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Archive for the ‘ Edmonton Real Estate News ’ Category

Mortgages – The Basics

Thursday, February 14th, 2013

For most people, getting a mortgage is one of the most important steps in financing your new home. Without a mortgage loan, most individuals couldn’t afford to buy a new home at all. Mortgages make it possible for you to become a homeowner, but there is a whole host of paperwork and other rigmarole that you have to go through before you can actually get a mortgage. For some people, this can certainly be a rather difficult task that might dissuade them from even pursuing home ownership at all. Of course, when it comes down to it, millions of people have gone through the mortgage loan process and millions more are primed to follow in their footsteps.

Of course, going down the road of a mortgage loan can be both exhausting and frustrating. There are many different aspects of applying for a mortgage that can seem overwhelming to some. If you have gotten to the point at which a mortgage loan application becomes necessary, then you’re probably going to want a little help. There’s no doubt that a REALTOR® can assist you in that endeavor. Although they aren’t required for you to get a mortgage, they can provide their wealth of knowledge and expertise when it comes to procuring a loan. Indeed, for the most part, they are going to offer you their expert guidance as you make your way through the mortgage process. In many cases, they will have access to a wide variety of different professional lenders, making your search even easier.

In Canada, there are two different main types of mortgage lenders: banks and licensed mortgage professionals. You’ll need to decide which lending option is the right one for you. Many people might think of a bank as an obvious first choice because it’s an institution that revolves around money. It’s also relatively common to receive loans from banks for certain things. Even so, banks are limited to one product, and licensed professionals have access to many products with multiple lenders that may suit your needs better. Even so, some individuals might find that banks are a good fit for them as well.

In either case, the first thing your lender is going to have you do is see if you can be approved for a mortgage loan. In some cases, a certain lender will offer pre-approval status to those who qualify. But, it’s important to understand that pre-approval is certainly not the same thing as approval. You are only pre-approved based on certain criteria that might not be in play by the time you actually get ready to buy a house. Thus, it’s important to not put too much stock in pre-approval unless you plan to buy a house shortly thereafter.

In general, your financial preparedness will be determined by two factors: Gross Debt Service (GDS) ratio and Total Debt Service (TDS) ratio. The GDS ratio looks at certain important costs that must come out of your monthly income like heating costs, taxes, and your prospective mortgage payments. The TDS ratio takes into account other housing costs and debt payments (e.g. credit card payments, car loans, etc.) that will have to come out of your monthly income. It is considered ideal if your GDS ratio is at or below 32% and your TDS ratio is at or below 40%. Of course, this frees up about 28% of your monthly income for extraneous costs.

Basically, these ratios really focus on your ability to make all the payments that will be expected of you as a homeowner. Lenders need to make sure that you will be able to take these costs on your current monthly budget. Once they’ve determined that you’ve got a financially viable means of making these payments, it will be time to decide which type of loan works best for you. There are several different types of loans to choose from, and each one offers its own benefits and disadvantages. Your lender and your REALTOR® will likely go over all the options you have for getting a loan.

There are really five distinct categories of mortgages that you’ll have to understand: fixed rate, variable rate, conventional, open, and closed. In some instances, there may be some natural overlap between these five, but understanding them keenly can help you make the right decision. A fixed rate mortgage essentially locks in the interest rate for your payments no matter how much the external interest rates increase or decrease. By contrast, a variable rate mortgage follows the path of the regular interest rates, and you must make the payment according to fluctuations in those rates. A conventional mortgage is one in which the buyer makes a down payment of at least 20% of the house’s value and the mortgage essentially finances the rest. An open mortgage is one that you can pay off prior to the end of the term without having to pay a pre-payment charge. With closed mortgages, if you want to pay it off early, you’ll have to pay the charge. On the other hand, the interest rates for closed mortgages tend to be considerably smaller than those for open mortgages.

It’s also important to note that any down payments that dip below 20% of the house’s value, will force you to incur mortgage default insurance. This is a measure put in place to protect lenders in the event that you cannot make your mortgage payment. You can technically make a down payment as low as 5% of the total value, but you’ll likely have to add between 0.5% and 3% to that cost with the default insurance. Generally, the more you pay, the smaller your insurance costs will be. Of course, paying the standard of 20% (or higher) for your down payment will effectively negate the need for the insurance.

Once you’ve been approved for a mortgage loan, you can then ensure that you are ready to make an offer on your preferred property. If your offer is accepted, you will likely be bound to the agreements made in the mortgage contract. That’s why it’s always important to follow every aspect of the mortgage dealings and read your contract thoroughly to make sure you understand all the rules that apply. Paying the mortgage off in lump sums might seem like a good way to skip out on the rising interest rates, but if you’re lender had stipulations about those kinds of payments, you might be on the hook for extra charges. It’s always a good idea to have a copy of your mortgage contract with you in the event that you need some guidance.

All in all, there are a lot of aspects that you have to consider during the mortgage process. But, getting a mortgage is really a matter of understanding what you want, and finding the right lender for the job. Many home buyers tend to shop around for lenders because you never know which one will offer the best rates and terms. In any event, it’s certain that a REALTOR® can help you along the way in every aspect of the home buying process. Getting a mortgage is certainly difficult, but it can be made much easier with a little professional help.

We encourage everyone to speak to a qualified mortgage specialist about their specific needs and situation, and to get the best and most up to date advice.

Now may be the time to buy a home in Edmonton!

Thursday, February 7th, 2013

The simple equation to any real estate transaction is two fold. The first is location, location, location and the second being, of course, supply vs. demand. In Edmonton, these two equations are indicating a very strong buy signal.

The City of Edmonton had a population of 812,201 as reported by the last Census which was conducted in 2011 thus making it Alberta’s second-largest city and Canada’s fifth-largest municipality. Edmonton is the northernmost North American city with a metropolitan population over one million and a resident of Edmonton is known as an Edmontonian. Edmonton is a cultural, governmental and educational centre. It hosts a year-round slate of festivals, reflected in the nickname “The Festival City.” It is home to the West Edmonton Mall which was the world’s largest mall in the world from 1981 until 2004 and is still the largest mall in North America. Edmonton is also the home of the Fort Edmonton Park, which is Canada’s largest living history museum.

Edmonton’s historic growth has been facilitated through a number of annexations beginning with the absorption of five adjacent urban municipalities including Strathcona, North Edmonton, West Edmonton (Calder), Beverly and Jasper Place. The annexations of surrounding areas and rural lands continued well into 1982.

Edmonton is the northern anchor of the Calgary–Edmonton Corridor and is now the staging point for large-scale diamond mining operations in the Northwest Territories and large-scale oil sands projects occurring in northern Alberta. Current estimates place the total value of oil in the oil sands project to be in excess of $16 Trillion Canadian (Cdn). According to an article in the Edmonton Journal:

“Over the next two years, the board predicts Alberta will create 132,900 net new jobs — or about 40,000 more people than the entire population of Red Deer — cutting the province’s unemployment rate to 4.5 per cent by 2013. That’s just one per cent above the pre-recession lows of 2007.”

The Petroleum Human Resources Council of Canada says nearly 40,000 new workers will be needed in the energy sector by 2020 just to replace those who retire, plus 90,000 additional oil-patch workers will still be needed. With China, South Korea, Japan and Thailand all spending Billions of dollars, Husky Energy Inc., (OTCQB: HUSKF) spending $2.5 Billion on its Sunrise Phase One Sit Project and ExxonMobil (NYSE: XOM) spending $10.9 billion (Cdn) on the Kearl Oilsands Project there will be a record demand for new workers.

What that means to you is an exploding population base that is going to push demand for homes higher. With limited availability, homes will of course begin to demand higher and higher prices. It’s the simple law of economics. Limited supply and high demand equals higher prices. You have to consider that most of the neighborhoods in Edmonton enjoy an occupancy rate of over 96%. Consider that Lansdowne, Grandview Heights, Malmo plains and a few others were at 100% occupancy with no homes for sale as the time of this writing.

Now don’t be scared off from buying a home in Edmonton simply based on occupancy rates. What this really means is that buying a home in Edmonton is going to be a great investment and that the neighborhoods are stable, non transitory areas which are great for starting or raising a family. Further consider that many neighborhoods in Edmonton were designed specifically to attract families and to encourage neighborly interaction, you can see why it is a great place to live.

Case in point are Terwillegar, Lake Sumerside, and Windermere which are examples of the new Urbanism style of development showcasing roadways specifically constructed to encourage pedestrian traffic, houses situated closer to the street in order to encourage interaction between neighbors and neighborhood parks being provided to be the focus for the community. This is just one example of many. Furthermore, the housing market in Edmonton boasts a multitude of neighborhoods to choose from. Form the newer “neo-traditional” community already discussed to the more seasoned neighborhoods developed in the 1940’s through the 1960’s. All of which have their own specific charms and attractions.

The City of Edmonton boasts world-class schools; parents can choose from ten different post-secondary institutions of learning. Some examples are the Grant MacEwan University, the largest university in Western Canada, the Northern Alberta Institute of Technology which trains more apprentices than any other school in Canada, and then there is the University of Alberta which is ranked as one of the worlds leading research universities.

The City of Edmonton also boasts world class healthcare with Edmonton’s Capital Health Region beeing ranked no. 1 in Canada for the last 5 years in a row.

The City of Edmonton also has outstanding community attractions and recreation areas. There is the Edmonton Valley Zoo featuring more than 300 exotic and native animals, community swimming pools, the Muttart Conservatory, multiple parks including arenas and outdoor skating and much, much more. There is guaranteed to be something for everyone. Boasting over one million people, the Greater Edmonton area offers all of the conveniences of a big city but with the comfort and feel of a small home town.

As we have shown there are a myriad of reasons for a person to move to the City of Edmonton. But if you needed even more of an incentive consider that home prices in Edmonton are lower than the national Canadian average and the City of Edmonton boasts lower taxes as well. Whatever the reason, of which there are many, now is the time to move to Edmonton and to buy your home.

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The trademarks MLS®, Multiple Listing Service® and the associated logos are owned by The Canadian Real Estate Association (CREA) and identify the quality of services provided by real estate professionals who are members of CREA. Used under license.

The trademarks REALTOR®, REALTORS® and the REALTOR® logo are controlled by The Canadian Real Estate Association (CREA) and identify real estate professionals who are members of CREA. Used under license. REALTOR® logo are controlled by The Canadian Real Estate Association (CREA) and identify real estate professionals who are members of CREA. Used under license.