Saturday, 30 March 2013

Are you Ready to buy a house? Read these home truths first

Are you ready to buy a house? Read these home truths first
By Ora Morison, Special to Financial Post

Homeownership for twentysomethings has been climbing steadily, but young people need to ask themselves some serious questions before taking the plunge.
Many young Canadians associate home ownership with their inevitable coming of age, but first-time buyers flocking to the housing market should be armed with knowledge.
As homeownership rates for those in their twenties have been steadily climbing over recent decades in all but the lowest category of income earners, many of these young people are entering the market without knowing much about buying their first home.
“I’ve been saving up for the down payment on the house probably since I was 21,” said Josh McMaster, a 28-year-old who works in accounting in Brantford, Ont.
He hopes to buy his first home within the next year and is looking for a place in the $215,000-$250,000 range. But despite diligently saving hefty portions of his paycheque over the years, Mr. McMaster said he hasn’t done much research beyond scanning local listings online and in the newspaper.
Combined with the fact that buying a home is such a huge financial commitment, inexperienced young home buyers need to be very careful before signing on the dotted line, said Gail Bebee, a personal finance author who is currently teaching a course on home buying at the University of Toronto.
It’s easy for young people to forget about additional costs of home ownership — things they never had to worry about while renting, Ms. Bebee said. These include ongoing maintenance costs, home insurance, and building up an emergency fund earmarked for surprise special assessments if they purchase a condo.
Young people are often attracted to condos because of their size and proximity to downtown, but condos are among the most complicated properties to buy, Ms. Bebee said. In part, that’s because you’ve got to factor in costs such as condo fees, which condo unit owners can’t control.
Even if young people factor in home insurance, they might not consider that they’ll be paying additional insurance for their mortgage if they can’t afford a minimum 20% down payment.
“[Mortgage loan insurance] can add 4.75% to the value of the mortgage,” Ms. Bebee said. “Which is huge.”
Renting until you can afford a sizeable down payment can avoid that cost, but there is huge appeal — financial and otherwise — to home ownership.
“Once you rent, the money is gone forever,” Mr. McMaster said. “It doesn’t contribute to anything in the future. To have a house in the end, I think that’s great.”
And at his age, the time is right to buy, Mr. McMaster said. “I want to plant roots and start building a family,” he said.
Despite indications that many young people may be delaying settling down until later in their life, data indicate the trend toward home ownership among young Canadians is building. Statistics Canada research released in January shows nearly three-quarters of top-earning twentysomethings owned a home in 2006, the latest year for which there are data, up from 60% in 1981.
But if you’re not ready to settle down, locking yourself into homeownership might not be a smart decision, Ms. Bebee said.
“It depends on your individual needs. Some people are itinerant. They’re planning to move to another city or work overseas for a year,” she said.
Buying and selling within a short period of time means the transaction costs might exceed any gain you might make on your investment.
“Don’t think you are going to buy and move [within] a few years,” Ms. Bebee said. “You’ll make the lawyers rich.”
Because of all the upfront costs to buying, Ms. Bebee recommends planning for at least a five-year timeline in your first home. That means thinking about where you’ll be in your personal life that far down the road.
“You might be married, you could even have a kid,” she said. “You’ve got to forecast.”

Source: Financial Post
Kevin & Faye Kitzman
Sales Representatives
Remax Real Estate Centre
Direct : 519-577-0603
Faye Kitzman
Mortgage Agent
Mortgage Intelligence

Thursday, 28 March 2013

First-time buyers poised to stand tall even as Canadian home purchase intentions fall: RBC

First-time buyers poised to stand tall even as Canadian home purchase intentions fall: RBC
Cautious mood, less urgency among Canadian homebuyers, but majority still consider homeownership a good investment

TORONTO, March 26, 2013 /CNW/ - Four-in-10 Canadians (40 per cent) planning to enter the housing market over the next two years will be first-time homebuyers, according to the 20th Annual RBC Home Ownership Poll.
The majority of Canadians are taking a wait-and-see approach to home purchases, with 15 per cent likely to buy in the next two years, down from 27 per cent last year. The 12-percentage-point drop is the biggest year-over-year fall in overall buying intention as tracked by this annual poll.
"The more cautious mood this year is not surprising and is consistent with broader economic and industry forecasts. An unseasonably warm spring, low rates and anticipation of mortgage rule changes may have led many Canadians to move forward their home purchases in the first half of 2012," said Sean Amato-Gauci, senior vice-president, Home Equity Financing, RBC. "Our findings suggest confidence in the housing market is still high and young Canadians are the bright spot as they look to buy their first home and seek the advice to do it right."
A majority of Canadians (84 per cent) believe that a house or condominium is a good investment. Just over half of Canadians think that now is the time to get into the housing market (52 per cent), while fewer Canadians believe house prices will be higher at this time next year (43 per cent, down from 47 per cent in 2012). More Canadians in 2013 feel that the current housing market is in balance (40 per cent, up from 36 per cent last year).
What factors are sidelining buyers?
  • The RBC poll found that three-quarters (75 per cent) of Canadians feel that recent government changes to mortgage rules will impact or delay prospective homebuyers from getting into the market, but this may be more perception than reality. The poll also showed almost six-in-10 recent and prospective homebuyers say that a required minimum 5-per cent down payment (59 per cent) and a shortened mortgage amortization period to 25 years from 30 years (56 per cent) had little to no impact.
  • Nearly half of Canadians (49 per cent) expect mortgage rates will be the same at this time next year.
  • Consistent with consumer trends, almost half (46 per cent) of first-time homebuyers cite affordability as a top reason for not buying (47 per cent in 2012). Meanwhile saving for a down payment (32 per cent, up from 18 per cent a year ago) and job security (28 per cent, up from 20 per cent a year ago) have taken on increased importance this year.
Given mixed sentiment in the Canadian housing market, the majority of Canadian homebuyers seek qualified advice in their home purchases. Three quarters of Canadian homebuyers (76 per cent) turn to their banker for mortgage advice and four-in-10 (40 per cent) say a bank is their primary source of information for advice on financing a home purchase, either by speaking to them directly or using their websites and calculators.
"With all the ambiguity in the market, Canadian homebuyers, especially first time homebuyers, are looking for trusted advice. Speaking with an industry expert, like an RBC mortgage specialist in your area, can alleviate concerns to help guide your home financing decisions and they can also provide great rates," added Amato-Gauci.
Highlights from across Canada:
Atlantic Canadians (91 per cent) and residents in Manitoba and Saskatchewan (89 per cent) are the least likely Canadians to purchase a house in the next two years, while British Columbians are the only region where a majority describe the current market as a buyer's market (where buyers have the advantage because the number of houses available exceeds the number of buyers).
British Columbia: British Columbians are evenly divided on whether it makes sense to buy a house now (51 per cent) or wait until next year (49 per cent). One-in-five British Columbians (20 per cent) say they are likely to purchase a home within the next two years as residents in this province were more likely than any other Canadian region to forecast lower housing prices in the next year (38 per cent, national: 24 per cent).
Alberta: Nearly nine-in-10 Albertans (89 per cent) surveyed say buying a house or condo is a good investment, higher than the national average (84 per cent), even as home buying intentions have dropped from a year ago (22 per cent, compared with 31 per cent). Almost half of Albertans (49 per cent) feel their current housing market is balanced, compared to the national average of 40 per cent.
Prairies: The majority of residents in Manitoba and Saskatchewan (56 per cent) say it makes more sense to wait until next year to buy a home, in contrast to the national average that believes it makes sense to buy a home now given current housing and economic conditions (52 per cent). Still, 88 per cent say buying a house or condo is a good investment.
Ontario: While a majority of Ontarians (86 per cent) do not expect to buy a home in the next two years, almost as many (83 per cent) feel that a home or condo is a good investment. Given current housing prices and economic conditions, more than half of Ontarians (52 per cent) say it makes more sense to buy now, while 48 per cent prefer to wait until next year.
Quebec: While a majority of Quebecers (87 per cent) surveyed do not expect to buy a home in the next two years, they also believe that a home or condo is a good investment (84 per cent).Given current housing prices, Quebecers were almost evenly split between saying it makes more sense to buy a house now (49 per cent) versus waiting until next year (52 per cent).
Atlantic Canada: Given current housing prices and economic conditions, Atlantic Canadians are the most likely in the country to say it makes sense to buy now (64 per cent), rather than wait until next year (36 per cent). Confidence in the investment value of a home remains high in Atlantic Canada (81 per cent), just below the overall Canadian sentiment (84 per cent).
About the 20th Annual RBC Home Ownership Poll
RBC is the largest residential mortgage lender in Canada. As the country's number one source of financial advice on homeownership, RBC conducts consumer surveys as one way to provide insight to Canadians about the marketplace in which they live.
These are some of the findings of an RBC poll conducted by Ipsos Reid between Jan. 31 and Feb. 8, 2013. The online survey is based on a randomly selected representative sample of 3,005 adult Canadians. With a representative sample of this size, the results are considered accurate to within ±3.0 percentage points, 19 times out of 20, of what they would have been had the entire adult Canadian population been polled. The margin of error will be larger within regions and for other sub-groupings of the survey population. These data were statistically weighted to ensure the sample's regional and age/sex composition reflects that of the actual Canadian population according to the 2011 Census data.

Thursday, 21 March 2013

Should I buy or rent now?

Should I buy or rent now?

Rob Carrick Globe and Mail Mar 15

Should I buy or rent?

I love to study real estate trends and to learn as much as I can

about property. I personally own a rental property and currently rent a place. I’m always

looking to expand my knowledge on this field. I might be purchasing another rental

property in the near future. I want to be as informed as possible. Buying a place isn’t like

buying a case of beer. Yet we put in more thought into the case of beer sometimes.

Do you have any questions about buying vs renting a home?

This article is going to

pull together my best posts on the topic to help you make the most informed decision on

how you spend hundreds of thousands of dollars over your lifetime.

Bookmark this page.

Let’s not waste any more time folks!

Where should you live after college?

There are many options for
your living situation after college. Everything will totally

depend on your financial situation and where you can land a job (assuming you look for a

“real job”). Most of us will go where the money is.

The options are fairly simple:

1. If you have no money and insane amounts of debt, you need to beg your parents

to let your sorry self move back in.

2. If you have job prospects, you can choose from a variety of options noted in the

aforementioned article.

What if you want to buy a place? I wrote about
what you need in order to buy a home

after college

. It won’t be easy, but it’s possible for you to get your own place in your

early-20s. The goal at this point should be to figure out what you want to do next. Will

you travel? Will you look for more credentials? Will you take the first job that comes

your way?

What if you’re still at home in your mid-20s?

It’s fine to stay with your parents while you save up or try to figure out the rest of your

life. It’s important to take some time to tackle debt and build some savings.

Eventually, you need to grow up. You should
get out of your parents’ place in your mid-

20s. It’s not cool. There’s so much to do in this world that it’s an absolute shame to stay

with your parents and miss out on what’s out there.

What are you going to tell your dates? My roommates are sleeping?

What are you going to do when you want some peace or to relax? Tell your parents to

leave their own home?

If you’re at home and you’e pushing 30, it’s time for a change. Grab life by the balls and

do something. Don’t wait for the universe to do you any favors.

Should you buy or rent a place when you’re making

good money?

You would figure that I covered everything humanly possible with my 2,000 + word post

buying vs renting. That post went live many years ago. I thought it was going to be the

definitive piece on real estate. I was wrong. I’ve gone into buying a house vs renting on

numerous occasions since.

Once you start making good — and hopefully this happens to everyone reading this,

you’re going to be debating the idea of buying a place. Instead of giving you a yes or no

answer, I wanted to share some tools that will help you make up your own mind.

What tools can help you when deciding to buy or rent?

This is the best time to be alive. There are literally tools for everything. You can figure

anything out for free without even getting out of bed. There are two key tools that should

help you decide if you should be buying or renting.

Credit score.

Why should you care about your credit score in your 20s?

Your credit score affects your pocket.

Important when finding a place to rent because many landlords will ask for this.

Crucial when trying to get a home mortgage.

Most employers ask for your credit score.

Simply put: money! You can save a few bucks on coffee or you can save

INSANE amounts of money by building up your credit score.

Now that you know why your credit score is important, how do you even figure out what

your credit score is? The answer is below.

A cool way to find out your credit score right now is…

Credit Sesame, a tool where you can check your monthly credit score for free.

Why should you sign up with Credit Sesame?

You’ll know where your stand with your

credit score. If you want to apply for a home mortgage or even finance a car in the near

future, you’re going to want to know what your credit is like. You don’t want to be hit

with an unpleasant surprise when you find out your credit score sucks and that dream

home is nothing but a dream.

They email you updates to your credit score

. Whenever your score changes you get

notified via email in case you totally forget about your credit score while having a life

(you better have a life!).

How can you
improve your credit score so that you can find a place to live?

Pay down debt.

Fix errors on your credit report.

Make your payments on time- always!


Fixing your credit score is sort of like dealing with a hangover. You screwed yourself

over. Now you have to get out of this mess. You have nobody to blame but yourself. The

good news is that the damage is by no means permanent.


There’s a calculator that can help you make this decision much easier. Don’t be a fool.

Run the numbers. See what the numbers tell you.

Rent Vs. Buy Calculator

Should I rent or buy? This calculator does the complicated math for you by

comparing the costs of renting vs. buying a house.

You will need to input several numbers so the calculator can accurately compare

all the factors affecting renting versus buying (interest, property taxes, tax

savings, appreciation, opportunity costs, closing costs, selling costs, etc.).

When you finish make sure to print the handy "rent or buy" comparison table so

you have an easy reference sheet.

Finally, if you need help completing any field just click on that data entry box and

instructions will appear in the area to the right so you know how to answer the

questions. And if you like this calculator please make sure to "like" or +1 to help

us out!

Thanks, and good luck with your new home...

Top of Form

Entry Descriptions Entry Fields Explain/Instruct

Monthly rent ($):

Monthly rental insurance ($):

Estimated annual inflation rate (%):

Purchase price of home ($):

Down payment amount ($):

Length of mortgage term (# of years):

Mortgage's annual interest rate (%):

Discount points on home purchase (%):

Origination fee (%):

Other loan costs ($):

Mortgage Insurance (PMI %):

Homeowner's insurance rate (%):

Monthly association dues ($):

Estimated monthly maintenance ($):

Annual property tax ($):

State plus Federal income tax rate (%):

Interest rate you expect to earn on savings (%):

Expected annual home appreciation rate (%):

Number of years you will stay in this house:

Realtor commission rate (%):

Total estimated cost of renting:

Total estimated cost of buying:

Bottom of Form


credit -

What do the numbers tell you? Are you ready to buy a place yet? Should you be renting?

What if you can save a ton of money by renting? Then do it! Keep your money in a

savings account

. Leave it under your pillow. Just because you’ve saved up money it

doesn’t mean that you have to buy a place.

Is there anything wrong with renting?

Hopefully you checked out your credit score and ran the numbers from earlier. I’ve

stressed many times that
renting can easily trump owning a place. Before I even move

forward another step, I need to remind you that paying for a roof over your head is not

throwing money away. Throwing money away is when you have one shot too many on a

Friday night.

What are some of the main benefits to renting over owning a home?

Increased flexibility. Letting your lease expire is a simple process. You ever try

selling a piece of property? I thought about it last year but I wasn’t impressed

with the offers that I received. You can move around when you rent. You can get

up and go. The same isn’t true when you own.

You can rent a nicer place. A rarely thought about fact is the idea that when you

rent, you can get a nicer place that you could usually afford to buy. Just saying.

You don’t worry about anything. Anything that breaks on its own is not your

problem. You don’t have to stress about property taxes or new windows. You just

pay your rent and that’s all.

I’ve done both. I’ve lived in a condo that I own. I also currently rent a place out. Renting

comes with much less stress and hassle. Don’t worry about any social stigmas. Your

broke friends can continue being broke.

Should you buy vs rent on emotion?

Absolutely not.

You use your gut instinct on Friday nights or when meeting someone new. You don’t use

your gut before agreeing to buy something worth hundreds of thousands of dollars. While

it’s totally common to fall in love with that house or to want to move ASAP, you really

should slow this process down. You don’t want to feel buyer’s remorse the second that

you walk into your new place.

Before you leave…

As we part ways for today, I want you to always remember that you don’t have to buy a

home just because interest rates are low or because you’re at that age. Do what’s best for

you. It’s your life. If you want to
travel the world first, then do so. If you want to save up

more money, then keep on saving. If you’re happy with the place that you’re renting, then

stay there.

Kevin & Faye Kitzman

Sales Representatives

Remax Real Estate Centre

Direct : 519-577-0603



Faye Kitzman

Mortgage Agent

Mortgage Intelligence




Wednesday, 20 March 2013

Tips for Paying Off Your Mortgage Faster

Tips For Paying Off Your Mortgage Faster
For most homeowners, paying off their mortgage quickly – so that they own their home free and clear – is a top priority. Paying down additional principal during the first years by a variety of means can shorten the mortgage — and dramatically lower the amount of interest you will end up paying over the life of the financing. Here are a few ways to make this happen:
  • Consider making lump sum prepayments. Most lenders will allow you to do this on the anniversary date of the mortgage.
  • Use your tax refund to make mortgage prepayments. Instead of spending your tax return, invest it in your financial future by putting it toward your mortgage.
  • Consider making bi-weekly or weekly mortgage payments. This strategy can add the equivalent of another monthly payment each year, which can add up over the life of the mortgage.
  • Round up your payments. Even a few extra dollars each month can amount to significant savings over the long term.
  • Increase the amount of your payments when your income rises. The trick here is to keep your lifestyle generally at the same level as before, while concentrating on debt reduction.
  • Ensure that your payments are as large as you can afford. Try tracking where your discretionary income goes each month – you may find room to increase your regular mortgage payment, or make a lump sum prepayment.
  • For some variable rate mortgages, keep your payments the same size when rates go down. This allows you to put the savings associated with a lower rate towards the goal of principal reduction.
Explore your Options with Mortgage Intelligence Online Calculators
I would be happy to discuss your individual mortgage strategy. As a supplement to my consultation with you, there are also a range of helpful calculators on the website which allow homebuyers and homeowners to explore different mortgage scenarios. In particular, the Mortgage Payoff, Bi-Weekly Payment, Mortgage Analyzer and Debt Payment Accelerator calculators can help you understand the financial benefits of paying down your mortgage as quickly as possible. In addition, the home budget calculator can help you to track your spending patterns in order to increase your mortgage payments.


Kevin & Faye Kitzman

Sales Representatives

Remax Real Estate Centre

Direct : 519-577-0603



Faye Kitzman

Mortgage Agent

Mortgage Intelligence




Tuesday, 19 March 2013

Getting the House Ready to Sell

Getting the House Ready to Sell

Disconnect Your Emotions

When conversing with real estate agents, you will often find that when they talk to you about buying real estate, they will refer to your purchase as a "home." Yet if you are selling property, they will often refer to it as a "house." There is a reason for this. Buying real estate is often an emotional decision, but when selling real estate you need to remove emotion from the equation.
You need to think of your house as a marketable commodity. Property. Real estate. Your goal is to get others to see it as their potential home, not yours. If you do not consciously make this decision, you can inadvertently create a situation where it takes longer to sell your property.
The first step in getting your home ready to sell is to "de-personalize" it.

Make Your Home "Anonymous"

If there is a new home sales tract near your home, go visit. It doesn't matter what size the homes are. What you will find are some wonderfully (but sparsely) furnished homes that anyone could live in -- with the emphasis on "anyone." They are anonymous. There may be a baseball glove in the boy's room, but no family photos on the walls.
There may be "personality" - but no person.
The reason you want to make your home "anonymous" is because you want buyers to view it as their potential home. When a potential homebuyer sees your family photos hanging on the wall, it puts your own brand on the home and momentarily shatters their illusions about living in the house themselves.
Put away family photos, sports trophies, collectible items, knick-knacks, and souvenirs. Put them in a box. Rent a storage area for a few months and put the box in the storage unit.
Do not just put the box in the attic, basement, garage or a closet. Part of preparing a house for sale is to remove "clutter," and that is the next step in preparing your house for sale.

Uncluttering the House

This is the hardest thing for most people to do because they are emotionally attached to everything in the house. After years of living in the same home, clutter collects in such a way that may not be evident to the homeowner. However, it does affect the way buyers see the home, even if you do not realize it.
Clutter collects on shelves, counter tops, drawers, closets, garages, attics, and basements. You want as much open clear space as possible, so every extra little thing needs to be cleared away.
Take a step back and pretend you are a buyer. Let a friend help point out areas of clutter, as long as you can accept their views without getting defensive.

Kitchen Clutter

The kitchen is a good place to start removing clutter, because it is an easy place to start.
First, get everything off the counters. Everything. Even the toaster. Put the toaster in a cabinet and take it out when you use it. Find a place where you can store everything in cabinets and drawers. Of course, you may notice that you do not have cabinet space to put everything. Clean them out. The dishes, pots and pans that rarely get used? Put them in a box and put that box in storage.
You see, homebuyers will open all your cabinets and drawers, especially in the kitchen. They want to be sure there is enough room for their "stuff." If your kitchen cabinets, pantries, and drawers look jammed full, it sends a negative message to the buyer and does not promote an image of plentiful storage space. The best way to do that is to have as much "empty space" as possible.
For that reason, if you have a "junk drawer," get rid of the junk. If you have a rarely used crock pot, put it in storage. Do this with every cabinet and drawer. Create open space.
If you have a large amount of foodstuffs crammed into the shelves or pantry, begin using them – especially canned goods. Canned goods are heavy and you don’t want to be lugging them to a new house, anyway – or paying a mover to do so. Let what you have on the shelves determine your menus and use up as much as you can.
Beneath the sink is very critical, too. Make sure the area beneath the sink is as empty as possible, removing all extra cleaning supplies. You should scrub the area down as well, and determine if there are any tell-tale signs of water leaks that may cause a homebuyer to hesitate in buying your home.

Closet Clutter
Closets are great for accumulating clutter, though you may not think of it as clutter. We are talking about extra clothes and shoes – things you rarely wear but cannot bear to be without. Do without these items for a couple of months by putting them in a box, because these items can make your closets look "crammed full." Sometimes there are shoeboxes full of "stuff" or other accumulated personal items, too.
Furniture Clutter
Many people have too much furniture in certain rooms – not too much for your own personal living needs – but too much to give the illusion of space that a homebuyer would like to see. You may want to tour some builders’ models to see how they place furniture in the model homes. Observe how they place furniture in the models so you get some ideas on what to remove and what to leave in your house.
Storage Area Clutter
Basements, garages, attics, and sheds accumulate not only clutter, but junk. These areas should be as empty as possible so that buyers can imagine what they would do with the space. Remove anything that is not essential and take it to the storage area.
Or have a garage sale.

Source* Real Estate


Kevin & Faye Kitzman

Sales Representatives

Remax Real Estate Centre

Direct : 519-577-0603



Faye Kitzman

Mortgage Agent

Mortgage Intelligence




Wednesday, 13 March 2013

Valuable Fraud Prevention Tips for Homebuyers and Homeowners

Valuable Fraud Prevention Tips for Homebuyers and Homeowners

March is Fraud Prevention Month. Canada Mortgage and Housing Corporation (CMHC) has consistently been a leader in the fight against mortgage fraud and offers the following tips to protect yourself against becoming a victim of mortgage fraud.

Misrepresentation of Information

Mortgage fraud occurs when someone deliberately misrepresents information in order to obtain mortgage financing that would not have been granted if the truth had been known. This can include:
  • Misstating one’s position or inflating one’s income or length of service at theirjob;
  • Misstating employment status (ie. salaried/full time versus contract, part time, hourly or commission-based or self-employed);
  • Misrepresenting the amount and/or source of the down payment;
  • Purchasing a rental property and misrepresenting it as owner-occupied;
  • Not disclosing existing mortgage and/or debt obligations;
  • Misrepresenting property details or omitting information in order to Inflate the property value;
  • Adding co-borrowers who will not be residing in the home and do not intend to take responsibility for the mortgage.
Another common form of fraud is when a con artist convinces someone with good credit to act as a “straw buyer.” A straw buyer is someone who agrees to put his or her name on a mortgage application on behalf of another person. In return for their participation, straw buyers may be offered cash or promised high returns when the property is sold. Often, straw buyers are deceived in to believing that they will not be responsible for the mortgage payments.

Consequences of Misrepresentation

Borrowers who misrepresent information and straw buyers who allow a property to be purchased in their name are committing mortgage fraud and will be responsible for any financial shortfall in the event of default. They may also be held criminally responsible for their misrepresentation.

Reporting Fraud

If you suspect that you or someone you know has been the victim of mortgage fraud, please contact your local police department or The Canadian Anti-Fraud Centre.
Toll Free: 1-888-495-8501
Toll Free Fax: 1-888-654-9426
To find out more about mortgage fraud, visit the fraud prevention section of the Canadian Association of Accredited Mortgage Professionals (CAAMP) website at
For over 65 years, Canada Mortgage and Housing Corporation (CMHC) has been Canada’s national housing agency, and a source of objective, reliable housing information.
For story ideas or to access CMHC experts or expertise, contact CMHC Media Relations — National Office at: 613-748-2799 or by e-mail:

Published: March 7, 2013
Kevin & Faye Kitzman
Sales Representatives
Remax Real Estate Centre
Direct : 519-577-0603
Faye Kitzman
Mortgage Agent
Mortgage Intelligence

Tuesday, 12 March 2013

Cash poor.. Can you still afford to buy a home?

Cash poor…Can you still afford to buy a


By | Thu, 7 Mar, 2013 12

All of the recent changes to Canadian mortgage rules make it pretty clear: Regulators

want to dissuade
first-time homebuyers from purchasing a property with nothing down.

Yet, despite changes that did away with 100 percent financing back in 2008, and the

recent barring of cash-back mortgages by the Canada Mortgage and Housing Corp.,

buyers can still manage to take a step up the real estate ladder with little upfront cash.

The question is - does it make financial sense?

Let’s weigh the options….

Why it's best to have a robust down payment

While saving for a sizable down payment can be a huge financial burden, it's an

investment that can save you a considerable amount of cash in the long run. Remember –

the smaller your down payment, the riskier you look to a bank. Low down payment home

mortgages require more leverage, and high leverage borrowers are open to a substantially

higher risk of bankruptcy.

While larger down payments inherently help lenders, they also benefit borrowers in a

variety of ways. This is especially true for buyers who are planning to sell in the early

years of their residential mortgage. With the recommended 20 percent down payment,

you'll generally have enough equity built in to your property to cover closing costs, even

if there has been a 10 percent decline in the market value of the home.

Alternative down payment options

Coming up with tens of thousands of dollars for a down payment isn't always an option,

especially when you're a young, first-time homebuyer. Houses are expensive - no ifs,

ands or buts about it! At a time when the average Canadian home price hovers around

$356,000, the Canadian Association of Accredited Mortgage Professionals has found that

more than one-fifth of all renters have less than $5,000 put away for a down payment.

So what's a cash-poor house hunter to do?

For many, the answer is to seek out an alternative down payment source.

Borrowing from nontraditional sources

When buying a home in Canada, you generally need a minimum down payment of 5

percent of the purchase price of the home. It's worth noting at this point that legislation

prohibits you from borrowing that 5 percent from your mortgage lender
if that lender is a

bank or federal trust company.

However, you're free to borrow your down payment from a number of different credit

sources. Popular choices include a line of credit, personal loan, or even a credit card. Of

course, tossing your down payment onto your VISA isn't the most responsible way to

manage your investment (don’t do it!).

If you're thinking about borrowing your down payment, get ready for some serious

interest charges. More often than not, the interest rate on a borrowed down payment will

be much higher than that on your mortgage, or have a riskier variable rate, at the very


The cash-back option

It's worth noting that any lender who isn't federally regulated (like a credit union, for

example) can still offer cash-back down payment mortgage products. Not surprisingly,

the interest rates on these offers are astronomical. Homebuyers are also required to come

up with the cash for
closing costs, including legal and inspection fees, as well as land

transfer taxes, and other fees.

Be wary: There's speculation that the loophole that enables some institutions to offer this

product will be eliminated in 2013 through new mortgage insurer and/or provincial


The RRSP Home Buyers’ Plan

First-time homebuyers are encouraged to take advantage of the government's Home

Buyers’ Plan (HBP) in order to draw upwards of $25,000 from their RRSPs in order to

fund their down payment. And while this is a great option, it comes with a few red flags.

First, draining your retirement savings in your 20s and 30s means you'll risk losing years

of tax-deferred investment gains. Secondly, any installments that aren't paid back before

the deadline are taxed as income on that year's income tax statement. Statistics show that

as many as one-quarter of HBP participants miss or underpay on an installment.

Going with a gifted down payment

Generous relatives are often willing to help fund a down payment through a financial gift

to a first-time homebuyer. In most cases, however, lenders will only consider gifted down

payments from a parent, grandparent or sibling.

It's important to note that a "gifted" down payment is very different from a personal loan

from a relative. With a gift, there's no expectation to pay the relative back. If you're

borrowing money from a relative in order to make ends meet, this is not a gift. It's an

additional liability that your lender will need to consider as it increases a borrower's debt


Proceed with caution & get advice

When it comes to buying a house with someone else's money, always remember to be

careful. Just because you qualify for a cash-back mortgage or have enough squirreled

away in your RRSP doesn't mean you're ready to shoulder the
responsibilities of a


. Talk with an accredited mortgage broker and your trusted financial advisors

before you make your final financing decisions.

is a free personal finance and education site for women.

Nothing contained herein is intended to provide personalized financial, legal or tax

advice. Before implementing any financial strategy, you should obtain information and

advice from your financial, legal and/or tax advisers who are fully aware of your

individual circumstances.

Kevin & Faye Kitzman

Sales Representatives

Remax Real Estate Centre

Direct : 519-577-0603



Faye Kitzman

Mortgage Agent

Mortgage Intelligence