Archive | January, 2013

Appliances

January 30, 2013

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Sellers are required to guarantee that your appliances are in good working order on the day of closing. What happens if the fridge breaks two days later?

Any damage that occurs after the date of closing is the responsibility of the buyer. So, that stove is your repair cost. There are companies that will do specific insurance for appliances to cover any damage occurring around the purchase; if you are concerned about the age or state of the appliances, you should consider investigating the cost of these policies.

Cesia

Cesia is a real estate lawyer at Wall-Armstrong and Green, a boutique law firm in Barrie focusing on real estate and estates. When she’s not online, she can usually be found in her garden.

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How Low Can it Go?

January 28, 2013

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We’re talking about the 10-year fixed mortgage rate.  Last year we saw them dip below the 4% mark (see some previous posts from last year: 10-Year Mortgage Below 4% & Should You Consider a 10-Year Mortgage?) and many Canadians started to make the switch to the previously unpopular 10-year term.  The 10-year mortgage continues to be popular this year, with rates dropping even lower.

Last week, mortgage brokers started seeing rates below 3.8%!  Just a few short years ago, anything below 3.8% for a 5-year term was considered fantastic, but now Canadians can lock in for 10 years at rates below 3.8%!

Usually, the main concern about locking in for 10 years is the penalties.  If you have to get out of that mortgage early for one reason or another, mortgage penalties can be outrageous – especially if you have to break the mortgage in the first 5 years of a 10-year term (though with most mortgages you can easily port it to a new house, so it’s not like you’re locked into that property for 10 years…).  But what most people don’t realize, in Canada, the most your penalty can be beyond the first 5 years of the term is a 3-month interest penalty.  So once you’re out of the first 5 years of a 10-year mortgage, the penalty to break that mortgage is quite low.

The best way I’ve heard it described is this:

Think of it as a slightly higher 5-year rate, and with that slightly higher rate, in 5 years you have the option to renew at the same rate for an additional 5 years. The cost of not exercising that renewal option is only a 3-month interest penalty.

 

A 10-year fixed rate mortgage is not for everyone. But if you’re looking for rate (and payment!) stability, and are likely to stay in your mortgage for at least 5 years, be sure to talk to your favourite mortgage broker about the 10-year term – it could end up saving you tens of thousands of dollars over the next decade.

Tim

Tim is a mortgage agent in Barrie who specializes in helping first-time home buyers. He works with a variety of lenders and can help customize a mortgage with the best rates & options that fit the needs of each customer.

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Good fences make good neighbours

January 23, 2013

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Last week, I blogged about whether you have to disclose a crime that once occurred in your home. Today’s question: do you have to disclose the neighbours?

Generally speaking, as long as you aren’t asked, you don’t have to disclose anything about the neighbourhood. You can’t lie and say that the neighbours have no dogs, but you don’t have to volunteer information about the very noisy one who likes to bark right under your bedroom window. And if you move into a nuisance situation, you likely have very little recourse against the prior owners.

Cesia

Cesia is a real estate lawyer at Wall-Armstrong and Green, a boutique law firm in Barrie focusing on real estate and estates. When she’s not online, she can usually be found in her garden.

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Debt Service Ratios — What are They?

January 21, 2013

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When applying for a mortgage, one of the things lenders look for is whether or not the person/people applying for a mortgage can afford the mortgage payments.  Makes sense, right?  Obviously if they’re going to lend someone money to purchase a house, they want to be sure they can afford the payments each month.

There are two “debt service ratios” lenders look at when evaluating a mortgage application.

First, there is the Gross Debt Service (GDS) Ratio.  This is the percentage of gross income (income before taxes) required to cover monthly payments associated with housing costs.  This includes costs like mortgage payments (including principal and interest), taxes, heating costs and condominium fees.  Many lenders require this percentage to be no more than 32% of the gross monthly income.

So if someone had a mortgage payment of $1200/month, with estimated taxes of $250/month, along with $100/heating (=$1550), the person/people applying for the mortgage would need to earn approximately $58,000/year before taxes to meet most GDS ratio requirements.

The other debt service ratio lenders look at when evaluating a mortgage application is the Total Debt Service (TDS) Ratio.  This is the percentage of gross income needed to cover monthly payments for housing and all other debt and financing obligations.  Many lenders require this percentage to be no more than 40%-44% of the gross monthly income.

Using the numbers from the first example (a mortgage payment of $1200/month, with estimated taxes of $250/month, along with $100/heating), and add to that a car payment ($300) and a student loan ($250), we’d have a total of $2100 in monthly expenses. This means the person/people applying for the mortgage would need approximately $62,500 in gross yearly income to meet a 40% TDS ratio requirement.

Sound a little complicated?  It can be.  And it’s made even more difficult by different lenders having different target ratios, and even different ways of measuring debt and payments.

Let your favourite mortgage broker give you a hand.  We deal with these lenders (and their crazy, complicated ratios and requirements) on a daily basis, and most of the time our services are 100% free to our clients.  If you’re getting ready to purchase your first home, looking to refinance the one you’re in, or simply looking to negotiate a better rate when your current mortgage comes up for renewal, contact your favourite mortgage broker – we’d be more than happy to help.

Tim

Tim is a mortgage agent in Barrie who specializes in helping first-time home buyers. He works with a variety of lenders and can help customize a mortgage with the best rates & options that fit the needs of each customer.

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Do you have to disclose what happened in your house?

January 16, 2013

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In 1996, in a home in Bowmanville, Ron England stabbed his mother and stepdaughter to death while suffering from paranoid schizophrenia. In the fall of 2011, Eric and Sade-Lea Tekoniemi purchased the property. Once they discovered the events that had occurred years earlier, Sade-Lea developed heart palpitations and anxiety attacks, and the couple has now sued the realtor and the prior owners for non-disclosure of the murders. This leads to the question of how much you have to disclose when you sell a house.

In Ontario, we are in a “buyer beware” system. While the buyer can’t deliberately hide something that materially affects the house, such as prior water damage or a broken furnace, a house being the scene of a crime is much more of a grey area. This case may demonstrate whether the law will be expanded to require more disclosure by sellers.

Cesia

Cesia is a real estate lawyer at Wall-Armstrong and Green, a boutique law firm in Barrie focusing on real estate and estates. When she’s not online, she can usually be found in her garden.

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