It’s the equivalent of a vehicle history report, but it’s for any resale home or condo in municipalities across Canada, explains Alex Weiner, president of Home Verified, the company that produces the report. It costs $70 and the current owner must provide consent.

Much of the information can be sussed out in other ways for free, but for homebuyers who are short on time and concerned about crime and insurance claims, this report is a good investment for a little peace of mind.

If you’re planning to buy, you don’t have to worry about buying high if you stay well within what you can afford and don’t plan on moving anytime soon. Buying a home you’ll stay in for the very long term doesn’t require market timing. Over the long term–think 15 years or more–your home will be one of your best investments. Of course, you have to be able to hang on to it that long, which is why over-extending yourself makes no sense. You want something that’s comfortable to manage now, and when interest rise, as they most certainly will.

If you’re planning on selling within the next five years, then sooner may be better than later. Did you plan to downsize when you retired? With five or less years to go, capturing your equity now while markets are still flush makes good sense. Looking to upgrade to your forever home? You might want to wait. Lower priced homes tend not to lose as much value while more expensive homes tend to feel the drop most. After a correction you may get almost as much for your existing smaller home, while you save substantially on the upgrade home you buy.

If you’re staying put, stop spending your equity. Negative equity–owing more than your home is worth–sucks, and if you keep tapping that equity through lines of credit or by consolidating debt to your mortgage, you’re putting your home’s value into the grey area should a correction come. Yes, it may be very tempting to pull on all that equity you built to have a fabulous family vacation or to finance the start of a new business. But if that equity disappears in a market downturn you’ll feel the gut-wrenching horror of having to write a cheque to the bank to cover the shortfall should you have to sell your home.

Real estate, like every other investment, runs in cycles–sometimes up, sometimes down–and every homeowner should be prepared for both sides of the cycle. Knowing what you’re going to do next will help you make the right decision about what to do with your home and your investment.

Outside of those programs, if you try to withdraw money from your RRSP you’ll usually be hit with a steep withholding tax—as much as 30% of the money you withdraw. That penalty will eventually be refunded if your income is low enough though.

StatsCan also reported on the number of municipalities issuing building permits in Nov. Building permits totally $6.2 billion, down 17.9% from Oct. and the lowest performance since Jan. 2012. The building permit decrease follows a 15.9% increase in October.

In 2010, when it seemed like another economic collapse was imminent, the spread between variable and fixed rate mortgages was about 170 basis points. Today’s it’s closer to 30. In fact, a friend of mine recently got a five-year fixed rate mortgage for 2.89%, which is a mere 29 basis points above a variable rate. Such deals are easy to find across the country.

Mark Fidgett, a Vancouver-based mortgage broker, believes variable mortgages only make sense when there is at least a one-percentage point spread to fix rate mortgages. The danger, he explains, is when rates rise. If the Bank of Canada increases the prime rate by, say, 25 basis points then variable rate mortgages will also increase by that much.

So if that happens you’ll simply lock in to a fixed rate then, right? Well, by that time, these incredibly low deals on fixed mortgages will be long gone. Robert McLister, editor of the Canadian Mortgage Trends website, explains that fixed rates are based on bond yields, which typically rise in advance of the prime rate. “You get people with variable rates thinking they’ll lock in at the right time, but nine times out of 10 they’re late,” he says. “Bond yields have already moved and so has the fixed rate.”

Of course, you can take the view that rates won’t rise for years, as one expert did in Carrick’s story. Then, technically, variable will save you money. But like investing, timing the marketing can be dangerous. No one knows for sure how the economy will do. If the economy performs better than expected, the BoC could raise rates earlier than expected. While it’s unlikely—some argue the BoC will wait for the U.S. Federal Reserve to increase its rates in 2015—but you never know.

Even if rates don’t rise until 2015 it’s impossible to know what fixed rates will be at that point. Fidgett thinks that we’ll see fixed rates around the 3.25% to 3.5% range for the next year, but it’s not unreasonable to think that rates will get back to 5% in the not to distant future. “It wasn’t long ago that those were great rates,” he says.

One argument variable rate fans make is that over time, they tend to save people money. But it’s hard to make that case when rates have little or no room left to fall. “The odds of variable outperforming are far less then they have ever been in the past,” says McLister.

There is one good reason to get a variable rate today: if you’re planning to sell a house within five years. Breaking a fixed-rate mortgage can be costly since you either have to pay an interest rate differential or a three month interest rate penalty, whichever is higher. It’s likely you’ll end up having to pay that differential, which is far more expensive than the three-month interest rate hit. Variable rate mortgages do not have the interest rate differential fee, only the three-month interest rate penalty. So, if you plan to sell a house within the three or four years of buying it, then consider a variable rate.

Otherwise, it’s hard to make an argument for the variable rate mortgage. You wouldn’t buy a stock strictly for a 4% yield, when a Government bond can pay you the same—it just doesn’t make sense to take on added risk when you can make as much from a more stable investment. It’s the same thing with mortgages. There’s simply not enough reward to put your monthly payments at risk of a rate increase. Plus, who knows if we’ll see fixed-rates this low ever again.

I am a first time home buyer and need a mortgage. The house I’m going to buy will cost about $400,000 and I am putting 10% down. My bank has offered me a 3.09% fixed rate, if I lock in for 5 years. This sounds pretty good, but I’m wondering if I should go with a fixed rate or a variable rate. Any advice?

Answer

New Brunswick Sturgeon or Blue Arctic Char? For a fish lover these are both great options. When it comes to choosing between a variable rate or fixed both are great options too. That’s because interest rates are so insanely low these days. But I think what tips the balance in favour of a fixed rate these days is that the price you pay for certainty is incredible low.

Even just a few years ago the variable rate mortgage was the better option for those people who were willing to take a risk on interest rates. Moshe Milevsky, a professor at York University, published a study that outlined “detailed evidence that Canadian consumers are better off, on average, financing a mortgage with a short-term (variable) interest rate, compared to a long-term fixed rate.” Milevsky’s fundamental conclusions remain relevant, but at this particular point in history, fixed rate mortgages have become way more competitive.

That being said, there are three factors to think through as you look at the variable versus fixed question for yourself: Goals, math and emotions.

Outline your goals before choosing a mortgage

Before you decide whether to go variable or fixed, outline your goals, says Joe Jacobs, a mortgage broker at Mortgage Connection Inc. For example, “If you are looking to pay down your mortgage debt as fast as possible, you will likely want a different product than if you want to maximize cash flow.”

Variable versus fixed is only one of the things you’ll need to decide. It is also really important to consider other mortgage options you might not know about such as lump sum and flexible payments. You can talk through your goals with the mortgage specialist at your bank, or find a mortgage broker to help you assess the options at a number of different lenders.

Run the numbers on different scenarios

Ask your mortgage specialist or broker to run the numbers on different scenarios. If interest rates rise by 1% in the next 5 years, how much more you will pay in interest, versus if rates stay put. How does the math change if rates go up by 2%? And how much will your monthly payment change in each of these scenarios.

You should know that many lenders will let you “fix” your payment even if you have a variable rate mortgage. What this means is that as rates rise you’ll simply pay more towards interest than and less towards the principle. This is a way to have certainty with your monthly payment, but without paying the higher rate to go fixed.

Know yourself and how you feel

The third factor is your emotions. Mortgage broker Joe Jacobs provides this litmus test on whether to choose variable or fixed:  “If you are driving in to work and you hear that the Bank of Canada is raising rates, will this cause you to panic, pull over and call me? If so, you should go fixed. Variable clients need to be okay with fluctuation.”

Signing up for your first mortgage is a big deal. Ask questions to ensure that you get the best product for your circumstances, and when it comes up for renewal in five years ask these questions all over again. Don’t fall into the trap of renewing without thinking because you may miss out on getting the best deal available.

I am getting ready to renew my mortgage and want to make sure I fully investigate the features available to me. Any advice?

Answer

A mortgage is a mortgage is a mortgage, right?

Wrong.

In addition to getting the lowest rate possible, you can add on various features that allow you to customize your mortgage to suit your needs. I’ll walk you through a few of them below, but I have a note of caution first. Anytime you add a feature on to your mortgage, it can give you more flexibility, but could also raise your costs. So when you’re looking over the paperwork, make sure you do a full cost versus benefit analysis based on your needs.

A great mortgage broker can be a helpful resource. They can explain the various features available and they can go to different lenders to find those features for you at the best rate possible.

Fixed payments on a variable rate mortgage

For some people, it is really important to know with certainty what your mortgage payment is going to be every month. But instead of locking into a fixed-rate mortgage you can actually get a variable-rate mortgage with a fixed payment. If interest rates go up, more of your payment goes towards the interest and less to the principle. And if interest rates go down, more goes to principal and less to interest. This strategy provides you with the certainty of what your payment will be, with the advantage of paying the absolute lowest rate possible.

That being said, if interest rates go up significantly, the bank could require that you increase your payment. So it is best to assume a higher interest from the get-go to give yourself some wiggle room.

Making extra payments

Pre-payments are a great way to pay off your mortgage faster. Some lenders will allow you to make pre-payments on a monthly basis or through annual lump sums. But the rules for making extra payments can vary greatly between mortgages and many will cap off how much you can pay of your mortgage at 20% of your balance owing during a given year.

For example, if you get a tax refund, instead of taking an all-expenses paid trip to Cuba, consider applying that money directly against your mortgage. Extra payments like these can zap years off your mortgage and save you thousands in the process. But it is worth noting that this flexibility can come at a cost: the more pre-payment flexibility you have, the higher your rate because the lender will need to factor in that your mortgage could be paid off faster and therefore make them less money.

Flexible payment features for changing circumstances

Some mortgages will also allow you to take a lower your payments or to take payment vacation. While you should avoid skipping payments, there are times when you might want to do just that? Perhaps you’re planning a sabbatical, going back to school or taking time off work during a parental leave. Or you’re an entrepreneur who could use a flexible payment feature to account for big swings in your income. Or you might work in a field where you don’t get paid for part of the year, like some teachers. If you work in education, you may be able to get a mortgage that allows you to pay more over 10 months so you can skip the payments in July and August, when you aren’t receiving a paycheque.

For this feature to work, the bank will ask you make lump sum payments or pay a little more each month by increasing your regular payments. This builds up a buffer so which will allow you to apply to skip a certain number of payments without incurring any penalties or increasing the length of your mortgage.

There is also a feature that allows you to skip a payment in an emergency. You don’t want to use this feature, but if you need to, some mortgages will let you to skip a payment. You can only use it once a year and you have to pay the amount back during that year.

Three things to watch out for

Cost: Having features like these can increase your costs. Don’t pay for what you don’t need.

Penalties: Understand the restrictions on your mortgage so you can make use of the features and not be hit with penalties.

Availability: Different lenders offer all different options. Do some research to find the features that would be helpful to you, then connect with a lender that offers them.

My fiancée and I both have principal residences and neither of us wants to lose the capital gains exemption when we get married. Delving into the Canada Revenue Agency website, it seemed to say one of us could elect to keep our principal residence while converting it a rental for up to four years. Other websites seemed to indicate this was not possible once you are married, which makes us wonder what our options really are. I appreciate any insight you might have.

Answer

I’m a big fan of the institution of marriage. You have someone to talk to after a bad day at the office, and another salary to use to share the mortgage payment. Having a spouse also makes childcare easier, and allows you to split the household chores. To top it all off, the actuaries actually say that you’ll live longer than someone who isn’t married.

So provided you still like the person you promised to be with “as long as we both shall live,” it is a pretty good deal. But that doesn’t mean you get to have two principal residences after you tie the knot. Sorry.

Only one principal residence per family

As you know, the CRA allows you to have just one principal residence per family, for the purposes of the capital gains tax exemption. This rule applies even if you didn’t actually walk down the aisle and sign a marriage license. The language was made au courant in 2001 when the CRA added in “common-law partner,” in addition to “spouse.”

You don’t have to choose which house you designate as your principal residence immediately; you can make the election when you sell one of the properties, unless you decide to rent one of the properties. The CRA website says, “You can be considered to have sold all or part of your property even though you did not actually sell it.” For example, “You change all or part of your principal residence to a rental or business operation.”

Rental option of principal residence must meet conditions

There is an exception, as you mentioned. The Income Tax Act allows you to elect under subsection 45(2) to have a property remain as your principle residence upon converting it to a rental for up to four years. But there are a bunch of conditions you have to meet, related to employment.

I reached out to Jason Heath, a fee-only financial adviser at Objective Financial Partners, to get a better handle on how those conditions might apply to you. Broadly speaking, you would have to be living away form your principal residence for work or because your partner is relocating for work.

Heath goes on to say “a taxpayer can designate a property as their principle residence for up to four years even if they are renting it, but they can’t simultaneously designate another property that their spouse owns as that family’s principle residence.”

So in your case, if you were to rent your house out and move into a rental property with your spouse then you could still designate your house as your principal residence even though you’re not living there—although you would still need to file a subsection 45(2) election as part of your next tax filing. The problem is, says Heath, you plan to move into a property that’s already owned by your soon-to-be spouse. In that case as a family unit you’d own two properties at the same time, but only one can be designated as your principal residence.

Calculating capital gains tax

The rules on capital gains tax can be complicated for those who aren’t immersed in them. I recommend you connect with an accountant before you sell to help you figure out your adjusted cost base and to see if any reserves or deductions apply in your circumstances.

The super simple calculation is that you pay tax on half of the proceeds of the sale, at your marginal tax rate. Say you sold the property and recognized a $100,000 gain you would pay tax on $50,000. So if you are in a 40% tax bracket that would be $20,000.

While the tax component is part of the equation on which property to keep and which to sell, there are other more important variables to consider, such as investment goals and marital harmony. And don’t under-estimate the importance of marital harmony.