Start The New Year Right

by Darrin DeRoches January 6 - 12, 2011

Let’s start off the New Year talking about money. I received this email  “Hello Darrin , I read your column in View, and would like your thoughts on how one should proceed with mortgages given the climate of the day;  a variable, a fixed,  what do you think  a home buyer should do?  We purchased a home and take possession in March, so we are watching what happens bank wise with mortgage rates, but would like your input, on what you would advise. Enjoy reading the tips on real estate, thanks”     My response was to shop around for the best deal and sign a five year closed mortgage.  Seems simple enough but here’s why.  Mortgage rates are the lowest they have been in decades.  We seem to forget that about a year and a half ago rates were at six to seven per cent and they were considered affordable.  Ten years ago I signed a commercial mortgage for 18 per cent.  I am now negotiating an eight per cent renewal. We should be dancing in the streets with all these low rates around.  The ‘climate of the day’ is to sign for as low and as long as possible. The rates will hold until the latter part of the year so to sign a variable and wait it out, may be advantageous, but to most consumers who are looking to just sign and forget about it – do exactly that – sign a new mortgage and forget about it for five years.     Another example of low rates is the new percentage in allowable rent increase this year for landlords.  The government just posted a .07 per cent allowable increase. This is the lowest increase in 35 years! Wow. Good news for everyone renting since the increase will be neglegible.  What I do not understand is the introduction of HST and the increase in hydro will kill most landlords.  For those tenants who pay their own gas and hydro – the increase works since they have to bear the increase costs.  The landlords who pay hydro are screwed.  Yes I am taking the side of the poor landlord.  The allowable increase will not cover the higher costs of hydro and any increase would not cover it – anyways – but what is the government thinking?  The lowest increase in 35 years?  How do they figure it out?  There will be a ton of landlords applying for a larger increase in rent which will cause a big backlash from tenants etc.  Hydro can increase as they deem fit and the government can create all these green initiatives but who is paying for it? This time it is the landlords and those who pay their own hydro – happy New Year!  V                          Darrin DeRoches is a local real estate and mortgage broker. He can be reached to answer questions, comments or stories about real estate experiences through this weekly column at mail@uniquerealty.ca.