The conversation around homeownership in Mississauga and surrounding cities has been a challenging one, especially as prices remain high across all housing types in the city and surrounding municipalities (in fact, the average 905 condo is selling for over $400,000 and has been for sometime now).
But while it’s frustrating for experts—and non-experts who entered the market years ago—to tell prospective homebuyers that they’ll have to move to find an affordable housing, some people might be interested to know that there are indeed still places in Canada that offer affordable homes for single buyers with more modest salaries.
And a recent Zoocasa report reveals where solo homeowners-to-be on a budget might be able to purchase a home.
“While having a dual-income household can greatly improve purchasing power and the ability to qualify for a mortgage, that’s not to say homeownership isn’t in the cards for single-income earning buyers. In fact, according to recent calculations by Zoocasa in celebration of Single Awareness Day (February 15), there are a number of markets where it’s possible to buy a home on one income – and even have money left over,” says Penelope Graham, managing editor, Zoocasa.
Graham says that, to determine which markets were affordable, the average and benchmark home prices were sourced from regional real estate boards. It was then assumed the buyer would make a 20 per cent down payment and take out financing with a 3.29 per cent interest rate amortized over 30 years, to determine the minimum income required to qualify for a mortgage on the average home.
Those findings were then compared to median income data of “persons living alone who earned employment income” as reported by Statistics Canada.
So, where can solo buyers most easily afford a home?
Overall, single home buyers will see the best bang for their buck in Eastern Canada and the Prairie provinces, with Regina taking top spot out of 20 cities for greatest affordability.
There, a single buyer earning the median income of $58,823 would enjoy an income surplus of $20,025 on the average priced home of $284,424.
That’s followed by Saint John, where someone earning the median of $42,888 would see a surplus of $18,038 on a $181,576 home, and Edmonton, where earning $64,036 would net a $17,826 surplus on the average home price of $338,760.
MLS listings in Calgary, Lethbridge, Winnipeg, and Halifax also fall within the realm of affordability for single-income purchasers.
So, where are single buyers less likely to purchase a home? As expected, Zoocasa says the Greater Golden Horseshoe (which includes Toronto and the GTA), is out of most people’s budgets.
Graham says a buyer earning the median of $50,721 would fall a whopping $88,361 short on the average $1,019,600 for MLS listings in Vancouver. Toronto real estate listings are the second-least affordable with an average home price of $748,328; a buyer earning $55,221 would face an income gap of $46,858.
Victoria is the third least affordable with an average home price of $633,386, still $39,359 above what the relatively high median income of $86,400 could afford.
Other markets not considered affordable for single buyers include Guelph, Kitchener-Waterloo, London, Montreal, and Ottawa.
Naturally, the housing market is more difficult for single millennials to navigate.
Zoocasa says the research also compared how earnings ranged by age group per location, and which demographic enjoyed the greatest affordability when purchasing a home. Across every market, Gen Xers (35 – 44 and 45 – 54 age brackets) enjoy the greatest earnings and purchasing power, with 11 markets considered within affordable reach (compared to 10 markets across all age groups).
Millennials (aged 25 – 34) had the least earning power in each city, behind Boomers (aged 55 – 64).
Overall, single home buyers aged 35 – 44 purchasing a home in Regina enjoyed the greatest affordability of all, with an income surplus of $24,215. A millennial purchasing in Vancouver had the least, facing a gap of $92,774.
Check out the infographics below to see which Canadian housing markets are most affordable for single buyers, courtesy of Zoocasa.
Top 5 Most Affordable Housing Markets for Single Home Buyers
1 – Regina
Average home price: $284,44
Income required: $38,798
Actual median income: $58,823
Income surplus: $20,025
2 – Saint John
Average home price: $181,576
Income required: 24,769
Actual median income: $42,888
Income surplus: $18,038
3 – Edmonton
Average home price: $338,760
Income required: $46,210
Actual median income: $64,036
Income surplus: $17,826
4 – Saskatoon
Average home price: $290,736
Income required: $39,659
Actual median income: $55,758
Income surplus: $16,099
5 – St. John’s
Average home price: $295,211
Income required: $40,270
Actual median income: $51,964
Income surplus: $11,694
5 Least Affordable Housing Markets for Single Buyers
My husband and I bought our first home three years ago, and I’ll admit we made some mistakes along the way.
Here are 5 hard lessons we learned as first-time homebuyers.
1. We bought a very old house. Before we bought the home, we had it inspected by a reputable home inspector. In his report, he suggested that we have the house’s foundation assessed by an engineer. But we didn’t do that. Why? We were in too much of a rush to buy the house.
Lesson? Pay attention to the inspection report. After living in the home for about a year and a half, I called an engineer who told us a foundation wall had to be replaced–and soon. It wasn’t cheap.
2. Our agent told us that upping our offer by a few thousand dollars would only mean an extra $40, $50 or $60 a month on our mortgage. It doesn’t sound like much, but if interest rates go up spending thousands more on our home will hurt.
Lesson? Once you figure out your maximum price, stick to it. This is one thing we actually did well. In the end our offer was accepted at the price we were willing to pay, but upping our bid could’ve made paying the mortgage a lot tougher.
3. When you’ve been a renter for most of your life, it’s a shock to suddenly find yourself responsible for repairs. We hired a roofer who did a really bad job, and we had to pay another roofer to do the work a second time. Then I had to go to small claims court to try getting my money back from the first one.
Lesson?Shop around before hiring a contractor. I should have paid more attention to a couple of negative online reviews. You can also look up court decisions online to see if other customers have had problems.
4. We were able to put a 20% down payment on our home and had about $10,000 set aside for closing costs, taxes, home insurance and other expenses. It wasn’t enough.
Lesson?Set money aside, then set some more aside. You also need to budget for the unexpected. In the first year, we spent several hundred dollars on a new sump pump after our crawl space flooded. Last year, we spent a few hundred dollars on an exterminator for mice.
5. This past winter, while our foundation wall was being dug up and replaced, I called a real estate agent to talk about possibly putting our house up for sale. I was pretty fed up with the seemingly unending problems and stress. The good news was that our home had gone up in value and we could make a profit. Though we’ll stay put for now, at least we have an exit plan–as long as the housing market stays strong.
Lesson? Have an exit plan. Hopefully these hard-earned lessons can help you become homeowners. Or maybe decide to remain renters. Good luck!
Waiving a home inspection is like purchasing a used car on Craigslist without taking a look under the hood — you’re likely to run into issues down the road. A new survey from the online home improvement marketplace, Porch, reveals that 86 percent of home inspections uncover one or more problems that need to be addressed. While hiring a home inspector will set you back about $377 on average, their expertise could save you from buying a lemon or shelling out thousands of dollars in future repairs.
Prospective homebuyers can use the information provided by a home inspector to negotiate a lower sales price, accounting for the cost of repairs or replacing a feature altogether. Of the 1,000 individuals surveyed by Porch who hired a home inspector, 37 percent submitted a revised offer with help from their real estate agent, saving an average of $14,000 off the listing price of their new home. That’s no small chunk of change!
Here we examine the most-flagged home inspection issues buyers can use to negotiate the best sale price.
Photo: James Bombales
1. Roof – flagged in 19.7% of reports
Roofs with asphalt or cedar shingles have an average lifespan of 20 years whereas metal roofs only need to be replaced every 50 to 75 years. Your home inspector will look for signs of water damage, mold or algae, and take note of any sagging or missing shingles.
2. Electrical – flagged in 18.7% of reports
If you’re looking to purchase a home built prior to the 1950s, you’ll want to inquire about its electrical wiring. Knob-and-tube wiring, which was popular from the 1880s to the 1940s, can cause electrical shocks and fire. Other issues to take note of include exposed wiring, ungrounded wire receptacles and paint on electrical outlets.
Photo: James Bombales
3. Windows – flagged in 18.4% of reports
While broken windows are a pretty obvious spot, your home inspector may conduct a simple test to check for air leaks. However, there’s no guarantee the home owners will agree to repair the window seals — some consider this cosmetic, rather than structural.
4. Gutters – flagged in 16.9% of reports
Your home inspector will want to make sure the gutters are in good working condition, assessing their size, any damage, and how far water is directed away from the house.
Photo: James Bombales
5. Plumbing – flagged in 13.6% of reports
Plumbing problems can quickly add up, costing an unsuspecting homeowner thousands of dollars. With a flashlight in hand, your home inspector will scan for potential leaks, polybutylene piping, DIY projects gone wrong, tree root damage, and more.
6. Branches overhanging roof – flagged in 13.3% of reports
Having an old-growth tree in your front yard might seem like a selling point, but it can actually cause a lot of damage if not properly maintained. Branches can rip off roof shingles, leaves can pile up and clog up your gutters, and heavy limbs can come crashing down into your living room.
Home inspectors will evaluate the condition of a fence that lines the property. But again, this is one of those “choose your battles” situations. Are you willing to risk losing out on your dream home because a few pickets have gone missing? Probably not.
8. Water heater – flagged in 12.2% of reports
While a rickety fence may be no big deal, a busted up water heater certainly is. Home inspectors check for things like water leaks, sediment buildup, corrosion on the pipes, and low water pressure.
Photo: James Bombales
9. Driveways, sidewalks, patios, entrance landing – flagged in 11.9% of reports
Cracks in your driveway or patio are pretty much inevitable. That being said, you’ll want the home inspector to ensure water isn’t seeping into those crevices. If major issues do turn up, you may be able to seek compensation for those repairs.
10. Air conditioning – flagged in 9.9% of reports
According to the Porch survey, most homebuyers negotiate only $500 for AC repairs, but the actual costs are much higher — think thousands of dollars, not hundreds.
Photo: James Bombales
11. Exterior paint – flagged in 9.6% of reports
If the house was constructed before 1979, your inspector will likely conduct a lead paint test. Additionally, if the exterior paint is peeling, some lenders (like the Federal Housing Administration and Veterans Affairs) will not approve the loan due to concerns over health and safety.
12. Foundation issues/cracks – flagged in 8.9% of reports
Home inspectors can look for obvious signs of foundation problems like cracks in basement walls, damaged bricks and uneven floors. If you and your home inspector suspect the problems are serious, you may want to bring in an engineer. But consider it money well spent — foundation fixes can cost $10,000 or more. Gulp.
A federal official unveiled Canada’s First-Time Home Buyer Incentive in Barrie, ON last week.
Adam Vaughan, the parliamentary secretary to the minister of families, children, and social development, said that $1.25 billion has been allocated for the program over the next three years. The program, which will begin on September 2, is expected to reduce monthly mortgage payments required for first-time buyers without increasing the amount they need to save for a down payment.
“Housing affordability is a major issue and a major concern for families,” said Vaughan. “This region has become one of the most expensive in the world and the prices of downtown Toronto are starting to echo up into communities like Barrie, and the success of Barrie itself is also having an impact on housing values and land costs.”
The program will be available to first-time home buyers with qualified annual household incomes of up to $120,000. Under the incentive, the Canada Mortgage and Housing Corporation (CMHC) will provide up to 10% on the purchase price of a new build and 5% on a resale.
When divorcing partners divide their assets, the split isn’t always as fair as it first appears. Here’s what you need to know.
Two weeks after his divorce, Phil Doughty received a blunt letter from his ex-wife’s lawyer. It informed him he’d contravened his settlement by not giving his ex her $100,000 share of his pension within 10 days of the divorce.
“It was a knockdown punch,” says the retired teacher from Montreal. “I had no idea I had to pay her right away, or that the money would come directly out of my pension fund.” Doughty thought his ex would simply get a share of his benefit after he stopped working. “I’d never heard of a company taking money out of a pension eight years before retirement.”
With his pension fund depleted, Doughty’s monthly cheques were reduced by over a third when he eventually retired, yet he was still required to pay spousal support from what remained, leaving him strapped. “I had to find another lawyer to help me get out of those support payments I couldn’t afford anymore.”
Doughty (we’ve changed his name, and those of all the featured subjects in this article) believes his pension arrangement should have been handled differently—at the very least it should have been explained to him properly. “I guess it was just something the lawyers worked out between them,” he says. “My lawyer and I never really talked about the pension.”
It seems hard to believe a lawyer would not talk to a client about how such an important asset would be divided, but Doughty insists he would have remembered such a conversation. His situation is just one example of how partners frequently get divorced without understanding all the financial implications.
“Divorce changes a person’s financial situation dramatically and often there is no planning for it,” says Debbie Hartzman, a Certified Divorce Financial Analyst in Kingston, Ont., and co-author of Divorce Isn’t Easy, But It Can Be Fair. (CDFAs are planners with additional training in the financial impact of separation and divorce. See “Where to get help,” at the bottom of this page.) “I’ve had clients say things like, ‘I just spent four years fighting with my ex, I have this cheque for $400,000, and I have no idea what that means in terms of my financial future.’”
Surely part of a lawyer’s job entails discussing financial matters surrounding divorce. Apart from custody of children, aren’t money and property the big issues in divorce? “A family lawyer’s job includes giving advice about a number of financial issues, but we are not financial analysts,” says Bruce Clark, who observed many divorce-related financial problems during his 35-year career as a family lawyer in Toronto.
Lawyers may not anticipate the long-term implications of divorce-related financial matters. For example, Hartzman explains it’s possible to have different divisions of assets that all meet the 50/50 requirements of the law but have profoundly different financial consequences for the divorcing partners. Her book includes a case study that presents different ways to legally divide the assets of a middle-class couple. Both are 58 years old, and the largest assets are the house and pensions (his is four times more valuable than hers). In one scenario, the assets are split more or less equally, so the initial net worth of the two partners is about the same. However, her share of the man’s pension is paid out as a lump sum, and the support payments are not structured to reflect the fact his post-retirement income will be higher than hers. As a result, after age 65 the woman’s net worth and monthly cash flow flatline, while the man’s relative financial situation steadily improves. “The person with the pension can end up in a much better financial position than the person with the house, particularly if the pension is indexed to inflation,” says Jim Doyle, a CDFA with Investors Group in Vancouver.
Here’s a different scenario: she keeps the house and gets only a quarter of his pension. To the untrained eye that seems to be simply an alternative way of dividing the pie equally. Yet this arrangement ensures the woman’s net worth stays similar to the man’s for the rest of their lives, without diminishing his financial situation.
Of course, case studies do not translate into rules that ensure ideal financial arrangements for every divorcing couple. That’s why it’s a good idea to consult a financial professional as well as a lawyer if you’re going through divorce or separation.
Don’t assume every asset must be split down the middle. “People often want to split up each individual asset, but not all assets are created equal. It’s usually better to look at assets in terms of how to divide the whole cake,” says Hartzman.
Doughty is not the first divorced person to be subject to pension shock. Many people don’t even realize pensions have to be shared after divorce, says Clark. “In my experience, most people consider their pensions to be their personal property, as opposed to an asset that must be shared equally after a divorce. In a longer-term marriage the pension is often the single biggest asset.”
This was the case for Doughty and his ex-wife, who had sold their matrimonial home shortly before separating. By law his ex-wife was entitled to half the teacher’s pension that accumulated during their marriage.
“Pensions are very, very complicated assets,” says Sharon Numerow, a CDFA and divorce mediator with Alberta Divorce Finances in Calgary. “Defined benefit pensions must be independently valued by an actuary, and the rules about paying out a spouse vary from province to province.” For example, in Alberta there are no longer any provincial pension plans that allow monthly payouts to an ex-spouse when the member spouse retires. Therefore, the only option is to give the ex-spouse a designated value that is transferred into a Locked-In Retirement Account or LIRA (called a locked-in RRSP in some provinces). “This almost always has to be done after the separation agreement is signed, and not usually at retirement,” says Numerow.
On the other hand, Ontario recently adjusted its Family Statute Law in the opposite direction. Now a portion of a person’s pension payments can be made directly to an ex-spouse after retirement. Another possibility is for the spouse without the pension to get another asset equal to the value.
Bottom line, don’t underestimate the potential for misunderstanding pension division. It’s important to work with your lawyer to understand the legal issues, then talk to a financial planner who can help you appreciate the short-, medium- and long-term implications of the division of this and your other assets.
Close to home
Another key, says Hartzman, is determining whether it’s viable for one partner to stay in the family home. There are two main questions: Can one partner actually afford to keep the home? And how will keeping the home affect that person’s financial future?
“Most people I’ve worked with live in houses that require two incomes, so after divorce one person would be trying to maintain the home on half as much income, and often it just isn’t affordable,” Hartzman says. “Can you imagine how hard it is to tell someone already going through the emotional turmoil of divorce that they can’t afford to stay in the family home they and their children are so attached to?”
Sandra Baron, an Ottawa mother of two, did manage to stay in the matrimonial home after her divorce. A financial planner helped her figure out how to pull this off. “My first lawyer really didn’t seem to understand my financial situation,” Baron explains. “I went to see a financial planner and asked if I could afford to buy out the matrimonial home from my husband. He helped me work it out.”
Baron and her spouse had always lived within their means. They had no debt other than a mortgage with much lower principal than they qualified for. That, combined with support payments and Baron’s earning potential (she had been an at-home parent most of her marriage but began doing contract work after the divorce), meant she was able to keep the family home.
The financial planner also gave Baron some tax-saving advice on how to invest some money she had brought into the marriage. Since she had that money before the marriage and kept it in a separate account, it was not an asset that had to be shared equally. However, had she used that money to help pay down the mortgage, it would have become part of the value of the matrimonial home and therefore a joint asset.
This is also the case if one spouse receives an inheritance or gift during the marriage. In most provinces, as long as the money is kept in a separate account it does not have to be divided equally after a divorce. But if it is used to purchase a joint asset, such as a house, it becomes the property of both spouses. (In some jurisdictions growth in the value of the inheritance or gift may count as an asset to be shared.)
Perhaps the biggest factor in Baron’s situation was that she and her husband actually saved money for their separation. “It was almost five years from the time we realized the marriage was likely not able to be repaired that we saved for the eventual separation. Unless the relationship was harmful, I felt it was in the best interest of everyone—particularly the children, who are all that really mattered in the end—to plan and wait so things would be better for them financially.”
It’s a safe bet the path Baron and her ex-husband took is not typical of divorcing couples. Obviously they got along well, even after deciding to separate; they had no debts other than the mortgage and were both well acquainted with their family financial situation. The opposite is much more likely, says Numerow. “It’s common for one partner to know very little about the family finances, and they often don’t know the extent of their debts.”
Lady in red
When Anna Masters, of Taber, Alta., separated from her husband she moved in with her sister and started a new job at a bank. She also applied for a new credit card through that bank, so the person doing the credit check was one of her colleagues. When the Equifax credit report came through, the coworker quietly asked Masters to step into her office. “You are behind in all your bills and credit cards. Most of them are in collections,” the embarrassed colleague said.
“I was horrified,” says Masters. “Even the cell phone bills weren’t paid. I didn’t even know my ex had his own cell phone.”
That’s not the worst of it. Masters’ ex-husband had a line of credit she didn’t know about it, which listed her as a co-signer. Masters says he must have forged her signature on the application.
It’s not hard to find similar tales of woe. Alan Leclair of Winnipeg tried to remortgage his house not long before he and his wife split up. “When the credit check came in the banker said to me, ‘You’ve got debts you didn’t tell me about. You’d better go home and talk to your wife about it,’” says Leclair. These debts were considerable—between $30,000 and $40,000 in unpaid credit card balances. Fortunately, Leclair’s ex-wife eventually agreed to take responsibility for them.
Masters was less fortunate. She got stuck with a big chunk of debt—loans and credit cards her husband was supposed to pay off, but didn’t—as well as the line of credit he’d fraudulently put her name on. “I could only get part-time work at the bank, but I worked every other junk job I could find. It took me three years, but I paid off my share, and in a way I’m glad I went through the experience. I’m in control of my finances now,” Masters says.
The one smart thing Masters feels she did in the lead-up to her separation was to start setting aside money (“Omigod money,” she called it) so she’d have something to fall back on in an emergency. “Even before I realized the full extent of the financial mess we were in, I knew my ex was spending irresponsibly, so I started squirreling money away.” That money—about $3,500, which she kept in a sock hidden under a pile of towels in the linen closet—ended up being used to cover her living expenses during a spell of unemployment after moving to a new town after she was separated.
Leclair did something similar. “I had a friend who was going through a divorce and I asked him for advice. He said, ‘Put a few bucks away.’ So I did.” He hid cash in his house and even left about $500 at a friend’s house. “When the separation happened I was in scramble mode, dealing with all kinds of things. It was comforting to at least know that money was there,” he says.
Clark, the family lawyer, explains any money you stash prior to separation “will still be subject to division, but you will have the use of it while property issues are being sorted out. There is nothing illegal about this as long as you declare the amounts you have put aside.”
It’s hardly surprising that people have trouble working through issues like asset division and debt. But the path to divorce is laden with other potential financial mistakes.
One is trying to settle too fast. “People want it settled tomorrow,” says Jim Doyle, the financial planner. “Emotions often determine the choices rather than making the numbers make sense. I say to people, ‘Let’s slow down and do the math.’” He says it’s common for partners to make hasty, ill-advised decisions about asset splitting just to avoid conflict. “Sometimes in relationships where there is an imbalance of power, one person might simply capitulate, resulting in a financial decision that may have negative consequences down the road.”
Don’t ignore the tax implications. “One of the biggest items that is often overlooked in separation and divorce agreements is tax deductions, such as child-care expenses, and credits that may apply to separated and divorced parents,” says Numerow. For example, a divorced parent can claim one child as a dependent, but both parents cannot claim the same child.
Another dangerous road is trading property for time with children. “Big mistake—just don’t do it,” says Numerow. In addition, remember that spousal or child support and asset division are, for the most part, completely separate issues.
Finally, if you’re a common-law spouse, don’t assume the process is the same as it is for married couples. Generally, legal requirements regarding spousal and child support are the same, provided a couple has been living common-law for at least two years (three in some provinces). However, the division of assets is not automatic, as it is in a marriage, which comes as a surprise to many people, Numerow says. “Go to a lawyer and find out what you do and don’t have to share. Laws concerning common-law separations vary by province.”
One message Clark, Numerow and Hartzman all want to get across is this: both partners should always be aware of the family’s financial situation. If one partner is more hands-on with the money, the other at least needs to understand the big picture. “I’ve met a lot of spouses who weren’t involved in the finances and they’re ashamed,” says Numerow. “I tell them, ‘Don’t beat yourself up over it. Now is the time to begin your learning.’ However, if both partners were on top of the family finances it would make divorce a lot easier.”—written by John Hoffman
Where to get help
Certified Divorce Financial Analysts usually charge between $175 and $250 per hour. “If people do their homework and bring in all the relevant financial information, we can usually get a fairly good handle on the situation in two hours,” says CDFA and author Debbie Hartzman. “For an individual, it usually takes no more than three hours overall. With couples it usually takes three sessions of an hour or an hour-and-a-half each.” She notes that a better understanding of your financial situation can save your lawyer’s time, which is much more expensive.
To find a CDFA, do a web search for your town and CDFA, or visit the website of the Institute for Divorce Financial Analysts (www.institutedfa.com) and search by city, town or area code.
A snapshot of typical mortgage documents and a few tips on what to watch out for
Thomas Bruner was a well-informed and financially savvy shopper. Thank goodness. Because his bank made errors in his mortgage documents. Big errors.
It was late 2015 and Bruner and his wife, Leslie, were in the process of selling their North York town-home to move into a larger upper beaches family home in the east end of Toronto. (We’ve changed names to protect privacy.) As a number-cruncher, Bruner knew how important it was to shop around for the best mortgage rate and was delighted to secure a five-year fixed rate of 2.49% with his current bank. To get that rate, he’d shopped around and negotiated hard with the bank representative at his local branch. But when the purchase of the home was closer to being finalized, Bruner was transferred to a bank mortgage specialist. That’s when the problems started.
A meticulous man, Bruner read every word of the 30-page mortgage document—some of it in small, fine print, and other sections bogged down with legal jargon. An hour later, Bruner emerged stunned. His bank had made a mistake. A big mistake. A mistake that added $100s to his monthly payments and tens of thousands in interest over the life of the mortgage.
Instead of 2.49%, they’d calculated his mortgage payments based on a rate of 2.99%. The bank had also changed the rate of payments from biweekly to monthly. If he’d signed the mortgage documents without reading the package, he would’ve paid more than $4,075 in extra interest payment,over the five year term*. That’s no small change. (*Assumes a $450,000 mortgage amortized over 25 years, interest calculated based on a five-year term.)
So, Bruner called the bank’s mortgage specialist. Rather than apologize and amend the error, the mortgage rep tried to argue that this was now the going mortgage rate—the best the bank could offer. Bruner was stunned, yet again. “I argued back,” he recalls, “explaining that we had locked in our rate during the pre-approval process. We were only 40-or-so days into the 90-day rate-hold guarantee.”
Screwed by the bank?
Bruner isn’t the only one to notice problems. According to the Ombudsman for Banking Services and Investments (OBSI), errors made by the banks rank No. 4 in the top 10 reasons for customer complaints. However, when asked for specific statistics on the precise number of complaints lodged, and how many of these complaints directly relate to errors in mortgage documents, an OBSI spokesperson replied that they don’t release this information. Instead, the OBSI offers very pretty spiderweb and sunburst visual representations of customer complaints.
This lack of transparency prompts the question: How many other people have been screwed by a professional working in the real estate market? (Cue the wrath of every bank, mortgage broker, home inspector, insurance agent, realtor and renovator involved in this industry.)
Still, how many of us signed a document only to realize, after the fact, that there was an extra charge? Or found an error that’s in the lender’s favour? While reading every page of every legal document we sign is the smart, prudent thing to do, truth be told very few of us understand all of what’s written in an insurance contract, mortgage document or even a purchase and sale agreement.
To help, here’s a snapshot of typical mortgage documents and a few tips on what to watch out for—keep in mind every lender have their own versions of this document, so this is meant to be illustrative only.
To help you process the information, consider the following.
Look for key rates and terms
The pink arrow points to the mortgage interest rate that you will be charged during the duration of the loan term. Check this. Even a 10 basis point change in the rate can add up over the long haul.
The green arrow points to the length of your amortization, expressed by the number of months. Check this. Some of the biggest mortgage document errors are in how long a loan is amortized for; while a cheaper monthly rate can seem appealing, this sort of error can tack on tens of thousands of extra interest costs over time. Above this amortization rate, is your term length—how long you’re committed to pay this lender, based on the rates and terms you’ve both agreed upon. The line should also state whether you’ve agreed to a fixed, variable or open mortgage. . The type of mortgage you agree to can have serious implications on the penalties you’re charged should you opt to make an extra payment, or break your mortgage agreement. For simplicity sake, a one year mortgage is expressed as 12 months, while a five-year mortgage term is expressed as 60 months and a 25 years amortization is expressed as 300 months.
The three numbers in the red box reflect the monthly mortgage rate you will pay (a mixture of principal plus interest), the monthly property tax you will pay to your bank (who will then make a payment on your behalf) and the total amount you will pay based on the addition of these two amounts. If you want to double-check your lender’s math, try Dr. Karl’s Mortgage calculator.
The orange arrow is how frequently you will make payments to your lender. Check this. Not only does payment frequency help reduce the overall interest you end up paying, but to make changes after you’ve signed your document can cost you an out-of-pocket fee.
The yellow arrow is the day you first get your money and the day the interest clock starts ticking. Pay attention to this. Some lenders will charge you a larger amount for the first payment of your mortgage to cover the interest that has accrued from the Advance Date to the day you make a payment against the outstanding loan. Some lenders don’t increase the first payment, but allocate a larger portion of this payment to pay off the outstanding interest. Either way, you want to be clear about what’s being charged, and when.
Don’t forget property taxes
Under the property taxes clause you will notice that the monthly sum added to your mortgage payment is an “estimate” based on the lender’s assessment of your annual property taxes. If you don’t want to pay your property tax monthly or you want to amend how much you pay you’ll need to negotiate this with your lender.
Loan prepayment privileges can make or break a penalty
In recent years, we’ve heard a lot about mortgage penalty fees. You pay these penalties to your lender whenever you break the negotiated terms of your loan contract. If you have an open mortgage, there should be no penalties for pre-payments or to pay-off the entire loan before the end of the negotiated term. If you have a variable-rate mortgage, you will be charged a penalty that’s equivalent to three months of mortgage payments, plus administrative fees. If you have a fixed-rate mortgage, you will be charged a fee that’s calculated using the Interest Rate Differential calculation. This calculation is different for every lender, but it can add up, quickly.
Planning a reno? Read the fine print
Many homebuyers are shocked to learn that they can void their home insurance policy if they undertake home modifications or renovations without first notifying the insurance company and, typically, paying an additional premium. But did you know you can also void your mortgage loan contract—and prompt a lender to recall and cancel the loan—if you obtain a mortgage and don’t disclose intended construction, alterations or renovations to the home? Read your mortgage contract carefully to see exactly what must be disclosed.
Be prepared with documentation
When reading your mortgage contract the lender will typically list the type of documents you are required to submit in order to verify the information you have provided. This will include pay-stubs, Notice of Assessments for your income tax, as well as additional loan or income verification. But don’t be surprised if your lender follows up with requests for additional documentation. Typically, they cover this off with a broad statement that notifies you that any information they request must be provided. A sample of this type of statement is above, in the red square highlight.
Check the accuracy of the payment frequency
Do you have a plan to pay off your mortgage quickly? Part of that plan may include how often you pay your mortgage—the more frequent the payments, the more you pay and that means paying off the principal faster, which reduces the overall interest you pay for the loan. Every mortgage document will have an area where you can choose the frequency of payments. Be sure to check off your selection, as making change after the document is signed will cost you, as you can see below (in the red circle).
Administrative fees to open and close a mortgage loan can add up. Ask for an amortization schedule—to verify how much of each payment is going towards the principal and how much is interest—and you’ll need to pay your lender. Want a mortgage statement? Fork out more money. Need to renew, you may be slapped with an additional fee. But the one that can be annoying, even if it is relatively minor, is the “Payment Change Fee” (highlighted in red). If there’s an error in your payment frequency in mortgage document you signed and you phone to make a correction, this lender will slap you with a $50 fee. Not your error, but it is your penalty. To avoid paying unnecessary fees, make sure to check your mortgage documents for inaccuracies.
Make sure you have insurance
Did you buy a home but forget to shop for a home insurance policy? If your mortgage advance date arrives and you still haven’t been able to submit valid home insurance to your lender, expect a fee. For example, this lender charges $200 per month until you can provide evidence of a valid insurance policy for the home.
Other fees are deducted from the loan amount
Did your lender ask for an appraisal on the home you want to buy? Don’t be surprised if you have to pay for that report (see highlights above). Plus, some lenders who require title insurance will deduct it from the total amount loaned to you; it’s only a few hundred dollars, but it can leave you scratching your head as to why you didn’t get your full mortgage-loan amount.
Where to go to complain
Have questions or concerns about your mortgage documents? In your contract you should see a clause that clearly states how to get in touch with your lender or how to lodge a complaint. If this doesn’t work, and you’ve worked with a mortgage broker, contact the broker directly. They should work on your behalf to sort out any discrepancies with the lender. Finally, if your independent broker isn’t helpful or if you went through a bank to get a loan and you’re not getting anywhere, consider contacting the bank’s ombudsman. This is an independent role within a financial institution that’s tasked with addressing consumer complaints. If this fails, consider lodging a complaint with OBSI. But be warned: It can take up to nine months just to get an answer on a complaint, sometimes longer.
Scan the mortgage snapshot
Finally, almost all lenders now provide a synopsis of all fees and terms in that back of your loan document. This doesn’t mean you should skip over the body of the document, but this summary is a great spot to start verifying if key terms, such as the mortgage rate and the length of amortization, is accurate. If not, mark it, and go back to your lender. Don’t be afraid to fight for what you agreed to. Bruner wasn’t.
Despite the reluctance by his bank’s mortgage specialist, Bruner eventually got the rate he was initially promised. One key component to his negotiations were the emails he’d kept. The correspondence was evidence of what Bruner was promised and made it hard for the bank to rescind the initial offer.
Source: Money Sense – by Romana King October 31st, 2016
You get a housekeeper, but you can’t bring boys over
Though apartment buildings designed for professional women—think the Barbizon Hotel on the Upper East Side, or the Martha Washington Hotel on Park Avenue—are largely a thing of the past, some of these women-only enclaves still exist in Manhattan. One of these is the Webster Apartments on West 34th Street, and the New York Times is ON IT.
Specifically, they recently ran a profile of a 24-year-old resident of the building who ticks basically all the boxes you’d expect from someone who lives in what is basically a glorified dorm. She’s a recent New York City transplant (check) who works in fashion (check) and doesn’t mind the living situation because she lived in sorority houses in college (check). Her room, which measures just 13 feet by 8 feet, is decorated with twinkly lights (check), a copy of The Devil Wears Prada (check check), and a poster of Audrey Hepburn in Breakfast at Tiffany’s (checkcheckcheck). “I had to live in Manhattan,” she told the Times. “I was so excited when I went to get my license and it said New York, New York.” (Oh, honey.)
But what’s really interesting to us, as professional real estate gawkers, are the specifics of this particular living arrangement, which isn’t so different from the ones offered at trendy “co-living” situations like WeLive or Common—but without the cool start-up factor, and with far more stringent rules.
Residents at the Webster Apartments get their own rooms, but have shared bathrooms—five or six to a floor, to accommodate 25 to 30 women (each room also has its own private sink). According to the Times, rents in the building go from $1,000 to $1,800, and are determined by a sliding scale “pegged to the resident’s income.” Residents must also be employed, “at least 35 hours a week or have an internship or fellowship of at least 28 hours a week,” with a yearly between $30,000 to $85,000.
What do you get for that price? Actually, quite a lot: Housekeeping, two meals a day, plenty of common spaces (including a TV room and a library), and per the Times, “social events, most with an educational or professional bent”—resume workshops, mixers, and the like. (The resident they profiled mentions a painting workshop, but there are also yoga classes and movie nights, among other things.)
When you compare the cost of living there to something like WeLive—where a studio will soon cost $3,050 (albeit with a private bathroom)—it may seem like a pretty decent deal, particularly if you’re new to the city or not inclined to live with strangers. There is still a rule that men aren’t allowed into rooms—and given that these sorts of boardinghouses came from a general fear of women’s well-being in early-20th-century New York City, it’s not surprising that it exists, though that doesn’t make it any less weird in modern-day New York City. (Though the building apparently has “beau rooms” that are “uniquely decorated recalling ‘Legends and Lotharios.’” where you can take a, well, beaus.)
But the Webster’s website notes that it’s been filled to capacity since it opened in 1923, so clearly there’s a demand for this sort of housing—even if the audience for it is limited. And the resident the Times spoke with, at least, is happy with her situation—especially considering it’s temporary, since the Webster has a five-year limit for residents. “Even when my mom came to visit me last month and stayed on a cot in my room, she was like, ‘I don’t want to go back home!’” Isn’t that sweet.
Women, especially those in their 30s, are the most reliable mortgage candidates in Canada, according to Toronto-based author and money coach Lesley-Anne Scorgie.
Scorgie—who wrote three books on fiscal responsibility for young women and couples—stated that a closer look at individual credit scores will reveal that Canadian females are better at fulfilling their mortgage obligations than males.
“Single women have a lower tendency to default than males. It has to do with their psychological make-up. It has to do with risk aversion which women have more of than men,” Scorgie told The Globe and Mail.
Canadian Real Estate Association spokesman Pierre Leduc agreed, adding that while no hard numbers on gender-based spending in Canada exist as of present, CREA transactions point at a significant rise in the number of females participating in the country’s housing markets.
Toronto agent Suzanne Manvell concurred with these points.
“I have worked with many single women, as have many of my colleagues, who are ready, willing and able to purchase on their own,” Manvell said. “Some like the convenience of a condo, others a simple residential home. Some, including myself, have elected to become landlords and are happy in that role and have parlayed their first purchase into a secondary income property.”
Female buyers have been playing an increasingly important role in ensuring the vitality of the housing machinery in North America, observers said.
In the United States alone, single women now account for 15 per cent of all home purchases, according to the 2016 U.S. National Association of Realtors Home Buyer and Seller Generational Trends report.
Young Canadian homeowners are in for some tough times if the housing market comes crashing down around them, a new study suggests, but realtors and economists say there’s no reason to panic.
A report released last week by the Canadian Centre for Policy Alternatives suggests that one in 10 homeowners under 40 will be underwater on their mortgages — meaning their debts will be greater than their assets — if real estate prices crash as expected at some point in the near future.
Right now, real estate prices are overvalued by anywhere from 10 to 30 per cent, according to Bank of Canada estimates. Eventually, most analysts say, the market will correct itself and prices will go down, either due to declining incomes, rising interest rates, or a combination of both.
When that happens, homeowners under 40 will be disproportionately affected — not because they stand to lose more actual dollars, but because they are debt-strapped and will see a bigger drop in their net worth, the study argues.
Canadians in their 30s carry debt worth an average of four times their incomes, according to the Centre for Policy Alternatives. That means they stand to lose a much bigger percentage of their net worth if their homes lose value. (Joe Raedle/Getty Images)
“Their entire net worth is wrapped up in their home when they’re in their twenties and thirties. They’re early on in a mortgage, so … almost everything they’ve paid has gone into interest,” John Andrew, a real estate professor from Queen’s University in Kingston, Ont., said.
“And the other thing is that they’ve leveraged this to the hilt. So it’s a triple whammy, those three factors.”
‘Not a big deal’
Families in their thirties could lose an average of $60,000 if there is a correction of 20 per cent, and that would represent an average of 39 per cent of their net worth. People in their twenties would see their net worth reduced by 45 per cent in the same situation.
It all sounds scary, but young homeowners do have one thing their older counterparts do not — time.
“Even if you’re underwater, it’s not a big deal, because as long as you live in this house and you pay your mortgage, that’s fine,” Benjamin Tal, deputy chief of CIBC’s World Markets, told CBC News.
CIBC’s Benjamin Tal says young homeowners shouldn’t panic about a potential drop in housing prices because they have the luxury of being able to wait it out. (CIBC)
“Of course, it’s difficult to be underwater. It’s not a very good thing to experience. But from a practical perspective, as long as you have a job and you have income, I really don’t see a situation in which you should panic.”
Andrew agrees. Asked what advice he has for young homeowners, he said: “Don’t panic. Yes, your net worth may have declined significantly, but until you go and sell your house, if you’re in the market, you’re in the market.”
Interest rates hikes an ‘urgent issue’
Both Tal and Andrew say the bigger issue at play here is the possibility that interest rates on mortgages will rise, triggering the anticipated drop in housing prices.
“I’m pretty sure we’re not going see a collapse in home prices until we see a rise in interest rates,” Andrew said.
And while most young homeowners can withstand a housing market crash by staying put and waiting it out, not everyone can afford to pay a bigger monthly mortgage.
“If you can’t keep the house because you can’t afford the extra $350-$400 a month in mortgage payments, now you’ve got a really serious and urgent issue,” he said.
‘The economy will slow down’
Soaring interest rates and declining housing prices can also impact the economy at large.
“You have a situation in which more young people, young families, spend more money on their housing as opposed to anything else. So you don’t go to restaurants, you don’t take vacations — you just finance your mortgage,” said Tal.
“And if you don’t [spend money], the economy will slow down, and that will make things even worse because it means that unemployment starts to rise, and therefore some people actually won’t be able to pay at all.”
That’s particularly bad news in Canada, said economist David Macdonald, who authored the Centre for Policy Alternatives study.
“We’re already seeing weak growth in Canada,” he said, “and this would add to that slow growth.”
What’s the solution?
In his study, Macdonald recommends the government look at adopting U.S.-style policies to help young Canadians weather the storm.
That could mean giving unemployed homeowners some leeway on their mortgages, or allowing those in extreme circumstances to walk away from their mortgages without taking a huge hit to their credit scores.
But these are solutions for later down the road, when prices start dropping, he says.
In the meantime, Tal said young and prospective homeowners should make sure they have enough wiggle room in their budgets to comfortably make monthly mortgage payments even if rates rise by a couple of percentage points.
“If they cannot do it, they should buy a smaller house,” he said.
Or, not buy a house at all.
‘There’s nothing wrong with renting’
Studies like this one might put you off buying at all, and that’s a perfectly reasonable option, said Andrew, especially in high-cost cities like Toronto, Vancouver and Calgary, where a housing market crash would hit hardest.
“If you look at a lot of world-class cities around the globe, there’s nothing wrong with renting. If you lived in New York City, you could easily rent your entire life and you wouldn’t feel inadequate about it.
“We’ve got this kind of Canadian hang-up,” he said. “There’s this sense that if you don’t own your own home … you’re not a success. And I think that’s changing.”
Homeowners in big, expensive cities like Vancouver stand to lose the most if housing prices drop. That’s why some analysts say it might be better for city-dwellers to rent. (Robert Giroux/Getty Images)
Renting means avoiding the hidden costs of home ownership, like maintenance and property taxes. What’s more, you can up and leave whenever you want.
“Certainly for young people, as long as you’re saving some money, as long as you’re putting a significant amount away monthly and working toward that long-term goal, there’s absolutely nothing wrong with that.”
Source: CBC Sheena Goodyear, CBC NewsPosted: Nov 16, 2015 5:00 AM ET
Young Canadian homeowners are disproportionately vulnerable to a housing correction, and more than 1 in 10 would owe more than they owned in the event of a modest or larger pullback in the market, according to a report.
The report, by the Canadian Centre for Policy Alternatives, was released Monday. The left-leaning think-tank urges governments to implement policies aimed at bringing down debt loads before its too late.
Policymakers have been warning for years about the dangers of high house prices and the debt loads they tend to generate. But the CCPA report is among the first to quantify how those debt loads are skewing disproportionately towards younger people, who often have no other assets than the house they borrowed so much to buy.
1 in 10 wiped out by 20% correction
Their debt loads make them even more vulnerable than the population at large to a housing correction.
The Organization for Economic Co-operation and Development (OECD) issued a warning Monday about the risk of correction, particularly in Toronto, which has a rapid pace of new condo development.
It pointed to high debt-to-income levels in Canada and urged tightening on mortgage lending in markets such as Toronto and Vancouver, where homes are expensive compared to incomes.
“In Ontario, and especially Toronto, economic activity has been relatively buoyant and demand by foreigners has been boosted by the falling Canadian dollar. That said, newly completed but unoccupied housing units have soared in Toronto, increasing the risk of a sharp market correction.”
Central bank says houses overvalued
The Bank of Canada estimates Canadian house prices are currently 10 to 30 per cent overvalued, and some private-sector economists say the problem is even worse.
“Declines in real estate prices would have a strongly disproportional impact on young homeowners,” CCPA economist David Macdonald said. “If, or more likely when, real estate prices fall, families in their 20s and 30s can expect to lose a substantial portion of their net worth, and could find themselves owing more than their house and other assets are worth.”
He offered some crunched numbers to back up that contention.
The debt-to-income ratio for people in their thirties has almost doubled since 1999, hitting a new high of 4 to 1, the highest of any age group.
Young families hit hardest
If Canada sees a housing correction near the midpoint of the Bank of Canada’s projections, younger families would be disproportionately hit by that:
Families with people in their thirties would lose an average of $60,000, which represents 39 per cent of their net worth.
1 in 10 families with people in their thirties or younger (169,000 families across Canada) would have a negative net worth, meaning their debts are larger than their assets. Today, the CCPA says there are 44,000 families in this group who are under water even before any housing price correction.
If the correction is larger, say something in the range of 30 per cent, the impact would be even greater, as 294,000 households or one in seven families would be underwater.
People in their twenties would lose less in dollar terms, less than $40,000 each on average, but that figure would reduce their net worth by 45 per cent.
Families headed by people in their forties and up would lose more in dollar terms to a housing correction because their houses tend to be larger and worth more. But with an average loss of $70,000 to $80,000, that only represents 23 per cent of their net worth because they tend to owe less, and they tend to have other assets beside their house.
Housing corrections tend to have a cascading impact on the rest of household finances because of the large amounts of leverage involved in buying a home. As a rule of thumb, every 10 per cent decline in house prices represents a loss of 20 per cent on the average person’s net worth, Macdonald said.
“In cities with higher prices, like Toronto, Vancouver and Calgary, young families would likely see declines in net worth dramatically worse than the national average due to higher leverage,” he said.
“A badly managed downturn in real estate prices could wipe out the wealth of a large number of Gen-Xers and Gen-Yers,” he said. “We need to recognize that young families are the most likely group to be plunged underwater by a nasty housing correction.”
Source; CBC News Pete Evans, CBC NewsPosted: Nov 09, 2015 9:27 AM ET