Tag Archives: home buyers

10 reasons why credit unions are worth a look

There are pros and cons to using a credit union.

Credit unions offer a good alternative to the banks, but along with fewer fees are fewer branches and ATMs.

It`s your money, so why does it seem to cost so much every time you touch it, move it or invest it?

Many consumers are asking that question, and transaction fee fatigue is prompting them to join the more than 1.7 million people in the province who use credit union to bank, get loans and mortgages, and other financial services. Credit unions have been serving Canadians for more than 100 years —Ontario’s first one was founded in Ottawa in 1908. Carefully regulated, credit unions combine the attentive service of a  cooperative with the financial safeguards of the Canadian banking system. Credit unions offer fewer branches and ATMS, and overall service that might or might not be better than a big bank’s. But many people are giving them a look; here are some of the reasons.

1. Competitive rates

Credit unions typically have low lending rates and pay higher deposit interest. They are owned by members, not shareholders, so they can shave off costs and pass savings along. For example, Meridian Credit Union, the largest group in Ontario with 44 branches and eight commercial business centres, offers a “better than market rate” against any other financial institution on a five-year fixed-rate mortgage.

2 Fewer fees

While a credit union needs to make a profit to be sustainable, it can afford to give its members a break on such things as transaction fees and other account service charges that can really add up credit card options and chequing or savings accounts. “Some credit unions offer lower fees because their members don’t expect them to make large profits or large investments in infrastructure. Others use these types of subsidies to expand services,” said Kimberley Ney, senior vice-president of marketing and corporate social responsibility for credit union Alterna Savings. “It really depends on what is important to the collective.”

3. On your side

Run by the members through a board of directors, a credit union doesn’t have to answer to corporate shareholders. Members of the credit union (you must buy a share which can cost from $25 to $150 when you open an account) may earn a dividend. Each member can vote and participate in decisions such as charitable donations. In a new Forrester Research study, credit unions had the highest customer advocacy ratings — a belief by customers that their interest is served before profits. Four of the five chartered banks received below-average scores.

4 Keep the profits in your community

Credit unions across Canada donated $37.5 million to charitable causes in their own areas last year. The credit unions make the point that many of the options such as scholarships can directly benefit local families

5. Support business start-up dreams When you have a business idea but no capital to get started, it is almost impossible to get credit from major lenders. Alterna Credit Union’s Community Micro-loan Program has been bridging that gap for more than 10 years. A recent study by Carleton University’s Carleton Centre for Community Innovation pointed out that 60 per cent of the potential entrepreneurs who applied to Alterna had been turned down for loans by at least one other banking institution. But the program has been successful with a repayment rate of more than 90 per cent. The program also has long-lasting benefits for the community. “It goes beyond writing the cheques,” said Susan Henry, manager of corporate social responsibility at Alterna. “We do business development training and life skills as well. There is a lot of support.”

6. Small Business Heroes

Fees and financing costs can make a dent in a small business bottom line. A recent survey by the Canadian Federation of Independent Business (CFIB) gave credit unions top marks in these categories from more than 12,000 small business owners (running companies with less than 50 employees).

7. Convenient locations The big banks still have the most branches, but with close to 500 credit union branches in Ontario credit unions are still a major presence. In smaller towns the credit union sometimes may be the only financial institution. To locate a branch go tohttp://locator.cucentral.com/

Credit Union members have access to free ATM transactions through The Exchange Network, To find a banking machine one near you, go to www.the-exchange.ca .

8. Tailor-made services Credit unions reflect the members’ collective personality. In 2009, the Creative Arts Savings and Credit Union was formed by a group of Canadian actors to provide banking services geared to people in an industry where paycheques are not as regular as for those with a steady office job. Some credit unions offer special language services. The Finnish Credit Union features a Finnish-English website and office staff who are of Finnish heritage. DUCA was started in 1954 by the Dutch community and now has 12 branches with 35,000 members in Southern Ontario.

9. Services. Credit union users are members of the organization. In its best-banking awards study, research firm Synovate ranked credit unions first for branch service and overall excellence. They also tied for first for telephone banking and financial planning.

10. Flexible

Some of the most popular consumer banking services, such as no-fee chequing accounts, ATMs, internet banking, debit cards and cheque imaging, were initiated by credit unions.

Ontario credit unions claim to be more friendly and flexible to small buisiness. “We meet with each small business owner and determine what products and services they most need and create a banking package accordingly,” said Scott Windsor, vice-president of communications at Meridian, one of the largest credit unions in Ontario. “Some small business may have high transactions volume, so we would create a package with free/low transaction fees, but a higher loan rate. It’s about finding the services that are right for them.”

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4 things credit unions do that make banking with them better

On a scale of one to 10, how much do you like financial advisors?

Be honest…

Unsurprisingly, you’re not the only one. It turns out a lot of millennials have a” negative perception of financial advisers,” according to a millennials and wealth management report by Deloitte.

It also points out that word-of-mouth and personal recommendations significantly influence around 50% of millennials. Yep, they’re more likely to “consult peers and media” instead of using a financial adviser and those who do use an advisor are likely to cross-check the facts using external sources.

So you could say that there’s a sense of distrust felt by youth in Canada when it comes to banking. If you have to question your bank that much, maybe it’s not the one for you. Banking should be easy because you don’t need any unnecessary stress factors in your life.

Luckily, you have another option (no, not carrying cash on you 24/7) – banking with a credit union. These financial institutions act in the interest of their members and work to make things better in your local community (without the drab financial advisor spiel).

With that in mind, we’ve compiled a list of four lovely things credit unions do.

They’re involved with the community

Credit unions understand that most young families in Ontario are dealing with large amounts of debt ranging from credit cards to student loans, and mortgages. Understanding the impact of heavy debt loads on the future of young people, credit unions want to step in and help any way they can. Aside from helping with debt management, they’re also involved in grassroots programs in their communities. Credit union staff members volunteer thousands of hours each year to help local non-profits and community initiatives. And they also help their communities thrive by hiring locally, keeping their members’ dollars local, and reinvesting their profits back in the local area. 

They’re environmentally friendly

Given the very nature of their cooperative model, it should come as no surprise that over the years, many credit unions have been recognized as Canada’s Greenest Employers. In fact, Ontario’s credit unions have made environmental performance a key part of their growth strategy, and are engaged in a full spectrum of operational improvements. But it doesn’t end there, they also have social and environmental finance innovations aimed at improving every aspect of their operation – from carbon neutrality and paperless banking to responsible investing, assistance for green start-ups, and social enterprise.

They help individuals, local businesses, and charities

The act of charity is centered around helping people in need. And since credit unions strongly believe in helping people, it’s only natural that they’re involved in a variety of charitable endeavours. From local sponsorships, to grants, bursaries, and even financial literacy blogs, credit unions are pretty much dedicated to helping everyone. They also support local community events and non-profit organizations through donations. When several provinces were suffering from floods earlier this year, multiple credit unions across Canada rallied to donate $150,000 to the Red Cross at a moment’s notice.

They offer tailored financial advice

Credit union staff ensure products are tailored to the specific financial needs of each customer. This means you’re not going to hear about investment portfolio options when you simply want to set up a savings account (unless you want to). Irrespective of your current financial situation, credit unions can help you tackle debt, save for a large purchase, or plan for a stress-free retirement. With the expertise to provide financial guidance to help their members build a strong foundation for their future, it’s no wonder that more and more Canadians are switching to credit unions. Will you?

Source: DailyHive.com – Daily Hive Custom ContentDec 11, 2017 

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In 2018, these homes will sell the fastest

With reduced buying power next year, expect house hunters to scoop up everything under $500,000.

Paul D’Abruzzo, an investment advisor with Rockstar Real Estate, says that while most people will qualify for less money on their mortgages, they won’t be completely shut out of the market. They will simply adjust their demands.

“If somebody was preapproved for $500,000, their new approval will be $400-450,000, so they will lose 10-20% of their preapproval amount,” he told CREW. “It won’t shut people out, it will just move them lower. If some were on the brink of getting approved, you’ll lose some there, but lower-priced properties will do very, very well.”

In Toronto, that will put single-family detached homes even further out of the reach than they are now, but the popularity of condos will keep soaring.

“In Toronto, with everybody’s sightline coming down, condos will be the most popular,” said D’Abruzzo. “In the GTA, like Mississauga or Vaughan, it will be condos and maybe townhouses.”

Single-family detached homes will become difficult, but not impossible, to afford. The Greater Toronto Area’s fringes still have moderately priced detached houses for sale, and even with the new mortgage rules, that won’t change.

“In Hamilton, Kitchener and St. Catharines, $400,000 gets you a detached home,” he said, “so you’ll see a continued trend of population spreading out into the horseshoe.”

According to D’Abruzzo, 2018 will not be kind to sellers—at least not through the first few months—but he recommends being patient.

“Right now, people are trying to get their places sold before the mortgage rules kick in,” he said. “Next year, inventory will be crap in January and February. If anyone is scared or fearful and waiting to sell their house, patience is the solution right now. Just wait and see, because nobody knows for sure what it will be like.”

Akshay Dev, a sales agent with REMAX Realty One, echoed that wait-and-see approach. While nobody will miss out because of too much time on the sidelines, Dev says Toronto’s chronic housing shortage will continue working in sellers’ favour next year.

“Whatever correction was needed is done, and in the spring we should see the market picking up and being strong,” he said. “In the Toronto area, there’s a huge shortage of housing, so it’s still going to be a seller’s market, but I don’t expect crazy bidding wars. Sellers will still get the prices they’re expecting.”

Contrary to popular belief, first-time buyers won’t have trouble purchasing starter homes, especially because cheaper abodes will be in high demand. However, they might live in those homes longer than the historical average.

“Historically, we’ve seen that when people graduate from their first buying experience, it takes anywhere from three to five years to move into the next level of housing, but it may become five to seven years with new rules,” said Dev.

Source: Canada Real Estate Magazine – by Neil Sharma 8 Dec 2017
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Top dollar: How high can you go?

Affordability is a major concern for today’s aspiring first-time homebuyers. In hot real estate markets like the Greater Toronto and Greater Vancouver regions, however, the desire for affordability can be challenged by the competitive fervour caused by escalating prices and bidding wars. As anyone who has researched homeownership in these markets knows, it’s easy to feel the pressure to bid higher than you’d like.

Resist the urge. It’s important to go house hunting with a firm price range in mind. If something is outside of your budget, it’s not affordable – period. A successful home purchase isn’t about beating out 20 other offers; it’s about sealing the deal on a home you can afford, with money left over each month after your mortgage is paid, to cover your other expenses, savings and a little bit of fun, too.

It’s a tall order, but there is a formula to help you find that sweet spot.

FIND YOUR RIGHT PRICE

Lenders and mortgage insurers look at two debt service ratios when qualifying you for a mortgage (and mortgage insurance, which you will need if you make a down payment of less than 20 per cent the cost of the home).

  • Gross debt service (GDS)
    The carrying costs of your home, such as mortgage payments, taxes, heating, etc., relative to your income.
  • Total debt service (TDS)
    Home carrying costs (mortgage payments, taxes, heating, etc.) plus your debt payments (credit cards, student loans, car loans, etc.), again relative to your income.

The highest allowable GDS ratio is 39 per cent, and the highest allowable TDS ratio is 44 per cent.

Want a shortcut to determining affordability? Use Genworth.ca’s “What Can I Afford?” online mortgage calculator. Input your income, current monthly debt payments and other details for an instant result that shows how much mortgage you can comfortably afford. (Note: For the interest rate, be sure to input the Bank of Canada’s conventional five-year mortgage rate, as that is what lenders use when determining GDS and TDS.)

DOWN PAYMENT STRATEGIES

Once you know how much mortgage you can manage, limit your house hunt to homes that keep you in that price range. That way, you won’t panic or find yourself in financial trouble if interest rates go up in the future.

 

You can buy “more house” for the same total mortgage if you have a larger down payment. Saving aggressively is one way to do that. Pair that with other strategies, such as the following:

  • Borrowing money from your RRSP under the government’s Home Buyers’ Plan.
  • Asking family for help via gifts or loans. (Don’t be embarrassed: 23 per cent of respondents in the 2017 Genworth Canada First-Time Homeownership Study say they’d do it!)
  • Taking on a side gig or second job.
  • Gulp! Moving back home with your parents so you can save on rent.

LOCATION, LOCATION, LOCATION

The other way to end up with a smaller mortgage is to buy a less pricey house. Fixer-uppers help, but the most dramatic payoff may come from expanding your search to a wider radius.

Consider buying in a nearby city or suburb that you can commute to work from. Or blaze new ground by moving farther afield in search of a new home and new adventures – with the spare cash to enjoy them both!

Source: HomeOwnership.ca 

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What the new mortgage rules mean for homebuyers

mortgage math

Today, the Office of the Superintendent of Financial Institutions (OSFI) introduced new rules on mortgage lending to take effect next year.

OSFI is setting a new minimum qualifying rate, or “stress test,” for uninsured mortgages (mortgage consumers with down payments 20% or greater than their home price).

The rules now require the minimum qualifying rate for uninsured mortgages to be the greater of the five-year benchmark rate published by the Bank of Canada (presently 4.89%) or 200 basis points above the mortgage holder’s contractual mortgage rate. “The main effect will be felt by first-time buyers,” says James Laird, co-founder of Ratehub.ca. “No matter how much money they put down as a down payment, they will have to pass the stress test.” The effect of the changes will be huge, resulting in a 20% decrease in affordability, meaning a first-time homebuyer will be able to buy 20% less house, explains Laird.

MoneySense asked Ratehub.ca to run the numbers on two likely scenarios and find out what it would mean for a family’s bottom line. Here’s what they found:

SCENARIO 1: Bank of Canada five-year benchmark qualifying rate

In this case, the family’s mortgage rate, plus 200 basis points, is less than the Bank of Canada five-year benchmark of 4.89%.

According to Ratehub.ca’s mortgage affordability calculator, a family with an annual income of $100,000 with a 20% down payment at a five-year fixed mortgage rate of 2.83% amortized over 25 years can currently afford a home worth $726,939.

Under new rules, they need to qualify at 4.89%
They can now afford $570,970
A difference of $155,969 (less 21.45%)

SCENARIO 2: 200 basis points above contractual rate

In this case, the family’s mortgage rate, plus 200 basis points, is greater than the Bank of Canada five-year benchmark of 4.89%.

According to Ratehub.ca’s mortgage affordability calculator, a family with an annual income of $100,000 with a 20% down payment at a five-year fixed mortgage rate of 3.09% amortized over 25 years can currently afford a home worth $706,692.

Under new rules, they need to qualify at 5.09%
They can now afford $559,896
A difference of $146,796 (less 20.77%)

If a first-time homebuyer doesn’t pass the new stress test, they have three options, says Laird. “They can either put down more money on their down payment to pass the stress test, they can decide not to purchase the home, or they can add a co-signer onto the loan that has income as well,” says Laird. The stress test will be done at the time of refinancing as well, with one exception. “If on renewal you stay with your existing lender, then you don’t have to pass the stress test again,” says Laird. “However, if you change lenders at mortgage renewal time, you may have to pass the stress test but it’s not crystal clear now if this will be the case for those switching mortgage lenders.”

So if you’re a first-time homebuyer, it may mean renting a little longer and waiting for your income to go up before you’re able to buy your first home. Alternatively, some first-time buyers will buy less—maybe a condo instead of a pricier detached home. Or, the new buyers may opt to get a co-signer to qualify under the new rules.

But whatever you do, if you’re a first-time buyer, make sure you understand what you qualify for using the new regulatory rules, and get a pre-approved mortgage before you start house-hunting. “This shouldn’t be something that shocks you partway through the home-buying process,” says Laird.

And finally, do your own research and run the numbers on your own family’s income numbers. You can use Ratehub.ca’s free online mortgage affordability calculator to calculate the impact of the mortgage stress test on your home affordability.

Source; MoneySense.ca – by   

 

 

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Is it cheaper to buy a house than a condo in the GTA? This expert thinks so

While many first-time buyers look to condos as a relatively affordable option, one Toronto housing market expert says that it is actually less expensive to buy a low-rise home in the GTA.

According to Realosophy Brokerage co-founder John Pasalis, when you control for the size difference between low-rise and condos in the GTA, condos are more expensive per-square-foot.

In the Maple neighbourhood of Vaughan a 1,385 square-foot rowhouse costs $685,000, while a condo of a similar size in the area would likely cost $684 per-square-foot, or $947,000. It’s just one example of a price difference that can be seen across markets in the GTA.

Pasalis believes that this discrepancy in prices can be chalked up, in part, to investor demand.

“The majority of new condominium construction is driven by investor demand — not demand from families,” he writes in a recent blog post. “Investors are willing to pay much more (on a per-square-foot basis) than end users are.”

Pasalis says that investors prefer smaller units, which typically have a better return on investment, which means that developers are creating units that are too small for families, at prices they cannot afford.

“When developers are pricing a unit, they’re thinking to themselves, why would I charge this much when I can get this much?” Pasalis tells BuzzBuzzNews. “And those prices don’t make sense for a two- to three-bedroom unit, which is likely why we’re not seeing as many of those units being built [in the GTA.]”

In order for a condo to be good-value-for-money for a young GTA family, Pasalis says that low-rise prices would have to increase at a much faster rate than they currently are.

“The rate of appreciation for low-rise homes in the 905 region isn’t going to be very high in 2018,” says Pasalis. “So I don’t see this trend changing in the next year or so.”

While Pasalis admits that for families with a budget of $400,000 or less, a condo may be the only option for homeownership, he says that those with one of $700,000 or more should consider their options.

“They can choose to buy a two-bedroom 1,000 square-foot condo in Maple for that price, or a three bedroom 1,385 square-foot row house with a finished basement and backyard. For most, it’s a pretty simple choice,” he says.

Source: BuzzBuzzHome.com –  

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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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