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Cost of Owning The Average Fort McMurray Home

If you’re new to town, or thinking about moving to the “Great White North”, then you’ve probably heard horror stories about the cost of living in our region!

A member of the public reached out to us this week and wanted to get a sense of what it might cost (monthly) to own a home here, so I decided that this week’s post would simply answer that question.

No Longer Crazy

Before getting into the “meat” of the subject, I wanted to outline an interesting point…

Fort McMurray is relatively expensive compared to plenty of places, but in recent years, home costs here have adjusted down, while, in much of Canada, prices have risen. This has taken some of the sting out of Fort McMurray home ownership.

That being said, there are many costs, related to the actual owning of the home, which have been rising, and therefore, somewhat offsetting those lower home prices.

Let’s look at some of these costs, starting with the mortgage!

Average Mortgage Cost - Today: $2,546.15

In the past, it was common for our clients to purchase homes with 0% or 5% down and amortize the loans over 35 or 40 years.

Today, I find that the most common mortgage that my buyer clients secure look like this:

25-year amortization 5-year fixed rate 15% down payment

I think, in part, this is due to tighter federal lending rules, but also because during harder times, there has been a resurgence of prudence - a new-found financial conservatism if you will (we always support careful thought!).

$600,000 is what you could expect to pay if you were going to purchase a brand new, fully developed “jewel box” 1,500sqft 2-storey home with a double detached garage in the rebuild area of Stonecreek (north of the bridge).

I took a poke around the RBC online mortgage calculator and it tells us that a mortgage on a $600,000 home for with the terms listed above would cost $2546.15 per month. Eric Dunham, RBC mortgage specialist, can be contacted through the page we have made specially for potential buyer clients.

That’s now, but what about the future? Well, it’s a double-edged sword:

On the one hand, home prices are falling.

On the other hand, the general consensus is that mortgage rates are due to go up. If they rose 75 basis points (e.g. if we plug in an extra 0.75% into RBC’s mortgage calculator), then in 18 months, for a $600,000 home, the mortgage payment might be $2,754.98.

Based on the average home falling to $550,000, however, assuming the same mortgage terms, despite the higher interest rate, the monthly payment would remain relatively unchanged from today at $2,525.40.

Municipal Taxes - $236.85

This is a deeply political issue and a crucial one for locals.

The first thing to clear up is that, unlike in most Canadian towns, cities, and municipalities, there is ONE municipal tax rate for residential properties in Wood Buffalo.

Annually, city assessors estimate the value of homes and multiply their estimates by this tax rate (known as the “mill rate”).

The other significant piece of information to digest is that today and for all years in recent memory, the residential municipal tax rate has been extremely low compared to the tax rates of most other local governments throughout the nation. This is because the value of commercial and industrial assets in the region are so high that huge sums have been levied on businesses that have operations in the tax jurisdiction.

For 2017, the total tax rate which a residential property owner pays is 0.474% per annum (0.039% per month). For a $600,000 home, this would be $236.85.

Through Bill 21, The Alberta Government is attempting to make sure taxes on businesses are relatively stable compared to residential taxes throughout the province. The consequence of this is that if the bill is implemented without exception, then either commercial/industrial tax rates would need to come down, or residential ones would need to rise (more likely both). While Bill 21 is a provincial regulation, it is a hotbed issue locally because it would impact local residents and the municipal budget negatively. Local politicians vying for votes have different ideas about how to avoid or mitigate this.

In the worst case, the local municipal tax rates could at least double over 5 years.

When costs of homeownership increase significantly and quickly like this, they can negatively impact overall demand for homes and therefore prices (all other things being equal).

My take? Watch for the introduction of different tax rates for luxury properties, etc. I’d be surprised if home owners escape fairly significant increases in the tax rate. Who knows!

Clearly, these issues are something that local homeowners and potential home buyers will probably be keeping a close eye on.

You can learn about Bill 21 here.

Utility Bills - $350

Our experience with home ownership and speaking to clients and reviewing bills leads us to the general conclusion that most people pay an average of $350 a month for a brand new home of this type for natural gas and electricity combined (heat, hot water, light, electrical outlets & appliances). This tends to rise in winter due to higher heat loss causing the natural gas bill to rise, and also in summer due to higher electric bills when using the A/C.

But what about the future?

Utility costs are set to rise modestly due to the carbon tax (they could fall if it is scrapped). You can learn about the tax and rebate here:

Here’s how Alberta’s carbon tax works

The government pegs the indirect costs for higher prices on goods and services at around $50 to $70 per household this year. Already some companies have alerted clients of higher prices due to the carbon tax.

Around 60 per cent of households will get a rebate. Full rebates will be provided to single Albertans who earn $47,500 or less, and couples and families who earn $95,000 or less.

Approximately six per cent of households will get a partial rebate. The income levels for a partial rebate are up to $51,250 for a single person, $100,000 for a couple, and between $100,750 and $103,000 for a couple with children.

The full rebate amount is $200 for an adult, $100 for a spouse and $30 for each child under 18, for up to four children. Single parents can claim the spouse amount for one child, and the child amount for up to four more children. read more at edmontonjournal.com

Homes built under last fall’s new building code (that is, all new homes) have higher R-values (they are better insulated) and this tends to bring down heat loss/gain and therefore costs associated with heating or cooling your home.

On balance, let’s say that the $350 cost might move to $400 per month.

We recommend getting quotes from several energy suppliers before committing to a plan.

Garbage & Water - $60

Currently, the RMWB charges approximately $60 per month per household for regular family usage of these services (water is metered).

Home Insurance - $200

Call insurance companies for quotes (all policies differ), but commonly our clients reference numbers in the range $100-$300 per month. We have also noticed that these rates have increased since the 2016 wildfire.

Cable & Internet ~$150

Again, please don’t rely on our estimates (call companies for quotes), but $150 gets us a good cable, phone and internet package.

Total Monthly Costs of Homeownership - $996.85 (plus mortgage payment)

If you want to play it safe, budget $1,100 to $1,200 a month for costs to run the average Fort McMurray home.

Typically, older homes with more heat loss (bungalows, bi-levels with larger roof footprints, heated garages with on-grade slabs) cost more. So do homes with specific features that add insurance risk (wood burning fireplaces).

The other noticeable trend in the above costs is that many of them are likely/set to increase over the coming years. This may, in turn, reduce demand for homes and prices.

Depending on the home you choose, and depending on your own choices (for example insurance), the above list may not be a complete one, so do watch out for additional costs. Check out this handy calculator from the Canada Housing and Mortgage Corporation if you don’t want to miss any.

Budgeting is a really helpful part of your market research because once you and your family/financial advisor have discussed monthly budgets in detail, then you can calculate the price range of homes to look at that will deliver properties that satisfy that monthly budget!

Buying a home is a thrilling journey so enjoy the ride! Please do look after yourselves and know that if you and yours need quality advice, we have specialist buyer’s agents here to help.

Cost of Owning The Average Fort McMurray Home See more on: https://ateamymm.ca

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New Post has been published on Mortgage News

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What's the Difference Between a Mortgage and an Auto Loan ... - Zing! Blog by Quicken Loans (blog)

What are the biggest loans you’ll take out in your lifetime? If you’re like most people, they’ll be the ones you use to finance the purchase of your home and car.

But aside from the sizable financial commitments that come with these jumbo-size loans, mortgage and auto loans don’t have as much in common as you might think. In fact, you’ll find differences in everything from the credit scores you’ll need to qualify for these loans to the time it takes to close them.

In short? Auto loans are a big deal. But qualifying for and closing a mortgage loan takes more effort and paperwork as well as better credit.

The reason for this is simple: Car loans are big loans. But mortgage loans are even bigger. Lenders take on more risk when lending you the hundreds of thousands of dollars that you’ll likely need to finance the purchase of a new home, so you should expect the application process for a mortgage loan to be far more rigorous.

“Perhaps the biggest difference in the application processes between mortgages and auto loans is the fact that your lender will scrutinize your credit history much more closely whenever you apply for a mortgage,” says Michelle Black, president of Fort Mill, North Carolina-based credit-repair firm HOPE4USA. “Since you will likely be applying to borrow much more money when you take out a mortgage, this, of course, makes sense.”

The Credit Hoops

When you apply for a mortgage loan, your lender will look at all three of your credit reports, which are maintained by the national credit bureaus of Experian, Equifax and TransUnion. Mortgage lenders will scrutinize each of these reports in-depth, looking for any potential warning signs – such as late payments, high credit card debt or past bankruptcies – that could label you as a high risk to default on your monthly mortgage payments.

Black said that when you apply for an auto loan, lenders will still study your credit report. But they will usually look at just one of your three reports, Black said.

“This potentially makes your approval for auto financing much easier,” she explains.

Credit Dings Hurt More

If these reports are filled with credit dings, qualifying for a mortgage loan might be near impossible, according to Black.

For instance, if you filed Chapter 13 bankruptcy, this financial misstep will remain on your credit report for seven years. A chapter 7 bankruptcy will remain on your report for 10. Black said that most mortgage lenders won’t approve you for a mortgage loan if a bankruptcy filing is relatively new. The same can be said of a foreclosure, which will remain on your credit reports for seven years.

But auto lenders, again because they are passing out less money, might be more willing to overlook these financial setbacks.

“These same red flags can make it difficult to qualify for an auto loan and can certainly lead to higher interest rates and less attractive terms,” Black says. “However, they are not necessarily deal killers as they would likely be in the mortgage world.”

Risk-Tolerance

Bob Lonergan, vice president of sales enablement with Bozeman, Montana-based Zoot Enterprises, which offers instant credit and loan origination solutions for financial institutions, said that auto lenders are frequently willing to take on greater risks when lending to consumers.

“The auto industry wants to sell more cars,” Lonergan says. “To do this, they’re willing to take on a higher level of risk, so they’re more willing to lend to customers who don’t have perfect credit.”

Realize, though, that while auto lenders might be more willing to loan money to borrowers with credit issues, these credit-challenged borrowers will have to pay higher interest rates. Auto lenders aren’t as risk-aversive as mortgage companies might be, but they’ll still protect themselves financially by charging riskier customers higher rates, according to Lonergan.

“It’s true that it’s easier to qualify for an auto loan than it is for a mortgage,” Lonergan says. “But credit issues will still hurt in some way, no matter what type of loan you are applying for.”

Paperwork

There is one area in which mortgage and auto loans don’t differ: the paperwork you need to prove to lenders that you’re a good bet to repay your loan on time.

Lonergan said that you should expect to come up with plenty of paperwork, whether you’re applying for a mortgage or an auto loan.

For instance, you might need to provide copies of your most recent pay stubs, tax returns and bank account statements when applying for both auto and mortgage loans. You’ll need to provide proof of auto insurance when applying for an auto loan and proof of homeowners insurance when applying for a mortgage.

“There is always paperwork involved,” Lonergan says. “That is changing a bit. But you will still have to provide documents to verify you can afford the loan you are taking out.”

Time

Finally, there’s time. Earning approval for a mortgage loan is far from a quick process. Approval times will vary, but you can expect to wait from 30 to 45 days – sometimes longer – to get full approval for a home loan.

Getting approved for an auto loan is a far quicker process. You can usually receive a loan from the dealer the very day you buy your car, if you have solid credit. It’s often financially smarter, though, to get preapproved for an auto loan from a bank or credit union before heading to the dealer. These lenders will often provide lower rates, and having a loan in hand might also convince dealers to offer you a lower rate on their own financing.

If you plan on making either of these purchases soon, it’s important to check your credit score and touch base with your financial advisor.

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