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New Mortgage Rules: Buyer Stress Test

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There are new changes coming into effect on January 1, 2018 introduced by The Office of the Superintendent of Financial Institutions (OSFI) requiring all uninsured borrowers to complete a newly designed buyer stress test before they can qualify for a mortgage.

What is an uninsured borrower? It is anyone who has put down twenty percent or more of the value of the property as a down payment to secure their mortgage. These borrowers do not need mortgage insurance and are therefore known as uninsured borrowers.

Insured borrowers have down payments of less than twenty percent and terms less than five years, and these borrowers have been required to pass a stress test since last year. The stress test ensures that borrowers can afford their loan payments even if interest rates suddenly increase.

Under the newly proposed test lenders want to mitigate the risk of default by the proposed stress test and that is why uninsured borrowers will have to now qualify based on the greater of a five year fixed rate from Bank of Canada or the current rate + 2% stress test. Which of these two criteria will be used to determine the test outcome, depends on which of the two measures will have the highest value.

If you already have an approved existing mortgage, this rule does not affect your current mortgage no matter when the closing is. Pre-approved mortgages concluded between 17th October to 31st December 2017 should technically still be honoured by most major financial lenders, but we advise you to double check your pre-approved application. For all applications made in 2018, new rules will apply with no exceptions to both new mortgages and any mortgage renewals. Other changes under these new rules  include restrictions on co-lending or bundled mortgages.

These changes are surely going to affect different segments of the populations. Most vulnerable will be young first home buyers that are using funds given by their parents for a larger down payment and who may not yet have high paying jobs, many being just at the start of their careers. Also heavily affected will be buyers looking to expand or move up to a larger home as they will not be able to qualify for a bigger mortgage than previously possible and may not be able to negotiate as good a terms and rates as before. Industry experts are concerned on a cooling effect the new rules may have on the real estate market in the coming year.

However, not all outcomes of these new measures are negative. While buyers’ power and affordability is certainly going to decrease, rising national household debt is a growing concern as it continues to break records. By introducing this stress test, the government is preparing the market for any eventual rate hikes and the test would ensure we are prepared for them on both sides as realtor professionals and consumers. It is also a good time to consider those higher than normal debt ratios and rein in household debt and expectations, which all lead to a more balanced, stable market and more affordable home prices for buyers in the long run. The new stress test may also shift buyer focus to condos and townhomes.

Also this new rule does not mean that borrowers with higher debt ratios will no longer be able to get mortgages at all. While these borrowers should be prepared to pay higher rates, smaller B level lenders will still be able to offer some flexibility. Also, most provincially regulated lenders are not bound by these new regulations and local credit unions are expected to be very busy in the coming year. GTA continues to attract large numbers of newcomers, which is still the most important source of new buyers and any cooling or slow down of the market is likely to be temporary.

If you have any questions about the new regulations or have any other real estate related questions, please contact us at any time.

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Market Report: August 2017

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Last week, the Toronto Real Estate Board (TREB)  released its market report for August. There has been a general cool-down in the GTA real estate market, in partly in response to new regulatory measures introduced by the Provincial Government earlier  in April. There was an overall  34.8% decrease in sales compared to August 2016 with only 6,357 transactions in August 2017. New home listings fell by 6.7% compared to August of last year. Detached home sales was probably the most affected segment of the market overall, with average prices around 20% lower than in April 2017.

However, all these jaw dropping stats aside, the actual house prices were up 3% from last year bringing an average price of a GTA home to $732,292. In addition, TREB’s  home price index composite benchmark, designed to smooth out variations and which accounts for typical homes throughout TREB’s market area, was actually  up by 14.3% on a year-to-year basis in August. This means that some areas in GTA were affected  differently and notably some areas such as Durham, Peel and Halton regions remained very much a seller’s market. The condo market in particular continued to outperform all other segments, up 21.4% from last year to an average price of $507,841 in August 2017. It is interesting to note that this is the first time the condo market has outperformed the single detached home category and the first year it has gone into double digit growth. Similarly, the rental market remains an equally hot area. Most rentals in the Toronto area are leased for over listing price, often with multiple offers and additional incentives.

While summer’s month-to-month sales also saw a decline, it can more typically be attributed to a slower than usual, traditionally slow seasonal market. This decline in sales may also be attributed to the psychological slow-down effect of the new provincial regulations on the Buyers. Reports indicate that the economy in the GTA continues to grow and is at a healthy pace which may play a key factor in normalizing the relationship between buyers and amount of listings on the market, which results  in a well balanced real estate market rather than an unsustainable market driven by irrational decisions, bidding wars and double digit growth.  A return to normalcy is welcomed by both sides in the long-run.

Despite the general cooling off during the summer since the announcement of new measures and recent interest rate hike , the GTA real estate market should not be dismissed so fast. TREB consumer research suggests that buyers that have previously put off their decision are set to return to the market and most likely in the fall. Most real estate purchases are not driven by speculation and cannot usually be subject to indefinite delay, often arising by pressing social and financial obligations of the Buyers’ everyday lives.  Current market predictions are that as more buyers jump into the fall market that has a smaller number of listings, this can affect the rate of price increase.

GTA real estate prices are expected to continue to grow year-to-year as the main factors that drive the real estate market have not changed. Population growth, low-interest rates, strong GDP growth and high employment figures continue to indicate that the region remains an attractive option for both local and  international buyers.

To view the full report click here.

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Garage Sale Organizing: 11 Useful Tips & Problems To Avoid

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As we come to the latter part of summer, it’s still a pleasant time of the year with summer bargain hunters looking to snag that perfect deal. Additionally, it’s a great time to host a garage sale to declutter your home before the cooler weather arrives and put some extra cash in your wallet. Early fall is also a popular period for students looking for back to school deals as well as young renters and new homeowners on the lookout for your used furniture and other discounted items. It is also an ideal time to put your winter related items on the market, such as:  sports equipment, holiday decorations, exercise equipment and various holiday collectibles.

 Mitra Moves You Team is organizing its annual garage sale in the German Mills area of Thornhill on September 2nd, 2017 from 8am-12pm. Joining our neighbourhood garage sale won’t cost you a cent and we will take care of the signs and advertising for you. All you have to do is show up on September 2nd in the Thornhill German Mills Area and make sure you are ready to bargain!

If you are interested in participating or just want to shop around, feel free to call us at 416-832-9292 or email a: hello@mitramovesyou.com for more information.

To help you get started, we outline 11 useful garage sale tips to host a great garage sale and 11 common garage sale problems to avoid when organizing your garage sale. See you on September 2nd!

 11 Useful Garage Sale Tips:

  1. Establish the purpose of your garage sale. Do you need to declutter in time for selling your home or need quick extra cash? This will affect the way you organize your sale, your pricing strategy and ability to negotiate and discount. It’s worth noting that it often pays more to price things slightly lower in order to sell more items. If you want to get top dollar for items of real value, consider selling them at popular online auction sites like Ebay or eBid.                       
  2. Make sure you have the right supplies at least a day before the sale. Supplies include: tables, coat hangers and stands, price stickers/tags, masking tape, scissors, money pouch/fanny pack, plenty of small cash/change for those pesky $20 dollar bills, pen/pencil and tracking ledger of sale items.                                                                          
  3. Clean & dust all your sale items.
  4. Sort everything into categories before you price anything.
  5. Price everything! This is a key step and is not be avoided. Most problems involving garage sales are always inevitably related to incorrect or lack of pricing, as you will discover in the problems section below.
  6. Price everything correctly. Consider pricing similar items the same amount or using blanket pricing method e.g. all shirts – $5. For larger items in working condition, a general rule for pricing should be in the range of 20-30% less than what you initially paid for it. Price big ticket items higher than your actual asking price because you will be expected to negotiate.
  7. Organize and display your items in the most attractive way possible. Some ideas to consider: placing your most sellable and larger items closest to the curb, grouping similar items, creating stylish vignettes and personalised tags, displaying clothes on hangers which is much easier for customers to go through. Displaying your items on tables is preferred, as shoppers like to see things at eye level. However, remember when it comes to toys, always place them at kids’ eye level or somewhere where they can reach them easily.
  8. Create a friendly and relaxed atmosphere. Shoppers will likely linger for much longer if they feel comfortable. Be friendly, but not overbearing. Do not hover over customers, find an activity of your own, put on the radio for some friendly background music. Make sure you have water and drinks out for your fellow shoppers and their pets, especially if it is hot out.
  9. Make sure you have bags/boxes for the purchased items so your customers can happily leave with their purchases. Consider packing materials like old newspaper and magazines and old fabric scraps for wrapping fragile items.
  10. Make a “free stuff” box that you can fill with things you want to give away. Make sure it is placed somewhere easily visible in your yard or by your driveway.
  11. Donate leftover items to charity. Try not to keep anything you decided to get rid of in the first place. You can organize a charity pick up for the day of or after the sale, or leave unwanted items in your designated “free stuff” box by your driveway.

11 Garage Sale Problems to Avoid:

  1. Missing or no prices: this is consistently the number one problem garage sale shoppers face and report to be their ultimate pet peeve. Unpriced items will simply make shoppers leave. Remember that most of people at garage sale are looking for a bargain, so to them price is everything. People also don’t like to ask questions, so having every item priced should be your number one priority when organizing your sale.                                                                                           
  2. Incorrectly priced items can lead to confusion and customer frustration, which can be easily avoided if you have organize and think through your pricing strategy before the sale.
  3. Don’t base your sale items on your personal tastes. Just because you wouldn’t buy something that may be broken or aged, there are plenty of people who like to fix and restore objects or may be looking for a particular or component.
  4. Not labeling items: as mentioned above, generally people do not like to ask a lot of questions, so try to label your sale items clearly. Also you are not always going to be available to answer questions, proper labeling will take care of that.
  5. Lack of outlets: a common question often heard at garage sales is “does it work?” To avoid this question and make sure you don’t lose a potential sale on a hot item, have some outlets with a power bar available to test your plug in items.
  6. Don’t keep your sale items on the ground. Try to avoid displaying your items low on the ground. If you must do so, make sure you use bright coloured tarps or old tablecloths to make your displays more appealing.
  7. Mark ‘not for sale’ items clearly.  To avoid any confusion, place ‘not for sale’ signs on these items that are visible during the sale.
  8. Have your money with you at all times. Keep large bills in your pockets or fanny-packs separately from smaller bills. Do not use a cash-box that you may leave unattended or forget.
  9. Keep your home safe. Make sure doors and access points are locked, where you do not want shoppers to wander through. If you don’t know people personally avoid letting them inside the house. Direct them to the nearest public washroom if required.
  10. Do not get sentimental over your merchandise. Garage sale shoppers are generally looking for a bargain and don’t share your emotional attachment to the same objects.
  11. Don’t haggle over low priced items, it is just not worth it. If customers purchase several items, make sure you give them an additional discount or throw in another low priced item for a special deal.
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Best Renovations Before Selling

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You’re ready to sell. Should you renovate first?

After making the decision to sell, many homeowners turn their focus to renovations to add value to their home. It’s a valid consideration before you officially list your property. The key is in knowing what renovations are going to give a high return on your investment.

Know the market

Start by talking to a Realtor ® , preferably one who has several years experience in your neighbourhood. Ask how your home compares to others on the market or that have recently sold. And ask about the state of the market. In a seller’s market, you may not have to renovate as extensively as you would in a buyer’s market. If you decide to renovate, discuss your plans with your Realtor ® , he or she will be able to help you determine what projects will be most profitable.

Choose your renovation project(s)

According to some sources, some renovations can have a return on investment equivalent to 5 or 6 times their initial cost. Here are projects that may give you big bang for your renovation buck:

1. New paint

It’s as simple as that. The idea is to create a blank canvas where a prospective buyer can imagine living. The best way to do that is to choose a neutral shade (creamy whites and greys are popular now) and paint each room. This will tie in the rooms as you move from one space to the next. And it will freshen and brighten spaces as well. It may not necessarily be to your taste, but it will appeal to buyers.

2. Update flooring

If your hardwood is showing wear, or you have old carpet, you may want to consider updating your flooring. Look at having hardwood professionally refinished. In areas of carpet, remove the old and replace with hardwood/laminate. If you must carpet, choose a durable, low pile in a neutral colour.

3. Update fixtures

Old fixtures date your home. Look at replacing light fixtures throughout your home. And take a look at fixture laden rooms like the  kitchen and bathroom. Consider replacing or updating countertops, plumbing fixtures (taps & faucets) as well as cabinet hardware. These are small upgrades that can make a big difference.

4. Remodel or add a bathroom

Update the bathrooms in your home. Sometimes this is as simple as a fixture change and retiling the floor. But if you’ve got a pink toilet and matching tub, you may want to consider completely remodelling the space. Or if your current home has only one bathroom, you may want to consider adding another (3-piece) if at all possible. This is one renovation investment that usually sees significant return.

5. Remodel the kitchen

This can make a significant difference in the value of your home. Look through magazines for current kitchen trends. Things to consider include: an open lay-out, an island, brightness through windows or under cabinet lighting, white cabinetry is often more preferred to dark. Appliances are important too – the current trend is towards stainless steel finishes.

Before you spend a penny

Once you’ve decided to renovate to increase your home’s resale value, there are some key things you can do to ensure your projects are done on-time and on-budget. This is very important when you consider that you’ll also have the costs and logistics of moving from this home to another. Do yourself a favour and consider the following:

1. Set your budget

Once you know what needs to be done, do your homework to determine the extent of your renovations and what they’ll cost. Weigh these costs carefully. Remember, renovation costs are in addition to  the costs of moving, land transfer and legal fees and the downpayment on your new property. And be prepared with money in reserve – a good rule of thumb is +30% of your original budget – to allow for unforeseen issues.

2. Set your timeline

Renovations don’t happen overnight. Especially involved projects like a bathroom or kitchen. If you need to sell sooner rather than later, then this may mean sticking to cosmetic renovations. If you have the luxury of time, then you can look at larger projects like updating a kitchen or bathroom, or creating an income suite. Check with the pros who will be completing the work for you and ask for a timeline. Then budget more time for unforeseen issues. If you’re doing the work yourself, be sure to give yourself plenty of time so that you’re not cutting corners as your listing date looms.

3. Create a plan

From day one until the project is complete, you should be following a plan. This is crucial particularly for large, multi-stage renovations. A plan can be created with your contractor so that you both have a clear vision of what – and when – things should be accomplished and how much is spent along the way. This will help to keep lines of communication open as well. If you’re doing the work yourself, a detailed plan will keep you on track so work is completed on time.

Let the Mitra Moves You Team be your guide

The Mitra Moves You Team takes pride in serving Thornhill and other communities. We are committed to transforming dreams into sustainable wealth through strategic home ownership and real estate investments. And we’re just a phone call away.

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What is Ontario’s Fair Housing Plan?

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It’s no secret that Toronto’s housing market is on fire. Do an online search and you’ll find hundreds of articles and opinions on everything from why the market is hot, to when or how the ‘bubble’ will burst.  Toronto’s housing market is experiencing unprecedented housing price increases and while many will profit handsomely, the current trend is creating a market that is unaffordable to many more (potential) homebuyers and renters. Housing is a basic need for all Ontarians. In an effort to alleviate the pressures Ontarians face trying to buy a home or afford their rent, the provincial government recently introduced the Fair Housing Plan.

Ontario’s Fair Housing Plan

The Plan consists of 16 comprehensive measures designed to:

  • Bring stability to the current market
  • Protect the investment of homeowners
  • Enable more people to find an affordable place to live particularly in the GTA and Greater Golden Horseshoe (GGH).

Most notable of these measures is The Non-Resident Speculation Tax. In making the announcement, Premier Wynne was very clear that the tax “has nothing to do with new Canadians and people who want to make Ontario their home…with this tax, we’re targeting people whoaren’t looking for a place to raise a family. They’re looking only for a quick profit or a safe place to park their money.”

According to a press release from the Office of the Premier, this is a “15 per cent Non-Resident Speculation Tax (NRST) on non-Canadian citizens, non-permanent residents and non-Canadian corporations buying residential properties containing one to six units in the Greater Golden Horseshoe (GGH).”

There are also measures designed to address rent control, stimulate creation of more new purpose-built rental apartment buildings, stem tax avoidance and excessive speculation in the housing market, and to create a new Housing Supply Team to work with developers and municipalities.

You can learn more by visiting the following links:

https://news.ontario.ca/opo/en/2017/04/making-housing- more-affordable.html

https://news.ontario.ca/mof/en/2017/04/ontarios-fair- housing-plan.html

Will these measures work?

The answer to this is that time will tell. For now, the market continues to offer interesting options for selling, downsizing and investing. If you’re interested in exploring what potential the market has for you, talk to a Realtor ® .

The Mitra Moves You Team takes pride in serving Thornhill and other communities. We are committed to transforming dreams into sustainable wealth through strategic home ownership and real estate investments. And we’re just a phone call away.

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Downsizing Explained Real Estate

Time To Move To A Smaller Home? Downsizing Explained

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As a senior, you’re probably familiar with the notion of downsizing, i.e. selling your current home for a smaller residence. You may even have friends or relatives who have taken the plunge. For many people, making the move to a smaller home opens the door to living large. We are not really talking about having piles of money to spend (although for some that may be true!), we are talking about the opportunities that open up when you downsize.

Imagine being able to travel on a moment’s notice where all you have to do is lock the condo door behind you. Or after years of traveling back and forth, you’re finally close enough to be the one who hosts the birthday party. Or your years of commuting are over and you can finally live in that vibrant urban neighbourhood with amenities steps from your door. That’s living large and what downsizing could offer you.

7 Reasons People Downsize Their Home:

1. The kids are grown and the current house is too big

2. To do less house-related work

3. To be closer to children, grandchildren and other family

4. To decrease living expenses and save money

5. More freedom to travel

6. For a different lifestyle – city living for some, country living for others

7. Desire for a simpler life

Your reason for downsizing is as much a part of your smaller home search as your budget.

Make a list

Sit at your kitchen table with a pen and paper:

  • Make a list of reasons why you are considering downsizing.
  • Make a list of the best things about where you currently live.
  • Make a list of the things you would like to change.
  • Make a list of ‘needs’ (these are concrete things like the number of bathrooms, stairs vs. no stairs, yard size, accessibility, etc.).
  • Make a list of ‘wants’ (these are nice to have, but not deal breakers i.e., fireplace, landscaping, deck or pool, hardwood vs. carpeting, etc.)

The idea is to get you to imagine living somewhere new and to start thinking about the kind of lifestyle you want to live within that smaller space. This will also give you an idea of what you want your new residence to provide for you at this stage, and going forward, in your life.

Amazing smaller home options:

  • Condominium where you can come and go as you please; may offer amenities like gym, swimming pool, rooftop decks/gardens
  • Townhouse where snow removal and lawn care are done for you
  • Small detached or semi-detached home where you can garden and barbecue and have the grandchildren for a sleepover

Make a financial plan

Talk to your banker, financial adviser or other knowledgeable source about your desire to downsize. Discuss the impact this change will have on your finances. Prepare now, so that you understand the financial processes that will occur when you sell, buy and move to your new home. Some things to discuss:

  • Will you need a mortgage? How will that impact your income/savings into your retirement years?
  • Get help creating a budget to handle the following move-related expenses:
  • Closing costs
  • Moving expenses (you may need a professional to help you sort through your belongings and/or hire a company to pack and transport)
  • Minor renovations to your new home before you move (painting, hardwood refinish, minor repairs, etc.)
  • Create a budget based on your new home’s current fixed costs (i.e. utilities, property tax, etc.) so you know what your monthly expenses will look like BEFORE you buy.

Call a Realtor ®

And make an appointment to discuss your plan. If you haven’t purchased property in many years, it might feel like you’re doing it again for the very first time. A lot of rules, fees and regulations have changed. Your Realtor ® will help you with the following:

  • Assessing the current value of your home and giving you a realistic approximation of what you can expect to receive upon selling. Your home may be worth significantly more than you think at this time!
  • Informing you of closing costs you will incur including, but not limited to: Home inspection fees, Land transfer tax, Legal fees and related expenses, HST, Home insurance
  • Showing you a variety of properties that best represent your ‘must haves’ and ‘needs’ and negotiating your new home purchase.
  • Selling your current home.
  • Walking you through the process step-by- step.

Call The Mitra Moves You Team

Thriving communities offer an incredible range of dwellings from which to choose. If you’re downsizing, it’s possible to remain within – or close to – your current neighbourhood. Start by finding a Realtor who cares for you and knows the area. The Mitra Moves You Team takes pride in serving Thornhill and other communities. And we’re just a phone call away.

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Toronto Real Estate Market 2017

What does the Toronto real estate market hold for 2017?

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Of course, there’s no magical way to predict how the Toronto real estate market in 2017 will perform in the coming year, but if we take a close look at the Toronto real estate market last year, there are key indicators and past trends that can help predict how Toronto real estate in 2017 may unfold.

2016 Year-in- Review

According to the Toronto Real Estate Board’s (TREB) Market Year in Review Outlook Report 2017, last year was a year of record home sales that were driven by “population growth, low mortgage rates, low unemployment and above-inflation income growth.” A lot of buyers were shopping for homes but the demand for housing outstripped the inventory of houses on the market. As a result, housing prices increased.

High Demand + Low Inventory = Higher $$$

There was a lot of media buzz last year over foreign buying activity, but the statistics show that the record home sales we saw in 2016 were “heavily based on domestic demand.” In fact, foreign buying activity in the GTA only accounted for “a minimal 4.9 percent of transactions.”

The property types that saw the largest price growth last year include detached and semi-detached houses and townhouses. But with low inventory of these properties, competition in the Toronto condo market increased and resulted in a rise in condo prices as well. And according to an IPSOS Recent Home Buyer Profile, 51 percent of recent home purchases were made by first-time buyers.

Toronto Real Estate Market 2017 Outlook

For Prospective Buyers
Based on what we know from last year, it looks like the competition for available housing will outstrip the listings for sale in 2017. For hopeful home buyers, this means that there will be stiff competition for the listings available. Because of this, according to an IPSOS Profile of Likely Home Buyers conducted on behalf of TREB, 80 per cent of intending GTA home buyers plan to use a Realtor to help them navigate their home purchase.

For Prospective Sellers in the Toronto real estate market
TREB is forecasting the average selling price will see “an approximate calendar year growth rate ranging between 10 per cent and 16 per cent.” For prospective sellers, this may be a good year to consider future plans for downsizing or moving out of the city and take advantage of the valuable equity of your home. If you want to know the market value of your home, or need to learn about the options available to you, a Realtor is your best first step.

Let MMYT Be Your Guide

Mitra Moves You Team transforms dreams into sustainable wealth through strategic home ownership and real estate investments.
There are so many things to consider when purchasing or selling any property, that it can be overwhelming. Let the experts at the Mitra Moves You Team be your guide. We take pride in helping our clients find the ideal property based on their unique requirements. And we’re just a click or phone call away. Call 416-832-9292.

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Ontario’s land transfer tax changes

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News feeds have been buzzing about changes in Ontario’s Land Transfer Tax. This is something that will have particular impact on first-time buyers and luxury homebuyers. It’s a bit of a good news/bad news scenario. Here, we will explain the changes so that when you purchase your home, taking ownership will be a smooth and happy experience.

What is the Ontario Land Transfer Tax?

This is the tax the government of Ontario charges the homebuyer. The Land Transfer Tax (LTT) is payable on the day the transfer of ownership is registered, in other words, on closing day.

What are the changes?

First-time Homebuyer’s Refund: As of January 1, 2017 qualified first-time homebuyers may be eligible for a refund on all or part of the Ontario Land Transfer Tax to a maximum of $4000 (this new change doubles the current maximum rebate of $2000). Essentially, this will allow first-time buyers to claim more of the purchase price of a home before incurring LTT costs.

In monetary terms, it means that qualifying purchasers would pay no LTT on the first $368,000 of the purchase cost of any eligible property. So if you’re a qualified, first-time homebuyer and you buy an eligible home for say, $350,000, you pay $0 in Ontario LTT.

To benefit from this refund, first-time homebuyers must meet specific eligibility requirements. The property to be purchased must also meet specific eligibility requirements. Click here to learn what those requirements are.

New Land Transfer Tax Rates for Homebuyers:

For all homebuyers (not first-time) making property purchases, Ontario has “modernized” the LTT rates which have not changed since 1989. As of January 1, 2017 the new tax rates will be:

  • 0.5 per cent up to and including $55,000 (no change);
  • 1 per cent above $55,000 up to and including $250,000 (no change);
  • 1.5 percent above $250,000 up to and including $400,000
  • 2 per cent above $400,000 up to and including $2,000,000
  • 2.5 percent above $2,000,000 and over (an increase of 0.5 percent)

Is that all the LTT homebuyers have to pay?

Unfortunately, the answer is no. Many local municipalities also charge LTT. For example, a home purchased in the city of Toronto is subject to the Municipal Land Transfer Tax. And like the Ontario LTT, it is due at the time of closing. The rates are similar to what Ontario charges. You can learn more here.

The City of Toronto does offer rebate opportunities for homebuyers including first-time buyers. To see if you are eligible for a City of Toronto LTT rebate, click here.

Wherever you are purchasing a home in Ontario, be sure to check if the municipality in which the home is located charges its own LTT. This will help you to be financially prepared and avoid any unpleasant surprises on the day of the property closing.

After all this, do homebuyers have to pay HST too?

The answer is a qualified ‘yes’. Homebuyers investing in a newly constructed home or one that has been significantly renovated are required to pay HST. However, HST does not apply to resale homes. The good news here is that buyers of new homes may receive a rebate of up to $24,000 of the provincial portion (8%) of the HST. To learn more, contact the Canada Revenue Agency at 1-800- 959-1953.

Still have questions?

When it comes to purchasing a home there is no doubt that knowledge is power. We strongly recommend that you visit the links below to learn more. After all, the more you know, the more prepared you will be to find the home you’ve always wanted.

We invite you to contact us with any questions or if you’d like to further discuss any of these changes. Would you like to stay informed with more valuable articles like this one? Please click here to sign up for our newsletter!

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New Mortgage Rules Simplified

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Ready to purchase your new home? Before you do, you should know that Canada recently introduced new mortgage insurance rules.

Knowing and understanding how they will impact you will get you even closer to finding your dream home! Here, we have simplified what these changes are and how they will be implicated. Use this as a starting point in preparing for your new home purchase.

What exactly is mortgage insurance?

The technical term is mortgage default insurance. It is provided to banks or other financial institutions (lenders) through the three Canadian mortgage insurance companies including the Canada Mortgage and Housing Corporation (CMHC) and is backed by the government of Canada. The job of mortgage insurance is to protect the lender in the event of a borrower defaulting on their mortgage. The Canadian government requires that lenders carry mortgage insurance for mortgages they grant. To do this, the lenders look at the down payment a prospective borrower is making towards the property they intend to purchase. Based on the down payment, the lender will and/or may require high-ratio mortgage insurance or low-ratio mortgage insurance.

High-ratio insurees usually make down payments equal to less than 20 per cent of the property purchase price to a minimum of 5 percent. The law requires that lenders purchase mortgage insurance fto buyers for all high-ratio mortgages. This cost is always passed on to the homebuyer.

Low-ratio insurees usually make down payments equal to 20 per cent or more of the property purchase price. Lenders have the option of purchasing mortgage insurance for these homebuyers. This cost is usually paid by the lender.

In order for a lender to approve a mortgage loan, the buyer must meet the criteria for qualifying for mortgage default insurance. In other words, the buyer must prove they can manage payment of the mortgage. Here is where the changes kick in:


The Buyer’s Stress Test

Buyers with high-ratio mortgages will be required to qualify for mortgage insurance through a mortgage rate “stress test”. To do this, lenders will calculate a potential buyer’s Gross Debt Service (GDS) and Total Debt Service (TDS) ratios. The GDS ratio is the percentage of a buyer’s gross monthly income that is required to pay their total monthly housing costs (principal, interest, property taxes & heating or P.I.T.H.). The new rules require that GDS be calculated using the Bank of Canada’s conventional five-year fixed mortgage rate NOT the rate the buyer will be paying*.

To qualify for mortgage insurance, GDS must not exceed 39%. The TDS ratio is the percentage of a buyer’s gross monthly income that is required to pay their total monthly P.I.T.H. PLUS payments on all other debt. The new rules require that TDS be calculated using the Bank of Canada’s conventional five-year fixed mortgage rate NOT the rate the buyer will be paying*. To qualify for mortgage insurance, TDS must not exceed 44%. By applying the higher interest rate in the calculation of GDS and TDS, the stress test can indicate a borrower’s ability to continue paying their debts in the event of rising interest rates or a reduction in household income.

Buyers with low-ratio mortgages will be subjected to the same high-ratio stress test as of November 30, 2016. In addition, key criteria they must also meet include (but are not limited to):

  • A maximum amortization length of 25 years
  • A property value of less than $1,000,000
  • A minimum credit score of 600

*Unless the buyer’s contract mortgage rate is higher, then the higher rate is used.

The Seller’s Tax Declaration

When you sell your primary residence in Canada, the proceeds from the sale are exempt from taxes and sellers were not required to report it to Canada Revenue. The new rules require that taxpayers must report the sale on their tax return in order to claim the exemption.  According to the Canada Revenue Agency (CRA): “These measures will ensure that the principal residence exemption is available only in appropriate situations.”

Still have questions?

When it comes to purchasing a home there is no doubt that knowledge is power. We strongly recommend that you visit the links below to learn more. After all, the more you know, the more prepared you will be to find the home you’ve always wanted. We invite you to contact us with any questions or if you’d like to further discuss any of these changes.

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