For the last few years, Canada has made headlines for promoting an extremely inclusive immigration agenda. In fact, since 2019 the government has resettled more refugees than any other country.¹ But immigration policies have recently come under fire from Toronto residents who are already tired trying to navigate tough real estate market.

Inventory is low and home prices are high, both of which continue to be a concern amongst residents of the Greater Toronto Area of whom already holds the largest population of immigrants in the country compared to all other major metropolises.

 

 

Rising Need For Affordable Housing

 

The Canada Mortgage and Housing Corporation (CMHC) cites that nearly 22 million homes need to be injected into the housing market in order to increase supply and improve affordability by 2030.² Similarly, as more immigrants pour into areas like Toronto, the need for more affordable housing becomes even greater.

The government already expects a shortfall of roughly 3.5 million homes, especially in high concentrated areas like Toronto, which means its not likely real estate will become more affordable by the 2030 target date.²

Residents are already feeling the weight of Canada’s anemic supply of affordable homes, many experts think liberal immigration policies are only encumbering a recovery to more normalized market conditions. While ramping up building capacity is crucial, it may not be feasible considering the constant growing demand for affordable homes.

 

Benefits of Immigration for the Toronto Real Estate Market

 

Despite the short-term stress immigration may be causing the Toronto real estate market, many key economists feel optimistic that immigration could be the key to the affordability crisis, not only for Toronto but the entire country.³

Recent data shows some evidence that the forecasted housing shortfall can be most attributed to rising inflation and higher construction prices, not simply a rapid rise in population due to immigration. Key experts also note that there has been a lack of affordable housing across Canada for nearly two decades, while major immigration reform has been relatively recent. A shortage of affordable homes isn’t anything new.

Many organizations feel that accepting more immigrants can have the opposite affect on the housing market by infusing the labor force with a greater supply of skilled workers. In fact, a recent survey from Environics Institute for Survey Research found that 85% of Canadian respondents thought immigration has a positive impact on the economy.¹

More skilled workers could help lower vacancies in the construction industry, improve employee turnover, and help reduce input costs associated with building, which in turn could help increase inventory.

 

Summary

 

The impact immigration has on the Toronto real estate market is certainly something up for debate. On one hand it seems clear that immigration is putting a prolific amount of additional stress on the Toronto housing market, helping keep demand high and supply low. On the other hand, accepting new immigrants could help increase the population of skilled workers, driving builder capacity and output.

Whether you are a new or seasoned homebuyer that in favor or opposed to immigration reform, its pretty evident that there will still be a shortfall in affordable housing in the Greater Toronto Area for the time being.

 

 

Sources

 

1 https://foreignpolicy.com/2023/08/28/canada-immigration-trudeau-policy-multiculturalism-backlash/#:~:text=Since%202019%2C%20the%20Canadian%20government,is%20a%20bastion%20of%20multiculturalism.

2 https://www.gta-homes.com/real-estate-info/the-impact-of-immigration-on-the-housing-market/

3 https://www.cicnews.com/2023/08/is-immigration-causing-canadas-housing-crisis-0838904.html#gs.4p01yj

As a first-time homebuyer it can feel a bit trepidatious embarking on your first homebuying journey, however that hasn’t stopped thousands of Canadians from successfully becoming new homeowners through the support of key government assistance programs.

While the average price of homes in Ontario has been elevated, many experts forecast price growth to decelerate into 2023.¹ In combination with key first time homebuyer programs, that means buying a new home could get a bit easier.

There are several new programs and financial incentives available to first time homebuyer that can be leveraged to help make affording your new Canadian home much easier.  Nevertheless, each program has its own separate set of eligibility criteria, so it’s important to know the programs that might work well for you and which to avoid.

Here’s a quick review of some of the most useful first-time homebuyer government assistance programs that you should consider utilizing if you are still considering making the leap to homeowner status.

 

 

1.    First Time Home Buyer Incentive (FTHBI)

 

One of the biggest barriers to homeownership for many first-time homebuyers is saving up for a down payment. According to recent data from the National Bank of Canada, it can take and average of anywhere between 7 to 17 years for the average homebuyer to save for a typical down payment, depending on where you choose to plant roots.²

The First-Time Homebuyer Incentive (FTHBI) program makes it easier for first time homebuyers to afford buying a new home by providing a financial incentive, between 5-10% of the property’s purchase price, as a benefit on top of any down payment you have already saved and utilize toward your purchase.

The FTHBI is an equity sharing program, meaning it leverages future appreciation in the home. Either after 25 years or when you go to sell your home, you will have to repay between 5-10% of the property’s market value at the time of repayment.

Certain floors and ceilings do apply to the amount needing to be repaid and consumers must meet specific eligibility criteria to qualify for the FTHBI program. For example, your total qualifying income cannot exceed $150,000 in areas like Toronto and Vancouver.

Additionally, this program is specifically reserved for first-time homebuyers and your down payment must come from allowable sources, such as savings, RRSP, or gift from a family member. 

Learn More: https://www.placetocallhome.ca/fthbi/first-time-homebuyer-incentive

 

2.    Home Buyer’s Plan (HBP)

 

It’s common for your financial goals to change over the course of your life. In fact, the financial goals you prioritize now may not be the same as those goals for your future self.

Nevertheless, the Home Buyer’s Plan (HBP) program give first time homebuyers the option to prioritize homeownership today by enabling you to fund the purchase of a new home using up to $35,000 from an owned, eligible registered retirement savings plan (RRSP).

Tapping into your existing savings that’s been earmarked for retirement can be extremely powerful and it can be done on a tax-free basis as to help fund your down payment on a new primary residence.

One main caveat with this plan is that you need to be a resident of Canada when you take your distribution up until when the purchase or build has been completed. Additionally, you must repay your RRSP within a 15-year repayment window.

While there are some limitations with this plan, keep in mind that it can also be combined with other first time homebuyer assistance programs to maximize your total buying potential.

Learn More: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/what-home-buyers-plan/participate-home-buyers-plan.html

 

3.    First Home Savings Account (FHSA)

 

An often-overlooked government-sponsored assistance program for first-time buyers is the new First Home Savings Account (FHSA) program. This program was first introduced back in 2022 and was designed with the goal of empowering first-time homebuyers to save for a new home purchase. 

The FHSA program allows first-time homebuyers to save up to $8,000 annually, with a $40,000 lifetime contribution limit, on a tax-free basis. Contributions are tax deductible and withdrawals, when used to purchase a first home, would be non-taxable.

Another great perk to opening a FHSA is that any funds in the account that do not go towards the purchase of a qualifying property can be transferred into a RRSP or RRIF tax-free. If they are not transferred in this way, they could be subject to tax basis. Eligible new buyers can open a new FHSA on or after April 1, 2023.

Learn More: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account.html

 

4.    Land Transfer Tax Refunds for First Time Homebuyers

 

Despite elevated home prices, there are still a few ways to save money if you are a first-time homebuyer. In fact, there are several rebate and land transfer tax refund programs to incentivize new homeownership.

The first program is Ontario’s Land Transfer Tax Refund, which allows qualifying first-time homebuyers to recoup a portion of the provincial land transfer tax you are required to pay as part of your overall closing costs.

You could potentially get back up to $4,000, depending on the value of your home, so long as you are at least 18 years old, are a Canadian citizen (or permanent resident), and occupy the property as your primary home within 9 months of registering it into your name.

Additionally, if you are a first-time homebuyer in Toronto, you can potentially take advantage of its First Time Purchaser Rebate incentive that has the same qualifying requirements as the provincial program, but with a higher maximum of up to $4,475. If you’re smart, you can even stack these two programs to recoup even more money, for a combine benefit of up to $8,475.

Learn More: https://www.ontario.ca/document/land-transfer-tax/land-transfer-tax-refunds-first-time-homebuyers OR https://www.toronto.ca/services-payments/property-taxes-utilities/municipal-land-transfer-tax-mltt/municipal-land-transfer-tax-mltt-rebate-opportunities/

 

5.    Habitat For Humanity GTA Programs

 

If you’re finding it difficult to make the transition from renting to owning the Greater Toronto Area (GTA), consider applying for housing through one of many Habitat for Humanity housing programs.

For years Habitat for Humanity has helped residents of the Greater Toronto Area find safe and affordable places to live. While its not technically a government-sponsored organization, Habitat for Humanity continues to help build multi-unit buildings across GTA.

The result is that it can leverage housing resources to give low- and moderate-income, first-time buyers access to purchase properties, such as condominiums and townhomes, at affordable price points.

While you do have to meet certain income eligibility requirements, this organization may be a great resource to consider when buying your first primary residence. Overall, Habitat for Humanity of GTA has helped over 500 families through its affordable homeownership programs.

Learn More: https://habitatgta.ca/

 

Sources

 

1 Global Property Guide. (n.d.). Canada Residential Real Estate Market Analysis 2023. https://www.globalpropertyguide.com/North-America/Canada/Price-History

2 Galea, I. (2022, July 27). It’s taking Canadians years longer to save for a down payment, data show. The Globe and Mail. https://www.theglobeandmail.com/business/article-saving-down-payment-real-estate/

There are many benefits to owning real estate including appreciation and the opportunity to earn passive income. However, most property owners also don’t consider the risks that come with owning real estate.

 

While you may already have protection in place to hedge against a common hazard, such as a fire or busted pipe, there are less overt risks that also require consideration. In fact, one of the many risks that’s becoming increasingly prevalent is real estate title fraud.

 

Real estate title fraud occurs when a person illegally transfers ownership of or takes a loan out against a property without the real property owner’s permission. Most of the time the property owner isn’t even aware that fraud has occurred until it becomes a much more serious issue.

 

In the Greater Toronto Area (GTA), incidents of real estate and title insurance fraud have been on the rise, with at least 30 recent occurrences where properties have been sold or mortgaged illegally.¹

 

For most of the cases, criminals were able to structure schemes using the stolen identification documentation in combination with stand-ins that impersonate either tenants or the property owner. Since the actual fraudsters are not front facing, it adds a layer of complexity to the scheme that it difficult for authorities to investigate and track.

 

As a property owner, its’s important to be vigilant of the risks associated with real estate title fraud and have proper protocols in place to help prevent personal loss. Here are a few steps you can take to fight back against real estate title fraud.

 

 

1. Protect Your Physical and Virtual Identity

 

The best way to protect yourself against real estate title fraud is to prevent it from occurring in the first place. A best practice that all property owners should follow is making sure to keep your physical personal identification documents (i.e., government licenses, passports, birth certificates, etc.) in safe and secure place.

 

Protecting your identity also extends to your online presences as well. According to Equifax, consumers can protect their virtual identity by never writing down and using strong passwords, frequently changing online credentials, being careful accessing social networks, not using public Wi-Fi, and not falling victim to phishing attempts on the internet.²

 

If you want to add another layer of protection for yourself and assets, consider purchasing identity theft protection. Identity theft protection is a cheap and accessible way to help protect yourself against a variety of fraudulent schemes but should be especially useful at helping prevent real estate title fraud.

 

2. Always Get a Title Insurance Policy

 

The best way to protect against real estate title fraud is by obtaining a title insurance policy. Title insurance offer property owners and lenders protection against losses related to improper or illegal conveyance of title.

 

Title insurance is not a catch all for every fraudulent scenario, however it can help mitigate the consequences if you fall prey to a real estate title fraud scheme.

 

In most cases, title insurance can help cover an owner’s legal expenses involved with restoring your rights as the property owner.³ It can also cover costs to help recoup loss and make owners whole who are victim of these fraudulent scams.³

 

3. Implement Tenant Screening Processes

 

Another way property owners can deter real estate title fraud is by implementing appropriate tenant screening processes. Tenant screening processes helps ensure you are renting your property to credible persons.

 

A few best practices include requiring proper identification before renting to prospective tenants. You can also require a background check as part of your property application.⁴ These steps can be the first line of defense that can help deter unscrupulous prospective renters.

 

Another component worth adding is requesting banking information for the purposes of processing rental payments. While it’s against the law to require tenants to pay rent via automatic payment, you can offer that as an option which would then add another layer of security that fraudsters would need to overcome when executing any fraudulent scheme.

 

4. Install Physical Security Measures

 

If you want to prevent nefarious activity, physical deterrents can help shore-up your defenses. As a property owner, installing cameras in common areas is a great way to create a sense of safety and deter criminals.

 

Another good practice to implement is having a forwarding mailing address on file. This helps ensure your mail stays with you and doesn’t end up in the hands of those seeking to commit fraud.

 

5. Complete Periodic Due Diligence

 

While real estate title fraud cases have recently been identified, its still easy for property owners to be lulled into a false sense of security. At the very least property owners should be completing periodic due diligence to help stave off possible fraudulent threats.

 

Property owners should conduct frequent property searches to ensure your property isn’t being listed for rent or sale without your consent.

 

You should also check public databases to verify your information as the legitimate property owner has not been modified. If systems have old contact information, make sure you update this to ensure receipt of current notices, updates, or information. You want to stay in the know of all correspondence related to your property.

 

Lastly, complete periodic spot checks on your personal (or business) bank accounts and credit reports to ensure all transactions are legitimate and to monitor for suspicious activity. Criminals may get your information and test its legitimacy on other platforms before pursuing a more complex real estate title fraud scheme.

 

Sources

 

1 https://www.cbc.ca/news/canada/toronto/organized-crime-groups-behind-gta-home-sales-mortgages-without-owners-knowledge-1.6719978#:~:text=CBC%20Toronto%20has%20learned%20that,without%20the%20real%20owners'%20knowledge

 

2 https://www.consumer.equifax.ca/personal/education/identity/how-to-protect-yourself-from-identity-theft/

 

3 https://www.cbc.ca/news/canada/toronto/prevent-title-insurance-fraud-1.6711615

 

4 https://www.tritoncanada.ca/can-your-landlord-ask-you-for-a-background-check/

If it feels like the cost of goods and services continues to go up, the likely culprit is probably inflation. Over the last few years inflation has started to have a broader impact on the economy, from your morning coffee to the gas you put in your car to commute to work. One of the best ways to hedge against inflation is through real estate.

 

Historically, real estate has been a great tool that has been championed by experts for its ability to withstand inflationary pressures. Today, people are turning to real estate to help combat inflation as it continues to impact the economy.

 

Even with rising inventory and a higher interest rate environment, real estate continues to be an effective asset people can turn to as inflation impacts purchasing power. If you are concerned about inflation, here are a few reasons why real estate may be the best tool in your arsenal to hedge against rising inflation.

 

 

 

1. Real Estate is a Tangible Asset

 

Inflation is troublesome for many reasons. One of the biggest reasons to watch what inflation is doing is because inflation can decrease your purchasing power, whether you realize it or not. When purchasing power begins to decline, investors often look to other assets that hold their value better against rising prices.

 

Real estate is considered one of the gold standard assets to combat high inflation because it's a tangible asset. While tangible assets like real estate can depreciate over time, they are still a physical asset so they aren’t really devalued by inflation.

 

2. Property Values Historically Outpace Inflation

 

Generally, real estate performs better against inflation over other investments like stocks, which are often negatively impacted by curbed consumer spending.

 

Inflation can also make it more difficult for investors to value companies. For example, as price increases make it hard to predict how companies can compete against peers or how they will grow in comparison to the market.

 

On the other hand, real estate values have historically outpaced inflation. Since real estate is considered a long-term investment, it can help preserve wealth over time.

 

3. Owning Real Estate Helps with Cost of Living

 

Another way real estate is a good method for hedging against inflation is that it can help you keep up with the cost of living despite rising costs. Investment real estate does well against inflation by providing investors with healthy streams of rental income which can keep pace with market price trends.

 

Similarly, people often use mortgage financing to purchase a new home. Those that have locked into a fixed-rate mortgage have a significant advantage over those that pay rent because their monthly housing payment won’t change. Comparatively, rent often goes up alongside inflation.

 

4. Shelter is a Basic Human Necessity

 

Lastly, consider that real estate is shelter, a basic human necessity. That means there will always be a demand for real estate, whether people choose to own or rent. Owning real estate is certainly more beneficial and has been found to be one of the biggest contributing factors to building generational wealth.¹

 

Key Takeaways

 

No one likes to deal with inflation, but using real estate to hedge against rising inflationary pressures is a smart financial decision.

 

There are several reasons why real estate is the ideal asset to hedge against high inflation. Being a tangible asset, real estate values often provide more protection because they increase during periods of monetary devaluation.

 

Real estate is also a necessity meaning there is always demand for it in some capacity. While owning a home can help normalize your monthly housing costs, investing in rental properties can offer both appreciation and streams of rental income that can work in tandem to fight rising inflation.

 

Sources

 

1 Butler, I. (2022, September 21). How to Build Generational Wealth in Canada. The Motley Fool Canada. https://www.fool.ca/investing/how-to-build-generational-wealth/

 

 

Recent inflation has had a tremendous impact on thousands of household budgets across Canada. However, higher food and gas prices are the least to worry about for some consumers who either bought a new home or refinanced at peak pandemic conditions.

 

The Bank of Canada has taken to rapidly increasing interest rates to help curb inflationary pressures. But if you are a borrower that has a variable-rate mortgage with a fixed payment, you may be close to hitting your trigger rate which may subsequently cause your monthly mortgage payment to go up.

 

Many lending experts are concerned that if interest rates continue to increase, nearly 750,000 borrowers could also be stuck paying higher mortgage payments¹. As a result, this could put more pressure on the economy by forcing borrowers to slash spending even more.

 

Nevertheless, if you are in fact a borrower that has a variable-rate mortgage, don’t panic just yet. You will have a few different choices to deal with reaching your trigger rate. Let’s take a closer look at how trigger rates work and how to manage them.

 

 

 

What is a Trigger Rate?

 

Few borrowers with variable-rate mortgages may know what a trigger rate entails. A trigger rate refers to the interest rate that lenders can increase a mortgage holder's monthly payment, even if it would normally be fixed.

 

As the central bank increases interest rates, lenders adjust mortgage rates to shifts in the market benchmark. Variable-rate mortgages are pegged to these benchmarks, which means if you have a variable-rate mortgage, your payment can be subject to change.

 

However, some borrowers opt for a variable-rate mortgage with a fixed payment. Similarly, these loans are subject to adjustment based on fluctuations in the benchmark interest rate.

 

However, rather than increase your monthly mortgage payment when interest rates rise, lenders reallocate how much of your payment goes towards interest rather than the principal balance of your loan.

 

Normally small interest rate adjustments aren’t a major issue, but the sharp increase to the benchmark interest rate has left several borrowers in the situation where reallocating their payment would result in no amount going towards principal. In fact, the new rate wouldn’t even be enough to cover the interest.

 

Since Canadian lending rules don’t typically allow negative amortization, borrowers hitting their trigger rate will need to choose from a handful of options once hitting this threshold.

 

Recent data from the Bank of Canada indicates that at the end of 2021 roughly a third of homeowners that had a mortgage had a variable interest rate. Of those borrowers, 80% had fixed payments².

 

What Are Your Options if You Hit Your Trigger Rate?

 

If you are a borrower with a variable-rate mortgage that has a fixed monthly payment and you are expected to hit your trigger rate, don’t panic.

 

Your lender should be reaching out to you to discuss a few different choices to deal with your rate adjustments. A few different options include³:

 

1.   Changing Your Payment

 

The first option to deal with hitting your trigger rate is to simply change your monthly mortgage payment so that at least some portion is going toward reducing your principal balance. This could mean extending the term of your loan if you have room to do so. If you can’t extend your loan term, increasing your fixed payment amount could also work.

 

2.   Make a Prepayment

 

Since your trigger rate is partially calculated by how much money you owe on your mortgage, making a one-time lump sum payment could be a variable option to help push your trigger rate higher.

 

Keep in mind that some lenders may have special rules for how many additional payments you can make and how they are applied to your loan. Make sure you review your mortgage documentation to see if this is permissible.

 

3.   Switch to a Fixed-Rate Mortgage

 

If you're really in a bind, your mortgage lender may permit you to switch your loan to a fixed-rate mortgage. While this is certainly an option, the downside is that your monthly mortgage payment will probably still go up. Also, note your rate will be locked in based on current market rates which could wind up costing you more money over time.

 

4.   Payoff Your Mortgage

 

Lastly, you always have the option to pay your mortgage off in full to avoid your trigger rate. However, depending on your loan balance this may not be an option for most borrowers. Even if you have the means, consider the impact tapping into your cash reserves may have on your current budget and future financial goals.

 

Key Takeaways

 

As Canada continues to try to manage the economic impacts of inflation, thousands of homeowners might soon see their monthly mortgage payments spike.

 

Those borrowers that chose variable-rate mortgages with a fixed monthly payment might soon hit their trigger rate if rate increases continue.

 

But while hitting your trigger rate isn’t ideal, rest assured there are still a variety of options that can help manage changes to your mortgage.

 

Adjusting your monthly payment, prepaying, or even modifying your loan to be a fixed-rate mortgage could all be ways to address your trigger rate without breaking your budget.

 

Sources

 

1 STOREYS. (2022, August 29). 750,000 Canadian Mortgages at Risk of Rising Trigger Rate Payments This Fall. Retrieved October 3, 2022, from https://storeys.com/750000-canadian-mortgages-at-risk-of-rising-trigger-rate-payments-this-fall/

 

2 Alini, E. (2022, July 27). What is your mortgage trigger rate? This calculator helps you estimate it. The Globe and Mail. Retrieved October 3, 2022, from https://www.theglobeandmail.com/investing/personal-finance/household-finances/article-calculate-mortgage-trigger-rate/

 

3 Choi, B. (2022, September 7). What is your trigger rate, and how does it affect your variable-rate mortgage? MoneyWise Canada. Retrieved October 3, 2022, from https://moneywise.ca/investing/mortgage-trigger-rates#:%7E:text=Generally%20speaking%2C%20the%20trigger%20rate,mortgage%20in%20January%20for%201.5%25

 

There is a lot that goes into preparing your home for sale, ideally leaving buyers with a great first impression that will hopefully result in them making an offer. But one of the things that might feel a bit intimidating is decluttering your space.

 

Research shows homes that are too cluttered make it much more difficult for buyers to envision themselves living in the space. Consequently, too much clutter can leave homes feeling smaller than they truly are.

 

According to the Processional Organizers of Canada (POC), unorganized homes are less appealing to homebuyers which can adversely impact your overall sales price.¹ It may also have buyers questioning whether your home was properly cared for or not.

 

Here are a few of the top strategies you should consider using to help you declutter your home and get it ready for potential buyers.

 

 

1. Perform an Initial Inventory and Spot Check

 

The first step to decluttering your home is understanding what you are working with. From larger projects to simple ones, taking a few minutes to look over effects that have accumulated will help you with goal setting and time management.

 

First, look at your home through the eyes of a potential buyer. Start by addressing the first things that catch your eye as these are the items that tend to be the immediate eyesores.

 

One of the best ways to create the illusion of more space is to focus on clearing off horizontal surfaces, such as counters, tables, and mantles.² Entertainment consoles and the tops of fridges are also often overlooked areas.

 

2. Divide Up Your Workload

 

One thing that helps a lot of sellers is divvying up the work to make decluttering your home more manageable. Tackling too much all at once can leave you feeling frustrated, stressed, and unmotivated.

 

Instead, consider decluttering from room-to-room basis. Starting with high traffic areas is ideal, however your starting point should make the most sense to your process and flow.

 

If working by room doesn’t resonate with you, consider decluttering by category. Some professional organizers feel the room-by-room approach isn’t always the most efficient method of decluttering.

 

Cleaning by category focuses on like-items and clearing those out before moving on to another subset. For example, if you have a lot of papers scattered from room-to-room, work on cleaning up those first (storing, recycling, junking, etc.) before moving onto something else. Clothes, books, and movies are a few other examples that could work well with the categorization method.

 

3. Create a Plan and Stick to It

 

Decluttering an entire home can be a large project. Once you have taken a preliminary inventory and divided up your work, the next step is to create a plan and schedule.

 

Having a formal plan will help you chip away at the work and will allow you to set key benchmarks. For example, say you only have a few set hours to declutter.

 

Maybe dividing those up equally over the weekend makes the most sense. You can even set a specific goal to have any given room done by a specific date.

 

Most importantly, don’t try to do everything all at once. It's more important to make incremental strides so you get a sense of accomplishment that will continue to motivate you through project completion.

 

4. Focus on Depersonalizing Your Space

 

If you want to draw in more buyers, focus your decluttering efforts on depersonalizing your space. When people look to buy a house, they want to imagine how they could potentially use the space. That is a bit hard with your personal photos and knick-knacks everywhere.

 

Alternatively, try to put more personal possessions in a safe storage space. This may include family photos, eclectic artwork, and unique decor.

 

Other key tricks to making your place less personalized is by repainting, focusing on neutral colors and schemes. You should also open curtains to allow natural light to flow into your home and provide the illusion of more space.

 

Sources

 

1 Professional Organizers in Canada. (2016, May 26). SOLD: Decluttering to sell your home. POC. Retrieved May 10, 2022, from https://organizersincanada.com/sold-decluttering-to-sell-your-home/

 

2 HomeChannel.ca. (2020, January 2). Selling a Home? How to Declutter in Two Weeks. HomeChannel.ca - News | Blog. Retrieved May 10, 2022, from https://www.homechannel.ca/news/selling-a-home-how-to-declutter-in-two-weeks

 

You often hear economists talk about the housing market in terms of sales metrics, mortgage rates, and home prices. But what many experts subtly discount is the role inflation has on market performance.

 

While inflation may seem like a strange concept, but it’s really just the measure of price increases for goods and services over a set period of time. This means that as inflation increases, your subsequent purchasing power declines.

 

For many, inflation often squeaks through without you ever really considering it's there. Maybe you pay a little more at the pump or spend a few more dollars on groceries each week.

 

But on a macroeconomic level it can have a tremendous effect on the economy, especially real estate. Let’s take a deeper dive and look at how this one key metric might be impacting your ability to buy a new home, obtain a mortgage, or lease that new downtown apartment.

 

 

The Impacts of Inflation on Canadian Real Estate

 

Canada’s inflation rate recently reached a high point in early February, hitting 4.8%. That’s not anything to scoff at especially when you consider the trajectory of housing prices.¹

 

For decades home prices have been on an upward climb, making affordability an ongoing concern. The COVID-19 pandemic certainly exacerbated this trend, although lower financing rates have certainly helped.

 

According to the Canadian Real Estate Association (CREA), home prices have grown over 300% over the course of the last two decades.¹

 

But the real problem is that rising inflation will only create another headwind that will impede buyers looking to purchase new homes by restricting their purchasing power.

 

Some buyers are already finding current home prices to be a challenge, with the average home price set at around $713,500.¹

 

Adding inflation into the mix, it can create additional barriers for potential buyers looking to obtain a new mortgage meaning they may delay buying and continue to rent for a longer period.

 

However, real estate investors should rejoice as investing in real estate has traditionally been an effective way to hedge against inflationary pressure. Furthermore, as more people turn to renting, there is the opportunity to earn a higher return on your investment compared to other asset types.

 

Another way inflation impacts real estate markets is by putting added pressure on inventory. New construction is one area that often struggles as inflation rises due to higher building costs.

 

Factoring in existing supply chain disruptions felt by the recent global health crisis, inflation could damper new housing starts for a prolonged period, translating to less homes available on the market for potential buyers.

 

Lastly, inflation often has an indirect impact on mortgage interest rates. As inflation increases, the government often raises rates to make borrowing more expensive and helps to cool the economy.

 

In early March, the Bank of Canada increased the benchmark interest rate to 0.5% which should help mitigate inflationary pressure.² On the flip side, higher interest rates make obtaining a new mortgage more expensive, hindering new home buyers. It's a fine, double-edged sword.

 

The Bank of Canada has recently announced its plans on additional rate hikes over the next year. While mortgage interest rates remain low, who knows how long that will last.² Despite where home prices are at, it may be advantageous to buy a home now before rates get any higher.

 

Sources

 

1 Boisvert, N. (2022, February 2). Inflation isn’t the main factor driving Canada’s sky-high housing costs, experts say. CBC News. Retrieved March 24, 2022, from https://www.cbc.ca/news/politics/housing-inflation-conservatives-1.6335633

 

2 Ting, M. (2022, March 6). Interest rates are rising. Is it time to switch to a fixed rate mortgage? CBC News. Retrieved March 24, 2022, from https://www.cbc.ca/news/canada/british-columbia/fixed-rate-variable-mortgage-interest-rates-1.6373827

 

There is no debate that the housing market has been performing exceptionally well over the last couple of years, despite headwinds brought about by COVID-19. However, borrowers now face new challenges in the form of increasing inflation and rising interest rates.

 

Mortgage interest rates have been near historical lows for some time as demand for homeownership remains high. But as the old saying goes, nothing lasts forever.

 

The Bank of Canada has already signaled it will begin to increase rates over the next year, starting near the end of February.¹

 

In fact, many analysts predict rates to jump fairly quickly. Markets anticipate around seven hikes throughout the year, although this would largely be dependent on how the economy is performing as a whole.

 

There are many reasons why it is advantageous to buy now rather than waiting until later when rates are higher. If you were on the fence deciding whether now is the right time to buy a new home, here are some things you should consider that may make you think twice about pushing off that new home purchase.

 

 

1.Lower Pricing and Costs

 

Buying your new home now versus waiting a couple of months could translate to thousands of dollars in savings. While small, incremental rate increases may not seem like a lot, when you consider the average home price across the country is around $720,850, even a fractionally higher interest rate can mean a lot more interest you will have to pay over the life of your loan.²

 

Similarly, lenders are also shifting focus to purchase activity as higher interest rates may start to dissuade and erode applications for refinancing. This means lenders will be competing against one another. Leverage the pricing competition to your advantage as markets transition into a purchase heavy cycle.

 

2.Heightened Purchasing Power

 

Increasing interest rates have a direct impact on the amount of home you can afford. Experts have often said that for every 1% increase to rates translates to approximately 10% less buying power.

 

Higher rates have a direct impact on loan amounts. For example, suppose you decide to purchase a modest new house, but have a strict budget that you cannot exceed for your monthly housing payment.

 

All else equal, your purchase power could decline substantially with even a minor increase in rates because in order to keep the payment the same for a mortgage with a higher rate, you would have to compromise by lowering the loan amount.

 

A swing in rates could spell a reduction of thousands of dollars in buying power which is why it's ideal to leverage your elevated purchasing power now, while rates are effectively low. Don’t lose out on your ability to get the most home for your budget.

 

3.Liberal Lending Standards

 

Another reason to buy a home now while rates are still low is because you never know when credit will be this cheap or easy to obtain again. In general, Canadian credit scores have been improving making it easier for you and other borrowers to qualify for a new home loan.

 

According to Borrowell, the average score in 2021 was 667, up from 649 in 2020.³ While your credit score may be well above or below this curve, the fact remains that creditors are still very willing to lend out money and the trend indicates borrowers should meet the benchmark criteria in qualifying for a new mortgage.

 

It's important to buy while credit standards remain more liberal and while borrower credit trends are improving. As rates increase, lenders may tighten lending requirements, which can make it harder to qualify for a new loan.

 

Key Takeaways

 

It’s finally time to take a step back and accept the fact that mortgage interest rates will be going up. The Bank of Canada has all but guaranteed rate increases over the next several months.

 

While it shouldn’t come as a shock since rates have been near historic lows for quite some time, now is the time to act to ensure you don’t leave thousands of dollars on the table.

 

Waiting to buy and see what rates will do is a risky move which could have wider implications than you realize. You could end up paying more for a similar home in a couple of months.

 

Far worse is if you are already someone who is on the edge of being able to afford a new home, rising rates could delay your ability and opportunity to buy a home for the foreseeable future.

 

It's important to consider buying now while factors like lower pricing, heightened purchasing power, and liberal lending requirements are still to your advantage.

 

Sources

 

1 Hughes, S. (2022, January 26). What a Bank of Canada rate hike could mean for mortgages and the housing market. Financialpost. https://financialpost.com/real-estate/mortgages/what-a-bank-of-canada-rate-hike-could-mean-for-mortgages-and-the-housing-market

 

2 Hughes, S. (2021, December 15). Average home price in Canada hits all-time high of $720,850. Financialpost.

Retrieved February 23, 2022, from https://financialpost.com/real-estate/average-home-price-in-canada-hits-all-time-high-of-720850

 

3 Surman, R. (2021, January 18). What is the Average Canadian Credit Score? Borrowell^TM. Retrieved February 21, 2022, from https://borrowell.com/blog/highest-canadian-credit-score-study

 

Don’t worry, it's not just you. Over the last few years, the size of condos has seen incremental declines in size and available space.

 

New data suggests that between 2015 and 2017, the median size of condominium units has decreased by around thirty-four square feet¹. While that may not seem like a lot, when you are already living in a smaller space every inch of space goes a long way.

 

Nevertheless, the fact remains that condos continue to be great investments and remain popular among owners (especially in metro areas). However, you may need to get creative when maximizing and organizing your living space.

 

If you are looking to get the most out of your small living space, consider these tips and techniques to help you get the most out of your condo’s storage space.

 

 

 

Store Smarter Not Harder

 

Since you are already working with less space than a traditional home, it's important to maximize functionality whenever possible. One of the best ways to do this is to buy furniture that has built in storage.

 

Using bed frames, sofas, or sectionals that have built-in storage underneath will help give you an extra place to stash your effects and help keep your floor free of clutter.

 

Similarly, aesthetic furnishing can have cross functionality². A great example is living room storage benches, chairs, or accents that work as additional seating if you’re hosting guests, but also work as a storage container for throw blankets, pillows, or other items.

 

Investing in smaller appliances with stacking storage are also an efficient way to keep your living space functional without sacrificing livability.

 

Up and Out of the Way

 

Loosen that feeling of crampedness by removing clutter off the ground by storing it up and away. One way to store away furnishings is to invest in floating shelves which can easily free up space and provide more breathing room to your space.

 

Storage hangers or bins placed on the back of doors can also help utilize unused space. Consider storing shoes, coats, or even towels this way, keeping them out of sight and out of mind.

 

 

Minimalism Meets Orderly

 

Incorporating a bit of minimalism can make your condominium feel like it's bigger than it actually is³. It can also supplant poor organizational habits to help make your space more orderly³.

 

Consider using various organizational containers with labels in your kitchen to help maximize your eating area and counterspace. Don’t stop there. Labeling can help you organize storage bins in other areas through your home including closets and bathrooms.

 

Embracing minimalism and doing more with less will help simplify household processes and help reduce clutter. For example, simple bulletin boards or wall organizers are also great and remove the need for that designated junk drawer, leaving you with more storage space.

 

 

Lock It Away

 

If you are buying a new condominium, consider if it came with a storage locker. While many older condos are void of separate designated storage areas, new units usually have such spaces for owners to stash belongings.

 

In order to maximize this resource, make sure to optimally organize your locker as best you can. Consider putting heavy items near the front so you don’t have to move and navigate through smaller items to get to them⁴.

 

Also, storage lockers are also prone to theft so make sure to keep more valuable items near the back if at all possible.

 

Lastly, consider your condo storage locker as a staging area for unwanted clutter. Use the space to clear up space around your unit until you find time to sell or donate unwanted effects⁴.

 

Sources

 

1 Grant, C. (2021, October 20). Assessing average condo size: Toronto paying more for less. Canadian Real Estate. Retrieved December 21, 2021, from https://www.canadianrealestatemagazine.ca/news/assessing-average-condo-size-toronto-paying-more-for-less-334871.aspx

 

2 Lue, A. (2017, January 09). 5 smart ways to maximize space in the incredible shrinking condo. Retrieved December 21, 2021, from https://storeys.com/5-smart-ways-to-maximize-space-in-the-incredible-shrinking-condo/

 

3 Breaux, A. (2020, January 10). This Tidy Toronto Condo is Packed with Organizing Ideas You'll Want to Steal. Retrieved December 21, 2021, from https://www.apartmenttherapy.com/organizing-and-storage-ideas-in-a-toronto-condo-tour-36701812

 

4 Assan, H. (2018, January 04). Living In A Condo? 4 Tips On How To Efficiently Use Your Storage Locker: Jiffy Self Storage Blog. Retrieved December 21, 2021, from https://www.jiffystorage.com/blog/storage-units/living-condo-4-tips-efficiently-use-storage-locker/

 

Whether you are buying a new home or already an experienced homeowner looking to refinance, lenders look at a multitude of factors when approving you for a new mortgage.

 

Recent data shows that 410,000 new mortgages originated in the second quarter of 2021 alone, which is a 60% increase compared to the same period the year prior¹. This isn’t surprising as home prices have gone up substantially over the last two years.

 

The Canadian Association of Accredited Mortgage Professionals (CAAMP) also notes that the average homebuyer finances roughly 67% of their purchase price². If you are looking to buy a new home or refinance to take advantage of the low-rate environment, here are a few factors your lender will be sure to analyze.

 

 

 

Credit Score

 

One of the first things that lenders look for when qualifying you for a new mortgage is your credit score. Credit data is pulled from the two Canadian credit repositories, namely Equifax Canada and TransUnion.

 

Scores often range between 300-900, with the lower representing poorer credit and the top end representing someone with excellent credit³. Requirements vary from lender to lender but, in general, most lenders require a credit score at or above 650³.

 

You can request a free copy of your credit report each year. The types of credit, payment history, credit utilization, and new inquiries all go into determining your overall credit score.

 

Outstanding Debt and Payment History

 

Lenders will review your outstanding debts and payment history to help determine your likelihood and ability to repay new credit requests.

 

While your payment history is already considered, in part, by your credit score, lenders will still review any outstanding balances you carry and their relation to your income to make sure you can support taking on new debt.

 

Ideally, you want to have no late or delinquent tradelines, especially on current or previous mortgages. However, the existence of these factors may not necessarily outright disqualify you from obtaining a new mortgage, so long as blemishes can be sufficiently explained and documented. If you can demonstrate you are a responsible borrower that can manage credit, you could still get approved for a new mortgage.

 

Qualifying Income

 

The amount of money you earn is a major factor that lenders analyze when approving you for a mortgage. Not only do they need to verify how much you earn but also the stability of your income and its likelihood of continuance.

 

For example, a full-time salaried borrower may have less hoops to jump through than self-employed borrowers or those relying on variable sources of income for qualification.

 

Lenders will typically want to see that you have a two-year history of receiving any income being used for qualification substantiated by supporting documentation such as recent paystubs, T4 statements, and/or personal T1 generals⁴.

 

Liquid and Non-Liquid Assets

 

Most lenders will want an itemized summary of your assets to review as part of your mortgage application⁴. This includes liquid assets such as checking and savings accounts but could also include non-liquid assets such as registered retirement savings plans (RRSPs) and vehicles.

 

Borrowers with substantial assets are often considered more responsible borrowers in the eyes of lenders because you have access to additional reserves should an unexpected event occur, that could temporarily impact your income used to make your monthly payments.

 

Down Payment

 

If you are buying a new home, lenders will want to know how much of your own money you are contributing to your purchase transaction. Putting down more money is more favorable than putting down less money because it reduces the overall risk to the lender.

 

If your down payment is coming from a typical bank account, lenders will often want to see a 90-day history showing the source of funds being used.

 

Other down payment sources, such as the net equity from the sale of another property should be documented with a fully executed purchase agreement and a mortgage statement for any existing mortgage loan secured by the property.

 

Gifted funds may also be an eligible source of down payment provided you have a signed gift letter and proof the funds have been received into your bank account from the donor.

 

Property Condition and Value

 

Lastly, lenders will need to analyze the condition and value of the subject property that will be used as collateral to secure your new mortgage loan.

 

Your lender may require an appraisal inspection report be completed before approving your credit request to make sure the value supports your requested loan amount. It also helps the lender identify any issues related to the property’s condition.

 

In some cases, you may find a lender who will approve a mortgage based on an automated valuation model (AVM) to determine your home’s property value, but it's never a guarantee.

 

Sources

 

1 Evans, P. (2021, September 05). Canadians have record-high mortgage debt. What happens when rates rise? | CBC News. Retrieved November 15, 2021, from https://www.cbc.ca/news/business/debt-mortgage-feature-1.6162668

 

2 Dunning, W. (2015, June). A Profile of Home Buying in Canada (Rep.). Retrieved November 15, 2021, from Canadian Association of Accredited Mortgage Professionals website: https://mortgageproscan.ca/docs/default-source/default-document-library/a-profile-of-home-buying-in-canada.pdf?sfvrsn=e54ef47e_0

 

3 Logan, H. (2021, August 18). Minimum Credit Score for a Mortgage in Canada. Retrieved November 15, 2021, from https://www.nerdwallet.com/ca/mortgages/minimum-credit-score-for-mortgage-canada

 

4 Cooper, S. (2021, October 21). Mortgages 101: Guide to Getting Your Mortgage. Retrieved November 15, 2021, from https://www.greedyrates.ca/blog/mortgages-101-a-guide-to-getting-your-mortgage/