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Friday, July 25, 2014

Can a Mortgage Be a Part of Your Investment Strategy?

With today's low interest rates it, sometimes makes sense to put the minimum down payment, say 20% in this case, and either invest the rest or keep the rest invested if you have additional funds. It's not hard to make a return higher than 2.5% to 3% although there may be a little risk. 


It also sometime makes sense to pull equity out of your home to invest. Of course there is definitely more risk here as you are borrowing to invest; but your borrowing at the lowest interest rates available. If considering an investment strategy like this always talk to at least two people; your mortgage advisor as well as a financial planner. Maybe even your accountant for that matter.


See the attached article I pulled from Canadian Mortgage Trends on this subject and their commentary on a recent survey below:


"For most home buyers, a mortgage is the only path to ownership. But a recent survey reveals that mortgages are also being used as a preferred investment strategy for wealthy Canadians.

The survey commissioned by Investors Group found that 67% of high-net-worth Canadians those with investable assets of $500,000 or more who have a mortgage could actually pay off their home in full if they so choose.

A full one-fifth of wealthy Canadians have mortgages, with an average size of $156,890.

There was a time when extinguishing one's debt was of paramount importance. This was particularly the case in the past where interest rates were higher and, for many, servicing debt precluded them from investing in future goals, whether that be retirement, education or the like,says Peter Veselinovich, vice-president of banking and mortgage operations at Investors Group.

Today that is not necessarily the case. Individuals may wish to retain current investments rather than triggering capital gains taxes. That means paying down the mortgage often isn't the best plan.

Other tax-efficient uses of mortgage debt include investing in income-producing assets such as real estate, as well as businesses or investments in the common term of the word effectively any asset that may yield a cash return, he said.

The low interest-rate environment requires only a modest return to service the debt incurred to acquire these assets, while the normal returns available to a prudent investor would be the icing on the cake, Veselinovich added. Mortgages provide access to lower-cost funds than many other lending facilities because they are seen by the lender as being fully secured, and have a built-in cushion (equity portion) in the event that the value changes over time.

Other interesting facts from the survey:

  • 32% of high-net-worth Canadians own additional commercial or residential properties

  • 42% have investment rental properties

  • More than one-quarter of wealthy Canadians (with mortgages) do not have plans to become mortgage-free before retirement"


Tony Marchigiano 1-155 Water Street

Mortgage Broker Vancouver, BC

cell: 604 505 7109

fax: 604 909 4666

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Thursday, July 17, 2014

Mortgage rules may be tighter for the self-employed, but options remain

This was the title of a recent article in the Globe & Mail and is something I would agree with. Mortgage rules are getting tighter including ones for self employed people, however, there are still options as long as you have at least 10% down payment as well as the following things that the article details:


If you are self-employed, live in a rural area or don’t have the best credit, you may find it increasingly difficult to get a mortgage.


Yet while tighter lending rules are making it harder for some people get approved by a bank, going to a second or third-tier lender isn’t something everyone is comfortable with.


Real estate experts say if you are self-employed, traditional lenders like the big banks may still lend you the money – it may just come at a higher interest rate, require a bigger down payment and increased scrutiny.


Customized products for the growing number of people who are self-employed often come with a minimum 10 per cent down payment instead of the usual five per cent, while the typical five-year closed rate for most is higher than what many banks are offering, said John Andrew, a real estate expert with Queen’s University.


Your chances are also better if you can show income tax records dating back a few years that suggest a steady income.


“If you can show your income tax records and things like that going back 10 or 15 years, and your income is fairly steady or even better, rising, they’re still going to consider you to be self employed, but you’re going to be about as well off as you can possibly be,” Andrew said.


“You’ll never be as good as somebody with a non-self-employed job, which is kind of ironic because you can still lose your job, and that’s the complaint that a lot of self-employed people have. They could be doctors or dentists or lawyers and be making $400,000 and have been doing it for 20 years, but at the end of the day, they’re still consider to be self-employed, and there’s always this suspicion that doesn’t apply if you can show a pay stub from your employer.”


Jason Scott, a mortgage associate with the Mortgage Group in Edmonton, says some people who are self-employed may also have difficulty getting approved by a traditional lender because the tax breaks available to them may make their income look lower than it actually is.


“If they’re being tax efficient, they’re paying more for that mortgage but they’re saving a lot of money on income tax,” he said.


Bad credit history is trickier, although some alternative lenders will still consider backing you if you can explain what happened.


“It has to have a story. It has to (give me) some sense as to why you were bankrupt,” said Matthew Robinson, chief executive of W. A. Robinson Asset Management Ltd., which backs mortgages through its Pillar Financial Services division.


“What happened? Were you sick? Did you go a through a divorce? (I need) a story that makes sense, not just that you had bad credit because you don’t know how to pay credit cards.”


That may get you a higher interest rate, but those lenders argue the rate is justified because of the risk attached, and because of the extra work that goes into verifying information and working to understand the circumstances that led to the bad credit.


“Everybody thinks they deserve a 2.99 (per cent) mortgage. But at the end of the day, a 2.99 mortgage is zero risk. It’s the lowest end of the scale,” said Robinson, whose company works with self-employed people, rural properties and also provides bridge financing for construction projects.


“If there’s any work involved, if there’s any administration on a any level, the bank cannot afford to do a 2.99 mortgage. There’s not enough room.”


He suggests talking to a mortgage broker who will have relationships with various institutions and be able to steer you toward the best mortgage for your particular situation.


“Mortgages are becoming so complex, and there are so many options for people, they should actually be using a mortgage broker even if they think they’re best client in the world,” says Scott, who has also written a book to help homeowners titled, Approved! Mortgage Advice for All Stages of Life.


“It becomes a case of you don’t know what you don’t know. There are so many strings and such fine print on mortgages these days that it really does pay to use a broker.”


Whatever approach you take, experts say there is always room to negotiate – whether on the mortgage rate or on the quality of your documentation.


And you would also be wise to put any mortgage documents you get from alternative lenders in front of a lawyer to make sure you are comfortable with the terms.


Full Article >


 Tony Marchigiano | Mortgage Broker |
Cell: 604 505 7109 | Fax: 604 909 4666
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Thursday, July 17, 2014

Vancouver home prices on the rise, to increase sharply by the end of the year: Royal LePage

Prices for all home types grew in 2014’s second quarter, according to Royal LePage’s house price survey released July 9, and these prices are expected to grow significantly by the end of 2014.


The biggest growth was seen in the average price of detached bungalows, which increased 5.2% to $1,107,290. Prices for two-storey homes increased 4.6% to $1,204,011.


Prices for standard condominiums stayed almost flat, increasing only 0.3% to an average of $491,984.


“Prices in Vancouver are up overall because of increased buying activity, due to continued low interest rates and a pent up demand leftover from a fairly slow start to 2014,” said Bill Binnie, broker and owner of Royal LePage North Shore.


“Sales are up this quarter due to more demand than we’ve seen in at least the past three years.”


Royal LePage forecasts Vancouver home price increases of 7.1% for the remainder of the year.


“The real estate environment is very stable right now, so the future of house prices depends a lot on interest rates. If the rates remain the same as they are currently, we can expect to see slow but steady price appreciation for the rest of the year,” Binnie said.


Inventory levels in the city are below the 10-year average, according to Chris Simmons, broker and owner of Royal LePage Westside.


“While there has been a steady supply of new housing being built over the last few years, the supply of listings has not increased markedly,” Simmons said.


Inventory levels are particularly low for detached bungalows, which is driving the prices higher. Condo inventories are continuously growing, keeping price increases lower.


Across Canada, home prices grew between 3.9% and 5.2% in 2014’s second quarter, with increases across all housing types. The national average price for detached bungalows grew 5.2% to $406,454. The price of two-storey homes increased 5.1% to $440,972 and standard condos increased 3.9% to $258,501. Royal LePage forecasts national average price growth of 5.1% for the year.


Full Article >

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Wednesday, July 9, 2014

Low Interest Rates Fuel Strong June Housing Starts

This was the title of a recent article in the Globe & Mail which discusses the fact that persistent low interest rates are fueling a escalation in housing permits/starts as well as sales of high end homes. Even after interest rates started climbing last summer and we were told it was the end of ultra low rates we're now back where we were last year with rates as low as 2.89% for a 5 year fixed mortgage term. It's been more than 6 years now of ultra low rates and every year economist have been predicting the rise.
See the full article below if interested:

B.C. court says the mortgage penalty class action against CIBC can proceed. The court “certified” the class action last week, meaning that the case can be heard and the evidence weighed.

According to Kieran Bridge, the plaintiff’s lead counsel in B.C., “the principal issue is whether mortgage language about prepayment penalties that was used by CIBC on mortgages entered into between 2005 and 2009 is so vague that it is void and unenforceable, so the penalties that were collected must be refunded to customers.


An alternative question, he says, “is whether the problems with the mortgage language limits any prepayment penalty to no more than three months’ interest on the amount prepaid.”

“Another significant issue is whether, even if the mortgage language is otherwise enforceable, the mathematical formula used by CIBC was improper and not permitted by the mortgage language, and led to overcharges that must be refunded.”

Particularly interesting is that the action claims that CIBC’s prepayment formula was “marked as being internally confidential.” That makes it sound like CIBC was trying to hide the formula from people, an allegation that CIBC would certainly deny, we suspect.

The next steps following a class action certification are generally the production of documents by both parties and the holding of examinations for discovery. Bridge adds that this ruling also enables parallel class actions in Ontario and Quebec to apply for certification.


This case has been going on since 2011. It all came about when lead plaintiff Erin Sherry broke her FirstLine mortgage early and got dinged with a $47,000+ penalty. CIBC, which owns FirstLine, later reduced the prepayment charge and Sherry further recouped the losses when she refinanced at Macquarie Financial at a lower interest rate. But that wasn’t enough for her to drop the case.


Here is the judgment if you’re interested. The allegations against CIBC have not been proven.

Full Article >


Tony Marchigiano | Mortgage Broker |
Cell: 604 505 7109 | Fax: 604 909 4666

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Wednesday, July 9, 2014

REBGV June Stats

The Greater Vancouver housing market enters the summer season with home buyer activity on the rise.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Greater Vancouver reached 3,406 on the Multiple Listing Service® (MLS®) in June 2014. This represents a 28.9 per cent increase compared to the 2,642 sales recorded in June 2013, and a 3.7 per cent increase compared to the 3,286 sales in May 2014.

Last month’s sales were 0.6 per cent above the 10-year sales average for June of 3,386.

“Competition amongst home buyers today is as strong as it’s been in the region since 2011,” Ray Harris, REBGV president said.

 The sales-to-active-listings ratio currently sits at 21.3 per cent in Greater Vancouver, which is the highest this measure has been since June 2011.

 “Over the last three years, we’ve seen changes in demand yet home prices at the regional level have remained relative stability,” Harris said. “While these numbers provide high level trends, it’s important to know that changes in prices always vary depending on neighbourhood and property type. Consult your local REALTOR® for information on trends in your area of choice.”

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $628,200. This represents a 4.4 per cent increase compared to June 2013.

New listings for detached, attached and apartment properties in Greater Vancouver totalled 5,339 in June. This represents a 9.5 per cent increase compared to the 4,874 new listings in June 2013 and a 10.1 per cent decline from the 5,936 new listings in May. Last month’s new listing count was 2.6 per cent below the region’s 10-year new listing average for the month.

The total number of properties currently listed for sale on the MLS® system in Greater Vancouver is 16,011, a 7.4 per cent decline compared to June 2013 and a 0.4 per cent decrease compared to May 2014.

Sales of detached properties in June 2014 reached 1,462, an increase of 32.7 per cent from the 1,102 detached sales recorded in June 2013, and a 58.7 per cent increase from the 921 units sold in June 2012. The benchmark price for detached properties increased 6.2 per cent from June 2013 to $976,700.

Sales of apartment properties reached 1,308 in June 2014, an increase of 22.5 per cent compared to the 1,068 sales in June 2013, and a 27.5 per cent increase compared to the 1,026 sales in June 2012. The benchmark price of an apartment property increased 2.4 per cent from June 2013 to $378,000.

Attached property sales in June 2014 totalled 636, a 34.7 per cent increase compared to the 472 sales in June 2013, and a 53.3 per cent increase over the 415 attached properties sold in June 2012. The benchmark price of an attached unit increased 3.1 per cent between June 2013 and 2014 to $471,200.

Full Stats Package >

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Thursday, July 3, 2014

Consumers Are Increasingly Doing Business With Mortgage Brokers

A recent survey by CMHC (Canadian Mortgage Housing Corporation) has determined that consumers are increasingly using brokers to help them with their mortgage financing as reported by Canadian Mortgage Trends.


A portion of the article is attached below along with some of the benefits of working with a broker:


2014 CMHC Mortgage Consumer Survey



CMHC’s Mortgage Consumer Survey is one of the best looks at mortgagor behaviour because, unlike most other industry surveys, it focuses only on recent borrowers.


And those recent borrowers are telling us something interesting. Despite fierce direct competition from lenders, consumers are increasingly doing business with brokers. Brokers have picked up market share in 3 out of 4 mortgage categories tracked by CMHC.


Here are some of the benefits of working with a mortgage broker:


-       Mortgage Brokers are specialists in ALL mortgage products. Our role is to act as a link between you and  

        the banks so that you do not have to spend your valuable time shopping around for the perfect mortgage.


-       Rather than working for one financial institution, brokers deal with many lenders all across Canada.

        Brokers can offer you more choices and more competitive rates.


-       Expert, unbiased and fast service is FREE!


-       They are not tied to any specific lending institution and yet the perfect lender for your mortgage

         reimburses us with a “finder’s fee.”


-       There are no broker costs hidden in your mortgage and lenders pay standard fees.


-       Every client is going to have different goals, dreams and plans. Some brokers specialize in making sure

         that your financing is going to facilitate your dreams.


-       Annual reviews to discuss and make plans to pay your mortgage off faster. 


-       Your broker can be your first stop for all mortgage inquiries and changes going forward, not the lender

         your mortgage is placed with. (Optional)


-       If your situation requires special attention, brokers have access to several equity and private lenders so

         that every client can find the financing they require.



Tony Marchigiano                          1-155 Water Street

Mortgage Broker                            Vancouver, BC               


cell: 604 505 7109

fax: 604 909 4666

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Thursday, July 3, 2014

Vancouver real estate hot spots identified


Certain neighbourhoods in Vancouver are becoming real estate hot spots, with buyers in bidding wars sometimes paying significantly over asking the asking price to settle in their dream location.

According to Ray Harris at the Real Estate Board of Greater Vancouver, homes listed in Vancouver East are typically selling 15 days faster than those listed in other parts of the city.


The area, he says, is the hottest it's been for three years.


Realtor Lorne Goldman identifies the Main and Fraser neighbourhoods as the most popular right now, with demand significantly outstripping supply.


He says it's not unusual for sellers to receive nine or 10 offers.


"Frequently, there are offers with hundreds of thousands over the list price," he says. "Recently one sold — on a 33 foot lot — for $1.53 million. The prices are escalating promptly in that area."


Just a few blocks west, in the Cambie area, realtor Clair Rockel says June is typically a slower month, but that's not the case this year.  


She says the demand is coming from local buyers, who have wanted to live in these neighbourhoods for a long time.


"You have people approaching agents that are known to do a lot of business in certain neighbourhoods and they say, 'We need this and we are willing to pay a premium for that'," said Rockel.

"I saw it a few years ago, and I saw it before that in 2007...We have a market where the supply just cannot keep on with demand."


Full Article >

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Thursday, June 26, 2014

Canada`s Anti-Spam Legislation

Canada's new anti-spam law was passed in  December 2010 and, following a Governor in Council order, it will enter into force on July 1, 2014. Once the law is in force, it will help to protect  Canadians while ensuring that businesses can continue to compete in the global marketplace. On January 15, 2015, sections of the Act related to the unsolicited installation of computer programs or software come into force.


When the new law is in force, it will generally prohibit the:


  • - sending of commercial electronic messages without the recipient's consent (permission), including     messages to email addresses and social networking accounts, and text messages sent to a cell phone;
  • -alteration of transmission data in an electronic message which results in the message being delivered to a different destination without express consent;
  • -installation of computer programs without the express consent of the owner of the computer system or its agent, such as an authorized employee;
  • -use of false or misleading representations online in the promotion of products or services;
  • -collection of personal information through accessing a computer system in violation of federal law (e.g. the Criminal Code of Canada); and
  • -collection of electronic addresses by the use of computer programs or the use of such addresses, without permission (address harvesting).

There are three government agencies responsible for enforcement of the law. When the new law is in force, it will allow:


  • -The Canadian Radio-television and Telecommunications Commission (CRTC) to issue administrative monetary penalties for violations of the new anti-spam law.
  • -The Competition Bureau to seek administrative monetary penalties or criminal sanctions under the Competition Act.
  • -The Office of the Privacy Commissioner to exercise new powers under an amended Personal Information Protection and Electronic Documents Act.

It will also allow all three agencies to share information with the government of a foreign state if the information is relevant to an investigation or proceeding in respect of a contravention of the laws of a foreign state that is substantially similar to the conduct prohibited by this Canadian law.


The law will also allow individuals and organizations who are affected by an act or omission that is in contravention of the law to bring a private right of action in court against individuals and organizations whom they allege have violated the law. Once into force, the private right of action will allow an applicant to seek actual and statutory damages. Statutory damages may not be pursued if the person or organization against whom the contravention is alleged has entered into an undertaking or has been served with a Notice of Violation.


Before filing a lawsuit against an individual or organization, get legal advice. An individual or organization could be responsible for paying considerable legal fees incurred by the alleged violator if they file an improper claim or one that is not considered to have merit.


More Info >

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Thursday, June 26, 2014

Do Credit Unions Really Have Better Mortgage Rates? Sometimes.

A recent article in the Globe & Mail called "A cheaper, under-the-radar mortgage option: credit unions" talks about credit unions offering lower rates than other lenders including the big banks, however, in my opinion this is not always the case. This past fall I was putting the many of my clients with a local credit union as they were offering the best rate on the market with full mortgage prepayment options to pay off your mortgage faster. As a mortgage broker I'm able to shop the market to determine what's best for my clients depending on their individual circumstances and what is being offered in the market at that time.
There are definitely pros and cons to every lender including credit unions. Credit unions are sometimes more flexible around approval options and have access to 35 year amortizations still but a big thing to consider is that they are local so in many cases if you moved from one province to another you may not be able to take or "port" your mortgage to a property outside of the province they do business in. This could result in a hefty penalty if breaking your mortgage term before maturity.
Here's the full article if interested:

When you last shopped for a mortgage, did you consult with a credit union? If you’re like more than four out of five recent home buyers, you didn’t.


Most mortgage shoppers overlook credit unions (CUs) because they think the rates aren’t good enough, or CUs aren’t convenient enough, or that they’ll save more by consolidating banking at their bank. But credit unions are dead set on changing those perceptions, and they’re fuelling mortgage competition in the process.


We saw that competitive spirit in February when Meridian, the country’s fourth-largest credit union, became the first major financial institution in 2014 with a five-year fixed mortgage under 3 per cent. That first mover advantage paid off. “Our pipeline of mortgages is double what it was last year,” says Meridian chief member services officer Bill Whyte.


And just this month, Ontario’s DUCA Financial Services launched the lowest five-year fixed rate in the country through select mortgage brokers.


As we speak, the top 10 CUs are advertising five-year fixed rates that average 0.56 percentage points lower than the top 10 banks, according to That’s not including the profit sharing that some CUs pay mortgage customers. These “member dividends” can range up to $200-plus per year for every $100,000 of mortgage.


Of course, banks can and do offer “discretionary” rates below their advertised rates. But discretionary rates aren’t visible on the Internet, where four out of five consumers go to research mortgages. That benefits credit unions, to the extent they publish lower advertised rates.


Like credit unions, banks are also recognizing that low rates can sell themselves. Bank of Montreal’s much-publicized 2.99-per-cent promotions helped make it No. 1 among big banks in mortgage market share growth since 2012. And now we’re seeing other banks jump on that bandwagon, including Bank of Nova Scotia and Toronto-Dominion Bank, which both ran sub-3 per cent five-year fixed specials this spring.


But credit unions are going a little further to win mortgage share, and people are taking notice. In 2013, CU mortgage portfolios grew 58 per cent faster than the overall market. And they show no signs of letting up.


CUs kicked their mortgage campaigns into high gear last summer. And the market share growth chart at the bottom of this column shows it. Credit union analyst David McVay, of McVay and Associates, attributes that growth spurt largely to credit unions’ “aggressive pricing.”


But low rates aren’t their only edge. CUs also pitch that they are member owned, not owned by outside investors. They don’t have to pay dividends to 3rd-party shareholders, which lets them work on smaller margins and/or pay dividends to their customers instead.


Regulation is also an advantage. “Being provincially regulated, we have more mortgage options available to our members than the big banks,” Meridian’s Mr. Whyte says, “… and we’re appropriately leveraging that, albeit not cutting any corners.”


Those mortgage “advantages” vary widely by credit union, but can include higher borrowing limits on a home equity line of credit, 35-year amortizations for those putting down 20 per cent or more, 100 per cent financing and easier qualification rules for conventional variable-rate mortgages and terms less than five years.


But if credit unions are so great, why do they have a piddly 8 to 13 per cent of mortgage market share, depending on whose statistics you believe?


Awareness is a major challenge. CUs don’t have $200-million to $300-million a year to spend on marketing like the banks do. “I would suggest we haven’t got our story out there about how co-operative banking is an alternative to the banks … and the fact that we can do almost everything the banks can do,” Mr. Whyte says.


To counter that, CUs are increasingly running high-profile rate specials, some of which are being picked up by the media. They’re also doing a lot of joint marketing. Last year, for example, a group of Ontario credit unions got together to promote co-operative banking. They’ve never done that before, Mr. Whyte says.


One area where banks outclass most credit unions is mortgage funding, an area where credit unions are clearly not created equal. However, the larger CUs – Vancouver City Savings Credit Union, Coast Capital, Servus and Meridian – can compete with the big banks through their access to millions of dollars of cheap deposits, their main source of mortgage funding.


After deposits, the next cheapest way to fund mortgages is securitization – i.e., packing mortgages and selling them to investors. And CUs are securitizing like never before. In Ontario, for example, CU mortgage securitization grew 36.2 per cent last quarter, dramatically faster than the industry.


Compared to the big boys, smaller credit unions don’t have as much low-cost capital, so they’re often not as competitive on rates. But even there you can find exceptions, like Toronto’s Slovenia Credit Union and its 2.89-per-cent five-year fixed.


The Internet is the great equalizer for micro-credit unions like Slovenia. Whenever they have excess deposits to lend out, they can cheaply advertise ultra-low rates online to thousands of potential customers. “The Internet will help [credit unions] level the playing field with the big banks,” Mr. Whyte adds.


The Internet also makes it easier to attract new customers. Meridian, for example, is launching a new website next month that lets people join the credit union online, instead of driving to a branch.


Despite their co-operative spirit, however, CUs have an uphill battle to steal share from the dominant banks. Banks are ubiquitous and perceived safe, so people park most of their accounts with them. Moreover, consumers’ preference for one-stop financial shopping gives banks an edge in the mortgage game.


But mortgages are a big deal to CUs too. They account for about half of their revenue and roughly 60 per cent of the loans they make. Furthermore, mortgages give them a chance to cross-sell things such as credit cards, GICs and RRSPs.


So despite being around for 113 years, this is only the beginning for Canadian credit unions in the mortgage market. They’re going to battle to the bone for your mortgage, and the competition they incite will benefit all borrowers.


Full Article >


Tony Marchigiano

1-155 Water Street

Mortgage BrokerVancouver, BC


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Thursday, June 19, 2014

10 Tallest Buildings in Vancouver

Vancouver is known for its mountain views, but below these mountains stand some tall buildings.Centred in the downtown core, these buildings follow some strict guidelines to preserve YVR views, but that doesn’t mean you won’t feel pretty small surrounded by these skyscrapers.


Scroll through the list below, from shortest to tallest, to find out some fun facts about these massive towers. Watch for a bonus at the end!


10. Bentall 5: 550 Burrard St.
9. Park Place: 666 Burrard St.
8. Fairmont Pacific Rim: 1038 Canada Pl.
7. Royal Centre: 1055 West Georgia St.
6. The Melville: 1189 Melville St.
5. Harbour Centre: 555 West Hastings St.
4. Shaw Tower: 1067 West Cordova St.
3. One Wall Centre (aka Sheraton Vancouver Wall Centre): 1088 Burrard St.
2. The Private Residences at Hotel Georgia: 667 Homer St.
1. Shangri-la: 1128 West Georgia St.


Full Article and Slide Show >

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Thursday, June 19, 2014

Is your Mortgage registered as Residential or Collateral? Here are the pros & cons of both.

There has been some recent negative media attention lately around Collateral Mortgages. There are definitely pros and cons for both Collateral & Residential. What's the difference? Well it's in the way it's registered at land titles. A residential mortgage is a more traditional way of registering a mortgage.

Collateral mortgages have gained popularity over the last 20 years or so. There are lots of benefits to them. A home equity loan, which is registered as a collateral mortgage, gives you features and benefits such as the ability to split your mortgage balance between fixed and variable rates in order to hedge against the ups and downs of rates over the life of the mortgage.

It also allows you to have a line of credit built in for future borrowings. Some lenders and banks offer collateral and residential mortgages. Where some of the media attention has been focused lately is on the lenders and banks who only offer collateral mortgages like, as reported in a recent CBC news story, TD, ING Direct, National Bank and various credit unions.

The con getting the media attention is the fact that it is more difficult & expensive to switch your mortgage from one lender to another with a collateral mortgage.

The mortgage has to paid out completely and reregistered at land titles. Of course to do this will involve incurring legal fees and more paperwork. There are a couple lenders who will pay for those legal fees. 

My advice; ask your Mortgage Advisor in the early stages of the application process. Will my mortgage be a collateral or residential one? 

If you have any questions around this topic please don't hesitate to call me anytime to discuss or clarify. 


 Tony Marchigiano1-155 Water Street

 Mortgage BrokerVancouver, BC

 cell: 604 505 7109

 fax: 604 909 4666

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Thursday, June 12, 2014

Are shorter amortizations always better? Not always.

A recent article in the Globe & Mail discusses 4 reasons why a longer amortization might be better. This goes against what most think, that is, that a shorter amortization is always the way to go. 
Take a look at the full article to find out who it might benefit and why…

For years we’ve been taught that shorter mortgage amortizations are better. Most people in the mortgage business don’t challenge this premise and certain lenders preach it as gospel.


Consider this recent statement by a bank spokesperson: “Choosing a shorter amortization is the most responsible approach to home financing. It’s something we have been encouraging our customers to consider for years, as it means becoming debt-free sooner.”


How wise is that advice? Do longer mortgage repayment periods truly cost you more, all things considered?

In some cases the answer is unequivocally no. Longer amortizations, which spread your payments over 30 or 35 years instead of the traditional 25, can cost you significantly more in mortgage interest. But consider these four scenarios where “longer” is actually better.


1.) You have other high interest debt

Extended amortizations – for example a 30-plus year repayment period – lower your mortgage payments, freeing up cash flow. That’s cash you can put to better uses.


Suppose you’re paying 3.5 per cent on a mortgage but have a car loan at 6 per cent or credit card debt at 18 per cent. Why on earth would you pay more than you had to on your mortgage?


2.) You have higher-yielding investments

Even if you’re debt free, a longer amortization can still make sense. The trick is, you must earn an after-tax return on your investments that’s higher than your mortgage rate.


For example, if you’ve got a 3.5 per cent mortgage but can earn 4.5 to 5 per cent on tax-sheltered investments (like those in a tax free savings account), a financially secure homeowner is often better off lengthening their amortization and directing the mortgage payment savings to those investments.


There’s a caveat of course. Investment returns are more risky than pre-paying a mortgage, which is essentially a guaranteed return. Therefore, you must be able to withstand – or wait out –potential investment losses. Assuming you don’t need to cash in the investments for 10 years or more, the odds are very good, historically speaking, that you’ll generate positive returns.


“I can live with [the assumption of] an expected 5 per cent nominal return on balanced investments over the long run,” says Moshe Milevsky, a finance professor at York University’s Schulich School of Business. He says that even the conservative Canada Pension Plan targets almost 4 per cent annual returns, after inflation.


3.) You expect low long-term mortgage rates

One of the most important concepts in finance is the “time value of money.” This is the idea that money in your hand today is worth more than the same amount of money in the future. That’s because you can invest money today to earn a return over time.


By definition, the time value of money holds that a 25-year amortized mortgage has the exact same present value (cost in today’s dollars) as one with a 35-year amortization, assuming equal interest rates.


Put another way, you’re no further ahead by choosing the shorter 25-year amortization, so long as:


a) You invest the payment savings of a longer amortization in something that earns you at least the same rate of return as the interest rate on the shorter amortized mortgage.


b) Your average mortgage rate in years 26 to 35 is roughly less than or equal to your average rate for the first 25 years. (Remember, with a 35-year amortization you’d still have 10 years of payments after year 25.)


4.) You think inflation will rise long-term

Time value of money also comes into play here. The higher the rate of inflation, the less your money is worth in the future.


“If you believe that inflation now is artificially low; if you believe that inflation can only go up, you want to borrow money for longer,” Mr. Milevsky says. “Inflation benefits the borrower.”


“If inflation spikes tomorrow you’re better off with a longer amortization,” he adds, because you’d be repaying your mortgage loan with “devalued dollars.”


Put another way, the smaller the difference between your mortgage rate and the rate of inflation, the less sense it makes to pay off your mortgage quicker (and the greater the benefit of a longer amortization).


A word of warning

A longer amortization means you pay less principal with every regular payment. In turn, you’ll have a bigger balance every time you renew the mortgage.


After 10 years, for example, a $200,000 mortgage at 3 per cent interest would leave you a:

  • - $137,235 balance if you chose a 25-year amortization
  • - $162,205 balance if you chose a 35-year amortization.

If today’s historically low rates rise by the time you renew, a longer amortization means you’ll pay more interest on a bigger balance. This is a key risk that your other investments would need to offset.


Where do you get a long amortization?

The standard amortization in Canada is 25 years. But if you have at least 20 per cent home equity, most lenders will offer you 30 years. A handful of lenders (e.g., Alterna Savings, B2B Bank, Coast Capital Savings, First Ontario, RMG Mortgages, Vancity) even have 35 year amortizations.


The free option

Shorter amortizations force homeowners to save more, which can aid the less disciplined among us.


But if you’re a well-qualified borrower, have a savings mentality and are eligible for a longer amortization, a 30– to 35-year amortization is one of the best free options you can get.


Remember that even with an extended amortization, you can easily make optional extra payments to replicate a shorter amortization. You can even automate those extra payments. Then, if an investment opportunity arises or you need extra cash for personal reasons, simply reduce your mortgage payments back to the minimum and divert the cash flow to a better use.


For the right borrower in the right circumstances, longer mortgage repayment periods can be a sound strategy.

“Borrowing money at cheap rates, to invest in long-term and more profitable projects makes perfect sense,” Mr. Milevsky says. “If it works for the biggest companies in the world, it can work for you…but beware of the risks.”


Full Article >


Tony Marchigiano | Mortgage Broker |
Cell: 604 505 7109 | Fax: 604 909 4666
1 - 155 Water Street |




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Thursday, June 12, 2014

Vancouver aims to slow rate of heritage house demolitions

Applications to demolish and replace single-family houses in Vancouver have surged so much this year that city staff can’t keep up, even as the wheels of council grind toward a new heritage-protection policy.


The city’s general planning manager said there are 250 current applications for new single-family houses as he laid out policies Tuesday aimed at slowing down the rate of destruction for pre-1940 houses. In Vancouver, an application for a new single-family home almost always means the removal of an older one.


After months of mounting public anxiety about the rising numbers of character houses being torn down, manager Brian Jackson said Tuesday the numbers are scary.


Demolition statistics show that pre-1940 houses in Vancouver are significantly more likely to be torn down than newer ones, and most of the pre-1940 teardowns the last five years have been on the west side. Forty per cent of houses torn down since 2008 have been pre-1940 houses, even though those buildings only represented a quarter of the homes in the city.


“It really begins to tell a story that we’ve got a problem,” said Mr. Jackson, as he laid out the proposal for change that the Vision Vancouver council asked for last December. Councillors will vote on the measures Wednesday after hearing speakers.


Those proposals include some incentives, such as giving owners permission to add more space to their character house if they retain it. And there are disincentives, such as requiring anyone demolishing a pre-1940 house to ensure that 90 per cent of it is recycled.


Staff are also proposing a temporary moratorium on any demolitions in First Shaughnessy, the city’s original wealthy suburb created by the Canadian Pacific Railway in the early 1900s. Thirty-seven pre-1940 houses have been torn down there since 1982; 16 demolition applications have come to city hall just in the last year and a half.


Mr. Jackson said the city’s new building code, coming into effect July 1, also allows city staff to be more flexible about upgrades when homeowners are renovating older houses.


The suggested changes have produced a wide spectrum of responses.


Councillor Elizabeth Ball said many seniors in Dunbar and Kerrisdale, who are the biggest group of owners of the city’s character-house stock there, are being scared by real-estate people telling them the new protective measures will cause the price of their homes to fall because new owners won’t be able to redevelop.


“What is going to make it possible for the senior trying to maximize the value of their home?” she asked, even though her party, the Non-Partisan Association, has generally been critical of Vision Vancouver for not doing enough to protect the city’s older homes.


But people who have been mounting campaigns to save the city’s character houses say the policies, while at least a start to doing something about the problem, are too limited.


Marion Jamieson, who plans to bring her concerns to council Wednesday, said she’s afraid the new policies will just mean more demolitions in her neighbourhood, upper Kitsilano. That’s because many of the older houses there are from the 1940s and won’t be protected under the city’s cutoff date.


Elizabeth Murphy, a former city planner, said the new policy is weak and broad-brush, compared with the very detailed zoning bylaw that was put in place in west Kitsilano during the 1980s to save character houses there from demolition.


Ms. Murphy said the new requirement to recycle 90 per cent of a pre-1940 house, if the owner insists on demolishing it, is more of an inconvenience than a barrier. Mr. Jackson told councillors that recycling adds about 20 or 25 per cent to the normal $16,000 cost of demolition.


She also said the city needs to go back and look at some of the changes made in 2009 that led to the current demolition frenzy – changes that allowed laneway houses, higher houses and more basement space.


Full Article >


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Thursday, June 5, 2014

Looking for a "New Normal" in the Residential Mortgage Market


Recently, CAAMP (Canadian Association of Accredited Mortgage Professionals) released its spring consumer report, Looking for a “New Normal” in the Residential Mortgage Market.

The report, compiled by Will Dunning, CAAMP’s chief economist reveals that first-time home buyers continue to enter the Canadian housing market in substantial numbers and feel confident they can weather a downturn in the housing market.


Overall, Canadians still feel optimistic about the economy in the coming 12 months, and say they have no regrets taking on the size of mortgage they did.  The report also includes information on consumer borrowing behavior and an outlook on residential mortgage lending.


Full Press Release >




Tony Marchigiano1-155 Water Street
Mortgage BrokerVancouver, BC
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Thursday, June 5, 2014

REBGV Stats May 2014

An increase in home buyer demand put Greater Vancouver in the upper reaches of a balanced real estate market in May.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Greater Vancouver reached 3,286 on the Multiple Listing Service® (MLS®) in May 2014. This represents a 14 per cent increase compared to the 2,882 sales recorded in May 2013, and a 7.7 per cent increase compared to the 3,050 sales in April 2014.

Last month’s sales were 6.5 per cent below the 10-year sales average for May of 3,514.

The sales-to-active-listings ratio currently sits at 20.4 per cent in Greater Vancouver, which is the first time that this measure has been above 20 per cent since June 2011.

“Our MLS® statistics tell us that there’s more home buyer demand today than at any point over the last three years,” Ray Harris, REBGV president said. “With sales surpassing the 3,000 mark in May and our sales-to-active-listing ratio exceeding 20 per cent, this is the most active marketplace we’ve seen since the spring of 2011,”

New listings for detached, attached and apartment properties in Greater Vancouver totalled 5,936 in May. This represents a 5 per cent increase compared to the 5,656 new listings in May 2013 and a 0.2 per cent decline from the 5,950 new listings in April. Last month’s new listing count was 2 per cent below the region’s 10-year new listing average for the month.

The total number of properties currently listed for sale on the MLS® system in Greater Vancouver is 16,072, a 6.7 per cent decline compared to May 2013 and a 3.6 per cent increase compared to April 2014.

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $624,000. This represents a 4.3 per cent increase compared to May 2013.

“Home prices have experienced consistent yet modest increases in our region since the beginning of 2013,” Harris said.

Sales of detached properties in May 2014 reached 1,453, an increase of 19.9 per cent from the 1,212 detached sales recorded in May 2013, and a 23.1 per cent increase from the 1,180 units sold in May 2012. The benchmark price for detached properties increased 5.4 per cent from May 2013 to $966,500.

Sales of apartment properties reached 1,286 in May 2014, an increase of 13.2 per cent compared to the 1,136 sales in May 2013, and an 11.2 per cent increase compared to the 1,156 sales in May 2012. The benchmark price of an apartment property increased 3.2 per cent from May 2013 to $377,500.

Attached property sales in May 2014 totalled 547, a 2.4 per cent increase compared to the 534 sales in May 2013, and a 5.8 per cent increase over the 517 attached properties sold in May 2012. The benchmark price of an attached unit increased 3.1 per cent between May 2013 and 2014 to $469,100.

Full Stats Package >

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Friday, May 30, 2014

Are Low Mortgage Rates Here To Stay?


A recent article on Canadian Mortgage Trends discusses this idea and the fact that Economist, Benjamin Tal, said, last August, that the end of ultra low rates was here when rates started to rise but here we are again with 5 year fixed rates below 3%.


Former Feds Chief, Ben Bernake, was, in private, reported to saying, that the Feds Fund rate (one of the most influential in the world) would not return to the norm in his lifetime.


If rates do stay as low as they are, and it is the new norm, it would make any correction in the housing market sometime far off in the future, if ever. Also if rates stay low and/or rise very slowly over a longer period of time then there's an argument that increases in income, over time, could counteract that. 


Whether this forecast is comes true or not you should stress test your mortgage or your pre-approved financing prior to purchasing to make sure you're prepared either way.


The full article suggests what to ask & the tests to do to prepare or contact your Mortgage Advisor to do it for you.


Sustainably Unsustainable


“I think this is the real thing. This is the end of extremely low interest rates. They’re simply unsustainable.” – Economist Benjamin Tal, August 2013


Benny Tal is one of the sharpest economic analysts on the block. For him to go out on a limb like this shows how convincing the rate-hike thesis was last summer.


Since that time, the unsustainable has proven quite sustainable.


Following the spring/summer rate spikes of 2013, homeowners feared that the low-rate ship had sailed. And now, only 6 to 7 months later, the market is again flush with sub-3% mortgages.


Just yesterday, in fact, Scotiabank launched the lowest mass-market 5-year fixed rate in its history: 2.97%. (Mind you, this is a rate the bank could have marketed last year, had the previous Finance Minister — with all due respect — not suppressed rate competition.)


Of course, Scotia’s offer trails credit unions and brokers, who have already been quoting 5-year rates in the 2% range for most of this year.


The point is, despite what credible commentators may forecast, and despite how hawkish the economic data may get, rates may go up but they don’t have to stay up.


Each day that passes, the market gets slightly more comfortable with the notion that low rates are a long-term phenomenon, due in large part to demographics and structural economic changes. Former Fed chief Ben Bernanke reportedly opined in private recently that the Fed Funds rate (one of the most influential interest rates in the world) would not return to its long term average in his lifetime.


Economic analysts are now acknowledging the possibility of a neutral Bank of Canada rate that’s just 1 percentage point above today’s 1.00%. Talk like that would have been considered heresy at the turn of this century.

The above is all educated speculation of course, but it’s something to consider after you’ve assessed all other term selection criteria. Those being:


  • - Your tolerance for higher rates (and thepotential for a 25-35% jump in your payments and/or interest cost).
  • - The premiums being charged for rate certainty — i.e., how much more you’ll pay for longer fixed-rate terms.
  • - The probability of you refinancing or moving before your mortgage term is up.
  • - The proven tendency of short-term rates to outperform long term rates.
  • - Your ability to qualify in the future based on your employment situation, marital status, rental property      
  •    holdings, etc.
  • - The benefit of diversifying your rate exposure (e.g., choosing a hybrid mortgage, or choosing a fixed
  •   mortgage if you’ve already got heavy exposure to long-duration fixed income investments.)
  • - And so on…

If your plan incorporates these factors and today's rates truly are unsustainable, at least you’ll be able to ride out the increase with confidence.


And if rates continue at these “unsustainable” levels, borrowers should consider it a that hopefully keeps on giving.






Tony Marchigiano 1-155 Water Street

Mortgage Broker Vancouver, BC


cell: 604 505 7109

fax: 604 909 4666

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Thursday, May 29, 2014

Gastown renewal project fuses heritage with hip

The 100 block of West Hastings that straddles the line between Gastown and the Downtown Eastside is one of the most rapidly gentrifying streets in Vancouver. Its transition from down-and-out to up-and-coming, spearheaded by the 2009 redevelopment of the Woodward’s building, can be seen in its idiosyncratic weave of historic architecture, trendy new restaurants, dollar stores and money marts.


A gym called Revamp offers a hopeful neighbourhood narrative as a colourful-looking character washes the windows for the newly buffed and toned. Now, some of the crumbling Edwardian buildings in the area are following suit.


At 151 West Hastings, the Ormidale Block, a commercial redevelopment project by Vancouver-based Century Group that will get under way this spring, is a unique fusion of old and new, heritage and high tech that may well offer a new neighbourhood model.


The developer is betting on finding a high-tech tenant who does not want a Class A office look, but does want modern amenities.


The transformation of the terra-cotta-tiled building, poised between the Flack Block, a study in heritage preservation-conversion by Robert Fung-Salient Group, and the new Goldcorp Centre for the Arts, offers an inventive take on how to fit a contemporary building into a historical context.


“We didn’t want to fetishize heritage, or to make the building look deliberately old,” says project architect Michael Wartman of B&H, who adds he was inspired by Rafael Moneo’s city hall in Murcia, Spain. Instead, working with heritage consultant Donald Luxton, they identified what was worth keeping in the Romanesque Revival building designed by George W. Grant and built in 1900, and what was not.


“Since the interior of the building had no real redeeming features,” Mr. Wartman says of the building’s innards that had already been through two rather unfortunate renos, “we decided to just keep the heritage facade on Hastings Street.” A number of features that have been lost over time will be restored including a detailed bay window and a large glass-and-steel storefront that features curved glass panels at the entry.


The interior will feature open-plan, loft-like offices with exposed wood-decked ceilings and concrete radiant floor heating-cooling. Working within the confines of the narrow site bounded on three sides will make construction challenging, Mr. Wartman says, with materials lifted in by crane. But apart from a few small seismic gaps with neighbouring buildings that were easily remedied, the site is being used to advantage, with the sloping laneway allowing for an additional floor of commercial space in the back facing West Cordova Street.


The architect’s mandate was to create something that respected the heritage grain of the 19-acre neighbourhood, which includes about 100 commercial buildings, while maximizing the energy efficiency and comfort factor demanded of Century Group’s demographic target: the new creative arts and technology sector that is making Gastown a budding high-tech hub.


With TED moving its main talks from Long Beach, Calif., to Vancouver for at least two years, and George Lucas locating his Industrial Light and Magic studios here, the timing is right.


Maurice Ouellette, the architect-turned-developer who is vice-president of Century Group’s corporate development, saw the potential of the owner-occupied building. “I went for a walk in the area in the spring of 2012,” he notes of the environs across from Victory Square and the historic Dominion building, “and asked a Colliers agent if the building might ever become available.”


Within six weeks it was acquired by Century Group, a largely suburban developer looking for a property that would place them in a more urban context, at a $7-million sale price with $11-million budgeted for renovation.

With a reputation for being environmentally and community minded, Century Group also hopes to contribute to the area’s balanced growth, says Brett Walsh, director of real estate finance. “You really have to credit the City of Vancouver’s vision in terms of not ‘sanitizing’ this area,” a fate he notes has befallen historic-zoned quarters in many cities, such as San Diego, where the mix of “high-end restaurants and upscale condos feels disconnected and antiseptic.”


A key to keeping the area vibrant, he says, is actively encouraging commercial real estate activity that once made the neighbourhood the city’s first downtown, before suburban flight and the demise of the streetcar pushed commerce westward and drug and poverty problems ensued.


While open drug use still takes place in the area, the street-smart grit of the neighbourhood is seen as a plus for hipster high-tech clients who value “authenticity.”


“It’s an exciting new development and a great contribution to the neighbourhood,” Leanore Sally, executive director of the Gastown Business Improvement Society, says of the plans for Ormidale. The current high-tech trend is not just about “big companies,” she observes, but also, “startups and cultural creatives – young urbanites attracted by the dynamism of the area – not only the cafés and restaurants and clubs but also by the easy transit and bike access.”


With the high-tech sector driving a mini commercial real estate boom in Gastown – where square footage is cheaper than downtown – landlords have to respond to the demands of the millennial work force. Drafty heritage buildings that swelter in summer do not fit the bill. So the architectural challenge is to create a new purpose-built, energy-efficient building that still respects the scale and heritage.


The renovated Ormidale Block will offer a new modern entrance on the sloping laneway, with double-height ground-floor retail space designed with restaurant-ready kitchen and ventilation systems.


Inspired by Seattle’s Olson Kundig Architects use of weathered steel, Mr. Wartman decided to clad the back of the building with the same material to fit in with the grittiness of the laneway and the SRO building next door. A shimmering steel mesh canopy over the entry will literally and figuratively peel back historic layers to reveal a new focus.


The six floors and 39,500 square feet of commercial space will feature a high-performance envelope and cutting-edge mechanical system that will provide more fresh air circulation than any other downtown building.

Shared access to a 4,800-square-foot green rooftop deck, bike racks, showers and electric bike plug-ins are further features designed to appeal to the high-tech millennial demographic. At the same time, original terra-cotta tiles on the front facade are being painstakingly restored.


“It’s all about rejuvenating the original building carcass, while staying true to the spirit of the place. Price point was what attracted businesses to Gastown five years ago, but now it’s all about desirability. This is the area for high-tech firms,” says Mr. Ouellette, who hopes to attract multiple tenants for the commercial and retail space.

He’s convinced that HootSuite might not have relocated to a former CSIS office in Fairview Slopes last year had the right facilities been available in Gastown.


Young high-tech firms are attracted to the same things that drew Century Group to the 100 Block Hastings Street – that perfect mix of gritty urban grain and hipster friendly shops and eateries that now proliferate in Gastown.


Gastown project

Estimated construction time: 14-18 months with spring, 2015 completion


Office space type: Class A


Proximity to transit: Walking distance to Waterfront Station – with links to SeaBus, West Coast Express train, SkyTrains and city bus lines


Local businesses

32: Technology companies

7: Film and video production companies

19: Creative agencies

29: Architects, interior designers, planners, engineers

18: Web design/multimedia agencies

58: Restaurants and bars

9: Art galleries12: Marketing/PR firms

51: Consulting firms

15: Law firms

19: Cafés and coffee shops


(High-tech and new media companies include Zaui Software, Idea Rebel, BootUp Labs Entrepreneurial Society, SEOinVancouver and Marketr.)


Full Article

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Friday, May 23, 2014

Worst Mistakes First Time Home Buyers Make & How to Avoid Them

A house is one of the biggest investments most Canadians ever make, so it's important to plan ahead, to think about what you need in a home and what you can afford.

Getting pre-approved for a mortgage is a great way to budget for a home and signal that you're a serious buyer. However, keep in mind that the amount for which you are approved is the maximum amount the lender feels you can afford based on your income and projected property expenses. That figure doesn't account for other expenses you may face, such as renovations or emergency home repair, as well as regular household costs.

"You know best ... what your costs are, so my advice would be look at what your paycheque is net, line up all those costs, including what you're being told on the calculator is affordable for you, and see what is left at the end of the month," Ms. Kiskuna says. "The last thing you want to do is hang yourself out to dry with [mortgage]payments that are simply too high to carry."

Here are some other mistakes first-time buyers make, and how to avoid them:

Not knowing your credit score

A credit rating is a record of your credit history and current financial situation. A good credit rating can improve your ability to get loans, so if your score is low, you may want to work on improving it before you apply for a mortgage.

Not budgeting for the costs of home ownership

Being a homeowner brings new expenses, including property taxes, higher insurance costs, regular upkeep and an emergency fund for repairs. Don't forget to factor in the cost of any renovations your new home may need.


Not researching down payment choices

Lenders typically require CMHC mortgage loan insurance if you make a down payment of less than 20 per cent, and premiums for that insurance can be as high as 3.25 per cent of the value of the loan. Under the Home Buyers' Plan, first-time buyers can use up to $25,000 in RRSP savings ($50,000 for a couple) for a down payment. A higher down payment will save thousands of dollars in interest over the life of your mortgage.

Focusing too much on interest rates

First-time home buyers rush in to the market when interest rates are low. While rates are important, other things have a greater bearing on the overall cost of home ownership, including the cost of the house, the type of mortgage, the amortization period and payment options.

Not choosing your own payment schedule

Paying off your mortgage sooner saves you interest costs, while a longer amortization period reduces your regular payment and frees up cash flow. You can save thousands of dollars in interest by choosing a shorter amortization period, paying fortnightly instead of monthly, or increasing the amount of payments by even a small amount. Use an online mortgage calculator to run the numbers.

Forgetting about closing costs

When calculating closing costs, assume you will need an additional 1.5 to 2.5 per cent of the purchase price to cover such things as the home inspection, legal fees, land transfer tax, property tax, property insurance, utility hook-ups and moving costs.

Tony Marchigiano
Mortgage Broker
1-155 Water Street

Vancouver, BC



fax: 604 909 4666

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Friday, May 23, 2014

Gen Y is redefining home ownership - and the B.C. real estate market

Imagine living in 700 square feet of space, in an apartment, centrally located, stylishly appointed, with stainless steel appliances and public amenities such as a dog wash station. You don’t own a car; instead, you rely on transit or a bicycle for getting around. Unlike the old days, it’s not a temporary station until you can afford a house. It’s life as you’ll always know it, as you grow your career and maybe raise a family.


You’ll probably move around, from job to job, and city to city. You might consider yourself fortunate to have the freedom from the shackles of a big mortgage, job with benefits, and house that needs ongoing maintenance. Or, you might resent the fact that you can’t afford the home ownership rite of passage that belonged to your parents’ generation.

Millennial or Gen Y kids born between 1977 and 1994, if we use the Census Canada definition, have entirely different expectations from their parents.


“They will be the first generation that is not going to be better off than their parents were,” says Melanie Reuter, director of research for the Real Estate Investment Network.


Her interpretation. But, because millennials are such a large group in Canada, representing about 27 per cent of the population, says Ms. Reuter, it’s imperative that businesses gauge this group’s behaviour and respond accordingly. She has been studying Gen Y economic behaviour for the last few years, and has written a report on her findings to be used by investors.


“If you don’t pay attention to what this generation wants, regardless if you agree or not, you won’t have a business soon because they are such a large cohort that they do have spending power.”


They also have a lot of debt. A hefty part of that debt is student loans, but credit card debt is also responsible. British Columbians between the ages of 18 and 24 have the second to highest income-to-debt ratio on average in Canada, according to Ipsos Reid, 2012 Canadian Financial Monitor. British Columbians between 24 and 44 are in third position. (The highest average income-to-debt ratio belongs to Albertans between 25 and 44).


“It’s also in part due to their spending habits,” says Ms. Reuter. “These are all generalizations – but they aren’t savers.”


They might have grown up in a bedroom community, such as the west side, or a suburb. But they are a more urban group, no longer dependent on a car, partly because of cost, and partly because they genuinely care about sustainability. They don’t see the cachet of owning a car, as did their parents’ generation.


“They didn’t get their driver’s licence the day they turned 16,” says Ms. Reuter.


“For the younger generation, it’s almost a badge of pride they wear, not needing a vehicle.”


Because they use transit, they’ll want to be located close to work, and close to transit hubs. And because of the rise of single-parent households – roughly 16 per cent of all families, according to 2011 census figures – many were likely raised in townhouses or condos, and will already be used to living in smaller spaces, says Ms. Reuter. They also like new spaces, as opposed to old houses they’ll have to spend weekends fixing up.


“There’s no stigma to a condo,” she says. “That’s what they know.”


We’ve already seen the demographic shift in Vancouver neighbourhoods such as Dunbar, Kerrisdale, Point Grey and Kitsilano that used to be filled with middle-class families just starting out in life. Young families have mostly gone to the more urban east side, leaving the west side to an older, wealthier demographic.


Ben Smith, VP of sales and marketing at Rennie & Associates, says he’s already seen a major shift in the last six months. This year he’s seen a sudden surge in demand for three-bedroom condos, purchased by downsizing boomers. Those boomers are trading their homes for spacious condos. Those same boomers are helping their kids with a down payment on their own condo, which is the only way a lot of Millennials will ever afford to live in Vancouver.


“It’s exciting, because for years we’ve been talking about this, and we’re finally seeing it happen,” he says. “There is $88-billion worth of clear-title real estate tied up with boomers. In B.C. and Vancouver especially, we are all equity and no income. If you don’t have that down payment, you don’t have a home.”


Hrissa Soumpassis, 31, grew up in a house in Prince Albert, Sask., and currently operates her own fashion label out of her rented 700-square-foot live-work studio at Main and 5th Avenue. Like all Millennials interviewed, she does not own a car. She works from her home, enjoys urban life, and has no problem moving for work. She plans to live in New York for six months, and then return to Vancouver, where she’ll eventually settle down and purchase a condo in the same neighbourhood, if all goes according to her plan. She says that growing her own business and condo ownership are priorities.


“All my money goes toward my business because that will grow,” she says. “It’s not like, ‘Oh, I think I’ll start my business and see how things go.’ I have to organize all my finances with the bank to make sure that in the future I can buy something. That’s new for me. I wasn’t thinking about that until about a year ago.”


Jens Ourom can divide his demographic into three categories. There is the group that sees home ownership has an “unrealistic sacrifice from both a financial and lifestyle perspective.” There is the group that is “raging mad, resistant to retiring as renters – a potential powder keg whenever affordability, housing prices, mortgages, and anything related to the white picket fence … are broached as conversation topics.” And then there is the “What’s the big deal about affordability?” group. Members of that group are counting on a trust fund or big inheritance to get them into the homeowner income bracket.


Mr. Ourom, 27, says he belongs in the first camp, that Millennial who sees pricey property as just too big a sacrifice when there’s so much else that the world has to offer. He is debt free because he worked hard to get scholarships to pay for his degree. He lives car-free and pays a premium in rent to live centrally.


“I really think the concept of saving for a home is maybe overblown and what you should be doing is saving for a future,” says Mr. Ourom. “If your goal is to have a home and work on a home and invest in that, then great, but this generation is already finding different ways they want to save for the future, whether it’s investing in education, or starting a business. I think people are getting more creative with it.”


Ben Paylor, 29, is doing his PhD in experimental medicine at the University of British Columbia, but he will not stay in Vancouver because of the high cost. Instead, he expects to move several more times for his career, and he’ll settle somewhere more affordable. He does not, however, see his situation as unfortunate, but rather, as liberating.


“My friends who got teaching jobs, they are mostly still in Calgary and they have bought houses because it made sense, given the life they were following. But the prevalence of that is so much less. I don’t look at that negatively; some part of me is envious as well. It just seems so simple, not moving around all the time. But there is some awesome stuff I have been able to do because of my education. There is a trade off involved there.

“With my path and my work I am in, I will likely move around three or four more times before I settle down. I might not own property for five to eight years, or something like that. Questions like that are quite abstract to me right now.”


Because he owns a house, James Griffiths, 34, is an outlier among his peers, he says. He and his wife own a modest house on a narrow lot on Vancouver’s east side. However, to cover their mortgage, they rent out four bedrooms, which means a constant turnover of tenants. Mr. Griffiths is a self-described workaholic. He obtained his masters while working a 40 to 50 hour work-week. He could only afford the down payment, he says, because he and his wife cared for his ailing grandfather in his final years, living in his grandfather’s basement suite rent-free.


“That was a very difficult thing to do,” he says. “It’s psychologically challenging to help someone you love in the later stages of their life. But that’s one way we found to both save up, and contribute to our family.”


That helped him pay off his student loan and, along with help from his parents, save up for the down payment. Still, he has a $500,000 mortgage.


“And I’m spooked about that,” he says. “I’m very driven to get that number down, and to spend all the time I can working, and it hasn’t been very good for life balance on my part.”


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Sunday, May 11, 2014

Vancouver real estate edges closer to seller’s market

Greater Vancouver’s housing sector is edging closer to becoming a seller’s market.


A measurement closely watched by the real estate industry, known as the sales-to-active-listings ratio, hit 19.7 per cent in Greater Vancouver last month – the highest since June, 2011. The ratio was 15.7 per cent in April, 2013.


B.C. real estate agents consider it a balanced market when the ratio ranges from 15 per cent to 20 per cent. It is deemed a buyer’s market below 15 per cent and a seller’s market above 20 per cent in the Vancouver area.


The Real Estate Board of Greater Vancouver reported Friday that residential housing sales climbed to 3,050 in April, up 16.1 per cent from 2,627 resale properties that changed hands a year earlier.


The benchmark home index price rose 3.6 per cent year-over-year to $619,000 in April for single family-detached homes, condos and townhouses that sold on the Multiple Listing Service.


There were a total of 15,515 active listings last month, down 7.3 per cent from a year earlier.


For existing single-family detached homes that sold on the MLS in April, the index price jumped 6.6 per cent year-over-year to $2,201,600 on Vancouver’s West Side, while rising 8.8 per cent to $901,200 on the East Side.

While activity has been picking up, sales in April were 5.2 per cent below the 10-year average for the month, board president Ray Harris said.


Developers are watching the property data closely.


Will Lin, president of Rize Alliance Properties Ltd., said the buzz about offshore buyers engaging in speculation has subsided for good reason.


“Contrary to what some developers like to believe, it is difficult to get offshore buyers to purchase Vancouver real estate when there is no real linkage for these buyers to Vancouver. They are buying for a good reason, occupying it for themselves or use it as a vacation home or have relatives that are going to come here and using it,” Mr. Lin said in a recent interview.


He added that given the high prices in the region, it is difficult for speculators to make fast money.


“This market is not conducive to that kind of quick flipping. Every real estate transaction has certain costs like legal fees,” Mr. Lin said. Then there is British Columbia’s property transfer tax. Using the home index price for Vancouver’s West Side of $2,201,600, a purchaser who pays that amount for the house would have to fork over $42,032 alone in the property transfer tax. If that purchaser later sells, there is the real estate commission to pay, not to mention various fees related to selling.


“A quick flip within a year or two is not going to let you make too much money,” Mr. Lin said.


In the Fraser Valley, there were 1,470 sales in April, up 7.6 per cent from 1,366 in the same month of 2013.


The overall April benchmark index price in the Fraser Valley, which includes the sprawling and less-expensive Vancouver suburb of Surrey, climbed 1.5 per cent to $433,100 for residential properties.


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