The Montreal Gazette, February 14, 2010

Re: "Housing prices are getting dangerously high" (Montreal Gazette, Feb. 12, 2010).

The spectre of higher interest rates in the future should have everyone concerned. It's a matter of when, not if - but that could be tempered by fixing a few problems with our system.

Right now buyers can pick up the keys to a new home owing almost exactly what they paid for the house (95 per cent of the house plus CMHC fees). If we couple this with 35-year amortizations, you can see we are helping people into houses in which they might not have any significant equity for 10 years.

We have an excellent plan that allows first-time purchasers to borrow up to $50,000 per couple from their RRSPs to put towards a down payment. If a couple hasn't been able to struggle a little to put the equivalent of at least 10 per cent of the purchase price into their RRSPs, why are we lending them money? If we simply go "old school" - 25-year amortization and minimum 10 per cent down - people will start building equity instead of paying interest, and housing market stability will be more realizable. If we don't, we are no smarter than the Americans, filling a few pockets with short-term gains and everyone else with long term pains.

John Deakin
Pointe Claire

It would seem that the Government of Canada is inclined to agree with John. On February 16, Finance Minister Jim Flaherty outlined new mortgage lending rules that will require borrowers to meet more stringent standards.

First, borrowers will be required to prove that they can support mortgage payments calculated using the five-year fixed rate with a 25-year amortization, even if they opt to sign up for a longer term or a lower variable rate.

Second, the rules will lower the maximum Canadians can withdraw when refinancing their properties, to 90 percent of the value of their home, instead of 95 percent.

Third, in order to curb speculation in the real estate industry, borrowers will now be required to put down a minimum of 20 percent on non-owner-occupied properties in order to qualify for CMHC mortgage insurance.

These new rules will come into effect on April 19.

For the 2009 tax year, Revenu-Quebec had in place a renovation tax credit program which was similar to (but more restrictive than) Revenue Canada's program. In essence, taxpayers who hired a contractor to renovate their primary residence in 2009 will receive a non-refundable tax credit equal to 20% of the cost of the renovations which exceed $7,500 but do not exceed $20,000. Therefore, the maximum tax credit earned would be $2500.

The Quebec plan differs significantly from the Federal plan in many ways. For instance, the work HAS to be performed by a licensed subcontractor - the home owner cannot do it himself. Also, the work has to affect the physical building that is your primary residence - outdoor pools, hot tubs and landscaping work do not qualify.

Deakin Realty has a professional accountant on staff. Don't hesitate to contact us for more information on this program!

» Revenue-Québec website

Much has been written in the business pages of late concerning interest rates and what they will be doing in the near future. The Bank of Canada has stated that they will not increase their “prime rate” before July. This does not mean that the rate will decrease, only that there will be no increases until then.

One of the key influences on the Bank of Canada’s rate decision is the value of the Canadian dollar. The Canadian dollar has been performing well, however, our dollar’s rise is predominantly a product of the US dollar’s weakness. Our currency is closely tied to the price of commodities, particularly oil. Case in point: the price of oil popped up to $80/barrel and our dollar jumped to $0.975 US. Oil dropped to ~ $75/barrel and our dollar dropped to $0.95 US.

The Bank of Canada is stuck in a tough spot. If they increase rates to try and slow the pace of recovery or inflation, our dollar will increase in value. As our dollar increases in value, the cost of our exports increases, making us less competitive on the international market. Money markets look for a safe place to “park” money in the fear that the US greenback will fall further, with bleak economic news and a prime interest rate that is virtually giving away money for free.

So what does all of this mean for your mortgage? If you are locked-in long-term (like 5 years), you can sleep at night. If you are looking for a new mortgage, a re-mortgage or a renewal, an important change happened recently. Variable mortgages were available until 6 months ago at “prime minus”, meaning that if you had prime minus a point, your rate was as low as 1.25% - obviously extremely cheap money. The banks recently changed this and now offer only “prime plus” on variable mortgages, resulting in higher rates and as much as a 2% swing.

So today, you might be looking at 3.25% on a variable rate, but with a little shopping or with our assistance you can secure 3.9% for 5 years and 4.1% for 6 years. Now, 4%+ sounds high against 1.25%, but not bad against 3.25%.

Naturally, the first step in refinancing is to take advantage of the best rates available. There are, however, other things that can be done after you have signed your mortgage papers to reduce your cost of borrowing. Our strongest advice to our clients is to take advantage of penalty-free prepayment options. The two most popular payment options are “anniversary payments” and “double-up payment” options. Anniversary payments allow you to pay down up to 15% of your original mortgage amount at any time, once per calendar year. A key feature of this option is that the payment goes directly against the principal owing on the mortgage, greatly reducing the future interest paid. Also, most mortgages allow you to double up your monthly or bi-weekly payments as well. This second payment is also applied entirely against the principal owing and helps to reduce future interest. The impact of using these pre-payment options is that your mortgage gets paid off faster and the amount of interest you save is huge. For example, it is very common for a family to shorten the length of their amortization from 25 to 15 years simply by making use of some or all of the pre-payment options available to them.

In closing, we are committed to giving you the very best advice for your individual situation. Should you require mortgage financing advice, it would be our pleasure to help. We frequently deal with all the major lenders, and we can direct you to the best product for your needs.

The 3,411 real estate transactions registered in November 2009 were enough to surpass, by 4 per cent, the record-breaking sales levels of November 2007.

All property categories registered an increase in sales in November 2009, and all categories managed to exceed the record-breaking sales levels of 2007. Condominiums led the way with a 12 per cent increase compared to November 2007. Plex sales also increased by 2 per cent compared to November 2007. Finally, single-family homes posted a 1 per cent increase compared to 2007.

“The market is very active. Now is a good time to sell a property, and it’s also a good time to buy a property as mortgage rates are still low and the inventory of homes for sale is quite extensive, with 21,197 properties on the market in the Montréal area,” said Mr. Michel Beauséjour, FCA, Chief Executive Officer of the Greater Montreal Real Estate Board.

» See the complete interview with M. Beausejour

One of the renovation costs that frequently comes up when moving is painting. Often our clients will plan to paint part or all of their new house before they move in. By the same token, sometimes sellers will want to paint a room or two before selling to help their home show at its best. Since painting comes up at some point in most real estate transactions, we thought it might be helpful to have Dave Beaupre, from “FinDécor Painting” give a little insight on how to estimate painting costs. Here is some expert advice from Dave the painter:

So you have bought a new house, and plan to do some painting... Perhaps you are looking to add your personal touch through changing colors and décor, or it could be that the house is looking a little dingy and needs some TLC. Whatever the reason, a great time to paint all or some of your new house is right when you get it. By painting before the move in, you avoid moving furniture around, make cleaning up easy, and help to keep the cost low.

Painting before you move is a great idea, and there are two main reasons why you may wish to hire a professional painter to do the work for you. The first is simple - you may not have the time or the know-how to paint on your own. The second is that the “window of opportunity” between houses is often short, and a professional painting crew can get the job done quickly and cleanly to suit your needs.

Naturally you are wondering... how much will painting add to the cost of the move? Well, here is a quick and easy way to approximate the cost:

Typically this sort of costing is done using a cost per square foot of surface area. The idea is to find your painting surface in square feet and multiply by the cost. Here are a couple of examples:

Example A:

You have just bought a 1600 square foot “cottage” and would like to paint the whole interior (a 2-storey house with 800 square feet per floor). The calculation would be:

2 (floors) x 800 (square feet/floor) x 3.5 (to obtain the wall & ceiling square footage) x $0.60 (the average cost per square foot) = $3,360 to paint the house.

Example B:

You would like to paint a single bedroom in your new house. (10’ X 15’) The cost would be:

10’ x 15’ gives and area of 150 square feet. 150sf x 3.5(to obtain the wall & ceiling square footage) x $0.60 (the average cost per square foot) = $315 to paint the room.

Tip:

The 3.5x factor is the key to estimating the cost. However, if the ceiling paint is in good condition and does not need to be painted, the 3.5x factor can be replaced with 2.5x and you’ll end up with the cost for all the walls but not the ceilings.

Of course, these are guidelines, but the numbers are accurate enough that you can rely on them. These valuations provide a rough guide and typically include good quality (Benjamin Moore) paints. If you are planning to use eco-friendly or specialized high-end paints, this can add as much as 15 to 20 percent. Similarly, this is for the average paint job. If the job includes some more complex tasks (like wainscoting throughout) or is not standard (like cathedral ceilings), you might need to add some safety cushion or call an expert to get a more concrete figure.

Finally, remember to book your painter in advance. Normally 2 to 4 weeks is fine but 4 to 8 weeks is recommended in the busier summer season. Once the keys are yours, the right way to start is to do a walk through with your painter to confirm the price and set expectations. This is an important step in succeeding with your paint project and the right time to communicate what is type of detail and quality are expected.

I hope the above “primer” will get your paint project started on the right foot.

Yours truly,

Dave-The-Painter
FinDécor Painting Inc.
514-966-0966

» For more paint related topics, please visit FinDecor's website and blog at: www.findecor.ca