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Good morning everyone. With all the recent talk about rising interest rates and inflation, and the high cost of renting, here is some assuring news about why real estate is a good investment. An experienced real estate agent I worked with in the 80’s once told me that everyone once stood around the real estate office and said, ‘What’s this world coming to. Our kids will never be able to own a home. The average price of a small home in Scarborough had reached $29,000!” Imagine if someone bought up 10 homes at that price back then! What would that person be worth today? How much wealth could have been generated by pulling equity from those houses and buying more real estate, and then pulling equity from those houses and investing in more real estate, etc. You know what I’m saying. Keep me in mind for your finance needs, whether buying, switching or refinancing. Thanks

Hello again, Firstly a big :Thank you” to so many of my fans who took the time to acknowledge and thank me for my articles. This is regarding the challenge of buying a home these days. The combination of high home prices and increasing interest rates has created a less-than-attractive scenario for many potential home buyers. Having said this we have seen a correction in some home prices in the last couple months. We have seen appraisers correcting values downward from prices agreed to in offers to purchase. In one recent case our appraisal came in low by $100,000 on a $780,000 purchase price. We ordered a new appraisal and that appraisal came in at purchase price! Go figure! Renting is not necessarily pretty as an alternative. Toronto rents have just risen 17.2% year over year. Higher interest rates and cooling demand for housing ownership has pushed demand to rent.  I hate bringing negative news your way but this is what I have been seeing. Keep safe and be well.

Turns out there’s a 19% chance that they already own several properties A recent survey by RATESDOTCA and BNN Bloomberg found that out of the respondents who purchased a home within the last 18 months, nearly one in five already owned multiple properties. The remaining respondents were almost evenly split — 40% were first-time home buyers, while 39% were resale buyers. That neatly matches data published in the Bank of Canada’s 2021 financial system review, which found that investors represent 20% of all home purchases in Canada. Many suspect that the increase in demand from speculators has contributed to the soaring prices of Canadian real estate during the Covid-19 pandemic, with annual increases averaging around 30% — even in smaller cities and rural areas. With housing supply at historic lows, any increase in demand is naturally going to send prices shooting skyward. “Prices are going up, and investors that are speculating on the increase in price are adding to the demand pressures because some of them are buying these homes,” Bob Dugan, chief economist at the Canada Mortgage and Housing Corporation, told The Globe and Mail in November 2021. “That is something that worries me because that adds extra froth to the market, pushes home prices higher and can create a harder landing if and when the market turns and prices correct.” The average house price now stands at an incredible $713,500, according to the latest figures from the Canadian Real Estate Association. Even outside the pricier markets of Greater Toronto and Vancouver, a Canadian home will still hit the pocketbook hard, at $563,500. With prices climbing so rapidly across the country, RATESDOTCA and BNN Bloomberg were curious as to how respondents were paying for their down payment. It turns out that almost half are doing the old-fashioned way — from their personal savings. Around a quarter said they are getting the money from selling another property, while 19% said they are getting it from their family. Another 14% said they are taking out a home equity loan from a current property.  Most respondents report putting down a sizeable down payment of at least 20%, which is required for borrowers purchasing a home worth $1 million or more. The survey also found that a vast majority of homebuyers (71%) opted for a fixed mortgage rate, with only 18% choosing a variable rate. Fixed mortgage rates currently come at a premium compared to variable rates, and also entail higher penalties to break the mortgage early. But on the other hand, fixed-rate borrowers won’t be hit with surprise rate hikes during their term.  Five-year fixed mortgages are consistently the most popular product with Canadians, who tend to prefer stability. While The Bank of Canada dropped and held interest rates down during the pandemic, it has signalled it will begin raising rates in March. Martin Charney B Comm(416) 524 5518 MagicalMortgages.ca Alpha House Mortgage Corporation / Lic #10226

Did you see what I saw yesterday? If you own a home valued over $1MM dollars, the ‘powers that be’ are considering charging you a new annual tax. This is not a property tax. This is not an income tax. It’s a tax on you just because you own a home that is valued greater than $1MM. If you live in small town Canada then you have little to worry about. If you live in Canada’s largest cities then take note. And if you have been paying attention recently, you would know that a huge percentage of houses in GTA, Vancouver, etc. are valued in excess of that amount. The fact that our homes have increased so much in value isn’t a reflection of our incomes having increased that much. In fact many of our seniors have seen their personal income drop due to retirement, health issues, etc. Covid has caused many of us to lose our incomes and jobs, or seen our incomes reduced. Higher inflation and regular increases in the carbon tax has also reduced our net incomes. No government would dare to charge a capital gains tax on the sale of our homes. It would be political suicide. But this new talk seems to be pushing the envelope. Is this just a trial-balloon concept or should we expect to be digging deeper into our pockets at the end of the year ahead? Let’s see what happens. Oh yes, if your mortgage is renewing in the next few months consider getting an approval through me for a new mortgage, where we hold current rates for 120 days. This is one way to hedge your bets on possible interest rate increases this spring. Martin Charney

Housing costs are currently lower for homeowners—on average—compared to renters!    Peppy here is enjoying his new home rather than renting. Like me, he is biased and thinks that it is a good time to look into homeownership. (Seems he loves doggie treats). Here’s Why Owning a Home is Worth It! When you own your home, you add equity for your loved ones. (Equity is just a way of saying the money that is yours over time after the payments are made).  Say you were in a house for the last 5 years, 10 years, 15 years, the equity in your home can be used in financing retirement, buying more real estate, investing in the stock market, etc. In the early 80’s, the prime rate was 18%. Peppy didn’t think much of that, but Peppy’s ears perked up when he realized that the rate at which money that can be borrowed commercially (the prime rate) is 2%, making mortgages more accessible. Also, you might have noticed with continued immigration and low vacancy rates, renting was becoming less feasible. Below you will find out more about why you should consider homeownership. There are some things Peppy and I would like you to know that will help you on your journey of owning a home of your own. Please read the article below and enjoy! Hope you had a good autumn weekend. The trees are at peak colour in Algonquin right now. Consider a day trip there. If you go, buy a park pass online because visitor numbers are being controlled this year. Martin Charney, B Comm. (416) 524 5518 MagicalMortgages.ca Alpha House Mortgage Corporation Lic 10226 —————————————-   Despite higher home prices and larger mortgages, monthly housing costs are currently lower for homeowners—on average—compared to renters! In fact, in the second quarter of this year, homeowners paid on average $769 less per month compared to renting an equivalent dwelling, according to a new survey sponsored by Royal LePage. “For those who are able to secure a sufficient down payment, it is more financially beneficial to buy a home in Canada than to rent over the long term, in 91% of cases analyzed,” reads a release from Royal LePage. The cases analyzed assumed the borrower was able to put down a 20% down payment. “Historically, homeownership has been very profitable for Canadians, many of whom have factored their real estate investments into their retirement planning,” Karen Yolevski, chief operating officer at Royal LePage Real Estate Services Ltd., said in a release. “Owning a home is widely viewed as a means to save money and build equity.” More than 270 scenarios were analyzed by survey author Will Dunning, president of Will Dunning Inc. “This research tests a belief that is held by a lot of Canadians, that owning is better financially than renting,” Dunning said, “And, [the research] finds that this belief is very often correct.” While most of today’s buyers count on home price appreciation, the study found that even if there was no growth in home values, homeownership would result in a positive rate of return on investment in most cases. The total monthly costs for owning a home may be more than renting, but one factor that gives the edge to homeowners is the equity that’s accumulated with each mortgage payment. The principal portion of each monthly payment can be considered a form of forced saving. Today’s Homeowners Building Equity Faster Than Ever!   Despite record-high home prices, historically low mortgage rates are still allowing today’s homeowners to pay down their mortgages faster than ever. At today’s rates, more than 60% of an average borrower’s first mortgage payment goes towards the principal, according to data from Edge Realty Analytics. This means that at prevailing rates, today’s new buyer will have paid off at least 16% of their mortgage within the first five years. Comparatively, for homeowners in the 1980’s, five years of mortgage payments resulted in just 3.8% of their mortgage being paid down. The Royal LePage analysis included all costs associated with buying and selling a home– closing costs, fees for lawyers and real estate agents and land transfer taxes. It also took into consideration ongoing costs, such as utilities, repairs, homeowners’ insurance and condo fees. The scenarios tested included a mortgage renewal at a higher interest rate of 3.64% in five years. “Even in that scenario, homeownership is expected to remain more affordable than renting, in most situations,” the analysis found. Please contact me if you need further information on homeownership or the prevailing mortgage rate. Martin Charney, B Comm. (416) 524 5518 MagicalMortgages.ca Alpha House Mortgage Corporation Lic 10226

Many of my clients have been asking for pre-approvals lately. The agents for vendors are often insisting on firm real estate offers without financing conditions. Many potential purchasers feel comfortable with a lender pre-approval but in fact that document shouldn’t be considered as strong as a commitment. Quite often pre-approvals aren’t much more than an interest rate hold on funds. My practice is to pre-qualify a potential purchaser. We collect the important documentation and information to underwrite the client’s request. This greatly increases our probability to have a successful client outcome. By asking for documents such as tax returns, employment contracts, proof of regular overtime income/employment bonuses, etc. up front, we deal with challenging concepts when we have time, not when the purchaser is in the middle of a stressful offer negotiation. If we see the future need for consolidating some debt or bringing in a family guarantor we deal with that proactively so the client can focus on the home search. I invite you to read the enclosed article to get further feedback on the subject. How to build your personal credit Many Canadians are under the assumption their mortgage is as good as done once they have a mortgage pre-approval. But the truth is a buyer cannot expect a mortgage pre-approval will automatically translate into a mortgage. The lender now needs to consider the property itself, approve all the terms and review the documentation before you transition from pre-approved to approved. Buyers often do not appreciate there is still some uncertainty when it comes to their mortgage. Unfortunately, once in a while this uncertainty bites back – with calamitous consequences. Going in Without Conditions in a Hot Market Not that long ago, when housing supply equalled or exceeded demand, the buyer would insert a clause requesting five business days (usually) to arrange mortgage financing – this is called a “condition of financing.” Even one or two days can make a world of difference. These days across much of Canada, residential real estate is such a hot commodity it’s more likely offers to purchase will be firm and without a condition of financing. The process is very skewed in favour of sellers at the moment, and it’s really not a comfortable or fair situation for the buyer. The fact of the matter is homebuyers, especially first-time buyers, are taking this risk every day. In many markets, it’s the only way you will win in a multiple-offer situation. It is clearly in the buyers’ best interests to know in advance how much mortgage they might qualify for. This is achieved by providing complete information and documents to your bank or mortgage broker and allowing them a deep-dive into your personal finances and credit. They can then underwrite your application upfront. Even when a thorough review has been conducted, and you are clutching a pre-approval certificate, there are many things that could happen to compromise your home purchase. Insured Mortgage Approval Suppose you are in line for an insured mortgage, which is always the case with less than a 20% down payment. Your mortgage approval is technically approved twice – first by the lender and then by the insurer. And please understand that no mortgage insurer has seen your pre-approval request. The pre-approval considers your personal creditworthiness and borrowing capacity. The actual amount you qualify for also depends on the property itself: that plus the lender and insurer’s assessment of your application. Please remember, pre-approvals do not consider the specific properties. Reasons Why the Property Can Hurt Your Mortgage Approval To secure a mortgage, the borrowers and the property have to pass muster. No one knows the exact property you are going to buy when you are pre-approved. When it comes time for the lender to approve your mortgage, there are many ways the specific property can impede the approval. There are several reasons why a specific property can cause concern. For more information, we defer to Dustan Woodhouse, whose passionate concern for this topic inspired this article and who lists many more here. 1.     Value of The Home: When multiple buyers are competing on the offer presentation day, there can only be one winner. In this market, the winner often has to bid much more than the market value. When this happens, the appraisal may come back with a value less than you paid. That will not necessarily kill your mortgage approval, as long as you have additional financial resources to cover the shortfall, if necessary. Note: This market does not favour buyers who go in subject-free (firm) with no wiggle room. If you are using all your financial resources to come up with the down payment and closing costs, what can you do if the value comes back lower? 2.     Property Condition: Have you ever seen an MLS listing that says “as-is” or “handyman special?” Those are red flags to a lender, and a mortgage may not be forthcoming at all. The appraisal may further report poor conditions, mold or even structural issues. 3.     Property Specifics: There are many reasons a property may prove challenging. Here are some examples of property types that will seem problematic to a lender: Log homes Homes on leased land, First Nations, government or private Rural properties with a hint of hobby farming Properties containing asbestos, underground oil tanks, aluminum wiring The remaining economic life of the property Suppose the property was a one-time grow-op or drug lab. Good luck with that – no matter the price you pay, even if the property has been remediated. One property earlier this year had an MLS listing that proudly mentioned a 15-foot fish pond in the backyard – with a fish farm permit. That mortgage was VERY hard to place. 4.     Location: If a lender feels the property you picked is simply too far from your workplace, they may assume you need to keep a second home or place to stay, and in such cases they impute a “shelter cost” for you. This might also skewer your approval. 5.     Condos: Mortgage

Mortgages for Dummies Martin A. Charney B.Comm If you’re self-employed, you still have a choice? Are you using 2018, 2019 OR 2020 taxable income to prove your income for a mortgage? Because 2018 and 2019 were generally good for many business people, you may qualify higher today. But very soon, the huge challenge will arise.  If you use 2019 and 2020 income, because Covid has reduced many business owners’ 2020 incomes, qualifying personal income will drop drastically for many. Lenders’ Law: If the last year was higher than the previous year, the law is to take the average. But if the last year was lower, because lenders are conservative, they take the lower year as the stated income. So, if 2020 was lower than 2019, we can’t average 2019 and 2020 income in 2021 and will have to use the lower 2020 pandemic income. That’s not a good thing! 2021 may also end up being a challenging year for self-employed purchasers because we will have to average the ugly 2020 income with 2021 income, but let’s hope ’22 is higher than ’21. With this in mind, I recommend that self-employed home buyers try to buy sooner rather than later. Before being expected to file ‘20’ taxes, take advantage of 2 good years (i.e. ‘18 and ‘19) while still possible! I have been in the mortgage industry for many years, so my expertise will be very valuable. I appreciate the opportunity to help purchasers and Realtors close many more transactions. p.s. If we can’t prequalify buyers, we may use our rent to own Home to Own (H20) Program as an alternative. Be more prosperous.

Canadian real estate is in a melt-up, and the Government of Canada (GoC) was warned not to pour any gas on the fire. Naturally, they’re getting ready to pour gas on the exact fire they were told not to. On May 3, 2021, the GoC will expand the First-Time Home Buyer Incentive (FTHBI) program. The program is the type used to push prices higher and stimulate demand during a downturn. Instead, the government plans to expand the program in the frothiest markets. Let’s take a dive into how Canada will be speculating alongside homebuyers.   First-Time Home Buyer Incentive (FTHBI) The First-Time Home Buyer Incentive (FTHBI) is a shared equity mortgage program. People that buy a home with the program get 5 to 10 percent of the purchase price as an additional down payment but it’s not free. The state is buying an equity stake in the home. It’s like taxpayers become a shareholder in your condo and that is the reason we, as active successful experienced mortgage agent have never done a FTHBI transaction! Do you want the government as your partner? The down payment funds they give are considered a non-interest-bearing second mortgage. No principal payments are required, and the maximum term is 25 years, or when you sell the home. The repayment is based on the value of the home at the time you pay it off though. Until then, the government considers itself a part-owner of the home. Since the government is speculating along with you, they share some risk. If the value of the home goes up during this period, taxpayers make money. If the value of the home falls, taxpayers lose money. Homeowners shoulder all maintenance and carrying costs. What could go wrong?  To qualify for the program, income is capped at $120,000 per year, so no high-income borrowers. The maximum mortgage amount is 4x your qualifying income. Since the FTHBI is technically a second mortgage, it’s included in the total debts. The pitch is, it lowers your monthly costs. If home prices rise significantly, it can cost a lot more than the interest. The stated reason is, the program helps low-income households. The reality is, it’s trying to spur more demand from low-income households. Let’s say your household makes $120,000 per year, and you have a down payment of $50,000. Under the current rules of the program, you may qualify for up to $530,000, and they’ll kick in 10% of the down payment. If you resell, you cover the maintenance and selling fees, and they collect 10% of the gross costs. Canada Is Expanding This Program In Its Frothiest Markets When the program was launched in 2018. Starting May 3, 2021, Toronto, Vancouver, and Victoria will see the max income boosted to $150,000. The leverage ratio will also increase to 4.5x, giving those buyers an extra 12.5% leverage. It’s not hard to read this as trying to pump city home price growth, since they now lag small towns.

Co-Ownership differs from rent to own or Home to Own (H20) because it allows one party, the Occupier, to buy, occupy and close immediately on a property at a slightly higher purchase price than they could otherwise currently afford to buy at.    The Occupier will eventually be responsible for paying 50% of the net selling profit (after mortgage and commission) to the Enabler whenever the property is sold. If during the term of co-ownership, the Occupier sees an advantage and certain benefits accruing and, therefore, elects to do improvements, pay down the mortgage or rent the property out, the Enabler will irrespectively remain irrevocably entitled to 50% of such resulting net profit. The Occupier pays all the normal home ownership expenses including the: 1.   Mortgage; 2.   Property taxes; 3.   Property insurance; 4.   Maintenance; 5.   Utilities and 6.   earns any basement apartment rentals that may exist. The other party, known as the Enabler, comes and stays on title without having to put any money down or pay any monthly costs. The Enabler’s risk may derive from any default suffered by the Occupier, for which default the lender may have rights against the Enabler. There is a tailor-made Joint Venture (JV) Agreement signed by both parties for their protection catering specifically for any eventuality either may suffer, as a result of: 1.   Death; 2.   Insolvency; 3.   Sale desired at any time; 4.   Dispute 5.   The desired increase in any existing mortgages by the Occupier; 6.   The desired improvement to the property by the Occupier or 7.   The rental of the property by the occupier.   Any pay downs to the mortgage or improvements made to the property will be at the sole discretion of and cost of the Occupier. The purchase of such a property is considered by to be one of the first 5 properties the Enabler is legally entitled to own in the Enabler’s private name. Rationality: Although the Occupier must qualify alone, they may not qualify for a sufficient mortgage as they may desire in their preferred area. Although the Occupier pays all expenses they TOGETHER WITH the Enabler will qualify for a higher mortgage and purchase price than the Occupier will alone. Martin Charney B Comm  Alpha House Mortgage Corporation Lic #10226    magicalmortgages.ca  50/50 Co-Ownership Q&A Q What can 50/50 Co-Ownership do for me as Buyer/Occupant if we need to pay slightly above what we can qualify for? A By the Investor/Enabler adding his income, you become entitled to a higher mortgage and therefore, can buy higher. Q How can you help us achieve that? A We have Investor/Enablers who share title with you and they add their income to yours as your personal guarantors. Q Who pays the down payment, closing costs and all normal monthly home ownership expenses? A Because your Co-owner is guaranteeing your mortgage on your property, you do as the Occupant. Q What does the Enabler get out of this for taking the risk that we may default any time before it is sold? A The Enabler gets half of the net proceeds (after the mortgage and agent’s commission) when the property is sold. Q Can we do alterations and improvements to our jointly owned property? A Yes with the investor Enabler’s consent which won’t be unreasonably be withheld. Q What regulates all the details that could occur? A lawyer draws up a Joint Venture (JV) Agreement covering everything that could possibly occur Q When can we sell? A At any time. Q What if we or the Enabler dies, goes bankrupt, wants to sell or is in default? A The JV Agreement provides for every eventual. Q Who get the monthly rental if there is a self-contained basement rental? A You, the Buyer occupant. Q What normal home ownership expenses do we, as Occupants pay? A Mortgage, property taxes and insurance, maintenance and utilities. Q What flexibility do we have? A You can pay down your mortgage or improve and renovate the property and enjoy it more. Q Give me an example of the 50/50 split. A If you paid $500,000 and sold for $700,000 (5% comm.) in 3 years, you’d make make $82,500.