Skip to content

CategoryMortgage Tips

Posted Money saving tips

Paying over list price has become normal.. but still requires a cool head.

Sold over asking

Here’s a recent article in The Star where I provided some advice and comments on bidding wars.

The trend continues.  Properties are selling for above asking price in hot markets across the country.  In Toronto, it’s becoming the norm.  Some say an epidemic.

Last month I reported on sales that sold for 128% and 138% of list price.   We’re talking about selling prices of $1,035,000 and $1,150,000.

A few days later, we saw a home sell for $1,308,808.    That’s $479,880 above asking price or put another way, 158% of list price.   Sale prices this much above asking are either a clear case of listing too low, in the attempts of attracting multiple offers, with the hope of getting a higher than normal selling price… or, someone is paying way above market value for reasons beyond my understanding.

Continue reading “Paying over list price has become normal.. but still requires a cool head.”

Posted 6 Comments on Stay away from mortgage cashback offers! Interest rates

Stay away from mortgage cashback offers!

CanadianBills It’s the Spring market…  ok, the weather isn’t saying this but the real estate market is.  You’re gonna start seeing and hearing more ads on TV, radio, news sites, even finance blogs.    So here’s a some quick words of advice.  STAY AWAY FROM TODAY’S CASH BACK OFFERS!

There are a few different types of mortgage cash back offers.   The most common offer is one where the Bank or Lender gives you 5% of the mortgage balance on closing.  That’s right they give you 5% back in cash.  For example: a $400,000 mortgage would get you back $20,000 in cash.

This type of cash back does serve a purpose.  If you are a young home buyer with little or no down payment, but you have a good job and don’t want to wait to save up that down payment, then this isn’t a bad way to get in the market.  Just ask those that did this 5 years ago.   With real estate values up by around 35% to 50% in that time, this isn’t a bad deal.   Continue reading “Stay away from mortgage cashback offers!”

Posted Case study

Lower rate = Lower payment and a Lower balance in 5 years!

Mortgage Burning1 We all know that a lower interest means a lower monthly payment.   But did you know that a lower interest rate means you will also owe less when your mortgage comes up for renewal?    This has been overlooked by consumers and experts alike.  I haven’t seen any articles covering this.  And it should change how you choose your next mortgage product.

It all has to do with the effects of compounding interest.   Let’s take a look at 2 borrowers, each with a $400k mortgage.  Borrower 1 is Mary.   Borrower 2 is Dave.   Mary has today’s 5 yr fixed rate of 3.29%.   Dave has the more normal rate of 5.50% (the rate most experts think we will see in the next 3 to 5 yrs).    We’ll amortize both mortgage over a 25 yr term.

Dave’s mortgage has monthly payments of $2441 and a balance owing of $356,749 at the end of 5 years.   Mary’s mortgage has monthly payments of $1953 and a balance owing of $343,728 at the end of the first 5 years.  Notice the difference in the balance owing after 5 years.    We are talking about a $13,021 difference.  That’s the effects of compounding interest. Continue reading “Lower rate = Lower payment and a Lower balance in 5 years!”

Posted Mortgage News

Olympics are coming.. and so are the dumb bank ads.

RBC-Bank I’m a huge hockey fan.   I love watching Olympic hockey.  It’s fast paced and every game counts.    If you’re like me, then you’ll probably be glued to the TV set watching and cheering on Team Canada.   GO CANADA GO!

Unfortunately, that means you’ll also have to put up with those dumb bank ads.   These ads drive me nuts.  They deliver a terrible message to consumers.    Here’s one from RBC  from the 2010 Olympics about a young couple buying a home, probably their first, and the RBC mortgage specialist recommends they ‘split their mortgage to save money…. part fixed and part variable’.   Anyone get that?  Sounds like some sort of magic solution.   Confused?  You should be.

Splitting your mortgage is probably the worst thing you can do.  Here’s why the BANKS like it.  There are certain BANKS that will allow you to split your mortgage into 2 or more parts.   This product was introduced in the mid ’90s.   Now ask anyone that took this type of mortgage it they’d ever take it again.   NO WAY!   Continue reading “Olympics are coming.. and so are the dumb bank ads.”

Posted Case study

Buy now or wait for house prices to fall? The results may surprise you…

Housing-affordability

Should I buy now with interest rates still hovering at record lows, or wait for prices to fall?   When will house prices fall? … and by how much?    What will the interest rate be in the future when house prices fall?

These are the questions most Canadians asking themselves these days.   It’s no secret that Real Estate values are at an all time high in most parts of the country.   The calls for a housing correction, crash, or bubble have been going on for almost 10 years now but it hasn’t materialized.

I won’t get into the discussion here about whether house values will drop or crash or when that could happen.. because I don’t think it should be part of the buying decision.   That’s not a typo.  Market timing is a dangerous thing.  Stock advisors will tell you this.  Buy now, if you are able to commit to the plan.  Read on to see why I believe this to be true. Continue reading “Buy now or wait for house prices to fall? The results may surprise you…”