Month: March 2021

Mortgage brokers are warning that after record low-interest rates, the market is set to rise in 2021.

The COVID-19 global crisis introduced an incredible opportunity for homeowners and lenders alike. Interest rates in Canada hit historic lows which allowed many people to get into the real estate market, or at least make their down payment saving journey easier. According to Global News, Canadians took out $118 billion in additional mortgage debt in 2020. This represents a 7.6% increase in growth; the fastest increase we’ve seen in ten years.

The low-interest-rate impact

Across Canada, mortgage rates are rising and with the high price of housing, economic recovery has definitely been happening. But, it’s also been raising red flags for policymakers. This could lead to restrictions on property investments for investors from abroad, but can also lead to rate hikes, although the Bank of Canada says otherwise.

“We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2% inflation target is sustainably achieved,” the Bank of Canada said in a statement.

While many Canadians are feeling the squeeze of the pandemic-driven economy and are worried about paying off credit cards, others are paying attention to forecasts from economists relating to the housing market and wondering if they really did get into the market at a good time or not.

According to the Financial Post, “after an 8.5% jump in the aggregate benchmark price for a home in 2020, the lender’s economists see 8.4% growth in a gradually softening 2021, to $669,000, ‘setting the stage for a more modest’ 3.9% gain in 2022.”

The article then goes on to explain capitalist economists are projecting that house inflation will increase past 10% during the first quarter of 2021.

However, the rise in mortgage rates and interest rates isn’t always necessarily bad news. As mentioned before, the good news is that this means that the Canadian economy is in a period of rehabilitation and low-rate mortgages are giving people who otherwise would not able to break into the market, a chance. Economic recovery is always a cause for celebration.

According to Tiff Macklem, governor of The Bank of Canada

The Bank of Canada, (BOC) released a statement from officials, led by Tiff Macklem, saying that the BOC is committed to keeping low-interest rates until 2023.

“Our main message today is that it will take quite some time for the economy to fully recover from the COVID-19 pandemic,” Macklem said during a press conference. “The Bank of Canada will keep providing monetary stimulus to support the economy through the recovery.”

The average mortgage rate for a 3-year fixed bank rate is 1.5% according to Ratehub.com. So, for example, if you took out a mortgage for $450,000 and your interest rate is 1.54% over 30 years, you’d be paying $1561.69 monthly. If you think about it, your monthly mortgage payments are less than the average price of a two-bedroom apartment for rent in larger cities like Toronto and Vancouver.

“Housing construction and resale activity have been particularly strong. We noted the large house price increases in some markets that will warrant close monitoring for speculative activity,” said BOC Deputy Governor Lawrence L. Schembri.

Purchasing with a mortgage broker

Banks play a large role in the type of mortgage a lender can receive. They also play a part in commodity prices, quantitative easing, monetary policy, and lending criteria for banks that offer mortgages to lenders. Mortgage brokers can help you navigate the monopoly of lending from banks and assist in finding you the perfect variable rate, or prime rate mortgage.

For those looking for a prime rate on their fixed-term mortgage, one of the best things you can do is consult with mortgage brokers to help you find the best mortgage rates and mortgage amount available in the location of your choice. When you’re looking to purchase a property, knowing the terms of your mortgage and other data necessary to make informed decisions is crucial.

When working one-on-one with a mortgage broker, talk about what you’re looking for in your mortgage rate and what time of prime rate you’re looking for. Mortgage rates fluctuate, so mortgage experts can help you decide when is the best time to buy in Canada while also shopping around for the best term for your specific goals from a variety of lenders.

The lasting impact on mortgage rates in Canada

It’s no secret that COVID-19 has rocked Canada and the rest of the globe. Mortgage rates hit a record-low in 2020; something we never thought we’d see. When it comes to finding a great interest rate, consider how long you’ll be borrowing for and if you’re getting a prime rate.

Data has shown that the Canadian economy is resilient and mortgages are a key player in our economic restoration process. The Bank of Canada has done Canadians a huge favour by being able to pledge to keep interest rate lows until 2023. As an investor, it would be wise to cash in on these historically-low rates as soon as possible.

However, in the future, the government may introduce legislation that makes it harder for home lenders to acquire a mortgage. We may also see a limit on foreign investment opportunities to help curb inflation rates. That’s why it’s so important to talk to your bank to assess your opportunities. Working with a mortgage broker can help you get the mortgage rates that meet your needs and help you cut through red tape when you’re looking to purchase a property.

Either way, if you’re hoping to get a good mortgage, now is the time. The best advice is to get into the real estate market in Canada as soon as possible because these low-interest rates aren’t sticking around forever, and we’ll definitely miss them when they’re gone.

Arizona is a hotspot for Canadian real estate investors, and with optimistic news of vaccine rollouts, investment activity in Phoenix has picked up considerably.

“We received the highest ever requests for preapprovals from Canadians over the last two weeks and, because we’re connecting them to local realtors, a lot are moving forward and searching the market,” Florida-based Alain Forget, RBC Bank’s director of business development, told CREW. “It’s been building since about November and December when the first vaccine rollout announcements were made, and now as people see all the vaccinations done in Canada and the U.S., and the easing of restrictions, people are beginning to see the light at the end of the tunnel. They know 2021 will be a much better year.”

In the United States, vaccination programs have by and large been successful and it’s sparked hope of life returning to a more normal pace in 2021. That has, in turn, galvanized a lot of Canadians in Ontario, Quebec, British Columbia and Alberta to search Arizona’s Valley of the Sun for investment opportunities. Forget isn’t surprised to see savvy investors diving headlong into that particular market.

“In those Canadian provinces, there’s low inventory and multiple offers are common, which pushes prices up, but now they’re starting to realize the U.S. is an option,” he said. “Arizona has always been in the top-three destinations for Canadian investors. Scottsdale, which is on the west side of Phoenix in the Valley of the Sun, doesn’t have a lot of land but there’s been a lot of building there in recent years. It’s also very affordable. The average purchase price for Canadian investors in the U.S. is $500,000 and that buys a lot of real estate in Arizona.”

The Valley of the Sun is very business-friendly and, as a result, a lot of companies have established their bases of operation in the area, including a lot of Canadian firms. In fact, there’s a lot of active cross-border trading activity occurring with companies based specifically in Arizona, says Forget.

“It’s a growing market, in terms of demographics, and one of the top destinations in the U.S. Phoenix is a big city with lot of people and not much land on which to build,” he said.

According to Tricia Lehane, a sales agent with RE/MAX Excalibur in Phoenix, there are more than 25,000 Canadian homeowners in the Valley of the Sun. As investors, she says they operate both long-term and seasonal rental properties. In particular, the Phoenix-Mesa-Scottsdale area, known as Maricopa and Pinal counties, is hot.

“When the [Great Recession] hit, Canadians were coming here in swarms to purchase,” she said. “They continue to, and I’m sure they always will, invest in Arizona. The average price of a property in the Greater Phoenix Area is $350,000, and the population is just under 5 million.”

In particular, Canadians are partial to purchasing single-family homes as investment properties, which can average about $4,500 in monthly rent in Scottsdale, says Lehane.

“In the Greater Phoenix Area, it’s about $3,500 a month for a year-long rental,” she said. “A lot of my Canadian clients are doing seasonal rentals and they’re bringing in more money. For high-end, larger properties, a seasonal rental can bring in about $25,000 a month, and in South Scottsdale, you’d look at about $10,000-12,000 a month in the high demand season.

“Maricopa County is the third-fastest growing area in the U.S., in terms of inbound movers.”

How the COVID-19 pandemic is shaping Canadian real estate

At the onset of the COVID-19 pandemic, many people thought that the housing market would cool down. However, the coronavirus pandemic has done the exact opposite and caused house prices to soar amidst a lack of homes for sale. The pandemic has changed the landscape of real estate in Canada and has impacted the way we view homeownership in today’s market.

Taking advantage during COVID-19

With more people working from home, buyers aren’t looking to buy homes that are specifically close to work. This means that people are purchasing property outside of big cities and looking for potential homes in smaller towns. This is opening up vacancies in larger cities due to available housing options. However, the prices of homes have steadily increased in these areas instead of declining.

other main factor is that people are actually spending more time in their homes. Since people have the option to work from home, they’re noticing a lack of space or are realizing they’re just not happy with the property they chose to buy or rent. This has increased demand for homes with lots of space (particularly space for an office) and a need for public transit to accommodate those working in the big city.

In addition, tenants are looking to move on from rental properties and find their next home. With a lack of in-person open houses, this could have been tricky. However, the pandemic has brought a host of online options for people looking for their next property, or looking to sell their pre-pandemic home. As a tenant, it’s important to have homeownership goals, and there are various programs offered by the Canadian government to help first-time homebuyers based on their income.

But commercial property and home sales have boosted during COVID-19, according to agents. This could be due to a variety of factors that increase demand and make homeownership a more viable option for people living in Canada.

Lowered interest

One of the biggest changes to the real estate landscape is that interest rates hit an all-time low during the pandemic. For those looking for long-term investments, or even their first home, this was really good news. You could get a mortgage and not have to pay a ridiculous amount of interest on the money that was lent to you which could positively impact your financial situation.

Fewer options

During these unprecedented times, residents aren’t really selling their homes, especially at the beginning of the pandemic, when people thought the housing bubble was going to burst. The amount of properties for sale has lowered options for prospective buyers in the Canadian real estate market. With fewer housing options comes fewer home sales and the opportunity for a post-pandemic boom.

Higher prices

Higher prices may be related to lowered options during the pandemic. This upward trend is a sign of the need for single-family homes in Canada. The average home price in the country is currently just over $678k and could grow as much as 16% according to Global News. This means buyers will have to have a sizeable down payment to remain competitive in the market.

 

Buying during a pandemic

If you’re looking to purchase your first home or an investment property during the coronavirus pandemic, there are a few things you can do to become competitive and remain optimistic. Luckily, the real estate market has shifted to accommodate social distancing and other safety measures during these unprecedented times to make viewing and purchasing easier than ever.

Virtual tours

More realtors are offering virtual tours to minimize contact. Virtual tours are becoming the way of the future as it allows people to view more than just a floor plan. These tours allow you to walk through multiple properties a day, which can help people narrow down what they’re looking for in a home. The real estate industry is pivoting to a more digital landscape and is making use of technological advances to increase home sales volume. However, this doesn’t diminish the need for real estate agents or other industry professionals.

Working with real estate industry professionals

Working with agents and realtors can really help you have a competitive edge when you’re looking to purchase a residential or commercial property. These experts can provide you with the knowledge that’s necessary for you to make an informed decision when purchasing a property during the coronavirus pandemic. An agent can help find current listings that reflect what you’re looking for in a space or a great investment opportunity for someone looking to rent their space to tenants.

Prepare for a bidding war

Buyers have to be willing to offer a sizeable down payment on their future home in order to get the property they want (and we know that’s easier said than done). Across Canada, prospective buyers are often subject to bidding wars and losing out on prime real estate because they aren’t competitive enough. Working with agents and mortgage brokers could help future homeowners by creating a sales plan that includes preemptive action and changes should there be a bidding war for a specific home.

Post-pandemic real estate market

The real estate market might not ever return to its pre-pandemic state. COVID-19 is a global crisis that is affecting every person in the world. Realtors and owners are feeling the crunch of the crisis. The opportunity for investment is endless with the news of vaccinations. Another key factor a change in the market post-pandemic is the influx of foreign investors once the border is open again.

Once travel is allowed again, and investors from international markets are allowed to purchase a house, Canada will see an economic boost related to real estate investment. Investors are realizing how important it is to see the potential in real estate investment opportunities, including commercial properties. However, millennial Canadians seem to be jumping on the opportunity to invest in the real estate industry by purchasing their first family home.

Millennials and the market

If there’s one group that’s benefitted from the work-from-home lifestyle and current global crisis – it’s Canadian millennials. While the majority of millennials still rent, some are looking to get a mortgage and purchase their first long-term house. Millennials are becoming the majority of clients for modern real estate agents as they’re gaining financial stability and looking to grow and start families.

Since millennials are well versed with the digital worlds, they’re able to navigate online real estate management websites and choose an agent they prefer, or property that meets their individual needs. They can find that house with a basement office or recreation space and no longer be tenants in a landlord’s world. Many millennials have their down payment already (whether from saving or requesting help from family members) but are waiting for a sign that this is the right opportunity for them.

It’s also savvier for millennials to own houses due to the financial restrictions of monthly rent payments or condo management fees. Millennials who can qualify for a reasonable mortgage during the COVID-19 pandemic should definitely take advantage of the real estate market and low-interest rates before the market becomes oversaturated. They should take the opportunity to no longer be a tenant, and become the latest homeowner on their Facebook feed.

The ever-changing real estate industry

It should come as no surprise that real estate in Canada is evolving into a massive, unstoppable force. If a global crisis couldn’t cool down the real estate industry, it’s likely nothing will. Next year we’ll see even higher demand for homes across the country from the public. There’s already data that suggests the impact of the pandemic will lead to higher home prices than ever seen. We’re already breaking economic records according to the latest data and clients are lining up to work with realtors more than ever.

Remember that markets fluctuate, but change on a scale like we’ve seen in the last decade is unprecedented – much like the era we’re living in! COVID-19 has changed everything so much, and housing is no exemption. Since the onset of COVID-19’s stronghold on the world, commercial and residential units have been harder for tenants to find. But sellers are waiting for the dust to settle to get into a long-term selling commitment or taking out another mortgage.

A market shaped by a virus

It’s no secret that the world will be forever changed by the COVID-19 crisis. Having a plan that adapts to the changing times is important going forward with any real estate purchase in the future. For investors, now is the best time to get into purchasing real estate as the value is slated to grow dramatically over the next year. If you’re able to read online about how certain agents and home sales work, it would be in your best interest.

Doing your research before any investment endeavour is a crucial part of being a smart investor. The real estate landscape has changed dramatically because of COVID-19 safety restrictions and safety measures. We may not even get back to a pre-COVID market, and online tours and zoom meetings with realtors might stick around for the foreseeable future. The best thing we can do is be resilient and try to adapt to the current global crisis as it happens. We need to change our program based on the way our top health officials see fit.

Economic recovery post-COVID

One thing is for sure, the real estate game in Canada will drive economic recovery following COVID-19. Mortgage management companies will see an influx of people looking for affordable options once travel restrictions are lifted and the border is open again. As the world reopens, we’ll see signs of things returning to normal and we’ll see people thriving amidst new beginnings. Thankfully, the digital world has kept the market afloat since we’re using modern technology in ways we’ve never conceived before.

People can work from home, have birthday parties, watch a movie and purchase real estate thanks to technological advances. It’s important to remember that one hundred years ago, during the Spanish Flu, people weren’t as lucky. The potential for people to buy real estate during these times was unthought of. In today’s day and age, during a modern health crisis, we’re adapting pretty well – all things considered.

As a nation, we have to look out for the best interest of our residents in the future. We must plan for economic recovery, and amplifying our real estate is a big part of increasing options and demand. Whether that means trying to cool down the market, or working to see it rise to new, unthought-of heights, is yet to be seen. But the bottom line is, if Canadians and investors can take advantage of the COVID crisis, they should.

Once everything is said and done, we’ll see the roaring twenties of the 21st century. Commercial and residential real estate will be rampant and buyers could benefit from an oversaturated market. It’s important to remember that many sellers are holding out on listing their assets until the pandemic is over, so there will be more options once this is all over.

Looking for a property to purchase can be daunting, but keeping these factors in mind can help you make an informed decision when you’re ready to purchase real estate. Taking advantage of low-interest rates, utilizing agents and preparing for bidding wars are key components to getting the property of your dreams in today’s day-and-age. It just takes a little creativity, and the end of a global health crisis, to help you reach your homeownership goals.

The COVID-19 pandemic has proven a couple of things: not only is the multi-family residential sector resilient, it’s probably the safest, if not smartest, bet for investors.

And the clearest way to capitalize on it, according to Equiton Partners Inc.’s Cliff Fraser, is as a passive investor because, in shouldering fewer responsibilities, it abets access to wider inventory.

“The pandemic shone a light on what essential real estate really is—which asset types perform well—and people have figured out multi-family is great because everyone needs a place to live,” said the chief business development officer of the Burlington, Ontario-based company. “Historically, it’s been a resilient asset class, but even more so during the pandemic.

“There are some limitations to day-to-day asset management, namely time, funds or cash, and then there are other daily responsibilities, like family and work. You can’t grow your portfolio to become as big as you’d like as a one-person shop, however, as a passive investor—that is, by using an asset management company—you can.”

Conversely, active real estate investors are responsible for finding investment properties and either conducting their own due diligence or hiring others who can, then going through the arduous underwriting process. Moreover, active investors typically tend to hyper-concentrate all their risk, and that could easily go awry.

“The passive alternative some people might not know exists is relying on someone else to do the hard work and enjoying the benefits of the asset class with a lot less risk, and in a tax-efficient way,” said Fraser. “One thing that people do is diversify risk by potentially investing in multiple asset types, so you spread out the concentration, and instead of doing the work yourself, you have experts doing it for you.”

The main way through which passive investing is tax efficient is the investor can use registered funds and, depending on how it’s set up, isn’t taxed immediately.

As a private REIT, Equiton is an active real estate investor that provides its clients passive investment opportunities. Moreover, it focuses on creating passive real estate investment funds for clients that, on multi-family investments, earn 7-10% cash flow and share price returns. In addition to investing in the multi-family residential sector, Equiton is involved in the commercial and industrial sectors, real estate development and lending.

“Income-producing assets are the foundation of real estate investing because they’re essential real estate,” said Fraser. “People need places to live, and given the supply and demand dynamics in Ontario, and Canada as a whole, more people need places to live because of our immigration system. Demand is outstripping supply, so we’re going to continue seeing basic Economics 101 with more demand than supply, and the value and demand of these assets will continue doing well in this environment.”

Ryan McKeown is the owner of I Branched Out, a home décor shop in Parry Sound that specializes in high-end, custom furniture using real Ontario wood. Born and raised in the town of just over 6,000 residents, McKeown’s has noticed a dramatic change over the last several years.

“It started three or so years ago, but the pandemic has certainly caused people to get out of the city and move north. We’re only two hours from Toronto,” McKeown told CREW. “We see that in my store all the time. Just today, I had someone who listed their downtown Toronto condo and they’re building a cottage 10 minutes from downtown Parry Sound.”

I Branched Out, located on Parry Sound’s main street, is a popular destination for one-of-a-kind craft furniture purchases, and as a result it receives customers from as far as the immediate GTA. However, like most small businesses, it has struggled through the COVID-19 pandemic, and according to McKeown, if not for the seeming tidal wave of new residents, his business might not have survived.

“Our store made it through the pandemic mainly because of the new building here in Parry Sound,” he said. “We see eight to 10 people every Saturday who aren’t from here.”

As a result, it has become commonplace for houses in the town to sell for over $1 million, and according to Matt Smith, who’s launching a boutique brokerage, Engel & Völkers Parry Sound, in the town’s downtown on March 22, people are moving to the town for its “12-month living.”

“The big attraction to the area is the lifestyle. You get a lot more activities in Parry Sound with the trails, boating and the outdoors lifestyle,” said Smith, a longtime broker with Engel & Völkers Toronto Central in Yorkville. “A lot of communities this size can’t support a year-round lifestyle, which means they shut down after Thanksgiving, but Parry Sound has a regional hospital here, and it really is a regional hub. It can support 12-month living.”

The town is receiving a robust contingent of entrepreneurs who are opening up high-end boutiques, as well as young artists, says Smith. Moreover, some of the available properties are as opulent as anything found in Toronto, if not more, including a 37-acre, 50,000 sq ft former lodge whose current owner is using it as a private residential estate. The town’s emergence as a hotspot for luxury properties compelled Smith to open Engel & Völkers Parry Sound and staff it with local realtors.

And with a slew of custom construction in the town, Smith anticipates his new brokerage will be busy.

“It’s really gotten a lot stronger since COVID happened,” said Smith. “It had been coming along for a few years, with families relocating up here and skyrocketing prices. You used to be able to pick up a nice place in the low to high $800,000 range, but now it’s well over $1 million. The price points alone have driven things to luxury status. You used to find waterfront cottages here and now people aren’t building cottages, they’re building four-season homes. These are the changes we’ve seen in Parry Sound in the last 12 to 18 months.”

Vancouver’s commercial real estate market closed 2020 on a promising note with $2.2 billion worth of transactions in Q4, and $7.9 billion during the entire year, according to a report from Altus Group.

Although that’s a 15% decrease from $9.3 billion in 2019—transactions also declined by 8% on an annual basis to 1,421 from 1,550—and the office and residential land sectors also endured declines, retail, industrial and multi-family actually increased.

“The retail sector had a surprisingly strong finish to the year, up 18% in total investment volume for 2020 compared to 2019. Two benchmark sales of multi-tenanted retail plazas in Q4-2020 pushed the total amount invested in the quarter to $276 million, a 50% increase from Q4 of 2019,” said the report by Curtis Taylor and Erika Siegert, both senior analysts at Altus Group. “Despite COVID-19 restrictions in place across the country, many retailers have remained open for business in British Columbia, which appears to have had a positive effect on this asset class.”

The industrial sector also had a strong showing and comprised 22% of the total dollar volume, marking a 34% annual increase last year. Moreover, industrial sector availability rates are low, thanks to the continued dominance of e-commerce and food delivery businesses, which have driven demand for warehousing and storage facilities.

The Apartment sector also proved resilient in 2020, according to Altus’s report.

“Rising apartment vacancy rates led to increased availability for multi-family assets in the Vancouver market area, which resulted in apartment sales surpassing the $1 billion mark in 2020, marking a 30% increase year-over-year.”

However, the office sector recorded the largest decline in 2020 of all asset classes. The 60% drop in sales meant that transactions fell short of $1 billion for the first time in five years. Moreover, indecision about whether or not to return workers to physical offices has put upward pressure on office vacancy rates and plunged investment in the sector.

Residential land investment also struggled, declining by 32% last year to $1.5 billion—a 10-year low.

Year-round cottaging is a nascent trend gripping Ontario, and according to two of Canada’s foremost cottage country experts, it’s showing nary a sign of abating.

Colin McAllister and Justin Ryan, whom Canadians will recognize from How Not to Decorate and Home Heist on HGTV, as well as Cabin Pressure and Great Canadian Cottages on Cottage Life Television, split their time between Toronto and Haliburton, where they own a cottage, and aren’t the least bit surprised by the burgeoning enthusiasm for arcadia.

While there’s certainly a strong contingent of empty nesters “winterizing” cottages, Ryan told CREW that they aren’t the only ones.

“Because of technology, people are able to stay connected to everyone and there’s a whole new breed of older and younger people who want to buy into cottagecore,” he said. “For the longest time, cottaging had been the reserve of people with spare cash who could either hire a cottage or purchase one as their second home, however, by our values and estimations, every demographic and percentile of the population seem absolutely hell-bent on taking their foot off the gas.”

In recent years, Toronto’s grown into a congested metropolis replete with increasingly expensive, yet shrinking, housing; a city in which desired abodes on detached lots have become the exclusive domain of the city’s truly well-heeled. However, the Bank of Canada’s decision to plunge interest rates in the wake of the COVID-19 pandemic was an inadvertent panacea for the growing throng of disenchanted Torontonians “hell-bent on taking their foot off the gas.”

“There’s definitely an ambition now for people to work from home who ask themselves, ‘Why would I choose to be in the city?’” said Ryan. “So much of what we have to do can be done from home and that’s why the cottage market has done so well, and I anticipate it will continue doing well because more people than ever are looking to use cottages as their primary homes.”

It’s timely, then, that the duo are releasing Here With Colin and Justin, a magazine intended to introduce readers to the rich, vast nature of what they call the “New Rural Lifestyle.” The magazine will help tyro cottagers acclimatize to their new surroundings and teach them about the finer points of four-season recreation, food and drink, gardening and landscape, arts and crafts, home décor, and even ecology.

“For us, it’s about connecting with the great outdoors, being in the moment, living one’s best life and sharing, with like-minded individuals, the very best that cottage country has to offer,” said McAllister. “Covering all aspects of the perfect rural existence, we’ll be championing a respected stable of creative locals, whilst welcoming a new generation of explorers: an ambitious collective who’ve chosen to escape the city in pursuit of a decidedly calmer future.”

The first issue of Here With Colin and Justin will hit newsstands May 13, 2021.

In today’s competitive mortgage market, low interest rates are advertised across the board, but while many lenders offer rock-bottom rates, reviewing all of the terms and conditions in a mortgage contract is imperative before signing the dotted line.

Let’s focus on the three Ps of a mortgage contract: prepayment privileges, portability, and penalties. Sometimes the difference between lender A’s and lender B’s interest rates could be a few fancy coffees a month. But that difference could cost you thousands of dollars over the term of your agreement, so let’s dig in.

Prepayment provisions

This section covers the frequency and maximum allowable amount that you are able to pay down on your mortgage annually. It might be written as “10/10” terms, “15/15” terms, etc. For example, a 10/10 prepayment term typically means that you’re able to increase your regularly scheduled payment up to a maximum of 10%, or that you can make a lump sum payment of up to 10% of the original principal amount. Be sure to look for lenders that are flexible on when you can pay lump sums down.

Portability

This portion of your mortgage contract refers to your ability to move (port) that mortgage to a new property without triggering a penalty. It involves taking your existing mortgage amount, terms, rate, etc., and moving it from one home to another. This is especially important to keep an eye on if you think you may not be in your home for the full length of your term. I see this quite often with military borrowers and people on temporary assignments. Always make sure that your contract has the ability to port your mortgage, otherwise you could incur costly break penalties. It’s equally as important to review the restrictions on your portability terms, too.

Penalties

Penalties can be triggered if you make a change to your mortgage—this includes refinancing your mortgage, requesting a line of credit, or even fully paying off the mortgage—before your term is up. Since the majority of Canadians will make a change before the end of their term, it’s very important to pay attention to the break penalties. It’s a pretty simple calculation on variable rate mortgages (VRMs). Regardless of when you break a VRM, your penalty is just three months of interest payments, which is much lower than its fixed rate counterpart. Understanding how each bank calculates their fixed rate penalty (also known as an interest rate differential or IRD penalty) is equally as important. Some lenders will calculate that penalty based on your contract rate (the rate on your mortgage approval) while others use the posted rate on their website. So, getting a rock-bottom rate but having a higher posted rate actually means your penalties are substantially higher than a contract rate calculated penalty, and that could cost you thousands of dollars more.

When determining which lender to agree with, it’s always important to review the full terms and conditions of your mortgage contract. If something doesn’t seem right, or you don’t understand or agree with it, bring it up with your banker or mortgage broker before signing it. Oftentimes, changes can be negotiated in the contract before it’s signed, and, again, that can potentially save you thousands of dollars.

Countless renters have endured a difficult year because of pandemic-induced job losses, and their difficulties have extended to small landlords, many of whom find themselves in precarious positions as well.

In the capital, the Ottawa Small Landlord Association (OSLA), established last fall, is advocating on the behalves of the city’s rental property owners. In addition, renters incapable of paying rent to no fault of their own, other opportunistic renters have taken advantage of the provincial government’s moratorium on rental evictions and now some unfortunate landlords, who have received scant government relief for lost rental income, are stuck between a rock and a hard place.

And according to the OSLA’s founder and president, that’s just the tip of the iceberg.

“In the City of Ottawa alone since the beginning of 2020, there are a combined 11 different rental housing regulations,” said Tony Miller, a realtor, landlord and registered lobbyist at city hall, where he consults on proposed legislations. “Ottawa used to be somewhat friendly to landlords, but I can’t say that anymore. From a small landlord’s perspective, typically one bylaw doesn’t scare people away—you just have to deal with it—but when there’s a combination like we have now, those don’t encourage small landlords to stay in the business. It doesn’t encourage people to get into the business at all.”

Chief among the proposed regulations that rankle is a vacant unit tax modelled after Vancouver’s, the intent of which is to curtail speculation, but Miller says such a problem isn’t endemic in Ottawa. Although he concedes there’s a slew of vacant units in the city, he cited a different reason.

“Small landlords who keep their units vacant aren’t speculators; they buy for cash flow and want their units tenanted, and they need that income,” he said. “What’s happening now is because of the Landlord and Tenant Board’s (LTB) nine-month hearings backlog and the eviction ban, 23% of small landlords left one or more units vacant in February,” Miller said, quoting internal survey results. “How will the city reconcile their vacant unit tax with the fact that small landlords are making tough decisions to leave their units vacant because of the LTB backlog and having no resources to evict bad tenants damaging property or not living up to the Residential Tenancies Act?”

As the Ontario Landlords Association (OLA) previously told CREW, both corporate and independent landlords are vulnerable to the whims of the state, and without unencumbered enforcement mechanisms, delinquent tenants will keep gaming the system.

“A lot of people are taking advantage of this because there’s no enforcement of eviction,” said Willam Blake, a landlord and OLA representative. “People not previously paying rent saw this as an opportunity to keep not paying rent. If you don’t pay me for six months and I can’t enforce it, you’ll ask yourself, ‘Why do I even have to leave?’”

As a small landlord himself, Miller is a long time advocate who formed the OSLA last year with the objective of influencing legislation, even if he readily admits that his efforts can sometimes be in vain—“We already know the decision is made, so it’s more about influencing the underlying work to mitigate the impact on small landlords”—and to educate his membership. He says that with the help of other tireless workers, like Kayla Andrade of Ontario Landlords Watch, he hopes to make the rental landscape as hospitable to landlords as it is to tenants.

He added that city hall has, for the most part, been receptive to his ideas, which he hopes will help them see the bigger picture.

“We want to incentivize people to become landlords by putting a pause on regulations,” said Miller. “The city has really big plans for intensification and small landlords love building secondary suites.”

Forget Toronto—it’s rare to find a condominium in the GTA’s that’s selling for under $1,000 per sq ft, but a project in Scarborough is doing just that, making it one of the few affordable condo developments in the region.

East Pointe Condominiums, an 11-storey, 114 unit mid-rise, slated for development in the Kingston Rd. and Morningside Ave. area, is selling for around mid-$800 psf, and there’s hardly any rental competition in the area despite being nestled next to the University of Toronto’s Scarborough Campus.

“We’re about 1 km away from UofT at Scarborough, and Centennial College is nearby too,” said Mike Bowering, president of Mutual Developments, East Pointe’s builder. “The university there is drastically undersupplied with housing. UofT has 15,000 students and only 850 beds, and it’s slated to increase enrolment up to 30,000 in the next 10 or 15 years.”

It’s true that the COVID-19 pandemic chased international students out of the country and domestic students back to their parents, but that is very likely to change by summertime. In 2019, according to the federal government, there were 828,356 international students in Canada, the majority of whom studied in Ontario. For most in the province, Toronto was their choice city.

“Our universities are suffering because foreign students are major contributors to them, because they pay more than domestic students. Domestic students are also missing because a lot of them are taking classes online,” Phil Soper, president and CEO of Royal LePage, previously told CREW. “The federal government paved the way for students to return to Canada, and a lot of them came back in January, but most won’t be back until September when the school year starts.”

As a result, residential property investors will have plenty of opportunity to fulfil student demand, although with most units in the region don’t carry well. But Bowering says East Pointe might allay some of their concerns.

“For investors, it’s the same old story: buy low and sell high. At $1,500 psf, you try to get as much rent as you can, but there aren’t many condos that carry if you pay over $1,000 psf,” he said. “Our prices are mostly between $400,000-600,000, and 10% of our units will have three bedrooms, which are considered family sized.”

Investors gain the most when they jump in early because they can ride a high wave of appreciation, particularly in up-and-coming, and therefore desirable, neighbourhoods. The Kingston corridor underwent some revitalization around a decade ago, which also saw maximum property heights rezoned to eight storeys, but there hasn’t been much residential development in the area. Mutual Developments is looking to capitalize on the gap in the market.

“There are a lot of advantages to that area, with a GO Train right there, the beach and a lot of other amenities,” said Bowering. “Scarborough is a bit less expensive compared to the rest of the city. If a condo in downtown Toronto costs well above $1,200 psf, you can get one in Scarborough at $850 and get about $2,000 a month in rent.”