Never buy a house without a home inspection
February 17, 2012
Mark Weisleder
In Ontario's hot housing market buyers are being advised by agents to make 'clean' offers without home inspections. Don't do it.
Ontario’s hot housing market continues to spark bidding wars and, in many cases, buyers are being advised by agents to make “clean” offers to get the house they want.
By “clean”, the agent means an offer without any conditions in order to make it more acceptable to the seller. Big mistake. I constantly hear stories from ‘successful’ home buyers, who bought without an inspection. They later uncovered major problems, many of which could have been identified with a proper inspection. This meant large repair bills and unfortunate lawsuits involving unhappy buyers, sellers and real estate agents.
In a column last September, I wrote about the issue and offered a simple 20-item home inspection checklist for buyers. The home inspection system is far from perfect, but it is the best way to safeguard your interest.
Related: 20 things to look for in a home inspection
Inspections are imperfect because in most cases the inspector is not permitted to look behind walls or under floors which means many potential problems are hidden. But Andrew Radomski of Pillar to Post, a professional home inspection company, tells me that inspection firms can identify plenty of potential trouble spots. These include:
• Obsolete knob and tube wiring. This is found in homes built prior to the 1950s in most of the original City of Toronto. It is hard to get insurance if your home has knob and tube wiring.
• A 60-amp electrical service when the norm today is either 100 or 200. Again this will lead to higher insurance premiums.
• Old galvanized plumbing. It rusts, can leak and plug up, slowing water flow. Old lead pipes are a health risk.
• Any roof over 20 years old should probably be partially or completely replaced.
• Old foundations will gradually deteriorate, causing leaks, and are expensive to repair.
• Windows can be expensive to replace, if in poor condition.
Some firms use thermal imaging technology and, for an additional fee, can identify problems with the structure, moisture leakage or air leakage in a home. They can also better identify when there is insufficient insulation, plumbing leaks or poor construction, which can lead to problems down the road.
In some cases the seller will conduct a pre-listing inspection and make a summary of the results available to any interested buyer. A good idea, but as a buyer, you cannot rely just on this and should still conduct your own inspection. You do not know how thorough the inspection was and, more important, what qualifications the inspector had.
Some sellers try and create the atmosphere for bidding wars by saying that they will not accept any offers for a four- or five-day period. They hope that buyers will come in early, pay for a home inspection in advance and then be in a position to make an offer without any conditions. While this is better than doing no inspection at all, the disadvantage is that you may pay for this inspection but still not win the bidding war.
Related: 17 things to know about closing your house deal
And if you try and buy a home by yourself, without an agent, you had better find a home inspection company first and determine how much time they might need to do an inspection for you. Real estate agents work with many home inspection firms, so they can normally arrange for an inspection for buyers within forty-eight hours.
In Ontario, the home inspection industry needs to be licensed, as there are many inspectors today who do not have insurance in the event they make errors. British Columbia and Alberta have licensed inspectors.
Sellers, consider getting your home inspected before putting it up for sale and fix any problems that are identified. Don’t cover them up or you will face a lawsuit after closing.
Buyers, do not get pressured into making an offer without a home inspection condition, especially for older homes. I know the process can be frustrating, but it is better to be frustrated and lose a bidding war than to win a bidding war and pay more for it after closing.
More real estate columns by Mark Weisleder
Mark Weisleder is a real estate lawyer. mark@markweisleder.com.
Friday, February 17, 2012
Friday, February 10, 2012
New Building Awards Will Benefit Toronto
Richard Silver TREB President
President's Newspaper/Magazine Columns
Toronto SUN Column (as it appears each Friday in the Toronto Sun)
New Building Awards Will Benefit Our City
February 10, 2012 -- In recent months Canada has received high marks in a number of studies conducted by various international consulting firms including Forbes, FutureBrand and Reputation Institute. When it comes to doing business, branding, and reputation, our country has been rated number one in the world. As Torontonians, we should be proud of our contribution to such rankings. In fact, in an April 2011 study conducted by PriceWaterhouseCoopers, Toronto placed second only to New York as the world’s most successful city.
One key element that contributes to Toronto’s outstanding international reputation is development. We have for example, more condominium buildings currently under construction in Toronto than in any other city in North America. Trends like this one demonstrate the confidence that developers and consumers have in the Greater Toronto Area (GTA).
To recognize innovative Commercial buildings that contribute to our city, Greater Toronto REALTORS® have established the Toronto Real Estate Board (TREB) Commercial Building Awards, and to tell you more about them, I have invited the Chair of our Association’s Commercial Division Larry Purchase to share this column.
Throughout the next five months developers, architects and Greater Toronto REALTORS® will have the opportunity to nominate projects as part of the TREB Commercial Building Awards. Projects can be nominated in various categories as follows: Green, Industrial, Commercial Office, Commercial Residential, Multi-Residential and/or Institutional.
Nominated buildings, which must be located in the GTA and have been completed between January 2009 and November 2011, will be evaluated based on various criteria. These include the project’s sensitivity to the environment, its design and innovation, and its success in answering a specific developmental need in the community.
A panel of five judges will visit each of the nominated projects to assess overall exterior design and determine how each fits into its surrounding area. Once each of the sites has been visited, the judges will meet to select one new and one retrofit building for a TREB Commercial Building Award.
The selected projects will be announced at a special awards ceremony that will take place at the Toronto Real Estate Board offices on October 30, 2012.
By recognizing outstanding accomplishments in new and retrofit Commercial buildings, we hope to inspire others to continue to strive for excellence, as doing so contributes to the quality of life throughout the GTA and to our city’s strong international reputation. When we work together to make ours a better city, and take the time to recognize such efforts, we all win.
All completed entries for the TREB Commercial Building Awards must be received at the Toronto Real Estate Board no later than Friday, May 31, 2012 at 4:30 pm.
To download a nomination form please visit TREBCommercial.com
Richard Silver is President of the Toronto Real Estate Board, a professional association that represents 32,000 REALTORS® in the Greater Toronto Area.
Follow TREB on www.twitter.com/TREBhome, www.Facebook.com/TorontoRealEstateBoard and www.youtube.com/TREBChannel
President's Newspaper/Magazine Columns
Toronto SUN Column (as it appears each Friday in the Toronto Sun)
New Building Awards Will Benefit Our City
February 10, 2012 -- In recent months Canada has received high marks in a number of studies conducted by various international consulting firms including Forbes, FutureBrand and Reputation Institute. When it comes to doing business, branding, and reputation, our country has been rated number one in the world. As Torontonians, we should be proud of our contribution to such rankings. In fact, in an April 2011 study conducted by PriceWaterhouseCoopers, Toronto placed second only to New York as the world’s most successful city.
One key element that contributes to Toronto’s outstanding international reputation is development. We have for example, more condominium buildings currently under construction in Toronto than in any other city in North America. Trends like this one demonstrate the confidence that developers and consumers have in the Greater Toronto Area (GTA).
To recognize innovative Commercial buildings that contribute to our city, Greater Toronto REALTORS® have established the Toronto Real Estate Board (TREB) Commercial Building Awards, and to tell you more about them, I have invited the Chair of our Association’s Commercial Division Larry Purchase to share this column.
Throughout the next five months developers, architects and Greater Toronto REALTORS® will have the opportunity to nominate projects as part of the TREB Commercial Building Awards. Projects can be nominated in various categories as follows: Green, Industrial, Commercial Office, Commercial Residential, Multi-Residential and/or Institutional.
Nominated buildings, which must be located in the GTA and have been completed between January 2009 and November 2011, will be evaluated based on various criteria. These include the project’s sensitivity to the environment, its design and innovation, and its success in answering a specific developmental need in the community.
A panel of five judges will visit each of the nominated projects to assess overall exterior design and determine how each fits into its surrounding area. Once each of the sites has been visited, the judges will meet to select one new and one retrofit building for a TREB Commercial Building Award.
The selected projects will be announced at a special awards ceremony that will take place at the Toronto Real Estate Board offices on October 30, 2012.
By recognizing outstanding accomplishments in new and retrofit Commercial buildings, we hope to inspire others to continue to strive for excellence, as doing so contributes to the quality of life throughout the GTA and to our city’s strong international reputation. When we work together to make ours a better city, and take the time to recognize such efforts, we all win.
All completed entries for the TREB Commercial Building Awards must be received at the Toronto Real Estate Board no later than Friday, May 31, 2012 at 4:30 pm.
To download a nomination form please visit TREBCommercial.com
Richard Silver is President of the Toronto Real Estate Board, a professional association that represents 32,000 REALTORS® in the Greater Toronto Area.
Follow TREB on www.twitter.com/TREBhome, www.Facebook.com/TorontoRealEstateBoard and www.youtube.com/TREBChannel
Monday, February 6, 2012
Saturday, January 28, 2012
Why It's a Good Time To Buy a Home
A posting from The Toronto Star January 28, 2012 issue. Visit the Star to view article and comments.
Moneyville / Real Estate / Why it’s a good time to buy a home
Good time to buy a home?
Why it’s a good time to buy a home
By Mark Weisleder | Fri Jan 27 2012
I believe there has never been a better time to buy a home. I’ve been in the industry for 28 years as a lawyer and I haven’t seen so many positive signs for housing, whether you are thinking or buying or locking in a mortgage.
Here’s why:
Mortgage rates at historic lows: They can’t get any lower. Four to five-year fixed mortgages at 3 per cent are unheard of. It is lower than the variable rate that most Canadians have been paying for years. Rates have nowhere to go but up, either later this year or next. If you are paying a variable interest rate, lock in now.
Canada’s appeal: This country has everything going for it — a stable banking and political environment, steady real estate market, the natural resources people want and few social tensions. That makes us a safe haven in a volatile world.
Our immigrant draw: Because of the above, we’re a draw for immigrants, often wealthy ones. When they get here, they need a home. So in my view while the real estate market may level off in some areas of Ontario, it should stay strong in most of the GTA and likely Canada’s other large urban centres as well.
Mortgage defaults: According to CMHC, over 99 per cent of Canadians pay their mortgages on time. It quite a different picture in the U.S. where 7 million homes are in foreclosure and perhaps another 7 million homeowners are under water. This represents almost 15 per cent of all homes. So while the American housing market will likely be weak for the next few years, this should not occur in Canada. Our banks are not dumping homes onto the market, so there is no downward pressure on prices.
Recourse Mortgages: In many U.S. states, if you can’t pay your mortgage, the only thing the bank can do is foreclose; they cannot sue you for any shortfall. So when homes go under water, owners give the keys back to the bank. In Canada, loans are almost all Recourse, meaning if you don’t pay and there is a shortfall, the lender can sue you for the difference. This is another reason why, in my opinion, even if times do get tough, Canadian homeowners will find a way to make the payments until things improve.
Income-to-price ratio: Another misleading statistic is that in major markets, like Toronto, the average price of a home is now 4.6 times the income of the average Canadian. This same statistic was found just before the U.S. and UK markets went into the tank. However, if you look at median incomes of Canadians against the median cost of homes, this average comes down to around 3.5, which is not dangerous. Using averages are wrong. A person receiving social assistance will not buy a home, and should not be included in any relevant statistic.
High consumer debt: The warnings about rising debt ratios must be examined carefully. The Governor of the Bank of Canada is worried that the average personal debt ratio is now 156 per cent in Canada. This means a household making $100,000 per year, owes $156,000, two-thirds of which is mortgage debt. Why is this so bad? At an interest rate of 3 or even 5 per cent, the amount needed to service the debt is manageable. Most people do not pay off their mortgages in one year. Still, this is another good reason to consolidate your debt now, at these low interest rates, and lock in.
No guarantees: Nobody can predict the future and there’s always the possibility of a major economic shock. Yet, in a U.S. presidential election year, politicians will do whatever is necessary to prevent it. If the economy goes into the tank, so do re-election chances. The U.S. is already showing signs of economic recovery.
No matter what, do not take on a monthly payment higher than what you can afford. Meet with your lender or mortgage broker in advance to figure out what you can afford before you start looking for a home. It may be the best time to buy, but you need to buy smart.
Mark Weisleder is a lawyer, columnist, author and speaker to the real estate industry. You can contact Mark at mark@markweisleder.com
Moneyville / Real Estate / Why it’s a good time to buy a home
Good time to buy a home?
Why it’s a good time to buy a home
By Mark Weisleder | Fri Jan 27 2012
I believe there has never been a better time to buy a home. I’ve been in the industry for 28 years as a lawyer and I haven’t seen so many positive signs for housing, whether you are thinking or buying or locking in a mortgage.
Here’s why:
Mortgage rates at historic lows: They can’t get any lower. Four to five-year fixed mortgages at 3 per cent are unheard of. It is lower than the variable rate that most Canadians have been paying for years. Rates have nowhere to go but up, either later this year or next. If you are paying a variable interest rate, lock in now.
Canada’s appeal: This country has everything going for it — a stable banking and political environment, steady real estate market, the natural resources people want and few social tensions. That makes us a safe haven in a volatile world.
Our immigrant draw: Because of the above, we’re a draw for immigrants, often wealthy ones. When they get here, they need a home. So in my view while the real estate market may level off in some areas of Ontario, it should stay strong in most of the GTA and likely Canada’s other large urban centres as well.
Mortgage defaults: According to CMHC, over 99 per cent of Canadians pay their mortgages on time. It quite a different picture in the U.S. where 7 million homes are in foreclosure and perhaps another 7 million homeowners are under water. This represents almost 15 per cent of all homes. So while the American housing market will likely be weak for the next few years, this should not occur in Canada. Our banks are not dumping homes onto the market, so there is no downward pressure on prices.
Recourse Mortgages: In many U.S. states, if you can’t pay your mortgage, the only thing the bank can do is foreclose; they cannot sue you for any shortfall. So when homes go under water, owners give the keys back to the bank. In Canada, loans are almost all Recourse, meaning if you don’t pay and there is a shortfall, the lender can sue you for the difference. This is another reason why, in my opinion, even if times do get tough, Canadian homeowners will find a way to make the payments until things improve.
Income-to-price ratio: Another misleading statistic is that in major markets, like Toronto, the average price of a home is now 4.6 times the income of the average Canadian. This same statistic was found just before the U.S. and UK markets went into the tank. However, if you look at median incomes of Canadians against the median cost of homes, this average comes down to around 3.5, which is not dangerous. Using averages are wrong. A person receiving social assistance will not buy a home, and should not be included in any relevant statistic.
High consumer debt: The warnings about rising debt ratios must be examined carefully. The Governor of the Bank of Canada is worried that the average personal debt ratio is now 156 per cent in Canada. This means a household making $100,000 per year, owes $156,000, two-thirds of which is mortgage debt. Why is this so bad? At an interest rate of 3 or even 5 per cent, the amount needed to service the debt is manageable. Most people do not pay off their mortgages in one year. Still, this is another good reason to consolidate your debt now, at these low interest rates, and lock in.
No guarantees: Nobody can predict the future and there’s always the possibility of a major economic shock. Yet, in a U.S. presidential election year, politicians will do whatever is necessary to prevent it. If the economy goes into the tank, so do re-election chances. The U.S. is already showing signs of economic recovery.
No matter what, do not take on a monthly payment higher than what you can afford. Meet with your lender or mortgage broker in advance to figure out what you can afford before you start looking for a home. It may be the best time to buy, but you need to buy smart.
Mark Weisleder is a lawyer, columnist, author and speaker to the real estate industry. You can contact Mark at mark@markweisleder.com
Wednesday, January 18, 2012
Is a 2.99% Mortgage Too Good To Be True?
Is now time to refinance mortgage?
Is a 2.99% mortgage too good to be true?
January 17, 2012 By Madhavi Acharya-Tom Yew 2 Comment(s)
Bank of Montreal made headlines with the 2.99 per cent five-year mortgage it unveiled last week.
Most of the other big banks have followed suit, but before signing on the dotted line you should read the fine print. These mortgages have restrictions that you won’t find on other products.
“It’s the lowest rate available but I would only recommend it to people who are very sure of their circumstances for the next five years,” said Kerri-Lynn McAllister of RateHub.ca, a Web site that compares mortgage rates. “You may want to look at a slightly higher rate that offers all the flexibility of a standard mortgage.”
The Bank of Montreal says this mortgage offers Canadians a way to be mortgage-free faster because it offers a great rate and a shorter amortization. But it differs from a typical mortgage in several ways.
1) The maximum amortization period is 25 years. A typical mortgage offers an amortization period of up to 30 years.
2) You can make as lump sum payment once a year equal and increase your monthly payments as long as the total doesn't exceed 10 per cent of the principal amount owed. Most mortgages let you make monthly and lump sum pre-payments of 20 per cent or more.
3) You cannot skip or double-up on a payment.
4) You cannot refinance or switch your mortgage to another lender for five years. Most home owners who sign a five-year term don't make it that long. On average, they last three years and 9 nine months, and then they either refinance or move.
McAllister said that because the amortization is capped at 25 years, you may not be able to borrow as much. That could hurt first-time buyers in markets such as Toronto and Vancouver where home prices are in the stratosphere.
The refinancing restriction means, the only way you can refinance is if you do so with BMO," McAllister said. "They know you’re locked in to them so you don’t have any bargaining power if they don’t offer you a good rate or term.”
BMO agrees that this mortgage is best-suited for someone who plans to be in their home for awhile.
“Customers were telling us they wanted something simple and easy to understand that would allow them to be mortgage-free faster,” said Katie Archdekin, head of mortgage products at the Bank of Montreal.
Archdekin said the shorter amortization rate is designed to do just that.
While many home owners have good intentions when it comes to pre-payments, very few actually take advantage of these options, she added.
“This product carries fewer features than our other mortgage products but it’s very easy to understand,” Archdekin said. “This product really supports customers to pay off their mortgage faster by instilling that discipline directly into the regular payments.”
Is a 2.99% mortgage too good to be true?
January 17, 2012 By Madhavi Acharya-Tom Yew 2 Comment(s)
Bank of Montreal made headlines with the 2.99 per cent five-year mortgage it unveiled last week.
Most of the other big banks have followed suit, but before signing on the dotted line you should read the fine print. These mortgages have restrictions that you won’t find on other products.
“It’s the lowest rate available but I would only recommend it to people who are very sure of their circumstances for the next five years,” said Kerri-Lynn McAllister of RateHub.ca, a Web site that compares mortgage rates. “You may want to look at a slightly higher rate that offers all the flexibility of a standard mortgage.”
The Bank of Montreal says this mortgage offers Canadians a way to be mortgage-free faster because it offers a great rate and a shorter amortization. But it differs from a typical mortgage in several ways.
1) The maximum amortization period is 25 years. A typical mortgage offers an amortization period of up to 30 years.
2) You can make as lump sum payment once a year equal and increase your monthly payments as long as the total doesn't exceed 10 per cent of the principal amount owed. Most mortgages let you make monthly and lump sum pre-payments of 20 per cent or more.
3) You cannot skip or double-up on a payment.
4) You cannot refinance or switch your mortgage to another lender for five years. Most home owners who sign a five-year term don't make it that long. On average, they last three years and 9 nine months, and then they either refinance or move.
McAllister said that because the amortization is capped at 25 years, you may not be able to borrow as much. That could hurt first-time buyers in markets such as Toronto and Vancouver where home prices are in the stratosphere.
The refinancing restriction means, the only way you can refinance is if you do so with BMO," McAllister said. "They know you’re locked in to them so you don’t have any bargaining power if they don’t offer you a good rate or term.”
BMO agrees that this mortgage is best-suited for someone who plans to be in their home for awhile.
“Customers were telling us they wanted something simple and easy to understand that would allow them to be mortgage-free faster,” said Katie Archdekin, head of mortgage products at the Bank of Montreal.
Archdekin said the shorter amortization rate is designed to do just that.
While many home owners have good intentions when it comes to pre-payments, very few actually take advantage of these options, she added.
“This product carries fewer features than our other mortgage products but it’s very easy to understand,” Archdekin said. “This product really supports customers to pay off their mortgage faster by instilling that discipline directly into the regular payments.”
Tuesday, January 17, 2012
Is Now The Time To Lock In My Mortgage?
Is now the time to lock in my mortgage?
Published Tuesday, Jan. 17, 2012 10:51AM EST
Last updated Tuesday, Jan. 17, 2012 2:26PM EST
Thanks to intense competition between lenders, a 10-year mortgage is now available for under 4 per cent. It certainly makes it tempting to dive into the real estate market, writes Rob Carrick in today's Globe Investor section.
In the article, veteran mortgage broker Vince Gaetano of MonsterMortgage.ca is quoted as saying, “This is a fantastic opportunity for somebody to lock in and have peace of mind for 10 years without worrying about a renewal.”
Of course, household debt is at record highs in Canada, so consumers must tread carefully when borrowing for a home.
Mr. Gaetano joined The Globe and Mail for a live discussion about mortgage rates, where they are heading and what home owners should consider when making decisions about borrowing.
If you have a question that did not get answered, you can reach Mr. Gaetano at info@monstermortgage.ca.
Published Tuesday, Jan. 17, 2012 10:51AM EST
Last updated Tuesday, Jan. 17, 2012 2:26PM EST
Thanks to intense competition between lenders, a 10-year mortgage is now available for under 4 per cent. It certainly makes it tempting to dive into the real estate market, writes Rob Carrick in today's Globe Investor section.
In the article, veteran mortgage broker Vince Gaetano of MonsterMortgage.ca is quoted as saying, “This is a fantastic opportunity for somebody to lock in and have peace of mind for 10 years without worrying about a renewal.”
Of course, household debt is at record highs in Canada, so consumers must tread carefully when borrowing for a home.
Mr. Gaetano joined The Globe and Mail for a live discussion about mortgage rates, where they are heading and what home owners should consider when making decisions about borrowing.
If you have a question that did not get answered, you can reach Mr. Gaetano at info@monstermortgage.ca.
Buy Now To Get an Unheard-of Rate For a 10-year Mortgage
Rob Carrick
Buy now to get an unheard-of rate for a 10-year mortgage
Rob Carrick | Columnist profile | E-mail
From Tuesday's Globe and Mail
Published Monday, Jan. 16, 2012 6:02PM EST
Last updated Tuesday, Jan. 17, 2012 5:11PM EST
There’s a brilliant reason to get into our expensive and quite possibly weakening housing market right now.
A 10-year mortgage is now available for under 4 per cent. You can thank the banks for this unheard-of rate. In the past week or so, competition between them on mortgage rates has gone nuclear.
Have you caught all the warnings about how the house that you can afford now because mortgage rates are so low will crush you when borrowing costs rise? With a 10-year mortgage, you’ve got long-term cost certainty. “This is a fantastic opportunity for somebody to lock in and have peace of mind for 10 years without worrying about a renewal,” said veteran mortgage broker Vince Gaetano of MonsterMortgage.ca.
Now, about the housing market. Numbers released Monday show average prices are down almost 3 per cent since April, even after ticking a bit higher last month. At a conference last week, some of the country’s top bankers talked as if a cooling in the market is a done deal.
Price-wise, patience will very likely be rewarded in the housing market: Prices could easily decline enough to make a difference to buyers – especially in markets like Vancouver and Toronto.
But low mortgage rates also have a big impact on affordability, and that’s a point that supports buying now if you plan to live in your house for a good long while and can afford the costs of home ownership while meeting your savings obligations.
Low is a word that may actually undersell what’s happening in the mortgage market right now. Last week, Bank of Montreal announced a 2.99-per-cent rate for five-year fixed-rate mortgages amortized over 25 years or less. That’s the lowest rate on record for this type of mortgage.
Other banks announced a special rate of 3.99 per cent for seven years, a deal that Vancouver mortgage planner Robert McLister said was not as good as the BMO offer despite providing two more years of rate certainty. “There’s no question in my mind that the five-year rate would work out better,” said Mr. McLister, editor of the Canadian Mortgage Trends blog.
It’s a different story with a 10-year mortgage for 3.99 per cent, which became available late last week from online bank ING Direct. According to the RateHub.ca website, 10-year rates as low as 3.84 per cent can be had through lenders working with mortgage brokers.
A 10-year mortgage at less than 4 per cent “creates a much more interesting conversation,” Mr. McLister said. Monster Mortgage’s Mr. Gaetano said that when the cost of locking in for 10 years gets as cheap as it is now versus the five-year term, “you have to pounce on it.”
Not too long ago, Mr. Gaetano was one of many experts who believed variable-rate mortgages were superior to all fixed-rate options. But while the banks have been highly competitive on fixed-rate mortgages lately, they’ve pretty much ruined the variable-rate option by cutting way back on discounting.
You can get a variable-rate mortgage today for 2.8 to 3 per cent at best, which is darn close to the cost of locking in for four or five years right now, and you’ve got zero rate certainty. Every time the prime rate rises in the next several years, so will your borrowing costs. “The variable-rate party’s over,” Mr. Gaetano said. “Those products are dinosaurs.”
Let’s get back to the housing market for a moment. The biggest support for prices right now are the low mortgage rates we’ve been talking about here. When rates rise, that support crumbles. Things could get ugly.
Why consider buying now? Because you can borrow money at 3.99 per cent or a bit less for 10 years. It’s like freezing time at the exact best moment ever to finance the purchase of a house. If the price of your home declines, it’s bound to be on the rise again a decade from now. Meanwhile, you’d have the chance to put a decade’s worth of salary increases to work in ramping up your payments and making periodic lump-sum payments.
One hitch with 10-year mortgages is that you won’t likely get the best rates from the big banks. Mr. Gaetano said the banks don’t much like 10-year mortgages because they can’t easily securitize them, which means packaging them up to sell to investors. That means you’ll may need to visit a mortgage broker or check out ING Direct.
Note: You can play around with various mortgage rate and house price scenarios by using our online mortgage payment calculator.
Here's how rates on 10-year mortgages compare with other terms:
One year 2.59% - 2.84%
Two year 2.59% - 2.69%
Three year 2.89% - 2.99%
Four year 2.99% - 3.09%
Five year 2.99% - 3.29%
Seven year 3.84% - 3.99%
10 year 3.84% - 3.99%
Source: RateHub.ca, MonsterMortgage.ca
Today (Jan. 17) at noon (ET), Vince Gaetano of MonsterMortgage.ca joins The Globe and Mail for a live discussion about mortgage rates, where they are heading and what home owners should consider when making decisions about borrowing.
Buy now to get an unheard-of rate for a 10-year mortgage
Rob Carrick | Columnist profile | E-mail
From Tuesday's Globe and Mail
Published Monday, Jan. 16, 2012 6:02PM EST
Last updated Tuesday, Jan. 17, 2012 5:11PM EST
There’s a brilliant reason to get into our expensive and quite possibly weakening housing market right now.
A 10-year mortgage is now available for under 4 per cent. You can thank the banks for this unheard-of rate. In the past week or so, competition between them on mortgage rates has gone nuclear.
Have you caught all the warnings about how the house that you can afford now because mortgage rates are so low will crush you when borrowing costs rise? With a 10-year mortgage, you’ve got long-term cost certainty. “This is a fantastic opportunity for somebody to lock in and have peace of mind for 10 years without worrying about a renewal,” said veteran mortgage broker Vince Gaetano of MonsterMortgage.ca.
Now, about the housing market. Numbers released Monday show average prices are down almost 3 per cent since April, even after ticking a bit higher last month. At a conference last week, some of the country’s top bankers talked as if a cooling in the market is a done deal.
Price-wise, patience will very likely be rewarded in the housing market: Prices could easily decline enough to make a difference to buyers – especially in markets like Vancouver and Toronto.
But low mortgage rates also have a big impact on affordability, and that’s a point that supports buying now if you plan to live in your house for a good long while and can afford the costs of home ownership while meeting your savings obligations.
Low is a word that may actually undersell what’s happening in the mortgage market right now. Last week, Bank of Montreal announced a 2.99-per-cent rate for five-year fixed-rate mortgages amortized over 25 years or less. That’s the lowest rate on record for this type of mortgage.
Other banks announced a special rate of 3.99 per cent for seven years, a deal that Vancouver mortgage planner Robert McLister said was not as good as the BMO offer despite providing two more years of rate certainty. “There’s no question in my mind that the five-year rate would work out better,” said Mr. McLister, editor of the Canadian Mortgage Trends blog.
It’s a different story with a 10-year mortgage for 3.99 per cent, which became available late last week from online bank ING Direct. According to the RateHub.ca website, 10-year rates as low as 3.84 per cent can be had through lenders working with mortgage brokers.
A 10-year mortgage at less than 4 per cent “creates a much more interesting conversation,” Mr. McLister said. Monster Mortgage’s Mr. Gaetano said that when the cost of locking in for 10 years gets as cheap as it is now versus the five-year term, “you have to pounce on it.”
Not too long ago, Mr. Gaetano was one of many experts who believed variable-rate mortgages were superior to all fixed-rate options. But while the banks have been highly competitive on fixed-rate mortgages lately, they’ve pretty much ruined the variable-rate option by cutting way back on discounting.
You can get a variable-rate mortgage today for 2.8 to 3 per cent at best, which is darn close to the cost of locking in for four or five years right now, and you’ve got zero rate certainty. Every time the prime rate rises in the next several years, so will your borrowing costs. “The variable-rate party’s over,” Mr. Gaetano said. “Those products are dinosaurs.”
Let’s get back to the housing market for a moment. The biggest support for prices right now are the low mortgage rates we’ve been talking about here. When rates rise, that support crumbles. Things could get ugly.
Why consider buying now? Because you can borrow money at 3.99 per cent or a bit less for 10 years. It’s like freezing time at the exact best moment ever to finance the purchase of a house. If the price of your home declines, it’s bound to be on the rise again a decade from now. Meanwhile, you’d have the chance to put a decade’s worth of salary increases to work in ramping up your payments and making periodic lump-sum payments.
One hitch with 10-year mortgages is that you won’t likely get the best rates from the big banks. Mr. Gaetano said the banks don’t much like 10-year mortgages because they can’t easily securitize them, which means packaging them up to sell to investors. That means you’ll may need to visit a mortgage broker or check out ING Direct.
Note: You can play around with various mortgage rate and house price scenarios by using our online mortgage payment calculator.
Here's how rates on 10-year mortgages compare with other terms:
One year 2.59% - 2.84%
Two year 2.59% - 2.69%
Three year 2.89% - 2.99%
Four year 2.99% - 3.09%
Five year 2.99% - 3.29%
Seven year 3.84% - 3.99%
10 year 3.84% - 3.99%
Source: RateHub.ca, MonsterMortgage.ca
Today (Jan. 17) at noon (ET), Vince Gaetano of MonsterMortgage.ca joins The Globe and Mail for a live discussion about mortgage rates, where they are heading and what home owners should consider when making decisions about borrowing.
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