August 16, 2006
Interest article for people looking to bu a rental property
Rental squeeze set to tighten
Tuesday, August 15, 2006
There will be no relief for Calgary renters looking for new accommodation in 2007.
A national housing agency report forecasts this year and next to be one of the tightest periods ever for the city's apartment market.
Canada Mortgage and Housing Corp. said Monday that Calgary's vacancy rate will end up at 0.6 per cent this year and in 2007, the lowest level in Canada. The minuscule vacancy rate is a boon for landlords -- some of whom are increasing rents in Calgary after three years of flat prices -- but a serious headache for renters.
"It has been so stressful," said non-profit sector worker Kirsteen Connelly, 35, who learned -- to her relief -- she had snagged a two-bedroom apartment Monday. Connelly and her husband, Phil, are expecting a baby in December and had been looking for a home for the past month.
At one point, the couple viewed an apartment alongside two dozen other people. "I've been close to tears more than a couple of times," she said.
CMHC's forecast counts units in buildings that have three or more rental spots and are available for immediate occupancy.
Richard Corriveau, a Calgary-based economist for the CMHC, said Calgary is approaching the record-low vacancy level of 0.5 per cent seen in 1997 -- when the city grew rapidly without the scale of home building seen now.
"Obviously this gives rise to some significant rent increases, which we're already experiencing," Corriveau said.
However, "when people see vacancies that low and 20 per cent rent increases, they see that as a market that is extremely tight and does give additional incentive to produce new units."
CMHC said Edmonton also will be one of the tightest rental markets in the country, with a forecast vacancy rate of 1.5 per cent this year, dropping to one per cent the next.
The housing agency report came the same day the provincial NDP called on the government to create a ministry of housing.
"We've got a crisis brewing right across the province," MLA Ray Martin said. "At least the Lougheed Conservatives saw the need to do some planning when you have an overheated economy."
The NDP said a ministry dedicated solely to housing existed from 1982-86, and it co-ordinated the policies for housing across the province.
Martin said it could be created without adding to government bureaucracy if another department was trimmed. "Things are going to get worse before they get better, if we don't start to make some fundamental changes."
Jason Chance, a spokesman for Seniors and Community Supports, said the department is already a one-stop shop for housing programs for low income Albertans. "We've been quite effective in not only establishing new housing opportunities, but we've also created an effective support mechanism for those units that we've already got in place."
Earlier this month, Premier Ralph Klein rejected the NDP's call for a task force on homelessness, saying that his government is doing enough already.
Over the past four years, the federal and provincial governments have spent about $200 million in Alberta helping to build 3,200 affordable housing units. About $36.5 million of that has been spent in Calgary.
But criticism of the government's housing policy also comes from other quarters. Stephen Shawcross, a Calgary director with the IBI Group -- an international urban design consulting firm -- said both the federal and provincial governments are abrogating their responsibilities by not implementing concrete plans to spur the development of affordable housing.
Offering incentives to investors to built rental accommodation and allowing "granny suites" over garages are just two options, he said.
"There are solutions to the problem," Shawcross said. "This isn't rocket science. It takes political will."
The space crunch in Calgary has also motivated Calgary social justice activist Grant Neufeld to organize a coalition dedicated to improving protections for tenants. A meeting will be held to discuss the yet-unnamed organization tonight at 6 p.m. at the Old Y building, 223 12th Ave. S.W.
August 09, 2006
For the past five years True North Mortgage has been offering clients friendly, professional and informative service at best rates via an online platform. We are pleased to announce the opening of our new downtown Calgary storefront location. Depending on preference, clients are now able to come into our office, visit our website or call one of our toll free numbers for mortgage assistance.
We look forward to continuing to serve our clients across Canada!
August 09, 2006
Do you want to know what other clients are doing?
Have a read.
Client File #1053
We received a call from a very anxious client located here in Calgary. He had just 2 days to waive his financing condition and TD bank just told him they wouldn't provide him with a mortgage, even through they had already pre-approved him. TD claims that they didn't realize he was new to Canada. Turns out, TD did him a favour. We packaged the file and sent it to Maple Trust. We had full approval within 8 hours and all conditions met within 36 hours. Best of all, the rate was 0.25% better than what TD was originally offering him.
Client File #1063
We received an application from a client living in Edmonton. She and her husband fell in love with their dream home and really wanted to buy it. Unfortunately, given their current income, they could not afford the mortgage needed. They had great credit and good stable jobs but their bank just could not approve a mortgage of the size needed. After the clients called us, we quickly determine that a 35 year amortization would reduce the monthly payments enough to make the deal work. The clients ended up getting their dream home at a great rate. Also, if they earn additional income in the future they could always increase their monthly payments to order to reduce their amortization.
August 09, 2006
GST Tax Cut provides some relief for Real Estate transactions.
Effective July 1, 2006, the Tory government has announced a decrease in the GST from 7% to 6%. This move, combined with a small increase in the basic personal exemption for federal income tax, will save about $650 per year for families in the $45k to $60k annual income bracket. The estimate from the Finance department is that this decrease will save Canadians about $8.7 billion over the next two years.
This reduction could provide those who are planning a real estate transaction this spring with a pleasant surprise.
What you need to know:
1. July 1st is the demarcation date. If ownership or possession transfer occurs before that date, the 7% GST applies; after that date it doesn't.
2. If an agreement of purchase and sale is signed after May 2nd, with the deal closing after July 1st, the 6% rate applies.
3. Buyers who signed a purchase agreement on or before May 2nd and whose GST is based on the 7% rate, will be able to claim a transitional adjustment** from the Canada Revenue Agency. What does this mean for consumers? For a client buying a $200,000 home, it means a $2000 saving up front. It will also result in savings on all the associated fees that get paid out to lawyers, appraisers, home inspectors and movers. Not to forget the furniture and appliance purchases.
**To claim a Transitional Rebate, a person must complete an application form and file it with the CRA. If a new housing rebate is available in respect of the purchase, the individual who claimed the new housing rebate is the individual who claims the Transitional Rebate. When the application form becomes available you will be able to obtain it on the CRA Web site (www.ccra.ca) or by calling 1-800-959-2221.
August 09, 2006
Should you lock in?
Two weeks ago, the Bank of Canada bucked the trend it had set during the fist half of this year which featured seven consecutive increases in the overnight rate, with the most recent increase to 4.25% taking effect in late May. This last increase sent the Prime Rate to 6.00%. The Bank left the rate unchanged as it determined that the current rate was sufficient to hold inflation within the target range of 2% annually as the outlook for economic growth and inflation has not changed materially from the Bank's last update in April, 2006. In its analysis, the Bank judged that the Canadian economy continues to perform slightly above its production capacity. This would usually signal the need for more rate tightening in order to hold inflation in check, but the Bank anticipated medium term weakness in US consumer consumption and further depreciation of the US dollar.
This forecast, together with the lagged effects of a higher Canadian dollar, lead the bank to hold firm on its overnight rate.
What does this mean for the Canadian mortgage market?
Have we reached the end of increases in the Prime Rate for now?
The answer of course is: perhaps and perhaps not. We can conclude that the recent decision and commentary from the Bank may renew consumer demand for variable rate, Prime based mortgage products. When the Prime Rate reached 6.00%, the spread between the five year fixed mortgage rate and variable rate mortgages reached its lowest point in more than five years. The reduction in significant interest savings from the increases in the Prime rate during the first half of this year lead many of our clients to choose the security of a fixed rate over the uncertainty of a variable rate in their mortgage product selection. With the Bank of Canada holding steady on the overnight rate and with most Canadian investment dealers predicting no further bank rate increases for the remainder of this year, consumer preference may shift back to Prime based, variable rate mortgage products. If you think a closed varibale rate mortgage is right for you, don't look any further than our prime minus 0.95% mortgage. No Fees, Great Rates!
The Team at True North Mortgage
August 09, 2006
Interest only mortgages have been in the news and have already been widely available in the US. They have finally come to Canada. A few lenders are just starting to test the waters in Canada with this new product. Here are a few real-life examples from current clients that have used the product.
Johnny approached us a few weeks ago looking to purchase a rental property in Calgary. With great credit and good stable employment, Johnny was able to put 25% down. The mortgage (P&I) payment was going to be $1480 per month on the rental property. Unfortunately, Johnny believed that he would only be able to collect $1500 in rent for the property which would not be enough to cover mortgage payments and property tax. This is a common situation faced by our clients in many major city centers in Canada. Enter the interest only mortgage. We introduced the interest only mortgage product to Johnny for his rental property purchase and described how an interest only mortgage would reduce his monthly mortgage payment to $1,071. The interest rate is set at prime minus 0.8 which is a great rate for any mortgage. An interest only mortgage makes a lot of sense on a rental purchase because it not only reduces the monthly expense but also maximizes the tax advantages of a rental property. In the end, Johnny was able to buy a rental property which was likely to appreciate in value and provide positive cash flow.
Dave is an independent contractor who makes good money but his income while predictable, is not consistent. Many months go by when he earns nothing and then suddenly he earns a big chuck of cash. Dave wanted a mortgage that has the flexibility to match his income without sacrificing a really great rate. Traditionally, we would have offered him a secured line of credit, which offers total flexibility but it comes at a price. Most mortgage rates are set well below prime but a secured line of credit is often at prime. The difference can equate to hundreds of dollars every month. Enter the interest only mortgage. The interest only mortgage is perfect for Dave because he was able to get the great rate of prime minus 0.8% and when he receives his big chunk of cash he is able to make large lump sum payments towards his principle whenever he wants. Dave jumped on the interest only mortgage as a way to pay minimal monthly amounts while still paying off his mortgage in 25 years by making large lump sum payments.