Richard Silver’s Downtown Toronto Blog » Mortgage

Your Finances: A New Approach to Home Ownership & Finances

Richard Silver — Thu, 25 Aug 2011 20:23:23 +0000

President’s Resale Homes & Condos Column

TREB President’s Column as it appears in the Resale Homes & Condos

August 6, 2011 — As I begin my term as president of the Toronto Real Estate Board, I am excited to use this column to arm homebuyers and sellers with information that will help consumers make informed decisions when it comes to real estate.

For most people, buying a home represents an opportunity for a fresh start and ours is definitely a city that embraces new beginnings.

With more than 38,000 transactions during the first five months of 2011 for example, our city saw 50 per cent more homes change hands than in the similarly sized city of Houston, Texas. For those not quite ready to start packing boxes though, there is another way to get a fresh start, which can also leave you in good stead when you are ready to make your next move.

According to Canada’s 2006 Census, about 60 per cent of Canadian households that own a home carry a mortgage. If you count yourself amongst this group, and your mortgage is coming up for renewal, refinancing your mortgage is an option worth considering. Beyond simply renewing your term, refinancing can serve as way to restructure your finances while taking advantage of today’s low interest rates. However, low rates or not, borrowed money must be paid back, so better to pay it back when the rates are low.

As one of the thousands of people who have examined new ways to approach personal finances this year, I recently met with a mortgage specialist. As a result of our discussions, I am now paying a lower monthly interest rate than I was five years ago, which allows me to attribute more funds toward the principal of my mortgage.

I have also taken advantage of the opportunity to make payments on a weekly rather than a monthly basis. Because of the lower payments, I also added an amount on each payment to go directly to the principal. The cost of doing so is negligible and it allows me to pay down my mortgage faster.

You might also consider adjusting your amortization period, or shortening the total life of the mortgage, by increasing your payment amount. Rather than focusing mostly on the interest amount, I negotiated the highest pre-payment privileges that I could and am working at conscientiously using today’s low interest rates to our family’s advantage.

Given the extended period of low rates we have enjoyed throughout the past decade, many people might wonder why paying down a mortgage should still be an important goal. The answer is simple: equity, or the diference between the price for which a property can be sold and your mortgage on the property. Essentially, it is the stake you have in your home.

Real estate values fluctuate and are contingent on a number of factors including employment, interest and immigration rates. By striving to own a greater portion of your home, you are taking a more stable approach to your finances.

The Bank of Canada noted recently that Canadians’ debt, including mortgages, is equal to nearly 150 per cent of disposable income. Despite this statistic, we do seem to have taken a more cautious approach to spending, with individual Canadian credit card debt declining marginally in the first quarter compared to a year earlier, according to credit specialist TransUnion. Directing such discretionary funds toward home equity is certainly an effective means of establishing a firmer foothold on your financial future.

If you’re one of the many Canadians considering a new approach to your finances, I encourage you to talk to your financial institution about refinancing your mortgage in a constructive way. The changes to your payments can be e ortless while still achieving a significant effect on your equity.

By renewing your commitment to your current home, you’ll be putting yourself in a much stronger position to make a move when the next home of your dreams comes along.

To help you weigh the options as to whether moving or refinancing is right for you, talk to a Greater Toronto Realtor. For more information visit TorontoRealEstateBoard.com where you’ll find updates on the market, open house listings, neighbourhood profiles and more.

Follow TREB on www.twitter.com/TREB_Official, www.Facebook.com/TorontoRealEstateBoard and www.youtube.com/TREBChannel

Canada Mortgage and Housing Corporation: Toronto Housing Outlook

Richard Silver — Mon, 15 Nov 2010 20:00:39 +0000

Yearly the Canadian Mortgage and Housing Corporation releases a Greater Toronto Housing Outlook. It is a great resource as it mashes together information form different sources of data including sales data from The Toronto Real Estate Board.

Canada Mortgage and Housing Corporation: Toronto Housing Outlook

View more documents from Richard Silver.

Check out their web site and sign up to receive these regularly.

Toronto Real Estate Board: C.D. Howe Commentary

Richard Silver — Sat, 11 Sep 2010 00:47:57 +0000

Here is a commentary from TREB about a study by the C.D. Howe Institute . It points to the misconception that the Canadian Real Estate Market is doomed to follow the U.S. Real Estate market in the next few months.

Here are their thoughts:

My own thoughts?

At last count 1/4 of 1% of Mortgages in Canada were in default where in the U.S. recently, over 12% of Mortgages were delinquent. Have a look at the charts above.

When interest rates really increase (more than one or two points) and immigration to Canada drops, we will have a serious correction.

Until…expect the market to have seasonal fluctuations and the normal peaks and valleys moving through a Seller’s, Balanced and a Buyer’s market.

If you are waiting to buy and being counselled not to, remember that you must live somewhere and that buying rather than renting allows you to build equity….especially if you can make use of the Today’s lower rates to pay down financing or make improvements.

For the full report see: http://www.cdhowe.org/pdf/ebrief_105.pdf

Your thoughts? Feel free to comment below!

Toronto Real Estate: Opportunity Knocks!!

Richard Silver — Fri, 19 Dec 2008 22:41:43 +0000

There are some great opportunities in the Toronto Home Market right now. Here is a great thought from my favourite Mortgage Broker, David Smith of Oriana Financial.

“One area where the credit crisis is benefiting people is in the area of home buying. Unlike other markets that were fuelled by speculation, most people buying in Toronto were buying homes to live in them.

That’s why even though listings are up, they are not up to the extent of most other markets.

Combined with cheap interest rates, there is a unique buying opportunity for the courageous motivated buyer.

Last summer, mortgage rates were as high as 5.75%. A $400K mortgage would have cost $2500/mo.Now we can get you that mortgage for 4.75%. This mortgage would cost you $2270/mo. It doesn’t sound like much, but over the five years of that mortgage you would save almost $14,000.00, and that’s a lot of money” says David.

Of course, if you couple that with motivated sellers, and softer prices for buyers, opportunity knocks and don’t forget Sellers, most of you will be buying up which means you will win whatever you feel you have lost, when you buy! What a great opportunity!!

Toronto Real Estate: Love Your Mortgage Broker!

Richard Silver — Fri, 19 Dec 2008 22:27:35 +0000

Over the years of my buying and selling, and that of my clients, I have established a very strong rapport with my Mortgage Broker. I can count on him to give me good advice, be conservative when I am on a flight of fancy, or feed me the realism that an insecure cockeyed optimist needs when I get down about my personal market exposure.

Good Mortgage Brokers are in the market and aware of it daily. They have access to many lenders and instruments and can shop around for the best rates and most flexible conditions, if required. They also are able to work in bulk and have been able, over the years to get me preferable terms that my bank would not offer me…till they realized I was going elsewhere with my business….Somehow it impresses me even less when that last minute offer comes from my bank or when a new manager appears to pitch me HIS mortgage services…

I encourage anyone buying or selling to find a good mortgage broker, ask your friends for referrals, especially when they have bought or sold a few times. Build a strong relationship with them… just like you do with your Realtor. Always ask them for their best and honest advice and make sure you give them all the pertinent information. It is hard to advise you unless you do…

Over the years David Smith has been my true love mortgage guy! He has given me great advice and our friendship has continued. I can confide in him and do when needed as I would my therapist but that is for another blog…

Mortgages and The United States Economy…

Richard Silver — Mon, 13 Oct 2008 23:04:44 +0000

There is a Big Cow (not an Elephant) in the room when any discussion takes place about the US and its present credit crisis. Neither the Democrats nor the Republicans will touch this Holy Cow; Mortgage Interest Deductibility.

At its conception in the early 1900′s it was a great boon for a young growing economy but what it has created is a Society that has flourished on great amounts of debt.

A Canadian will proudly tell you that their Mortgage is paid off, an American will look at the Canadian and wonder why they would do something so foolish. Why not use the equity to buy something else until there is no more equity left, just debt. Sadly, the Bush Government has been running the Country the same way.

Canadian Banks allow Buyers to borrow up to a 33% of their gross income; American Banks allow 60% due to the deductibility of Mortgages.

In the US right now 20% of homes for sale are in default, in Canada, 1/4 of 1% of mortgages are in arrears. Interest Deductibility was a great idea at the time; however, it is time for tough talk in the States.

The US is a great country and will weather this crisis but will it do so with quick fixes or can it get everyone back on track. If not, the American Dream may become a nightmare.