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-- Condo Advice
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Originally posted by MarkT secure a rate now for 5 years or roll the dice and see where rates are in Sept. '10

have you locked in yet?
I'm still riding it out for now, but thinking it might be time soon

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Originally posted by Sasha i spend just over 1k on my car per month

That blows my mind.
If you need it, you need it, but wow

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Originally posted by Pett have you locked in yet? I'm still riding it out for now, but thinking it might be time soon

trying to figure out the 'optimal' time is bit like trying to time the stock market (i.e. nearly impossible).

I maintain that the decision to go variable or fixed, or to convert from variable to fixed, is a question of individual risk tolerance and an honest evaluation of your financial position. emotional well-being factors in there too, lol. ask yourself if you still can afford your payment if Prime rises a fair bit and/or whether you'll be an emotional mess watching it climb.

it also depends on what you have now...but IIRC, you have a discounted rate too, don't you? I have 2.5 yrs left at 'Prime minus 1.00%' and likely will ride it out until the end. the spread has been (and remains) too big for me to throw that away and convert to fixed, even when 5yr rates bottomed out earlier this year in the 3.50% range. I'm essentially betting that Prime will not rise so high and so fast as to offset the savings I'll have enjoyed in the interim.

but I think my bet is a much safer one vs. someone with a rate of Prime or Prime + something...especially if they are at the limit of their affordability based upon today's Prime rate.

I have no hard economic data (or crystal ball) to back up the feeling, but I just don't believe the doomsayers suggesting that there might be sharp, frequent increases by the Bank of Canada to its target overnight rate next year. If you oversimplify and figure that the BoC's central focus is to control inflation, wouldn't you have then have to buy into a 'rebound' theory whereby inflation is predicted to spiral out of control, if you are believe that the BofC will move swiftly and often to raise its rate? I think a slow, steady recovery is the more reasonable suggestion, but who am I to say...it *could* happen and that has to factor into anyone's risk analysis.

ultimately, I don't think anyone will *regret* taking a fixed rate below 4.00%. historically speaking, it's a great rate and there's something to be said for cost certainty, especially for first time homebuyers or people without a substantial fallback position.

Re: Condo Advice

quote:

Originally posted by 1dawoman I'm debating between 2 condos I like. Both are of equal square footage. One is about 5 years old and the other one will be supposedly finished Sept. 2010. I'm in no rush to move out as I live with parents who are letting me stay with them indefinitely. Do I a) buy the 5 year old property even though it costs a little more (higher maintenance fees) and may require a few renovations. or b) go with the newer condo with lower maintenance fees and pick all my colours/finishings... I am aware of possible risks in buying from a builder but I would like to make a little profit upon resale in 8 or 9 years... Just wondering if anyone has had to decide between these two options before and might have some advice/suggestions for me.

if the 5yr old property costs a little more, there's a reason...and that reason is likely that it's simply worth more. higher fees are to be expected, since (as mentioned) a new development will typically have artificially low fees for the first couple of years. if they are TOO low to start, that's not a good thing if you intend to own long term. you want 'reasonable' fees and a well-managed building if you're buying for a longer period. if you're going to flip it soon-ish, rather than 8-9 years, it's not so bad as the eventual higher fees will be the next owner's problem.

given that the existing condo will likely appreciate at roughly the same rate as the new build, assuming similar markets, I think other factors will be greater determinants of 'making a profit' (again, if truly exiting the market when selling), such as location, unit/building quality and wide market appeal.

IMHO, location is perhaps most important if you're trying to beat the 'average' appreciation. you can try to identify a location that could/should appreciate more than surrounding areas in the coming years. Queen East, is probably one of those areas, IMHO.

if you're living at home rent-free (or at a much lower cost than it would be to live on your own), you may financially be better off with the new build and banking as much money in the meantime to increase your down payment...although, as I mentioned earlier, you're taking on interest rate risk that could offset any gains made by waiting.

I bought a condo in 2007 pre construction. I closed in August 09 and sold the same month. I made a cool 50 grand. Not bad for a two year investement.

I'm a real estate agent so if you have any questions, feel free to pm me

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Originally posted by Sasha i spend just over 1k on my car per month

holy fuck

If I spent that much on a car every month it sure as fuck wouldn't be the Mazda I have now

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Originally posted by MarkT obviously, a gain/loss is only realized when you sell. until then, it's a paper gain/loss.

I won't say that's wrong, but it is a matter of perspective. "Mark to market" is what every major investor does. A higher net worth has its own benefits regardless of how liquid the assets are.

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the more relevant stat might be whether new constructions prices appreciated to a greater extent than an equivalent resale property over that same time period.

They did. New constructions are usually at least 10-20% discounted from the actual market value because of how important it is for them to secure occupancies (otherwise they could be out of pocket for a long time). Of course, that won't help you if there's a housing crash, but if prices stagnate then you're still going to come out ahead.

Note that this varies by area - if the location is in extremely high demand then the discount may not be as significant.

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a new construction also subjects you to mortgage interest rate risk.

This has been mentioned a few times. It's not really the case. If you want a fixed-rate mortgage you can lock in the rate when you sign the deal - as I did, much to my disappointment today. Lenders do, in fact, guarantee rates well beyond 12 months, in the specific case of new construction homes/condos. They partner with the builder.

My final rate, while high by today's standards, was actually half a point lower than the original guaranteed rate. That's how the builder mortgages work - if the rate goes up then you've locked in the original rate, but if it goes down they'll still lower it for you. Again, every contract is different, but mine was with TD, so it's not like this was an unusual scenario.

If on the other hand you're going for a floating mortgage, then new construction isn't any riskier than buying an existing property (somewhat less, in fact, because you might be able to flip it before getting locked in if rates skyrocket, depending on your contract).

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point ultimately being...you're taking on more than just the risk of 'drama' on inconvenience with a new build.

Yes, of course - I kind of glossed over those because they are essentially the same risks as you'd get with a pre-owned unit.

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Originally posted by VERTiG0 holy fuck If I spent that much on a car every month it sure as fuck wouldn't be the Mazda I have now

he just needs a faster car

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Originally posted by Sasha i spend just over 1k on my car per month

F_ck thats expensive! Yeah the TTC sucks but that would give you an extra $900 per month!

I can't see myself buying a car until I absolutely need one!

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Originally posted by MarkT "renting vs buying" and "condo vs. house" are topics on their own...suffice to say that some of the info here is misleading. rent is a tax credit and only reduces tax payable for relatively low income earners. IIRC, my provincial tax credits were consistently nil every year that I rented. my rent paid made zero difference. IMHO, I wouldn't consider a primary residence (condo or house) as an 'investment' in the traditional sense. it's not that you won't see it gain/lose market value, or that it's not preferable to see your property appreciate vs. depreciate, but that it's not the same as buying stock at x price and selling at y. obviously, a gain/loss is only realized when you sell. until then, it's a paper gain/loss. with a primary residence, it's not only unrealized until you sell, but unrealized until you sell and if you either exit the market entirely or buy again in another market that didn't experience the same level of appreciation. Aaron gave a lot of good examples of what can be involved with a new construction. it can indeed be stressful and you need to determine if you can live with the potential drama in exchange for the pros that come with a brand new home that you were able to customize somewhat and be the first to occupy. there are clear benefits to be enjoyed. one thing I would add is the builders can even make changes to room dimensions, if necessary. in theory, your 12x 10 bedroom could actually turn out to be 11 x 10 due to some unforeseen engineering/build requirement and you're shit outta luck with pretty much zero recourse. unusual? sure. but remember that you're buying a floorplan (that can change) with materials/finishes (that can change) with a tentative closing date (that WILL change, lol). new home warranty programs have less teeth than they ought to...so don't take too much solace in them either. regarding appreciation, keep in mind though that most existing properties in the same market had similarly appreciated over the same time period of time too. whether you took possession then on an existing property or took position later on a new build is irrelevant in that regard. the more relevant stat might be whether new constructions prices appreciated to a greater extent than an equivalent resale property over that same time period. what a new build does allow you to do is have your price set long before you have to incur the full expense required to acquire and maintain the asset. i.e. it eliminates the risk of price increases in the interim. but that is *not* to be confused with eliminating price risk, period...as an increase in value is not guaranteed. in theory, prices could have plateaued or even dropped in the interim (and in fact, that IS what happened in several areas of the country recently). you simply can't say with certainty where the market will be 2-3 years from now...though at the present time, it's quite reasonable to assume that Toronto home prices will continue to appreciate for the foreseeable future. still...there is risk. a new construction also subjects you to mortgage interest rate risk. you know what mortgage rates are today if you close on a purchase now, but you do not know what they will be in 2-3 years when a new condo is built. virtually no mortgage lender will guarantee a rate beyond 12 months and the longest rate guarantee typically provided for current 'top' rates is anywhere from 30-120 days. with rates still at a relative low point and the likelihood is that they will be higher in the coming years, you're definitely taking on interest rate risk with a new construction vs closing on something now. something that recently impacted people who took possession last year vs. a buying a condo that will closing years from now...the introduction of Toronto's municipal land transfer tax. previously, there was just the provincial LTT, but now there are both. thank you David f'n Miller. what will impact people going forward if they choose a new construction vs buying now? HST (yes, there are thresholds, but it will still impact a significant portion of buyers in Toronto. point ultimately being...you're taking on more than just the risk of 'drama' on inconvenience with a new build.

do you work as a financial advisor? If yes, can I be your client?

quote:

Originally posted by Pett have you locked in yet? I'm still riding it out for now, but thinking it might be time soon

www.primerate.ca

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Originally posted by Man_Devil F_ck thats expensive! Yeah the TTC sucks but that would give you an extra $900 per month! I can't see myself buying a car until I absolutely need one!

Not to mention Zip Car/Auto Share are available when Needed.

I'm moving into a condo that I purchased relatively soon and I've factored that it's going to be cheaper living in the condo with my Mortgage + maintenance fees then what I currently Pay:
~ Imaginary Rent
~ Car + Gas/Maintenance
~ GO Train Pass
~ Gym Membership

Those 4 things combined are $250-$300 more a month then what I'm predicting to spend when living in the condo.

I think a lot of it has to do with what fits in your lifestyle and what you're accustomed to.

I've never lived in an old house. Growing up we always bought new houses as that is what my family preferred. I personally can't see myself buying used, but that's just want use to.
I'm hoping that there aren't any major issues with the condo, but if there is, i'm blaming it all on VDUB!!!