FIXED-RATE VS. ADJUSTABLE-RATE MORTGAGES: WHICH MIGHT BE RIGHT FOR YOU?

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As a mortgage broker here in Canada, I know that diving into the world of mortgages can feel like stepping into a labyrinth of numbers and jargon. In this article, I will explore two of the most common mortgage options in Canada: fixed-rate and adjustable-rate (often referred to as variable rate) mortgages. We’ll break down what each one means, explore their pros and cons, and look at real-life scenarios to help you figure out which might be right for you.

What Is a Fixed-Rate Mortgage?

A fixed-rate mortgage means that the interest rate you secure at the beginning of your loan remains constant for the entire term, whether it’s five, ten, or even twenty- five years. This means your monthly payments stay the same, providing stability and making it easier to plan your budget. This consistency can be reassuring, especially if you’re focused on future financial planning and want to protect yourself from unexpected increases in interest rates.

Pros of Fixed-Rate Mortgages:

  • Stability: You know exactly what you’ll pay every month, making budgeting a breeze.

  • Protection: If market interest rates rise in the future, your rate remains unchanged, saving you from potential increases in your payments.

Cons of Fixed-Rate Mortgages:

  • Potentially Higher Initial Rates: Fixed rates in Canada might be higher than variable rates, especially when the Bank of Canada’s interest rate is low.
  • Less Flexibility: If interest rates drop significantly, you’ll need to refinance to take advantage of lower rates, which can involve additional fees and paperwork.

What Is an Adjustable- Rate (Variable Rate) Mortgage?

An adjustable-rate or variable mortgage has an interest rate that can change periodically, depending on the Bank of Canada’s benchmark rates. Variable rate mortgages often have a lower interest rate compared to fixed-rate mortgages, making monthly payments more manageable. However, there is always the risk that interest rates may adjust, which can impact your monthly payments.

Pros of Adjustable-Rate Mortgages:

  • Lower Initial Rates: You may enjoy lower payments compared to a fixed-rate mortgage.

  • Potential Savings: If the Bank of Canada’s rates stay low or decrease, you might save money over time compared to locking in a higher fixed rate.

Cons of Adjustable-Rate Mortgages:

  • Uncertainty: Your mortgage payments could increase if interest rates rise, making long-term budgeting more challenging.

  • Complexity: Understanding how rate adjustments work requires a bit more attention to economic trends and terms outlined by lenders.

Real-Life Scenarios: Which Option Fits You?

Suppose you’re planning to stay in your Canadian home for a long time – perhaps 10 or 15 years. In this case, a fixed-rate mortgage could be your best friend. It offers predictability and peace of mind against market shifts, something quite valuable when managing monthly expenses in cities like Toronto or Vancouver where housing costs are significant.

Conversely, if you foresee moving within a few years or expect your financial situation to change, a variable rate mortgage might work in your favour. The lower interest rate can ease the financial burden as you settle into homeownership. For instance, if you’re a young professional expecting to relocate for work in 5 years, the potential savings can be a smart choice, even if you face adjustments later on.

Financial Planning Tips Based on Market Trends

Stay Informed: The Canadian mortgage market is influenced by decisions made by the Bank of Canada. Keep an eye on economic news and interest rate forecasts to anticipate changes.

Think Long-Term: Reflect on how long you plan to live in your home. Your horizon can greatly affect whether a fixed or variable rate is more advantageous.

Seek Advice: Mortgages can be complex, but you’re not alone. A seasoned Canadian mortgage broker can offer insights tailored to your unique financial situation and help you navigate these decisions with confidence.

Choosing between a fixed-rate and an adjustable- rate mortgage doesn’t have to be intimidating. By understanding your options and planning ahead, you can find the right choice for your lifestyle and financial goals.

By: Jason Woods
289-925-9599
jason@jason-woods.com
www.jason-woods.com

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Introducing the Cornerstone of Associating Realtors: Realtor’s Together, Stronger Together.

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What started as an idea to amalgamate the Realtors Association of Hamilton-Burlington (RAHB) and Waterloo Region Association of Realtors (WRAR) soon caught wind and spread like all good ideas often do. Julie Sergi, a realtor with RAHB for 19 years, saw an opportunity to join forces with a like-minded organization to form a stronger association of realtors. Shortly after talks began, the Mississauga Real Estate Board (MREB) and Simcoe and District Real Estate Boards (SDREB) also asked to join. Talks between the four groups began in the fall of 2023 and took about nine months to negotiate. By July 1st, 2024, the Cornerstone Association of Realtors (Cornerstone) was formed, with Julie Sergi elected as Chair for Cornerstone’s 2024/2025 Board of Directors.

“We have similar ideas and mindsets and felt that pooling our resources, funds and staff would better serve a greater community of realtors,” Julie says.

The Association represents almost 9,000 realtors and serves Hamilton-Burlington, Mississauga, Niagara North, Haldimand County, Norfolk County, and Waterloo Region. “Cornerstone was created to help the public,” Julie explains. “It allows us to operate at a higher capacity, offer better services and training for realtors, and gives us a stronger position to lobby the various levels of government.”

By amalgamating, they have removed redundancy, become more cost-effective by operating under one budget, and can provide better access to information for smaller districts like Simcoe, which previously operated with a small staff. “We can better serve smaller communities with a larger brain pool, giving them access to more resources,” says Julie.

Despite the amalgamation, Cornerstone will maintain offices in its four locations: Mississauga, Hamilton, Waterloo, and Simcoe.

Cornerstone, a not-for-profit organization, offers enhanced professional development at little or no cost to realtors, which is good for them and even better for their clients. “If realtors are better educated, they can better serve the buyers and sellers in these areas,” says Julie.

As the second largest realtor association next to the Toronto Region Real Estate Board (TRREB), Cornerstone adopted the tagline REALTORS® Together, Stronger Together after repeating this mantra throughout the months leading up to their amalgamation. Their vision is to “establish a new, more influential, capable, and member-centric organization designed to meet the evolving needs of realtors and help them thrive in the marketplace.”

One area of significant focus for Cornerstone in the real estate market is data gaps in the MLS (multiple listing service) property database. By combining forces, Cornerstone felt it was imperative to accept inter-board listings within the larger market at no charge. They believe all Ontario realtors should have the same access to all Ontario MLS listings. The organization not only supports realtors but also provides tools and information to landlords and tenants, actively educating those in the rental market.

Cornerstone holds several monthly events, virtual and in person, and donates generously to Habitat for Humanity, a not-for-profit organization advocating for affordable housing across Canada. On September 12th of this year, they kicked off their inaugural event, a Charity Golf Tournament, to raise money for Habitat for Humanity Waterloo Region (Habitat). With the support of sponsors, donors, volunteers and the community, the event raised $45,045.

While developing something new always comes with a few hiccups, Julie says it took little time to iron out the details, and members see the value of having more resources, better access to MLS listings, and a larger team to work with.

“Cornerstone is looking forward to being a different member-centric and transparent association that assists the public, provides more information and consistent messaging, and ensures its members are the best realtors out there.”

Julie Sergi is a Broker with Royal LePage Burloak Real
Estate Services in Burlington.

BY JULIE ACHTERMEIER

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Government’s New Housing Rules: A Boost For First Time Home Buyers Or A Recipe For Higher Prices?

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The Federal Government announced in September that, in addition to the new 30-year amortization option for first-time homebuyers of new builds (which took effect August 1st), they will also extend this option to first-time buyers of resale homes and all buyers of new builds, who take out an insured mortgage. The new rules, set to take effect on December 15th, also include reducing the down payment for homes between $1 million and $1.5 million to less than 20 percent. For high-earning first-time buyers on the edge of entering the market, these changes could give them the boost they need to become homeowners.

While the government aims to create more demand for newly built homes and provide first-time homebuyers with more options, some experts feel the move will further drive up home prices. Developers still struggle to initiate new building projects due to high interest rates and construction costs. And with these new rules, the housing shortage could become even more pronounced.

The Canadian Home Builders’ Association shared their thoughts shortly after the announcement that boosting household borrowing power could cause an “inflationary effect” and drive up real estate costs where demand exceeds supply. The result could allow first-time buyers to take on more debt but do nothing to help affordability.

To gain further clarity on this issue, we asked two local realtors to share their thoughts.

Brenda McKinley from Realty World Legacy in Burlington believes the new rules will make it easier for buyers to get into the market and has seen mortgage brokers become busier as buyers work to get pre-approved ahead of the December changes. “This is opening doors for so many new buyers,” Brenda says. “We are seeing people become approved for mortgages who previously couldn’t.”

Recognizing that a more extended amortization period could prolong repayment, she explained that “historically, new buyers are tight for the first couple of years, but as their income increases, they can (and should) pay more down on their principal.”

The new options are available for buyers in higher income brackets; however, lower- income buyers still rely on family to help them with down payments. “Buyers should buy as soon as they can afford a home,” Brenda advises. “I would rather spend $2,500 a month on a mortgage than rent. You can’t get growth in equity if you don’t have home ownership.”

Shae Invidiata of RE/MAX Aboutowne Realty shares the vision for building equity but cautions that first-time buyers should be educated about the risks. “It’s part of home ownership to build equity,” Shae says. “But by prolonging amortization, it will take longer to build up that equity and homeowners will be paying more interest over time.” She explained that most people are still struggling with the cost of living, which hasn’t adjusted despite recent interest rate drops by the Bank of Canada.

“We still have an inflation problem and are not out of the woods yet,” explains Shae. “Rates could go up again, and buyers need to ensure they can comfortably afford their payments if that happens. Comfortably, not stretched.”

Shae’s best advice is to consult a realtor who will tell you what you need to know, not just what you want to hear. Buyers approved for a $2 million dollar mortgage, for example, should consider buying between $1.3 and $1.6 million to build equity and be able to afford their home for the long term, should rates go up or they lose their job. She advises obtaining proper representation, sitting down and crunching the numbers. She says, “The phrase “living within your means” has more relevance now than ever.”

BRENDA MCKINLEY, BROKER OF RECORD
Realty World Legacy
289.714.3878 | brenda@realtyworldlegacy.ca

SHAE INVIDIATA, SALES REPRESENTATIVE
RE/MAX Aboutowne Realty
905.339.3444 | shae@invidiata.com

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With Lower Interest Rates, Is Now A Good Time To Refinance Your Mortgage?

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With interest rates dropping, many homeowners ask the same question: Is now the right time to refinance my mortgage? The simple answer? It could be! But as with most financial decisions, a few factors must be considered to ensure it’s your correct move.

Why Refinance?

Refinancing your mortgage can be an excellent opportunity to take advantage of lower interest rates, reduce your monthly payments, or even shorten the term of your loan. It can also provide access to home equity, enabling you to tackle renovations, consolidate debt, or fund other projects that may have been on hold.

Lower rates can mean significant savings over time for many homeowners in Canada. Still, weighing those savings against the costs involved in refinancing is essential. That’s where you need help to navigate these decisions and understand the bigger picture.

Things to Consider Before Refinancing

When considering refinancing, it’s essential to evaluate a few key factors:

  1. Closing Costs: Refinancing isn’t free. While you might save on interest, there are legal
    fees, appraisal costs, and other expenses that come into play. You will need to calculate
    whether the savings from lower interest outweigh these upfront costs.
  2. Remaining Mortgage Term: If you’re already halfway through your mortgage term, switching to a new mortgage could reset the clock, and that might only sometimes be in your best interest. You should assess your long-term financial goals to see if it makes sense.
  3. Fixed vs. Variable: Lower rates may tempt you into a variable-rate mortgage. However, fixed rates offer stability, especially if you’re looking for predictable monthly payments. It’s really important to explore which option aligns best with your financial comfort zone.

How Can A Mortgage Broker Help With Your Refinancing Goals?

Refinancing can be a fantastic opportunity, but every homeowner’s situation is unique. That’s why I recommend consulting with a mortgage broker – to offer personalized advice tailored to your financial goals. Whether you’re looking to lower your payments, pay off your mortgage sooner, or tap into your home’s equity, they can guide you through the process, help you avoid any pitfalls, and ensure you make the most of the current rates.

Feel free to reach out if you’re considering refinancing or want to learn more about your options. We are here to help you make the right choice for your future.

JASON WOODS
Broker
Direct: 289-925-9599
jason@jason-woods.com
www.jason-woods.com

BY JASON WOODS

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Our Aging Population: Housing Options Available Where You Live

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Retirement is around the corner for many in Canada today, with a quarter of the demographic falling into the senior category by 2030. While so much of the population is hitting this milestone, their housing options may differ from what they once envisioned. Downsizing to a smaller home or condo is much more expensive than a decade ago, and options are limited. Retirement homes are becoming more expensive, and long-term care homes have become less desirable as stories of neglect and loneliness emerged during the pandemic.

In this issue, we look at emerging trends for supporting senior living.

Age in place

According to a November 2023 study by the CMHC, seniors who can afford to stay in their original homes choose to age in place as long as their health allows. Many communities provide more support for seniors in their original homes through activities, check-in services, and health care support. The City of Hamilton now provides several community services for aging adults (55+), all outlined in their fully downloadable and printable Older Adult Guide available online.

The goal of these services is to support seniors as they enjoy their retirement years while maintaining their original homes for as long as possible, including options such as food
delivery, yard work assistance, house cleaning, and in-home care options.

Co-housing

While much of Canada copes with housing challenges, alternative living arrangements are becoming
available to seniors. Co-housing is a structured community where each resident has a home but shares amenities. Some are retrofitted buildings, apartments or townhomes, and while most are not age- restricted, they have a senior focus.

The Canadian Co-housing Network (CCN) is a non-profit organization with 49 communities across Canada, either built or under construction. Hamilton is one of the communities actively looking for land to build 15 to 30 units by 2025. The CCN also aims to create homes with a smaller carbon footprint by using environmentally friendly building choices and designs with sustainability in mind.

Naturally occurring retirement communities (NORCs)

A NORC is a community or geographic area where many older adults reside and strive to bring services to a building or neighbourhood. The University Health Network (UHN) in Toronto researched how home care could be streamlined and publicly funded for NORCs, reducing travel time for many personal support workers (PSWs) by bringing them to several clients simultaneously in the same area.

In Hamilton, the El Mirador apartment building is supported by Oasis Senior Supportive Living. This NORC emphasizes physical fitness and healthy living programming. A dedicated team at the UHN is mapping potential sites to expand their reach and offer more housing options for seniors as the population of this demographic grows.

Co-living

Since home prices soared during COVID-19, so did the level of creativity families developed for sharing accommodations and affording a home. While we have seen multi-generational living grow, we also witnessed the emergence of co-living: seniors choosing to buy a home together and share expenses. This phenomenon is more common for older women who have become widowed, divorced or have grown children, and they prefer the company of friends to living alone. With Ontario zoning laws now allowing up to three separate residential units per property, this option is more accessible to those with the equity to pool resources.

While the age-in-place movement has grown, long-term care homes will remain necessary for those facing mobility and severe health challenges. As the population ages, the healthcare system will need to adapt. Those in good health want more choices of how and where they live, with services in place to support them.

By: JULIE ACHTERMEIER

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Where are the buyers coming from? Realtors share their insights

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It’s no secret that the dream of buying a home is becoming harder for many families and first-time homebuyers, yet the housing market is still doing well and homes are still selling at all price points. It begs the question: Who are the buyers? In the luxury market, prices vary depending on the location, but homes priced appropriately are still selling quickly. We know that real wages in Canada have not kept up with home prices, and most first-time homebuyers cannot afford a $250K down payment, but some are still able to enter the market for the first time.

SO, WHAT’S HAPPENING OUT THERE?

WE ASKED SOME OF OUR TOP REALTORS TO WEIGH IN AND PROVIDE THEIR INSIGHT. HERE’S WHAT THEY HAD TO SAY:

KIERAN MCCOURT, SALES REPRESENTATIVE WITH THE GOODALE MILLER TEAM
CENTURY 21 MILLER IN OAKVILLE:

Your team are experts at selling luxury homes in Oakville, Burlington and the surrounding area. Can you tell us where your buyers are coming from? Are they international or moving out of Toronto, or are people still able to “move up” in our local area? Are young families still able to afford to buy a home in the better neighbourhoods in our area?

We are seeing far fewer foreign investors buying property in Oakville these days. Speculation has died down and the government regulations restricting real estate purchases by foreign buyers have had an impact.

Our typical buyers for $5 million + homes are in their 40’s or 50’s, often with teenage kids. They value the great schools in our area, and have benefited from steady appreciation in home equity over the last 20 years. They likely have high income careers or have sold their businesses and have the capital to invest in a dream home. Some may also be taking advantage of generational wealth transfer as their parents move into smaller homes.

We estimate that about 50% of our buyers are local to the area, and the remaining 50% are coming from Toronto, Markham, Richmond Hill or are transferring to jobs in the GTA from the US or overseas. Higher interest rates are not really an issue for these buyers. We currently see no storm clouds on the horizon for Oakville. It has become a favourite destination for affluent buyers and the lifestyle is arguably one of the most desirable in the whole GTA.

ANITA SULLIVAN, BROKER WITH ROYAL LEPAGE
REAL ESTATE SERVICES IN OAKVILLE:

You do a lot of work helping seniors downsize and buy condos in Oakville, Burlington and the surrounding area. Can you tell us where your buyers are coming from? Are retirees still able to afford to buy a smaller home or condo in our area and release some of the equity they have tied up in their homes?

Our buyers are local and also coming from Mississauga and Toronto. For the majority their goal is to downsize from a detached home to a condo and put some equity in the bank.

But downsizing is more complicated than it was a few years ago. In the past, retirees would buy first, knowing their home would sell. This mindset has changed, and now they are uncertain about selling their homes. We are seeing more offers with a ‘condition on sale of property,’ something we haven’t seen for a while. The number of sales is down in the luxury condo market, and some condos are taking longer to sell.

MICHAEL BREJNIK, SALES REPRESENTATIVE WITH
ROYAL LEPAGE BURLOAK REAL ESTATE SERVICES
IN BURLINGTON:

You do a lot of transactions for homes that would normally be attractive to first-time buyers in Burlington and the surrounding area. Can you tell us where your buyers are coming from? Are they international investors, people moving out of Toronto, or are young people still able to “get a start” in our area? Are young families still able to afford to buy a home and how do they finance it?

The cost of a down payment for a first-time homebuyer has increased exponentially compared to a generation ago, and many young buyers need help affording it. It’s almost impossible without family help.

We are not seeing many international investors, but we do see buyers relocating from the GTA, Mississauga, and Brampton as prices continue to be more affordable in the Burlington area. We have also seen many young people put their search on hold because of interest rates and house prices, and some believe that house prices have further to fall, so are unwilling to risk entering the market at this time. The small interest rate drops recently will help, but more is needed for first-time homebuyers to start looking again.

By: Julia Achtermeire

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The Shifting Real Estate Market – Halton

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Who could have imagined a global pandemic would cause such a rise in housing demand and prices? But here we are over two years later, and after a brief pause in activity during the first lockdown in 2020, house prices have been rising ever since. A mass exodus from Toronto condos and homes to more rural spaces coupled with record low interest rates established a trend that has continued into 2022.

After two years of bidding wars and overinflated prices, the market finally seems to be poised for some sort of correction. But what does that mean? Is the market softening? Our real estate experts say no, there’s no need to push the panic button. The market is simply shifting and adjusting after two years of turmoil.

The Toronto Regional Real Estate Board (TRREB) explains that after explosive growth in the first quarter, the second half of 2022 should see “a more moderate pace of price growth” due to rising interest rates and a slight increase in inventory.

Alex Irish from Alex Irish & Associates in Oakville explains, “The market is adjusting and becoming more balanced. It’s been skewed for sellers and made it very difficult for buyers, but now we’re seeing a market that favours both buyers and sellers.”  Alex reminds us that spring is typically a busy selling season. The grass is green, pools are open, and homes look more attractive than in winter.

Despite new restrictions on foreign buyers and interest rates on the rise, it’s not enough to get people worried. Some buyers may be holding off, but many more are anxiously diving in now that they can compete.

“Buyers are always optimistic that prices will drop,” says Alex. “They recognize a great opportunity as listings increase, and many have been waiting a long time to break into the market.”  While homes in desirable neighbourhoods are still going into multiple bids, sellers are no longer listing low and hoping to get well over asking.

“Buyers are fatigued from the competition and many put purchasing a home on the back burner,” explains Michael Brejnik from Royal LePage Burloak Real Estate Services in Burlington. “Stabilizing prices mean fewer bidding wars and a more traditional market, so buyers are looking again.”

Michael explains that there are now fewer listings with offer dates, which means homes have to be priced more accurately, rather than the practice which had become common of underpricing and holding offers on a specific date. This scenario gives buyers more confidence and the ability to negotiate, something they haven’t been able to do in two years.

Another factor that may be impacting the market is that homeowners who bought in 2017 when interest rates were very low now have mortgages coming up for renewal, and they may find that they can’t afford the new payments. Some are looking for homes with rental apartments to create a source of income to help offset mortgage payments. Or they are forced to downsize or move out of the area.

In other cases, buyers who were pre-approved at lower interest rates a few months ago now have 60-90 days left before their paperwork expires and they need to find something quickly.

And then there are the buyers who left Toronto at the start of the pandemic and moved to the outskirts but now find they are going back to the city to socialize and work once restrictions were lifted. “People realize they’re ok sharing common areas again, so some are heading back to the city,” says Michael.

Overall, the market is in flux, and multiple factors continue to affect buying and selling decisions. It’s too soon to make solid predictions, but all indications point to a more balanced market which is good news for buyers and sellers.

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The Shifting Real Estate Market – Hamilton

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Who could have imagined a global pandemic would cause such a rise in housing demand and prices? But here we are over two years later, and after a brief pause in activity during the first lockdown in 2020, house prices have been rising ever since. A mass exodus from Toronto condos and homes to more rural spaces coupled with record low interest rates established a trend that has continued into 2022.

After two years of bidding wars and overinflated prices, the market finally seems to be poised for some sort of correction. But what does that mean? Is the market softening? Our real estate experts say no, there’s no need to push the panic button. The market is simply shifting and adjusting after two years of turmoil.

The Toronto Regional Real Estate Board (TRREB) explains that after explosive growth in the first quarter, the second half of 2022 should see “a more moderate pace of price growth” due to rising interest rates and a slight increase in inventory.

Lynn Fee from Keller Williams Complete Realty in Grimsby explains, “Supply and demand changes give the impression the market is softening, but that’s not the case. Inventory is increasing, so bidding wars have slowed down, but prices are still high, and it’s still a sellers’ market.”

Despite new restrictions on foreign buyers and interest rates on the rise, it’s not enough to get people worried. Some buyers may be holding off, but many more are anxiously diving in now that they can compete.  “I wish I had a crystal ball,” Lynn laughs. “But the reality is this is a market that changes weekly. It’s tough to predict what will happen next, but it appears we’re heading into a more balanced market.”

While homes in desirable neighbourhoods are still going into multiple bids, sellers are no longer listing low and hoping to get well over asking. Those buying are looking for recently renovated homes, or ones with pools, and are willing to pay top dollar.

“Buyers know that renovations are costly, and the wait time to hire a contractor or put in a pool can be up to two years,” explains Sarit Zalter from RE/MAX Escarpment Realty in Ancaster. “Buyers want a home that doesn’t require any renovations, and they are more educated about what’s out there.”

She says that while the market is still high and vibrant, it is becoming more sensitive and specific. “A few months ago, you could sell high no matter where you lived, but now people are more selective about the location.”

Another factor that may be impacting the market is that homeowners who bought when interest rates were very low now have mortgages coming up for renewal, and they may find that they can’t afford the new payments. “Rising interest rates make monthly payments difficult for families renewing mortgages,” says Lynn. “We may see an influx of homes purchased in 2017.”

In other cases, buyers who were pre-approved at lower interest rates a few months ago now have 60-90 days left before their paperwork expires and they need to find something quickly.

And then there are the buyers who left Toronto at the start of the pandemic and moved to the outskirts but found they were going back to the city to socialize and work once restrictions were lifted. As Sarit explains, “this type of buyer wanted more house for their money but didn’t embrace their new community, so now, they want to move back to the city a few years later.”

Overall, the market is in flux, and multiple factors continue to affect buying and selling decisions. It’s too soon to make solid predictions, but all indications point to a more balanced market which is good news for buyers and sellers.

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Market Update: Oakville

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Market Update: Burlington

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