Category Archives: new homes

What happens when builders can’t get financing?

Source: Real Estate Professional – by Neil Sharma10 Nov 2017

In the wake of Castlepoint Numa’s announcement that it failed to secure financing for Museum Flats, the highly touted and anticipated Junction Triangle condo development, many purchasers feel like they’ve been left hung out to dry in a market that’s grown more expensive.

By one purchaser’s account, this is the second time Castlepoint has informed his family that it will not be completing a development.

According to Akshay Dev, a sales agent with REMAX Realty One, researching builders is paramount. If he’d ever encountered a builder who failed to secure financing, he’d steer clear of them.

“I haven’t had a situation like that in my portfolio yet, but definitely before we get into projects I like to do some research about the builder to make sure they have a certain reputation, background and that they have credibility,” Dev told REP. “Some builders I like working with, and some I keep my paws off.”

Dev is frequently invited to development launches, which are good places to conduct due diligence. He likes to scrutinize the builder and their past projects, as well as determine whether or not problems could arise at any point during their latest build.

He added that, because banks typically provide financing when a development is 70% sold, a developer unable to secure financing might hint at other problems.

“If a builder is pulling out of a project, it means they lack credibility right there,” he said. “If a developer cannot achieve [70% sales], it means there’s something wrong there. Either the project or location aren’t good, or they don’t have the experience to handle the whole situation.

While Dev hasn’t had a builder fail to bring a project to market, he would tell his clients not to renegotiate with them for a relaunch, or even buy a unit in a future project.

“I would advise them to walk away. If they reached a point where they haven’t gotten financing, there’s a lot more involved in this. If you’re going to talk to a builder about getting financing, what is the guarantee that they’ll get it, and what’s the guarantee there won’t be problems afterwards? It’s a credibility issue right there and then.”

Zia Abbas, owner and president of Realty Point, agrees with that sentiment, and added that, as a sales agent, his reputation is on the line as well.

“As far as I’m concerned, whenever I go and sell any product to my client, for me the credibility of the builder is as important as the location of the project,” said Abbas, adding a builder’s credibility is in their portfolio. “What if we find the best of the best location but the project won’t proceed because the builder doesn’t have the reputation?”

Abbas admits that some builders he’s spoken to have said that they could pull out of the project and bring it back to market at higher price points that better reflect Toronto’s hot market, they wouldn’t sully their reputations that way.

“They’ll stick with the promises made, and this is what is called credibility,” he said.

But that doesn’t mean unscrupulous builders never give in to temptation.

Such builders don’t just damage sales agents’ reputations, they also lose the latter money.

“I’ve never worked with these builders and I’m not going to work with any builder with whom I’m not comfortable because the money I’m making on commission is all future commission,” he said. “There would be nothing in my hand. What if the project doesn’t go through? I’m going to lose time, money and credibility in front of my client.”

Abbas has been selling in throughout the GTA for a long time and says he’s had a couple of builders pull out of projects. Clients’ deposits were returned with nominal interest. As a veteran sales agent, he knows how to keep builders like that at arm’s length.

Toronto city councillor Ana Bailao recently went on record as saying that there needs to be more protection for purchasers like the ones who won’t be moving into Museum Flats.

Dev agrees.

Purchasers’ deposits are held in trust, but there have been cases in the past in which rogue builders and lawyers took off with the monies.

“Anybody who has invested money in real estate is investing hard earned money,” he said, “and hoping to grow that money and take their net worth to next level. We need to make sure wherever they put their money is safe. If they invest in certain people who don’t have a proven track record, then they are risking their investments. If you go to credible builders, chances are your money is safe, your project will be completed, the builder will get financing and deliver you a quality product. And with the right market conditions, you’ll get a good return on your investment.”

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What’s the best mortgage for the first-time home buyer?

Image courtesy of ddpavumba / FreeDigitalPhotos.net

Q: I’m buying my first home—a starter home—that I plan to live in for the next five to seven years. How do I know which mortgage is right for me?

— Housing Newbie, Toronto 


Answer from Robert McLister, mortgage planner with Ratespy:  There are endless mortgages to choose from so get one-one-one advice when you can. In the meantime, here are four quick tips:

#1.  If you plan to live in the home for five-plus years, then portability (i.e., being able to move the mortgage to a new property without penalty) is less important. But people’s plans change so don’t ignore porting features altogether. The best portability options afford you:

→ The lender’s best rates if you need to add money to the mortgage (helpful if you upgrade to a more expensive home)

→ More time to close your new mortgage after your old home sells (look for 60 days minimum).

#2.  If you don’t foresee moving, refinancing or making big prepayments in the next five years, consider low-frills mortgages. You’ll get a cheaper rate in exchange for smaller prepayment privileges, bigger prepayment charges (aka, penalties) and/or a restriction on refinancing with other lenders before your renewal date.

#3.  Most first-timer buyers choose a 5-year fixed rate because their finances don’t allow for much interest risk. But if you’re financially stable, have great credit and save at least 5% of your income each month, consider shorter fixed terms and variable rates. In our low-rate environment, they’ll give you extra savings.

→ If you do go variable, look for one that keeps your payment the same regardless of interest rate fluctuations. It’s easier for budgeting and gives you peace of mind if rates start climbing.

→  If you can’t decide between fixed or variable, check out a hybrid mortgage. Hybirds let you split your mortgage into two different rates (e.g., half fixed and half variable). They’re a great way to take advantage of lower rates while still protecting yourself if rates climb.

For more tips, have a peek at this mortgage checklist.


Source: MoneySense.ca by March 28th, 2016 

Image courtesy of ddpavumba / FreeDigitalPhotos.net

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Four things people always forget to check when buying a new home

Buying a home is no easy task.

With so many open houses and so many choices, by the time you find a property that just has that right feeling, you’re usually tempted to grab for the pen and sign your life away. Take a minute though; because people often get so lost in the appeal of the home and property itself, they forget to consider the surrounding neighbourhood. And believe us, your new home can really lose its luster if its located say, a 30-minute drive away from the nearest grocery store or school. That’s why Canada AM hosts sat down with Real Estate Expert Sandra Rinomato, so that you can get the home you want, in the neighbourhood you want it in.

CONSIDER YOUR LIFESTYLE

Whether you have pets, or are extremely active or consider yourself a foodie–these factors can all influence the areas in which you might want to live. So take a second to think about all the things that are important to you, Rinomato says. Maybe you want a short commute, or want to be in close proximity to a dog park, or restaurants and shopping centres. This should be the first thing you do after figuring out your financing and having an idea of what you can afford.

WALK SCORE

If you don’t own a car or plan to rent the property out in the future, a solid walk score can go a long way (the higher, the better). A walk score is based on your ability to walk from the property in question to things like banks, transit, shopping centres and so forth. Rental tenants can be lured in by a high walk score, and it’s generally a plus to know that convenient services aren’t very far away.

SCHOOL DISTRICT

It’s really easy to move into a new home and then realize it’s nowhere near or a school, or the kind of school you wanted to enroll your children into. Fortunately, there are many resources available online that can show you what kinds of schools are in your area (Ontario’s is right here).

EMERGING NEIGHBOURHOODS

By the time you have everything sorted–the neighbourhood, the school, the walk score, etc.–you might realize there’s no property that checks all of your boxes. Don’t worry, that’s normal. But often, it means sacrifices have to be made and you may have to look outside of your ideal neighbourhood. If this happens, Rinomato has some advice for how to find emerging neighbourhoods, where costs are still low but will rapidly rise in the future. The best way to find these spots is to look at the periphery of areas that are already hot and popular. As the population grows in the core, development will spread to the fringes.

Source; theloop.ca – FEB 26

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Mississauga Set to Welcome Another Iconic High-Rise

The urbanization of Mississauga is continuing with the emergence of another stylish, modern high-rise condominium.

While City Centre has been the focus of most condo developers, some companies are looking beyond Square One to fast growing neighbourhoods in need of sleeker and more urbane skylines. With the Erin Mills area growing fairly rapidly, Daniels has cornered the market and erected three buildings in Erin Mills Parkway and Eglinton region. The brand built the West Tower Residential Condominiums and the Skyrise Rental Residence in the neighbourhood and is about to put its third Erin Mills property — Arc Condominiums — on sale.

“We have very deep roots in this [neighbourhood],” says Daniels spokesperson Dominic Tompa. “We’ve been building there since the 80s.”

When we say Daniels has the market cornered, we don’t mean it simply boasts more buildings than other developers. It has a literal community in the area, known as Daniels Erin Mills. The company calls the area a “mixed use” community designed for residents who want to “live, work, play, grow and shop” in and around their home.

Targeting the growing Erin Mills area is wise. For years, the sleepy neighbourhood was content to be home to Erin Mills Town Centre, Credit Valley Hospital and pockets of family homes. There was ample living space, but not a lot of options for play (unless you count the long-dead EMTC mini-golf course and Montana’s). With EMTC being reinvigorated by a dramatic facelift and more shops and restos popping up in the community, the time to further urbanize the evolving space was ‘nigh.

While some people shake their fists at any new skyscraper, it’s hard to deny that Arc is going to look pretty cool.

“The design is very unique,” says Tompa. “It has a luxury cruise ship feel, so it’ll be unique for the skyline. It has a lot of character. We’ve got 15,000 sq. ft. of retail space and two floors (or 50,000 sq. ft.) of office space [going into the building]. People will be able to work and shop there.”

When Arc is built, the three buildings (Arc, West Tower and Skyrise) will share an exclusive space that will boast an outdoor courtyard, gardening plots, a running track and more.

“It’ll anchor the community,” Tompa says. “We’re bringing in the farmer’s market as well. Backyard Farmer’s Market will be in the plaza area in the base of the Arc.”

In terms of amenities, Arc’s offerings are not dissimilar from other Mississauga high-rises. Residents can expect a full-court gymnasium, fitness centre, outdoor terrace with barbecues, a bookable lounge and meeting space, a smaller lounge with comfy seats and a bookable party room.

As far as prices go, people shopping for affordable condos will be pleased to know that some units start in the low 200,000s. In terms of design, features and finishes are selected by interior design company HOKand the uniquely-shaped suites (which will be influenced by the curvaceous design of the building) will boast nine foot ceilings, laminate flooring, quartz countertops, custom-designed cabinetry with soft-close drawers and stainless steel appliances.

In terms of demand, Tompa says Daniels is seeing a lot of interest.

“We’re just starting to be out there with the building itself and a lot of people are waiting for it to come out.”

Since Daniels has been present in the area for three decades, Tompa has noticed an interesting trend in terms of demographics. Rather than primarily attracting first-time homebuyers or singles, the condos are appealing to long-time residents who are ready to downsize within their long-term neighbourhood.

“It’s really interesting, we had a lot of local buyers who wanted to downsize to West Tower,” he says, agreeing that Daniels has, in this case, sort of been able to follow and adhere to the lifestyle requirements of residents moving through the lifecycle. “You can walk to the hospital, which is good for people who have retired. It’s across the street from the mall and restaurants. It’s a really nice location and even though it’s Mississauga, you could live here and not need a car.”

For those interested in purchasing a unit, registrants can join the Arc Condominiums Inner Circle by visiting the website. Inner Circle members will receive an invitation to attend the first advance sale before the public gets a kick at the can. They’ll also get a more comprehensive selection of suites, floors and views. If you’re interested in joining, expect to pay a one-time fee of $300. That $300 will be applied towards your purchase or, in the event you decide not to buy an Arc suite, refunded in full.

As for the retail space, Tompa says Daniels does its best to curate the occupying businesses to suit resident’s needs.

“We try to curate a community. You need a place to shop and be entertained and play. It’s a place to spend your time. The east side of Arc will have the retail space and it’s a little too early to know who will occupy it. There [will be] a restaurant at the base and a pharmacy. We try to get the right fit for the community.”

As for when units will go on sale, Tompa expects people will be able to start purchasing in late May or early June. The building will offer everything from studio suites to three-bedroom units.

“There’s a growing demand for three-bedroom units. Some people are coming from 200,000 sq. ft. houses and still want the extra space and other [residents] are families with children. We’re recognizing and accommodating that demand.”

Click on link to get more info on this new condo development. 

Source: Insauga.com by Ashley Newport on February 24, 2016

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New mortgage rule might ‘temper’ hot markets, but not for long

$500K downpayment graphic

Starting Feb. 15, mortgage insurers require 10% down payment on portion of mortgages above $500K

Beginning next week, many Canadians hoping to buy an abode will need to put more cash down before they can call it home. The extra cost might keep some would-be homeowners from mortgages they can’t really afford, but it’s unlikely to leave any lasting impressions on the country’s most “overheated” real estate markets.

The federal government announced in December that mortgage insurers, including the Canada Mortgage and Housing Corporation — by far the largest in the country — will require a 10 per cent down payment on any portion of a mortgage it insures above $500,000 and up to $999,000.

That’s double the five per cent down they currently ask to insure mortgages worth more than 80 per cent of a home’s value.

“We want to make sure we create an environment that protects the people buying homes so they have sufficient equity in their home,” said Finance Minister Bill Morneau at the time, also noting that “elevated” house prices were the driving force behind the move.

The change will “likely impact a broad spectrum of buyers,” though it will surely be the highest hurdle for those who don’t already have a good bit of equity from one home already.

“The majority of the impact is going to be on first-time homebuyers, particularly first-time buyers in the hotter markets,” says Don Campbell, senior analyst at Real Estate Investment Network, an organization that tracks Canadian housing trends.

Bill Morneau Finance Minister

Finance Minister Bill Morneau announced the new mortgage rule in December, saying the government was trying stabilize real estate markets in some cities, like Toronto and Vancouver. (Chris Wattie/Reuters)

“It could certainly prevent them from getting into a market that is overheated.”

That could, the theory goes, ease the intense demand for starter properties such as single-family detached homes in places like Toronto and Vancouver — one of just several factors keeping average house prices in those cities so astonishingly high — and perhaps help those markets cool off a bit.

Good politics, bad policy?

It could also help save some people from themselves, encouraging sober second thought about getting locked into mortgages that would stretch their finances dangerously thin.

There’s plenty of evidence that many Canadians have taken on alarming debt loads to finance their dream of home ownership, leaving them vulnerable to ruin if the markets start to deflate.

Young Canadians and their families would face the brunt of the impact. A report by the Canadian Centre for Policy Alternatives, for example, found that about 10 per cent of homeowners under 40 would be bankrupted if housing prices dropped 20 per cent.

The C.D. Howe Institute similarly calculated that about half a million first-time homeowners, mainly young people with lower-than-average incomes, could be left ruined if the historically low interest rates that have fuelled drastic jumps in house prices went up, or they faced a personal financial crisis.

Canadians who have built equity in their homes throughout the real estate boom of the last 15 years or so, though, would be on more stable ground.

Once it becomes psychologically normalized for people, there’ll be less of an effect.
– Don Campbell, real estate analyst

The underlying problem is that it’s far from clear if the new mortgage rule — just the latest in a string of government-led measures to shield the economy from the high household debt loads Canadians are carrying around — will make a mark where one is most needed.

“I would say, generally speaking, there is some good politics in this but not much good policy,” says Jon Sowerby, a licensed mortgage broker with Toronto-based TvH Financial.

“It’s made to look like Mr. Morneau is on top of things, but the reality is that it’s not going to have a massive impact on the market.”

$500K downpayment graphic

Starting on Monday, CMHC will require a 10-per-cent down payment on the portion of any mortgage it insures over $500,000. (CBC News)

Drop in the bucket

The Canadian Association of Accredited Mortgage Professionals agrees. The organization revealed last year that first-time homebuyers put down an average of about 21 per cent of their home’s purchase price, a number that has not deviated much since real estate prices began their relentless climb in the late 1990s.

The analysis is based on data gathered from an annual survey of 800 Canadians who just bought a new home.

The same report estimates that of the 120,000 to 125,000 sales of homes that involve a mortgage of $500,000 or more each year in Canada, around 10,000 would involve down payments that had to be increased under the new rule.

Eveline Zia housing real estate prices

Last summer Eveline Xia, who began the popular social media hashtag #DontHave1Million, led demonstrations in Vancouver, demanding more decisive action from the government on soaring real estate prices. (Jim Jeong/Reuters)

It concludes that the change will have negligible resonance in the Canadian mortgages market.

That’s not to say that first-time buyers haven’t been looking ahead to the deadline, hoping to get in before a down payment lightens the coffer that much more.

The minds of homebuyers

Michael Elmenhoff is a realtor who does a lot of work in the east end of Toronto, a formerly blue-collar area of the city where the average starter home in a “cool neighbourhood” sells for about $650,000.

He says he saw about a 50-per-cent traffic increase in the first few weeks of this year compared to 2015, a time that is generally considered a slow period for buying before the spring markets picks up.

For example, Elmenhoff listed a rowhouse with three bedrooms, two baths and no parking on the boundary of the trendy Leaside neighbourhood for $499,999 dollars in early January. The property attracted about 150 prospective buyers and 13 offers before selling for $649,000.

The interest was almost exclusively from first-time homebuyers, Elmenhoff says. “That kind of traffic is unheard of, really.”

He expects to see a slowdown come Monday.

“With the market seeming to be at precariously high price points, the new mortgage rule could help ease the situation,” he says, adding that “anything to temper the speculation and the leveraging” is welcome.

Low rates, inventory remain factors

But realtors and analysts agree that, at best, any changes will likely be very short-lived because so many of the factors keeping prices sky high, like low mortgage rates, a short supply of detached homes, and speculation by foreign buyers, all remain in place.

“Once it becomes psychologically normalized for people, there’ll be less of an effect. It will slow down buyers in that $500,000 to $900,000 range for a while, then it won’t,” says Campbell.

“Or people will just get more creative in securing a loan.”

Source: CBC – Lucas Powers, CBC News Posted: Feb 11, 2016 5:00 AM ET

 

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RRSP 2016: 2 good reasons to withdraw money from your retirement fund

The Home Buyers' Plan allows an individual to take $25,000 from an RRSP or a couple to withdraw $50,000 and put it toward buying or building a first home. But it has to be repaid. A similar program exists if you're going back to school.

The federal government has created two programs that allow you to withdraw money from an RRSP without a penalty before you retire — theHome Buyers’ Plan and the Lifelong Learning Plan.

Whenever you take money from a registered retirement savings plan, you are taxed on it at your marginal tax rate, so you lose 12 to 49 per cent of your savings off the top to the tax man, depending on your income and where you live.

There are plenty of bad reasons to withdraw money from your RRSP – among them needing cash for a vacation, wanting to buy a car or giving money to the kids.

The best reason to take out money is because you are retired and want to convert it into a registered retirement income fund that will pay your bills. At that point, you are likely to be in a much lower tax bracket than when you were working.

Financial advisers point out that if you do withdraw money, you miss out on several years of the compound growth you would have on the RRSP investment.

But both buying a house and getting an education are investments in themselves that can pay off in the longer term.

Here’s how those two programs work.

Home Buyers’ Plan

Each individual can withdraw up to $25,000 to buy or build their first home or to buy a home for a related person with a disability by applying under the Home Buyers’ Plan.

For couples who are first-time buyers, that’s up to $50,000 toward a first home. The down payment is often a stretch for young buyers and putting more than 20 per cent down means escaping the additional cost of CMHC insurance.

Buyers have to enter into a written agreement to build or buy the home, and it must take effect before Oct. 1 that year or after the year of withdrawal.

For those who are buying for a relative with a disability, it is the relative who must have entered into such an agreement.

The buyer, i.e. the person with the disability, has to live in the home. It can’t be a rental property.

The catch is that anyone taking advantage of the program must pay back what they took out of their RRSP within 15 years, starting in the second year after purchase of the home.

A bank can help you set up regular withdrawals so you meet the repayment schedule. Many people are house-poor in the first few years of home ownership, so it can take a lot to structure their finances to both pay the mortgage and refund their RRSPs.

There’s a financial penalty from the government if you don’t – they’ll start taxing you on the money you withdrew.

And when you repay the money to your RRSP, there won’t be a tax deduction from your income, because you got that deduction the first time around.

It’s a popular program. According to research from the Canada Revenue Agency, 1.8 million Canadians have used the Home Buyers’ Plan since 1992, borrowing more than $18 billion from their own savings.

But for the 2011 tax year, 47 per cent had paid less than the full required repayment and were being taxed for using it.

Lifelong Learning Plan

The Lifelong Learning Plan allows you to borrow up to $10,000 a year to finance full-time education at a qualifying school. You can withdraw a maximum of $20,000 over a period of four years from an RRSP owned by yourself or your spouse. If you both go back to school, you can withdraw up to $40,000.

It is essentially an interest-free loan from the RRSP to finance retraining, but only for you and your spouse. It can’t be used for your children.

To take the money out of the RRSP, you must be enrolled in a school that qualifies for the education tax credit or have received a written offer to enrol by March of the following year.

By the fifth year after the first LLP withdrawal — or the second year after you stop going to school full-time —  you must start repaying into your RRSP. The first year, you’re expected to repay a minimum of one-tenth of what you owe, though you can repay it faster. You have 10 years to make up the full amount.

As with the Home Buyer’s Plan, the government will begin taxing you on the money if you don’t rebuild your RRSP.

If you’re earning a significant income and would benefit from the tax deduction a regular RRSP contribution would get you, then keeping to the 10-year repayment schedule and also making regular RRSP contributions makes sense.

You can use the LLP as many times as you like up to the age of 71, as long as you have repaid back the money you took out for previous LLPs. It can be a tool to retrain if you are thrown out of a job — without the penalty of paying tax you would otherwise owe on an RRSP withdrawal.

The CRA has not released recent figures on hwo many Canadians take advantage of the LLP.

Source: CBC News Posted: Jan 02, 2016

For more information on the RSP Home Buyers Plan, contact the Ray C. McMillan mortgage team to schedule your no obligation consultation and get into your new home faster.

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Do you know the biggest cost of your new home?

New road construction is one of the infrastructure costs built into development charges.

Development charges are making it more difficult for young families to afford new homes.

So what are development charges? Ontario’s cities and towns pass bylaws to set development charges. They use these charges to collect money from new homes and businesses to pay for critical infrastructure: sewers and water pipes, roads, transit, parks and community centres. There is no doubting their importance.

The Development Charges Act is the over-arching provincial legislation that allows municipalities to collect them.

These bylaws are accompanied by a background study, which outlines the estimated amount and location of development within a municipality, and the related calculations of how the new services will accommodate the new population.

The topic of development charges (DCs) is part of the province’s 80-day public consultation on improving the land use planning and appeals system. I have been writing about the consultation in this space over the past few weeks and will continue to discuss it until the consultation ends on Jan. 10.

BILD and the Ontario Home Builders’ Association addressed DCs during a recent meeting held at our office that sought input from both associations’ members. The province is our partner in economic growth, and we have a lot to say about DCs’ effect on this growth.

In 2012 alone, the industry estimates that more than $1 billion was paid in DCs by new-home owners across the GTA.

But at the end of the day, DCs and other taxes represent one-fifth of the cost of a home in the GTA, according to a study of six GTA municipalities by Altus Group Economic Consulting. That is too much for a young family to take on.

The study involved Toronto, Markham, Oakville, Bradford West Gwillimbury, Ajax and Brampton.

Since 2004, those municipalities have increased DCs between 143 and 357 per cent.

Let’s look at the Town of Oakville, as one example: for a new single-detached home, Oakville charges $23,503 in DCs; Halton Region charges $36,778; Oakville’s school boards charge $4,175 in educational DCs to allow them to acquire land for schools. In total, that new-home owner is paying $64,456 in DCs.

Those DCs are added to new-home owners’ mortgages, and they must pay the interest on those charges for decades.

When DCs are the biggest charge on a home, they pose a threat to the affordability of homes and even the health of the home-building industry.

It’s important to note that our industry employs about 202,700 people and generates $10.8 billion in wages.

 

During the current 80-day provincial consultation, now is the time for citizens ton tell the province about what they think is fair and reasonable to be charged by the municipalities.

Municipalities do have other alternatives to raise revenue. And it’s time they looked at their other options.

 

This column has been updated from a previous version.

Bryan Tuckey is President and CEO of the Building Industry and Land Development Association and a land-use planner who has worked for municipal, regional and provincial governments. Follow him at twitter.com/bildgta , facebook.com/bildgta , and bildblogs.ca.

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