Joe Oliver, the federal finance minister, downplayed fears of a housing bubble and emphasized three of Canada’s largest markets continue to distort national housing numbers.

“There are three urban centres, Calgary, Toronto and Vancouver, where the prices continue to go up and there are affordability issues,” the finance minister said following a conference in Toronto hosted by the Investment Funds Institute of Canada. “I don’t see a housing bubble, neither does the governor of the Bank of Canada or the CMHC or the OECD.”

September housing results could be more of the same for those cities. The Calgary Real Estate Board said Wednesday sales were up 12% in September from a year ago while the price of single family home in the city rose 10.6% from a year ago to $512,800 in September. Condo prices were up 9.5% from a year ago to $330,200. Toronto and Vancouver results are due out this week.

His comments reflect what others have suggested about those cities driving overall housing comments. Some economists have suggested the housing market is mediocre at best in a majority of Canadian cities outside of the big three. Those cities are responsible for a third of all sales this year while contributing to almost 50% of the dollar value.

Mr. Oliver said it would be difficult for him as finance minister to cool off just three Canadian cities and leave the rest of the country unscathed if he was to further tighten the lending environment. “That’s one of the challenges. There are some markets flat and some are experiencing some decline,” said Mr. Oliver. “We are examining all the issues and we are keeping it very much in mind.”

He reiterated that while he is not ready do anything immediately, the long-term goal is to reduce the government’s involvement in the mortgage market.

The finance minister wouldn’t directly address a published report Wednesday quoting the Canadian managing director of Pacific Investment Management Co. who stated the market here may be 10% to 20% overvalued and could get to 30% if the Bank of Canada doesn’t start talking up rising rates.

Mr. Oliver did say he was in New York the last couple of days talking to money managers and hedge fund managers and real estate came up in those conversation.

“Our situation was totally different from the U.S. situation before the recession and it’s quite a bit different now. For one thing, their mortgages are non-recourse and ours are not, with the exception of Alberta. They also have mortgage deductibility. There are some differences,” he said.

He said Americans are “sophisticated” but they come from an U.S. perspective. “Something happened to them so it will happen to someone else,” said Mr. Oliver, adding any talk of the Bank of Canada raising rates is outside of his mandate.

The finance minister did say people understand that interest rates cannot stay this low forever but it might be difficult for them to act on that knowledge. “People can know intellectually what the history of interest rates have been, psychologically they aren’t perhaps prepared. I think it’s important for people to understand.”

Source: Garry Marr, Financial Post

House prices in Canada continue to climb[/caption]Home prices in Canada’s major cities are running at a rate many economists just don’t think is sustainable.

We won’t get a complete picture of sales and prices in August for a couple of weeks, but preliminary figures from local real estate boards suggest there’s plenty of momentum. And that has some economists wondering about how long this will last.

“Existing-home sales remained strong in a number of major cities in August and prices continued to outrun income,” Bank of Montreal economist Sal Guatieri wrote in a research note. “How long prices can continue to outpace family income in these major cities is unknown, but it can’t go on forever. The longer it does, the greater the risk of a correction when interest rates rise.”

Falling mortgage rates helped make homes more affordable heading into the summer, according to Royal Bank of Canada. And a recent survey by real estate consulting and research firm Altus Group found home buying intentions everywhere except B.C. were up this summer compared with a year ago. “While first-time buyer intentions are down slightly, homeowners with mortgages are showing more interest,” Altus Group said.

Policy-makers probably won’t do anything to cool prices now, since many smaller housing markets aren’t running as hot as Toronto, Calgary and Vancouver.

Here’s a look at how some markets across the country performed in August, according to data released this week by their local real estate boards.

TORONTO

– 7,600 homes sold on the MLS, up 2.8 per cent from a year earlier, and well above the 10-year average sales level of 7,059 for August.

– the average selling price of all types of homes in Greater Toronto was $546,303, up 8.9 per cent from a year earlier.

– the average price of detached homes in the downtown area covered by the 416 area code was $902,428, up 14.7 per cent; for condos it was $370,899, up 4.1 per cent; for townhouses it was $463,798, up 11.7 per cent.

CALGARY

– 2,267 homes sold on the MLS, up 3.4 per cent from a year earlier; condo sales were up 14 per cent and townhouse sales up 20 per cent, sales of single-family homes fell 2.4 per cent.

– the average price of a single-family home was $545,238, up 5.42 per cent, and the benchmark price of a single-family home was $512,300, up 10.24 per cent; the average price of a condo apartment was $332,006, up 11.48 per cent, and the benchmark price of a condo apartment was $298,200, up 10.2 per cent.

– the average number of days a home spent on the market before selling dropped to 39, from 45 a year earlier.

VANCOUVER

– 2,771 homes sold on the Multiple Listing Service, up 10.2 per cent from a year earlier and 4.3 per cent above the 10-year average for August.

– the benchmark price of all types of homes in Metro Vancouver rose 5 per cent to $631,600 (the benchmark seeks to create a more apples-to-apples comparison than the average price, which can be distorted by changes in the size or location of homes that are selling.)

– the benchmark price of detached properties rose 6.6 per cent to $984,300; the benchmark price of apartment properties rose 3.6 per cent to $379,200; the benchmark price of attached properties rose 3.9 per cent to $474,900.

OTTAWA

– 1,203 homes sold on the MLS, down 1.1 per cent from a year earlier, but a tiny bit above the five-year average of 1,199.

– the average sale price for all types of homes was $360,214, up 3.4 per cent.

– the average price for a condo was $263,996, up 2.7 per cent, while the average price of other types of homes was $381,628, up 1.9 per cent.

EDMONTON

– 1,552 homes sold over the MLS, down 6 per cent from a year earlier.

– the average selling price of all types of homes was up 5 per cent to $368,597, the median selling price was up 5.7 per cent to $348,900.

– the median price of a single-family home rose 5.8 per cent to $402,750, while the median price of a condo fell by 0.6 per cent to $228,500.

REGINA

– 348 homes sold over the MLS in the Regina area, down 8 per cent from a year ago. That was below the five-year average of 365 but above the ten-year average of 336.

– inventory levels are the highest they’ve been in more than 20 years. The number of properties for sale at the end of August was 223 per cent higher than two years earlier.

– the benchmark price was $299,600, down 2.4 per cent from $307,000 a year earlier and homes sat on the market for an average of 48 days before selling, compared with 32 days a year earlier.

Source: Tara Perkins, The Globe and Mail

The risk of a property market crash in Canada has not ebbed, according to an increasing number of analysts polled by Reuters who said chances of a steep fall in prices have increased in the past year.

Still, the survey medians showed house prices will likely rise more than earlier expected at least until 2017, reflecting ongoing reluctance by forecasters, many of whom work for mortgage lenders, to predict negative returns on property.

This year Canadian home prices on average will appreciate by 5 per cent followed by a 2-per-cent rise in 2015 and then again in 2016 after doubling in value over the past decade.

But seven of 20 respondents in the poll conducted Aug 19-26 said the threat of a property market meltdown had intensified over the past year, especially in Toronto and Vancouver, up from five of 21 in the May poll.

“[The] risk has increased due to house price increases significantly exceeding income growth and the oversupply of condos in downtown Toronto,” said John Andrew, professor at Queen’s University.

Canadian households on average hold debt worth more than 1.5 times their income and when mortgage costs increase once the Bank of Canada begins raising benchmark interest rates, it will make that burden even heavier.

The BoC will probably raise rates in the third quarter of 2015, a Reuters poll showed on Tuesday. “Lower mortgage rates in the spring and summer have enticed more marginal home buyers who ultimately won’t be able to carry heavy debt load in the future when rates rise,” said David Madani, Canada economist at Capital Economics.

Still, the medians suggest prices will not decline nationally, at least not until 2017 – the end of the polling horizon. Even in Toronto and Vancouver, two of the country’s most expensive markets, prices are not expected to fall.

Many are of the view that prices will only cool, dodging a U.S.-style nosedive where property prices fell by more than a third, leaving millions of Americans in negative equity.

Thirteen of 20 participants said Canada’s housing boom is different from other real estate booms and is therefore unlikely to end in a crash.

“The risk of a crash is negligible, based on my expectation that any sustained increase in mortgage interest rates will be minimal – at most half a point by the end of 2015,” said Canadian housing economist Will Dunning.

Source: Anu Bararia, Reuters

With mortgage rates near all-time lows and the government of B.C. saving first-time buyers up to $7,500 by increasing the First Time Home Buyer’s Property Transfer Tax limit from $425,000 to $475,000 (and partial savings up to $500,000), now could be the perfect time to finally take the plunge into home ownership.

If you are thinking of obtaining a loan of any kind, like a new mortgage, vehicle loan or any other loan, it is important to understand how the banks think. By setting up your finances as optimally as possible, you can increase your chances of getting approved instead of declined. Here are some tips for increasing your borrowing power in 2014.

Also, having all of your documents ready may allow you to make a more competitive offer on a timesensitive deal like a foreclosure in real estate. Here are some of the documents you will likely need: Two years of T1 Generals (tax returns filed to the CRA); Two years of Notice of Assessments (document sent back from the CRA once income taxes have been filed); Job letter and paystubs if an employee; Mortgage statements and lease agreements if you own real estate; And more, depending on your circumstances.

Find out what your credit score is

It is always a good idea to obtain a copy of your own credit bureau report ahead of time. Every time a lender does a credit inquiry, your credit score will take a small hit. Learning ahead of time whether your credit score is good or bad will allow you to prepare and fix anything that may appear on your credit rating.

You can obtain a copy of your own credit rating yourself at Equifax.ca.

Get pre-approved

If you plan on purchasing real estate or a vehicle in 2014, it would be a good idea to discuss your options with your broker or bank to learn more about what you qualify for. You don’t want to be wasting your time looking at making a major purchase only to find out you won’t qualify for the loan you need to make that purchase.

If looking to obtain a mortgage, get a pre-approval so that you will have a sense of what your borrowing cost will look like and lock in your interest costs.

Investigate RRSPs

If you are a first-time homebuyer, you can pull out up to $25,000 per person out of your RRSPs to be used towards the purchase of your first home. Important points about the first time homebuyer plan are: The $25,000 is tax free, but must be repaid into the RRSP over a 15-year period.

The funds have to be in the account for 90 days before you pull them out, so make sure if you plan on buying a house in the spring, you make an RRSP contribution this fall.

You can create “money out of thin air” by making an RRSP contribution shortly before purchasing because of the tax refund.

Example: If you deposit $20,000 into your RRSP and earn between $30,000 and $62,500 annually, you will get an approximate $6,500 tax refund once your taxes have been filed. You will now have $26,500 available for the down payment, not $20,000.

Filing your taxes

Generally, the sooner you file your taxes, the better. There are some exceptions, however.

Lenders will generally use either your minimum guaranteed income (common for salaried employees) or what you have averaged for the past two years on your income taxes (the net income on Line 150 on your taxes).

So, if you had a very good year in 2013 and have a variable income (self employed, or a large amount of your annual income is derived from commissions, bonuses, etc.) you should file ASAP. However, if 2013 was a very poor year, you can still get away with using your 2011 and 2012 income taxes to qualify for a mortgage or other loan until the summer. If you had a bad year, you may want to buy in the first half of 2014 instead of waiting.

Presales completing in 2014

If you have a presale completing in 2014, it is important to prepared ahead of time. The developer will usually give you an idea of the estimated closing date well in advance, but the dates often change.

Make sure you are prepared in advance. Once the developer is ready to close, they usually only give about 10 business days’ official notice which means you should already have your financing arranged. Rates can be held for 90-180 days depending on the lender (most lenders are 90-120 days) so start early to make sure you get the best possible rate by the completion date.

If you are buying a new presale that doesn’t complete until after 2014, make sure you find out if the developer has arranged a rate hold guarantee with a bank. The rate will usually be higher than current market rates but it’s important to have a worst-case scenario. Financing is harder than it has been in a long time. Make sure you get the update on what is new and how some of the new rules may impact you. Particularly for real estate investors, it is much more difficult to qualify for rental properties.

Source: Kyle Green is a mortgage broker with Mortgage Alliance Meridian Mortgage Services Inc.

The Canadian Real Estate Association (CREA) has updated its forecast for home sales activity and prices for 2014 and 2015.

Little is expected to change on the sales front but nationally average home prices are expected to increase by 5.7% in 2014 but by such 0.7% in 2015.

The CREA report says that an extraordinarily bleak winter resulted in slow start to 2014 national sales activity. As the first quarter ended, sales momentum heading into spring was constrained by a continuing shortage of listings in a number of local markets. However, the rise in newly listed properties in April and May supported an increase in sales activity.

Overall, the deferral of sales and listings reflects a delayed start to the spring home buying season, with combined sales for the period from March to May coming in largely as anticipated and at average levels. These deferrals are now likely to have been largely depleted, which suggests that the strength of sales momentum heading into the summer may be transient.

CREA’s forecast for sales activity in 2014 is largely unchanged from its previous forecast published in March. At that time, interest rates had been expected to start to edge higher in the second half of the year. However, it now appears that interest rates may not begin to rise until closer to the end of the year, which remains supportive for home ownership affordability over the balance of 2014.

Sales are forecast to reach 463,400 units in 2014, representing an increase of 1.2% compared to 2013. This is little changed from CREA’s forecast of 463,700 sales, a rise of 1.3%, published in March.

Activity is still expected to remain in line with its 10 year average and to hold within fairly short reach of 450,000 units for the seventh consecutive year.

British Columbia is forecast to post the largest year on year increase in activity at 8.3% and make the biggest contribution to the increase in national sales activity. B.C.’s projected increase in sales this year largely reflects a slow start to 2013.

Alberta’s annual sales are projected to rise by 3.8% in 2014, while activity in Saskatchewan, Manitoba, and Ontario is expected to be roughly in line with 2013 levels. Sales are forecast to fall by 1.7% in Quebec, by 4.2% in New Brunswick, by 5.1% in Nova Scotia, and by 2.6% in Newfoundland and Labrador.

In 2015, the outlook for the economy, jobs and incomes is one of further improvement, accompanied by a slow and gradual increase in fixed and variable mortgage interest rates.

On balance, these two opposing factors should most benefit housing markets where sales are currently softer but prices remain more affordable. Sales in relatively less affordable housing markets are likely to be more sensitive to higher fixed mortgage rates, whether from the standpoint of higher monthly mortgage payments or qualification for mortgage financing based on the posted five year mortgage interest rate.

As such, provinces east of Ontario are expected to post the largest gains in activity in 2015 in the range of around 2.5% to 5% while sales in provinces from British Columbia to Ontario are forecast to remain little changed.

National activity is now forecast to reach 467,800 units in 2015, representing a further annual increase of 0.9%. This would result in sales staying in line with the 10 year average for the eighth year in a row.

Average prices have remained firm and continue to reflect a rise in the share of national sales among some of Canada’s most active and expensive markets compared to last year. Additionally, prices have been heating up in some markets, particularly in Calgary and Toronto where single family properties remain in short supply.

The national average home price is now projected to rise by 5.7% to $404,300 in 2014, with similar sized gains in British Columbia, Alberta, and Ontario. More modest changes in average prices are forecast for all other provinces this year.

The national average price is forecast to edge up a further 0.7% in 2015 to $407,300. Alberta and Manitoba are forecast to post average price gains of2% in 2015, followed closely by Ontario at 1.2%. Average prices in all other provinces are forecast to remain stable, edging up by less than 1%.

Source: PropertyWire

For many years, the Canadian and U.S. housing markets tracked each other fairly closely, but that hasn’t been the case since the U.S. housing bubble burst in the middle years of the last decade.

According to an analysis from BMO chief economist Doug Porter, the difference between the two housing markets has never been greater, with average resale prices in Canada now 66 per cent higher than resale prices in the U.S.

The strength of Canadian home prices has surprised even optimistic observers. The latest data from the country’s real estate boards indicates resale prices (not including new builds) jumped six per cent in the past year, and the average price of an existing home in Canada has now pushed past $400,000.

That compares to an average price of around $250,000 in the U.S.

Comparisons like this are never as telling as they seem, because of differences in how average prices are measured, and because average prices say little about which way a housing market is headed.

And then of course there is the fluctuating exchange rate, but Porter notes that even after adjusting the numbers for exchange rate changes, Canada’s housing market is still about 50 per cent more expensive than the U.S.

“The main takeaway is that, contrary to all expectations, the Canadian housing market has just kept on rolling in 2014 even as the U.S. housing market has paused for breath (after a steep climb out of the dungeon),” Porter wrote in a client note last week.

But will it keep on rolling? The seemingly endless debate continues between those forecasting a Canadian housing bubble burst and those saying the market is healthy.

Yet with recent weakness in housing starts and building permits, some economists — such as BMO’s Sal Guatieri — have started to warn that a housing market correction could cause a recession.

Guatieri noted in a report earlier this month that Canada has become more reliant on real estate-related jobs than it has been in the past, making the economy more vulnerable to a correction.

But overall, the bank sees the odds of a serious housing market bust-out as being low.

All the same, a significant number of international investors have gone bearish on Canada’s housing market, predicting double-digit price collapses. Pimco, the trillion-dollar hedge fund run by billionaire Bill Gross, recently predicted a 30-per-cent collapse in house prices in Canada over the next few years, starting this year.

If Pimco’s prediction were right on the money, and nothing changed in the U.S. market, Canadian average resale prices would still be about a third higher in Canada than in the U.S. — even after the price crash.

Source: Daniel Tencer, Huffington Post Canada

Unlike a lot of first-time home buyers, in 2009 Jesse MacNevin decided to go for a house that was less than the amount he was approved for.

“I started doing the numbers and talked to a few real estate agents,” he says. “Then I went to my credit union for a pre-approval. I realized then that I needed to focus more on what I could actually afford versus how much they would give me.”

While he was given the green light to aim for a $350,000 home, he settled on a condo for just under $260,000 instead. “I didn’t want home ownership at the expense of everything else. I remember looking at my budget at the time and thinking the last thing I wanted was not to be able to travel. It wasn’t exactly what I wanted, but it was cheaper and fulfilled all my needs. In hindsight, it was a good move.”

MacNevin says having a good real estate agent and lawyer helped him determine what he could really afford, where there might be potential problems and the ins and outs of closing the deal. A mortgage broker was also important when it came to the signing process and making sure there was flexibility in his mortgage terms.

Not everyone entering the home buying market is so diligent.

When doing the mortgage math, it’s not enough to plug some numbers into an online estimator, says David Stafford, managing director, real estate secured lending, for Scotiabank in Toronto. “This is probably the largest single financial transaction that most people do in their lives, and it can get very complicated. Online estimators typically won’t give you the full picture.”

He says buyers need to look beyond the actual purchase price and factor in a percentage (typically 1.5 per cent of the purchase price) for closing expenses from the outset. “Land transfer taxes, legal fees, title insurance and other things are all part of the math.” They also need to consider ongoing expenses that will be over and above monthly mortgage payments, such as utilities, property taxes, insurance, maintenance and condo fees.

Sometimes there are additional surprises that come into play in the initial stages of home ownership, such as reimbursement fees if the former owner has prepaid their property taxes and moving costs, says Toronto-based Richard Desrocher, a general legal practitioner and former real estate broker.

The immediate financial aspects are only part of the process, which is why a home inspection is a good idea, he says. “You won’t know what’s going on behind the walls and on the roof. It’s pretty scary after you close a deal to have to deal with drain problems.”

There are also ways people can reduce their costs if they talk to the right people, Desrocher says. “A lot don’t realize that many financial institutions are willing to negotiate down from their published rates. A mortgage broker is much better informed about where the best deals are and can shop the market for you.”

Source: Denise Deveau, Postmedia News

The Conference Board isn’t buying the notion that Canada’s housing market will suddenly crumble, saying the most likely outlook is for a modest decline nationally and in some specific markets.

The Ottawa-based think-tank argues in a comprehensive new look at real estate in Canada that the conditions for a crash simply don’t exist, despite numerous reports that the market is overbuilt and overvalued.

Rather, the report argues that with the possible exception of Toronto, housing starts the past three years have been roughly in line with the 20-year average.

Even in Toronto, there is only a “borderline” case that it could be overbuilt.

“At this point in the housing cycle, there is a risk that Canadian housing prices in some market segments are due for a modest correction,” the report states.

“Nevertheless, we believe that continued population growth, additional employment gains and modest mortgage rate increases will limit potential price declines in 2014 and 2015.”

There is a case for more dramatic price adjustment further out if higher mortgage rates start crimping affordability, the Conference Board says, but even then it is likely to be a soft rather than a hard landing.

In recent years, some economists and international organizations such as the OECD, the IMF, Deutsche Bank and The Economist magazine have described Canada’s housing market in stark terms, characterizing it as among the priciest in the world based on historical averages and other metrics.

But the consensus of economists within Canada has tended to be more subdued. Last week, the Canadian Real Estate Association also predicted a slowdown as mortgage rates start edging up later in the year, but it still saw the market overall growing in 2014 and 2015.

The Conference Board says fears of a housing bubble about to burst in Canada are exaggerated.

It says some of the evidence cited by correction hawks, including comparing home prices as a multiple of rental costs, don’t take into account historically-low mortgage rates that keeps affordability steady. Citing Toronto, it notes that in 2013 mortgage payments consumed less than 20 per cent of average household income, the same as in 1993.

“Mortgage costs, not just house prices, are the principal deciding factor for potential homebuyers,” says Robin Wiebe, the think-tank’s senior economist.

Even when mortgage rates do start rising, the Conference Board believes it will happen gradually and over an extended period. For instance, it forecasts rates with only a gain of 200 basis points — two percentage points — by 2017 or 2018.

But at current low rates, the typical homeowner on a posted five-year rate will have paid down $42,104 principal on a $100,000 in mortgage debt, so affordability won’t be seriously impacted once it comes time to renew at a higher rate.

The Conference Board provides an outlook on six major cities:

— Vancouver: Moved back into balance last spring. Recent price gains will give way to slower advances in 2014.

— Calgary: A approaching sellers’ conditions, noting strong price gains last year.

— Edmonton: Balanced, with brisk resale and price growth activity last year.

— Toronto: Balanced with healthy price growth. A major correction is difficult to see given solid employment and population growth.

— Ottawa: Market cooling due to falling employment from the government sector, flatter sales and tempered prices.

— Montreal: Flirting with buyer’s market conditions with sales and average prices having dropped somewhat last year.

Source: Julian Beltrame, The Canadian Press

The average cost of a Canadian home hit a record high of $388,553 in January. This price is 9.5 per cent higher than last year. The average cost of a home in cities such as Toronto and Vancouver rose to $526,528 and $606,800. Over the last ten years Canadian real estate prices have soared 84 per cent. With prices sky-high in some cities, the following tactics could help make buying your first home just a little bit easer.

Get a mortgage pre-approval before you start house hunting.

Before you start visiting open houses or checking out properties with a real estate agent, it’s important to visit your bank to see which houses you can afford. This ensures you’re shopping within the correct price range. Many people will need to take out a mortgage to buy property, but the amount you are eligible for is based on multiple factors including credit rating, household income and monthly expenses. Before you begin property hunting, visit a financial institution. This way you’re able to hold a competitive rate for between 30 to 120 days.

Buy a home with your parents or a buddy.

Young adults are increasingly relying on help from family members to buy a home. About 27 per cent now expect it. In a hot housing market, real estate agents have seen ‘gift letters,’ which detail the money a family member will contribute to assist them with mortgage approval, or simply thousands of dollars in hard cash. If a family member decides to loan the money rather than give it as a gift, parents should establish payment requirements in a legal document to ensure that everyone is satisfied.

Buy a home in a more affordable city.

House prices in Vancouver and Toronto are climbing to unaffordable levels for many people, but this doesn’t mean you have to live in these cities. Near Toronto, the housing markets in Ajax, Brampton, Milton and Mississauga are heating up. These are popular placees to buy a bigger lot, but potential homebuyers need to account for other costs (like gas and car insurance), as well as commuting times should their work remain in Toronto.

Buy a home that you can use as an income property.

You could buy a property you can live in but also split into a rental unit. The best outcome is if your renter’s payment covers your mortgage costs, but there are some important points to consider. First, you need to determine how comfortable you are living in close proximity with your tenants. For example, are you comfortable having a boarder live down the hall, or would you prefer to live on separate floors and use different entrances? Many people would prefer a semi-detached home with a separate entrance, bathroom and kitchen. If these don’t figure in the property you’re eyeing, you’ll need to budget for renovation costs.

Negotiate your house price and insurance.

Some people don’t feel comfortable negotiating, but it can save you a lot of money. First, the more information the better. Research the value of other houses. Chances are an identical house has been sold in the neighbourhood and you should check that property’s value against the one you’re considering. Understand why the seller is selling and shape your bid towards his or her plans. Also, understand that while the size of your bid is important, it isn’t always the deciding factor because some homeowners care how the new owner will treat the property.

When you purchase insurance, there are three types to consider: basic, standard and comprehensive. An independent broker can help you get the best rate and if you bundle your auto and home insurance with the same company you could receive up to a 15 per cent discount.

Tap into your RRSP for first-time home buyers.

First-time homebuyers can withdraw $25,000 from their RRSP as a part of the federal government’s homebuyers plan. If you’re buying a home with a partner, you can both take out $25,000 from your individual plans. If this equals a 20 per cent down payment, you can avoid mortgage default insurance, which tacks on several more thousands of dollars to your mortgage. If you do tap your RRSP, there is a tax loophole that lets you receive up to $20,000 in tax refunds. But one drawback with using your RRSP is that you must repay the amount you withdraw within 15 years or you will face a penalty based on your personal income tax rate.

Buy a smaller space.

One in eight households lives in a condominium. With the gap between the price of a house and a condo hitting record highs in Toronto, more families are becoming condo dwellers. The average size of a home in Canada was 2,300 square feet during the mid-2000’s. But that number has now dropped to 1,900 square feet and will probably keep shrinking. The size of your family will determine the size of your home. While you may have grown up in a single detached home with a backyard, in housing markets such as Vancouver and Toronto it’s important to manage your expectations.

Budget for your closing costs.

Tapping into a mortgage offers homeowners leeway in paying off their property, but along with your down payment there are other upfront closing costs you need to budget for. The Canada Mortgage and Housing Corporation suggests that you set aside an additional 1.5 to 4 per cent of your property’s purchase price to account for closing costs. Closing costs include a land survey that ranges from $1,000 to $2,000, an independent home inspection costing from $350 to $600, legal fees for a title search and paperwork that run to about $1,000, and a land transfer tax that varies based on your city and GST/HST.

Source: Josephine Lim, MSN Money

The five-year fixed mortgage at an advertised rate below three per cent has returned to Canada for the first time since last year.

Meridian Credit Union, the largest credit union in Ontario, announced this week it had lowered its benchmark five-year fixed-rate mortgage to 2.99 per cent.

According to market surveys carried out by RateSpy.com and Cannex.com, that is the lowest advertised rate for the popular mortgage term in Canada.

Meridian’s mortgage special is available just in Ontario, but it appears to have few other restrictions.

Earlier this month, MortgageBrokerNews.ca reported that two mortgage brokers — Verico Butler and Advent Mortgage Services — were also offering 2.99 per cent five-year fixed mortgages.

Brokers are often able to get mortgage rates for their clients that are lower than what big lenders offer. But sometimes, super-cheap mortgages have severe restrictions on such things as rate holds and prepayment privileges.

Fixed mortgage rates have been creeping down in the last month at most lenders as Canadian bond yields have been falling. Fixed mortgage rates tend to track bond yields.

The yield on Canada’s five-year government bonds has fallen 33 basis points so far this year to 1.62 per cent.

Last year, some big banks attracted the ire of Finance Minister Jim Flaherty for aggressively pushing 2.99 per cent five-year mortgages. He was worried that cheap financing would stoke a housing market that some economists were calling overheated and overvalued.

Since credit unions are provincially regulated, Flaherty has no formal power to pressure Meridian over its current promotion.

Source: CBC News