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January Residential Sales and Home Prices Move In Opposite Direction

Mon, 12 Feb by Pauline Relkey

2018 has started off to a solid start compared to the 2 previous years in Regina. (Personally I am saying not much of a change).

143 sales in Regina compared to 139 in 2017 = 2.8%.

The Home Price Index reported a price of $279,400 down from $293,600 one year ago. The downward direction on prices is because of the over supply of properties and it’s pushing sellers to keep reducing their asking prices.

We have 1,133 active residential listings on the market at the end of January, over 20% increase from 2017.

The ratio of sales to new listings for the month was 30% (meaning only 30% of listings sold). Still a buyer’s market.  Condos make up almost 30% of the listings which is high.

Click here for the full report.

Lessons learned from Adam Carolla

Tue, 23 Jan by Pauline Relkey

Some of you may have watched his show called To Catch a Contractor.

Before launching a successful career as a TV and radio personality, Adam Carolla was a master carpenter and home builder, so he knows the work of skilled craftsmen when he sees it. Likewise, he can spot shoddy construction, and in this series he trains his eye on building blunders and the contractors responsible for them. With the help of no-nonsense builder Skip Bedell and his wife, private investigator Alison Bedell, Carolla seeks retribution for homeowners who have experienced a construction nightmare, by tracking down unscrupulous contractors and forcing them to face the wronged parties. The contractors are then given a chance to redeem themselves by fixing messes they left behind — all while under Adam’s and Skip’s watchful .

I watched a few of his shows lately and was pleasantly surprised by some of the lessons that rang so true for me.

The first lesson hit home – Don’t work out of your area of expertise.  This is so true for most, if not all occupations.  If you’re not sure of what you are doing, get some help from an experienced person or refer the job/client to them.  I have experienced this situation many times over the last 26 years in real estate and I do feel badly when I have to tell one of my clients, “No, I don’t work in that area of real estate, but I can connect you with someone good that does work in that area.”  I have chosen to work residential in Regina and close areas around Regina, but real estate in commercial, acreages, cottages is not my area of preference or expertise.  Yes I was licensed quite a few years ago and even though my license does include those specific areas, I have not pursued them because I don’t have the interest in them and haven’t pursued more training in those areas.  I let the people that know what they are doing in these fields handle the clients.

Another lesson he talked about was “Don’t undercut your competition to get the job.”  So true.  Real estate commissions are a high number and we turn blue explaining why (our costs from advertising to insurance to memberships to our split with our company and with the buyers company, etc.)  The costs are a lot of money and thankfully they usually come from the sale price of the house as most property sellers don’t happen to have that amount of money just hanging around, waiting to be spent.

Undercutting happens a lot in my business and it hurts all of us.  Usually the agents that undercut other agents will also undercut their work for their client.  Maybe they don’t advertise as much as others, maybe they don’t spend time following up on showings and leads, maybe they don’t keep in contact with their seller, don’t keep on top of the real estate market and share that info with their clients, etc.  Unfortunately the seller doesn’t find this out until it is too late and they have listed with the agent who offered the lowest commission.  Food for thought – if that agent was so quick to give up their money (commission), how quick do you think they will be to give up your money (sale price of your property) when an offer comes in?  I’ve always believed in the saying, you get what you pay for.  Thanks Adam.

Regina Home Sales Down, Listings at an all time high

Tue, 28 Nov by Pauline Relkey

My summary – even though the above title is true, sellers aren’t budging much when it comes to price.

Listings in Regina reached a record high for October with 1,444 homes for sale.

Sales numbers in and around the city dropped to their lowest level since 2008.

Average time to sell was 61 days which is the longest average listing to sale time in the last decade. The average sale price for October dropped by 1%.

Causes are overbuilding and lack of pressure on both buyers and sellers.

Diversified economy means people still have jobs and thusly sellers don’t feel pressured to sell at lower prices. Sluggish provincial economy causes buyer uncertainty. Buyers feel that prices might soon decrease. Regina has not seen big changes in prices as in other major cities.

Mortgage rules are tighter which reduces buying power.

The complete article is here.

Questions to Consider Before Meeting With a Home Designer

Wed, 13 Sep by Pauline Relkey

Designers typically charge an hourly rate for design services, so clients should do their homework before meeting with one. Think about what you want, what you NEED and what you can afford. If you think about these things before you meet with your designer, it can save you time and money.

To create a home that best serves you and your family, designers need to know your lifestyle, how you use your space, who uses the space and more. In other words, a designer needs to get inside your head. To help you prepare, here are things you should be able to answer about your space before meeting with your designer.

1. Who uses the space, and what activities will take place there? Having a list of all the uses for the space will help your designer get a feeling for the overall function. Is the room a personal space, like an office or a bedroom? If so, s/he might need to focus on creating an inspiring or a calming atmosphere.

Or maybe it’s a family room that is used by the entire family and needs to be a multifunctional place where teens do homework and everyone watches tv and plays games. Answering those questions will allow your designer to hone in on the function of the space, who uses it and why.

Also look at how big the space is. Does it allow for segregated areas or do we need to use a table as a multipurpose piece for both dining and homework?

Furniture that has multiple functions is a big space saver. A coffee table with a top surface for playing games and for extra seating, as well as a storage area below for books and toys, provides versatility.

2. Does the traffic pattern work in the space, or does the space feel cramped or underutilized? A major walkway should be at least 40 inches wide and the larger the walkway, the better. If you report that you often feel as though it’s a tight squeeze when multiple people are using a space, then a designer may remove the furniture and reconfigure it to accommodate a better flow.

For a kitchen usually islands are preferred over peninsulas if possible. An island opens up the space from every direction of the kitchen, whereas a peninsula allows for only one walkway. Again, it depends on the space, and your designer will be able to help you configure the best traffic flow. Sitting down and thinking about those times you’ve bumped into a family member as you’re cooking will give us clues to the right solution for you.

3. What kind of tasks do you need lighting for? Do you read a lot? Crochet? Or do you watch movies in the dark? The right lighting scheme will make your space more functional for all your tasks. If you tell your designer what you intend to do in your space, s/he can formulate the best lighting approach using task, pendant, undercabinet, recessed, ambient or natural light (via light tubes, skylights or a window), along with wall sconces and uplights.

For recessed lighting, use dimmer switches, which are great for low light while watching movies and giving off a soft ambient glow for entertaining. A table light or floor lamp is good for tasks or reading. Uplights are accent lights that can highlight artwork and collectibles.

4. What items are kept in this room? Let’s say you have one bathroom that’s shared by several family members, and you’re looking to remodel it. When you describe all the things that are stored in the space, the number of people who use it and so on, a designer will help you come up with the right storage solutions while keeping style in mind. For example, open shelving with baskets would give each family member his or her own basket, and would look great. Shallow wall built-ins, such as a medicine cabinet, would provide storage for shampoos, creams and toiletries.

A good designer can help solve storage issues but needs to know what issues should be addressed.

Here’s another example. If your counters are full of mail, keys, homework, magazines, electronic devices and so on, then maybe a main station is for you. A piece of furniture that has numerous compartments or drawers can help store those miscellaneous items.

If clutter collects in your family room, you might consider side tables with drawers or open side tables with a large basket or wooden crate for magazines, books and knitting supplies. Or maybe an ottoman that allows for storing items inside, such as blankets, pillows and things that are used sparingly.

Or maybe the solution is to add a functional piece of furniture storage in one room to help clear out space in another room, like a large armoire in your dining room that can store infrequently used dishware to free up space in your kitchen.

Think of how you do laundry. Do you need one hamper or four? Maybe you prefer to hang clothing rather than fold items after they come out of the dryer. Do you like to stand and fold clothes, or do you put them in a basket and fold them in another room? Do you need a place to iron or just the storage space to keep the iron and ironing board? Again, these are things that will help a designer quickly come up with the right design for you.

5. What look or feel do you want the space to have? Think of what you like in terms of colors, style and overall feel. If you’re looking for a calming environment in the bedroom, then maybe white walls, bedding and furniture are a good approach.

Ii’s recommended that clients create their own ideabook for each space and add comments on each photograph. Think about what it is in each photograph that inspires you, such as the color on the walls, the artwork, a piece of furniture or the overall feeling. Include information and pictures of appliances, plumbing fixtures, lighting fixtures, cabinet and door hardware, and flooring materials if these will be elements in your project.

Consider what speaks to you. Is there anything you personally cherish, example a colorful silk scarf that you love. This could set the tone for your family room. Paint the walls white to provide a neutral backdrop that allows you to add color throughout. Then add a tan sofa with colorful pillows and an accent piece of furniture painted a color taken from the vibrant scarf. A neutral rug can ground the space, and you can bring the scarf colors into other areas of your home through art and accessories, making it a cohesive home.

Don’t box yourself in with one design style, either. Be open to hearing a designer’s pitch on a combination of styles that might surprise you and also save time and money. For example, they might consider looking in other rooms of your home to swap out furnishings that will refresh and bring a new feeling to a room rather than buying all-new pieces. That old vintage chair in the basement could be just the piece you were searching for to break up a modern room.

6. What do you like about the space, and what do you most want to change and why? Not every room needs a total overhaul. In one room you may like a few things, such as the furniture and size of the room, but not the wall colors and rug. Sometimes just adding a few pillows and accessories is all a room needs.

You may like the overall feel of a space, but it may feel cramped with too much furniture. Designers can put together a floor plan for the best use of your space while considering focal points, large windows, art and so on. They know the space requirements for furniture and can map out the best traffic path.

A good designer will work with your list, making it a space that is right for your lifestyle while keeping the things you like and removing the things you don’t. Don’t be shy. Make clear what your likes and dislikes are. This is your space, after all.

7. How much money do you want to devote to your project? Setting budget expectations is important to the success of any remodeling or new construction project. Be realistic. A total average kitchen remodel can run as much as $80,000 and up. A basic kitchen remodel, keeping existing cabinets and floors, can cost about $16,000, depending on a variety of factors. If you’re on a strict budget, consider changes you need to have and which would be nice to have.

Share your budget right away with your designer, as this will set the tone of the makeover and will eliminate unnecessary backtracking later.

8. How much do you want to be involved in your project? Do you want a designer who will work with you, or do you want the designer to take charge and provide you with options? Clarifying your expectations will help you and the designer communicate well and ensure the result you want.

In the end, doing your homework will save you money that you can then put back into your project.

Regina Property Prices Stable Despite Number for Sale up 20%

Wed, 09 Aug by Pauline Relkey

Today’s Leader Post had an article about our latest real estate stats.

Our Association of Regina Realtors showed that at the end of July there were 1,512 residential properties for sale compared to 1,263 properties in July 2016. 30% of these listings are condos which is high.

Sask Trends Monitor says that this pattern of slightly fewer homes trading hands at slightly higher prices has been going on for several years now. We are at a maturing or leveling out of our housing market since the boom that happened in the mid-2000’s.

I personally have encountered quite a few price drops in the last 5 years so, as always, take this article, as the old saying goes, with a grain of salt.

For the full article, click here

House prices down in Canada

Tue, 18 Jul by Pauline Relkey

Take a look at what the Canadian Real Estate Association said about Canada’s housing situation.

CREA said home sales fell by 6.7 per cent last month compared to May — the sharpest monthly decline since 2010 and the third straight monthly contraction.

For the report, please click here.

Home Fixes Before Selling

Thu, 13 Jul by Pauline Relkey

Prioritize the projects that will bring the most value

Fix it to sell.

Structural is just as important as cosmetic.

Give the buyers what they want — create the “wow” factor.

The process of getting a property ready to put on the market can seem daunting enough. There is clearing the clutter, cleaning, organizing and scrutinizing your property with a fine-tooth comb. What needs attention and what can you leave alone?

Welcome to the new world of “fixing to sell.” Gone are the days of throwing it on the market and seeing what happens. Prepping for sale is a highly choreographed dance of repair along with a bit of renovation and presentation.

Pay attention to these 7 areas.

1.Structural and mechanical
It might not be glamorous, but buyers are looking at big-ticket items like the age and condition of the roof, air conditioning and heating systems, electrical panel and pipes.

You don’t have to replace all, but if any of these components are on their last leg, you might seriously need to consider replacing them as these items could factor into the kind of financing the buyer is able to obtain as well as insurability of the property.

Appraisers can be notorious for requiring a roof to be replaced, for example, as a condition of a loan. Replacing a roof that is at the end of its life before putting your home on the market will go a long way to solidifying buyer confidence in deciding to make an offer. The buyer (and you) won’t have to sweat what an inspector says, deal with a potential renegotiation before closing or face a price reduction. The last thing you want to be doing is putting on a new roof in the midst of trying to pack.

If you lack the budget to replace these items, get estimates on the cost involved to replace. You can always offer to contribute to the replacement cost in the form of a credit to the buyer’s closing costs.

2. Exterior

How does the exterior of your home look? Is there any wood rot? When was the last time it was painted? Are there any stucco cracks that need attention?

First impressions start from the outside, and the exterior will show up in photos across a multitude of websites, etc. This is definitely an area worth spending the money.

3. Landscaping

Speaking of the exterior, how does your landscaping look? Are the trees and shrubs overgrown, worn and wilted? What about the ground cover? Are the planting beds in need of some fresh mulch, pine straw, rock, etc.? Are there any overgrown tree limbs hanging over the house or blocking the home’s view? For a relatively inexpensive investment, you can transform how your exterior looks by trimming back and freshening things up with new plants and landscaping.

4. Cosmetic

Buyers buy with their eyes, so now is the time to go through the interior in detail. Are there dents and dings on the walls, scratched moldings or worn paint? Now is the time to spruce up the inside with a fresh coat of paint. Pick light, neutral and on-trend colors. Choose a neutral palette that will transition well with any buyer’s furniture. The latest trend is a combination of grey and beige.

Look at your light fixtures, ceiling fans and light switches — these are relatively inexpensive things to update and replace, yet they go a long way toward creating value. The front door? This is critical! Does it need a fresh coat of paint or new hardware? Consider adding a glass panel to create light that evokes a sunny and warm space.

5. Kitchen

This area is always huge with buyers. Even if the buyers barely know how to boil water, they always envision themselves in the kitchen cooking and entertaining or perhaps auditioning to be the next Food Network TV star surrounded by sleek appliances and cabinetry.
Here’s where you need to give them the look for less. Think new hardware on cabinets, adding or changing out a dated tile backsplash and updating appliances. Also, consider changing out counters — you might be able to find a reasonably price remnant of a granite slab.

6. Bathrooms

Simple and clean rules the day. Sprucing up your bathrooms to sell can be as simple as having the grout on the existing tile steam cleaned or regrouting where needed. Caulking, new plumbing and light fixtures along with mirrors can create value.

7. Flooring

What you walk on creates value. If you can only afford to make the investment in one significant part of your home, consider updating the flooring. There are a ton of low-cost options to choose from that include wood plank tiles and highly upgraded laminate flooring — think wide plank, light colored or hand-scraped styles. New flooring can totally transform the look of your space and give it the “wow” factor that buyers desire. New flooring can transform the look of your space and give it the ‘wow’ factor that buyers desire.

In undertaking for sale preparation, strike a delicate balance between what to fix and what to leave alone, but in the end, make the right improvements that will result in a faster sale for top dollar.

How to Use Prepayments to Be Mortgage Free, Faster

Wed, 14 Jun by Pauline Relkey

Using your mortgage prepayment options can drastically reduce the total amount you spend on your mortgage and shorten the time it takes to pay it down. If you follow these 3 steps, you can be mortgage free sooner than ever!

1. Know your prepayment privileges
Most mortgages have allowances for you to prepay down your mortgage faster. The standard prepayment amount allowed per payment can vary depending on your mortgage provider.

Your mortgage provider may be able to increase and decrease your prepayment privilege at any time throughout the life of your mortgage.

This means that if any life event occurs and you need to reduce your payment to the minimum, you might be able to. Most mortgage providers allow this free of charge, but with some providers you can only change your payments a set number of times throughout the year.

2. Increase your payments
Anytime you increase your payments, the excess that you pay per payment goes directly onto the principal portion of your mortgage. This is a great way to drastically reduce the interest you will have to pay over the term of your mortgage.

Typical prepayments allow you to add between 10% to 20% of your payment amount to each payment, depending on your lender. Some lenders also allow the use of “double up payments” which let you double each payment!

Here’s an example of prepayments being used on a typical mortgage:

All calculations are based off of a $400,000 mortgage with a 5 year term and 25 year amortization at a rate of 2.59% with monthly payments.

No Prepayments:
Monthly payments: $1,809.84
Principal paid over 5 year term: $60,836.51
Interest paid over 5 year term: $47,753.89
Mortgage amount remaining: $339,163.49
Years remaining on mortgage after 5 years: 20 Years

Adding a 15% Prepayment:
Monthly payments: $2,081.32
Principal paid over 5 year term: $78,201.00
Interest paid over 5 year term: $46,678.20
Mortgage amount remaining: $321,799.00
Years remaining on mortgage after 5 years: 15 years & 9 months

As you can see, the mortgage was reduced by $17,364.49 and you saved $1,075.69 in interest! The mortgage term was reduced by 9 years and 3 months in only 5 years!

3. Make a lump sum prepayment
Making a large payment can be a great option for paying down your mortgage, but may not be ideal for everyone. Lump sum payments help you reduce the amount of interest you will be required to pay on your mortgage. They can also be used to reduce your mortgage amount before selling your home and will reduce the penalty you will be required to pay.

Lump sum payments are usually between 10% – 25% of the mortgage total. Typically, you can make a lump sum payment onto your mortgage once a year. Every mortgage provider has their own specific guidelines for how you can make a lump sum payment in a calendar year. Your provider may require you put down a minimum amount for a lump sum prepayment, or you may only be eligible for one on the anniversary date of your mortgage.

If you decide that prepayments are for you, you can achieve mortgage freedom sooner than ever!

Contact me today if you are looking for a mortgage person and I will be happy to connect you with a couple of great people I have worked with.

The best month and day to put a home on the market

Wed, 15 Mar by Pauline Relkey

Homes listed between May 1 through 15 tend to sell 9 days faster and sell 1% above the asking price, according to a U.S. study.

Many homebuyers who start looking for homes in the early spring will still be searching for their dream home months later. By May, some buyers may be anxious to get settled into a new home — and may be more willing to pay a premium to close the deal.

bulbs-flowers

Mark your calendar for a Saturday in May

Research revealed the best day to place a home on the market is Saturday — listings that appear on a for sale by owner site on Saturdays garner 20% more views than early-in-the-week listings.  The second best day to list is Friday, when properties receive 14% more views. (My personal opinion is that the majority of people work Monday to Friday, so they have a bit more leisure time to search online on the weekends and possibly at the end of the week – on Fridays).

Sellers have to be cognizant of other factors, such as weather.  Sellers in nicer climates have more leeway as to when to list their home due to warmer weather patterns. Also, sellers who live in areas without distinct seasonal weather tend to have little variation in sales price based on the month.

But if you ask a Realtor when is a good time to list your property – the answer is now cause I’m here!

 

Top 5 Things Buyers Should Know When Buying Real Estate

Thu, 15 Dec by Pauline Relkey

There are 9 million Canadian millennials, representing more than 25% of our population. Born between 1980 and 1999, the eldest are in the early stages of their careers, forming households and buying their first homes. Buying a home is a daunting process for anyone, but especially so for the first-time home buyer. This is the largest and most important financial decision you will ever make and it should be done with the appropriate investment in time and energy. Making the effort to be financially literate will save you thousands of dollars and assure you make the right decisions for your longer-term financial security.

1. Don’t rush into the housing market. (can you believe that I am saying that as a Realtor?)
Do your homework and learn the basics of savings, credit and budgeting.  Lifelong savings is a crucial ingredient to financial prosperity. You must spend less than you earn, ideally saving at least 10% of your gross income. Do your savings automatically, having at least 10% of every paycheck put into a savings account. Hopefully if you don’t see the money, you won’t spend it. Contributing to an RRSP, especially if you are fortunate enough to have any matching funds from your employer, is essential.

The Tax Free Savings Account (TFSA) is an ideal vehicle for saving for a down payment and now you can contribute as much as $10,000 per year.

400-07048228 © frenta Model Release: No Property Release: No Puppets with piggy banks and coins. Isolated over white

You also need to establish a good credit record. Lenders want to see a record of your ability to pay your bills. As early as possible, get a credit card and put your name on phone and utility bills. Pay your bills and your rent in full and on time. Do not run up credit card lines of credit. The interest rates are exorbitant and the only one who benefits is your bank. Keep your credit card balances well below their credit limit.

Do a free credit check with Equifax and TransUnion once per year to learn your credit score and to see if there are any problems. They do make mistakes and sometimes put someone else’s problems on your report. Or you might think that the problem you had is all taken care of and you discover that the company you dealt with did not inform these credit places of the situation. I have done this more than once for myself and it can be a pain, but you are responsible for your own credit report and it’s good to know what info these companies have about you and if it needs updating.  These companies track all of your credit history, which includes student loans, car loans, credit cards and cell phone bills. Then they grade you based on your responsible usage and payments.

Budgeting is also essential and it is easier than ever with online apps. You need to know how you spend your money to discover where there is waste and opportunity for savings. The CMHC Household Budget Calculator or any other online budget calculator helps you take a realistic look at your current monthly expenses.

2. Make a realistic projectory of your future household income and lifestyle and understand its implications for choosing the right property for you.
Millennials are likely relatively new to the working world. Lenders want to see stability in employment and you generally need to show at least 2 years of steady income before you can be considered for a mortgage. This also applies if you have been working for a few years in one career and then decide to change careers to something completely different. Lenders want to see continuous employment in the same field. If you are self-employed, it is more challenging, and you need professional advice on taking the proper steps to qualify for a mortgage.

Assess the stability of your job and the likely trajectory of your income. Millennials will not follow in the footsteps of their parents, working for 1 employer for 40 to 50 years. In today’s world, no one has guaranteed job security. Take a realistic view of your future. Will your household income be rising? Will there be one income or two? Are there children in your future? Will you remain in the same city?
The answers to these questions help to determine how much space you need, the appropriate type of residence, its location and the best mortgage for you. Financial planning is key and it is dependent on your goals and expectations.

3. This is not a Do-It-Yourself project: build a team of trusted professionals to guide you along.
You need expert advice. The first person you should talk to is an accredited mortgage professional. There is no out-of-pocket cost for their services. Indeed, they will save you money. These people are trained financial planners and understand the ever-changing mortgage market. Take some time with them to understand the process before you jump in and find your head spinning with all the decisions you will ultimately have to make. They will give you a realistic idea of your borrowing potential. Before you fall in love with a house or condo, make sure you understand where you stand on the mortgage front. Mortgages are complex and one size does not fit all. You need an expert who will shop for the right mortgage for you. There are more than 200 mortgage lenders in Canada and they will compete for your business.

It is a very good idea to get a pre-approved mortgage amount before you start shopping (mandatory in my books). Just becuase you work with someone at a similar job, this doesn’t mean that you will qualify for the same amount of mortgage as your co-worker.  One of you might have more debt or more savings than the other, or issues with your credit report. Getting pre-approved is a more detailed process than just a rate hold (where a particular mortgage rate is guaranteed for a specified period of time). For a pre-approval, the lender will review all of your documentation except for the actual property. There is far more to the correct mortgage decision than the interest rate you will pay. While getting the lowest rate is usually the first thing on every buyer’s mind, it shouldn’t be the most important. Six out of ten buyers break a 5 year term mortgage by the third year, paying enormous penalties. These penalties vary between lenders. The fine print of your mortgage is key and that’s where an expert can save you money. How the penalty for breaking a mortgage is calculated is key and many lenders have significantly more consumer-friendly calculations than the major banks. A mortgage broker will help you find a mortgage with good prepayment privileges.

The next step is to engage a great real estate agent.           pauline-yellow-jacket-2-relkey-7092rev-2x3-300dpi hint hint

The seller pays the fee and a qualified realtor with good references will understand the housing market in your location. Make sure the property has lasting value. Once you find the right home, you will need a real estate lawyer, a home inspector, an insurance agent and possibly an appraiser. Make any offer conditional on a home inspection and financing, among other conditions that your realtor will help you with.

4. Down payments, closing costs, moving expenses and basic upgrades need to be understood to avoid nasty surprises.
The size of your down payment is key and, obviously, the bigger the better. You need a minimum of 5% of the purchase price and anything less than 20% will require you to pay a hefty CMHC mortgage loan insurance premium, which is frequently added to the mortgage principal and amortized over the life of the mortgage as part of the monthly payment. Your lender will want to know the source of your down payment. Many Millennials will depend on their parents to top up their down payment. The down payment, however, is only part of the upfront cost. You can expect to pay from 1.5 to 4% of the purchase price of your home in closing costs. These costs include legal fees, appraisals, property transfer tax, GST on new properties, home and title insurance, mortgage life insurance and prepaid property tax and utility adjustments. These can amount to thousands of dollars. Don’t forget moving costs and essential upgrades to the property such as draperies or blinds in the bedroom.

5. Test drive your monthly housing payments to learn how much you can truly afford.
Affordability is not about how much credit you can qualify for, but how much you can reasonably tolerate given your current and future income, stability, lifestyle and budget. Most Millennials underestimate what it costs to run a home, be it a condo or single-family residence.

The formal qualification guidelines used by lenders are two-fold:
1) your housing costs must be no more than 32% of your gross (pre-tax) household income; and,
2) your housing costs plus all other debt servicing must be no more than 40% of your gross income. Lenders define housing costs as mortgage payments, property taxes, condo fees (if any) and heating costs.
3) But homes cost more than that. In your planning, you should also other utilities (such as energy, power and water), ongoing maintenance, home insurance and unexpected repairs. Taking all of these costs into consideration, the 32% and 40% guidelines might well put an unacceptable crimp in your lifestyle, keeping in mind that future children also add meaningfully to household expenses and 2 incomes can unexpectedly turn into 1.
The best way to know what you can afford is to try it out. Say, for example, you qualify for a mortgage payment of $1400 per month and adding property taxes and condo fees might take your monthly housing expense to $1650. A far cry from the $500 you pay now to split a place with 3 roommates. Start making the full payment before you buy to your savings account and see how it feels. Do you have enough money left over to maintain a tolerable lifestyle without going further into debt?  Yes it might be a bit tight, but if you really want to be a home owner, you will make some sacrifices for that goal.  Keep in mind that this is not a normal interest rate environment. Don’t over-extend because there is a good chance interest rates will be higher when your term is up. Do the math (or better yet have your broker do it for you) on what a doubling of interest rates 5 years from now would do to your monthly payment. A doubling of rates may be unlikely, but it makes sense to know the implication.

Do Your Calculations Look Discouraging?
If so, here are some things you can do to improve your situation:
Pay off some loans before you buy real estate.
Save for a larger down payment.
Take another look at your current household budget to see where you can spend less. The money you save can go towards a larger down payment.
Lower your home price — remember that your first home is not necessarily your dream home.

Footnotes:
People break mortgages because of:
– job change,
– decision to upsize or downsize,
– decision to change neighbourhoods,
– change in family status (marriage/divorce)
– to refinance.
The last thing you want to discover is that discharging a $400,000 mortgage and only being 3 years into a 5 year term is going to cost you $15,000.

Lenders now also assess you on a 5 year term, presently at 4.64% even though you might be getting a lower interest rate on your mortgage.

Thanks to many mortgage professionals of Dominion Lending Centres who contributed to this report.

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