Are you looking to buy a new home in the current Toronto Real Estate Market? Before beginning the home buying journey, Home Buyers need to make key decisions. It is best to make these decisions based on data, by looking at insights into the past as to what has happened in Toronto Real Estate market.

I have listed two key questions below that every home buyer makes decisions on, these decisions can be personal or financial.

Is this the right neighbourhood for me and my family? What are the financial risks of buying a home in a particular neighbourhood? In 5 years what is the return on investment? Can I gain in $10,000 or $100,000? There is a big difference.

Where Should I Buy? What Should I Buy?

If you are looking to make informed decisions regarding your home buying Journey, you are in the right place. Let’s analyze, choose your neighbourhood and find your dream home using relevant real estate data.

“ Take the guess work out of finding your dream home. “

Toronto Real Estate Market Insights

Have you seen the movie “MONEYBALL”? Billy Beane (Brad Pitt), general manager of the Oakland A’s who is the inspirational subject of Moneyball. He was faced with a tight budget, 3rd lowest payroll in MLB. The first team in 100 plus years of American League baseball to win 20 consecutive games and the winners of the western division championship. This was the first known use of Analytics “Prioritization of statics and data” to make the player and personal decisions in professional sports. Today, every major professional sports team either has an analytics department or an analytics expert on staff. Any team that does not apply them to the fullest is at a competitive disadvantage.

What is Moneyball has to do with the Real Estate you ask? Let me explain.

As a home buyer, it is important that you understand some key statistics about Toronto Real Estate Market that will help you make informed decisions on your purchase. It is also imperative that your Real Estate Agent has a great understanding of the market and statistics at a neighbourhood level while his/her recommendation is supported by data.

Let’s look at these key statistics and why they need to be part of your decisions making for your home buying journey. I have used published data from TREB (Toronto Real Estate Board) for the city of Toronto to analyze and illustrate these key statistics.

Number of Sales “Demand” VS Active Listing “Supply”

The image above illustrates the Toronto real estate market demand and supply for the city of Toronto in 2018. The number of sales represents the real estate market demand and Active listings represent the supply side of the equation for the Toronto Real estate market.

Why do supply and demand matter? The supply and demand tell us the overall health of the Toronto Real Estate Market at the city level, especially if you compare these key statistics (Number of Sales and Active Listings) to the previous years.

As an example, let’s compare the number of sales from May 2018 to May 2017. In May 2017, City of Toronto had 3,926 sales, at the same time in May 2018 City of Toronto had 3092 sales. The Active listings within the city of Toronto in May 2017 was 5,829, however, in May 2018 it was 5797.

This means that the demand has decreased compared to the supply for the city of Toronto. This was the expected due to the introduction of the Mortgage Stress Test and Toronto Real Estate Bubble.

Average Price VS Median Price

I have compared average and median price for Toronto real estate market in the image above for the city of Toronto in 2018. The average price represents the average of all houses sold for each month and the median price represents the average value of most houses sold in the city of Toronto for each month.

It is best to compare average and median statistics by home type which we will discuss later. As a home buyer, you may also want to look at these statistics trends over a 3 to 5 year period for a similar type of home including square feet and number of bedrooms for the neighbourhood you want to move into.

Number of Sales by Type of Home

The number of sales by type of home shown in the image above for city of Toronto in 2018 illustrates the demand for each type of property for each month. As you can see from the chart above, there is a lot of demand for the condo market compare to a Townhouse market. What this illustrates is that condo is not an ideal buyers market due to its demand even though the average prices may be lower for a condo compares to other types of homes.

Based on the current market conditions, the home buyers affordability is impacted by many fronts. If you are a first time home buyer, make sure you understand your affordability first and understand what you need to do to get your mortgage approved before deciding on what type of home you want to buy.

Average Price by Type of Home

The average price by type of home needs to match your affordability and your affordability should be much higher than the average price of the type of home you want to buy. The image shown above illustrates the average price for each type of home in the city of Toronto in 2018 for each month.

My recommendation is that you look at these statistics trends over a 3 to 5 year period for a similar type of property for the neighbourhood you want to move into as it will give you an even more accurate estimate for you to make a decision on your next neighbourhood and the type of property you looking to buy.

According to the report published by TREB (Toronto Real Estate Board), the average price and number of sales have significantly increased within Greater Toronto Area over the last decade. In 2007, the average price of a house in Greater Toronto area was $376,236 and in the year 2017, the average price of a house is $822,622. The key is to understand the average price of each property type and for a specific neighbourhood as the average prices differ based on neighbourhood and property type.

If a home buyer is looking at a property in a specific neighbourhood and if the asking price is significantly higher than the average price, it is in the home buyers best interest to understand and question the asking price regardless of your affordability.

Median Price by Type of Home

Everyone likes a good deal, how do you measure if you got a great deal based on Real estate market conditions? the above image shows that median price by type of home within the city of Toronto in 2018 for each month.

if the price of the property that you just purchased is closer to or less than the median price for the type of home within a specific neighbourhood then you got your self a good deal.

If you are interested in a property, the first thing that I would suggest that you do is to work with your real estate agent and understand the median price for the type of home within the same neighbourhood. Once you identified the median price, this will ensure that you and your agent understand the value of the home and compare that to the asking price which will lead to a better outcome with your negotiation.

As a home buyer, there is a lot to consider when buying a new home. For most home buyers, buying a new home is one of the biggest financial investment in their lifetime. We empower home buyers by enabling you to make informed decisions using data.

At AskGauge, we connect you with verified and handpicked real estate agents who can walk you through the home buying journey seamlessly after understanding your goals and situation. We work with these realtors because we believe in using Real Estate data as a tool in helping home buyers make informed decisions and realtors that we work with uphold the same values on real estate insights as much as we do.

Submit a request and let us take the guesswork out of finding your dream home.

Buying a home is one of the major financial decisions an individual can take in his/her life. The entire process of home buying is considered a daunting task and we definitely need all the help that we can get.

When you are a first time home-buyer, there are definitely a lot of unknowns. Though it’s a complex process even in 2018, every home-buyer should not escape their way around the due-diligence required for the home buying journey. It is important to stay informed of the trends and you are in the right place if you are reading this.

“Show me your real estate agent. We will tell you who you are”

Yes, we made this up. But it’s completely true. A lot of your home buying journey is dependent on the potential of your real estate agent. He/she will be your go-to person for everything during the process.

Before we zero down on a real estate agent, we have been trained by several of our experienced friends and self-help articles on the questions we need to ask our prospective real estate agent. You will find most of them below (probably in the same order your wise friend told you)

1. How long have you been in the business?
2. How will you help me find the right house?
3. How many houses will I get to see?
4. How long will it take for me to see the first house?
5. Can you share a few references of people I can talk to about your services?

Just like how you have been trained to ask these questions, the real estate agents have been trained to professionally answer them perfectly. They will definitely ace your test.

You have a super power though (Yeah, AskGauge). Let’s look at some of the lesser known but important questions you can ask your real estate agent to see if he/she fits the bill.

Pens and papers, ready

Question 1 : How do you handle multiple offers?

Importance: Handling multiple offers is a very common situation for a real estate agent. This is a buyers’ market and your real estate agent needs to be highly skilled in negotiating with the seller’s agent in all situations as this would save you money. There may be multiple offers and your real estate agent’s negotiation strategy can definitely increase your odds.

Great real estate agents share their negotiation strategies with great interest. It is a craft and they would have perfected it through their years of experience on the field.

Also when you work with renowned real estate agents, they will definitely be working with a lot of other buyers looking for homes in the same neighborhood. Some of the buyers may be interested in the same properties that you like.

It is important to discuss with your real estate agent about how he/she will handle multiple offers from his buyers including you.

Question 2 : What’s your process?

Good real estate agents love answering this question. They will take you through your complete home buying journey and you will be able to visualize it. The manner in which your real estate agent explains the process can say a lot about his/her experience and passion for the job.

Let them know and take notes for your reference. This will be useful for you to track in the future. Ask questions if something is unclear and they would love to clarify your queries.

Question 3 : What neighborhoods do you work in?

Importance: Though real estate agents will be well-equipped with information about multiple neighborhoods in the city, they will definitely have their favorites. They would have dealt with a lot of properties from certain neighborhoods. Understanding this can help you if you have zeroed down on a few neighborhoods yourself and you can work with an agent who works there predominantly.

Question 4 : Among your clientele, how many of them are similar to me?

Importance: This number is an interesting indicator to understand your competition, i.e the other buyers who might work with your real estate agent. This can be based on factors like first time home-buyers, preferences, neighborhoods, budgets, approximate moving dates etc.

This includes their active clients as well as past clients. This will also give you an indicator on the bandwidth of your real estate agent.

Question 5 : Will there be a confidentiality clause to protect your offers from other interested buyers?

Importance: This protects your prices and maximum offers from other prospective buyers working with your real estate agent. If your offer is disclosed to another buyer, they might increase their offer to increase their odds. So it is important to have a confidentiality agreement and it is a two-way street. You will not have information about other buyers’ offers as their rights will be protected too.

Question 6 : Are you flying solo or work as a team?

Importance: Though both the categories have their own advantages over another, it is important to understand if you are working with a real estate agent who has a backing of a strong team proficient with diverse property types.

This increases the number of options for you to choose from. Most of the real estate agents have an extended partner network including home inspectors, mortgage experts and real estate lawyers. Working with a reliable network can make a lot of things easier in your home buying journey.

Question 7 : When is a right time to buy?

Importance: Although most real estate agents will love to answer this question with “ All the time “, this is to understand more about your real estate agent’s analysis of the market situation. Buying low is always the best time to buy (You can know more here)

Question 8 : How will you assess me as a buyer?

Importance: As a buyer, you have a lot of factors to assess real estate agents before you start working with one. From a real estate agent’s perspective, they will have their criteria to assess the buyers and understanding the same can prepare you for the home buying journey.

There are over 50000 real estate agents in Toronto. If a real-estate says he/she works with hundreds of interested leads every month, it is better to stay away. You are not just another number or a transaction.

You need a capable and dedicated real estate agent who will look out for your best interests and make your home buying journey a pleasurable experience.

Question 9 : What’s your niche?

Importance: Just like how real estate agents have their favorite neighborhoods, they will also have a specific niche where they are known for. It can be the type of clients they take on, the property they deal with primarily or the neighborhoods they operate in.

“Jack of all trades and master of one”

We made this up too. But find the ‘one’ niche your real estate agent specializes in. If it’s a match to what you are looking for, you have a match.

Question 10 : Have I missed out any questions that I must ask you?

Importance: This is a very honest approach and the real estate agent will be surprised too. Their answers would help you understand if you have missed out on something important. Every knowledge adds up and you might be guiding your friends in their home buying journey.

Take notes when you meet with a real estate agent so that you can refer back to them anytime in the future. It is always better to be sure than to assume something. You can also compare notes of your interactions with multiple real estate agents to weigh the pros and cons before you make the ultimate decision.

AskGauge helps home buyers in connecting them with verified and experienced real estate agents based on their needs and also provides the users with exclusive insights that brings down the home buying timeline considerably thereby simplifying the home buying experience.

https://askgauge.ca/10-questions-to-real-estate-agent/

Are you a first-time home buyer? This is one of the most important financial decisions of your life and it is an exciting journey ahead. We put together this article to help you understand the 8 important things in the home-buying journey.

1. Downpayment

Given the costs of the real estate market in the GTA, having a significant down payment amount can save you a lot of money on your mortgage payments.

In Canada, the minimum down payment required is calculated as a percentage of the home’s price.

If the price of the home is less than $500000, the minimum downpayment is 5%. If it’s between $ 500000 and $999999, the minimum down payment required is 10%. If the price is above 1 million dollars, the minimum down payment must be 20%.

If your down payment is lesser than 20% of the price of the house, it is required to insure the mortgage with CMHC (Canada Mortgage and Housing Corporation). This is again a premium that will add thousands to your costs. To avoid this, you need to meet the 20% down payment criteria.

It’s a wise move to increase your down payment to cut down on your monthly mortgages in the future.

1. Affordability

How much can you afford when it comes to home-buying is a very important question. Your affordability depends on various factors like income, debts, lifestyle, monthly expenses, your credit score etc.

You can use AskGauge’s affordability calculator to determine your purchasing power.

Note: The Mortgage Stress Test impacts your affordability, the new federal guideline impacts all potential homeowners who are planning to borrow through federally regulated lenders such as banks and even provincially regulated lenders such as credit unions. As a homebuyer you would need to qualify using a minimum qualifying rate which is 2 % higher than your contractual rate from the lender.

1. Perks and Tax Credits

Let’s look at something that can help you relax. The Home Buyer’s Plan (HBP) allows you to withdraw up to $25000 per year towards your down payment. You can repay this amount without any interest or penalties if it’s done within 15 years. This is a blessing as it increases your down payment thereby reducing your mortgage amounts.

As you are a first-time home buyer, you can also claim $5000 for the purchase of the house as long as it satisfies the following conditions. This is present on line 369.

i) The house purchased must be owned by you or your common-law partner

ii) The purchaser should not have lived in another home that’s owned by them in the year of purchase or the previous four years.

1. Mortgage Rates

Understanding mortgage rates and learning to compare the mortgage rates in the market is a much-required skill in today’s home buying scenario.

A mortgage is a loan that is backed by a property. When you qualify for a mortgage, there will be an agreed upon period of time before which you have to pay it back with interest.

There are four types of mortgages

Fixed rate mortgages: These mortgages have a fixed interest rate on them throughout the term period of the mortgage.

Variable rate mortgages: The interest rate fluctuates according to the market interest rate in variable rate mortgages.

Closed Mortgages: If you are planning to repay your loan faster, this is not an option you should consider. Closed mortgages require the borrower to pay a specific amount of money every month till it reaches the end of the amortization period. In Canada, amortization periods are normally capped at 25 years.

Open Mortgages: This type of mortgage allows you to pay off your mortgage faster. This will save you a lot of money in interest payments and at the same time, the banks tend to make fewer profits in this scenario. So open mortgages have a higher interest rate than the closed mortgage.

1. Neighborhood

Neighborhood plays a major role in the price of a property. There are a lot of factors that are to be considered before finalizing on a neighborhood for your dream home.

1. a) General Safety
2. b) Access to School
3. c) Access to Public Transit
4. d) Access to Work
5. e) Access to outdoor parks and trails
6. f) Access to retail and convenience stores
7. g) Type of homes you are looking to buy
8. h) Return on Investments

Zero down on one from your desired neighborhoods based on the above factors.

1. Closing Costs

When it comes to the home buying journey, the cost of the house is not the only price you should budget for. There are a lot of other costs which can be categorized under closing costs.

Home Inspector Costs: A certified home inspector will inspect your future home’s condition and structure. Professional guidance is very important as this would indicate the repairs required and the approximate costs.

Land Transfer Taxes: This is calculated based on the price of the house. In some cases, there is a full or a partial refund for the same.

Legal Costs: Working with an experienced real estate lawyer can make the process seamless as they will help you in reviewing the important terms and conditions of the agreement.

Apart from the above costs, you should also factor in expenses like Title Insurance, Property tax, and Moving costs. The rule of the thumb is to set aside upto 3% of the value of your home for the closing costs.

When you buy a home, you are not just buying a place to live, you are buying into the economy. As we always say, when you buy the home, you buy the economy.

1. Home Insurance

Your dream home is one of your most precious assets. When you have insurance for your smartphone, car etc, buying a insurance for your home is a no-brainer.

Home insurance covers the damages that occur to your home or the appliances inside your home due to fire, storm, theft, break-ins etc. Insurance will cover the costs of the repair or replacement.

However if your house is a flood prone area and if your house gets damaged because of a flood, most insurance policies will not cover that. For the high-value goods inside your house, you will have to add them to your insurance policy separately.

1. Renovations

When you are a first time home buyer, you will come across houses that require renovation after you buy to make it habitable.

You can either choose to take the do-it-yourself route or hire a professional to get things done in no time. If the renovations involve non-professional works, you can plan them on the weekends and get it done. You will save a lot of money in the process.

There are a lot of DIY hacks on Youtube that you can learn from. It is also a nice family activity and lends a personal touch to your home.

But if you are looking to get something done professionally with attention to detail and a quick turnaround time, it is better to go with the contractors. Though it might cost thousands extra than your DIY, it can save a lot of time.

It is important to do your research about the contractors before you award them the contract.

AskGauge helps first time home buyers by making the home buying journey easier and transparent. We work with experienced real estate agents, real estate lawyers, home inspectors and mortgage advisors who can help you make smarter decisions.

https://askgauge.ca/8-things-to-know-as-first-time-home-buyer/

https://askgauge.ca/i-make-6-figure-salary-why-was-my-mortgage-not-approved/

When was the last time you went to the bank to borrow money; you stated your income and they approved your loan? The chances are never.

Did you know that, when you get pre-approved for a credit card or line of credit, it is subject to further credit check and analysis? Your credit pre-approval is based on several factors including your profile as a customer.

As a customer, we really don’t notice it as the credit check and analysis happens instantaneously in the background as we complete our application online. If a pre-approved credit application goes through a rigorous evaluation, imagine what will take place to your mortgage application before being approved.

Your income is one of the important factors for your mortgage application, however, there are several other factors that can impact your affordability and approval of your mortgage application.

What are your monthly expenses?

When you start thinking of buying a home, one of the things you should consider is your monthly expenses.

• Are your expenses ‘must haves’ or ‘nice to have’?
• Can you avoid this expense altogether? Can you pay it off in full?

As an example, if you have a car loan for $20,000 and your monthly credit card bill is $3,500.

• Can you pay off your car loan in full or at the very least, how quickly can you pay off your car loan by increasing your monthly payment amount?
• Can you decrease your monthly credit card bill? Which of these expenses is nice-to-haves and can you avoid them or limit them?

You need to do this as early as possible and I would recommend a minimum of 12 to 24 months before you submit your mortgage application.

When you follow through with this approach,

• This will allow you to plan for a better financial future when you do move into your home
• Your spending behaviour will change, as you are constantly mindful of things you buy
• Your affordability or borrowing power will increase, hence you are better equipped to negotiate a better deal

Your monthly expenses can impact your affordability significantly. It is not just about how much money you make, but also about how you manage money. What are the minimum interests you need to pay for your credit card or line of credit on a monthly basis?

If you’ve done a detailed analysis of your spending and still can’t figure out how to reduce your expenses, there may be other factors to think about.

When I asked Beau Humphreys, Personal Finance Coach, about money problems, he had this to say: “Sometimes money problems have nothing to do with money. If you are finding yourself in financial trouble, think about the reasons why you might be overspending. Sometimes money problems can only be solved once you find the underlying behavioural issue that caused them in the first place.”

If you have money questions and are looking for someone to talk to regarding your finances, you can find Beau at investwisely.ca and you can check out his podcast as well.

What are your TDSR and GDSR Ratios?

When you apply for a mortgage, your mortgage agent or advisor will seek to understand your income, source of income, your expenses and your budget for your home.

In Canada, for mortgage applications, the lenders would like to see the TDSR (Total Debt to Income Ratio) to be <= 40 % and GDSR (The Gross Debt Service Ratio) to be <= 32%. This ratio may differ slightly depending on the type of (A, B, C) lenders.

What is TDSR (Total Debt to Income Ratio)? How is TDSR calculated?

TDSR ensures that consumers borrow and lenders lend in a responsible manner. TDSR ratio limits the amount that you can allocate for your monthly debt obligations to 40% of your household income this includes mortgage payment, property tax, condo fees, heating cost and other monthly payments (i.e. auto loans, credit card or line or credit payments, student loan).

TDSR = Total monthly debt obligations / Monthly household income

What is GDSR (The Gross Debt Service Ratio)? How is GDSR calculated?

GDSR is utilized by the mortgage agent or advisor to do preliminary assessment whether a potential borrower is already in too much debt. GDSR ratio needs to be less than 32% of your gross monthly income of which the amounts allocated to mortgage debt, property taxes, condo fees and heat. If your ratio is less than 32 % then your level of debt is acceptable.

GDSR = Total Monthly Payments / Gross Monthly Income

I can’t stress this enough, understand your (TDSR and GDSR) ratios as early as possible and have an action plan that will ensure that your ratios meet the requirements and beyond. The better your ratios the more leverage you have when you apply for your mortgage.

When you engage early with a mortgage agent or advisor, these are your benefits:

• You will build a relationship over time with your mortgage agent or advisor, who advised you in putting a financial plan together for your home buying journey.
• They have a vested interest in getting your mortgage approved while getting the best mortgage terms and rates that are available in the market
• They study the market and know what is coming down the pipeline, they may surprise you with a phone call “Hey, You may want to lock your mortgage before the interest rate goes up” and this had happened to me personally in the past.

Is your credit in good standing?

Most of us associate, credit is in good standing by looking at the credit score. Even though a good credit score (700 or above) is a good place to start, your credit report has more information than your credit score. A credit report will include trade lines(a type of liability), utilization, repayment history, inquiries or activity and judgements.

This is one of the critical factors for your mortgage application, an underwriter (one who analyzes your credit application) do a thorough analysis of your credit report. The mortgage professionals I work with, take their time in doing a detailed analysis of the credit report before recommending a mortgage solution or suggesting a plan for your home buying journey. They know it’s very critical to understand your credit report before recommending you a solution that fits your need as well as your situation. I would suggest plan this activity early with your mortgage agent. If a mortgage agent/advisor says that this is too early, get another agent who is willing and wants your business.

Caution: Don’t let everyone you talk to pull your credit report, only the one that you want to work with.

If you can manage your money, have a good TDSR & GDSR Ratios and your credit in good standing, lenders will love to take you on as a client. This also means that your mortgage agent or advisor have an easier task ahead, as it’s easier to get your mortgage approved and negotiate a better deal on your behalf. The lender will love the mortgage agent or advisor for bringing in a high-value client like yourself, hence it’s a win-win situation for all parties involved.

Which neighbourhood are you looking to buy? What is the market value of the property you were planning to buy?

As far as mortgage applications are concerned, Lenders look beyond your Income, Expenses, TDSR & GDSR Ratios and Credit Report. A property appraisal may be required by a lender to access the market value of the property before your mortgage is approved. The lender wants to ensure that your mortgage is not more than the value of the property. This seems now a regular occurrence especially in this market due to the fact that house prices have decreased and affordability is declined due to mortgage stress test. In some cases, the home buyers are taking on a second mortgage to cover the remainder of their mortgage. As per my earlier suggestion, it always helps when you have a plan in place and you follow that plan and adjust to the market if you have to.

Managing money is a discipline and a skill, I can openly say that I am not as good as my parents. We can all get better and work at it with enough help surrounding us. You can reach your goal of buying your dream home with my suggested process no matter what is your income level.

Are you thinking of buying a home or even renewing or refinancing your mortgage? I have handpicked several mortgage agents and advisors for you to choose from. Simply submit a request by answering few questions, get your quotes & recommendations and choose a service provider that closely meets your need.

Do you have experience hiring a real estate or mortgage agent? Are you planning to hire one in the near future?

There are close to 50,000 real estate agents in Toronto and 12,500 mortgage agents in Ontario. Home Buyer’s make decisions on multiple real estate service providers throughout the home buying journey and buying a home begins with finding the right real estate expert’s.

Every time you open your letterbox, step outside your home, open your social media account and turn on your favourite radio station you see and hear real estate ads in every medium in the form of flyers, big billboards, social media posts and radio ADs.

Have you ever wondered, what separates a great real estate expert from an average real estate or mortgage agent?

I was looking into investing in the GTA Real Estate Market a few years ago; I wanted to understand the market and decided to do some research and interview real estate and mortgage agents.

I explained my situation and asked for feedback and opinion. To my surprise, the recommendations from real estate experts were conflicting.

The responses are as follows:

Real Estate Expert 1: Invest and Walk away with $ 100,000 in Equity

You can invest today and walk away with $ 100,000 in equity 5 years from now.

Real Estate Expert 2: Wait until the market adjusts itself

Wait until the market cools down and currently the demand is very high where you will be overpaying for an investment property especially in the locations you are looking to buy.

Real Estate Expert 3: Investment is too risky

The value of the houses is high where the rent will not cover your mortgage in the short term and in the long term. The real estate bubble will most likely burst, it’s a matter of when. The investment is too risky for the potential return at this point in time and advised against moving forward with an investment.

I started to reflect on my previous experience as a first time home buyer. My curiosity took over and it left me wondering why there is a vast difference in opinions among Real Estate Experts. I had more questions than answers at this point.

I started to do more research, study the industry as well as talk to as many real estate experts within the industry. I talked to real estate agents, mortgage agents & advisors and mortgage underwriters.

Over the course of 2 years, I interviewed over 75 + Real Estate Experts and here is what I found that is striking that separates the distinguished Real Estate Experts from the rest.

1. Ability to Connect and Gain Your Trust

They demonstrate an ability to connect with you at a personal and professional level while earning your trust. They have an easier time communicating and have the ability to have the tough discussions where you feel comfortable engaging with them to answer their questions.

The first phase of a sales cycle is to gain your client’s trust, “You buy from people that You trust”, well they demonstrate and earn your trust very quickly.

2. Informational vs Transactional

An exceptional real estate agents are selective about their clients as they try to match their client’s needs and preference based on their niche. They are not afraid of telling you to walk away from the deal if its way above the market value, your situation & budget, based on the location and market condition. The decision is still yours to make, however, they will make sure that you are informed.

Great mortgage agents and advisors don’t just quote you lowest mortgage rates, they educate you on the product, rates, terms of the mortgage, cost of borrowing, pros & cons of the mortgage product and most importantly how do you pay your mortgage faster.

They are not your average sales professionals, who push you to commit and buy, instead, they will provide you timely information that enhances your experience and enables you to make an informed decision.

3. A Proven Methodology

The top real estate and mortgage agents use tried and tested techniques to make your home buying process easy. They spend quite a bit of time getting this right, they use different strategies including prompting you with open-ended questions and having the tough conversations early in the home buying process.

They are highly skilled at listening, engage you to understand your situation, needs, affordability and preference.

They only send you listings that meet your criteria as they have a great understanding of what you are looking for, your needs and your affordability. In fact, they will not take you on any showings before understanding your budget, situation, preference and needs which match with market conditions.

4. Recommend You A Solution

They connect, listen, inform you and add value to their tailor-made recommendation that fits your needs, preference, situation and budget based on the market condition.

They demonstrate their knowledge of the market and trend while educating you on the market and products so that you can make an informed decision.

A Real Estate Agent will show you the supporting numbers for the neighbourhood such as demand, supply, months of inventory for the property type, average or median prices, along with property taxes.

A Mortgage Agent will go over your Total Debt Servicing Ratio (TDSR), Gross Debt Service Ratio (GDSR), Affordability and most importantly your credit report with you. They will go over the mortgage terms including the interest rate, variable vs fixed interest rate options and lending options with you in detail.

5. Value Your Time and Money

A distinguished Real Estate and Mortgage agents value your time and money. They don’t think short-term when it comes to your relationship, time and money.

They know very well that referral is the best marketing tool that promotes their personal brand. The return on investment (ROI) on referral far exceeds any dollar they spend on marketing.

One of the agents that I talked to suggested that every home buyer or owner they meet or work with know at least 50 to 100 families who could be my potential referral client. It is in my best interest to leave a great impression and provide an excellent service.

How do they value your time and money you ask? They are very efficient in managing their time, they set appointments and show up for the meetings on time.

A top real estate agent will not take you on showings that don’t match your criteria, situation and budget as they don’t want to waste your valuable time.

A top mortgage agent would not recommend a mortgage product that does not fit well with your situation and need based on the market conditions.

6. Number of Reviews and Deals Closed

The numbers speak for themselves, a trusted real estate or mortgage agent will have stellar reviews and a good number of deals closed.

A prominent Real Estate and Mortgage Agents don’t come across as salespeople with a sales pitch who is trying to convince you to buy. They are a person who you don’t mind going for coffee or lunch with at work to connect and build a professional relationship with or even better to be your mentor.

They have a greater understanding of the sale cycle, they connect, add value by providing you timely information and gain your trust before asking you to commit to their services.

The great real estate experts close more deals and have more reviews not just because they are salespeople in suites. They demonstrate the ability to connect and gain the trust of their clients while educating them on the market conditions. They guide their clients via proven methodology and providing a tailor-made recommendation that fits the client’s situation and budget based on the market conditions.

Have you had experience hiring a Real Estate or Mortgage Agent? Are you looking to hire one? How was your experience?

At AskGauge, we connect homebuyers and homeowners with verified and experienced real estate and mortgage agents based on your needs. We made the home buying process simple while saving you time and money. If you are looking to buy a new home or trying to renew/refinance your mortgage, start your journey with AskGauge.

https://askgauge.ca/i-interviewed-75-real-estate-experts-here-is-what-i-found/

How many time has this happened to you? You went to your neighbourhood retail store and they offered 20 to 30 % discount on your purchase if you signed up for their credit card. You were sold on the offer because of the discount and chose to sign up for the card.

I am referring to the Credit Card that you either don’t carry it in your wallet or you have not used it since then.

Imagine what would happen to your credit, if you had moved to a different location and you totally forgot about signing up for that credit card and the remaining balance.

This recently happened to a couple; who also was looking to look to buy a new home. The balance on the credit was exactly $ 68 and the credit score went below 650 as the minimum payment was not paid for several months.

The couple had to look for private lending options as the mortgage applications will not be approved by A and B lenders because of their credit score. The mortgage interest rate will be significantly high; I am talking about 7 to 9 %. Their affordability was impacted and the cost of borrowing was significantly higher just because they forget to pay $ 68 in balance on a credit card they signed for a small discount.

Many of us subconsciously believe that our credit score will only be impacted by not paying the big bills. This may be because we can easily identify them and remember to pay them on time.

This is not how the system works, your credit score can easily be impacted by you not paying any amount even as small as $ 68 or even lesser than that.

The worst part is, this doesn’t just impact your credit score, it is going to cost you thousands of dollars more in interest for you to borrow money as well as limit your borrowing options.

That was an honest mistake and it can happen to the best of us. What steps can you take to avoid this from happening to you?

The first thing is to acknowledge that your credit can be impacted due to various reasons including for not paying the credit card minimum payment. I have listed examples of how your credit can be impacted and things that you can do to avoid this from happening to you.

Bill Payments

Pay your bills on time and if applicable ensure at the very least you pay the minimum payment before the due date. I have listed the examples of bill payments that you need to look out for.

• Credit Card and Personal Loans
• Telecommunication Bills (i.e. Phone, Cable, Cell)
• Entertainment (i.e. Apple TV, ESPN, Netflix, Streaming Services)
• Transportation Bills (i.e. Car Loan, Car Insurance, Parking Tickets, Toll Fees)
• Utility (i.e. Electricity, Natural Gas, Water, Alarm)

Are you moving?

If you are planning to move, make sure to change your address with your telecommunication, utility and Insurance providers. You also want to change your address with the city so that your vehicle ownership and driving licence is up to date. I would suggest that you call the providers ahead of time to understand the balance remaining and inform your moving plan.

Set up Mail Forwarding

If you are moving, ensure that your important mail gets forwarded to your new address. You can use Mail Forwarding when you relocate to a new address.

This ensures that even if you forget to change your address, you get your important mail to your new address. A small price to pay compared to your credit getting affected and paying more in interests.

Pre Authorized Payments

If you have pre-authorized payments set up through your credit card and your credit card have changed or expired; ensure to add your new credit card so the merchant can capture payments with your valid credit card.

If you have online banking you can easily filter the pre-authorized payments or you should be able to call the credit card company to find out what are the pre-authorized payments on your card.

If you are changing banks, ensure you have your pre-authorized bill payments are set up with your new bank account before you switch over to the new bank. Most of the banks do have a service that can automate this service for you. Make sure to check with your bank before switching over.

Identity Theft

Each and every one of us can be a victim of identity theft, this is a growing and serious concern. Security is the biggest risks for consumers and organizations, even with the technological advances over the last decade. This happens when your personal information is stolen without your knowledge or consent for criminal purposes. Identity Theft is a big topic and it is beyond the scope of this blog. I have listed published articles as the reference from Consumer Protection Ontario, RCMP, Canadian Consumer Handbook and The Globe And Mail where they cover Identity Theft in depth.

Check Your Credit Report

When is the last time you pulled your credit report and ask yourself these questions listed below? If you haven’t asked these questions recently then it’s time that you do.

When you do get a movement, pull your credit report from one of the credit bureaus and ensure to check the following

• What is my credit score?
• What are my liabilities? Do they match with what is listed on my credit report? Does anything seem odd?
• How is my repayment history?

I would suggest that you pull your credit report annually and do a preliminary credit analysis. You can check my blog on, “5 C’s of Credit and Why do they matter” where I have discussed 5 C’s of credit in detail.

If you don’t feel comfortable doing this on your own, submit the form below and I will get you in touch with one of the trusted mortgage agents within the Greater Toronto Area who can work with you to pull your credit report and do a credit analysis for you.

https://askgauge.ca/dont-make-this-mistake-how-68-can-ruin-your-credit/

Breaking Your Mortgage. Life is full of surprises. It’s unpredictable and we need to make amends whenever there is a pressing need.

You bought your condo in Toronto, negotiated and fixed your mortgage for 5 years with the best mortgage rate in the market at that time at 2.54 %. Two years into it, you were promoted at your work for that dream opportunity you had been eyeing and you have to move to Montreal. You assumed that you can port your mortgage to a new house in Montreal but when you called your lender, you found that they don’t operate out of Quebec.

You wanted a piece of Toronto Real Estate back then. But now it’s time to move on to your next adventure.

Should you break your mortgage and sell your condo as you have 3 years left on your mortgage term? This situation may happen to anyone and it’s important to know your options before taking a decision.

How is mortgage penalty calculated?

Breaking a mortgage is a very costly (and confusing) affair, You can be hit with a big penalty for breaking your mortgage early. The worst part is the calculation of the penalty does not follow a standard and it varies based on various factors.

Most lenders have a fee to exit from your mortgage term, Generally, it’s the larger of three months’ interest or the Interest Rate Differential (IRD) which is calculated from the difference between your initial posted rate and the current rate until the end of the term.

The IRD (Interest Rate Differential) is in place to compensate the bank/lender for the losses it suffers because you are exiting your contract early.

The tricky part is how the IRD is calculated when you exit the mortgage. You may have master negotiated a five-year fixed-rate mortgage at 3.10%, but the penalty for breaking your mortgage at most of the major banks is based on the posted rates, which may be much higher.

Toronto-Dominion Bank describes the IRD penalty as equivalent to the difference between your annual interest rate and the posted interest rate on a mortgage that is closest to the remainder of the term, less any rate discount you received, multiplied by the amount being prepaid, and multiplied by the remaining time left on the term.

If you are choosing a variable-rate product, it is a relatively simple equation: the fee for breaking most variable rate mortgages is just three months’ interest. IRD stays out of the equation.

It is also important to remember the rate discounts given or cashback promised against the posted rates when you took out the mortgage. These were provided to you with an expectation that you will not exit the mortgage before your term ends.

But when you have to break your mortgage prematurely, the discounts and cash back will have to be paid back on the way out. By now, you would have realized breaking the mortgage prematurely is a costly affair.

When you negotiate your mortgage rates, you need to remember this

“The lowest mortgage rate may not always be the best mortgage for you”

The devil is always in the details and if a low rate mortgage is going to handcuff you by charging you a hefty penalty, you may need to rethink your strategy. There are a lot of myths around mortgage rates and you can check our deep dive video podcast here.

Let’s look at how we can save ourselves from high penalties and the steps we can take to cut down the same.

Read your mortgage terms and conditions carefully

When you are happy to get a steal deal for your mortgage, you might be carried away and miss to read everything that’s under terms and conditions. All the mortgage agreements will contain information about what happens when you break your mortgage.

For variable rate mortgages, it is usually 3 months of interest payment. The equation changes drastically when its a fixed rate mortgage. It is very difficult to arrive at a number and you are at the mercy of your lender in this scenario.

The lenders will use posted rates instead of discounted rates when they calculate your penalty and that might come as a surprise to you (should we say, shock).

Read the contract thoroughly regarding what are the penalties for breaking your mortgages.

Prepayment options

Depending on the terms of your Mortgage, You have the possibility of prepaying your mortgage up to 20% of the principal annually at one go. This will definitely reduce your penalty as your outstanding has been reduced.

You also need to be wary of the fact that some lenders might not consider prepayments that are made 30–90 days before you request a discharge. So earlier your prepayment, the better are your odds of getting a lower penalty.

Let’s say you are planning to break your mortgage in mid-2019, you can prepay 20% of the principal in December 2018 and another 20% in January 2019 as they are technically two different calendar years.

Use penalty calculators

Almost all the lenders have their own penalty calculators. Take them for a spin and understand the costs involved. It is important to educate yourself on the same so that you can take the necessary steps to bring down the penalty.

If you are unsure, seek the help of a trusted mortgage professional who will be happy to assist you.

Let’s say you have an outstanding mortgage of $100000 and there are 2 years remaining in your mortgage period. Your fixed mortgage rate was 3.15%.

3.15% was your discounted rate but the posted mortgage rate was 4.74%

So for calculating your interest rate differential, we can use the following formula

(A posted rate at original mortgage date — posted rate for remaining term)/12

= (4.74% — 3.50%)/12 = 0.0010 (IRD factor)

IRD factor x Outstanding mortgage balance x number of months remaining = interest rate differential

0.0010 x 100000 x 24 = $ 2480

Some lenders may add a lender discharge fee as well to the above penalty.

In case of a variable mortgage rate, the calculation as mentioned earlier would be three months of interest payment.

Understanding the additional costs

When you break your mortgage, the penalty is not the only costs you must consider. Switching to a new mortgage is almost the same process as applying for a new one.

You have to fill up the application and also go through a credit check. There may be home appraisal as well as inspection costs. It may cost normally around a 1000 dollars and it can be a lengthy process and sometimes costlier as well.

Understand the why and do the math

Breaking your mortgage before the end of the term is definitely a costly exercise and it should have a purpose. Once you get an estimate of the penalties, revisit the reason for deciding to close the mortgage in the first place and do the math.

If it’s for a personal reason and cannot be avoided, go ahead. But if you are looking to save some money in the process, do the math and factor in all additional and hidden costs and see if you are on the green.

Mortgage payments are one of your major monthly expenses that have to be factored in and saving even a hundred dollar per month can make a big difference in the long run.

While it is next to impossible to get out of a mortgage without paying a penalty, it is always healthy to educate yourself on what constitutes the penalty charges and how you can bring them down fair and square.

At AskGauge, we pride ourselves in helping homebuyers make informed decisions in everything related to home-buying. We can connect you with verified mortgage agents who can take you through the process seamlessly after understanding your goals and situation.

What is the economic impact to Canadians due to the Toronto Real Estate Bubble? I have been hearing a lot of chatter and horror stories of which I am unable to verify or confirm. I hope that I can start a conversation with this topic and my hope is that we get answers to some of these questions. This impacts all of us one way or another, whether you are trying to buy a new home, you own a home or you are planning to downsize/upgrade.

The questions that I have been trying to get answers to are as follows:

• Who is most impacted by this real estate bubble?
• How many of us lost money and our dream home due to Toronto’s real estate bubble in 2017?
• What is the cost ($) to Canadians?
• How many of us have to pay more in mortgage interest rates?
• Who is benefitting from this?

We heard it from the media and experts as to the reasons for the Real Estate bubble in Toronto from foreign buyers, lack of supply, an unsustainable increase in house prices and speculative investments.

The Federal and Provincial Governments came down with the hammer in the form of regulations and policies in order to control the market and limit the impact to the overall Canadian Economy as well as try to address the supply side of the equation for the Real Estate Market.

Mortgage Stress Test

The regulators have argued that there are valid reasons for introducing the mortgage stress test and whether we agree with the stress test or not, I believe these are valid concerns.

• Household debt has continued to rise compared to household income
• Canadians have accumulated the highest household debt burden of any G7 Country
• Household prices have increased dramatically

Is the household debt rising due to mortgage obligations or other forms of debt (i.e. HELOC, Line of Credit, Car Loan, Credit Card, etc.) accumulated by Canadians? If it is, in fact, other forms of household debt, does the mortgage stress test really address the root cost of the problem?

Ontario’s Fair Housing Plan

This policy does address some of the concerns on the supply side of the equation within real estate. The policy did take some steps to protect the rental market, as well as discouraging foreign real estate investment in Ontario and to a certain extent, it has tried to control the market.

I am not questioning whether these policies are bad or don’t have good intentions. How are these policies and regulations impacting Canadian families?

I believe that these policies do have consequences under certain scenarios. I hope that the policymakers did consider the impact on Canadian families. Do the policymakers have an estimated number of Canadian families that will be impacted and overall cost to these families?

Home Buyers who signed up for New Build Homes before the Real Estate Bubble

Even though there are benefits to a new build over a resale home such as your new home comes with a third party warranty and ability to customize your home.

The disadvantage is that your down payment on a new build is a lot more than on a resale. In most cases, the down payment is close to 25% and most new build have a set schedule with a set amount. Another disadvantage is that your mortgage closes 3 + years from the day you sign up for the new build.

Imagine a scenario,

• You saved enough money for the scheduled down payment
• You went to the bank and got pre-approved for a loan for $ 800,000
• You went and signed an agreement with a builder for a new build home for $ 800,000

The house is ready, your family is eager to finally move in. You find out from your lender that they can only approve you for a mortgage amount of $ 600,000. The reason being is that your affordability is lower now due to mortgage stress test and the market value of your home had declined to 20 % from your agreed price. The lender also quotes you an interest rate that is higher than previously anticipated as the prime rate and risk of default has gone up to the lender.

How do you anticipate for your affordability to be less than 20 % from your pre-approved mortgage amount by your bank? How do you plan for the market value of your home to be less than the purchased value?

How many Canadian families endured this scenario? What is the cost to these families? Did these families endure hardships due to these regulations? Are they collateral damage?

First Time Home Buyers

I remember being a first time home buyer, it was exciting and overwhelming at the same time. My wife and I decided to move from Toronto to Ottawa. Being a first time home buyer in a city that you live in can be challenging but moving to another city was another.

I can relate to the pain of being the first time home buyer, as I still remember being told by my bank that my pre-approved amount is way less than what I anticipated.

We were unable to negotiate with the lender as we had no leverage at that time as our income wasn’t great. We were beginning to build our credit after coming out of school with upward of 60 k of student loan between the two of us.

Imagine a scenario,

• You saved enough money for your down payment
• You went to the bank to get pre-approved for $ 500,000
• You are being told by your lender that you can only get pre-approved for $ 350,000 for a higher interest rate

The first time home buyers are being hit by both sides of the coin.

• The affordability has been reduced by mortgage stress test
• The first time home buyers are also being priced out of the market as the price point for Condo & Townhouse is fairly high

Even though there were some steps to control the rental market, I believe the reason why Canadian families are looking to buy a new home is that they are being stretched financially in all necessary aspects of life.

The cost of living is significantly higher than 2 to 3 years ago whether you look at food, rent, transportation and utility cost. This year alone, under the pretext of the minimum wage increase the businesses have increased the prices significantly. Depending on the item in the grocery stores, the prices have increased to $1 to $5 more per item. I noticed that I am paying 30 % more for my haircut compare to last year.

A middle-class Canadian family’s hope was that the education and real estate is a long-term investment for generations to come. In my eyes, this is one of the reasons you see people working 2 or 3 jobs so they can afford a home and provide for their families. I myself had to do that for few years when I bought my house 10 years ago.

The Canadian middle-class families are being asked to pay more for essentials while their hopes and dreams are being shattered.

Downsizing To A New Home.

You worked hard all of your life, paid your dues and bought your house like 20 to 30 years ago in the hope that when you do retire you have some form of security which you can cash in on. You have been thinking of downsizing as your kids have moved out of the house. You are retired and been wanting to go on that long vacation with your better half.

The reality is that you have to wait for another 3 to 5 years or more

• The market value of your house is 20 % less than what it was a year or two ago
• The price point for condo or townhouse market is higher and it’s not a buyers’ market
• Your affordability is lower and the interest rate is higher

You are worried as we know life happens and you may not be able to take that long vacation with your better half. This is not something anyone should endure when they are ready to retire.

Upgrading To A New Home

You bought your first 2 bedroom condo 3 + years back, hoping that the market value of your condo will go up so you can upgrade to a detached home. You had your second or third kid on its way and you are ready for an upgrade.

The equity of your condo has increased, the market is hot and it is a seller’s market. Can you upgrade to a bigger home and take advantage of this situation?

Even if you use your equity and put down 20 to 25 % for your house, your affordability has been decreased significantly due to mortgage stress test and you have to qualify for a higher interest rate.

You are caught in between chicken and egg scenario.

• Do you take advantage of this market and sell your condo and upgrade?
• Do you look at alternative lenders as an option and pay a high-interest rate (8 to 12 %) for the mortgage for your new home?
• Do you just sell and rent?

None of these options is a winning formula for Canadian middle-class families who are trying to make a living while enduring high cost of living in Greater Toronto Area.

The federal and provincial governments may have good intentions for introducing these policies, however, the policies and regulations may be impacting hard-working Canadian middle-class families and their livelihood.

Are you or anyone in your family or friends impacted by the real estate bubble in Toronto? We want to hear from you and share your story with us? You can leave your reply in the comment section or email me at info@askgauge.com.

Borrowing Money Is Expensive”, especially when you compare that to your accumulated interest + fees for your saving and chequing accounts.

We borrow money on a daily basis, whether using our credit card, borrowing for education or car loans or home renovation. As part of managing money, it is important that we look at cost of borrowing for each type of loan and manage borrowing decisions wisely. We accumulate interest for each type of loan and may be paying additional fees.

Why Borrow Against your Home Equity?

Home Equity is the difference between the market value of your home and the outstanding balance remaining on your mortgage.

Your Home Equity goes up

• As You Pay Down Your Mortgage
• If the market value of your home Increases

As an example, let’s say your home is worth $ 750,000 and the mortgage amount remaining is $ 400,000, you may have $ 350,000 in home equity.

You may be eligible to borrow money using the home equity accumulated over time and your lender needs to approve before you borrow from Home Equity.

Borrowing Options

When you borrow against your home equity, you can use one of two options. You would need to decide what best suits your situation and need.

Home Equity Loan: A large amount of money is paid up front and you repay the loan over time with fixed monthly payments. The interest rate can be set when you borrow and remain fixed for the life of your loan.

Credit Limit

• Minimum: 15 K — This may differ depending on the lender
• Maximum: 80% of your home’s appraised value, minus the unpaid balance of the existing mortgage

Home Equity Line Of Credit (HELOC): Is a revolving line of credit and works similar to a regular line of credit. You can take out money whenever you want, up to the credit limit. You can pay it back anytime and borrow back again.

Credit Limit

• Minimum: 15 K — This may differ depending on the lender
• Maximum:
• HELOC amount cannot exceed more than 65 % of the value of your Home
• Mortgage Loan + HELOC cannot exceed 80 % of your home value

Example: Calculating HELOC

$ 500,000 $ 350,000

• Max Loan to Value = $ 500,000 X 80 % = $ 400,000
• Max Equity for HELOC = $ 400,000–350,000 = $ 50,00
• Confirm $ 50,000 does not exceed 65 % of your home value
• $ 50,000 / $ 500,000 = 10 %

Requirements for Approval

In order for you to qualify, depending on the type of lender you may need to pass the “Mortgage Stress Test” in addition to the home equity and credit limit requirements. A borrower needs to demonstrate to a lender that they have the ability to repay at a qualifying interest rate which is typically higher than the actual rate. The Lenders verify your finances, proof of income, credit check and analysis before your approval.

Benefits of Borrowing Against your Home

The interest rates are typically lower compare to unsecured loans such as credit card and personal line of credit. The cost of borrowing for these loan type is lower due to low-interest rates.

These loans provide access to a large amount of money, hence it can be utilized to increase the value of your home by renovating, pay for your child education or consolidating high-interest debts and paying it off quickly.

Pitfalls of Borrowing Against your Home

The risk for these loans is relatively safe for a lender. The benefits listed above are available to borrowers because your Home serves as the collateral for a Home Equity Loan or Home Equity Line Of Credit (HELOC).

You can lose your home if you fail to repay the monthly minimum payment. If the borrower fails to repay the loan, the lender can repossess the property, sell it and recover the funds. A borrower needs to understand the risks of using these type of loans. Even though these loans can provide a significant amount of money with low-interest rates, it is best to utilize these loans for purposes that can improve the value of your home.

Fees — “Why pay more, If you don’t have to”: If you must borrow, why not borrow for less; interest rates on loans secured by a home equity may be much lower than other types of loans. The closing cost may offset the low-interest rate in the short term.

As an example, let’s say you want to borrow $ 40,000 from your Home Equity and your appraisal + legal fees are $1,500 for that loan.

You just paid 3.75 % in fees before your loan is approved, hence it may be actually expensive compared to a line of credit. My suggestion would be that you work with your mortgage agent or negotiate with the lender to waive the appraisal + legal fees to reduce your cost of borrowing for your loan.

You may want to read the fine print listed in your Mortgage Terms and Condition or submit a request to renew/refinance your mortgage and discuss your situation in detail with one of our Mortgage Agent before deciding on borrowing against your home using Home Equity.

We shouldn’t just look at best mortgage rates when choosing a mortgage solution instead we should look at the Mortgage Terms and Condition. Check out my video podcast on “Best Mortgage Rates Myth”, where I discussed this in detail with Kevin who is a Mortgage Agent.

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