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Mortgage Types

Mortgage Types
You are now approved but what kind of mortgage will you get?

Conventional type of mortgage is when your down payment is usually a minimum of 20% of the purchase price. It does not exceed 80% of either the appraised value or purchase price. The bank will take the lower of the two. When your down payment is less than 20 % of the cost of the home your mortgage will be a high ratio. Mortgage loan insurance is required for this type of mortgage. The insure will charge a percentage of the mortgage amount which the premium can be added to your mortgage payments and amortized over 25 years, or paid in full on closing. The two most common insurers are CMHC and Genworth Financial Canada.

Open Mortgage this loan may be repaid in part or in full at any time without penalty (interest rates are usually higher). This is a good choice for people who plan on selling the home in the near future (or winning the lottery!) Generally, it is suggested that buyers take an open mortgage in times of high interest rates for the short term, and convert to a longer term closed mortgage when rates fall. Closed Mortgage this mortgage has fixed rates and fixed payments and is the easiest kind to work your budget around. Because they are generally longer term, they have lower interest rates than open term mortgages. This type of mortgage is less flexible and will often have penalties or restrictive conditions associated with prepayments and lump sum payments. There is often a “payout” penalty if you move before the end of the term.

Variable Rate Mortgage with this mortgage, your interest rate will fluctuate with the prime rate each month. It is an open mortgage and may be repaid in full or converted to a closed mortgage without penalty. Usually you have flexibility with your choice of payment frequencies and can take advantage of the potential declining interest rates. The advantage being to “lock in” on the lower interest rates before they become too high; it is advisable to have knowledge or advisement on interest rate predictions and trends.

- Kenan

Market News for the Month of March

Detached listings

There are 507 current detached listings and 50 sales year to date. The current market’s
hot price range is from $280,000 to $380,000, with the majority of the sales
occurring in this price range. With the current pace of sales this represents a 20 month
supply of listings. Comparing the previous year’s detached sales, in 2011 for the same
time period we had 69 sales. The detached listing inventory climbed over January and
market supply increased, sales in February were also down.

Attached Listing

There are 139 current attached listings and 11 sales year to date. With the current pace
of sales this represents a 25 month supply of listings. Attached listing represents strata
unit apartments, condos and townhouses. Attached listings declined over January with
the market supply decreased and the sales were up.

Land listing

There are 368 bare land listing and 4 sales year to date. With the current pace of sales
this represents a 184 month supply. Comparing the previous year’s bare land sales, in
2011 for the same time period we had 22 sales.

What can we say about the market; most of the sale prices were within a few thousand
dollars of the current listing price and the volume of sales was well off of the 2011
time period. When buyer’s see the value in the home they will pay close to the listing
price or more. One home over the past month sold for above the listing price. In most
cases the sellers have been on market for an extended period of time and followed the
market down quite often below the market value of when they listed. Often we feel
our home is the best and should get higher than others but we need to remind ourseves
that this has consequences. It is important to look objectively at what has sold and set
price carefully

- Kenan

Time to Buy – Mortgages

You have decided now is the time to buy your home, but where do you start? The first thing to do is to get pre-approved for your mortgage. This will save you the disappointment of finding a perfect home only to realize it is beyond your means. The Banks and Credit Unions will usually give you a pre-approval rate hold for up to 120 days. So if the mortgage rates go up you will be guaranteed the rate of your pre-approval and considering we are at a record low going up is more likely.

Now, what do you need for your pre-approval? The lender wants to confirm that you will have the ability to repay the mortgage. Essentiality what they will want to know is; what you owe (liabilities), what you own (assets) and what you make (income)?. They will require some of your personal information including; possibly a credit check, details of your employment, verification of income (a 2 year average of income, T1 for self-employed, Employment letter and paystubs for employed individuals, Notice of Assessments) other sources of income (pensions, support payments, rental income), your current bank information. They will also want to know the source of your down payment. If your down payment is a gift they will need a letter saying the down payment is a gift. Gifted down payments are only accepted from immediate family members.

Now you have all your information together you can book an appointment at your bank or credit union or consider going with a mortgage broker. The mortgage broker will meet where you want, when you want or even come to your home at hours convenient to your schedule. Banking institutions have “mortgage specialists” representing them and your mortgage can be placed with your own branch. The broker in most cases will get a commission from the bank for placing your mortgage and you get their personal attention at trying to find you the best interest rate. The broker’s expertise is essential if you are having difficulty putting together your information and if you have a less than perfect credit score. If you are difficult to finance and need alternative lending, the lender may charge you a fee for arranging your mortgage and pay the broker from part of that fee. Next week the types of mortgages.

- Kenan

Market News for the Sunshine Coast

Detached listings

There are 464 current detached listings and 28 sales year to date. The hot price range of the market is between $300,000 and $400,000. with 50 % of the sales occurring in this price range. With the current pace of sales this represents a 17 month supply of listings. Comparing the previous year’s detached sales, in 2011 for the same time period we had 50 sales

Attached Listing
There are 146 current attached listings and 2 sales year to date. With the current pace of sales this represents a 73 month supply of listings. Attached listing represents strata units apartments, condos and townhouses.

Land listing
There are 367 bare land listing and 3 sales year to date. With the current pace of sales this represents a 122 month supply. Comparing the previous year’s detached sales, in 2011 for the same time period we had 50 sales

This is typically a slower time of the year so I would not be overly alarmed by these stats. I have been checking around at some of the other Real Estate offices this week and most are showing an increase in buyer activity and in some cases there have been competing offers. Most of my fellow Realtors that I checked with are working with a number of Buyers and report an increase in showing activity. So I believe my next report on the market will show a significant difference

Reviewing the year to date sales I found most of the sale prices occurred within 5 % of their current listing price. The listings that were on the market the least amount of time sold within a few thousand dollars of their list price. The home with the largest difference between the original asking price was on the market for 17 months. So price it right.

- Kenan

Price it right! – The most important component of a successful sale.

Put aside your emotions and price your home right from beginning!  The advantages of an accurate listing price are a faster sale, less inconvenience, increased activity, often a higher selling price, reduced negotiations, and avoidance of a “stale listing” which can lead to your home standing out and being compared negatively to the competition.

Appraisers use to two main methods to appraise your home: one is by direct comparison and the other is by cost approach. The cost approach takes in the land and included site developments plus the home, garage, basement and extras. These are assigned values related to land sales and current building costs and the buildings will be depreciated according to wear and tear.

Realtors will sometimes do a worksheet on your home using the cost approach prior to using the direct comparison. Direct comparison is the most accurate indication of market value for your home. Your home is compared to similar homes that have sold and adjustments are made for differences.  Your realtor normally would come up with at least 3 homes that have sold recently and are similar to your home. If you live in a “cute, heritage style home” then the comparisons should be similar to that. If you live in 2800 sq ft home on a non view lot it will be difficult to compare to a 2800 sq ft view home given the difference a view makes to many buyers.

Also better to look at what your neighbor sold for than to look at what neighbor listed for. In a buyers’ market it pays to look at sales first and then the currently listed homes.   Through the internet many buyers are very well informed and they know the market. Buyers want to make sure they are getting best value for their money.

I quite often have sellers indicate they want to have a little room to negotiate.  Or they say that hopefully someone is going to come along and pay them 10 % more than suggested because their home is special. What the statistics show is that the best offer for your home will usually come in the first 30 days. After that time the price you expect to receive for your home, will decline. I have seen sales where an “average” property was listed for 4 years before it sold. Imagine the stress of being on the market for that length of time. Price it right.

- Kenan Mackenzie

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