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—The Mortgage Report: Oct. 5—
- Upstart iBuyer, Properly.ca, announced a $100-million credit line last week from Silicon Valley investors, enough to fund its nationwide growth, says CEO Anshul Ruparell. The company’s expansion will broaden options for people who want a no-stress way to sell their existing home while they go shopping for a new one.
- iBuyers, as we wrote in August, make quick guaranteed offers to home sellers. They provide a useful service if you:
- Need to show a mortgage lender that you have a firm sale (so you don’t have to prove you can carry two mortgages)
- Aren’t confident your home will sell quickly
- Believe home prices could fall and you want a backup bid.
- When Properly lists a home for sale, it offers the seller a guaranteed sale price that’s about 93% of the current estimated value. But from that, you have to deduct its 5% commission.
- “Properly will always purchase the home from our customer at the agreed upon price if it hasn’t been sold within 90 days on market,” says Ruparell. “Our customers can cancel their contract with Properly at any point in time, but Properly does not retain that same option….If Properly then resells the home for more than the price paid to the seller, 90% of any upside will be refunded back to the seller. “
- As an added convenience, for sellers who are moving to a new property, Properly waits to list their home until they move out.
- “Our customers come to us because they want to unlock their current home’s equity before having sold it (and without needing to live through showings and open houses) in order to buy their next home,” says Ruparell … Properly will professionally repair, clean, stage and market their home so that it sells for the highest possible price. It is only in the unlikely event that the home hasn’t sold within 90 days after they’ve moved into their new home that Properly will purchase their home at 93% of the originally estimated selling price. Most homes in Toronto sell on market in less than 15 days, and so if the customer ends up selling their home to Properly it is because nobody else was willing to pay more than Properly’s offer and, as a result, it is likely that they are actually selling to Properly at a value that is at or above market value.”
Another Record Low 5-year
- Just when you think 5-year fixed rates might have bottomed, the floor drops more. The lowest 5-year fixed rate in Canada is now down to 1.44% in Ontario. It applies to high-ratio default insured purchases only.
- That’s just 107 basis points above the benchmark 5-year government yield, a very small markup by historical standards. Over the long-run, this “spread” is closer to 150 bps for typical discounted mortgage rates.
Latest Econo-Chatter
- Here’s a look at what economists’ latest rate prognostications mean for mortgage term selection: Economist Rate Outlook: October
Spread Trouble
- The difference between what North American banks earn on loans and what they pay depositors is the lowest in history.
Also of Interest…
- Paying your rent on time may finally boost your credit score.
- The Aussies have deregulated their mortgage market to boost lending: “…We want banks to make some loans that actually go bad, because if a bank never makes a loan that goes bad it means it’s not extending enough credit.”
10 Comments
Very exciting news on the ibuyer front.
Hopefully they will be able to expand quickly as it seems that they are only operating in Toronto and Calgary right now.
I am working on getting my dad’s house ready to sell and this service would be great considering it all falls into the 5% cost range.
I am not a fan of realtors in general, but from the description it seems that iBuyer is actually bringing value to the table (rather than marketing speak).
The realtor market needs a huge shakeup and hopefully this could be a real start.
Variable rates are your friend more often than fixed rates.
Hi Spy!
I got another question I have been wondering: with the currently much lower interest rate, when renewing/refinancing a mortgage, would I want to maintain a similar monthly payment and shorten the amortization period or would I instead want to keep the amortization period and save/invest the extra cash? I’m thinking for the latter option, if the cash has nowhere to go, it could still go making prepayments, which makes it the former way with extra options?
Thanks!!
Hi Neo, It’s a great question for your financial advisor, but what some people do is keep payments high, hammer their mortgage and then reborrow the paid-down principal (using a readvanceable mortgage) to invest. If structured in a CRA-compliant manner where the borrowed funds are used to buy income producing investments, the interest is tax deductible. This is not advice and it must be suitable for the individual, but it can be a powerful strategy over time.
Not sure this is something that would appeal to me, but I’m certain it will be a crucial service for a great many people, and the fees seem reasonable to boot. I’ll be interested to see how this business model evolves over time.
Hey J Banks and Refi-Guy,
Absolutely. There’s going to be more competition in this space and it could evolve faster than many expect. Someday there will be a market of iBuyers ready to bid on your home. That’ll yield meaningful benefits because it’ll tighten the bid-offer spread and create more liquidity for what has always been a less liquid asset (real estate).
If I were selling a condo in Toronto right now I would ONLY use Properly. Prices are plunging and Properly’s 93% offer may look pretty good next month!.
Regarding high ratio default insured mortgages, is there any reason you can’t get insurance on a mortgage less than 80% LTV? Will insurers insure it? Next question being does securing that lower mortgage rate/payment offset the insurance costs?
Hey Scott,
If a low-ratio mortgage (
@Refi-guy
How do you figure variable is better when rates on 5 fixed mortgages are lower? Please explain that math.
Thank you very much Spy!!
Learned something new again today!