Good morning everyone;
It’s been a busy time and getting out the weekly communication every week has been challenging. I will continue to strive for a weekly schedule but may double up when needed. J
Despite the deep freeze the Toronto Real Estate market is starting to show signs of increased activity. The supply of freehold homes is still very tight but by in large whatever is coming to market is selling.
With March break around the corner, better weather and increased sales activity are expected. Many consider us already in the early Spring Market.
Construction Blog Starts next week!
I will be going through a major construction project myself over the course of this year and thought it might be beneficial to share some of my experiences as so many of clients do the same. Next week I will have a blurb on dealing with the city planners and various city departments.
Feel Good Story of the month!
After over a year of searching my clients were able to secure a wonderful detached home in the 416 area.
Although the home was listed with an “offers anytime” scenario we found ourselves in a bidding war with two other offers and after only 2 days on market!
Despite having to pay slightly over asking to “win” the home my clients did very, very well. The home they purchased is a detached 3 bedroom home with 2 parking and close to subway in a nice Toronto west neighbourhood. They paid about $150,000 below the average detached home sale in Toronto – FANTASTIC! In the Toronto real estate market detached home have become the “Holy Grail” of sorts.
They were able to do this because they mobilised quick and got their ducks in a row. We had seen many homes up until that point so they were confident during the process. Our offer was firm with deposit check in hand. Later I was told that one competing offer had a higher offer price but had a 2 day condition. The seller was more comfortable taking the firm offer.
Proposed Mortgage Qualification Change as of January 1st & How This Affects You!
Over the past several years, we have seen significant changes to the way that lenders qualify borrowers applying for mortgages – with each change making the mortgage qualification process progressively more challenging.
The latest proposed change for January 1st, 2015 would see existing unsecured debt payments (credit cards, lines of credit, etc) calculated using 3% repayment on the balance regardless of the contractual amount you’re required to pay each month. Those debts and their corresponding 3% payments ultimately determine your mortgage qualification amount. The more outstanding debt you have, the smaller mortgage amount for which you will qualify.
Currently, lenders accept the contractual payments for unsecured debt, even if the monthly payments are lower than 3% of the outstanding balances.
- Outstanding debt includes a $20,000 line of credit.
- At an interest rate of 6%, the bank currently only requires a minimum monthly ‘interest only’ payment of $100.
- New rules would require the more conservative use of 3% of the debt balance during qualification.
- This means that, after January 1st, the lender’s underwriting practices would require a payment of $600 per month (3% of the $20,000 outstanding debt) be used for qualification purposes instead of the current $100/month interest only payment.
- This has a significant impact on qualifying ratios.
- For instance, if someone makes $70,000 a year and wants to buy a home, and they have one debt – the $20,000 line of credit – they would currently qualify for a mortgage of about $425,000. As of January 1st, their qualification amount would drop to about $350,000 – a significant erosion of $75,000 in the buyer’s home purchasing capacity.
If you have balances on a line of credit, car loan/lease, credit card, student loan, etc, the mortgage qualification amount will dip even more as of January 1st!
Given that interest rates continue to hover near historic lows, the full impact of these new qualification rules could be even more pronounced and magnified once rates start to climb. If you’re considering a new mortgage in the next 4-6 months, please contact me so we can discuss your specific situation and plan accordingly in advance.
Now’s a great time to get a mortgage thanks to historically low rates. As you can see from the historical data below, today’s average mortgage rates are lower than they were in the 50s! Although rate isn’t the only important aspect of a mortgage, it’s interesting to see how rates have fluctuated over the past few decades.
Have a wonderful weekend, Anthony
Photo by Victor Porof