Dan Petersen

Whenever the Canadian real estate market topic comes up in conversation, it typically surrounds how first-time homebuyers are struggling to get their feet in the door. Whether the challenges of putting together a down payment or qualifying for a mortgage, aspiring homeowners have many hurdles to overcome.

But while these labours of Hercules are undoubtedly real, move-up buyers also have an uphill battle to overcome as they are contending with comparable issues, from higher borrowing costs to more expensive residential properties in their communities or a faraway distance.

Wait a minute. What is a move-up buyer anyway? This person currently owns a home and intends to sell this property to acquire a new one that is typically larger. The reasons for this decision will vary, but some common factors of moving up include needing more space for a growing family, upgrading to a better neighbourhood, taking advantage of favourable market conditions, and searching for a differently designed home.

At a time of tightening lending standards and above-trend mortgage costs, move-up buyers will need to determine how to finance this transition, which could happen at a snail’s pace or the speed of light. Let’s dig a bit deeper to consider your financing or borrowing options.

What Every Move-Up Home Buyer Should Know About Financing Options

Here are four financing options that every move-up homebuyer should know:

Using Your Home Equity Wisely

Did you buy your home before the coronavirus pandemic? Did you acquire one in the early days of COVID when rock-bottom interest rates fueled a buying frenzy? Whatever the case may be, you might have accumulated a tremendous amount of tax-free equity over the years. It might be enough to fund your next home purchase or the down payment on your next single-family house in Victoria, townhome in Halifax, or two-bedroom plus den condo in downtown Toronto.

Of course, the question becomes: Should you touch your home equity? The reality of the situation is that you can employ the gains from the sale of your home, but you should do so wisely or conservatively. Rather than use up 100 percent of your home equity, perhaps you can dedicate a certain percentage of the proceeds to your move-up acquisition.

Like buying a home will be the most significant financial decision of your lifetime, so is the decision to sell your home, since you might access hundreds of thousands of dollars in equity.

Line of Credit or Bridge Loan

Because you own your home, tapping into credit is a little easier. It will vary on a case-by-case basis, but generally, homeowners will be given favourable terms for a larger amount of capital.

As a result, you could be tempted to fund your move-up purchase with a line of credit. Or, if you need time between selling your current property and buying your next one, you may consider using a bridge loan. While it is imperative to speak with a mortgage broker about your financing options, making the necessary calculations, from interest rates to extra charges, is vital.

Both credit instruments can be useful and affordable mechanisms at your disposal. A line of credit can be an easier way to fund your purchase if it is only a small mortgage or purchase. A bridge loan can be a helpful tool in this transition period of listing your property and buying a new one without enduring immense financial pressure.

Are Second Mortgages Reasonable Options?

Typically, homeowners will use second mortgages to help consolidate debt when they have lost a job, suffer from a health ailment, or endure credit challenges. Private lenders usually offer them, and they come with higher interest rates (in this climate, it can be in the double digits!).

That said, conventional mortgage lenders might be willing to offer second mortgages with customizable terms and conditions. Many families use these financial products to help their kids buy a house or pay for their children’s post-secondary tuition.

At the same time, financial institutions will often push through a home equity line of credit (HELOC), as borrowers can receive up to 65 percent of the value of their home.

Ultimately, it is about weighing your financing options and determining what is best for you, your family, and your wallet. Communicating with both your real estate agent and the bank is crucial.

Cash-Out Refinance

A cash-out refinancing option consists of obtaining a new mortgage for your home, whether from a current lender or a new source. You will then pay the first loan in its entirety by using the second one, which will help you lock in a new interest rate and loan term.

This might seem enticing, but there are a few things you need to know:

• Users will pay fees and penalties to ensure the long-term savings exceed the upfront costs.
• Borrowers must meet requirements (length of homeownership, credit score, home equity, etc.).
• Clients must have a lower debt-to-income ratio.
• The minimum equity requirement is usually as much as 20 percent in equity.

Other Money-Related Tidbits of Information

In addition to your financing options, it is essential to think about other factors related to your move-up homebuying experience:

Refrain from going overboard and over budget on your next purchase.
Sit down and calculate your finances, from what you earn to your liabilities to your retirement savings.
Determine whether to buy or sell first (there is no right or wrong answer to this quandary).
Take your time and do your research on what is available in the real estate market.
Work with the right people to make the best decision possible.

Takin’ Your Time

The last few years have been a chaotic time in Canada’s housing market. The roller coaster ride of mortgage rates, the buying frenzy, the dramatic rise in home valuations, the modest correction, and everything else that occurred in the Canadian economy. As we learned, being impatient can often burn buyers and sellers. Therefore, you do not need to put the pedal to the metal. Instead, be patient and precise so you can be confident you made the right choices throughout the move-up homebuying process.

Source

Good news for Canadian homeowners! Rates are dipping and inventory is on the rise, making it the perfect time to make your move. With a 10.5% increase in home listings since last year and more to come, finding your dream home just got easier. Seize the opportunity today!

Dan Petersen⁠
Re/Max Action Realty LTD.⁠
(250) 262-7496⁠
dan@remaxaction.ca

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Connect with me for a mortgage referral and let's get you pre-approved!

Here's why it's crucial:

Gain a competitive edge: Pre-approval shows sellers you're serious and ready to make an offer, giving you an advantage in this competitive market.

Know your budget: Understanding your loan options helps you set a realistic budget, ensuring you find a home that fits your financial goals.

Let's make your homebuying journey smooth and stress-free!

Dan Petersen⁠
Re/Max Action Realty LTD.⁠
(250) 262-7496⁠
dan@remaxaction.ca

Are Canadian homeowners and prospective buyers beginning to take climate change more seriously in the real estate market?

A recent survey for Rates.ca and BNN Bloomberg found that 60 percent of young homeowners were thinking about the possible effects of climate change on the area where they were purchasing their residential property. By comparison, this rate was 31 percent for those 35 and 54 and a little more than one-quarter (27 percent) for those over 55.

However, climate change concerns are not resulting in much action by Canadians. The study learned that only 12 percent have applied for extra insurance to cover them in the event of extreme weather events exacerbated by climate change.

“We are living with the effects of climate change, and the results of the survey show that a growing number of Canadian homeowners are both aware of the risk and are taking steps to mitigate risk in where they choose to live or through additional insurance endorsements,” said John Shmuel, managing editor of Rates.ca, in a statement.

Indeed, many U.S. and Canadian insurance companies have warned about the growing costs of insuring homes in areas prone to devastating climate change-related weather events, be it floods or forest fires.

Meanwhile, additional studies have been sounding the alarm about climate-related risks, including property valuations. In fact, according to a recent report by the Centre on Climate Adaptation, climate change could reduce the value of homes in Canada by as much as 15 percent by 2050. At the same time, this has been seen in recent years.

A recent University of Waterloo study discovered that in the eight years before 2022, devastating flooding in Canadian communities resulted in a more than eight percent drop in the final sale of home prices. The extreme weather also resulted in a more than 44 percent decline in the number of homes listed for sale, and residential properties were on the market for nearly 20 percent more days before being sold.

“Canadian homeowners are paying closer attention to flood and wildfire risk when purchasing a home,” stated Blair Feltmate, head of Intact Centre on Climate Adaption at the University of Waterloo, in a press release. “With the impact of [extreme weather] featuring almost nightly on newscasts, homeowners are also increasingly aware of how flooding in communities can affect a home’s value.”

Industry observers present the case that the effects of climate change could be factored into a property’s value in the coming years and become the new norm. They say this would help consumers see the connection between climate risks and real estate prices.

But how would this work exactly? For example, potential buyers need to understand which areas are at a higher risk of floods or wildfires, areas that have poor air quality due to excessive air pollution, and areas that are warming faster than others, and similar facts could become associated with the decision-making process when it comes to evaluating and buying real estate.

Extreme weather events result in significant damage to buildings and infrastructure and might require repairs that could be expensive. Some weather-driven events, such as forest fires, can potentially destroy entire neighbourhoods. This not only results in displacement but also increases the burden of homebuilding for homeowners. Other issues can also be problematic, such as mould growth, foundation damage, and structural issues that could occur due to flooding and storms. Areas that are more vulnerable to rising sea levels and storms can also face challenges in terms of real estate prices and sales.

This does not mean the Canadian real estate market should expect the worst. Many major urban centres rank in the top ten of top North American cities that have engaged in sustainability, according to the Commercial Board of Real Estate (CBRE). These include Winnipeg, Toronto, Ottawa, and Montreal.

“The cities that take the lead on sustainability today will have a competitive edge as the economy shifts to a low carbon, more sustainable future,” said Robert Bernard, Chief Sustainability Officer at CBRE. “With over 50% of the world’s population living in cities, cities will be critical in driving sustainability and helping communities adapt to climate risks.”

According to housing market experts, climate change mitigation and adaptation measures should be better integrated into housing strategies, and governments should consider investing more in the modernization of green structures and other climate-friendly initiatives. Climate risk assessments should become part of real estate listings and be considered as important as other factors.

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Is it time for an upgrade? With remote work becoming the new norm, the demand for bigger homes is soaring!  Now is the time to find your dream space in this evolving market.

Let's chat about your next move!

Dan Petersen⁠
Re/Max Action Realty LTD.⁠
(250) 262-7496⁠
dan@remaxaction.ca

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At a time when mortgage rates are hovering between five and six per cent and home prices remain above their pre-pandemic levels, discussions surrounding the mortgage stress test have been prevalent across the Canadian real estate market.

The mortgage stress test is a federal government mandate requiring that borrowers prove they can afford higher payments if mortgage rates rise in the future. Typically, the stress test is the current mortgage rate plus two per cent. At the height of the current tightening efforts by the Bank of Canada (BoC), the stress test was north of eight per cent.

The purpose behind the rule is to prevent borrowers from taking on more than they can afford and to stop lenders from lending money to financially stressed or would-be fiscally challenged clients.

But now that the post-crisis real estate market is an environment where interest rates are at their highest levels since before the Global Financial Crisis, critics have wondered if the stress test is excessive, with some urging Ottawa to ease or suspend the measure.

For now, it appears that everything will remain the same, according to the country’s chief banking regulator.

What’s Going on With the Mortgage Stress Test?

According to the Office of the Superintendent of Financial Institutions (OSFI), the qualifying rate for uninsured residential mortgages will continue to be higher than 5.25 per cent, or the mortgage contract rate plus two per cent. Peter Routledge, the OSFI chief, stated in a December 2023 report that the stress test has resulted in a more robust and resilient mortgage financing system as it helps both borrowers and lenders better manage risk.

The federal government reiterated the OSFI’s stance shortly after its confirmation.

Others agreed, including Fitch Ratings.

The credit ratings agency supported the OSFI’s decision, calling it a positive for the Canadian real estate market, the nation’s banking system, and the broader economic landscape.

Underlying Risks in a Stable Mortgage Market

Despite everything that has transpired since the start of the coronavirus pandemic, both the Canadian real estate market and the mortgage industry have remained solid and cushioned the blows from the crisis-era fallout. In other words, delinquencies and forced sales have been largely absent in Canada.

However, the Canada Mortgage and Housing Corporation (CMHC) recently warned that approximately 2.2 million mortgages will have to be renewed in 2024 and 2025. This would represent nearly half (45 per cent) of all outstanding mortgages, totalling roughly $675 billion.

Even if the central bank engages in lowering its benchmark policy rate and the bond market responds, it might not be swift enough to prevent borrowers from paying higher rates.

In fact, the CMHC projected that as households renew in the coming years, the higher mortgage rates will equal about $15 billion in additional payments for households each year.

Ultimately, this could result in consequences for the economy since the funds will be reallocated from other sectors, the CMHC says.

Mortgage Rates in 2024

Financial markets are bracing for rate cuts this year. Investors think they could happen as early as March, while economists believe the likelihood is sometime in the middle of the year. This will lead to lower bond yields and, as a result, lower mortgage rates, with experts saying the conventional five-year fixed mortgage could slide to around 4 per cent. But whether this will help or hinder the Canadian real estate market and the national economy remains to be seen.

Whether you're a homeowner, prospective buyer, or industry enthusiast, connect with me to discuss more about the latest developments shaping the Canadian real estate landscape.

Ready to make a move? Despite low inventory and high mortgage rates, families across Canada are still finding their dream homes.

What's the top reason for moving? Watch and find out! Now's the time to prepare for your next chapter. Reach out – I'm here for you every step of the way.

Dan Petersen⁠
Re/Max Action Realty LTD.⁠
(250) 262-7496⁠
dan@remaxaction.ca

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Home Buyer’s Glossary: Real Estate Terms You Should Know

Amortization
The length of time allotted to paying off a loan – in home-buying terms, the mortgage. Most maximum amortization periods in Canada are 25 years.

Assessed Value
The dollar value assigned to a property by a public tax assessor for taxation. This valuation forms the basis for determining property taxes owed by the owner.

Balanced Market
In a balanced market, there is an equal balance of buyers and sellers, which means sellers often accept reasonable offers, homes sell within a good amount of time, and prices remain stable.

Bridge Financing
A short-term loan designed to “bridge” the gap for homebuyers who have purchased their new home before selling their existing home. This type of financing is common in a seller’s market, allowing homebuyers to purchase without having to sell first.

Buyer’s Agent
The buyer’s agent represents the homebuyers and their interests in the transaction. On the other side of the transaction, the listing agent represents the seller and their interests.

Buyer’s Market
In a buyer’s market, there are more homes on the market than there are buyers, giving the limited number of buyers more choice and greater negotiating power. Homes may stay on the market longer, and prices can be stable or dropping.

Closing
This is the last step of the real estate transaction, once all the offer conditions outlined in the Agreement of Purchase and Sale have been met and ownership of the property is transferred to the buyer. Once the closing period has passed, the keys are exchanged on the closing date outlined in the offer.

Closing Costs
The costs associated with “closing” the purchase deal. These costs can include legal and administrative fees related to the home purchase. Closing costs are additional to the purchase price of the home.

Condominium Ownership
A form of ownership whereby you own your unit and are interested in common elements such as the lobby, elevators, halls, parking garage and building exterior. The condominium association is responsible for building and common elements maintenance and collects a monthly condo fee from each owner based on their proportionate share of the building. Condos often have guidelines regarding noise, use of common areas and allowable renovations within the units.

Contingency
A condition or clause in a real estate contract that specifies certain events must occur or certain conditions must be met before the contract is legally binding.

Curb Appeal
The visual attractiveness of a property when viewed from the street or sidewalk. It’s often the first impression potential buyers have of a home and can significantly impact their perception of its value.

Debt-to-Income Ratio (DTI)
A financial metric used by lenders to evaluate a borrower’s ability to manage monthly payments and repay borrowed money. It is calculated by dividing an individual’s total monthly debt payments by their gross monthly income, often expressed as a percentage. A lower DTI suggests that the borrower has a good balance between debt and income, making them a less risky loan candidate.

Deposit
An up-front payment is made by the buyer to the seller at the time the offer is accepted. The deposit shows the seller that the buyer is serious about the purchase. This amount will be held in trust by the agent or lawyer until the deal closes, at which point it is applied to the purchase price.

Down Payment
The down payment is the amount of money paid upfront for a home to secure a mortgage. The minimum down payment in Canada is five percent of the home’s total purchase price. Down payments of less than 20 percent of a home’s purchase price require mortgage loan insurance. The mortgage loan amount is the selling price minus the deposit and down payment.

Dual Agency
Dual agency is when one real estate agent (or real estate brokerage) represents both the homebuyer and the seller in a real estate transaction. There are limitations and requirements around dual agency, which differ by province.

Equity
The difference between a home’s market value and the amount owing on the mortgage. This is the portion of the house that has been paid for and is officially “owned.”

Fixed-Rate Mortgage
A fixed-rate mortgage guarantees your interest rate for a pre-determined amount of time, typically five years. When the term expires, you can stay with the same lender or switch to a different one.

Freehold Ownership
A form of ownership whereby you own the property and assume responsibility for everything inside and outside the home.

Foreclosure
The legal process through which a lender takes control of a property due to the owner’s failure to make mortgage payments. Initiated after a series of missed payments, foreclosure ultimately results in the sale of the property, usually at a public auction, to recoup the lender’s losses.

Gross Debt Service
The percentage of your total monthly income that goes toward housing costs. Canada Mortgage and Housing Corp. recommends your GDS remains at or below 39%. Check out CMHC’s Gross Debt Service calculator.

High-Ratio Mortgage
A high-ratio mortgage is a mortgage where the borrower has less than 20% of the home’s purchase price to make as the down payment. A high-ratio mortgage with a down payment between 5% and 19% of the purchase price requires mortgage loan insurance. In Canada, 5 percent is the minimum amount required for the down payment.

Home Appraisal
A qualified professional provides a market value assessment of a home based on several factors such as property size, location, age of the house, etc. This is used to satisfy mortgage requirements, giving mortgage financing companies confirmation of the mortgaged property’s value.

Home Buyers’ Amount
This is a $5,000 non-refundable federal income tax credit on a qualifying home, providing up to $750 in tax relief to assist first-time buyers with purchase-related costs.

Home Buyers’ Plan
A federal program that allows first-time homebuyers to withdraw up to $35,000 interest-free from their Registered Retirement Savings Plan (RRSP) to help purchase or build a qualifying home. The borrowed amount must be repaid within 15 years to avoid paying a penalty.

Home Inspection
The home inspection is performed to identify any existing or potential underlying problems in a home. This protects the buyer from risk and gives the buyer leverage when negotiating a reduced selling price.

Home Warranty
A warranty that protects the homeowners against future problems with the home for a determined period of time. New home builders are required to offer warranty protection to homebuyers, such as Tarion in Ontario. Home warranty requirements and providers differ by province. Home warranty programs also exist for resale homes.

Land Survey
A land survey will identify the property lines. This is not required to purchase a home, but it is recommended and may be required by the mortgage lender to clarify where the owner has jurisdiction over the property. This is important if issues arise between neighbours or the municipality, should the owner wish to make changes in the future, such as installing a pool, fence or other renovations involving property lines.

Land Transfer Tax

This is the tax payable by the buyer to the province in which the transaction occurred upon transferring land. The amount varies depending on the municipality, land size, and other factors. Most provinces have Land Transfer Tax, though it may have a slightly different name (such as property purchases tax). If you are a first-time homebuyer, you may be eligible to receive a rebate, typically processed at the same time as the land registration, to offset the costs.

Low-Ball Offer
An offer on a home that is significantly below its market value or the asking price set by the seller. In a buyer’s market where supply exceeds demand, you might have more leeway to make a lower offer. When demand exceeds supply in a seller’s market, making a low-ball offer is generally not advisable as sellers have the upper hand.

Multiple Listing Service (MLS)
A database where real estate agents list properties available for sale or rent. It is a centralized platform allowing agents to share comprehensive information about listings, including photos, features, and prices. The MLS is often considered the most accurate and up-to-date source for real estate listings, and it provides the data for many consumer-facing real estate websites.

Mortgage Loan Insurance
If your down payment is less than 20 percent of the home’s purchase price, mortgage loan insurance is required. It protects the lender in case of payment default. Premiums are calculated as a percentage of the down payment, changing at the 5%, 10% and 15% thresholds.

Mortgage Pre-approval
A mortgage pre-approval helps buyers understand how much they can borrow before going through the mortgage application process. It allows you to make an immediate offer when you find a home since you know how much you’ll be approved for that lender and locks in the current interest rate for a period of time, insulating you against near-term rate increases.

Offer
An offer is a legal agreement to purchase a home. An offer can be conditional on several factors, the most common being financing and a home inspection. If the conditions are not met, the buyer can cancel their offer.

Porting
Transferring your mortgage (and the existing interest rate and terms) from one property to another.

Refinancing
Replacing an existing loan with a new one, typically to secure more favourable terms such as a lower interest rate. Homeowners often refinance their mortgage to reduce monthly payments, shorten the loan term, or access equity for home improvements or debt consolidation.

Seller’s Market
In a seller’s market, there are more buyers than there are homes for sale. With fewer homes on the market and more buyers, homes sell quickly in a seller’s market. Prices of homes are likely to increase, and there are more likely to be multiple offers on a home. Multiple offers give the seller negotiating power; conditional offers may be rejected.

Title Insurance
Title insurance is not mandatory in Canada, but it is highly recommended to protect both the buyer and the mortgage lender against losses related to the property title or ownership, such as unknown title defects, existing liens against the property’s title, encroachment issues, title fraud, errors in surveys and public records, and title-related issues that could prevent you from selling, leasing or obtaining a mortgage. Your lawyer can advise you on this.

Underwriting
The process by which financial institutions like banks and insurers assess the risk associated with a loan, insurance policy, or investment. Underwriters evaluate a borrower’s creditworthiness, the property’s value, and other factors to determine loan eligibility and terms. This risk determines whether the loan should be approved, and if so, at what interest rate and down payment requirements.

Variable Rate Mortgage
A variable rate mortgage fluctuates with the prime rate. Your monthly payments remain the same, but the proportion of your payment going toward principal versus interest can change.

Virtual Deals
The home-buying process completed using technology in place of face-to-face contact. Some common technology tools include 360 home tours and video showings, video conference calls, e-documents, e-signatures, and e-transfers.

Mastering real estate terminology and understanding the nuances of real estate terminology in Canada are critical steps for anyone buying, selling, or investing in property. Whether you’re navigating mortgage rates set by the Bank of Canada or simply trying to interpret the language of a property listing, a solid grasp of the terms used can empower you to make smarter decisions and provide you with the tools you need to navigate the Canadian real estate landscape with confidence.

Source

The Canadian real estate market is facing new realities. The Bank of Canada’s (BoC) rising interest rates have made purchasing a residential property more expensive. Higher immigration levels will likely exacerbate the supply-demand imbalance. Rising inflation, higher borrowing costs, and growing labour shortages have made housing construction activity a bit more subdued. As a result of these new market realities, many households today are searching for different types of housing, particularly value-added properties and communities.

“Today’s purchasers are focusing on value-added properties and communities, given new market realities,” said Elton Ash, the executive vice president of RE/MAX Canada.

“Listings that offer a short or long-term benefit – be it a basement apartment that allows homeowners to offset their mortgage costs now or homes that hold long-term potential in a future renovation or sale to a builder—are most sought-after. Location, while still an important aspect, has been replaced by value and necessity. A growing number of buyers are willing to travel further afield to get the best bang for their buck.”

Considering how high rents have become in the last couple of years, even a modest discount on a basement apartment’s rent can support homeowners’ mortgage payments.

A Look at the Numbers

The latest shift in consumer demand helps explain why detached home sales climbed up to nearly 45 per cent in the first half of 2023 in the Greater Toronto Area (GTA) housing market and close to 30 per cent in the Greater Vancouver Area (GVA) real estate market, according to new data compiled by RE/MAX.

Whether they bought at the beginning of the coronavirus pandemic when the central bank slashed rates to nearly zero, or families who took advantage of the modest correction during the BoC’s tightening cycle at the start of spring 2022, homebuyers will enjoy the long-term benefit of higher home prices because of the additional value found inside these residential properties.

To further support this supposition, the York Region housing market enjoyed a significant boost in detached home sales in the second quarter, skyrocketing 104 per cent from the previous quarter. As demand continues to increase and supplies fail to keep up, home valuations will likely maintain their general upward trajectory.

But the state of communities is essential, too. Whether it is amenities or the neighbourhood’s fabric, everything outside of a residential property can support prices. For homebuyers, it is a balancing act: the arts and culture of a major urban centre or the large shopping malls and large chain restaurants in these smaller communities.

And then there is the issue of taxes, especially the municipal land transfer tax.

While detached homes situated in areas outside Toronto enjoy slightly lower prices, they are not subjected to the municipal land transfer tax, something that provides enormous savings for homebuyers.

Remember, a recent Leger survey found that more than one-quarter of Canadians (28 per cent) say that the land transfer tax has affected their decision to dip or not to dip their toes in the Canadian real estate market.

Meanwhile, shifting back to the major urban centre, a handful of neighbourhoods in Toronto that possess long-term potential are bucking the national trend of sliding detached home sales.

Bathurst Manor-Clanton Park is considered the most affordable and undervalued area of North America’s fourth-largest city. Detached housing values are a little more than $1.7 million, representing the lowest average price point in the downtown core, which explains the robust homebuying activity in the first six months of 2023 compared to the same time a year ago.

H2 Investors Versus First-Time Homebuyers

There is little doubt that value-added properties are exceptional investments. The challenge, however, is that there is fierce competition between investors and first-time homebuyers.

According to Statistics Canada, housing markets that possess the largest percentage of investor-owned housing are Toronto (22 per cent), Georgina (18 per cent), East Gwillimbury (15 per cent), Richmond Hill (15 per cent), and Mississauga (14 per cent).

So, this creates a barrier to entry for households acquiring a detached home in either Toronto Central or municipalities outside Canada’s largest city.

“In Ontario, businesses owned 74,485 condominium apartments for investment purposes,” Statistics Canada stated in its report. “Most condominium apartments used as an investment in both Ontario and Manitoba were owned by in-province investors.”

Whatever the case may be, it is clear that shrinking inventories and robust demand will add to Canadian real estate market prices, be it in British Columbia or Ontario. Don’t believe it? Not even the Bank of Canada raising interest rates put a major dent into home prices this past year.

Source

During the pandemic-era housing boom, many homebuyers purchased residential properties at rock-bottom mortgage rates. In response to the national economy’s pressures, the Bank of Canada (BoC) slashed interest rates to near zero, allowing prospective homeowners to obtain greater purchasing power and acquire a detached house, townhome, or condominium suite that might have exceeded their initial budgetary limits.

Now that rates are at their highest levels in 16 years and the average five-year fixed mortgage rate is close to six percent when these homeowners renew their mortgages, they will need to be prepared for higher monthly payments. It might be a couple of hundred dollars, or it might be a couple of thousand dollars. It all depends on the size of the mortgage and the rate.

Before diving into the steps of renewing the mortgage, it is essential to become acquainted with the basics of mortgage renewals.

Mortgage Renewal: A Primer

So, what do you need to know about a mortgage renewal?

The term of their mortgage expires between one and five years, and you need to renew your mortgage to continue borrowing from the lender. When a mortgage term ends, you can modify the terms of the original mortgage, including changing the length of the term, from a three-year term to a six-year term, for example. Or you may adjust the amortization period or payment frequency.

What You Need to Know About Requalifying

Now, what about requalifying for a mortgage?

Borrowers need to requalify if they switch mortgage lenders. At the same time, considering how high interest rates are today, this would be pretty challenging to requalify for some. The process can be a lot easier if borrowers renew with the current mortgage lender and refrain from negotiating better terms and conditions. However, once mortgage holders attempt to shop around for a different lender, they must requalify. This could leave them in a difficult situation: it would be tougher to renew, and subsequently, homeowners might be left without a lender, forcing them to sell their home. Of course, the other option is to meet with a private lender and pay significantly higher interest rates.

H2 Steps to Mortgage Renewal

Mortgage renewal is a crucial decision that should be carefully considered. You must view current market conditions, evaluate your financial goals, and consult with mortgage professionals to ensure the renewed mortgage aligns with your goals. In addition, the process will involve renegotiating the terms and conditions of an existing mortgage loan, which affirms that a decision must be well-planned.

Here are six steps to follow when renewing a mortgage:

#1 Start the Process Before the Current Mortgage Expires

Beginning the renewal process a few months before your current mortgage term expires is vital. This will give you time to study the market, compare offers from different lenders, and negotiate the best terms. The renewal process can be initiated through your lender or mortgage broker.

#2 Clearly Understand the Terms of Your Current Mortgage

Mortgage agreements can be complex, and you should read the fine print before you start the renewal process. Therefore, you must carefully assess the current mortgage agreement, including the interest rate, remaining balance, repayment terms, and, most importantly, any applicable fees or penalties you may have to pay if you terminate the mortgage early.

This step lets you identify the changes or improvements you want in the renewed mortgage.

#3 Check the Market and Get Competitive Rates

Renewing your mortgage allows you to explore other lending options. Your goal should be to secure the most favourable terms. For this, you will need a clear idea about current interest rates, different mortgage products, and terms offered by other lenders. Many borrowers are not well-versed in these things, so consulting with a mortgage broker can simplify this process.

#4 Always Negotiate the Terms

When you have collected sufficient information about competitive rates and the different types of mortgages, you should first negotiate with your existing lender unless your goal is to find a new one altogether.

If your existing lender is not offering you the best terms, you can turn to potential new lenders and consider two other components:

• Evaluate each offer according to the improvements you seek in the new mortgage agreement.
• Ensure you receive better terms in the renewed deal regarding the interest rate, repayment schedule, amortization period, and prepayment options.

#5 Ensure All Documentation is Complete

The process of getting a mortgage (or renewing one) is intricate. One area that requires a bit more due diligence is documentation, as lenders will request a lot of paperwork:

• Proof of income
• Employment verification
• Bank statements
• Other documents that can help lenders determine your financial stability.

Indeed, this is a critical step, so ensuring all documents are accurate and provided to the lenders without delay is imperative.

#6 Review the New Agreement Carefully

Lastly, the final step during your renewal process is to review the terms and conditions of the new mortgage agreement. As a result, be sure to check the interest rate and payment schedule and ensure they align with your goals. If you need help understanding something, seek clarification from an industry professional. Ultimately, you should only sign the mortgage renewal agreement if you are delighted with the terms or have no better option.

Sources
CMHC

The Canadian housing market has seen record prices over the last two years. With record-low inventories and increasing demand, prices soared from coast-to-coast. It is the perfect recipe to create a seller’s market, meaning that competition for homes is fierce. RE/MAX brokers reported multiple-offer scenarios in key Canadian housing markets such as Toronto, Ottawa, and Vancouver. This leads many to question what prompts multiple offers and how to win a bidding war.

How a Bidding War Works

In a seller’s market, there are more buyers than homes available for sale. The combination of limited inventory and high demand often puts upward pressure on prices, creating the ideal conditions for a bidding war. Homes typically sell quickly in a seller’s market, and multiple offers on a listing are more likely, giving the seller the upper hand.

When market conditions favour sellers, demand is usually up, and inventory is down, which has been the case throughout the pandemic. With few listings on the market, the seller and listing agent may choose to set an offer deadline by which interested buyers must submit their offers. In a bidding war, there are multiple offers and pressure for potential buyers to compete to raise their bids, pushing the sale price well above asking.

A bidding war typically follows these steps:

• Buyers interested in the property submit their offers to the seller or real estate agent. The offer typically includes the proposed purchase price, conditions or contingencies, and the desired closing timeline.
• The seller reviews all received offers and assesses their attractiveness based on the purchase price, closing timeline, contingencies, financing details, and buyer qualifications.
• The seller may negotiate and respond to one or more buyers by issuing counteroffers. Counteroffers typically involve adjustments to the original offer’s purchase price, terms, or conditions.
• A bidding war can emerge if multiple buyers are still interested and engaged. Buyers may be notified that they are in a competitive situation and can revise and improve their offers.
• Buyers raise their initial offers, often exceeding the original asking price, to outbid other potential buyers and demonstrate their commitment to securing the property.
• The seller evaluates the revised offers and determines which is most favourable based on the purchase price, conditions, financing, and the buyer’s ability to close the deal.
• The seller accepts the winning offer, and the buyer proceeds to fulfill any remaining conditions or contingencies specified in the offer. Once all requirements are met, the sale is finalized, and the closing process begins.

 
In Canada, policymakers have introduced various measures to address these issues. For instance, cooling measures have been implemented to curb excessive speculation and prevent housing bubbles. These measures include foreign buyer taxes, restrictions on foreign investments, and stricter mortgage qualification rules. The objective is to ensure that the housing market remains accessible to Canadian residents and that affordability is not compromised.

The Importance of a Real Estate Agent in a Seller’s Market

Sellers can only hope to receive multiple offers on their listings. However, from the buyer’s perspective, it can be a frustrating and emotional experience. When you look at the bigger picture of a home purchase, “winning” is relative to the buyer’s goals. If the only objective is to buy a specific home, then offering the highest possible purchase price with no offer conditions is the way to go. It is the way to get the house you want.

However, most homebuyers have other goals, such as buying within a specific price point and a defined timeline for closing the deal and moving in. Then there’s the home itself. Does the buyer intend to fix and flip it? Demolish and build? Or are they seeking a move-in-ready home? Whatever that goal is, buyers should communicate it to their realtor, who can help strategize how to reach it. While you might need to make some concessions, your realtor will do what is necessary to realize as many of your goals as possible.

The real estate agent’s job is to approach the transaction objectively. This includes the process of real estate bidding and negotiating. They can bring logic to this emotional process and potentially help you avoid a massive financial risk. A professional, experienced real estate agent who knows the local market can help you keep your eyes on the prize – a home that suits you, your budget, and your long-term goals.

How to Win a Bidding War

Here are some strategies to help you make an intelligent bid and a wise purchase if all goes in your favour:

Know Your Budget – Knowing how much you can spend on a home is critical for a homebuyer. Getting a mortgage pre-approval can provide valuable insight and guarantees your mortgage interest rate for up to 120 days, which is essential as rates climb upward. When you’re ready to make an offer, despite your eagerness to win the war, so to speak, do your due diligence and consult with your lender before making a firm offer.

Consider the Worth of the House – This is especially important as housing prices soar, even in smaller communities. Your real estate agent will pull recent sales stats, giving you valuable insight into the selling price of comparable homes in the same neighbourhood and under the same market conditions. This can help you determine an offer you’re comfortable with and whether competing against other bids makes sense.

Reduce Your Offer Conditions – In a seller’s market, having fewer conditions on your offer can work in your favour. Flexibility on your desired closing date or inclusions could tip the scales in your favour. A clean offer is more likely to win in a seller’s market, especially in a bidding war. With that said, we highly recommend making the offer conditional on a satisfactory home inspection. Remember that even if you discover issues with the home in a seller’s market, you may still not have much negotiating power. However, having this information will help you decide if the house is worth what you’re expected to pay.

Consider the Location – Beyond the home itself, remember that location is a huge factor in determining a home’s value. Premium neighbourhoods come at higher prices, thanks to proximity to amenities, green space, transit routes, shopping, services, and other factors. Whatever draws people into the area is likely a factor driving up the selling price.

How to Avoid a Bidding War

Short-Term Strategy – One trick to winning a bidding war is to avoid it altogether. Make an offer before the home hits the MLS system or gains buyer attention through an open house. Your agent will best advise you on how to proceed, so prepare to drop everything to tour a new listing and make your offer before someone else does! (Note: Mortgage pre-approval in this scenario is critical.)

Long-Term Planning – The spring and summer real estate markets see the most activity under normal conditions, with buyers out in droves and bidding wars bubbling at the surface. If you’re not in a hurry to buy, minimize your competition and possibly even price by shopping in the “off” season. Winter sees a drop in inventory and demand, reducing your chance of being outbid.

Do Your Homework – You’ve determined how much you can afford, right? And you know what the home is worth based on the comparables your real estate agent pulled for you. You also know what the home is worth based on your lifestyle, budget, and future employment prospects. Make a bid that’s reflective of all these considerations. Before jumping on the bidding bandwagon, be confident you’re getting a good deal.

When asking how you win a bidding war, remember that the spoils don’t always go to the highest bidder. Know when to walk away. Even in a seller’s market, the perfect home is out there, waiting for you to find it.

Source

If you are interested in purchasing a residential property in 2023, the competition will be fierce as housing supply remains tight and demand begins to be renewed. Mortgage rates have likely peaked, the consumer remains in decent shape, the Canadian government’s immigration program anticipates seeing hundreds of thousands of newcomers in the next couple of years, and the national economy is holding steady.

While housing affordability is not at the forefront of the federal government as it was in the last election campaign, many local governments are taking action to ensure that more Canadians can achieve the dream of homeownership. But will this be enough to increase housing opportunities and ownership rates? Many industry observers argue that federal policy proposals, such as home renovation tax credits and co-housing CMHC-backed mortgages, might not be enough to curb sky-high prices. Instead, policymakers need to facilitate more supply initiatives, like streamlining new developments and speeding up the application process.

Indeed, despite the housing correction over the last 18 months, prices are still above their pre-pandemic levels, be it a detached residential property in Atlantic Canada or a condominium in downtown Toronto. This has left many Canadian households to continue renting, which has also become an exorbitant expense in plenty of markets.

So, are these trends weighing on homeownership rates across the country?

Home Ownership Rates Drop Across Canadian Real Estate Market

Since the beginning of the century, the homeownership rate in the Canadian real estate market has steadily risen, climbing from 63.9 per cent in 2000 to an all-time high of 68.55 per cent in 2019. However, according to Statistics Canada, the national homeownership rate slipped to a four-year low of 66.5 per cent in 2022. In all provinces, homeownership rates have been on the decline.

Here is a breakdown of provincial homeownership levels:

• British Columbia: -3.2 per cent to 66.8 per cent
• Alberta: -2.7 per cent to 70.9 per cent
• Saskatchewan: -1.9 per cent to 70.7 per cent
• Manitoba: -2.6 per cent to 67.4 per cent
• Ontario: -3.1 per cent to 68.4 per cent
• New Brunswick: -2.7 per cent to 73 per cent
• Nova Scotia: -4 per cent to 66.8 per cent
• Prince Edward Island: -4.6 per cent to 68.8 per cent
• Newfoundland and Labrador: -1.8 per cent to 75.7 per cent

 
Put simply, the homeownership rate is higher at the provincial level than nationally. However, the two most populous and expensive Canadian real estate markets – Ontario and British Columbia – are closer to what it is nationwide.

In addition, Canada ranked 23rd among Organisation for Economic Co-operation and Development (OECD) countries. This was also below the OECD’s average of 71.5 per cent.

Overall, everything that has transpired over the past year, from higher interest rates to slowing economic conditions, has discouraged young Canadians about owning a residential property.

Survey: Young Canadians Discouraged About Homeownership

According to the Bank of Montreal’s recent Real Financial Progress Index, 68 per cent of Canadians feel purchasing a home is out of reach. Seventy-one per cent of Generation Z Canadians (18 to 24) are most likely to share this view. This is followed by 69 per cent of younger millennials (25 to 34) and 65 per cent of older millennials (35 to 44).

The June 2023 survey from the financial institution revealed that 67 per cent of Generation Z Canadians plan to defer their home-buying efforts, while 73 per cent of younger millennials postpone their home-buying plans.

“While the challenging market and economic conditions may pose hurdles and uncertainty, we encourage Canadians to work with a professional advisor or planner to explore the many paths to homeownership,” said Gayle Ramsay, the head of everyday Banking, segment and Customer Growth at BMO, in a statement.

Finally, 71 per cent of Canadians consider housing costs the third largest source of financial anxiety, following unknown expenses and concerns about their personal finances.

Another Stark Revelation: Falling Housing Investment

Housing investment is falling across the country.

Statistics Canada recently reported that investment in building construction slumped 1.3 per cent in March to $20.3 billion. Within this category, residential sector investment construction tumbled 2.1 per cent to $14.6 billion, while non-residential sector spending rose 0.9 per cent to $5.7 billion.

The statistics agency discovered that investment in single-family homes dropped 1.8 per cent to $7.9 billion, with seven provinces recording declines. Moreover, multi-unit construction slipped 2.4 per cent to $6.7 billion, led by Ontario (-4.7 per cent).

This trend is seen in new housing construction activity data Canada Mortgage and Housing Corporation (CMHC) data show that housing starts declined 23 per cent month-over-month in May, totalling 202,494 units. Despite an immense jump in April, it was down considerably in March at 213,800 units.

Rishi Sondhi, an economist at TD Bank, says this has been expected due to declines in home sales feeding “into falling construction activity.”

“This is also consistent with permit issuance, which has dropped to 2019 levels, before the pandemic-induced runup in demand and construction,” Sondhi wrote in a research note.

“That said, starts are volatile and not every data point will move in a straight line downwards. Even with today’s decline, starts are tracking 4% higher than their first-quarter average, thanks to an April pop. This, alongside what will likely be a super-sized gain in home sales should generate a positive second-quarter growth print for residential investment, supporting the overall economy.”

Heading Into 2024 – and Beyond!

The Canadian real estate market has many storylines to follow, from high borrowing costs to tight inventories. The coming year should be an exciting time in Canada, with many components that could weigh on or support the direction of the overall housing activity, be it interest rates or local reforms. Whether prices will rebound in the second half of 2023 and heading into 2024 remains to be seen.

Source

Cashback mortgages are a type of mortgage that has gained popularity in Canada over the past few years. With a cashback mortgage, borrowers receive a lump sum cash payment from the lender at closing. This cash payment can be used for various purposes, such as covering closing costs or making home improvements.

How a Cashback Mortgage Works

Cashback mortgages are a type of mortgage that has become increasingly popular in Canada in recent years. With a cashback mortgage, the lender provides borrowers with a lump sum cash payment at closing. This payment can be used for various purposes, such as covering closing costs, making home improvements, or paying off high-interest debt.

The amount of cashback a borrower can receive typically ranges from 1% to 7% of the mortgage amount. However, the exact amount can vary depending on the lender and the borrower’s credit score and financial situation. The cashback payment is typically added to the mortgage balance, which means that borrowers will pay interest on the cashback amount over the life of the mortgage.

Advantages of a Cashback Mortgage

Cashback mortgages can provide several benefits for borrowers in Canada:

A cashback mortgage can help with the upfront costs of buying a home or refinancing an existing mortgage. This can be especially beneficial for first-time homebuyers or borrowers who need more cash.

Cashback mortgages can be a way for borrowers to make home improvements or pay off high-interest debt. By using the cashback payment for these purposes, borrowers can save money in the long run and increase the value of their homes.

A cashback mortgage can provide flexibility and financial security. The lump sum can be used for any purpose, meaning borrowers can choose how to use it based on their financial needs and goals.

Drawbacks of a Cashback Mortgage

While cashback mortgages can provide several benefits, they also have several drawbacks that borrowers should consider:

A cashback mortgage often has a higher interest rate than a traditional one. This means that borrowers will pay more interest over the life of the mortgage, which can result in higher overall costs.

They also often come with restrictions on refinancing or prepayment penalties. These restrictions can make it more difficult or expensive for borrowers to change their mortgage in the future.

In a cashback mortgage, the cashback payment is added to the mortgage balance, which means that borrowers will pay interest on the cashback amount over the life of the mortgage. This can result in higher overall costs and a longer mortgage term.

Finally, cashback mortgages may not be a good fit for borrowers focused on paying off their mortgage quickly. By using the cashback payment for other purposes, borrowers may delay paying off their mortgage and incur more interest charges over the long term.

How to Apply for a Cashback Mortgage

Applying for a cashback mortgage in Canada is similar to applying for a traditional mortgage. Here are the steps involved in applying for a cashback mortgage: 

• Determine whether you meet the eligibility requirements. These requirements can vary depending on the lender but may include credit score, income level, and debt-to-income ratio.
• Gather documentation to support your application. This may include income verification, bank statements, and employment history.
• Shop around for lenders to find the best cashback mortgage option for your needs. This may involve researching different lenders online or working with a mortgage broker.
• Apply for the mortgage. This will involve filling out an application and providing the necessary documentation. If you are approved for a cashback mortgage, you will receive pre-approval, which will outline the terms and conditions of the mortgage.
• Close the mortgage by signing the necessary paperwork and paying any fees or charges associated with the mortgage. Then you can begin moving into your new home!

Cashback mortgages are a popular option in Canada that can provide borrowers with a lump sum cash payment at closing. With careful consideration and informed decision-making, cashback mortgages can be valuable for borrowers looking to purchase or refinance a home in Canada. Talk to your financial advisor to see if a cashback mortgage might be a good option for you.

Source

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Before heading into the long weekend I want to say a massive THANK YOU to the most incredible clients in Fort St. John!


The year has had a good start and as we approach the Spring market, I can feel it getting busier. You deserve the best experience and being prepared prior to listing will help keep you ahead of the curve when the Spring market arrives.

What’s in it for you?
- A Client-First Experience
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When you’re ready, call/text (250) 262-7496⁠, or email dan@remaxaction.ca⁠⁠⁠. I love to help!

B.C.’s Cooling-Off Period⁠

Home buyers are now able to back out of a residential purchase within a set period after signing a contract thanks to BC’s new Home Buyer Rescission Period, also known as the “cooling-off period.” This change to real estate law was done so by the government of BC to help ‘cool off’ the market and the speed of decision making. Taking effect on January 1, 2023, it regulates all residential real estate, with few exceptions, regardless of whether a licensed real estate representative is involved in the transaction.⁠

Home Buyer Rescission Period⁠

Home buyers can choose to rescind a contract within 3 business days after the final acceptance of a firm and binding offer. It applies to all contracts, regardless of subjects, and cannot be waived by either the seller, buyer, or their representatives. Home buyers can legally withdraw from the firm and binding offer in exchange for a fee of 0.25% of the purchase price. ⁠ ⁠

If you have any questions about the new regulations, I encourage you to contact me as I would be happy to walk you through the new regulation and its implications for buying and selling.⁠

Dan Petersen⁠
Re/Max Action Realty LTD.⁠
(250) 262-7496⁠
dan@remaxaction.ca⁠

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When you purchase or gain an interest in property that is registered at the Land Title Office, you or your legal professional must file a property transfer tax return and you must pay property transfer tax, unless you qualify for an exemption. In most cases, property transfers are completed by a legal professional.

The property transfer tax is based on the fair market value of the property (land and improvements) on the day it was registered with the Land Title Office, unless you qualify for an exemption or purchase a pre-sold strata unit.

Property transfer tax should not be confused with annual property taxes. Annual property taxes are paid yearly to your municipal or rural tax office for each property you have a registered interest in to fund services in your area.

General Property Transfer Tax

The general property transfer tax applies for all taxable transactions. The general property transfer tax rate is:

1. 1% of the fair market value up to and including $200,000
2. 2% of the fair market value greater than $200,000 and up to and including $2,000,000
3. 3% of the fair market value greater than $2,000,000
4. Further 2% on residential property over $3,000,000

If the property has residential property worth over $3,000,000, a further 2% tax will be applied to the residential property value greater than $3,000,000. If the property is mixed class (such as residential and commercial), you pay the further 2% tax on only the residential portion of the property.

If the property includes land classed as farm only because it is used for an owner’s or farmer’s dwelling, up to 0.5 hectares will be treated as residential property.

Additional Property Transfer Tax

If you’re a foreign national, foreign corporation or taxable trustee, you must also pay the additional property transfer tax on the fair market value of the residential portion of the property if the property is within a specified area of B.C.

Have questions? Contact me to find answers.

Dan Petersen⁠
Re/Max Action Realty LTD.⁠
(250) 262-7496⁠
dan@remaxaction.ca⁠

The Canadian government’s Home Buyers’ Plan (HBP) lets you borrow money from your RRSP if:

1. You're a first-time home buyer; or
2. You’ve lived separately and apart from your spouse or common-law partner for at least 90 days and started living separately and apart anytime in the preceding 4 years as a result of a relationship breakdown (conditions apply).

If you’re looking to buy, build or maintain your primary residence, you can use this money for your down payment, closing costs, or both.

You can withdraw up to $35,000 from your RRSP per calendar year. Spouses or partners may also each withdraw up to $35,000 per calendar year — $70,000 in total. The borrowed funds must be in your RRSP for at least 90 days before being taken out. Withdraw the money no later than 30 days after the closing date.

You can borrow money from your RRSP tax-free if you pay it back to your RRSP starting no later than the second year after the withdrawal date. Pay back the full amount within 15 years, through regular payments. Every year, the government sends you a statement summarizing what you repaid and what's outstanding.

Want to discuss how this impacts your home-buying decision? Contact me with your questions and to find the answers you're looking for.

Dan Petersen⁠
Re/Max Action Realty LTD.⁠
(250) 262-7496⁠
dan@remaxaction.ca⁠

Professionals in my Referral Network bring you peace-of-mind during a busy time. You can trust them to deliver the same high level of customer service that I provide.

Dan Petersen⁠
Re/Max Action Realty LTD.⁠
(250) 262-7496⁠
dan@remaxaction.ca⁠

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