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HOME BUYERS, PATIENCE WILL SAVE YOU MONEY: It seems that during this time each year the Globe and Mail publishes a story about a crazy bidding war as buyer's flock into the market after the holidays. The reason these articles come out like clock work is because the same cycle keeps repeating itself. With less inventory than usual and buyers having taken a break over the holidays, they rush into the market all at once. Have a bit of patience and once more properties start coming up for sale, which they will, things will calm down and you'll find opportunities within the frenzy.



Toronto house hunters jumping in to the market early in 2016 - http://bit.ly/1PKmjX0

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When people talk about financial freedom it’s often with the hope they’re going to win the lottery. We’ve all slightly held our breath as we scan our lotto ticket hoping to hear some bells go off and winning more than $20. While we can’t control if we win the lottery, we do have some influence over one thing that can get us to a place of financial freedom faster, our mortgage.

 

For most Canadians their biggest monthly expense is usually a mortgage payment or rent. In Toronto this cost can eat up anywhere from 40-60% of a household’s income and maybe even more! Now imagine if you were able to eliminate this cost and had 40-60% more of your money available each month as disposable income. You would definitely be freer!

 

While it’s not the same as winning the lottery, we’ve definitely hit a jackpot in the opportunity represented by years of super low mortgage rates (check out the graph  above courtesy of ratehub.ca which shows the 5 year fixed and variable rate over the last 10 years. The drop in rates is even more dramatic when you go back to the 80’s when they were over 20%!!!). Right now you’re likely paying off more principle then interest and putting more money in your pocket rather than the bank’s. It’s because of low rates that the possibility of paying down your mortgage faster than ever feasible, and if you’re committed, doing so in record time.

 

So how can you do this?

 

Use some of these tips to chip away at your mortgage and hopefully realize financial freedom sooner, rather than later.

 

Tip 1: Add Additional Payments

 

As you add mortgage payments, you’re paying down the principle directly. The smaller your principle gets the less interest you’re paying and the amount of time to pay off the mortgage is reduced. An easy way to do this is rounding up your current mortgage payment so that you’re doing this automatically rather than when you think about it.

 

Tip 2: Reduce your Amortization Period

 

If you have a mortgage amortized over 25 years, reduce it to 20 (if you can, go to 15 years!) Be as aggressive as you can when setting up the amount of time that you will be paying off your mortgage. By lowering the amortization you’ll pay less interest and pay the mortgage off even faster. One way of doing this is by keeping your current amortization but setting the payments so they match those of a lower amortization period. This gives you the flexibility to reduce the payments if you ever need to.

 

Tip 3: Change Your Payment Frequency

 

If you’re currently paying your mortgage monthly, change to an Accelerated Bi-Weekly or Weekly Payment schedule. This type of payment schedule results in you making additional smaller payments that helps to payoff the principal sooner. For example, if you have a $600,000 mortgage amortized over 25 years with an interest rate of 3%, and were to switch to an accelerated payment plan, you’d save over $30,000 in interest and shave more than 2 years off the amortization period.

 

Tip 4: Make a Lump Sum Payment

 

If you receive a bonus or have extra savings or cash, make a lump some payment to lower your principal amount, which will lower the amount of time and interest it will take to pay off the mortgage. Most banks will allow you to make a lump sum payment of a certain percentage each year. Consider using a tax refund for this.

 

Taking the example above. If you had a mortgage of $600,000 amortized over 25 years at a rate of 3%, being paid monthly, and you were to make a one time payment of  $5,000, over the life of the mortgage you’d save $5,458 in interest and shave 3 months off your mortgage. Now imagine if you did this on a yearly basis what it could do!

 

Tip 5:  Allocate a Pay Raise to Your Mortgage

 

If you receive a pay raise, use a portion or the full amount each month as an extra payment. If you’ve been managing on your current salary, you won’t miss the increase in pay and better that it go toward helping you become mortgage free than buying stuff.

 

Use this online calculator to see how these tips can have an impact on reducing the life of your mortgage and the amount of interest you pay to the bank.

 

http://itools-ioutils.fcac-acfc.gc.ca/MC-CH/MC-CH-eng.aspx

 

Tip 6: Buy an Investment Property

 

How could getting an extra mortgage help you become mortgage free you ask? By having a mortgage that tenants are paying for you and a property where the value is increasing, over time the market and someone else are going to be building equity for you. When the time is right, sell the property and use this equity to payoff or make a big ass lump sum payment on the mortgage of your primary residence!

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When getting a house ready to sell, one of the key things me and my staging team will look at is the placement of art and pictures. What we notice quickly, and what a buyer will notice, is when a picture hasn't been hung correctly. Art helps set the tone in a room, which is especially important when selling your home, so you want it to complement the space instead of distracting from it.  Here's 6 tips to help combat the most common misplacements we see:

 

1. Hang a picture so that the centre is at eye level. 60 inches from the ground will usually get you in range of this. Very important if you're only hanging a single piece. A sore neck shouldn't result from looking up at your art.

 

2. Get the proportions right. You want to make sure the art work is appropriate for the size of the wall. A small piece on a big wall (unless you're an art gallery), is going to look odd, and if it's to big for the wall, it's going to look odd.

 

3. Select the right scale. This is especially important when you're hanging art above a sofa or bed. A good rule of thumb is that the piece should be about 2/3rds the length of the of the furniture it's going above. If you're using multiple pieces, include the length of each frame and space between them to figure this out.

 

4. Use proper picture hooks. Screws and bolts really should only be used for keeping the house together, not hanging a regular picture. The holes left from picture hanging hardware are so much easier to repair when you decide to move things around.

 

5. If you're hanging a row of pictures along the same line, use a level, or better yet a laser level, and mark your nail holes accordingly. To help determine spacing and positioning there's a couple of online calculators for this and even an App, Hang-a-pic (I haven't used it but it looks cool) www.datawranglers.com/tools/wallhanging.php  www.pictureframe.com.au/picture-frames-wall-hanging-calculator.html (this one uses meters so get your conversion calculator out).

 

6. Get an extra set of eyes. Having someone hold a picture in place before sinking a nail into the wall makes it so much easier to determine the right positioning, height etc. with out leaving a trail of holes.

 

Bonus Tip: Make yourself a picture hanger. You can buy these in the store, but personally I think a homemade one is better. Take a flat piece of wood similar in shape and size to those old wooden rulers. Drive a nail through it about half an inch from the bottom so that a small part of the nail is coming out of the back. Voila, you have a picture hanger. Place it against the wall with your picture hanging on the nail and once you've found the right place, press against the frame and the nail will make a small hole where the nail for your picture hook needs to go. Check out this link for visual instructions on how to make one http://celebrateeverydaywithme.com/the-best-ever-picture-hanging-tip/

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Nope, that’s not frost quakes or the Millennium Falcon hitting light speed, it’s Toronto’s real estate market breaking records!! December 2015 ended as the second best on record for theToronto & GTA real estate markets, and was the cherry on top of the best ever year for real estate sales!

 

In the City the average price for a home is now $659,270 an 8% jump over 2014 (the number you might hear in the media is $622K, which is the average price for the GTA & not Toronto specific), and sales for the year were 7% higher.

 

With all this record breaking, it’s not surprising that the average price for a detached home broke the $1M mark and sits at $1,047,483. The average price for other housing types were: Semi - $736,082; Townhomes - $542,406; and Condos $405,589.

 

Especially in the core, condos are now the primary first time buyer and investor option, so no surprise to see the average price break the $400,000 mark and show a 5% increase over last year!

 

(For a historic look at average prices for the Toronto Real Estate Board check out the graph below).

 

 

As affordability has increasingly become an issue for people looking to purchase a freehold home in the City, it’s helped to propel price increases and demand into the GTA commuter communities as people seek out more affordable housing options.

 

Those looking for a home in the $300,000 to $600,000 price range represented the biggest group of Toronto and GTA buyers in 2015 and accounted for 48% of 2015 sales. Those shopping in the $600,000 - $900,000 range represented about 25% of sales and for buyers in the over $1M price category, this was about 11% of all sales.

 

So now the question remains, what does 2016 hold in store for our real estate market? Check back in for my thoughts and a review of some prevailing opinions…coming soon.

 

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