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Lower down payments, renovation loans easier than ever

Many of us have fond childhood memories of dad loading up the station wagon heading out for a summer long weekend. For some the destination was a lakeside campsite, but for a lucky minority it was the sum­mer cottage by the lake.

But unless you were fortunate enough to inherit dad^‘s cabin, the thought of buying your own piece of recreational paradise can be a daunting task for most young families.

This spring, however, Canadian

Mortgage and Housing Corporation (CMHC) came out with a new program that provides Homeowner Mortgage Loan Insurance for borrowers with more than one residential property. This means that you can now get a CMHC-insured mortgage on a vacation property with as little as five per cent down.

Traditionally, lenders would require borrowers to put more money down on vacation home, usually 35 per cent or more. Even popular destinations such as Whistler required a minimum of 25 per cent down payment.

The CMHC change is therefore wel­come news for those who have been long­ing to get a vacation property but didn^‘t want to wait until retirement to come up with the down payment.

The purpose of this insurance product is to make it more feasible for Canadians to get a second home. It is important to distinguish between a second home and a rental property. This product is not intended to allow an investor to get a rental property with five per cent down.

Renovating the cottage

So imagine you found a great cottage to buy and you qualified for the financing with five per cent down, only to find out that the property is in need of some reno­vations. Did you know that these repairs can now be financed through CMHC^‘s Purchase Plus Improvements program? This product is probably the most under-used and least understood program that CMHC offers. In a nutshell, you can take the cost of fixing up a vacation home and get financing for the purchase based on the completed value not the sales price. Let^‘s look at a simple example:

Suppose someone was looking to pur­chase a cabin on the lake that was suitable for year-round access and the purchase price was $100,000. But the cabin needed a little TLC and repairs to the tune of $15,000. An appraisal would be ordered and the appraiser would be asked to provide two separate dollar values. One would be to confirm the value of the property as-is ($100,000) and the second would be to determine the value of the property upon completion of the improve­ments. If, for example, the value upon completion in our example added $15,000 to the value of the home, a first mortgage could be arranged for 95 per cent of the ^“as-improved^“ value, not 95 per cent of the purchase price. In this case that would be a first mortgage of $109,250, even though the purchase price was only $1oo,ooo.

There^‘s no catch to this, but there is

a condition. The lender will not advance the full $109,250 up front. They will not want to take the chance that the money has been advanced for the purpose of

renovations and the renovations don^‘t get done. In the event that this happened, the lender would then have a mortgage on the property for in excess of the value of the

home. To get around this, the lender will advance 95 per cent of the purchase price at closing ($95,000 in this case) and ask the lawyer to hold the balance in trust. It would then be up to the borrower to secure their own source of funds to com­plete the renovations. Home Hardware, for instance, will typically grant clients a line of credit or Visa card to pay for these costs with a 3o-day grace period. Once the work is complete on the cottage, the appraiser will then re-inspect the property to ensure that the work has been done according to the specifications previously outlined. The appraiser will then confirm that the property’s value has indeed increased as expected. Upon receipt of this report, the lender would then release the funds to the borrower that were being held back in the trust account. The net benefit to the borrower is that they were able to include the cost of their improvements into the financing of the property.

With a little help from these new prod­ucts maybe you can help create some great childhood memories for your kids.

Peter Kinch is the senior mortgage consul­tant and owner at The Mortgage Centre – Canadian Mortgage Team and is the author of ^“The Mortgage Minute^“ heard daily on News 1130 at 5:36 p.m. He can

be reached at 1-866-988-8326, www.peter­kinch.com or [email protected]

Weigh your cash flow and get that pre-approval

Province

While all the signs point to another banner year for the Canadian housing industry — especially across the Lower Mainland, where housing values just keep climbing — buyers should still be cautious before plunking their money down.

While employment remains strong and interest rates are forecast to stay low for a good while, it’s a much different housing market now than during the hot conditions of the late 1980s, when interest rates were much higher and so were down payments.

Now you can get into the market for five per cent down — or even less.

Trouble is, these kind of conditions can produce impatient buyers who want to get into the market — or move up to something nicer — before it’s “too late.”

“The problem is, many Canadians don’t appreciate the impact a large mortgage will have on their discretionary spending,” says Patricia Lovett-Reid, vice-president at TD Waterhouse.

“And the last thing you want to do is become really house-poor by spending too much on your home and not having enough to live on.”

Experts say the first thing you want to do before you start house hunting is to talk to a financial adviser who can help you navigate your way through what a house really costs — and how to finance those costs.

You could easily spend two per cent of the cost of the house by the time you rack up legal fees, transfer taxes and insurance for the new home.

You may want to use a mortgage broker or you may prefer to shop around on your own — which often starts with walking through the door of a financial institution for some advice.

Finding out how much you are good for is a fairly straightforward process that gauges how much you take in and how much goes out.

“One [formula] is the gross debt service ratio so your gross housing costs per month should not be greater than 32 per cent of your gross monthly income,” says Reid.

Now that you’re set to get into the market, it’s important to try not to get emotional about the process of buying a home — because you’ll be tempted to forget that advice you got at the bank and spend money you shouldn’t.

You probably want to avoid getting into a bidding war, because that can be the time when emotion really threatens to overwhelm logic and good sense.

And there isn’t much point in buying the home of your dreams only to find out after the closing date that it’s a money pit because there is a list as long as your arm of urgent house repairs to be done quickly.

And that means you really should make a commitment to buy contingent on a house inspection.

“And I think when the inspection is happening, you [should] walk through with the inspector,” said Reid.

“I mean, what better way to learn about the home you are likely to buy?”

© The Vancouver Province 2005

Sun

CHOKLIT

Presentation centre: 1174 – 1178 West Seventh, Vancouver

Centre hours: By appointment

Telephone: 604-722-8872

Website: www.hillside.ca

Project size: 3 residences

Residence size: 2,850 sq. ft., +1,200-sq.-ft. rooftop deck)

Prices: From $1.55 million

Developer: Hillside Developments

Architect: Arthur Erickson

World-renowned architect Arthur Erickson has applied his more than 50 years in the profession to creating three unique homes from a Fairview warehouse.

The ceilings are an astounding 30 feet above the floor.

“You can’t get those heights within the city nowadays,” Hillside Developments’ Gerry Mallelt comments. “We were able to do it here because it was a restoration of a warehouse.”

Residents will enter from street level through large store-front-style glass doors directly into the living area, its concrete walls inviting the display of artworks.

The main floor here is 600 square feet, but is just steps away is an elevated dining room that leads to a kitchen in the rear.

(The steps throughout the home are clear Douglas fir with stainless steel and glass railings.)

Above the kitchen and an upstairs den is a skylight that floods the spaces with light.

The kitchens, at a cost of $175,000, are done with maple door fronts, stainless steel appliances, backsplash and kicks and feature a 54-inch gas range, wine cooler and Subzero refrigerator.

The upstairs walk-in, mirrored dressing room has an Italian leather floor and custom closets. Italian ceramic tile is used in the adjacent master suite and a free standing, sculptural oval shaped tub is set in the foreground.

A roof hatch, described by Mallelt, as an “engineering feat” leads to the rooftop deck with its panoramic view of downtown Vancouver.

“There’s nothing like this in the city,” says Mallelt.

“It’s an interpretation of European architecture with the long narrow building and open spaces. The detail and quality is unsurpassed.”

He adds one of the three homes is fully furnished so all the residents have to do is pack their suitcases and move in.

© The Vancouver Sun 2005

Sun

Presentation centre: 3423 East Hastings

Centre hours: daily 2 – 7 p.m.

Telephone: (604) 617-0189

Website: www.zoey.ca

Project size: 10 townhouses, 24 apartments

Residence size: 662 sq. ft. – 1,125 sq. ft.

Prices: Apartments from $181,900, townhouses from $334,900

Warranty: 2-5-10

Developer: Westin Management Corp.

Architect: Rositch Hemphill and Associates

Interior design: Helen Hamilton

Zoey, across the street from the Pacific National

Exhibition, is a new-home rarity, available for occupancy now.

The townhouses have their own private roof decks, with unobstructed views (and, for some among us, especially of the hallowed grounds of the PNE and old Empire Stadium site). The apartments’ living rooms open onto 11- X 17-foot terraces.

Views from the townhouses are particularly amazing, in the opinion of marketing manager Sarah Kent, taking in “the whole city, ocean and mountains.” Some of the apartments also have views of Mount Baker.

“Another cool feature is the townhomes have their own private garage. It’s goes right into the units so they walk directly into their suite,” says marketing manager Sarah Kent.

To maximize the views and lights the architect has added large floor-to-ceiling, double-glazed windows.

All of the suites have been constructed in an open concept, with their living/dining areas combined, and have fireplaces as a central focus. The kitchens, best described as modern and sleek, all feature stainless steel appliances, granite kitchen countertops and Shaker-style kitchen cabinets.

The townhome master bedrooms also have two closets, including a walk-in and an 11-foot balcony.

Kent says about 70 per cent of the units have been sold.

© The Vancouver Sun 2005

Sun

There are two moving chapters in Townline’s Metroliving/Six in the City new-home story. One of them is the transformation of the ubiquitous overhead garage door into a residential feature. By pushing a button, does the living room become an extension of the patio, deck or terrace or vice versa? Depends on the time of year might be the the answer from Townline’s Kimberlee Robertson, in a Pappa Bear chair from Modernica in Metroliving’s downtown presentation centre, on Homer Street (Telephone: 604-682-1050). ‘We believe it will be a major selling point,’ her boss, Rick Ilich, says in a news release. “As far as we know, there is nothing like it in any other residential development in Canada.” Additionally, Townline plans to install car elevators — a first for Vancouver — in three of the six buildings. Story, K22.

 

 

 

Townline gives parking a lift in 3 buildings

Car elevators, popular in Beijing, Hong Kong, allow developers to increase the number of stalls on small sites

Westcoast Homes

Saturday, June 18, 2005

Small building sites in downtown Vancouver pose a number of challenges for developers, and one of particular concern for their eventual buyers is adequate parking space for their vehicles.

Townline Homes Inc. thinks it has found a solution for the residential buildings in its Metroliving/Six in the City project, featured earlier this month in Westcoast Homes.

In three of the six buildings, Townline plans to install car elevators — a first for Vancouver.

The addresses are 1241 Homer St., a new building; 1180 Homer St., a heritage warehouse; and 540 Beatty St., another heritage warehouse.

At 540 Beatty, the first two floors of the parking garage will be connected by a ramp but the third floor will have an elevator.

Townline Homes Inc. owner Rick Ilich noted the elevator will allow Townline to increase the number of stalls on the third floor to 20 from 12.

”City staff has been very wide-eyed and cooperative working with us. They recognize more and more [parking elevators] will be coming.

“Otherwise, not many people will want to build on these small properties. It’s complex and expensive.”

Ilich says the cost of creating a parking stall for a site of 120 feet by 120 feet is about $30,000 per stall.

But with a site 50 feet by 70 feet the cost of an elevator parking stall is about $65,000.

City hall urban designer Scott Hein says while the technology of elevator parking is new in North America it is already familiar in large metropolitan cities like Bejiing and Hong Kong.

“We need to learn more about it,” says Hein, adding the city expects parking elevators will be used more frequently as more small infill sites are developed.

In anticipation of that Hein says the city is now in the process of developing a policy around parking elevators.

He says one of the concerns of neighbours of commercial properties wanting to install a parking elevator is the queuing issue that may happen in back lanes.

While a parking elevator was discussed for a boutique hotel, planned at 1380 Hornby, it was not approved because of the restaurant component of the hotel, where the frequency of use for the elevator would naturally increase at peak periods.

The elevator would only be able to take one car at a time to its parking stall.

Vancouver heritage planner Yardley McNeill says, while the kinks are not yet worked out for commercial use, parking elevators do make sense for narrow heritage sites being developed into smaller residential housing projects.

“I think it’s a fantastic idea myself,” says McNeill.

“It’s really progressive on how parking can be handled in a difficult site.”

“I saw the I, Robot movie and there’s a scene of someone getting out of a car left on a conveyor belt and it’s picked up and the car is stacked vertically.

“It’s that quickness and automation. I thought that’s where we are heading.”

In the three Metroliving buildings the homeowners will use a remote clicker after driving their car from street level into the elevator.

They would then ride to their assigned parking level and drive off the elevator to the stall.

Ilich noted the parking elevators provide additional security to prevent car theft.

The other three projects in Metroliving will be a six-storey building with 12 lofts at 1168 Richards St.; 63 condos at 999 Seymour and 38 condos at 531 Beatty St.

© The Vancouver Sun 2005

Peter Simpson
Sun

Almost daily the print media have been publishing reports about our robust housing market. And not just buried in the back with the obits and classifieds. I’m talking front page, above the fold.

Reporters and editors don’t have to dig too deep for newsworthy material – every financial institution, every government agency that deals with statistics, and every housing analyst and economist have released glowing reports about the state of the housing market, particularly throughout the Lower Mainland.

You’ve likely read or heard the stories: The realtor salivating over the fact the home he listed sold for $112,000 over asking price; the empty-nester couple loving the fact they just got $2 million for the home they purchased two years ago for $660,000; or the young man who flipped an oceanview condo for $200,000 more than the pre-construction price he paid two-and-a-half years earlier.

The only elements missing from those newspaper reports were the dancing-in-the-streets photos.

Don’t get me wrong, the homeowners’ good fortune is indeed something to celebrate, and a person in my position can’t help but view the current housing market as a marvellous moment in real estate, but as a father of two daughters, I have this nagging question: Where will my children live?

Not surprisingly, first-time home buyers are concerned with rising home prices. For the past 11 years, the Greater Vancouver Home Builders’ Association has conducted an annual survey of potential first-time home buyers. Although responses to, say, questions about housing preference differ from year to year, the one constant is the universal fear that high prices will prevent them from owning a home.

Last week I had an interesting conversation with a young woman who is our association’s marketing and education co-ordinator. Wendy McNeil, 28, and Tony Dojosefski, 29, currently live in a rented 850 square-foot condo in downtown Vancouver and, spurred on by low mortgage rates and rising real estate values, they are actively searching for their first home.

Tony is a lifelong downtown condo dweller. Wendy grew up in a single-family home in Steveston. Their purchase preference, made after much thoughtful debate, is a townhouse with some semblance of a backyard. To accomplish their goal, they realize they must venture into the ‘burbs.

“The process of looking for our first home is very intimidating. We want to buy a nice place at a price we can afford, but we also understand we must compromise on the location, so we are looking at townhomes in Surrey. I describe Tony as a stereotypical Mr. Urban who is used to 24-hour access to everything, so suburban living will likely be a big adjustment for him,” said Wendy.

Wendy and Tony are still looking for “the one” and expect to make a decision soon.

Don’t wait too long, folks. Land prices are rising, as are the costs of skilled labour, some building materials, and the myriad development charges, taxes and levies imposed by all levels of government.

Architects, developers and builders are responding to these challenges by designing and building communities that use the available land more efficiently. Multi-family projects – highrise condos, lowrise condos, row houses, townhomes – are becoming more prevalent.

Twenty years ago, multi-family housing starts were 45% of the market in the Lower Mainland. This year to date multi-family starts are 75% of the market. In fact, the last time single-family starts outpaced multi-family starts was in 1988. Although not impossible, it is exceedingly difficult for the average first-time home buyer to start off with a single-family home in the Lower Mainland.

Townhome offerings have undergone significant design transformations over the years. In the late ’80s and early ’90s, most were spread out horizontally, many single-storey, all with double garages. Today, townhomes are more vertical, many with tandem two-car garages. The goal, thankfully, is to use land more efficiently and maintain the affordability threshold. Architects and designers, too, have done an admirable job of maximizing interior space. And today’s product choices are wonderful.

So, is this a good time to buy your first home or trade up? This market appears to be the real deal. I recently returned from a meeting of the Economic Research Committee in Ottawa. Three of Canada‘s leading housing economists agreed that the Canadian economy is doing very well, there is no real estate bubble and low borrowing costs will continue to support strong growth in housing.

There are many prospective first-time home buyers like Wendy and Tony, agonizing over what they should do. In my office I have a photo of an old man with white hair and full white beard. The caption underneath reads: “This is the young man who waited for real estate values to come down.”

Enough said.

Peter Simpson is the chief executive officer of the Greater Vancouver Home Builders’ Association.

E-mail: [email protected]

© The Vancouver Sun 2005

Don Cayo
Sun

With their property tax bills up 40 to 60 per cent this year — and in some cases on top of double-digit increases last year — dozens of small and medium-sized businesses in the District of North Vancouver are starting to wonder if they want to stay.

The size of the bills came as a nasty surprise to many because the district had lowered its mill rate a smidgen this year. A lot of the hardest-hit businesses are tenants who pay the tax bill as part of their rent, so they didn’t see the notices of sharply higher assessments on the strata warehouse units they occupy.

Most of these individually owned spaces in large buildings are used for some combination of small offices, storage, and repair or assembly shops. The tax increase is so large that the continued viability of some of the smaller firms may be threatened.

Even more threatened, I think, will be the district’s ability to hold onto its many small- to medium-sized service and supply companies.

It isn’t easy for a company to pack up and move its equipment, inventory and staff. But Greg Stromotich, owner of Koko’s Gourmet Pet Foods, tells me he fears an exodus is under way. Big box stores have already taken over several North Van areas that once were home to smaller businesses like his, he said. And now the tax hike is forcing him and many others to think about pulling up stakes and moving to a more business-friendly community.

The district council seems to have taken pains this year to divide its tax increase — 3.75 per cent in the total amount it collects — evenly among all classes of taxpayers. So the general business category, the one that covers the hard-hit businesses, is, as a group, paying only 3.75 per cent more than last year thanks to a combination of a slightly lower mill rate applied to a modest increase in total appraised value.

The problem is that the category is broad — it includes things like hotels and restaurants, as well as warehouses and repair or assembly shops. And the increase in assessed value was anything but slight for some businesses in the category — the ones located in those briskly traded strata units that command an ever-higher selling price.

A number of businesspeople, like Bill Donaldson of Donaldson Ropes Ltd., have been seeking a meeting with Mayor Janice Harris for more than a week, and on Thursday she agreed to meet with them. But she told me in a phone conversation that she doesn’t know what she can offer by way of short-term relief. And, for that matter, neither do I.

The appeal period is over, and the several appeals that I know about have all been lost, which suggests the soaring assessments reasonably reflect current prices.

Harris said a lot of other North Van businesses in the same category have seen their tax bills go up only three or four per cent this year — comfortably within the ballpark you’d expect given the modest increase in the district’s overall budget.

So it’s hard to argue that there should be a large and sudden decrease in this category’s tax rate. It would mean windfall savings for a lot of businesses whose assessments haven’t soared, and it would increase the burden on other categories of taxpayers. That’s especially unlikely to happen given that the district lost $1.1 million in budgeted revenue this year when, in a completely unrelated case, Western Terminals won huge concessions in a court appeal of its tax assessment.

Mind you, there’s still a case for an urgent and serious review of business tax rates in the district.

Two years ago, a Canadian Federation of Independent Business survey showed North Van’s business tax rate to be 3.37 times greater than its homeowners’ rate. That compared poorly with a provincial average of 2.42 times higher. And since then, the ratio has grown to 3.92 times greater — one of the worst in B.C.

Fixing this ratio will require a commitment over time, so it won’t do much for businesses hit with a too-big-to-swallow increase this year. But the council should still waste no time making a commitment to rein back its business tax levels to be in line with province-wide norms. This would at least give hard-pressed business a little confidence that things should get better in the long run if they’re able to tough out this very difficult year.

© The Vancouver Sun 2005