Canadian House Price Forecast

December 22, 2004


Royal LePage has forecast that the average house price in Canada to rise by 4.5% in 2005. RE/MAX issued a similar forecast, predicting average house price to rise by a more bullish 6%. Here is a comparison of the forecasts for various cities:

City Royal LePage RE/MAX
Halifax 1.7% 8.0%
Montreal 5.0% 6.0%
Ottawa 4.5% 6.0%
Toronto 2.5% 3.5%
Winnipeg 6.0% 3.0%
Regina 5.0% 4.5%
Calgary 6.2% 5.0%
Edmonton 7.0% 12.0%
Vancouver 3.0% 8.0%

Increasing home prices might make us feel a little bit richer, but in reality, property taxes are probably going to rise. If we stay in the same city, we are only moving from one high (or low) priced house to another. Unless we move from a high housing cost city like Vancouver (av. price $387,000) to Winnipeg (av. price $120,000), or make a speculative move like moving to a rental house, increasing house prices are neutral to slightly negative for most of us.
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Pre-pay your Mortgage

December 12, 2004


Most mortgages come with pre-payment previleges (e.g. upto 20% of the principal in any 12 month period). Since mortgage interest is not tax deductible in Canada, making a pre-payment is a very smart move, especially in the early years of a mortgage. When a pre-payment is made, it immediately reduces the principal balance on the mortgage. The interest portion of future payments also decreases. It is equivalent to getting a tax-free guaranteed return on your money.
Let us assume a $150,000, 5% mortgage, amortized over 25 years. Let us also assume that we pay an extra $150 every month. Over the life of the mortgage, we can save more than $30,000 and become mortgage-free 6 years earlier. A very useful mortgage payoff calculator can be found at Dinkytown.net.

Save Money on Morgages

December 11, 2004


When we bought our home, we first went to our local bank to arrange a mortgage. The bank offered us 1% off their posted rates for being “valuable clients”. However, Invis, a mortgage-broker who can arrange a mortgage from many sources, was able to offer a mortgage 25 basis points less than the “best rate” from our bank.
For a hypothetical example of a $150,000 mortgage with a 5 year fixed-term, amortized over 25 years, a 4.8% mortgage will be about $2300 cheaper over 5 years than a 5.05% mortgage.
A lower interest-rate should not be the only consideration in a mortgage. Banks may offer to set-up a secured line of credit along with a mortgage. They may offer better pre-payment terms. However, it is wise to shop around and haggle a little bit and put some extra cash in our pocket.