16 Dec

MORTGAGE PREPAYMENT(S)- THE PERFECT HOLIDAY GIFT!

General

Posted by: Alan J. Nicholas

Do you know what kind of prepayment privileges you currently have with your mortgage? Does your current lender allow you to make a 10% prepayment or a 20% prepayment on your principle amount? Can you double your monthly payment? Or can you even increase the amount you are paying monthly?

This is important information, and the following break down is going to show you why making a prepayment on your mortgage may just be the best holiday gift you can get yourself this season!

Mortgage Structure

Mortgage Amount: $400,000

Term: 60 months (5 years)

Interest rate: 3.19%

Payment: $1,932.19/month

After 5 years of monthly payments…

Interest paid: $59,068.97

Principal paid: $56,862.43

Balance outstanding: $343,137.57

Amortization remaining: 20 years

After 5 years of monthly payments with double-up payments twice yearly…

Interest paid: $57,621.44

Principal paid: $77,631.86

Balance outstanding: 322,368.14

Amortization remaining: 20 years

Effective amortization: 15 years 1 month

Interest saved over term: $1,447.53

Let us break this down. If you double your monthly payment of $1,932.19 twice a year, for the term of your mortgage (5 years in this case), you will save $1,447.53 in interest over those 5 years. Not too bad. But there is more…

If you did these double-ups twice a year for 5 years, and refinanced your mortgage after the 5 years but continued paying the higher payment of $1,932.19 instead of what the new monthly payments would be ($1,557.19), that extra $375 a month goes directly to the principal amount owing and takes 4 years and 11 months off of your amortization…

If that doesn’t excite you and you decided instead to continue making double-up payments for the remainder of the amortization, you would save $38,550.70 in interest…

So this holiday season, when you get your year-end bonus or are deciding how much to spend on loved ones, maybe first consider allowing yourself a mortgage prepayment or two because it could save you years of payments and potentially thousands of dollars in interest! If you have any questions, contact me today, for non biased advice!

11 Dec

First Time Mortgages: Expectations Vs. Reality

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Posted by: Alan J. Nicholas

First-time homebuyers are one of our favourite clients! It’s great to work alongside them and teach them the in’s and out’s about real estate, owning a home, and helping them cross “homeownership” off their bucket list. One thing that we find though, their expectations are often not aligned with reality. We are always honest with our clients about the reality of the situation, but we thought it would be helpful to clear up a few of those “expectations”.

1. Expectation: They have enough saved for their down payment

Reality: This seems to be the first “shocking” point to many first-timers. It’s also one of the most heartbreaking ones to explain to them too. Many times, they have saved for several years and come in with what they think is a sizable down payment…but, in reality, it’s less than what is needed. They will often have their sights set on a home that is well out of their price range. They have also potentially failed to account for stress-testing measures. As a general rule of thumb, 5% is the minimum on a property with a purchase price of less than $500,000. However, 20% or more is the ideal in order to avoid your mortgage being classified as a high-ratio mortgage and require mortgage insurance.

2. Expectation: Once you have the down payment you are all set!

Reality: There are many different costs associated with moving, buying a home, and other fees that many first-time buyers may not be aware of. A few fees to consider include:

• Legal Fees
• Property Transfer Fees
• Moving Costs (moving van, moving crew)
• Appraisal fee
• Searches and Title Insurance
These will total approximately 1.5-2% of purchase price.

3. Expectation: Costs will stay the same when going from renting to owning a home.

Reality: This is not true in most cases. Many people forget to account for the day-to-day and general upkeep associated with home ownership. These can include repairs on the home, insurance, property taxes, extra utility costs, etc. This is why we always encourage first-time buyers to sit down and look at their budget and “practice” the strains and additional costs. This allows you to see if you are truly ready financially for home ownership and also alleviates stress down the road.

4.Expectation: We qualified for (blank) amount of dollars—let’s use all of it.

Reality: This is rarely a recommended or smart decision. Pick a price range that you are comfortable house shopping for that would allow you to accommodate things like home renovations, upgrades, and updates. Looking at homes that still fit your needs but may just need a little more work can significantly decrease the amount you are borrowing. If you are open to different options when house-hunting, you can save money in the long run.

These are just four examples of how a first-time mortgage holders’ expectation are rarely the reality. However, there are other areas that we find they may have questions in or not be aware of. The mortgage industry is one that is forever changing, and it can be difficult to stay on top of all of the changes! If you have a question, concern, or just want to know about what to really expect when you are going through the mortgage process, consider giving me a call to discuss your options!

6 Dec

Pride in ownership can pay off

General

Posted by: Alan J. Nicholas

Any prospective homebuyer knows this situation well. You’re set up for a viewing but when you get there the condition is less than ideal. Maybe the toilets are dirty, or the cluttered kitchen is hiding its full potential. Immediately, you’re turned off and you’ve moved on to another property.

For the owner, that’s sale opportunity lost.

In a lot cases, buyers can’t really see beyond what’s in front of them. A messy place not only makes your home harder to see, it can cost you money.

Depending on who you talk to in the real estate industry, a messy home compared to a clean house could fetch up to a $20,000 swing.

That’s a lot of money for a weekend of washing walls, decluttering, taking the trash out, running the vacuum and putting some elbow grease.

There are few simple things during this time of year that can help make your home stand out above the rest.

1) While winter can be lovely, it can also get a little messy. Especially around the yard with all those snowy and muddy days. If you want to boost the curb appeal before prospective buyers step foot in your home, you’ll want to make sure you clean your walkways. Don’t be afraid to take advantage of a dry day to keep your garden looking presentable. A little maintenance goes a long way!

2) Winter is all about colour. It’s time to put away all those bright colours for the more earthy tones of

the season. If you’re not sure, those are browns, greys, orange and greens. Change your bed spreads, pillows and rugs to match the season. It doesn’t hurt to throw up a fresh coat of paint or an accent wall in an olive or burnt orange hue.

3) Winter also seems to have a smell. And you can recreate that in your home. The fresh scent of cinnamon or ginger are perfect for the season. You don’t want to go overboard, but nothing feels more welcoming then a home that smells of love and food. You can also decorate your home with the fruit of the season in a decorative bowl. It doesn’t even have to be in the kitchen. It can be right at the front entrance.

4) The change of season is a great time to make sure your maintenance is up to date. For the exterior, that means cleaning your gutters, windows and deck. If you have a pool, making sure it’s properly covered and tucked away for the winter. Inside, make sure the furnace and all your electrical components are working including your appliances. Nothing turns off a buyer more than looking at a home in disrepair.

5) The days are short and the weather tends to be a little unpredictable, so you’ll want to ensure your home is bright. If you’ve got some burned out lights both inside and out, replace them. And before a buyer comes in for showing, turn on all your lights. Keep your blinds and curtains open to let in as much light.

If you’re about to put your prized possession on the market, treat it like one and take pride in ownership.

3 Dec

The Great Debate: Gen-x Vs. Millennial

General

Posted by: Alan J. Nicholas

If you’ve ever been around a Gen-Xer and Millennial together, you’ve probably heard this debate before: Who had it easier trying to get into the housing market?

Undoubtedly, the millennial will claim there is no struggle greater than the one they currently face, while the Gen-Xer will tell their younger cohort that they are spoiled and don’t understand how hard it was to adult in the 90s.

So, are millennials better or worse off than Gen-Xers at the same age?

A report earlier this year from Stats Canada set out to settle the debate with some interesting findings.

For starters, the study found on average young millennials earned more than young Gen-Xers. Specifically, Gen-Xers between the age of 25 and 34 in 1999 earned on average $51,000 annually compared to millennials who earned $66,500 in 2016.

The study found that millennials in 2016 also had higher assets and net worth then their grunge-era counterparts in 1999 at $154,000 to just $76,700 respectively.

However, millennials were found to be more indebted, with a debt-to-after-tax-ratio at 216 per cent compared to 125 per cent for Gen-Xers.

The study also found millennials are taking on larger mortgages then previous generations. The median mortgage debt on the principal

residences of a millennial between the ages of 30 and 34 in 2016 was $218,000 compared to $117,500 for Gen-Xers in 1999.

Interestingly, though their median net worth is higher, there are greater differences in economic well-being among millennials, specifically, millennials in the top 10 per cent held 55 per cent of all total net worth accumulated by their generation.

The study also found that millennials are entering the housing market at similar rates as previous young generations.

So, who can claim the biggest hardship to getting into market? That would depend on how you want to spin the facts. Instead, maybe the key is in the finding that millennials are getting into the market at the same level as their parents and grandparents did before them.

Of course, there have been a number of market factors and challenges each generation has had to face. Consider late boomers trying to get into the housing market with interest rates at nearly 20 per cent in the early 80s, or the recession and economic malaise of the 1990s.

At the end of the day, and this study proves it, young people in every generation have found a way to look past the challenges in their face, and fulfill the dream of homeownership. And if you’re a young person ready to buy or soon to be, a mortgage broker is your best bet to help get you there.