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Thursday, 3 December 2015

Wednesday, 4 February 2015

Knowledge is power- Closing Costs

Closing Costs


Mortgage Term
Over the course of your amortization period, you may have many different mortgages. The term is simply the length of time that interest rates, payment schedules and obligations to the lender exist. When the term comes to a close, you will have the option to renew your mortgage at your current or new lending institution. You can also put a lump sum toward the principal without restriction, or pay off your entire mortgage without penalty. If you wish to change the structure of your agreement during the term you may have to pay a substantial fee to the lender. 

Choosing Security or Flexibility
Mortgages are available with closed, open and convertible options, with fixed or variable rates. The options you choose will reflect your beliefs about the market -- is it going up or down? -- and your short-term goals and desire for long-term security.
 
Amortization This is the amount of time over which the entire debt will be repaid. Most mortgages are amortized over 15-, 20-, or 25-year periods. The longer the amortization, the lower your scheduled mortgage payments, but the more interest you pay in the long run.

Open Mortgage This type of mortgage offers a great deal of flexibility, as it can be repaid in part or full at any time without penalty. This is a great mortgage if you believe interest rates are moving down or if you plan to move in the near future. The term may be limited to six months or one year.
 
Closed Mortgage Here the interest rate is fixed for the full term of the mortgage, and you will have to pay a penalty to change the agreement conditions. This type of mortgage is ideal for buyers who suspect that interest rates will rise and who are not planning to move in the near future. This type of mortgage is usually available in a wide variety of terms.
 
Convertible Mortgage With this mortgage, you'll enjoy the same peace of mind as a closed mortgage, plus the flexibility to convert to a longer closed mortgage at any time without penalty. If you think rates will drop, this will allow you to wait until you feel they have hit bottom, or if rates rise, you can lock in.
 
Additional Costs Before you calculate the amount of your down payment and determine what you can afford, it's a good idea to set aside a few thousand dollars to cover the extra costs that seem to spring out of nowhere. Here is an overview of costs you could encounter. The good news is that not all of them will apply.
 
Property Taxes If the Vendor has paid a portion of the taxes in advance, you will be responsible for reimbursing the Vendor on closing. Plus, if you have a high-ratio mortgage, your lender may require that you have your property taxes added to your mortgage payments.
 
Utility Fees Utility fees are calculated through a meter so you will be responsible for paying what you have used up on the meter. 

Survey Fee Your lender will require an up-to-date survey. You can make it a condition of the Offer to Purchase that the Vendor provide a survey, or you will have to have one done. If there is no survey available, you may purchase "Title Insurance" in lieu of a survey which saves you about $500 - 700.
 
Appraisal Fee A basic appraisal usually costs under $250.
 
Property Insurance Your lender will insist that you have insurance on your property because your home is used as security for the mortgage.
 
Service Charges You'll be charged for telephone, cable and a variety of other services that you hook up at your new home.
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Lawyer (Notary) Fees Each real estate transaction requires the assistance of a legal professional to review the Offer to Purchase, search the title, draw up the mortgage documents and take care of the details on the day of closing. Lawyers fees range widely depending on the complexity of the transaction. Ask your sales representative to recommend a lawyer. And remember, fees can be negotiated.
 
Mortgage Loan Insurance Premium and Application Fee Mortgage loan insurance will be necessary if you have a high-ratio mortgage (less that 20% down payment). The application usually costs $75 with a valid appraisal, otherwise it's $235. The actual insurance premium will range from .5% to 3.75% of the purchase price and is added onto the mortgage.
 
Mortgage Broker Fee Some brokers may charge as much as 2% of the total mortgage to find you a lender. In most cases though, the broker is paid by the lender. Buyers with good credit should not have to pay a fee.
 
Moving Costs Whether you've decided to do it yourself or hire a moving company, now is the time to budget for the costs involved.
 
Status Certificate If you're moving into a condominium (complex not necessarily a high-rise) this certificate outlines the condominium corporation's financial and legal state. It will cost you up to $100, usually paid for by the seller if agreed to in the Offer to Purchase.
 
Condominium Fees These monthly fees vary from complex to complex. The fees are applied to everything from grounds keeping and carpet cleaning to security personnel and health club maintenance. Depending on the type of structure, these fees will usually be a few hundred dollars.
 
Home Inspection Fee For around $300, depending on the size of your home, you'll receive a complete written report about the condition of the structure. Do your research and hire a reputable firm.
 
Renovation and Repairs Your home inspection may indicate the need for some general repairs or a major project. Have some money set aside, particularly if you are purchasing an older home. 
Redecoration Your taste will be different from the previous owner. Set aside money to paint and wallpaper. Prepare a list of things you can live with, for now, and decorating faux pas that need immediate alteration.
 
Water Quality Certification If you are purchasing a home with a well, you'll want to ensure the quality of the water. This will cost approximately $50 to $100.

Land Transfer Tax
Buyers in most areas will have to add Land Transfer Taxes to their closing costs.
 
Land transfer taxes are a part of the process unless you live in Alberta, Saskatchewan, or rural Nova Scotia. These taxes, levied on properties that are changing hands, are the responsibility of the buyer. Depending on where you live, taxes can range from a half a per cent to two per cent of the total value of the property.
 
Many provinces have multi-tiered taxation systems that can sometimes be difficult to understand. If you buy a property for $260,000 in Ontario, for example, .5 per cent is charged on the first $55,000, 1 per cent is charged on $55,000 - $250,000, while the $250,000 - $400,000 range is taxed at 1.5 per cent. Your total tax bill? $2,375.00.
 
The following chart illustrates Land Transfer Taxes  

Ontario
Up to $55,000 X .5 % of total property value 
From $55,000 to $250,000 X 1 % of total property value
From $250,000 to $400,000 X 1.5 % of total property value

From $400,000 up X 2 % of total property value 

Wednesday, 21 January 2015

Where are Interest Rates Going?


Why Canadians can expect low interest rates for longer — much longer: Morgan Stanley





Weaker growth will be driven by further cuts to spending and production in the energy sector, which has already reduced capex plans by an average of 20% year over year.
Morgan Stanley says the central bank will have no choice, but to cut its forecast next week when it releases its monetary policy report, a move that will further pressure on Canada’s struggling currency.
The bank said it expects the loonie to fall to 80¢ US in coming months as currency markets fully price in the second round of effects of lower oil prices.
Morgan Stanley said it expects the loonie to fall to 80¢ US in coming months as currency markets fully price in the second round of effects of lower oil prices.
Don’t look for another interest rate hike for two more years; in fact, there is a one in three chance the Bank of Canada will actually cut rates before the end of this year, Morgan Stanley predicts.
The latest forecaster to take a stab at the impact of plunging oil prices on Canada’s economy, the American bank stands out for its bearish take.
The bank not only pushed its forecast for the first rate hike to 2017, it predicted others would soon follow suit.
“The fall in oil is undisputedly negative for Canada’s economy,” the bank wrote in its report Wednesday “Canada Outlook: Sands through the hourglass.”
“Rate differentials should continue to move against Canada, if, as we expect, the market pushes out expectations for tightening from the Bank of Canada into 2017, reflecting a later closing of the output gap.”
Until Tuesday, most economists have expected a rate increase in late 2015. But dovish comments by Bank of Canada Deputy Governor Timothy Lane, led some to reconsider. BMO Capital Markets, which has cut its 2015 growth forecast to 2.1% from 2.5%, said Wednesday it was now looking for the next interest rate hike to come in January 2016.

Why the Bank of Canada won't be rescuing the economy from low oil prices



Terence Corcoran: There’s very little that governments or the Bank can, or even should, do. The real rescue operation for the economy will come from elsewhere. Read on
Oil prices that have fallen by about 60% since June are threatening economies that depend on commodities exports. Wednesday, Brent crude fell to US$46.49, while WTI was trading at $46.04. A steep spike sent prices up more than 6% to around $48, but analysts doubted it would last.
On the back of plunging prices, Morgan Stanley has cut its forecast for economic growth 0.6 percentage points to 1.8% for 2015 and sees the malaise stretching into 2016, where it expects growth to slow to 1.5%, down almost a percentage point from its previous forecast.
That compares to the Bank of Canada’s October outlook which saw the economy gaining 2.5% in 2015 and 2.3% in 2016.



Weaker growth will be driven by further cuts to spending and production in the energy sector, which has already reduced capex plans by an average of 20% year over year.
Morgan Stanley says the central bank will have no choice, but to cut its forecast next week when it releases its monetary policy report, a move that will further pressure on Canada’s struggling currency.
The bank said it expects the loonie to fall to 80¢ US in coming months as currency markets fully price in the second round of effects of lower oil prices.

Source:  Financial Post