Many prospective first-time homebuyers have likely been waiting patiently on the sidelines for a chance to get into the Canadian housing market.
As 2023 approaches, a window may be opening for some of them to get that first piece of real estate, whether it’s a condo, a townhouse or a detached home.
Home sales and prices have fallen in 2022 as the Bank of Canada raised its policy interest rate in a bid to cool searing-hot inflation. As a result, the extremely-hot Canadian housing market is cooling for the first time in years, albeit as prospective buyers face higher borrowing costs.
Many forecasts have been projecting a further cooling going into 2023, so if you’re a prospective first-time homebuyer thinking the new year will be your time to jump into the market, what do you need to do to make your dream a reality?
Here’s what you need to know.
How will I know if I can afford to buy a home?
According to Victor Tran, RATESDOTCA mortgage and real estate expert, the first step prospective first-time homebuyers must take is to talk to a mortgage professional to figure out what they can afford.
Be it a mortgage broker or a mortgage specialist at a financial institution, these professionals will help you figure out how much you can spend on a home, which is a combination of your down payment and what a lender will provide you, said John Pasalis, president of Realosophy Realty.
After you’ve found your mortgage professional, you’re going to want to assemble a “solid team” to work with you on your homebuying quest, Tran said.
“Team as in not just a mortgage broker, but also an experienced realtor in the area that you’re looking to purchase and a real estate lawyer. That’s the person who is going to wrap everything up and ultimately close the deal,” he said.
When it comes to choosing a realtor, it’s important first-time homebuyers take the time to interview multiple to find the right one, Pasalis said.
“From my perspective, a big part of their job is really educating buyers throughout the process. If you have someone who wants to educate you, warn you about certain things and prepare you, that’s generally better than someone who says, ‘How much do you want to spend? Let’s go look at houses,’” he said.
“In terms of working with them, a big part of it is their agent educating them early in the process and throughout the process because it’s a difficult market right now to navigate. There aren’t a lot of homes and when we’re looking at sale prices, some of them are very confusing. It’s very challenging to come up with a good value for a home, so you want to be careful when deciding who to work with.”
I’ve found a home and want to put in an offer. What’s next?
When you’ve found a home you want to put an offer to purchase on, one of the first steps you should take is to send the listing to your mortgage professional, Tran said.
If you are pre-approved for a mortgage, generally that reflects a rough estimate of how much a lender would provide you based on your down payment and other financial information. By sending the listing to your mortgage professional, they can give you a more accurate reflection on what your maximum mortgage amount can be on that home.
“Every property has different annual property taxes, and that can skew the numbers. It can impact the amount you can borrow depending on what the taxes are. If you’re looking for a condo, every condo has different monthly maintenance fees; that can also impact the amount you can qualify for as well,” Tran said.
“It’s important to keep your mortgage specialist or mortgage broker in the loop.”
Then, you must work with your realtor to figure out what the property is worth, Pasalis said. Your realtor should give you an idea of a reasonable range that the value of the home is in, and they do that by sending you similar homes nearby that have previously sold.
“In today’s market, agents are pricing things very differently. You have some agents still pricing homes below what they’re worth to create a bidding war,” he said.
“On the flip side, you have some agents and sellers listing homes for prices that are well above what they are worth, so you need to know exactly what the home’s worth, or at least get a good idea of it. Where you bid on it in that range is up to you, but that’s your starting point before making an offer.”
Once you’ve nailed down your offer price, consider putting conditions on your bid, including one on financing and home inspection, Tran said. If you’re buying a condo, you should also put a condition upon review of the status certificate, which is a document that could identify any financial or legal issues with the condo corporation, he added.
Prospective first-time homebuyers should also consider the closing date of the home they’re putting an offer on, Pasalis said.
“If you’re renting right now, you want at least a 60-day closing date because you’re going to have to give your current landlord a two-month notice. You don’t want to be owning and renting two places for too long,” he said.
“If a seller wants a very quick closing and you’re able to accommodate that, then certainly you may want to make that part of your negotiation strategy, to maybe try to get the seller to give you a slightly better price if you’re giving them a closing date that they want.”
How do I navigate the mortgage market?
While the Canadian housing market has cooled in 2022, many lenders in response to the Bank of Canada’s rate hikes have increased their lending rates, making it more difficult to qualify for a mortgage.
Prime lending rates at major Canadian banks currently sit at 6.45 per cent. Their 50-basis point increase from 5.95 per cent mirrored that of the Bank of Canada, which raised its key lending rate to 4.25 per cent on Dec. 7. That marked the central bank’s seventh rate hike of the year since March after sitting at 0.25 per cent for two years following the onset of the COVID-19 pandemic in 2020.
The Bank of Canada will make its next interest rate announcement on Jan. 25. It has signalled that a pause in rate hikes could be coming, with some economists predicting interest rates will peak in 2023.
In certain Canadian markets, it may be difficult for first-time homebuyers, especially Canadians on a single income, to buy real estate. If Canadians are seeking a mortgage from a major lender, they will be met with the banking regulator’s stress test. Canadians will have to either qualify at 5.25 per cent or the mortgage contract rate plus two percentage points, whichever is higher.
Canadians can increase their chances of getting a mortgage by increasing their down payment, Tran said, whether it’s from additional savings or a monetary gift from family or friends.
They can also look to a cosigner or guarantor on their mortgage, but that might not always help, he added.
“If they (your cosigner or guarantor) have a full-time job and free and clear property, then that’s great. You’re essentially adding additional income, but no additional liabilities,” Tran said.
“But if that cosigner or guarantor has debts of their own, they have a mortgage on a property or they have outstanding liability like credit cards or car payments, they may actually bring down your chances of qualifying.”
If Canadians run into trouble getting a mortgage from a traditional lender, there are alternative providers out there, like credit unions. But they do come with risks, Pasalis said. Alternative lenders typically require a larger down payment and their loans come with a higher interest rate, he added.
“It’s not necessarily easier to get a mortgage from an alternative lender,” Pasalis said.
“It has its own risks if one wants to go down that path.”
The question about whether to go with a fixed-term mortgage, a traditional option for Canadians as mortgage payments are set for a specific period, or a variable mortgage, which is prone to change with Bank of Canada rate decisions, comes down to whether you’re comfortable with risk, Tran added.
“Personally, I’m comfortable with a little bit of risk. I believe the prime rate will eventually come back down, maybe in a year or two. It’s a lot higher now than the fixed rate, but I may start seeing some savings in year three, four and five of the five-year variable term,” he said.
Also, “you might be walking down the street and you might see a house for sale, and suddenly now you’re in the market again looking to buy. You just never know, so that’s why I like variable. Just a little bit more flexibility.”
What other costs should I prepare for?
While there has been much focus over the years on saving for a down payment, there are other costs prospective first-time homebuyers need to budget for.
Pasalis, who is based in Toronto, recommends clients budget two to three per cent of the purchase price for closing costs, but lawyer fees and land transfer tax may vary from province to province. First-time homebuyers may also be eligible for a series of federal government incentives, including the First-Time Home Buyer Incentive — a program that sees Ottawa give some first-time homebuyers an interest-free loan of between five and 10 per cent of the cost of a home.
Furthermore, if first-time homebuyers put forth a down payment that is less than 20 per cent of the purchase price, they’ll need to get mortgage insurance, Tran said.
“I’ve seen people who buy homes maxed out and they can’t afford furniture when they move in,” Pasalis said.
“You don’t want to put yourself in that position where you’re just stretching so much that you’re sleeping on the floor because you can’t afford a bed.”
When’s the best time to buy? How can I maintain a positive mindset?
Both Pasalis and Tran say it’s extremely tough to time the market. However, recent industry reports offer some insight on where the market could be heading in 2023.
In a Dec. 13 report, Royal LePage said it’s anticipating Canadian home prices to drop just one per cent in 2023, and Re/Max told Global News on Nov. 29 that the new year could see “balance” return to the market. The Canada Mortgage and Housing Corp. (CMHC) said in an October report that home prices will resume their “upward trend” in the second half of the year.
Tran advises prospective first-time homebuyers to watch the market, and when they see a listing they really like, to “go for it.”
“That opportunity may not come by again. It’s a good time for buyers to get in right now because it’s a less stressful environment, and you can really take the time to make this big decision in your life,” he said.
However, shopping for your first home can be stressful, and Pasalis recommends prospective first-time homebuyers be realistic about what they want.
“The one thing that makes it a little bit depressing sometimes is when you look at what you can afford, and you’re like, ‘This is not my dream home.’ … If I’m a first-time buyer, I would personally try to look for value,” he said.
“If you’re looking at a home that needs some work over time, that has good bones … that’s a better bet because you end up getting that one probably for less than what, in theory, market value is today because those homes aren’t getting as many offers today.… If you want everything from day one, it’s going to be hard.”
At the end of the day, Tran said it’s important to plan for the process.
“Making the offer and getting the financing, I think that’s fairly easy,” he said.
“Planning is almost 80 per cent of the whole process. As long as you stay in touch with your individuals who are helping you … and you understand what’s happening in the market, it will be a lot easier on you and it will be a lot less stressful.”
— with files from Global News’ Craig Lord
Canada politics: Billions not spent on promised programs – CTV News
The federal government failed to spend tens of billions of dollars in the last fiscal year on promised programs and services, including new military equipment, affordable housing and support for veterans.
Federal departments are blaming a variety of factors for letting a record total of $38 billion in funding lapse in 2021-22, including delays and disruptions caused by the COVID-19 pandemic.
They also say much of the money remains available for future years.
The unspent funds also played a big part in the Liberal government posting a smaller-than-expected deficit in the year ending March 31, 2022.
Canada rang up a $90.2 billion deficit — $23.6 billion less than had been projected in the budget.
The unprecedented amount of lapsed funding, much of which has been returned to the federal treasury, has one observer suggesting it is a sign of long-standing challenges delivering on big federal projects for the country.
The amount of lapsed funds across government is spelled out in the most recent iteration of the public accounts, a report on federal revenues and spending by every department and agency tabled in the House of Commons every year.
The $38.2 billion that was reported as lapsed in the last fiscal year marks a new record over the previous year, which was $32.2 billion. That was a dramatic increase over the previous record of $14 billion in 2019-20.
That compares to around $10 billion about a decade ago, when Stephen Harper’s Conservative government was accused by political opponents and experts alike of using large lapses to make cuts by stealth.
Health Canada and the Public Health Agency of Canada reported the largest lapses of all departments and agencies, with nearly $11.2 billion of their combined $28.2 billion budgets going unspent.
Much of that had been set aside for COVID-19 initiatives that were not needed, said Health Canada spokeswoman Tammy Jarbeau. Those include vaccines, personal protective equipment and rapid tests.
“Both Health Canada and the Public Health Agency of Canada have rigorous internal financial management controls designed to prevent, detect and minimize errors and financial losses, and ensure the funding is spent in the best interests of Canadians,” she wrote in an email.
The pandemic figured in the responses and explanations from many other departments and agencies, with many blaming COVID-19 for delays.
One of them was the Defence Department, which reported a lapse of $2.5 billion in the last fiscal year. Much of the money wasn’t spent due to delays in the delivery of new military equipment such as Arctic patrol vessels and upgrades to the Army’s armoured vehicles.
There were also delays on major infrastructure projects for the military, according to Defence Department spokeswoman Jessica Lamirande. Those include upgrading and rebuilding two jetties for the Navy in Esquimalt, B.C., and a new armoury in New Brunswick.
“The COVID-19 pandemic has had a significant impact on many of our business lines,” Lamirande said.
“The impacts of the pandemic on supply chain and industry capacity are causing manufacturing backlogs and delays.”
Lamirande added most of the unspent funds are expected to be available in future years through a process called reprofiling, in which schedules are revised to reflect planned spending in future years due to those delays.
Former parliamentary budget officer Kevin Page said the government’s handling of lapsed funding now is “a little more relaxed” than in previous years, when unspent funds were not reprofiled and even used to justify budget cuts in Ottawa.
But defence analyst David Perry of the Canadian Global Affairs Institute said the Defence Department’s lapse, which has been steadily growing in recent years, is a symptom of Ottawa’s continued difficulties purchasing new military equipment.
“If we’re not getting those procurement projects through, we’re not getting new equipment into the inventory, so we don’t actually have the gear for our troops,” he said, noting many of the delayed projects were launched under the Harper government.
Perry also noted the current rate of inflation, which is already naturally higher for military equipment and the defence sector than most other parts of the economy. Not spending money now means Canada will have to pay more for the same gear and services later, he said.
The Infrastructure Department, the Canadian Mortgage and Housing Corp. and the Fisheries Department, which includes the Canadian Coast Guard, also reported delays with different capital projects, including on affordable housing and broadband internet.
“Due to the unprecedented circumstances over the last few years such as the COVID-19 pandemic, disbursing funds to proponents for many projects are expected to and will take longer,” CMHC spokeswoman Claudie Chabot said in an email.
Perry suggested a bigger problem.
“The government of Canada’s ability to actually deliver services to the public, especially when it comes to large projects, large capital projects, be it for equipment or infrastructure or IT projects, is struggling across the board,” he said.
Other federal entities with large lapses included Indigenous Services Canada, which failed to spend $3.4 billion, and Crown-Indigenous Relations and Northern Affairs Canada, which reported a lapse of $2.2 billion.
Spokesman Vincent Gauthier attributed much of the latter lapse to “the timing and progress of negotiations for specific claims and childhood litigations,” adding that funds will be available “in some instances” in future years.
Gauthier did not say why Indigenous Services, which is responsible for delivering federal services to First Nations, Inuit and Metis, failed to spend billions of dollars. He did say most of the money had been reprofiled “so that it will be available when recipients need it.”
Veterans Affairs Canada also reported a nearly $1 billion lapse last year, which the department blamed on fewer ill and injured ex-soldiers applying for assistance than expected.
However, critics have described earlier lapsed funding as evidence of the challenges many veterans face in accessing benefits and services. In 2014, the Royal Canadian Legion demanded the Harper government explain why $1.1 billion went unspent over seven years.
This report by The Canadian Press was first published Jan. 30, 2023.
Forecast: Coldest temperatures this winter coming to Eastern Canada – CTV News
The beginning of February is expected to bring Arctic-like temperatures across much of Eastern Canada, thanks to frigid air from the polar vortex.
“I think it will be a real punch in the face for easterners,” Environment Canada senior climatologist David Phillips told CTVNews.ca. “It’s going to be pretty short-lived and it’s going to be right across the east.”
The cold snap will descend on Eastern Canada between Thursday night and Friday, with temperatures becoming seasonable again on Sunday. In between, much of Ontario, Quebec and Atlantic Canada can expect the coldest days yet this winter.
“We’ll see temperatures that are really, brutally cold,” Phillips said from Toronto. “It’s really a one-and-a-half-day wonder.”
According to Environment Canada, as the cold air tracks east, daytime highs will only reach -13 C in Toronto, -20 in Ottawa, -21 in Montreal and -23 in Quebec City on Friday, and -18 in Fredericton, -15 in Halifax, and -18 in Charlottetown on Saturday.
“It’ll be sunny and bright, because it’s Arctic air,” Philips said. “It’s very dry, and it will be crisp”
Overnight temperatures on Friday night could dip as low as -20 in Toronto, -31 in Ottawa, -30 in Montreal, -34 in Quebec City, -28 in Fredericton, -21 in Halifax, and -23 in Charlottetown – all more or less double what’s normal for this time of year.
“The last time it was that cold in Ottawa was 27 years ago,” Phillips explained. “You can go year after year after year and not see a temperature of -20 in Halifax.”
These temperatures do not factor in wind chill, which could make things feel even icier.
“It’s going to be very punishing,” Phillips said. “It’s clearly an Arctic invasion of frigid air.”
The short-lived and bitter winter blast is being blamed on a weakened polar vortex, which causes icy Arctic air to push south, leading to rapid and sharp temperature drops.
There is a silver lining for those who have been missing out on winter activities.
“The second half of winter, according to our models, seems certainly a little colder, more winter-like, than what we saw at the beginning of the winter,” Phillips said. “But everywhere in Canada, we’re now well the beyond the halfway point. There’s more winter behind us than ahead of us!”
While much of Western Canada has been shivering through the winter, it’s been a different story in the unseasonably mild east. Phillips says December and January in Ottawa, for example, were the third warmest on record in 150 years; and both Ottawa and Montreal have experienced no days below -20 this winter, when normally they would each have about 10. Ottawa’s Rideau Canal Skateway is also still closed when it typically opens in January. Warmer winter temperatures, however, have also brought abundant snow.
“If you’re in the east, it’s looking like winter, but it doesn’t feel like winter,” Phillips said. “But it’s going to feel like winter when the cold arrives.”
Canada province experiments with decriminalising hard drugs – BBC
Canada’s province of British Columbia is starting a first-in-the-nation trial decriminalising small amounts of hard drugs such as cocaine and heroin.
From Tuesday, adults can possess up to 2.5g of such drugs, as well as methamphetamine, fentanyl and morphine.
It follows a similar policy in the nearby US state of Oregon, which decriminalised hard drugs in 2020.
Ahead of the pilot’s launch, British Columbia and federal officials outlined the rules under the federally approved exemption from the Controlled Drugs and Substances Act.
While those substances will remain illegal, adults found in possession of a combined total of less than 2.5g of the drugs will not be arrested, charged or have their substances seized. Instead, they will be offered information on available health and social services.
Federal minister of mental health and addictions Carolyn Bennett on Monday called the move “a monumental shift in drug policy that favours fostering trusting and supportive relationships in health and social services over further criminalisation”.
Some 10,000 residents have died from drug overdoses since British Columbia declared drugs to be a public health emergency in 2016, officials said.
“Decriminalising people who use drugs breaks down the fear and shame associated with substance use and ensures they feel safer reaching out for life-saving supports,” said Jennifer Whiteside, the British Columbia minister for mental health and addictions.
Thousands of police officers in the province have been offered training on the rule change, including those in Vancouver, the largest city in the province.
The programme will run from 31 January 2023 until 31 January 2026, unless it is revoked by the federal government.
Some experts have questioned the 2.5g limit, saying that it is not enough to account for the habits of many addicts.
There are some exemptions to the scheme.
The sale of drugs remains illegal. It is also illegal to possess drugs on the grounds of schools, childcare facilities and airports.
Canada legalised the use of recreational cannabis for adults nationwide in 2018.
But the four drugs now allowed in small quantities remain prohibited, meaning there are no plans to sell them in stores, unlike marijuana. Trafficking them across borders also remains illegal.
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