Residential Mortgage advice please

[sherry]

Hi,

My son is purchasing a new half duplex in Edm. (new build) these are the fixed rates offered to him from ATB. I havent been quoted a floating rate as of yet. He is considering selling next yr. I requested a "transferable mortgage that would not impose penalties or fees. There is a 3 month interest only penalty for a buy out. I deal in commercial mortgages for I own several properties in Peace River, so I am not fimilar with residential mortgages. Any advise would be greatly appreciated.

Thx so much!

1 year 2.89

2 year 2.95


3 year 3.19


4 year 3.29

 

[CurtisSvidal]

When is the sale closing....pricing for new construction closing outside a normal 120 day period is usually higher as there is a premium for the extended rate comittment period. Having said that the rates look good.

The transferable I assume refers to a portability option...moving the mortgage from one proprety to another. These are still legally a new mortgage with most lenders/mortgage insurers requiring some level of re-approval. Also I believe that to use this option with ATB the new property has to be within Alberta as that is their lending market.

 

[sherry]

Thx!



I decided on a 1yr fixed rate of 2.89%, as he is considering selling after one yr. He can sell without imposing any penalties or fees after the 1 yr term as well as the mortgage will be assumeable.



Previous to my revieew he had decided to go with th 30 month at 3.09%...the floating rate would still be locked in for 5 yrs and it would be at prime rate currently at 3%... this is where if he pays out and does not purchase another prop. a penalty would apply.



So after I examined things a little closer I felt the 1 yr fixed made the most sense.



The duplex should be completed by end of July, (he made a substacial down payment) so there shouldnt be a premium for an extended rate.... I was thinking these rates were a few bases points higher than they should be but havent made the time to shop them around, what are your thoughts?

Thx

 

[Thomas Beyer]

if you envision a one year hold only you should rent, and not buy a house, UNLESS you can buy significantly below market, perhaps because it is in a newly developed, rapidly expanding suburb.



Whether the rate is 2.8% or 3.2% is irrelevant in a one year transaction.



Don't major in minors !



Real estate has relatively high transaction costs, such as legal fees and especially realtor costs on exit (3-5%) and a possible is easily eaten up !



Also missing in your question is the % of downpayment, i.e. 20% or less as CMHC fees of up to 4.5% eat up even more of your potential profit.



Investing in real estate assumes a 5 year minimum hold to allow for some time to elapse to capture some (likely, but not guaranteed) equity upside in a rising market like Edmonton.

 

[sherry]

Thank you I agree.



It just so happened that my son decided to purchase the duplex last yr.. (unbuilt at the time) there has been a change of events... my husband and I own several commercial prop. in Peace River we made a recent purchase of a property that is currently under extensive renovations...my son has agreed to lease the new property and operate the business that is in the bldg. So he is undecided on what to do with the duplex...it is in Summer Side on the South side of Edm. and should rent out easily. What you have said in your email makes perfect logic I have thought the same and your email is confirmation! A five yr plan with good renters is a more feasable and realistic approach. He is hoping for $1500. a month plus utilities... I dont know the Edm. market well so I will need to research. Thx again!