Recently, there has been a lot of talk about mortgage rates going up, this seems to be the general consensus, but the only reason for this increase that I keep hearing is “it can’t be this low forever”.  Since I’m in the market to buy a condo in downtown Toronto for myself, I decided to do some more research on this topic and will share what I learned. Conventional mortgage rates follow bond yields very closely. Here’s an example using the past 10 years worth or weekly rates; both the 2-year bond yield (GRAY) and 1-year fixed conventional mortgage rate (RED). Please do not confuse bond yield with bond interest rate, as mortgage interest rates have an inverse relationship with bond interest rates.

The question then becomes: what causes the bond prices to rise and yield to decrease?
The answer to that question is quite complex, but in simple words, when government backed bonds are perceived as the safest investment, prices of bonds increase (thereby reducing their yield since they pay a set amount of interest no matter what the price).  This can be seen in the recent economic melt-down; where subprime mortgage-backed securities turned out to be overpriced, investors turned to bonds to keep their money safe which drove yields downward.

When will they go up?
In the chart it’s evident that the bond-yield has reached the bottom and it’s slowly starting to recover (gray line). This means that mortgage rates will soon follow and slowly start to increase by June 2010. As the economy recovers, so will the bond yield and therefore you and I will need to pay more interest on money borrowed in the form of a mortgage. After reading numerous reports, my prediction is that we will see only a slight increase in interest rates during 2010 since the economy will not recover overnight. Will this be a good enough reason to abandon the all-time low variable rates in favor of a 5-year fixed mortgage? I will explore that in Part 2 of this series.

When making an offer on any property, it is often wise to attach conditions. Three of the most common conditions on an offer include financing, property inspection, and legal conditions. In some markets, for example downtown Toronto condos, Realtors coordinate an offer date and expect competing offers. In these competitive circumstances, an offer with several conditions may be skipped over in favor of a lower offer without conditions.

This is one place where fear and emotion can kick in. Buyers are often pressured by agents into making unconditional offers based on the fear of losing out on a great deal. Unfortunately, making such offers can come back to bite you in the end. If you have your financing lined up, and are clear on your strategy, the one condition you still need is the home inspection clause.

Having a qualified inspector go over the property with a fine tooth comb usually costs between $250 and $500, but is a worthwhile expense to make sure you know what you are buying. The last thing you want to do is buy someone else’s problems, and for a small fee this can be avoided. Some of the things a home inspector will look at include:

• structure and foundation
• evidence of leaks or mold
• heating and cooling systems
• electrical system and appliances
• plumbing system and gas lines
• safety devices
• interior structures (walls, door frames, ceilings, stairs, etc.)
• windows
• roof and drainage
• garages, porches, and decks

Having a home inspector examine your potential purchase (after an accepted offer) will identify any problems ahead of time, and allow you to make your purchase with confidence. If there are any big problems, you can walk away from the deal. As a bonus, if the home inspector identifies some small problems you’d like to fix, you can often negotiate abatements with the seller.

So, when you’re ready to make your next offer, talk to your Realtor about adding an inspection clause and avoid buying other people’s problems.

Winter season is generally slow for rentals. At The Rentables, we see this by the amount of time some listings remain posted, and the reduced number of searches performed on Google for rental related key words. If your unit is vacant and you’d like to have the luxury of throwing up a “Sorry No Vacancies” sign, you may want to consider the opportunity cost of charging lower rent over the year.

Let’s consider the following scenario:
Your monthly rent is $1,000, but you can rent the unit a lot quicker if you reduce your monthly rent to $900. If your unit stays vacant for 2 months at $1,000, then total rental income for the year is $10,000 [1,000 x 10 months], where as if you rent a unit out right away for $900 by undercutting your competition and keep a good tenant for the year, you’ll collect $10,800 [$900 x 12 months].

Under California Law there is currently no maximum limit for rent increases. (This does not apply to Los Angeles and surrounding cities where maximum rent increase is 5% for rent and 2% for gas and electricity if landlord covers utility expenses.) Tenants are a lot less likely to move out during the winter and you may be able to collect your $10,800 and then raise your rent back up to $1,000/month once the lease ends. If you plan to use this tactic, be sure to use an appropriate lease and provide the required 60 days notice.

This option may not be right for everyone, and the purpose of this blog entry is to help you consider various options that you have as a landlord.

This may not apply to many of our readers,  but if you’re one of the unlucky ones caught doing something, or having something awkward going on in your front yard when the Google Street View car snapped a picture of you, then you may want to keep reading.

More and more people choose the Street View option to explore the neighbourhood before they move into an area, and having a bad picture may hinder your chances of renting out your property. Now, when we say bad, we mean burning house bad, planes crashing bad, or vehicles combusting infront of Houses in Toronto, Ontario bad; unfinished front yard or a neighbor’s rusted car will not get you off the hook.

If you’re not sure how your property looks on Street View, go to maps.google.com, find your address, and “walk” around to see what your property looks like from every angle. You can request for a picture to be removed by clicking “Report a problem” in the bottom left corner and then providing a sufficient information to have that picture removed or that area blurred out.

For more funny Google Street View images, check out http://www.streetviewfun.com/