How to buy and sell a home at the same time

You own a home now, but it’s time to make a change. If you’re moving up or downsizing, you probably have questions about how it all works. That is, the logistics of buying another home while you still own your existing property.

Here are 10 facts you need to know about navigating through the two transactions at once - to make the move as smooth as possible...

Get the facts on your existing home

What is your home worth?
Find out the value of your home by asking a Realtor to provide you with a detailed market evaluation. Alternatively, get a detailed estimate of the value by paying for an appraisal by a licensed appraiser. This will give you an idea of what residual funds you will net from the sale of your existing home which will determine how to structure a mortgage for the new home. Be conservative when working with the down payment amount so you have some wiggle room when negotiating the sale of your current home.

Three questions to ask
After you have determined what new mortgage amount you will require, you will then need to contact your current lender to ask them the following 3 questions...

1) Is the mortgage portable to a new property?

If it is and you are moving up, can the new mortgage rate be “blended” - and what will that new rate be in order to avoid paying a payout penalty?

2) If you were to pay the existing mortgage out in order to get a better rate, what would the penalty be?
Be advised that you are required to qualify for any new mortgage whether you “port” the existing mortgage to a new property or get a brand new one, as you are effectively only “porting” the terms of the mortgage

3) How are you going to sell your current home?
Options available to sell your home include for sale by owner, by a Realtor, or somewhere in between the two. I recommend using the services of a Realtor as I personally would like to leave any showings and negotiations with any potential buyers in the hands of a professional.

Ask a Mortgage Professional, Steven Porter, Mortgage Agent, Mortgage Architects

Financing your next home

Securing a pre-approval
Based on your initial findings about your current residence, I recommend obtaining a pre-approval for your next purchase as this will give you an idea of what kind of requirements you’ll need to meet in order to be approved for your next mortgage.


Quick, easy on-line mortgage pre-approval

What if your existing home hasn't sold by the time you take possession of the new home?
Your new mortgage may contain a condition to confirm your existing place has sold. This could be for either down payment or qualifying purposes, or both. See if a back-up plan is possible in case your existing home does not sell by the time you take possession of your new home. Your mortgage professional can work through a few potential scenarios with you until you’re comfortable with the options you have for all possible outcomes.

Investigate the "Home Sale Guarantee" offered by some professional Realtors

Keeping both homes, with one as a rental property
Perhaps you are looking into the possibility of keeping your current home and turning it into a rental property. Some lenders will allow this as long as you can qualify to carry both properties. Talk to your mortgage professional about the option of including potential rental income to help you qualify. Be aware that lenders tend to calculate the inclusion of rental income differently, so if you don’t qualify with your current lender, check others. If you are leaning to keeping both properties, ensure you explore all options in accessing funds for the down payment on the new home. For example, is a gift from a family member a possibility? Do you have sufficient funds in savings? Can you look at refinancing your current residence to access the equity?

What down payment requirements and proof do you need to provide?
If the down payment is coming from anywhere other than the sale of your existing home, the requirements are pretty straightforward; your lender will look for the paper trail to support the source of the funds being used. If the down payment funds are coming from the sale of a property, you’ll be asked to confirm what your equity position is via a current mortgage statement, as well as a copy of a fully-executed sale agreement for your current residence, along with all condition removals related to that contract.

The qualification process
Qualifying for your next home will be similar to getting approved the first time. Your lender will be looking at the usual application aspects - like income, credit, down payment, and the property you’re financing. If your income or credit profile has changed drastically, such as you becoming self-employed or your credit not being as good as it used to be, be sure to have a conversation with your mortgage broker about how the qualifying process could differ from the first time around.

Consider what you'll need for supporting documents
While many of our mortgage rules have changed, document requirements likely haven’t changed too much since you last qualified. What you’ll be asked to provide will be dependent on your current financial profile. Your mortgage professional, along with a mortgage pre-approval, will give you an idea of what you’ll be asked to provide in terms of supporting documents.

What to do when you need bridge financing
If the possession date for the sale property is after your purchase possession date, and you need those funds for a down payment, there is a solution known as bridge or interim financing. The lender will not only finance your mortgage, they will also give you a short-term loan to cover the down payment. This way the seller gets their money and you get possession of your new home even though your old home is still technically yours. Once your existing place has sold, your lender will recover the funds they lent to cover your down payment. It is important to note that you must have an unconditional or firm offer for your existing home in order to qualify for bridge financing. Be aware that not all lenders offer bridge or interim financing and the terms and costs for this service can vary, so double check the conditions before you commit.

Moving confidently from one home to the next
It can be stressful to sell and buy simultaneously. There are a lot of things that need to go right in order for everything to go smoothly for you. The best way to ensure a smooth move is to do your research first. Explore your options until you find one that allows you to confidently move forward into your next home while leaving the last one fondly behind.

Reprint - GoldenGirlFinance

For all your mortgage needs contact Steven Porter, Mortgage Agent/Planner, Mortgage Architects - 1-905-875-2582 or steven.porter@mtgarc.ca
 

Today's Most Desirable Home Features

Housing trends and styles are changing constantly. Today, more than ever, buyers have a strong sense of what they want in a home. 

Today’s desirable home features depend greatly on the type of buyer.  Buyers can be divided into two main groups. The first group are first-time buyers which is pretty self-explanatory. The second group are the move up buyers, which are looking to move into a home that addresses the shortcomings of their existing home. They aren't necessarily second-time buyers but they are often people that have out grown their current home. Buyer age is also a main factor in deciding the desired home features.

This article focuses on what is hot in the housing market today. Whether you are planning on renovating, selling, or you are looking for a new home, this information will help you make choices that will contribute to both your real estate enjoyment and investment.

Home Exterior

Today, stone and stucco are very popular choices. Brick is the standard material used with mass builders, but the more customized and trendy homebuilders are using stone and stucco on a more frequent basis.

Floor Layout   

Bungalows are hot nowadays. Excessive floor level changes are no longer popular as people desire to live on one or two levels.

Room Sizes

Room sizes have been gradually increasing for a number of years. Buyers tend to place the most importance on three key rooms: the kitchen, family room and master bedroom. You can expect to see these three rooms continue to increase in size over the next 10 years while rooms such as the living and dining room are likely to get smaller or disappear altogether. Many new homes scrap the living room and instead incorporate that space into the family room or the 'Great' room.

Buyers still, ideally, desire four bedrooms in their home and would like, if possible, two living areas. One of the living areas can be the recreation room in the lower level (basement).
A master bedroom on the main floor is ranked very important for buyers 65 and older. A two-car garage with ample storage area and a main floor laundry area is desirable for move-up buyers.

Kitchen and Bathrooms 

The kitchen is becoming the hub of the house. The most desired features for the kitchen include: an abundance of counter space, a butler’s pantry, deep drawers and two sinks. Stainless steel appliances are also very popular today, and in the upper end market, appliances concealed as cabinetry are very chic.

Large kitchens with an island and counter tops made of granite or marble are very desirable for move up buyers. However, this must be matched with stylish kitchen cabinets.

Luxurious bathrooms with a separate tub and multiple shower heads; pedestal sinks and large mirrors; an overall spa like feeling; attached dressing rooms and a place to sit are all desirable features. Master suite soaker tubs and whirlpools are still desirable for many home buyers, but not as important as other features.

Energy Efficiency 

With the green movement becoming more popular, energy efficient appliances, high-efficiency insulation, eco-friendly treatments, and environmentally smart building plans are among the "green" features touted in homes.

Tech-readiness 

Satellite and internet wired along with multiple phone jacks are what people want in today’s technology world. With today’s busy lifestyles relaying heavily on technology, even a day or two without high speed internet could be a major inconvenience.

Home Office 

Today, many people would much rather have home office space than a formal dining room. Many employers are seeing the business advantages of allowing employees to work from home. As well, many people are using work from home opportunities to help supplement income because of work shortage or as an opportunity to make money online.

Outdoor Living Space 

The popularity of outdoor spaces continues to grow. Patios, deck, exterior lights, fenced yard and fire pit extend the outdoor living space at home and make a great extra feature.

Other Notables

Some other notable features that home buyers consider very important when buying a home include central air conditioning, recessed lighting, hardwood flooring, energy efficiency and the potential to turn a profit should they decide to sell their home in the near future.

Today’s buyers are looking for a little luxury and features and treatments that are the highest quality their price range will permit.

Copyright 2014 Canada Realty News
Posted by, Steven Porter, Mortgage Advisor - steven@stevenporter.ca

2 Reasons to Switch Mortgage Providers at Renewal Time

 If you’ve ever renewed a mortgage before, chances are you’ve at least entertained the idea of switching mortgage providers. Switching providers is often the best choice, for two reasons: new lenders can usually offer you the best mortgage rates, as well as better prepayment options. The differences in these numbers from one lender to the next may seem insignificant, at first, but waiting until you find the best options can save you thousands of dollars in interest charges over the course of a mortgage term. Here’s why you should make the move:

1. Switch for a Better Mortgage Rate

Let’s say you purchased a home for $400,000, made an $80,000 down payment (20%) and took out a $320,000 mortgage amortized over 25 years. After 5 years, you need to renew, but your existing mortgage provider says the best they can offer you is another 5-year fixed rate of 3.89%. At that rate, your monthly mortgage payment would be $1,664 and you’d pay $48,975 in interest over 5 years.

If, instead, you had shopped around for a better rate/product for you, you could’ve found a 5-year fixed rate of 3.19% with a new mortgage provider. At that rate, your monthly mortgage payment would be just $1,343 and you’d pay $41,060 in interest over 5 years. By switching to a new provider, you could’ve saved $7,915 in interest during your 5-year mortgage term.

2. Switch for Better Prepayment Options

The second reason to consider switching mortgage providers at renewal time is if another lender can offer you better terms and conditions, with prepayment options being among the most important of them. Most lenders will let you increase your monthly mortgage payment amount once each year, but the amount you can increase it by often varies from lender-to-lender. The bigger the allowable increase, the more you can potentially save.

Example: 10% vs. 20% Prepayment Options

Let’s say you bought a $300,000 home, put $85,000 down and took out a $215,000 mortgage amortized over 25 years. If your current mortgage provider offered you a 5-year fixed rate of 3.79%, your monthly mortgage payment would be $1,107 and, over 5 years, you’d pay $37,880 in interest.

If, however, you decided to take advantage of your current provider’s prepayment options, you could increase your monthly payment amount by 10%:

$1,107.00 x 10% = $110.70

$1,107.00 + $110.70 = $1,217.70

If you did that just once* at the beginning of your new 5-year term, you’d pay just $37,229.22 in interest; that’s $650.78 less than if you had stuck with the original payment amount.

Now, if we assume you found a new mortgage provider who offered the same mortgage rate (3.79%) but a 20% prepayment option, your monthly mortgage payments could go up to:

$1,107.00 x 20% = $221.40 

$1,107.00 + $221.40 = $1,328.40 

If you increased it just once* at the beginning of your new 5-year term, you’d only pay $36,576.01 in interest; that’s $653.21 less than if you had stayed with your current provider and taken advantage of their 10% prepayment option, and $1,303.99 less than if you had done nothing.

*Remember that you could potentially increase your payment amount once each year and save even more, but we kept it simple for this example.

How to Make the Switch

If you find a new mortgage provider with an offer you’d like to accept and switch over to, you’ll need to submit a formal application, not unlike the one you originally submitted for your previous mortgage term. Keep in mind that the qualifying criteria may differ from lender-to-lender, so a new provider will likely require certain types of documentation with your application, such as proof of homeownership, employment and home insurance.

When your application is approved, the new provider will ask your existing provider for something called a Payout Statement. The statement outlines information regarding your current mortgage, including the outstanding balance as of the renewal date—this is the amount the new provider will use for your mortgage application.

Just before the switch is made, you’ll have to meet with the new provider again, to pay any outstanding fees for this new mortgage. These fees can include, but aren’t limited to, an appraisal fee, legal fees for signing the new agreement, a mortgage transfer fee and a discharge fee.

The entire process can seem a little daunting, but this is a great example of why it’s smart to work with mortgage brokers. Not only can a mortgage broker shop around for the best mortgage rate/product for you, they’re experienced in the process of switching providers and are happy to guide you through the process.

So, while the renewal slip your existing provider pops in the mail may seem tempting, it’s worth making an appointment with a broker and seeing what kind of offer they can find you. Just remember to give yourself lots of time: if you wait too long and your current mortgage term passes its maturity date, your existing provider will automatically renew you for another term.

Property sales in Canada reach highest level since March 2010

 Residential property sales in Canada increased by 0.8% in June compared to the previous month, the five monthly rise in a row, taking transactions to their highest level since March 2010.

The data from the Canadian Real Estate Association (CREA) also shows that national average price for homes sold in June was $413,215, up 6.9% from the same month last year.

The national sales to new listings ratio was 53.6% in June, up slightly from 53.2% in May but still well entrenched within the range between 40 and 60% that marks balanced market territory. Just over half of all local markets posted a sales to new listings ratio in this range in June, with a fairly even split among the remainder between those in buyer’s market and seller’s market territory.

Steven Porter

High-end of market continues to show strength: Sotheby’s

Luxury home owners worried about offloading their million-dollar properties can take heart from the figures in the new Sotheby’s report.

The controversial removal of Canada’s immigrant investor class program may have frightened a lot of homeowners, but a new report is showing that appetite and interest in the high-end of the market has remained relatively strong.
The Realtor says that sales of homes worth more than $1 million boomed in the first half of 2014 across all of the country’s major markets – Vancouver (up 34%), Toronto (up 34%), Calgary (up 17%) and Montreal (up 11%).
“Several factors are driving Canada's high-end real estate market in 2014: net migration into major urban markets, immigration of high net-worth individuals into cities like Toronto and Vancouver, significant transfer of wealth between generations and historically low interest rates,” said Ross McCredie, CEO of Sotheby's International Realty Canada.
“Heading into the second half of the year we expect Canada's high-end housing market to remain strong, especially in the single-family home category where inventory remains tight. We're also expecting to see renewed confidence in Montreal's real estate market given the recent change in the political climate,” he added.
Homeowners in Vancouver were particularly concerned about the impact of the cancellation of the program. However, according to the Sotheby’s report, the greatest sales gains were in the single-family home sector, posting a 38 per cent increase with a 37 per cent increase in condo sales.
written by:  Grainne Burns - Canadian Real Estate Wealth

Steven Porter, Broker, Buyer Rep. - REMAX Aboutowne Realty Corp.

Now is the time for home closing protection insurance

Due to the growing possibility of buyers being declined their financing at the last minute, sellers need some protection in the event their closing is delayed or cancelled and they are forced to carry 2 homes for an extended period of time.

One company that I have dealt with that provides this coverage is Canadian Home Shield. Their President, James Vlachos, who is an insurance broker, advises me that for as little as $99, sellers can purchase a $25,000 insurance policy that will cover all mortgage payments, real estate taxes, utilities and insurance premiums up to a total of $25,000 in the event that the deal does not close through no fault of the seller. I personally have had 2 seller clients recover over $9,000 in costs after a buyer failed to close their purchase agreement.

Buyers can also purchase breakdown insurance protection for their home systems and appliances. Since most real estate contracts provide that sellers only warrant their systems and appliances to the date of closing, this provides buyers with the opportunity to purchase additional insurance protection for a year after closing.

For further information, please see the attached website: http://www.canadianhomeshield.com/ 

by Mark Weisleder, Real Estate Lawyer, http://www.markweisleder.com

HOME PRICES FLAT IN MARCH

  In March the Teranet-National Bank National Composite House Price Index™ was essentially unchanged from the previous month. Except for the recession year 2009, this is the first time in 15 years of index data collection that home prices for Canada as a whole have failed to advance in March. However, the story varied widely from east to west. In all five metropolitan markets west of Ontario, prices were up from the month before: Calgary (1.4%), Vancouver (0.6%), Edmonton and Victoria (0.4%) and Winnipeg (0.2%). Prices were also up in Halifax (0.8%), though not enough to make up the pronounced declines of the previous three months. In Toronto and Quebec City prices were flat. In the remaining markets prices were down from February: 1.8% in Montreal, 0.7% in Hamilton and 0.6% in Ottawa-Gatineau. For this last market it was the seventh consecutive monthly decrease, for a cumulative decline of 3.5%. Prices have fallen in four of the last six months in Hamilton (cumulative decline of 2.0% over the period) and in six of the last eight months in Montreal (cumulative decline 3.0%) and Quebec City (cumulative decline 3.4%). Halifax home prices were down 4.9% from nine months ago.

Since in March 2013 the index was up from the month before, the flat reading of March 2014 resulted in a deceleration of 12 month home price inflation, to 4.6% from 5.0%. It was the first time in nine months that 12-month inflation has slowed. The gain from a year earlier was higher than the cross-country average in Calgary (9.7%), Vancouver (7.6%), Toronto (5.8%), Hamilton (5.2%) and Edmonton (4.7%). It was below the average in Winnipeg (3.4%) and Victoria (0.2%). For Victoria it was the first time in 13 months that home prices were up from a year earlier. Meanwhile, all the markets east of Toronto surveyed for the index were down from a year earlier, Montreal (−0.7%) for the first time since November 1996, Quebec City (−2.4%) for a second straight month, and Ottawa-Gatineau (−1.2%) and Halifax (−4.2%) for a third straight month.
Source - Teranet – National Bank House Price Index™

Posted by - Steven Porter, REMAX Aboutowne Realty Corp.

Market Watch

See the real estate market performance for the GTA. February 2014 Market Watch Charts available here:
http://www.torontorealestateboard.com/market_news/housing_charts/index.htm

Posted by: Steven Porter, Broker - REMAX Aboutowne Realty Corp.
www.PorterReaEstateSystem.com