Less Is More

Date:

If you’ve been keeping up with our recent newsletters, it should come as no surprise that Toronto’s November real estate results continued the trend that started mid-year.  Limited supply of freehold properties and strong demand for more indoor and outdoor space are driving price growth for ground-oriented properties.  The following table shows how sales of freehold properties were stronger than 12 months prior while condominium sales dipped slightly from last year.  As outlined in last month’s newsletter, there is sufficient choice in the condo market leading to stable prices.

Despite the sluggish spring sales due to the onset of the pandemic, Toronto’s year to date transactions at the end of November were only down 5% compared to 2019. 

As the economy struggles to emerge from the pandemic, the Bank of Canada is doing its best to help the recovery by maintaining an expansionary fiscal policy.  The resulting record low mortgage rates made headlines last week as HSBC offered a 5-year variable mortgage rate of 0.99% for high-ratio mortgages.  High-ratio mortgages are limited to transactions under $1M when buyers make down payments with less than 20% of the purchase price.  Banks can offer especially low interest rates for high-ratio mortgages because these mortgages are insured by the CMHC.  In these instances, the insurance premium which range from 2.4%-4.0% of the loan is paid by the borrower.  A typical 5-year variable mortgage rate for a conventional mortgage is currently at 1.85%.

I can hear the hamster running in your mind.  What’s the better option if a buyer has the funds for a 20% downpayment?

Option A – make a 15% downpayment thereby obtaining  the 0.99% high ratio mortgage rate, invest the remaining 5% downpayment in a GIC and pay the mortgage insurance premium OR

Option B – make a 20% downpayment which comes along with a higher conventional mortgage rate and avoid the mortgage insurance premium?

Well dear reader, I ran the numbers based on the average November 2020 Toronto property price of $979,224 and after the 5 year term of the mortgage, the cheaper option is…….  Option A by about $10,000.  If you’d like to see the math or find out the breakeven 5-year conventional mortgage rate, let me know and I’ll send you the details.

Shen Shoots The Breeze

I want to share something that is near and dear to my heart. Me and 3 friends who attend the same church, Grace Toronto Church (GTC) have been working on a project for the past 18 months or so and we are about to see it become a reality: a transitional home for young women (18-26 years old) who are struggling with homelessness.

Through speaking to experts who work on the frontlines serving these communities, we were told that the church can play an important and critical role in helping these women have a sense of belonging and community. The church would work alongside professional experts and social service agencies and together would provide support to these women as they seek to move from a narrative of alienation and despair to one of belonging and hope for the future.

With that in mind, we presented to our church’s board a proposal that would see us join forces with Loft Community Services (Loft) whereby Loft would rent a home, hire community support workers and use its existing programs and resources to holistically help these women. Grace Toronto Church’s role would be two-fold: finances and friendship. GTC would be the home’s major financial donor and would connect with the church community to provide volunteers to serve at the home as friends and mentors.

Despite a pandemic and our inadequacy in knowing how to proceed amidst the background of a global health crisis, we have seen and experienced God’s provision at every turn on this project. The lease for a house in Toronto’s east end was signed several days ago. With the help of many volunteers, generous businesses and the support of the staff at Loft and GTC, we are on schedule to be able to welcome three women into this home, which will be called Tabitha House by Christmas of this year!

If you’d like more details, please check out: https://www.gracetoronto.ca/tabitha-house

Photo by Prateek Katyal on Unsplash

Leave a Reply

Your email address will not be published. Required fields are marked *