New Home Buyer Question

[Marshall Placid]

I forgot to mention to the OP...

Since it is your first house, you can get a pre-approval.

With a pre-approval, you know exactly how much you can spend, before shopping for houses.

And, then.... go out and do some "shopping" without worrying about how much you can afford or if the banks will approve you later, etc.

Of course pre-approvals are not 100% "approved mortgages", but I would say 99% approved once you close the deal.

[i-VTEC]

So do I go to a bank first, get a pre approval mortgage, and the bank will let me know how much they can mortgage for?

Instead of pre sale condo shopping first and found a good one, which is $300,000 then fill out an pre approval mortgage application then found out that I am cannot mortgage that much?

[dinosaur]

Go to the development and talk to the mortgage broker if you have found the one you want to buy OR find a mortgage brokers.

They will do all the shopping for you.

[Gridlock]

I beg of you to also check one thing...what the rents are in the area for similar apartments.

Between strata fee and mortgage interest, you will not accrue massive equity gains by owning.

I wish to save you...you are exactly the type that these sales agents get wet for. Young little buyers that don't know the ins and outs of buying pre-sale.

[Bonka]

If you're serious in buying something, get pre-approved first so you can lock in a rate and know what your ceiling price is.

If you intended on buying a pre-sale however, no bank will approve a mortgage until construction is near complete so definitely consider that if you are buying at the top of your price range because a slight increase in interest rate or market upswing can ruin your chances of getting that mortgage and wipe you out of your deposit if you can't close.

[Gridlock]

^^Well, a mortgage broker hooked up with a condo marketing company will trade his left nut to make the sale happen because it lines everyone's pockets. Your mortgage might end up being through the national bank of kazmanistan, but they'll make it happen.

[dinosaur]

OK, so I just sent you a PM, but I will comment here for others with similar questions to read.

Pre-sale vs current.

You had mentioned that you were looking at pre-sales that were to be completed in 2-ish years. Here is the problem with working on your budget now for a situation 2 years from now: Interest rates.

Interest rates are going up...and it will be a while before they dip again. People may think a difference of 1-3% is not a lot but when you are dealing with large sums, like mortgages, it makes HUGE difference.

Example:
I purchased my pre-sale townhouse in 2007. Rates were 6.49% (good, right? not by today's standards).

When you buy a pre-sale you do NOT get today's posted rate in 2 years time. At the most, a bank will hold a rate for 120 days (most of the time is 90). This means that within 120 days of you closing date, you get the lowest rate. However...that "low" rate could be 6.5%. Of course this works FANTASTIC if rates are going down...but they aren't.

When my townhouse closed in 2008, rates were down and I locked in at 3.74%. It was a difference of over $400 on my monthly payment.

If you have budget of $250k. $50k d/p. Today's rate 3% five year fixed: $900/month.
Same amounts but at a potential tomorrow's rate of 6.5%: $1270/month.

Now, not only can't you afford that monthly payment plus tax and strata, you can't even rent the condo out for that much.

IF you want to buy and IF you are going to buy no matter the housing market, BUY NOW.

[i-VTEC]

I actually gathered a list of future condo that plans to build in Richmond, almost 25 Buildings, so if 100 units per building, that's 2500. Thats in Richmond alone, not counting new low rise buildings (even cheaper). Also Oakridge area plans on having 10 buildings around it. Supply is rising dramatically, while I don't think demand would be high if not the same.

2 Condos in Richmond I looked at recently, Concord Garden and Pinnicleliving. Both have sold 60% and 50% of total units respectively. But the thing is they have been selling for months.

A year ago or 2, Pre sale like 1st Phrase of Quintet in front of price mart in Richmond and Pre sale like Marine Dr, were sold out nearly first day of opening. But now we see Concord and Pinnicle having trouble.

Price is going down

[i-VTEC]

Below is a list of future/developed High Rise Concrete Condos and in Richmond Only, Not including Low Rise Wooden Frame Condos

Future condos,

A Condo Directly in front of Canadian tire (Some China Developer)
PinnicleLiving (Building 2 Condos, and own 4 more lands, perhaps 4 more condos)
Concord Garden (Own Multiple Land)
Bravo
Harmony
River Park
Parc Riviera
Mandarin Residence
River Green
Park Residences
Carrera (Multiple Phrases)
Quintet 5x Building
Altis
Cadence
CCM Tower
Monet
Ora 3x Buildings
Another one near Esso Gas Station on Westminster

Condos Built in the last 10 years,

Nova (2012)
Emerade Green (2012)
Camber (2012)
Aberdeen Residence (2008)
Wall Centre 2x (2010)
Acqua (2007)
Seasons 3x (2007)
Prado 3x (2003,2009)
Versante 2x (2008)
Flo 3x (2008)
Lotus Living 3x (2008)
Capri 2x (2003)
Ocean Walk 3x (2007)
Paloma 2x (2007,2010)
Camino (2010)
Opal (2009)
Merry Park (2009)
Fullerton (2008)
Hamptons' Park 4x (2006~2010)
Residence On The Park 2x (2007)
Mandalay 2x (2009)
Centro (2009)

[dinosaur]

Its not the price you need to concern yourself with...its the interest rate.

Anyone can find anything in their price range...the interest rate is the thing that can help or hinder you.

[i-VTEC]

Originally Posted by dinosaur

Its not the price you need to concern yourself with...its the interest rate.

Anyone can find anything in their price range...the interest rate is the thing that can help or hinder you.

"TD Mortgage Calculator

For a 25 year mortgage for $223,000.00 at the rate of 6.75%, your Monthly payment is $1,527.66"

Thats for 10 years 6.75 rate. But let say if interest rate stay the same at 6.75 forever.

Does that means I am paying $1,527.66 for 25 years which = $1527.66*12*25 = double the amount that I borrow of $223,000?

[dinosaur]

YUP!

amortization_schedule.jpg

Total borrowed: $226,236.00
Total paid: $488,304

[i-VTEC]

Wow, then I am renting!

Its much faster to save up then borrow less money

[dinosaur]

LOL!

People will try and avoid this by make a 13th payment every year which, iirc, will take 2-3 years off OR many bi-weekly payments that match with your pay cheques.

You can make accelerated payments to cut down on your amortization period and save some interest.

[dinosaur]

This is what I mean about how interest rates are the key. Who cares about the cost of housing....yes, it is stupid high, etc and it can/might/must come down....it REALLY doesn't matter.

A $200k house at a 10% interest rate is just as un-affordable as a $700k at 2%.

You can sign a 5 year fixed at 3% and when its time to renew, you might have to lock in at 8%. That is going to take us down....and its coming.

[i-VTEC]

How can you be certain Interest Rate going up

I don't know about the market, and you would definitely know a lot. Plan on sharing why you believe that's the case?

[dinosaur]

They can not going down much more and the bank of Canada has been slowly raising prime rate which is what our interest rates are based on.

Last month you could lock in with BMO for a 5 year fixed at 2.90%. Yesterday it was 3.65% for the same terms.

Compare last year to this.

Everybody clinched their ass together from 2008-2010 waiting for our economy to tank the the USA. Although our gov't and banks are VERY different than theirs, everyone was waiting for the banks to shit the bed. It didn't really happen but as a result of that scary time, people stopped spending. We were standing on a cliff waiting to be pushed off....but that push never happened.

To jump start the economy (that in canada froze, but did not tank) the BoC dropped interest rates which helped our housing market putter along at an OKAY rate. It wasn't stellar, a lot of people got fucked, but OH LORD, it was nothing like the USA. Ours was more based on fear than actual issues.

Well, now everyone is starting to unclench and realize that MAYBE, just MAYBE we dodged a bullet and that shit is okay now....so people are starting to spend. BoC sees it and starts to increase their rates.

Here is the problem I see....there are a lot of people like you out there. Mid-20s...making okay coin...want to invest...why not buy. Your money NOW affords you want you want and today's interest affords you want you want. The problem is, the increase to your salary is not going to match the increase to interest rates. So, in 4-5 years time when your mortgage is up for renewal...you are not going to be playing in the 2s and 3s. The 2s and 3s are "jump start economy" rates. You will be playing in the 6s and 7s which is the "division of class" rates.

[i-VTEC]

So its a gamble, its very likely that BoC sees this opportunely for people to spend and raise interest rates to cash in. Or BoC can remain the same.

[i-VTEC]

on a side note, ING Direct has a Fix 10 year 3.99 Rate or a 7 year 3.69

[miss_crayon]

Can I just make one comment. Two actually.

1) I feel bad for some of you who had bad experiences with BAD realtors. But I can tell you not every single one of us are the same. A lot of Realtors become realtors because they want to make money fast because they think it's so easy; so in turn they will lie and cheat their customers to close a sale when they realize it's not as easy peasy as people make it out to be. Those people are not in the business because they genuinely like what they do but because they think they are making a quick buck. Like any other job, you will meet good and bad people but wish some would stop painting us all with the same brush. I often try to leave comments in any real estate thread if there are questions because I want to educate those who don't know what's up.

TO the poster I quoted, I don't know the whole situation but I feel bad that you had to deal with an incompetant Realtor and had to be in that situation.

2) OP, what you end up doing (buying/renting etc) is up to you and the comments on this thread have good points. However, as someone who has seen this happen WAY too often, I think the bigger issue here is if you are ready to purchase something this big with your girlfriend. I am not saying or wishing your relationship will fail...but things happen sometimes and that's when something like this gets REAL messy. REAL.FUCKING.MESSY. I'm not trying to scare you or anything but it happens and it is not pretty.

Ex.)A couple months ago a Buyer had to forfeit their deposit (~$35,000) because him and his gf broke up and he knew he wouldn't have enough money for the additional deposits to come and pay the mortgage when it came time to complete (that is if he was to purchase it alone in the end).

$35,000 is not a small amount. I'm not saying all couples break up or anything when they purchase a house or something together but this question needs to be considered in my opinion. Rather now than later right?

Anyways, I wish you the best and hope you find something you love soon.

Originally Posted by catalin

I'm not an expert either and I can only speak from my experience.

Realtors complicate everything and they won't protect you if anything goes wrong. The lawyers do, which you have to see anyways to complete the paperwork. Bringing a realtor to house listed by another realtor is just a major bitchfest by the realtors when you're not looking. They're both after your money and the listing realtor can accept other offers without a realtor EVEN if your offer is accepted. Yes even with a signed contract. Real Estate board didn't do anything for me as I'm sure it happens a lot.

You should really try and buy something that's built already. It's better that they ask for your money then you asking for them to repair deficiencies.

Good luck
Posted via RS Mobile

[i-VTEC]

I know you guys are nice, and I know it would be really messy, but let just leave the relationship concern aside and focus on the real topic

[Gridlock]

I think Crayon has a very valid point. Realtors can get shit on. I think there is a portion that truly deserve it. On the flip side, there are a TON of buyers and sellers that let themselves get taken by them too.

It is very difficult to get a 100% true answer from someone that is 100% commission. That's a fact. Not to mention that the real estate boards control both the buyers and sellers market and boast that they have all the buyers. And the worst thing for all of them is a down market. Oh, and that same group also provides and maintains the proprietary numbers on the amount of real estate transactions and prices. So if you want a system where you can rig the system...you invented it right there.

Now that was just focusing more on resale...pre-sale? The entire place is designed to function like a money funnel.

This poor guy walks in with his gf and the entire room sees money signs. He doesn't know the ins and outs of mortgages, and no one in that room is going to tell him that renting is even an option. Why would you rent??!? when owning has never been cheaper. Of course, you are signing up for mystery interest 20 years, because you will only have numbers for the 1st 5. Strata payment is kind of questionable. And your building may or may not even be a hole in the ground, so you have 2 long years in an unknown market and economy.

And you ask a realtor?

Well, its always a great time to buy or sell real estate!

[Marshall Placid]

OP, looks like you are into pre-sale condos.

And, this depends on the completion of the development.

Usually, it is 1 or 2 years later.

As dinosaur pointed out, interest rates may go up and probably will.

And, the banks can only lock the interest rate in for a short period.

If you are buying to live as opposed to buying to invest, buy now.

If you are buying to invest, in a pre-sale condo, it is a big risk.

If you are buying to live, but only need to live in the condo 2 years from now, then skip pre-sale and buy 2 years from now.

Pre-sales are a risk all by themselves.

I would never, ever buy pre-sales.

----------

But, if you need to buy pre-sales, which completes a year or two from now, I really think interest rates, if they go up, would not go up by more than 100 basis points a year or two from now.

Why do I think so?

As you pointed out:

Originally Posted by i-VTEC

on a side note, ING Direct has a Fix 10 year 3.99 Rate or a 7 year 3.69

The banks themselves are offering a Fixed 10 year at 3.99%.

So, they are betting their bank (pun intended) that the rates will stay very low for the next 10 years.

Right now, the Bank of Canada's benchmark interest rate is 1%.

This is the rate in which chartered banks like RBC, ToDCT, BMO, etc. borrow money from BoC to lend to customers (you).

So, ING Direct (not chartered, but similar) has a spread of 3.99% minus 1% = 2.99% for profits.

So, yes, the banks are comfortable enough and confident enough the rates will not rise. If they do rise, it is only by a small amount.

One main reason to raise the benchmark rate is to "cool down" the real estate market.

And, on a NATIONAL level, the real estate prices are really not increasing substantially like what we SAW in the urban areas (Vancouver, Calgary, Tdot, etc.).

So, really, the Bank of Canada won't need to "cool" down the market because most of the increases are in large cities, and they account for a small population than ALL of Canada.

By this token, then your monthly payment won`t be very different a year or two from now (because interest rates won't rise, or rise only by 100 basis or 150 basis points), so if you want to do pre-sales, interest rates will be the same or a little higher 1 or 2 years from now.

But, in the end, pre-sales is a risk all in themselves, so prioritize your needs and wants:

1- Are you planning to move into the new condo now? Or 2 years from now?
2- If you rent, your rent disappears into the owner's pockets whereas if you own, your mortgage goes towards your OWN home.

If you want to buy an existing condo now, get a pre-approval.

It is easy.

Pickup the phone and get a mortgage broker like Dominion lending or talk to your mortgage specialist at your bank.

They will guide you through the process.

And, don't afraid to ask questions.

This is an opinion.

[Gridlock]

Totally respect your opinion. I disagree with a lot of it, but I don't want to get into a "heh, you're wrong here and here thing"

It's your opinion, and I respect that.

There is one thing I'd like to address. This:

Originally Posted by Marshall Placid

2- If you rent, your rent disappears into the owner's pockets whereas if you own, your mortgage goes towards your OWN home.

I disagree with this. The perception here is that each and every payment you make, you are one step closer to owning your home.

Great. Well, there's the strata payment. That's not exactly going to the whole owning thing. Interest is pissed up against the wind. That actually doubles the price of the condo over the life of the mortgage(ish). There is sales commisions on selling it. Legal fees.

Now you say, some of that is fair and some of it isn't. And I agree. Some of it is included in the price of rent. But I think its fair to say that today, apartment for apartment, it is going to cost more monthly to live in your own place than someone else's.

Whatever. I'm just saying its a LOOONG ass trip from signing the papers to making your last payment.

[i-VTEC]

Before, I say anything, thanks so much guys.

First I am not considering low rise condo because they are made out of Wood.
Once fire goes out, it spreads. So I just want to mention low rise condo is not option for me, but will consider it if I have no other way. So I hope this won;t turn into another topic high rise vs low rise.

Whether it is pre sale high rise or existing built high rise condo (consider buildings constructed after 2003). The only thing, existing condo's price is more expensive than pre-sale. A condo that was built in 200X and the price is selling = to the pre sale price for a condo that will be built in 2015 or 2016. So which one is more worth it? I think the answer is obvious

Also we are considering Richmond only at the moment.

I am in an odd situation, my parents bought a 2 Bed 2 Bath, but it is currently shared between my older brother and I. He isn't planning to get married or move out any time soon, rather its going to happen to me first.

That condo will eventually be mine (really good location, so I will rent that one out later on). But I am likely to get married and have kids right away, within a year or two MAX. Our relationship has been very good, been bf/gf for over 3 years now. We have met each other's parents numerous times. So living in my current condo is out of picture. Any how the problem exist where I do not have a lot of cash on hand like in the bank. So since I am considering a pre-sale which won't be built 2 years from now, me and my gf will saved up a lot of money from our paychque(just paid all our student loan off, my car is paid for etc..) then instead of mortgaging 250K we probably just need 130K of mortgage, therefore I pay really little interests.