1. MarketNews
JAMES METCALFE’S REAL ESTATE UPDATE SEPTEMBER 2011
RESALE MARKET REMAINS STRONG IN AUGUST
Toronto REALTORS® reported 7,542 sales through the The average selling price of an August resale home in the GTA was
TorontoMLS® system in August 2011, a dramatic 24% increase $451,663 - representing a double digit increase of over 10% versus
versus August 2010 sales of 6,083 homes. Sales performance the August 2010 average price of $409,564. Resale prices continue
was very positive especially in view of the less than certain to be bolstered by tight supply conditions. The total number of
economic outlook. Year-to-date sales (January thru August) total active listings on the market stood at 17,258 at the end of August,
63,157 - down by a marginal 2% versus the comparable period which was down by 12% versus the August 2010 month-end
in 2010. On a forward looking basis, sales will be bolstered by figure of 19,563. It took 27 days on average to sell a resale home
low mortgage rates. Given the current economic environment, the in August, which was 9 days fewer than the 36 days it took to sell
Bank of Canada is now expected to remain on the sidelines until a home in August 2010. Despite the sizeable price increase, major
the second half of 2012 or even into 2013. Full year 2011 sales home ownership costs (including the average monthly mortgage
are expected to reach the 90,000 unit plateau, which will make it payment) remain at affordable levels. Accordingly, we should not
the second best year on record (eclipsed only by 2007 when sales expect to witness a major short-term decline in prices during the
exceeded 93,000 homes). balance of 2011.
GTA RESALE HOME SALES (UNITS SOLD) - August GTA RESALE HOME SALES (AVERAGE PRICE) - August
2008 2008
2009 2009
2010 2010
2011 2011
5,000 6,000 7,000 8,000 $300,000 $350,000 $400,000 $450,000
James Metcalfe BROKER
416-931-4161 Royal LePage Real Estate Services Ltd.
www.OurHomeToronto.com Johnston & Daniel Division, Brokerage
Service@OurHomeToronto.com 477 Mount Pleasant Rd., Toronto, ON M4S 2L9
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2. Mortgage basics
Personal
Finance
Among the many kinds of mortgages to choose from nowadays • Lower interest rates which translate into higher savings
are conventional mortgages, high-ratio mortgages, zero-down (historically variable-rate mortgage rates are much lower
mortgages, vendor take-back (VTB) mortgages and assumable than fixed-rate).
mortgages. You must also decide on the amortization period (the • If interest rates go down, a larger portion of your payment
length of time it will take for your mortgage to be paid off) and goes directly to the principal.
the term (the length of time the agreed to interest rate applies). • The mortgage is usually paid off faster.
• The payments usually stay the same even when the rate
Once you’ve made all of these decisions, you must then decide
changes (in some cases the payment can fluctuate with the
if you want a fixed- or variable-rate mortgage and whether you
prime rate however).
want an open or closed repayment option.
Disadvantages include:
Fixed-rate mortgage
• If interest rates rise, more of your mortgage payment is
A fixed-rate mortgage features an interest rate that does not applied to interest, not principal.
change during the entire mortgage term. • You face potential increased risk in the event that interest
Some of the advantages to having a fixed-rate mortgage include: rates skyrocket during the term.
• Rates and payments remain constant, so if interest rates rise Repayment options: open or closed?
over the term of the mortgage, you won’t be facing any
Once you have decided which type of mortgage is best for you,
unpleasant surprises.
you need to consider your repayment options.
• You have the security of knowing exactly how much your
payments are and how much of your mortgage will be paid With an open mortgage, the borrower is able to repay any
off at the end of the term. amount of the balance at any time without penalty. This offers the
flexibility of being able to increase your payments to any amount.
There are also some disadvantages to fixed-rate mortgages,
The only disadvantages are that interest rates are generally much
including the following:
higher and that the terms are generally short.
• The borrower is locked into a fixed interest rate over the term
of the mortgage. With a closed mortgage, the borrower is unable to make extra
• This fixed rate of interest is generally much higher than its payments or pay off the mortgage balance until the maturity
variable-rate counterpart. date of the loan, unless he or she is willing to pay a stiff penalty.
• There is a penalty for refinancing before the end of the term However, many closed mortgages offer some free prepayment
to take advantage of lower rates. options (e.g., up to 20% of the original mortgage amount per
year). Additionally, closed mortgages generally carry much lower
Variable-rate mortgage
interest rates.
With a variable-rate mortgage, the rate is set at the beginning of
The preceding article is a general overview. It is recommended that each
each month according to the prime lending rate of major banks. individual consult a mortgage expert before making any decisions regarding
Its advantages include: their specific mortgage financing arrangements.
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3. Closing the deal
Legally
Speaking
As a buyer, closing is the point at which ownership and usually • Your lawyer will contact the seller’s lawyer with any questions
possession of the property is transferred from the seller to you. or issues regarding title and costs.
Your lawyer and your REALTOR® will do much of the work, but
• Your lawyer will check with local utilities (hydro, gas, water)
here’s a useful checklist:
to ensure there are no outstanding claims and to get final
• Make sure a copy of the signed Agreement of Purchase meter readings on the day of closing. You should contact the
and Sale is sent to your lawyer right away. Your REALTOR® utilities and telephone and cable companies well in advance
will usually do this for you. Your lawyer needs to see any to arrange for services in your name.
conditions that exist, and the date you and the seller have
• Meanwhile, your lawyer is busy making sure that property
agreed to close. The lawyer will ask you how you (and others
taxes on your new home are up-to-date, local zoning and
involved in the purchase) want to be registered on the title
building restrictions have been met and there are no liens
to the property.
on personal property, such as appliances, to be sold with
• Immediately begin satisfying any of the conditions of the your house.
agreement that require your action. These have definite
• Well before closing; contact your insurance agent to arrange
dates attached to them and if you miss one you may have to
homeowner’s insurance coverage to become effective on the
arrange an extension or possibly risk losing the entire deal.
date of closing. Your agent can give you a “binder” letter,
As each condition is met, the REALTOR® will fill out a waiver
certifying coverage is in place. If you’re moving from your
form for signatures.
current owned home to another, your agent will handle the
• Upon your direction and after the conditions have been met, homeowner’s insurance transfer for you.
your lawyer will begin searching title to the property. This is
• Your lawyer will review and verify the draft deed, statement
an exercise of going back through government records to
of adjustments and other closing information provided by
ensure a clear title that is transferable. Electronic registration
the seller’s lawyer, and will deal with any problems as they
and title insurance have significantly changed the way titles
arise.
on properties are transferred.
• A day or two before closing, you’ll meet with your lawyer to
• If you decide to have the home inspected, your offer should
go over and sign the closing documents. Bring the certified
contain a condition that the property passes inspection.
cheque(s) to cover costs involved. Your lawyer will let you
• If no current land survey exists on the property, arrange for know the amounts in advance.
one soon. Your lender may require it, and you’ll want it for
• The big day arrives. You don’t need to be present, usually.
your own peace of mind, anyway.
The lawyers for both parties exchange documents, keys and
• Contact your lending institution to begin the process of cheques and then register the deed and mortgage. Soon
finalizing mortgage documents. Ask if your lawyer can draw thereafter you’ll be given the keys to your new home.
up the documents; this will usually save money. Source: OREA
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4. TO MY VALUED FRIENDS AND CLIENTS
According to Canada’s 2006 Census, about 60 percent of of your mortgage. Of course, this will increase your per
Canadian households that own a home carry a mortgage. If payment amount.
you count yourself amongst this group, and your mortgage
Pre-payment privileges. Prepayment is a wise route to
is coming up for renewal, refinancing your mortgage is an
mortgage savings. Prepayment privileges accelerate paying
option well worth considering. Beyond simply renewing
off mortgage principal. Take advantage of them – perhaps
your term, refinancing can serve as way to restructure your
by using your annual tax refund to repay a portion of your
finances, while taking advantage of today’s low interest
mortgage. In each calendar year, you can typically prepay up
rates. However, when you meet with your mortgage
to 10% of the original amount of the mortgage.
specialist, here are some of the items other than the interest
rate you should be investigating in order to save money. Increase your payment. You can usually do this once a
year, by any amount up to a maximum of double the regular
Paying more frequently. Weekly or bi-weekly payments
monthly payment.
(as opposed to monthly) can save thousands of dollars in
interest. Each payment contributes to whittling down the As usual, your client referrals are both highly valued and
mortgage principal and adding to home equity. much appreciated. Until next time, take care!
Shortening the amortization period. Even a minor
decrease in the amortization period will allow you to save
a lot of money in interest costs by shortening the total life
PEARLS OF WISDOM
“Where a calculator on the ENIAC is equipped with 18,000 vacuum tubes and weighs 30 tons,
computers in the future may have only 1,000 vacuum tubes and weigh only 1.5 tons.” – Popular
Mechanics, 1949
“There is no reason anyone would want a computer in their home.” – Ken Olson, president,
chairman and founder of Digital Equipment Corp., 1977
“But what... is it good for?” – Engineer at the Advanced Computing Systems Division of IBM, 1968,
commenting on the microchip
“YOUR REFERRALS ARE SINCERELY APPRECIATED! THANK YOU!”
James Metcalfe BROKER
416-931-4161
Royal LePage Real Estate Services Ltd.
www.OurHomeToronto.com Johnston & Daniel Division, Brokerage
Service@OurHomeToronto.com 477 Mount Pleasant Rd., Toronto, ON M4S 2L9
In accordance with PIPEDA, to be removed from this mailing list please e-mail or phone this request to the REALTOR ® Not intended to solicit buyers or sellers currently under contract with a broker. The
information and opinions contained in this newsletter are obtained from sources believed to be reliable, but their accuracy cannot be guaranteed. The publishers assume no responsibility for errors and omissions or for damages resulting
from using the published information. This newsletter is provided with the understanding that it does not render legal, accounting or other professional advice. Statistics are courtesy of the Toronto Real Estate Board. Copyright © 2011
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