Monday, November 20, 2017

Commonly Used Terms for Mortgages Every Buyer Should Know


 Taking out a mortgage can be intimidating, there are many terms that might be unfamiliar to you as you go through the process. Here are the most common mortgage terms we think every homebuyer should know.
Amortization
This is a schedule that outlines your loan payments for the duration of the home buying loan. It details how much of each monthly payment goes toward the principal and how much goes toward the loan interest. Initially, the bulk of your payments will be applied toward the interest.
Appraised Value
An estimate of a property’s market value, used by lenders in determining the amount of the mortgage. Usually made by a qualified professional called an “appraiser”.
Assessment
The value of a property, set by the local municipality, for the purposes of calculating property tax.
Assumable Mortgage
A mortgage held on a property by the seller that can be taken over by the buyer, who then accepts responsibility for making the mortgage payments.
Blended Mortgage
A combination of two mortgages, one with a higher interest rate than the other, to create a new mortgage with an interest rate somewhere between the two original rates.
Bridge Financing Interim financing to bridge between the closing date on the purchase of the new home and the closing date on the sale of the current home.
Buy-down
When the seller reduces the interest rate on a mortgage by paying the difference between the reduced rate and market rate directly to the lender, or to the purchaser, in one lump sum or monthly instalments.
Canada Mortgage and Housing Corporation (CMHC)
The National Housing Act (NHA) authorized Canada Mortgage and Housing Corporation (CMHC) to operate a Mortgage Insurance Fund which protects NHA Approved Lenders from losses resulting from borrower default.
Closed Mortgage
A mortgage that cannot be prepaid, renegotiated or refinanced during its term.
Commitment
A notice from a mortgage lender to a prospective borrower that the lender will advance mortgage funds of a specified amount under certain conditions.
Conventional Mortgage
A mortgage loan of up to a maximum of 75% of the lending value of the property for which a lender does not require loan insurance.
Debt Service Ratio
The percentage of a borrower’s income that can be used for housing costs. Gross Debt Service (GDS) Ratio is the amount that a lender will permit a borrower to use from his/her gross income in order to qualify for a loan for housing costs, including mortgage payment and taxes (and condominium fees, when applicable). Total Debt Service (TDS) Ratio is the maximum percentage of a borrower’s income that a lender will consider for all debt repayment (other loans and credit cards, etc.) including a mortgage.
Default
Non-payment of instalments due under the terms of the mortgage.
Discharge
The removal of all mortgages and financial encumbrances on the property.
Equity
The difference between the price for which a property can be sold and the mortgage(s) on the property. Equity is the owner’s “stake” in a property.
First Mortgage
The first security registered on a property. Additional mortgages secured against the property are “secondary” to the first mortgage.
Foreclosure
A legal process by which the lender takes possession and ownership of a property when the borrower doesn’t meet the mortgage obligations.
Gross Debt Service (GDS) Ratio
The percentage of gross income required to cover monthly payments associated with housing costs. Most lenders recommend that the GDS ratio be no more than 32% of your gross (before tax) monthly income.
Gross Household Income
Is the total salary, wages, commissions and other assured income, before deductions, by all household members who are co-applicants for the mortgage.
Hazard Insurance
An insurance policy required by lenders to protect a property against damage or loss caused by fire, weather, etc.
High Ratio Mortgage
A mortgage that exceeds 75% of the loan-to-value ratio; must be insured by either the Canada Mortgage and Housing Corporation (CMHC) or a private insurer to protect the lender against default by the borrower who has less equity invested in the property.
Hold-back
An amount of money withheld by the lender during the progress of construction of a house to ensure that construction is satisfactory at every stage. The amount of hold-back is generally equivalent to the estimated cost to complete construction.
Interest Rate Differential Amount (IRD)
An IRD amount is a compensation charge that may apply if you pay off your mortgage principal prior to the maturity date or pay the mortgage principal down beyond the prepayment privilege amount. The IRD amount is calculated on the amount being prepaid using an interest rate equal to the difference between your existing mortgage interest rate and the interest rate that we can now charge when re-lending the funds for the remaining term of the mortgage. For more information, click on compensation amounts.
Interim Financing
Short-term financing to help a buyer bridge the gap between the closing date on the purchase of a new home and the closing date on the sale of the current home.
Maturity Date
Last day of the term of the mortgage agreement.
Mortgage
A contract between a borrower and a lender. The borrower pledges a property as security to guarantee repayment of the mortgage debt.
Mortgage Broker
A licensed individual who, for a fee, brings together a borrower in search of a mortgage and a lender willing to issue that mortgage.
Mortgage Insurance Premium
A premium which is added to the mortgage and paid by the borrower over the life of the mortgage. The mortgage insurance insures the lender against loss in case of default on the part of the borrower.
Mortgage Life Insurance
A form of reducing term insurance available for all mortgagors. In the event of the death of the owner or one of the owners, the insurance pays the balance owing on the mortgage. The intent is to protect survivors from losing their home.
Mortgage Payment
The regular instalments made towards paying back the principal and interest on a mortgage.
Mortgage Term
The length of time a lender will loan mortgage funds to a borrower. Most mortgage terms run from six months to five years, after which the borrower can either repay the balance (remaining principal) of the mortgage, or renegotiate the mortgage for another term.
Mortgage Prepayment Penalty
A fee paid by the borrower to the lender in exchange for being permitted to break a contract (a mortgage agreement); usually three months’ interest, but it can be a higher or it can be the equivalent of the loss of interest to the lender.
Mortgagee
The entity who lends the money.
Mortgagor
The entity who borrows the money. The borrower pledges a property as security to guarantee repayment of the mortgage debt.
Open Mortgage
A mortgage that can be prepaid or renegotiated at any time and in any amount without penalty.
Payment Frequency
The choice of making regular mortgage payments every week, every other week, twice a month or monthly.
Principal
The mortgage amount initially borrowed or the portion still owing on the mortgage. Interest is calculated on the principal amount.

P, I & T
Principal, interest and taxes due on a mortgage.
P & I
Principal and interest due on a mortgage.

Friday, November 3, 2017

October K-W Average Home Prices remain strong as inventory is still low

Last month a total of 481 residential properties sold in KitchenerWaterloo and area through the Multiple Listing System (MLS® System) of the Kitchener-Waterloo Association of REALTORS® (KWAR).  Home sales in October were down 16.6 per cent compared to the same month last year, but still above the previous 5-year October average of 464 sales.

On a year-to-date basis 5,842 residential units have sold compared to 5,816 during the same period in 2016, an increase of 0.4 per cent.


October’s sales included 289 detached homes (down 20.2 per cent), and 107 condominium units (down 17.7 per cent) which includes any property regardless of style (i.e. semis, townhomes, apartment, detached etc.). Sales also included 44 semi-detached homes (down 7.3 per cent) and 38 freehold townhouses (down 2.6 per cent).   


The average price of all residential properties sold last month increased 11.4 per cent to $454,398 compared to October 2016. Detached homes sold for an average price of $541,368, an increase of 13.1 per cent compared to October 2016. During this same period, the average sale price for an apartment style condominium was $249,993 for an increase of 11 per cent. Townhomes and semis sold for an average of $349,316 (up 13.7 per cent) and $354,668 (up 8 per cent) respectively. 


The median price of all residential properties sold in October increased 11.7 per cent to $419,000, and the median price of a detached home during the same period increased 10.2 per cent to $484,000.


“While the number of home sold so far this year is pretty much on pace with last year’s record breaking results, the demand from buyers continues to outpace new listings entering the market,” says James Craig, President of KWAR.


“I anticipate this continuing for the remainder of the year while buyers rush to beat the additional mortgage changes.”
Last month the Office of the Superintendent of Financial Institutions Canada (OSFI) revised it residential mortgage underwriting practices, which come into effect on January 1, 2018. The change will require the minimum qualifying rate for uninsured mortgages to be the greater of the five-year benchmark rate published by the Bank of Canada or the contractual mortgage rate +2%.


The number of active residential listings on the KWAR’s MLS® System to the end of October totalled 830, which is ahead of October of last year, but well below the previous five-year average of 1,522 listings for October. 


The average days on market in October was 24, compared to 27 days in 2016. On a month to month basis, it took two fewer days on average from list to sale date in October compared to September.


Contact me at www.kimlouie.net for a free home value report or th chat about the local real estate market!

How Smart is Your Home?

Smart home products are quickly catching on with consumers ranging from front doors that unlock as you come up the walkway, robot lawnmowers that keep your grass trimmed, remote controlled thermostats and lighting, to home monitoring cameras. What was once science fiction, or conveniences seen on the TV show the Jetsons, “Smart” technology has become today's reality.

This new trend has widespread implications for those people thinking about selling their home or shopping for a new home. A 2015 Real Estate Survey showed that 81% of home owners are more likely to purchase a home with Smart home technology installed. According to the survey, 33% of agents said homes with Smart technology sold faster than those without.

What does Smart home technology looks like today?
Any device in your home that uses electricity can be put on your home network and at your command. Whether you give the command by voice, remote control, tablet or Smart phone, the home reacts. The main idea for Smart homes is that we’re building intelligent living spaces that take care of us instead of the opposite.

Smart home technology isn’t just a new gimmick, it is a practical way to make your home greener, saving you time and money without lifting a finger. A few examples include:
1. Home Automation
What if your home could sense when you were awake and adjust the lights or thermostat accordingly? What if your baby monitor alerted you to your baby’s sleep activity and comfort level? And what if your refrigerator could detect when you’re low on groceries and then send your car a reminder to go to the grocery store.
It’s hardly a far-fetched thing today. Wireless Smart home technologies such as Nest and Zigbee have made it easier than ever to automate your home or control aspects of it from a Smart phone or tablet.
Nest, for instance, works with compatible Smart appliances— including Philips HUE lighting and Logitech remotes—to set your home on autopilot. Observe any room without getting up from the couch with easy-to-install cameras; set your remote control to also warm up your living room when you settle in for movie night; or even get updates on your pet’s eating habits while you’re at work.

2. Home security systemsThe next most popular type of Smart home technology that people currently have installed in their home according to the survey is Smart home security. In addition to traditional systems, these may include video monitors inside and outside the house that you can view on a Smart phone from anywhere you happen to be.

3- Home entertainments systems
No Smart home would be complete without the right entertainment system to compliment your lifestyle. A Smart home has you covered, from a superior 4K TV experience with a billion colours, to in-wall sound bars and outdoor speakers.

The Smart home industry is moving forward
While we all likely have more than a few Internet-connected devices already in our homes—whether it’s a Wi-Fi enabled game console, a Smart TV, or a connected security solution—these are piecemeal solutions. A truly Smart home is one that connects multiple systems into one system and collects and responds to data.

The Smart home industry is still moving forward, many companies are already pouring millions of dollars into developing technologies that seamlessly integrate our digital and physical worlds within our cars and homes and we are about to see the fruits of this movement in the near future.

Contact me today for a Free Home Value Report or for answers to all your real estate questions at www.kimlouie.net!