An overview on Rent to Own Home deals

Most of us aspire for own homes, but what percent of the population really owns a home? Won’t exceed 40%. Are you among the 40%? If not, you can be. The concept of rent own homes Brampton is there only so that people with lower finance availability can purchase a home, at the end of a certain pre-decided period. It is different from a mortgage because the sale does not take place at the beginning of the contract and there are added benefits in rent own home contracts like-  you don’t need a good credit score, like in mortgages, to qualify for a rent own homes Brampton agreement and you don’t need a lot of cash for down payment, instead a small percentage of the pre-decided purchase price is by default the down payment etc.

rent to own homes Brampton

The following are the important features of a rent to own homes Brampton contract:

1. The buyer gets to move into the house right away

2. The terms and conditions of the contract are decided in the beginning of a rent to own home contract and before ANY money changes hands. They include the period of rent, the rental, the down payment, the lease period etc.

3. The buyer is responsible for the maintenance of the home.

4. The down payment in a rent to own homes Brampton contract is also called ‘option money’ and is generally not refundable but is applied as down payment towards the same home for a mortgage.

5. The sale takes place once the rental period is over and your credit has improved. If needed, you can extend the term (subject to approval).

6. If you are not able to make your monthly payment, you have the option to sub-lease the property.

Rent to own home plans is good for buyers who are not able to get traditional bank financing. There is no risk of collateral as the property is in the name of the seller till the last payment. The buyers can also walk away from the ‘option’ contract i.e rent to own home contract if they find anything unusual or comfortable while residing at the time of rent. The rent to own home market is a little more complicated than the real estate market in order to find the best properties, terms of lease etc and hence a mortgage broker or an agent may be the best option at any point of time.

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Did you know you can Rent-to-Own a Condo?

What Is A Condo?

Condominiums, commonly known as condos, are properties that have individual housing units in a residential building or property. Each of the units is either separately owned or may be rented, and every condo has a common area like compound, parking, etc., that are jointly owned. It differs from an apartment style of living. Apartment buildings have a single owner while in a condo, there are different owners of each residential unit, an association with the Condominium properties exists as a society and not in an apartment residence, etc. 

Condos are built in different structures. They can be like regular apartments or stand-alone houses in a housing society or in the form of townhouse complexes. In any case, the Condo is managed by the association which binds all the condo units.

How Can You Rent To Own A Condo?

The sale of a condo unit is just like the sale of any other residential property which involves a selling deed between the owner and the buyer. Rent to own Condo is a type of sale offer to acquire a Condo. People with little or no finance and who are in need of a residence like Condo can opt for a Rent to own Brampton Condo deal. By signing such a deal, the buyer gets to move into the condo by neither purchasing the place nor on rent. In it, the buyer agrees to take the Condo unit on lease and make a monthly payment towards the owner. At the end of a certain period after making all the payments decided as per the terms and conditions, the buyer gets to own the condo property. To explain further, in a rent to own Brampton condo purchase, the ownership of the property is transferred to the buyer only at the last payment of the instalment.

It is similar to a mortgage in the context of the periodical fixed payment feature but is better because rent to own condo do not require a down payment at the beginning of the contract and are easier to avail than bank mortgages. Other than that, rent to own a condo also is beneficial in tax deductions, less maintenance and full control of the residential space. Lastly, it’s also useful to people who are willing to make an investment but are shy of cash.

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Why a Variable Rate Mortgage is better than Fixed

Updated as of Spring 2016

Ah yes. Spring is here. The snow is melting, flowers are starting to grow, but more importantly, it’s real estate season, and a realtor near you will soon be knocking on your door asking again if you’d like to buy or sell.

This is an important time for the banking industry, since a significant amount of their profits are traditionally made on the money they lend in mortgages.

Consumers are getting savvier. Rather than just going to their local bank branch, they’re increasingly shopping around for the best rate or going through a mortgage broker. This makes sense, considering comparison shopping can save a borrower thousands in the long run.

Deciding if you should go variable or fixed can be a tough decision to make. Both options have their advantages and drawbacks.

The Difference Between Variable And Fixed

Fixed Rate: This mortgage is set over a term of usually 1,3,5, or 10 years. During that term, the rate you first sign with will be the rate you pay throughout the term of the mortgage; in other words, there are no surprises. You have a permanent rate and payment that won’t change. This is great for peace of mind, especially when the future holds uncertainty.

The fixed rate is higher than the variable rate, with very few exceptions. Taking a fixed rate over a variable is almost like taking an insurance policy — because it’s predictable, you are taking on much less risk, which is why fixed rates are priced higher.

The fixed rate itself is driven by Canada Bond yields, which are driven by economic factors such as unemployment or inflation. Currently, these 5-year bond yields have flattened, paying less than 1% interest following decades of declines. These declines have driven fixed mortgage rates to some of the lowest rates ever.

The Canadian 5 Year Bond Yield VS Canadian Fixed Mortgage Rates

Variable Rate: Like the fixed rate, these are also set on a 1, 3, 5 or 10-year period, but are priced at a lower rate than the fixed rate mortgages. Why? Because if you go this route, you take on more risk.

Unlike fixed rates, variable rates might change over the term of your mortgage, and can increase or decrease. They too, are driven by economic factors, but your rate isn’t secured. Instead, variable rate mortgages are driven by the Prime Rate. Generally, the Bank of Canada will reduce rates when the economy needs some stimulus, and will raise them when the economy is doing well to control inflation.

The Canadian Prime Rate since 1970 according to the Bank of Canada

Because we don’t have a mortgage rate crystal ball and can’t know if variable rates will increase, decrease, or stay the same, you have to be prepared to take on some risk. Your rate may increase. If that happens, will you still be able to afford to pay it off every month? For one-third of Canadian families, an increase of as little as 1% could mean they will default on their mortgages.

While no one knows what the Bank of Canada will do with their rates, experts say it seems likely rates will remain relatively stable or increase. In addition to that, the Government has warned banks that dropping their rates any lower might spark a housing crisis.

Comparing the Two: Is Either Better?

While it’s possible to save money on a variable rate mortgage (assuming no major rate increases), the difference between fixed and variable rates is not significant as of spring 2016.

Fixed VS Variable Mortgage Rates in Canada since 2008

The Verdict For Spring 2016

As you can see, the savings difference on a monthly basis by going variable isn’t too significant at the moment. Given that variable rates are likely to increase over the 5-year term, it might be worth paying the extra $64 a month to have the peace of mind and stability that a fixed rate mortgage offers in this rate environment. This is a growing trend with nearly 66% of Canadians choosing fixed rates right now.

However, this might not apply to everyone, and there isn’t a one-size-fits-all solution. You do have to consider other factors, such as shorter terms or the flexibility you need built into your mortgage. For example, if you sign on to a 5-year fixed mortgage but decide to sell or refinance in 3 years, there could be some hefty fees associated with it.

If you do decide to go variable in hopes of saving some money, perhaps consider opening a high-interest savings account and put away the difference that you would be saving versus a fixed mortgage to mitigate some of the risk of rising rates. This way if rates do go up, you’ll have a cushion to help you pay it off. On the other hand, if rates decrease then you’ll be in a better position in the end.

Watch out for low-interest lenders who require CMHC insurance with 20% down. Some lenders would like to minimize the risk of default and they will require the CMHC insurance regardless of the size of the downpayment. The CMHC premium is a one-time percentage of a mortgage balance, so treat it as ‘hidden’ extra interest. Make sure you are comparing apples-to-apples when comparing interest rates as the advertised rate is only half the story.

A fixed rate looks really attractive at the moment and might be the way to go for many. But if you’re unsure of how to navigate all these possibilities and details, be sure to talk to a reputable professional about what might be best for you based on your situation.

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Canada Not Alone in House Price Mania

The dramatic rise in Canadian house prices has been making headlines almost daily.

And for good reason: prices in and around the country’s hottest markets, Toronto (and until recently) Vancouver, have been posting double-digit annual gains. In May, prices in Toronto and Vancouver were up year-over-year 29% and 8.8% respectively.

But Canada isn’t the only country experiencing skyrocketing home prices.

house price

Here’s a look at some of the gains over the last four years around the world (data compiled by The Economist):

  • 66% in Australia (+2.1% in the past year)
  • 30% in Britain (+6.3% in the past year)
  • 102% in Canada (+10.5% in the past year)
  • 44% in China (6.2% in the past year)
  • 61% in Israel (+9% in the past year)
  • 132% in New Zealand (+12.2% in the past year)
  • 115% in Sweden (+3.6% in the past year)
  • Even U.S. home prices have largely recovered to post-financial crisis highs. They’re up 10% from 2012, and up 4.8% over the past year.

But the two hottest housing markets are currently Iceland and Hong Kong, which posted annual price increases in Q1 of 17.8% and 14.4%, respectively, according to Knight Frank’s Global House Price Index.

home price

Since 2015, prices in Hong Kong have risen a whopping 236%. If you think Toronto prices are bad, those desperate for a slice of the real estate market in Hong Kong are now paying upwards of US$500,000 for “micro apartments” that measure no more than 161 square feet—just barely large enough to contain a Tesla Model X, as reported by Bloomberg.

Following Iceland and Hong Kong in the 55-market house price index is New Zealand in third spot and Canada, currently ranked as the world’s fourth-hottest housing market.

Signs are also appearing that other European markets are starting to pick up steam as well. Research firm Global Property Guide reported that in 2016, 18 of the 23 European housing markets that it tracks posted price increases, with some of the strongest gains in Iceland, Ireland (+8%), Romania (+11%), Estonia (+7.4%), and Germany (+6.9%).

Increases Largely Isolated to Major Cities

Not surprisingly, the largest price gains—in Canada and around the world—are predominantly restricted to the largest cities.

Over the past four years, prices are up 47% in Vancouver, 54% in London, UK, and 75% in Auckland, New Zealand.

International Monetary Fund (IMF) data shows that in Canada, home prices at the national level are about 13% lower compared to the major cities. The difference is even more pronounced in the UK, U.S., New Zealand and particularly in China, where average national home prices are 55% cheaper than in the major cities.

The IMF tracks housing markets in 57 countries and reports its findings in its quarterly Global Housing Watch. The economies are divided into three categories:

“Gloom” – Those where house prices fell substantially during the financial crisis of 2008-09 and have yet to make a turnaround (Brazil, China, Russia, Spain);

“Bust and boom” – Countries that have seen their prices rebound after falling sharply during the financial crisis (Germany, Ireland, Japan, New Zealand, UK, U.S.); and

“Boom” – Countries that saw only a modest drop in home prices through the financial crisis, followed by a quick rebound (Australia, Austria, Mexico, Sweden, Switzerland).

Unsurprisingly, Canada finds itself among the 22 “boom” economies, and has been on the IMF’s radar as prices continue to soar higher.

IMF’s Eye on Canada

In a previous report from June 2016, the IMF commented specifically on Canada’s housing market and its level of risk at that time: “Macroprudential policy has been broadly effective in alleviating financial stability risks and reducing tax payer exposure to mortgage finance. Additional macroprudential measures may be needed if housing market vulnerabilities intensify.”

Fast-forward to October 2016 when the Department of Finance did just that and introduced its new mortgage rules, which expanded mortgage stress testing requirements and imposed new restrictions on mortgage insurance.

With home prices in the Greater Toronto Area and Greater Vancouver Areas continuing to rise through the early part of the year (more so in Toronto following Vancouver’s introduction of a 15% foreign buyer’s tax), a new IMF report in May sounded yet another warning:

“(Canada’s) $1.5 trillion mortgage market has been important in sustaining private consumption but households are highly indebted and housing affordability, particularly in Vancouver and Toronto, has become a social issue with many first-time buyers priced out of the markets,” read the IMF report. “Credit ratings of Canada’s six largest banks were lowered recently, reflecting concern that high household debt and the rapid appreciation of house prices could weaken asset quality in the future.”

And back in January the Organisation for Economic Co-operation and Development (OECD) had also commented on the growing risks associated with Canada’s rising home prices.

Catherine Mann, the OECD’s chief economist, said a “number of countries,” including Canada and Sweden, had “very high” commercial and residential property prices that were “not consistent with a stable real estate market.”

Stepping Back from the Doom and Gloom

Despite the rapid increases in global house price, at least one top economist says that in itself isn’t cause for automatic alarm about another global financial crisis.

“This is a time for vigilance, but not panic,” Prakash Loungani, a member of International Monetary Fund’s research department, wrote in a blog post.

He and colleague Hites Ahir argue that the dynamics are different from the housing boom of the 2000s for two reasons:

  1. The current rise in house prices is not synchronized across countries. “And within countries, the boom is often restricted to one or a few cities. In many cases, the booms are not being driven by strong credit growth: some house price increases, particularly at the city level, are due to supply constraints.”
  2. Governments are now more active in using “macroprudential policies to tame housing booms.”

In its own report on the Canadian housing market, Fitch Ratings, while acknowledging the increasing vulnerability to a steep price correction, said there are key “structural features” that would safeguard a housing crisis like that seen in the U.S.

“Canada is unlikely to mirror the declines and fallout experienced during the U.S. housing crisis due to major differences in the housing and mortgage finance systems,” said Fitch Director Kate Lin, noting that banks are subject to rigorous oversight and regulations that ensure prudent mortgage lending and underwriting standards.

“What’s more, credit quality for Canadian mortgage loans remains strong unlike the drift towards weak borrower and loan quality that we saw a decade ago in the U.S.,” she said.

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Why Choose a Broker

For many Canadians, the purchase of a home is likely the biggest financial investment decision they will make in their lifetime. To help realize the dream of homeownership, you’ll want to work with a professional mortgage broker who will offer sound, professional advice and provide a mortgage solution that matches your needs and circumstances.

It is the job of a professional mortgage broker to stay ahead of the game, learning about the array of products available that best suit their clients’ needs. Generally, the broker is paid a referral fee by the lender, not by their client. Lending institutions will usually provide their best interest rates to the broker ensuring that, as the homebuyer, you don’t have to negotiate to get the best rate.

By assessing your needs, a broker will carefully weigh important decisions, such as lump sum payments and fixed versus variable rates, before they are made. A broker will also guide you through the process of completing and submitting mortgage applications and supporting documentation required by the lender. If the terminology seems a little confusing, your broker is there to explain important information and conditions set out by the lender as well as any steps required to close the mortgage transaction.

A few things to note about mortgage brokers:

In short, consumers choose a mortgage broker for four reasons: choice, advice, service and savings. By considering these factors, you’ll be able to make an informed decision, comfortably.

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Here’s A Great Way To Own a Home With a Negligible Investment

Yes, you have read it right, Rent to own homes Toronto allows you to have a home, where you can reside, with a little initial investment and does not involve a mortgage transaction. In Toronto, rent to own homes has always been in demand as rent to own homes offer the best opportunity to own a house at a low cost. Rent to own homes is unique because they do not burden you with the ownership of the house. In the beginning, you have to make an agreement with the lender or the lessor, in which all the terms and agreements of your lease would be laid down. Initially, you have to make a down payment, followed by a few periodic fixed payments. The ownership of the house is transferred to you only on the payment of your last instalment. And in this way, you can own the house of your choice.

The following are the wide benefits rent to own homes Toronto offers:

Less Initial Investment Required

The initial cash you require in a rent to own homes Toronto deal is only the down payment. The down payment is generally 20% or less of the market price of the property in Toronto- this is a huge benefit for home seekers with low finance available.

You Can Move In Immediately After The Transaction Is Made

As soon as the rent to own home deal is made, you can move into the property and reside. It is unique because you are not burdened with the ownership till the last lease payment and till then you can get to know how suitable the house is to you and your lifestyle.

Easier To End The Rent To Own Homes Toronto Deal

To end a rent to own home deal in Toronto, you only have to give your lessor a notice in advance of the period specified in the agreement and then you can move out of the house without any strings attached and also with no further payment.

No Trouble Related To Market Price Fluctuations Of House In Toronto

Since the price agreed upon in the agreement is final, you do not have to look after the market price fluctuations of the house any further. Market price fluctuations play a big role in the mortgage scenario and not in rent to own homes deal.

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Planning To Buy A Home For The First Time? Here Is Your Guide As A First Time Home Buyer

Buying a home is a very major event in your life. It can be daunting at the beginning, but if you be patient in the flow and follow a predetermined path then you can make your first time home buyer experience warrantable. To elucidate you with a clear picture of your first time home buyer experience, the following could be the most basic and important tips in your home buying process

A home that suits your needs when considering first time home buyer mortgage

Being a first time home buyer, given to choose from a wide range of charming properties, you are most likely to be provoked and you may like something which may be out of your scope or more than you need. So it is primary that you have a mindset of the type of house you want, in all the specifications and to what extent you are open to changes in the type of house you have determined.

first time home buyer mortgage

-Who can guide you to buying the property in the best deal

Since you are a first time home buyer, it is normal for you to not know about all the corners of the housing property market or also have a good knowledge in it. So your way into the property market is through a good real estate broker, who can guide a first time home buyer in getting a first time home buyer mortgage, in best of his abilities to get the property of your exact needs in all dimensions.

-Obtain a home inspection

What may appear to be flawless, and which you are going to buy, could be an illusion created by the seller. There is no substitute for having the final shortlisted home which you are planning to buy to get inspected by a professional. The professional shall check all the aspects ranging from quality of the property to its overall potential strength for a long and prosperous stay in it.

-How much mortgage can you qualify for

Majority of the first time home buyers lookout for first time home buyer mortgage backed properties as they are not ready to invest all of their liquid cash in to the property. As a first time home buyer, it is vital that you should have a check of your financial position, your credit ratings and your capacity for the amount of the number of instalments you will be able to pay in the future. Also, you can have a check for what amount of mortgage you qualify.

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