiscal and monetary perspective. You only need to look at the debacle south of the border to see how well we have done. The future course of the economy here will depend on the virus. While no one knows what that will be, suffice it to say that Canada’s economy is en route to a full recovery, but it may well be a long and bumpy one.

The Bank of Canada had its first meeting today with Tiff Macklem at the helm. The Bank of Canada said full recovery from the virus would take two years (more on that in the next email).

Dr. Sherry Cooper
Chief Economist, Dominion Lending Centres
drcooper@dominionlending.ca
9 Jun

Predictions for Post Pandemic Housing Prices in Calgary

General

Posted by: David Cooke

Recently, the out-going head of CMHC , Evan Siddall, announced a study that predicted housing prices would drop by 9-18% in the coming months. He predicts that people will not be able to keep up with their mortgage deferral debt. This is an interesting prediction as housing prices have been rising in Toronto and Vancouver over the past month and new house sales are booming here in Calgary.

 

David Cooke , Calgary mortgage broker

CMHC chief Evan Siddall

Evan Siddall is a economist who worked for Goldman Sachs and Irving Oil before moving to CMHC .  His biography does not show any experience in housing economics. Mortgage default companies like CMHC, Genworth and Canada Guaranty will be working hard to keep families in their homes to avoid foreclosures. Banks and other mortgage lenders are setting aside large reserves to cover possible losses. I suspect that even after the mortgage deferrals are over, lenders and mortgage insurers will come up with other accommodations. Interest rate reductions , interest forgiveness and increased amortization are 3 of the items they could pull out of their toolbox.

Interest Rate Reductions

Benjamin Tal , the deputy chief economist at CIBC lives and breathes housing and has done so for many years. He has a different view of  Mr. Tal says that Canada’s economy is “frozen”. When this is over , housing demand will still be there and people’s jobs will still be there.

I would like to add another item. How about all those people who have spent 10 weeks in a small apartment during this pandemic?  Don’t you think that they will want a larger home? I foresee an increased demand for single family homes across Canada. Imagine what it must have been like to have to stay for weeks in a 400 square foot condo in downtown Vancouver?  It would feel like a prison. Add to this the fact that by not spending money for 3 months on public transportation, movies, dinner out and all those things we usually spend money on many people have saved for their down payment. In the Toronto and Vancouver markets house prices have inched up by 1.5% while the pandemic has been going on.

Locally, here in Alberta, home sales dropped in April due to the lock down but the number of listings stayed high resulting in an over-supply which brought housing prices down. However, now that the lock down is easing and people are getting back to work, there is pent up demand for housing. Speaking with one show home rep lasst week , she said that people have had a lot of free time and they spent it researching homes online. They know what they want, how much it’s going to cost and in the case of starter homes, they are making offers. I expect that as soon as they know when their new homes will be ready they will sell their present homes quickly and the more expensive homes will start selling.

Finally, interest rates have come down. Combined with house prices that are at least 5% lower, now is a great time to buy.Housing prices are at the lowest that they are likely to be this year.  Some lenders are even offering incentives that I have never seen before in my 15 years as a mortgage broker. One lender is offering a $2000 cash back bonus . Another lender is offering 3 months of no interest payments, just pay the principal . This can easily save you $3000 over 3 months. That pays for a new fence, or window coverings and gets you off to a strong start. If you are interested in knowing more about buying homes in Calgary, Okotoks or any surrounding area in Alberta contact me at 403-836-1201

1 Jun

TD Charges Woman $30,000 penalty to Break her Mortgage during Covid-19 Crisis

General

Posted by: David Cooke

TD Charges Woman $30,000 penalty to Break her Mortgage during Covid-19 Crisis

Perhaps you saw this headline last week. A woman who lost her income as a realtor, lost 2 tenants and could not keep up the payments on her home. As a result she sold her home in April before prices dropped. What she did not expect was the penalty for breaking her mortgage to be so high. She was expecting a 3 month interest penalty which would have been around  $3000. Instead the bank used a little understood clause which says ” 3 month interest or the IRD (Interest Rate Differential)  , which ever is greater. ” . This resulted in a penalty of $29,530 !  If you check your mortgage paperwork you will find this if you have a fixed rate mortgage. Here’s a definition of IRDDavid Cooke - Calgary mortgage broker

Realtor charged $30,000 to break her mortgage

Interest Rate Differental

The IRD is a compensation charge that may apply if you pay off your mortgage prior to the maturity date, or pay the mortgage principal down beyond the amount of your prepayment privileges. The IRD is based on:

1-the amount you are pre-paying and

2-An interest rate that equals the difference between your original mortgage interest rate and the interest rate that the lender can charge today when re-lending the funds for the remaining term of the mortgage.

source: Canada Mortgage Trends

How do you avoid getting whacked with a huge penalty for breaking your mortgage? The first thing to do is get your mortgage arranged through a Dominon Lending Centres mortgage professional. We are well aware of these penalties and one of the first questions we will ask is if you think you will be breaking your mortgage during the term.  If so we will recommend a variable rate which would have a 3 month interest penalty or taking a shorter term . If your job isn’t secure we will keep you away from these lenders as well.

Finally, most mortgage companies and trust companies that offer mortgages don’t have a posted fee. As a result, the IRD for many of them is 75% lower than the banks. You may not know that but your trusted DLC mortgage advisor does. Remember, in the future always go to a mortgage broker, we will save you money, time and aggravation  every time.

https://www.cbc.ca/news/business/mortgage-penalty-pandemic-1.5588741

13 May

How to Safely Buy a Home in Calgary and Obtain Financing

General

Posted by: David Cooke

How to Safely Buy a Home  in Calgary and Obtain Financing

It may be hard to understand but there are still people out there buying homes, renewing mortgages and refinancing their homes to increase cash flow. How could they and why would they want to mix with strangers in these uncertain times?

Well, until March 14th , most places in North America were starting their busy spring housing market. People had given notice in January and February that they were not going to renew their leases and had made offers on new and existing homes. Many people were also shopping for rates as their mortgages were coming up for renewal. Who knew that the world was about to come crashing down on their heads.

Modified full appraisal Modified full appraisal

The housing industry had to make accommodations in order to help these people out.  If you had an accepted offer on a house, how could you obtain a mortgage without meeting a mortgage professional ? Fortunately we had the technology to help us out. Mortgage applications can be taken online or over the telephone and have been for several years. The big change has been signing a mortgage commitment. Lenders now allow us to have mortgage documents signed using an electronic signature.

If you had not made it that far in the house buying process, realtors have also made a number of changes to limit contact. Obviously sellers are not happy with having strangers walking through their homes and touching door knobs and other items. “RECA, the real estate Council of Alberta is encouraging realtors to ask a series of health questions before realtors arrange to show homes” says Julie Pinault of Royal Lepage Solutions in Calgary. “Think of a property as a museum and don’t touch anything” she adds.

“Open Houses have been cancelled for the foreseeable future” says Rebecca Yarmoloy of ReMax First. Homes can be first viewed using websites and if you are seriously interested in a property.”

Some realtors are going even further. Lionel Sale from Frist Place Realty states that buyers meet the realtor at the property. The sellers are encouraged to turn on all the lights and leave doors and closets open so that no one will touch any surfaces that could spread the virus. Some sellers are leaving disposable gloves by the front door.

If a home needs an appraisal, what can you do? Appraisers need 45 minutes to examine a property from top to bottom in order to establish a proper value for the home.  Once again, adaptations have been needed. For bungalows, the appraiser will go to the windows around the home and take photos. Other appraisers are   using 3rd party technology to do their jobs. They will Facetime or WhatsApp the client and have them walk around the house they way they normally would in order to do a full inspections. This is called a Full Modified Appraisal.

Finally, we get to the end of the process and you need to sign all the mortgage documents with the lawyer or notary. At this time, “wet” signatures are still needed. E-signatures are not allowed which poses a problem for social distancing. Another solution has been found. The home buyers go to the lawyer and go into a room with a copy of the mortgage documents. The lawyer sits in the next room using video conferencing or Zoom and goes over his copy of the documents, telling the buyers where they need to sign and explaining any parts of the contract they may not understand. When the clients leave, the lawyer goes into the signing room and picks up the signed copy to be registered at the title office.

From beginning to end in the home buying , refinancing and renewal process, it’s now possible to obey social distancing rules and accomplish your home financing goals.

If you need any further information please feel free to contact me. At 403-836-1201

David Cooke has been a mortgage broker since 2005 and presently works for Jencor Mortgage Corp, situated in Calgary, Alberta

7 May

Bank of Canada Puts The Economy on Life Support

General

Posted by: David Cooke

Bank of Canada Puts The Economy on Life Support

Bank of Canada Stands Ready To Do Whatever It Takes

On the heels of a devastating decline in the Canadian economy, the Bank of Canada is taking unprecedented actions. With record job losses, plunging confidence and a shutdown of most businesses, this month’s newly released Monetary Policy Report (MPR) is a portrait of extreme financial stress and a sharp and sudden contraction across the globe. COVID-19 and the collapse in oil prices are having a never-before-seen economic impact and policy response.

The Bank’s MPR says, “Until the outbreak is contained, a substantial proportion of economic activity will be affected. The suddenness of these effects has created shockwaves in financial markets, leading to a general flight to safety, a sharp repricing of risky assets and a breakdown in the functioning of many markets.” It goes on to state, “While the global and Canadian economies are expected to rebound once the medical emergency ends, the timing and strength of the recovery will depend heavily on how the pandemic unfolds and what measures are required to contain it. The recovery will also depend on how households and businesses behave in response. None of these can be forecast with any degree of confidence.”

“The Canadian economy was in a solid position ahead of the COVID-19 outbreak but has since been hit by widespread shutdowns and lower oil prices. One early measure of the extent of the damage was an unprecedented drop in employment in March, with more than one million jobs lost across Canada. Many more workers reported shorter hours, and by early April, some six million Canadians had applied for the Canada Emergency Response Benefit.”

“The sudden halt in global activity will be followed by regional recoveries at different times, depending on the duration and severity of the outbreak in each region. This means that the global economic recovery, when it comes, could be protracted and uneven.”

Today’s MPR breaks with tradition. It does not provide a detailed economic forecast. Such forecasts are useless given the degree of uncertainty and the lack of former relevant precedents. However, Bank analysis of alternative scenarios suggests the level of real activity was down 1%-to-3% in the first quarter of this year and will be 15%-to-30% lower in the second quarter than in Q4 of 2019. Inflation is forecast at 0%, mainly owing to the fall in gasoline prices.

“Fiscal programs, designed to expand according to the magnitude of the shock, will help individuals and businesses weather this shutdown phase of the pandemic, and support incomes and confidence leading into the recovery. These programs have been complemented by actions taken by other federal agencies and provincial governments.”

The Bank of Canada, along with all other central banks, have taken measures to support the functioning of core financial markets and provide liquidity to financial institutions, including making large-scale asset purchases and sharply lowering interest rates. The Bank reduced overnight interest rates in three steps last month by 150 basis points to 0.25%, which the Bank considers its “effective lower bound”. It did not cut this policy rate again today, as promised, believing that negative interest rates are not the appropriate policy response. The Bank has also conducted lending operations to financial institutions and asset purchases in core funding markets, amounting to around $200 billion.

“These actions have served to ease market dysfunction and help keep credit channels open, although they remain strained. The next challenge for markets will be managing increased demand for near-term financing by federal and provincial governments, and businesses and households. The situation calls for special actions by the central bank.”

The Bank of Canada, in its efforts to provide liquidity to all strained financial markets, has, in essence, become the buyer of last resort. Under its previously-announced program, the Bank will continue to purchase at least $5 billion in Government of Canada securities per week in the secondary market. It will increase the level of purchases as required to maintain the proper functioning of the government bond market. Also, the Bank is temporarily increasing the amount of Treasury Bills it acquires at auctions to up to 40%, effective immediately.

The Bank announced new measures to provide additional support for Canada’s financial system. It will commence a new Provincial Bond Purchase Program of up to $50 billion, to supplement its Provincial Money Market Purchase Program. Further, the Bank is announcing a new Corporate Bond Purchase Program, in which the Bank will acquire up to a total of $10 billion in investment-grade corporate bonds in the secondary market. Both of these programs will be put in place in the coming weeks. Finally, the Bank is further enhancing its term repo facility to permit funding for up to 24 months.

The Bank will support all Canadian financial markets, with the exception of the stock market, and it “stands ready to adjust the scale or duration of its programs if necessary. All the Bank’s actions are aimed at helping to bridge the current period of containment and create the conditions for a sustainable recovery and achievement of the inflation target over time.”

This is exactly what the central bank needs to do to instill confidence that Canadian financial markets will remain viable. These measures are a warranted offset to panic selling. Too many investors are prone to panic in times like these, which has a snowball effect that must be avoided. As long as people are confident that the Bank of Canada is a backstop, panic can be mitigated. The Bank of Canada deserves high marks for responding effectively to this crisis and remaining on guard. Governor Poloz and the Governing Council saw it early for what it is, a Black Swan of enormous proportions.

As a result, Canada will not only weather the pandemic storm better than many other countries, but we will come out of this economic and financial tsunami in better condition.

Dr. Sherry Cooper

Dr. Sherry Cooper

Chief Economist, Dominion Lending Centres

30 Apr

Building a Real Estate Portfolio

General

Posted by: David Cooke

Building a Real Estate Portfolio

More and more Canadians do not have a defined benefits pension plan. Companies are moving away from this model due to the expense of maintaining enough in the fund to pay out until the employee and survivors die. Those who are self employed also do not have pensions beside the Canadian Pension Plan.
What can you do if you fall into this category? How do you save enough to have a comfortable retirement? The answer is, build up your own investments through a real estate portfolio.

In order to purchase a revenue property you need 20% down payment . This can be a huge sum to save and you could get discouraged as you see property prices rising. There is a legal work around that is an open secret that realtors and other property investors have used for years.

Purchase a starter home with a 5% down payment. While you are living in the property, it is considered as your primary residence and any increase in value is tax free. Start from Day 1 to save for your next home. You may purchase a condo as the prices are usually less than most detached homes in Canadian cities. When you have saved 5% or if your present home has increased enough in value that you have more than 20% in equity you can remove that extra equity with a line of credit or by refinancing your home you can now purchase a larger home. Now you move to House #2 and rent out House #1.

You are now on your way to building a real estate portfolio. If you repeat this every 3 to 5 years in 20 years you’ll have a portfolio of 4 or more rental properties Is this for everyone? No, if you aren’t handy and if you don’t want the expense of hiring a property management company you cold end up spending your free time on maintenance of several homes.

Talk to your financial advisor or accountant first and then meet with your local Dominion Lending Centre mortgage professional. We can provide answers to your real estate financial needs.

David Cooke

David Cooke

Dominion Lending Centres – Accredited Mortgage Professional

19 Jun

4 Home Improvements that will pay you back

General

Posted by: David Cooke

Some home improvements provide more of a payback when you sell your  house in Calgary down the road.

Here’s a list of the four home improvements which will provide the biggest payback when you sell.

  1.  Adding square footage – while this can be a very expensive project, adding to the size of a house can re-coup between 50-83% of your initial investment. Putting a bonus room on top of your front facing garage increases the square footage without having to enlarge the foundation.
  2. A deck addition – adding a deck makes a house feel larger and allows you to enjoy your backyard during the warmer months. Typically you can get between 65-90% of your investment back .
  3. Re-modeling the kitchen – one of the most important rooms in the house is the kitchen. A well done project will get you between 50-120% back when you sell the house but remember not to over-do the project. A million dollar kitchen in a $500,000 home won’t be fully appreciated by future buyers.
  4. A bathroom addition – the second room buyers check out is the bathroom. While re-modeling a bathroom will recoup a lot of the renovation costs adding a second bathroom to a one bathroom home is huge. Many home owners find that they get between 80-130% of the cost of the project.

If you are thinking about buying a home or renovating your present home, speak to me your Calgary Dominion Lending Centres mortgage broker about how they can help you to finance any of these projects in your mortgage and pay low interest rates.