Category Archives: Real Estate

Canadian Mortgages Fixed and Variable

Fixed versus variable mortgages for Canadian mortgages

Right now, people who are refinancing their houses almost always opt for a fixed rate mortgages — 95% of refinances, according to Freddie Mac. The reason for this isbecause homeowners are increasingly conservative in the wake of the financial collapse, but it’s also because interest rates are among their lowest in 50 years. This means a fixed-rate loan is an easy choice for a borrower to make.

However, is a fixed-rate loan really the best choice for you? So, before you decide which property to go with…

Here is what you need to know about fixed vs. variable mortgages:

Also keep in mind, you can always contact a mortgage broker for professional advice:

1. Fixed Rate Mortgages Are Best For Long-Term Owners

Any real estate agent will tell you, people only tend to stay in a given property for about 7 years. However, if you’re buying a property, you intend to keep in the long term, hence a fixed mortgage is the way to go. It just so happens that rates are extremely low right now, going by historical standards, which means that you’ll benefit long-term by locking in current rates today.

2. Variable Rate Mortgages Can Be Great For Short-Term Owners

The fixed and variable mortgage question becomes more important if you’re planning to move out, relocate, or flip the house after a few years. Here, there’s no point to paying a premium on the loan in order to lock in your mortgage rate for 15 or 30 years if you’ll only own the place for five years.

In this case, the substantial discount you get on a variable mortgage can be more than worth it. Since variable mortgages generally have a fixed-rate period for the first 3-10 years of the loan, you get the benefits of the fixed rate for the full duration of the time you own the property.

Generally variable rate mortgages offer a substantially lower interest rate, usually a full percentage point less on a 5 year variable mortgage compared with a 30 year fixed mortgage, because the lender doesn’t have to factor in the additional risk of being stuck with a fixed rate loan when rates rise. However, if you’re planning on being a short term owner, the initial fixed-rate period can be more than long enough.

3. Here’s Why Variable Mortgages Have a Bad Reputation

Variable mortgages got a bad reputation during the subprime crisis because lenders and borrowers used them in very risky ways. They became so-called exotics, providing low payments initially and then increasing dramatically when the loan started to reset (unless they were refinanced). This system worked fine while home values were going up, but once values started falling borrowers weren’t able to refinance and found themselves stuck with the higher payments.

These days exotic mortgages are largely extinct. Rates are capped and limited, so most of the risk associated with the old-style variable mortgages doesn’t exist anymore.

If nothing else, you can always get in touch with someone at Sask Mortgages.

What is Canadian MLS

Multiple Listing Service in Canada

The Canadian MLS, or Multiple Listings Service, is a national database of real estate listings all across Canada. Starting from the MLS website, you — or a real estate agent — can locate nearly any property listed for sale or lease anywhere in the country.

Needless to say this is very powerful. According to statistics, around 90% of residential property sales start when the buyer finds a listing on MLS. As you might imagine, having a publicly-accessible database of “all homes for sale” is a big draw for people looking for homes to buy.

There are a few wrinkles, however. For example, MLS is actually not meant for the public. The main MLS system is only accessible to professional, licensed real estate agents who are members of the Canadian Real Estate Association (CREA). For many years, this meant that only homes which were represented by an agent could be listed on MLS — “for sale by owner” homes did not appear on MLS.

Listing On MLS Without an Agent

Nowadays, there are listing services available which will list your home on MLS even if you have not engaged the services of a professional agent like. Since many buyers (and buyers’ agents) rely on MLS to find homes for sale, simply having a property in the right location and listing it for the right price is often enough provided you can get listed on MLS.

Before you run to get your place listed, there is another wrinkle. As well as listing for an attractive price, it’s critically important to offer buyer’s agents a full commission in order to get their cooperation. Experts estimate that the volume of showings from professional Realtors will drop as much as 90% based on how far the seller reduces the commission they pay a buyer’s agent.

If you’re selling in the Lower Mainland of British Columbia, for example, you’ll want to offer the standard commission of 3.255% for the first $100,000 plus 1.1625% for the remainder to the buyer’s agent. (For the rest of BC, offer 3.5% of the first $100,000 plus 1.5% on the remainder.) Other provinces and territories will differ, so check the numbers for your area before you list.

Lastly, do a good job with your listing. The information you provide is all a prospective buyer will have to decide whether they like your home. A professional seller’s agent will do a professional job with the listing — arranging good quality photography, making sure all the important information is included, and otherwise ensuring the listing represents the home well. There’s a 90% chance your buyer will start here, so make a great first impression.

Using MLS As a Buyer — Or Seller Looking for Information

The availability of a free-to-the-public version of MLS is a wonderful tool to be sure. But before you spend hours hunting for “comparable” properties (or just looking what your neighbours’ homes sell for) keep in mind the public version has some critical limits.

Unlike the version of MLS which professional Realtors can access, the data on the public MLS is delayed by 1-2 days. Therefore the really good deals are generally gone even before they appear in public — they’ve been snapped up by Realtors with access to the private version.

Status reports are also delayed. Realtors often get calls from buyers asking about certain properties they found on MLS — only to get told that the houses in question already have a “Sold!” sign in the front yard.

On the other hand, Realtors can customize an ongoing MLS search for you, and ensure you get a steady stream of updates via email when property meeting your criteria appear on the database.