November 25, 2017

Costly Pitfalls To Avoid When Purchasing a Home

I have the pleasure of posting a guest blog today!!  When I read this post, it contained some incredible info that I wasn’t even aware of, so I had to share.  It is lengthier than my usual blogs but just scroll through and see what may be relevant for you.  Meet Rachel Craggy from Right At Home Realty.

What if I told you that before you purchased that house, you could have avoided a very costly pitfall before you ever took possession would you be interested in?  That is why it is important to aware of what pitfalls to avoid when purchasing a home.

Pitfall No. 1, The 60 Amp Service

To the unsuspecting buyer and often their realtor, you fall in love with a house.  You do your due diligence and you and your realtor inspect the electrical panel and it says 100 amp service.  To the unsuspecting buyer many think this is must mean the home has a 100 amp service right? WRONG!

The result:  In order for you to be eligible for a mortgage you need to insure the property in case of fire, etc.  Insurance companies will only insure the home if you pay to upgrade the service once you take possession.  The cost for this service upgrade as soon as you move in.

Approximately $4000

WHAT TO LOOK FOR TO AVOID THIS COSTLY PITFALL?

You want to look at the meter on the outside of the house.

60 Amp Service

60 Amp Service

100 Amp Service

100 Amp Service

Pitfall No. 2  Knob and Tube

Again another pitfall to avoid when purchasing a home is Knob & Tube.  Like the 60 amp service, insurance companies refuse to insure a house with knob and tube.  Although the ESA does not deem knob & tube unsafe, insurance companies do.  Again if you can’t get insurance, you can’t get a mortgage and you can’t buy the house.  The cost to remedy this pitfall as soon as you move in:

$6,000 – $12,000

WHAT TO LOOK FOR TO AVOID THIS COSTLY PITFALL?Knob and Tube Wiring

Knob and Tube Wiring

Pitfall No. 3.  An Old Furnace

Just as you are getting ready to close on your new purchase and your insurance company sends you a curve ball and asks for an inspection on your furnace.  In a few cases insurance companies have asked for the furnace to be inspected based on information provided in the home inspection report or the age of the home.

Or this is your first winter in your new home and after a month you discover your furnace is no longer working.  Low and behold your furnace has expired and you find yourself seeking emergency services to either get your furnace working temporarily or to install a new furnace for which you will now pay a premium.  The cost to rectify this costly pitfall:

$6,000 to $12,000

If you have a gas furnace and the furnace is old insurance companies will want to confirm there are no gas leaks.

If it is an oil burning furnace the insurance company may want to inspect the proximity to any heat sources, leakage and surrounding contamination and the biggest danger to owning an oil furnace, carbon monoxide leakage.

WHAT TO LOOK FOR TO AVOID PURCHASING A HOME WITH THIS COSTLY PITFALLThe life expectancy of an oil furnace can range from 30 – 35 years, you will need to determine whether the furnace has been property maintained, the amount of oil in the tank, and whether the chimney flutes are clean and free of debris.

The life expectancy of a gas furnace can range from 11 – 25 years depending on the quality and maintenance of the furnace.  Rarely when you look at the furnace will it tell you the date of installation.  However, when dealing with a gas furnace you can often tell the age of the furnace by the serial number.

If the furnace does’t have a serial number there is good chance it is more than 30 years old.  To determine the age from the serial number if possible. Some serial numbers can be interpreted by weeks and years. So a number reading 1193CA4567 would be dated as the eleventh week of 1993. According to Inspectapedia website, in the article, “How to Determine Furnace Age”, serial numbers from furnaces made after the year 2000 are easier to decipher. The serial number might have a six-digit code at the end; for example, 67890-3011606 yields a furnace date of June 2006. To read more on furnace age, click here.

Pitfall No. 4.  You Need A New Roof

The best way to avoid leaking in your home and more costly secondary problems is to ensure the roof on the home your purchasing is in good condition.  Depending on the condition of the roof, if the roof has not been replaced or maintained for a considerable amount of time you may be requiring more than just shingles, you may need to replace the plywood underneath which depending on the extent of the damage can run up your bill into the thousands.

The cost will depend on the type of roof, the size of roof, and the extent of the work:

$6,000 – $25,000

WHAT TO LOOK FOR TO AVOID THIS COSTLY PITFALLSOld Roof Shingles Needing Replacing

Old Roof Shingles Needing Replacing

Too Many Layers Of Roofing Shingles All Will Need To Be Ripped Off Replaced

Too Many Layers Of Roofing Shingles All Will Need To Be Ripped Off Replaced

Before hiring a home inspector, you can often tell the condition of the roof simply by standing back and looking at it.  Are shingles are broken or missing?   Are there multiple layers of shingles already?  You will need to determine if the roof requires a simple patch fix, if you can suffice with a rollover (another layer of shingles) or rip and replace.  If you are not comfortable getting up on the roof to inspect it and you suspect the house needs a new roof you will need to hire someone like a home inspector.

Pitfall No. 5.  The Leaky Basement

You come to a home you think you would like to purchase.  You walk through the living space and your falling in love, you descend to the basement and your nose is hit with a musty smell.  Depending on whether you want to finish the basement or use it for storage, water in the basement can become a breeding ground for hazardous mold.  It is important to source the cause of the water.  Some basements have been constructed below the water table and if this is the case, water seepage has less to do with leaking and more to do with hydrostatic pressure.  Other basement leaks could be caused by cracks in the basement which is in need of repair to simple and less costly repairs like property grading or eaves-trough replacement.

The cost to repair a leaky basement:  $500 – $25,000

WHAT TO LOOK FOR TO AVOID THIS COSTLY PITFALLYou can often smell a damp basement and that is your 1st telltale sign there is a leaky basement.  The next thing you should do is investigate signs of water penetration such as:

Efflorescence ~ the white deposits which indicates water penetration

Efflorescence

Efflorescence

Dark water marks

Dark Water Stains

Dark Water Stains

Mold

Mold

Mold

Pooling in the middle of the floor

Hydrostatic Pooling In The Middle Of The Floor

Hydrostatic Pooling In The Middle Of The Floor

You will need to investigate the cause of the water and bare in mind there may be more than one source.  Inspect the grading of the property, does water run toward or away from the house?  The condition of the eavestroughs, are they hanging down? Do they need replacing?  Also pay attention to where the downspout is directed in relation to the grade of the property.  Believe it or not, although you may think you’ve hired a professional to install your new eavestroughs and downspouts, a professional will know you always install the downspouts to ensure the water runs away from the house not towards it.  You should ALWAYS check the grading and make sure the downspout is positioned to ensure the water runs away from the house.  Next check out the walls of the basement.  If there are problems with the weeping tiles and cracks in the walls you may find the previous owner has attempted to finish and insulate the basement.  Here you may find mold or water staining in the insulation.  Check the plumbing.  Leaky pipes can also be a source of water penetration.  Is there evidence water has been puddling in the middle of the floor? This can be an indication of hydrostatic pressure which will be in indication of a very costly repair.

Your best approach is to try an investigate any signs of water penetration first, then bring in a professional for confirmation.

Pitfall No. 6, Galvanized Steel Pipes

You have been looking at resale homes and have come across a beautiful century home, lots of character and appears to have been renovated.  Low and behold you go down to the basement and the supply pipes like steel.  Galvanized steel pipes were commonly used until the 1950s/60s.  The problem with this type of plumbing is it has a shelf-life of 20 – 50 yrs after which time the zinc layer erodes and it develops a build up inside the pipes for which you will begin to see a reduction in your water pressure.

The cost to replace the plumbing:  $4,000 – $12,000

WHAT TO LOOK FOR TO AVOID THIS COSTLY PITFALLCorroding Galvanized Steel Pipes

Corroding Galvanized Steel Pipes

You may or may not have visible access visibility to all the plumbing in the home.  Below are two ways to check for this costly pitfall.

  1. To test for water flow restrictions, turn off all valves and faucets inside your home and allow them to remain off for at least fifteen minutes. Then, choose a faucet on the lowest floor of your home and turn it on; if there is an initial “burst” of water at good pressure, but the water flow dwindles noticeably, then you may be facing internal pipe corrosion.
  2. Another way to check for problems with your galvanized steel pipes is to examine fittings where galvanized pipes connect with other pipes. If you see white, powdery residue and/or water leaking, then you should suspect that galvanic corrosion is destroying your pipes.

To read more on galvanized plumbing click here.

Conclusion

If you are buying a home and you come across a costly pitfall, you have 1 of 2 options:

  1.  You can avoid buying the house altogether and find another house or
  2.   You can negotiate your offer to account for the unforeseeable cost.

Remember you always have options before you commit yourself to buy the home.  It becomes a lot more difficult to recoup the costs or walk away from a contract after you have committed yourself to the contract.  It is therefore important to educate yourself before so you know your options and have an idea of your costs before you’re stuck paying the bill!

http://www.burlingtonhamiltonhomesforsale.ca/blog/2017/11/4/top-pitfalls-to-avoid-when-purchasing-a-home

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Oakville, Mississauga, Burlington and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on  www.mortgagesbycolleen.ca  or call 416-459-2406

New Possibility: Empty Home Tax

Interesting developments are happening in the Vancouver market.  Toronto seems to be mirroring our western neighbour on foreign buyers tax, so it makes you wonder if the same penalties will be coming our way.  One report states that there are 99,236 properties in Toronto that are not regularly occupied.

Another report, states there are 15-28,000 Toronto homes that are sitting empty. They arrived at this figure based on addresses where electricity and water hadn’t been used in a year.  We have a huge rental shortage here, as does Vancouver.

Vancouver has  a rental vacancy rate hovering at zero and Vancouver renters are in crisis.  That’s a lot of rental housing that could be made available, so owners of residential properties in Vancouver will now have to complete an empty home tax declaration by February 2, 2018.

Penalties for non-filing include an assumption that their property is vacant which means a tax of 1% of its 2017 assessed taxable value; plus a $250 fine for non-declaration.

The tax does not apply to principal residences, properties rented for at least 6 months of the year in periods of 30 or more consecutive days or the following exemptions:  occupancy for full-time work (min. 180 days in the year); estate of deceased; transfer of property; undergoing redevelopment or major renovations; strata rental restriction; court order.

“Housing is for homes first, and as business and investments second – we need a tax on empty homes to encourage the best use of all our housing, and help boost our rental supply for locals,” added Vancouver Mayor Robertson.

I know a client here in Oakville that has 5 unoccupied homes in close proximity to her home and it is very unsettling for many reasons.  Personally, I hope we do institute this new tax as there are just too many reasons why a house should not sit empty and you have to wonder how people can get insurance for fire and theft on their homes when there is no one living there?  Very curious!!

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Oakville, Mississauga, Burlington and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on  www.mortgagesbycolleen.ca  or call 416-459-2406

http://www.mortgagebrokernews.ca/market-update/empty-home-tax-info-mailed-to-vancouver-homeowners-233964.aspx
http://www.metronews.ca/news/toronto/2017/06/12/in-housing-crunch-15000-to-28000-toronto-are-empty.html

Did You Know …​​

Did you know that when a borrower tells a lender they are prepaying the full or partial amount owing on a mortgage, the lender must in writing provide the applicable prepayment charge along with a description of how the lender calculated the charge.  This includes the amount owing on the mortgage, the annual interest rate, the comparison rate used for the calculation and the remaining term on the mortgage that was used for the calculation.

Over the past number of years, I have written numerous blogs about the exorbitant costs of mortgage penalties, which can reach in the tens of thousands of dollars.  Doing your homework and being informed is a consumer’s greatest defence against future mortgage penalties.

No one knows for sure what the future may hold but if there is a chance you may wish to move, downsize, sell your home and travel?  If that is the case, do not take a long term mortgage.  These are the discussions you need to have with your mortgage agent.

Take this case of an Edmonton couple that was initially quoted $17,000 to break their five-year fixed mortgage early.

Many mortgage shoppers tend to put greater emphasis on finding the lowest rate, which may save more money up front but can potentially cost more over the long run.  This is where a broker is very valuable, particularly for unexperienced buyers, as they can help find a suitable mortgage product that balances a competitive rate with the features and flexibility that are right for the buyer.

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Oakville, Mississauga, Burlington and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on  www.mortgagesbycolleen.ca  or call 416-459-2406

Window Of Opportunity

Dear friends, I am writing to give you a heads up of the impact of changes coming to the mortgage industry.  Are you considering refinancing your mortgage?  Come January 1, 2018, that window of opportunity will be closed!!  Let me explain the impact this will have on you, your family and friends.

The most impactful change is to the refinance market.  Let’s say you want to consolidate your mortgage and other debts into 1 mortgage, take equity out of your home for investment, home renovations or purchase another property.  Currently, you would qualify on the rate you receive but with the new legislation, you will have to qualify on the benchmark rate, which is currently 4.89% or 2% above the interest rate you receive, whichever is higher.  (For example, if your 5 year rate is 3.09% + 2% = 5.09%).  What does this mean?  It means this will greatly reduce how much equity you can take out of your home.

Right now, if you were to purchase a home with a minimum of 20% down payment, your debt servicing would be calculated on the 5 year interest rate you receive.  Come January 1, 2018, you will have to qualify in the same manner as above.  This means that the family’s purchasing power will decrease substantially.  Just to give you an idea, a purchase price of around $720,000 would be reduced to around $570,000 which is approximately $150,000 reduced buying power (these numbers are not exact due to variations in property taxes, condo fees, other debts, etc.)

If you think you may need to take equity out of your home for whatever purpose, do it now before the January 1st deadline.  Please call me if I can be of any assistance to you, your family or friends!

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Oakville, Mississauga, Burlington and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on  www.mortgagesbycolleen.ca  or call 416-459-2406

Mortgages Are Incredibly Personal!

Mortgages are incredibly personal and it is important to do your research and know what suits your income level and your lifestyle.  You need to know your pre-payment options with the goal to be able to exercise these options to reduce your mortgage.

Within the mortgage industry, there are 2 groups of people that determine what interest term they will select.  Group 1 takes a keen interest in following what is happening in the industry, the economy, the bond market, the world market and it’s impact on our economy.  The second group selects what they think is the right term but have other priorities in life and deal with i.e. the rate renewal on an as needed basis.

I have clients that only take variable rate mortgages but make their payments based on 5 year interest rates and are able to pay a substantial amount off the principal, hence they are always ahead of the game and rates don’t become the most important factor.

I also have clients that feel the most important aspect is to know exactly what they will be paying for the next 5-10 years so they can effectively plan and budget.  You need to know your capability to be able to make the payments.  There is no point in making higher payments or pre-payments on your mortgage if you have to incur outside debts to pay down your mortgage.

Whatever your needs or motivation, obtain all the pertinent information to help you decide which mortgage term is right for you and your family.  Obtain all the options from someone you trust and respect so you can make an informed decision.

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Oakville, Mississauga, Burlington and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on  www.mortgagesbycolleen.ca  or call 416-459-2406