How Much Can You Expect To Pay In Land Transfer Taxes?

Deposits, home inspections, legal fees...  

Whenever we start working with a buyer we go though the list of closing costs that they need to budget for.

One of the biggies is land transfer taxes.

Unless you live in Alberta, Saskatchewan, or rural Nova Scotia, land transfer taxes (or “property purchase taxes”) are a basic fact of life.  

These taxes, levied on properties that are changing hands, are the responsibility of the purchaser.

Many provinces have multi-tiered taxation systems that can prove complicated.  

In Ontario the tax is calculated on the value of the consideration at the following rates:

• amounts up to and including $55,000: 0.5%

• amounts exceeding $55,000, up to and including $250,000: 1.0%

• amounts exceeding $250,000, up to and including $400,000: 1.5%

• amounts exceeding $400,000: 2.0%

• amounts exceeding $2,000,000, where the land contains one or two single family residences: 2.5%.

On a $1,000,000 purchase, for example, the Ontario land transfer tax would be $16,475.

Purchasing in Toronto?

If you're purchasing a property in the city of Toronto, you'll need to factor in an additional land transfer tax.

On that same $1,000,000 purchase, you're looking at an additional $16,475, bringing your total land transfer taxes to $32,950.

This isn't chump change.

Are you a first time buyer?

First-time buyers of new and re-sale homes are eligible to receive rebates on the provincial and Toronto land transfer taxes.

The maximum provincial land transfer tax rebate for first-time buyers is $4,000 and the maximum Toronto transfer tax rebate for first time buyers is $4,725.  

Check out the Ontario Ministry of Finance’s website (here) and the City of Toronto’s website (here) for a more detailed breakdown of these rebates and whether or not you're eligible to receive them.

And for access to a land transfer tax calculator visit ratehub.ca here.

If you’re thinking of making a move and would like to know how we can help, feel free to contact us for more info.

Quick Breakdown: The New Mortgage Stress-Test

Last week, the federal government announced some upcoming changes to the way it calculates qualifying interest rates when implementing the mortgage stress test.

These change will take effect on April 6, 2020.

Before the change, the stress test is based on the interest rates posted by the 6 major banks (more specifically, the government looks at the Big 6 Banks’ posted 5-year fixed rates and then adds 2% on top of that number).

After the change, the test will be based on the interest rates posted by the mortgage industry (more specifically, the government will look at the weekly median 5-year fixed insured mortgage rate from mortgage insurance applications, and then add 2% on top of that number).

Essentially, the change will make sure the stress test is dictated by what’s actually happening in the market, as opposed to what the banks dictate. And the stress test will be more dynamic, since it'll be based on the weekly numbers.

The Government of Canada’s press release from February 18th states, “This follows a recent review by federal financial agencies which concluded that the minimum qualifying rate should be more dynamic to better reflect the evolution of market conditions. Overall, the review concluded that mortgage standards are working to ensure that home buyers are able to afford their homes even if interest rates rise, incomes change, or families are faced with unforeseen expenses. This adjustment to the stress test will allow it to be more representative of the mortgage rates offered by lenders and more responsive to market conditions."

While the change so far applies to insured mortgages, it’s expected to apply to uninsured mortgages as well. The February press release states, "The Office of the Superintendent of Financial Institutions (OSFI) also announced today that it is considering the same new benchmark rate to determine the minimum qualifying rate for uninsured mortgages. OSFI is seeking input from interested stakeholders on this proposal before March 17, 2020."

Insured Mortgages: When a borrower has less than a 20% down payment, lenders are required to obtain government-backed mortgage insurance. The mortgages must comply with the insured mortgage rules set by the Minister of Finance, including the insured minimum qualifying rate.

Uninsured Mortgages: When the borrower has a down payment of 20%, or more, of the sale price, insurance is not required. The minimum qualifying rate for uninsured mortgages is set by OSFI, the independent banking regulator.

So, what do the changes mean for the average borrower?

From what we're hearing, it’ll likely amount to a 2% - 3% increase in purchasing power.

For example, a budget of $800,000 under the current rules might increase to $815,000 - $825,000 under the new rules.

This might not sound like much, but any little bit helps in a tight market like Toronto’s.

If you have any questions just give us a shout and we’ll put you in touch with a mortgage specialist who can help.

The Importance Of Having A Mortgage Pre-Approval

When I meet with a new buyer client, one of the very first questions I ask is, “Have you been pre-approved for a mortgage?” 

More often than not, they’ve haven’t. 

Sure, they’ve done a bit of research on their own; plugged some numbers into an online mortgage calculator, crunched a few more numbers to see what they’re comfortable spending each month...  

Don’t get me wrong – this preliminary leg work is great in that it gives you a ballpark idea of what you’re in the market for. 

It’s not the same as having an actual pre-approval though.

What Is A Mortgage Pre-Approval?

Generally, you can get pre-qualified for a mortgage over the phone or online. 

You provide a breakdown of your employment history, your income, a list of assets and liabilities, and an approximate down payment amount. 

Based on this info, your mortgage broker will let you know how much you’re pre-qualified to spend and what sort of interest rate they can offer you.

An actual pre-approval is a bit different. 

It takes the process a step further by having you complete a mortgage application and provide your mortgage broker with the necessary documentation to verify the info provided in your pre-qualification (income verification letter from employer, banking info, proof of financial assets and liabilities, source and amount of down payment and deposit, proof of source of funds to cover closing costs, etc.).

I stress to my clients that having an actual pre-approval in place is essential.  Here are a few of the key reasons why:

Knowing What You Can Afford

There no sense in shopping for a Jalopy if you can easily afford a Jaguar. 

By the same token, why waste your time on a Jaguar if you’re really in the market for a Jeep? 

A mortgage pre-approval gives buyers a firm budget to work with. 

It helps to streamline the home searching process and allows us to focus specifically on those properties that are within reach.

Locking In An Interest Rate

A mortgage pre-approval locks in a current interest rate for you, for a period of a few months. 

If rates start to increase while you’re out shopping for a home, you’re guaranteed the original, lower rate. 

If rates actually go down while you’re out shopping, you’ll get the new, lower rate. 

It’s a win-win situation.

Giving You The Upper Hand Over Other Buyers

It’s common knowledge that the Toronto real estate market can be highly competitive, especially for buyers. 

It helps when I can tell sellers that my buyer clients have been pre-approved. 

It gives the sellers some peace-of-mind and reassures them that they’re dealing with serious, qualified purchasers. 

And of course being pre-approved helps when there are multiple offers. 

Sellers are much more likely to work with an offer that doesn’t have a financing condition in it.  

I've actually seen sellers reject the highest priced offer because it had a financing condition in it and accept a lower priced offer because it didn't.

In a real estate market that's as active as Toronto's, any advantage you can give yourself is going to make a difference  

A mortgage pre-approval is key in giving you the power to act quickly and confidently when the right property comes along.  

Happy hunting!

If you’re thinking of making a move and would like to know how we can help, please contact us for more info.

The Power Of A Firm Offer

In a seller’s market, where demand outweighs supply and properties often receive multiple offers, buyers need to do everything they can to give themselves the upper hand.

One of the most powerful ways to strengthen their position when competing with other buyers is to submit a firm offer-to-purchase.

Think about it - if you’re a seller with two offers in front of you and one of them is conditional upon the buyer arranging financing and the other one isn’t (all other things being equal), which one are you going to go with?

Accepting a firm offer means there’s no waiting period to suffer through with the possibility that the buyer will walk away from the deal.

A firm offer means you can go to bed that night knowing that you’re property is sold and it’s a done deal.

Peace-of-mind like this carries a lot of weight.

Keep in mind though; submitting a firm offer is not to be taken lightly.

Preparation is key and there’s work to be done ahead of time by the buyer, their realtor, their mortgage broker, and possibly their lawyer.

Financing Condition:

Obtaining a mortgage pre-approval is crucial, but it’s not worth much if your broker is surprised with significant details when the time comes to actually arrange the financing (eg. “I forgot to mention that I’ve got a $30,000 student loan I’m slowly chipping away at.”).

Be sure to provide accurate income and debt figures so that your pre-approval is solid and you can comfortably go in without this condition.

Home Inspection Condition:

If the sellers are "holding-back" on offers, get in there and have a home inspection done prior to the offer date.

Yes, it’s going to cost you approx $600.00 and you may not even end up getting the property.

But six hundred bucks is peanuts compared to the hundreds of thousands (or more!) you’ll be dropping on your home purchase.

Having the inspection done ahead of time will allow you to come to the table sans condition and give you a better shot at sealing the deal.

A number of sellers will actually have their own “pre-listing” home inspection done ahead of time and the results will be made available to all prospective buyers.

Status Certificate Condition (condominiums):

The best case scenario here is that the seller has already obtained a current Status Certificate and copies are made available to all prospective buyers for their lawyers to review prior to the offer date.

If the docs are not available ahead of time, the buyer and their realtor need to have a discussion about the risks of submitting a firm offer without seeing the Status Certificate.

There is some homework that the realtor can do to give their client some peace-of-mind in this area, but it needs to be clear that there are still risks involved and nothing can substitute for a lawyer's thorough review of the documents.

Succeeding as a buyer in a seller's market is hard work.

There's plenty of competition out there right now and you need to find every advantage you can.

Being able to submit a firm offer certainly tips the scales in your favour.

If you’re thinking of making a move and would like to know how we can help, please to contact us for more info.

Should I Buy First Or Should I Sell First?

As my career in real estate continues to grow (I’ll be entering my 13th year in the business next month), I find myself getting more and more repeat business from past clients.  Generally, this comes in the form of them wanting to sell the home I helped them buy a few years ago and move up to something bigger.  While this particular buying/selling scenario is not uncommon, it does have its own unique set of factors to keep in mind.  The easiest way to explore these is with the question, “Should I buy first or should I sell first?”

Buying First

When the time comes for someone to sell and move up, they usually have a pretty good idea of what they want in their new home.  More closets.  A powder room.  Some outdoor space.  Room for a home office.  The list goes on...  I can tell you from experience that my clients have an even more specific list of "must haves" the second or third time around.

Buying first is a great option as it allows you time to shop for the home you truly want as opposed to settling for whatever happens to be on the market at the time.  In the Toronto market inventory is often tight and it can sometimes take awhile for buyers to find and secure the right home.  The last thing you want is to be pressured into a purchase simply because the deadline on your own sale is approaching fast.  Buying first can give you more breathing room and peace of mind in this respect. 

Selling First

Selling first is a good option for some as it allows for a better idea of what their buying budget is.  What if your home sells for $50,000 more than you're expecting?  An extra 50K can certainly help check off more of the boxes on your buying wish list.  On the flip side, what if your home sell for $50,000 less than you're expecting?  No one wants to be in the position of having over spent on their purchase and coming up short on their sale.

Of course, when making any major real estate decision, current market conditions need to be considered.  In a balanced market, less weight would be given to this factor.  The reality though is that the Toronto real estate market is rarely balanced!  In a Seller's Market, buying first is generally going to be the safer option.  In a Buyer's Market, selling first will likely be the way to go. 

If you’re thinking of making a move and would like to know how we can help, please contact us for more info.

Under Pressure: Will Some Sellers Benefit From The New Mortgage Stress-Test?

Ever since the new mortgage rules were announced almost 2 weeks ago, I've been monitoring the Toronto MLS to see how many new listings hit the market and try to take advantage of the upcoming changes.

I found a few listings that explicitly highlight the impending rule changes in the "extras" section of the property description. Take a look at the screenshots below:

Under Pressure: Will Some Sellers Benefit From The New Mortgage Stress-Test? Photo

Under Pressure: Will Some Sellers Benefit From The New Mortgage Stress-Test? Photo

Whether or not prospective buyers will actually feel the pressure to make a move on either of these particular properties remains to be seen, but no doubt there are sellers out there who see a potential opportunity here.

I've already heard from a few seller clients of my own who are seriously considering bumping up their plans to list.

Instead of waiting until spring 2018 as previously planned, November 2017 has become a very attractive alternative.

While not every buyer needs to stress about the new stress-test (as I outlined in my blog post from last week), some will certainly be affected by the new rules. Specifically those who need to push their mortgage amount to the maximum.

Consider first time buyers, for example. They have no home equity to throw into the pot, and rely only on whatever down payment they have saved. These buyers would typically need to push their mortgage amount to the maximum in order to break into the market.

And these are the buyers that some sellers are hoping to capitalize on in the coming weeks.

A buyer with a current maximum budget of $450,000 might see their maximum budget reduced to as little as $360,000 after January 1st, 2018.  This person will be highly motivated to make a purchase in the coming weeks, as they’ll be priced out of the market come the new year.

And it goes without saying that a buyer as highly motivated as this will be more inclined to pay a higher price in order to secure a property in time.

We’ll see how things play out over these next 2 months. I'm sure we'll see properties sell for higher-than-expected prices, and I'm sure that a number of sellers will benefit from buyers who are acting under pressure.

Dum-dum-dum Da-da Dum-dum.

Dum-dum-dum Da-da Dum-dum.

If you're a buyer and you have any questions just give us a shout and we’ll put you in touch with a mortgage specialist who can help.

If you're a seller and you're considering listing your home in the coming weeks, give us a shout and we’ll help you make the right move.

Who's Actually Going To Be Affected By The New Mortgage Stress-Test?

Since last week’s announcement by the Office of the Superintendent of Financial Institutions (OSFI) about the upcoming changes to the Canadian mortgage rules, I’ve seen plenty of buyers fret that their budgets are going to be reduced by as much as 20%.

This isn’t necessarily the case though, and not every buyer needs to stress about the new stress test. Let’s recap what sort of changes are coming once the new rules are implemented on January 1st, 2018.

The Biggest Change

Once the new rules come into play no-one will be able to qualify at less than the benchmark rate (which today is set at 4.89%). And in fact, borrowers with a down payment of more than 20% will have to qualify at either the benchmark rate or their contract rate + 2%, whichever is greater. So it’s quite possible that some borrowers will have to qualify at a rate that is greater than the current benchmark rate of 4.89%!

To give you some perspective: Since the last round of mortgage rule changes came into effect last year, only default-insured borrowers (these borrowers typically have a down payment of less than 20%) have had to qualify at the benchmark rate.

Borrowers with a down payment of more than 20% (and not default-insured) have had the benefit of only needing to qualify at their contract rate (which is typically less than the benchmark rate).

Come January 1st 2018 though, all borrowers, regardless of their down payment amount and regardless of whether or not their mortgage is default-insured, will have to qualify at the benchmark rate (or possibly higher).

Not Everyone Will Actually Be Affected

I’ve spoken to a handful of buyer clients this past week (after urging them to check-in with their mortgage broker regarding the new rules), and all of them are happy to report back that they will not be affected.

Why not?Because not every borrower pushes their mortgage amount to the maximum.

For example, if a buyer qualifies for a maximum purchase price of $1,000,000 but only plans on spending a maximum of $800,000, then they won’t actually be affected by the new rules.

Buyers are often approved for mortgages that are significantly higher than what they actually want to spend. I’ve worked with plenty of buyers who are simply amazed at how much the bank will lend them and have no intention of going anywhere near that maximum number.

Some will certainly be affected by the new rules though.  Specifically those who do need to push their mortgage amount to the maximum.

Consider first time buyers, for example. They have no home equity to throw into the pot, and rely only on whatever down payment they have saved. These buyers would typically need to push their mortgage amount to the maximum in order to break into the market.

Will You Be Affected?

At this point, there are still some unanswered questions with regards to the timing of the implementation of the new rules. We’re advising all of our buyer clients to reach-out to their mortgage brokers immediately to secure financing options before the changes come.

If you have any questions just give give us a shout and we’ll put you in touch with a mortgage specialist who can help.

Multiple-Offers Are Still Very Much A Part Of The Toronto Real Estate Landscape

Multiple-Offers Are Still Very Much A Part Of The Toronto Real Estate Landscape Photo

We're in the 2nd week of the fall real estate market now, and anyone who's been following along knows that in the past 4.5 months (ever since the Liberals announced their "16-Point Fair Housing Plan16-Point Fair Housing Plan" in April) we've seen a decline in the number of sales and, perhaps more notably, a decline in average sale prices.

Q:  Do these declines mean that there's now room for price negotiation on every single property that comes on the market? A:  Nope.

In fact... plenty of houses are selling for 100% of the list price. And an even larger number of houses are selling for more than the list price!

Despite all the talk of a "buyer's market", there are still plenty of buyers out there willing to pay full price for the right property, or even compete with other buyers and pay more than the list price if need be.

Let's take a look at all sales in the first 10 days of September for some insight (we'll go as far west as the Humber River, as far east as Victoria Park, and as far north as the 401):

Houses

• 83 sales total

• 58 sales at less than the list price

• 10 sales at 100% of the list price

• 15 sales at more than the list price (the highest being 119% of the list price)

Condos

• 162 sales total

• 77 sales at less than the list price

• 37 sales at 100% of list price

• 48 sales at more than the list price (the highest being 117% of the list price)

Percentage-wise, this breaks down as follows:

Houses

• 70% of houses sold for less than the list price

• 12% of houses sold for 100% of the list price

• 18% of houses sold for more than the list price

Condos

• 47.5% of condos sold for less than the list price

• 23% of condos sold for 100% of the list price

• 29.5% of condos sold for more than the list price

While these numbers don't reach the heights that we saw in January - April 2017 (in March, for example, there were a total of 2,145 combined house & condo sales - 73% of which sold for more than the list price), they do show us that buyers aren't being scared out of moving forward with their home searches. If a property warrants it, buyers will make agressive offers and fight for what they want.

Let's see what the rest of the month brings...

If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.

Buy In The Summer And Then Sell In The Fall?

Buy In The Summer And Then Sell In The Fall? Photo

"Should I stay or should I go?"

The classic 1982 Clash song (which I fondly remember being a highlight on the dancefloor at the Dance Cave, circa '99-'01) is a fitting soundtrack for anyone considering a move in the current Toronto real estate market.

While buying is nowhere near as stressful as it was in the first four months of the year, selling is a different story. We're in a transitioning market now and selling your home isn't as simple a process these days.

This change in the market has many buyers and sellers confused about how to proceed.

I've got a number of clients right now who are hesitantly contemplating a "move-up" purchase into something larger than their current space.

While they're tickled by the fact that they aren't shopping for a home in the same feeding-frenzy market we saw in January - April, the prospect of having to sell their home in this more relaxed market has them second-guessing whether or not now is the right time to make a move.

While their hesitation is certainly warranted, I don't think anyone should be totally writting-off the possibilty of a move in this current market.

Keep in mind, shopping for a home in the fall might not be the relaxed affair it is right now. Although no one can predict exactly what's going to happen in the fall, we need to consider the possibilty that market activity will pick-up again and we'll all be looking back at May/June/July/August as a four-month blip.

A few possibilties to consider when looking at how the market might be spurred towards greater activity in September:

1. With today's interest rate increase by the Bank of Canada (I'm writing this blog post on July 12th, the same day that the Bank of Canada has announced their first rate increase in 7 years), there are going to be buyers out there motivated to make a purchase before their current pre-approval rate-hold expires in 90-120 days.

2. After "taking the summer off" from their home search, buyers who've been sitting on the sidelines since the Liberals announced their 16-Point Fair Housing Plan in April will simply decide to get off the fence and take the plunge.

If the market does start to warm-up again in September we could all be looking back saying, "those who bought in the summer and then sold in the fall did very well for themselves...".

If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.

Point-By-Point: Ontario's Fair Housing Plan

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Today, Premier Kathleen Wynne finally announced changes to real estate in Ontario in an attempt to increase supply and address affordability.

No doubt, there's going to be some confusion about the effects of the changes. Keep in mind though, the fundamentals of a healthy market have not changed.

Take a look at the plan below, point-by-point. If you've got any questions just give me a shout.

There are 16 proposed measures:

1. A 15-per-cent non-resident speculation tax to be imposed on buyers in the Greater Golden Horseshoe area who are not citizens, permanent residents or Canadian corporations.
2. Expanded rent control that will apply to all private rental units in Ontario, including those built after 1991, which are currently excluded.
3. Updates to the Residential Tenancies Act to include a standard lease agreement, tighter provisions for “landlord’s own use” evictions, and technical changes to the Landlord-Tenant Board meant to make the process fairer, as well as other changes.
4. A program to leverage the value of surplus provincial land assets across the province to develop a mix of market-price housing and affordable housing.
5. Legislation that would allow Toronto and possibly other municipalities to introduce a vacant homes property tax in an effort to encourage property owners to sell unoccupied units or rent them out.
6. A plan to ensure property tax for new apartment buildings is charged at a similar rate as other residential properties.
7. A five-year, $125-million program aimed at encouraging the construction of new rental apartment buildings by rebating a portion of development charges.
8. More flexibility for municipalities when it comes to using property tax tools to encourage development.
9. The creation of a new Housing Supply Team with dedicated provincial employees to identify barriers to specific housing development projects and work with developers and municipalities to find solutions.
10. An effort to understand and tackle practices that may be contributing to tax avoidance and excessive speculation in the housing market.
11. A review of the rules real estate agents are required to follow to ensure that consumers are fairly represented in real estate transactions.
12. The launch of a housing advisory group which will meet quarterly to provide the government with ongoing advice about the state of the housing market and discuss the impact of the measures and any additional steps that are needed.
13. Education for consumers on their rights, particularly on the issue of one real estate professional representing more than one party in a real estate transaction.
14. A partnership with the Canada Revenue Agency to explore more comprehensive reporting requirements so that correct federal and provincial taxes, including income and sales taxes, are paid on purchases and sales of real estate in Ontario.
15. Set timelines for elevator repairs to be established in consultation with the sector and the Technical Standards & Safety Authority.
16. Provisions that would require municipalities to consider the appropriate range of unit sizes in higher density residential buildings to accommodate a diverse range of household sizes and incomes, among other things.

If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.

Toronto Land Transfer Taxes Are Increasing. Ugh.

Toronto Land Transfer Tax Costs Are Going Up On March 1st Photo

If you haven't already heard, the City of Toronto Council has approved changes to the Toronto Land Transfer Tax which will result in additional costs for some home buyers with a closing date on or after March 1, 2017 (which is when the tax will be harmonized with the provincial LTT).

Click here to see the detailed City of Toronto Notice on the "original" proposed changes posted in December 2016 (NOTE: changes made to original proposals as per below).

Status

The following changes to the Toronto Land Transfer Tax were considered and approved by Toronto City Council on February 15, 2017. The changes are effective AS OF MARCH 1, 2017, for real estate transactions closing on or after this date:

• Added an additional LTT of 0.5% of the value of a residential or non-residential property from $250,000 to $400,000 (an additional $750)

• Added an additional LTT of 0.5% of the value of a residential property above $2 million

• Added an additional LTT of 0.5% of the value above $400,000 of a non-residential property

• Increasing the maximum allowed First-Time Home Buyer Rebate to $4,475, up from $3,725

• Amended the first-time home buyer rebate program eligibility rules to restrict rebate eligibility to Canadian citizens or permanent residents of Canada

TREB Efforts Achieved Significant Concessions – First-Time Buyers Protected

TREB (Toronto Real Estate Board) undertook a comprehensive campaign to oppose the proposed changes. As a result of these efforts, significant concessions were made to the proposals that went forward for City Council's consideration as follows:

• Under the original proposal, first-time buyers would have been forced to pay an additional $475 in Toronto LTT. However, TREB pushed for an increase in the rebate from $3,725 to $4,475, meaning first-time buyers will not face an increase.

• Many first-time buyers would have lost eligibility for the first-time buyer rebate entirely, meaning a total LTT increase of $4,475. TREB pushed back and all first-time buyers will be eligible for a rebate.

• As a result of TREB's efforts, first-time home buyers will NOT see any change.

If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.

Four Major Changes To Canada's Housing Rules

If you haven't already heard, the Canadian Department of Finance made an announcement earlier this month outlining a handful of changes that will have an impact on the mortgage/housing market.

The Globe & Mail followed the announcement pretty quickly with a detailed breakdown of all the changes, and how the affects might be felt.

Below is a reposting of that article in full. Enjoy!

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From the Globe & Mail, on October 3rd, 2016:

Four Major Changes To Canada's Housing Rules

The Liberal government has announced sweeping changes aimed at ensuring Canadians aren’t taking on bigger mortgages than they can afford in an era of historically low interest rates.

The changes are also meant to address concerns related to foreign buyers who buy and flip Canadian homes.

Below is a breakdown of the four major changes Finance Minister Bill Morneau announced Monday.

The current rules

Buyers with a down payment of at least 5 per cent of the purchase price but less than 20 per cent must be backed by mortgage insurance. This protects the lender in the event that the home buyer defaults. These loans are known as “high loan-to-value” or “high ratio” mortgages.

In situations in which the buyer has 20 per cent or more for a down payment, the lender or borrower could obtain “low-ratio” insurance that covers 100 per cent of the loan in the event of a default.

Mortgage insurance in Canada is backed by the federal government through the Canada Mortgage and Housing Corp. Insurance is sold by the CMHC and two private insurers, Genworth Financial Mortgage Insurance Company Canada and Canada Guaranty Mortgage Insurance Company. The federal government backs the insurance offered by the two private-sector firms, subject to a 10-per-cent deductible.

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The change

Expanding a mortgage rate stress test to all insured mortgages.

What it is

As of Oct. 17, a stress test used for approving high-ratio mortgages will be applied to all new insured mortgages – including those where the buyer has more than 20 per cent for a down payment. The stress test is aimed at assuring the lender that the home buyer could still afford the mortgage if interest rates were to rise. The home buyer would need to qualify for a loan at the negotiated rate in the mortgage contract, but also at the Bank of Canada’s five-year fixed posted mortgage rate, which is an average of the posted rates of the big six banks in Canada. This rate is usually higher than what buyers can negotiate. As of Sept. 28, the posted rate was 4.64 per cent.

Other aspects of the stress test require that the home buyer will be spending no more than 39 per cent of income on home-carrying costs like mortgage payments, heat and taxes. Another measure called total debt service includes all other debt payments and the TDS ratio must not exceed 44 per cent.

Who it affects

This measure affects home buyers who have at least 20 per cent for a down payment but are seeking a mortgage that may stretch them too thin if interest rates were to rise. It also affects lenders seeking to buy government-backed insurance for low-ratio mortgages.

Why

The government is responding to concerns that sharp rises in house prices in cities like Toronto and Vancouver could increase the risk of defaults in the future should mortgage rates rise.

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The change

As of Nov. 30, the government will impose new restrictions on when it will provide insurance for low-ratio mortgages.

What it is

The new rules restrict insurance for these types of mortgages based on new criteria, including that the amortization period must be 25 years or less, the purchase price is less than $1-million, the buyer has a credit score of 600 and the property will be owner-occupied.

Who it affects

This measure appears to be aimed at lowering the government’s exposure to residential mortgages for properties worth $1-million or more, a category of the market that has increased sharply in recent years in Vancouver and Toronto.

Why

Vancouver and Toronto are the two real estate markets that are of most concern for policy makers at all levels of government. These measures appear to be targeted at those markets.

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The change

New reporting rules for the primary residence capital gains exemption.

What it is

Currently, any financial gain from selling your primary residence is tax-free and does not have to be reported as income. As of this tax year, the capital gains tax is still waived, but the sale of the primary residence must be reported at tax time to the Canada Revenue Agency.

Who it affects

Everyone who sells their primary residence will have a new obligation to report the sale to the CRA, however the change is aimed at preventing foreign buyers who buy and sell homes from claiming a primary residence tax exemption for which they are not entitled.

Why

While officials say more data are needed, Ottawa is responding to extensive anecdotal evidence and media reports showing foreign investors are flipping homes in Canada and falsely claiming the primary residence exemption.

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The change

The government is launching consultations on lender risk sharing.

What it is

Currently, the federal government is on the hook to cover the cost of 100 per cent of an insured mortgage in the event of a default. The federal government says this is “unique” internationally and that it will be releasing a public consultation paper shortly on a proposal to have lenders, such as banks, take on some of that risk. The Department of Finance Canada acknowledges this would be “a significant structural change to Canada’s housing finance system.”

Who it affects

Mortgage lenders, such as banks, would have to take on added risk. This could potentially lead to higher mortgage rates for home buyers.

Why

The federal government wants to limit its financial obligations in the event of widespread mortgage defaults. It also wants to encourage prudent lending practices.

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Five previous federal housing moves since 2008

Monday’s package of announcements is the sixth time since the onset of the 2008 financial crisis that Ottawa has taken policy action in response to concerns about Canada’s housing market. July, 2008: After briefly allowing the CMHC to insure high-ratio mortgages with a 40-year amortization period, then Conservative finance minister Jim Flaherty moved to tighten those rules by reducing the maximum length of an insured high-ratio mortgage to 35 years.

February, 2010: Responding to concern that some Canadians were borrowing too much against the rising value of their homes, the government lowered the maximum amount Canadians could borrow in refinancing their mortgages to 90 per cent of a home’s value, down from 95 per cent. The move also set a new 20-per-cent down payment requirement for government-backed mortgage insurance on properties purchased for speculation by an owner who does not live in the property.

January, 2011: The Conservative government under Stephen Harper tightened the rules further, dropping the maximum amortization period for a high-ratio insured mortgage to 30 years. The maximum amount Canadians could borrow via refinancing was further lowered to 85 per cent.

June, 2012: A third round of tightening brought the maximum amortization period down to 25 years for high-ratio insured mortgages. A new stress test was also introduced to ensure that debt costs are no more than 44 per cent of income for lenders seeking a high-ratio mortgage. Refinancing rules were also tightened for a third time, setting a new maximum loan of 80 per cent of a property’s value. Another new measure limited the availability of government-backed insured high-ratio mortgages to homes valued at less than $1-million.

December, 2015: The recently elected Liberal government moved to tighten lending rules for homes worth more than $500,000, saying it was focused on “pockets of risk” in the housing sector. The package of measures included doubling the minimum down payment for insured high-ratio mortgages to 10 per cent from 5 per cent for the portion of a home’s value from $500,000 to $1-million.

Understanding Your 2016 Property Assessment Notice From MPAC

Back in April, MPAC started mailing out their 2016 property assessment notices to property owners across the province of Ontario. If you don’t have yours yet - keep checking the mail; they should all be out by the fall.

I’ve spoken to a number of clients recently about their assessments, and most are asking the same two questions:

1. The assessed value is significantly less than what we know our property is worth. Is this normal?
2. The assessed value has increased since the previous assessment. Does the municipality increase my property taxes by the same rate?

These are both excellent questions! Below are my answers.

The market value of your property is very likely going to be higher than MPAC’s assessed value.

While some assessments in the City of Toronto do come-in fairly close to market value, MPAC’s numbers are usually quite a bit lower than what the property would sell for on the open market. Sometimes the difference is quite significant!

It’s not uncommon to see MPAC’s assessed value be hundreds-of-thousands-of-dollars less than the current market value (depending of course on price point, location, etc.).

MPAC relies on a number of factors when doing their assessments, but apparently recent comparable sale prices don’t weigh heavily in the process!

Just because MPAC’s assessed value of your property has increased doesn’t necessarily mean you’ll pay more in property taxes.

In the City of Toronto, your property taxes should only increase if the value of your property has increased at a greater rate than the City average (unless of course the City has increased taxes as part of its budget requirements…).

Here’s a quote from the the FAQ section of the City’s property tax website:

• Reassessment at the municipal level, is "revenue neutral" and does not generate any additional revenue for the City. With a reassessment, the City must adjust the tax rate to remain revenue neutral, so no new funding comes to the City of Toronto as a result of property valuation changes.
• If your property value increases at a rate less than the City average, your property tax may decrease due to the reassessment.
• If your property value increases at a rate more than the City average, your property tax will increase due to reassessment.
• The City may need to increase taxes due to its budget requirements, however, this is separate and not related to reassessments.

Do you have any further questions about your assessment?

Maybe MPAC’s valuation actually seems too high to you, and you’re wondering if there’s cause to fight it? Give me a shout and I’ll be happy to provide you with the recent sales in your area. Who knows, you might be able to make a case…

If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.

Ouch! Feeling The Sting Of Flaherty's New Mortgage Rules

There’s been a lot of talk over the last few weeks about how many buyers out there are actually going to feel the sting of the new mortgage rules that came into effect on July 9^th.  While the media has been playing up the severity of the implications these new rules bring, most industry insiders feel that only a relative minority of purchasers will actually have their buying power significantly reduced.

I thought it might be a good idea to shed some light from a realtor’s perspective and take a look at a couple of real world examples.

Example #1

A client of mine was previously looking to purchase a one-bedroom condo in the King West area for somewhere in the $325,000 - $330,000 range.  With the new rules in place, he’s been bumped down to well under $300K.  This means he’s likely going to have to say goodbye to a separate bedroom and settle for a bachelor suite.  Now he’s wondering if renting might be a better option...

Example #2

Some clients of mine were previously looking to purchase a 3-bedroom, 2 bathroom home in the east-end for around $600,000.  With the new rules in place, they’ll likely have to take on a basement tenant if they want to continue shopping for a house in the same price range.  This means that they may have to settle for only one bathroom, since 2^nd bathrooms in these homes are almost always located in the basement.

So, there you go - two real world illustrations of how Flaherty's tightening measures are affecting purchasers in the Toronto real estate market.

I will note that, aside from these two buyers, none of my other clients have been noticeably affected by the new mortgage rules.  They're either purchasing with at least 20% down or they're planning on spending conservatively less than the amount they've been approved for.

What about you? Have you had to reassess your home buying plans as a result of the new mortgage rules?

For access to a Mortgage Calculator and other financial tools, visit my website here. 

If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.

What's In Store For The 2012 Real Estate Market?

Last month, the Toronto Real Estate Board posted the above video to their YouTube channel. In the video, Senior Manager of Market Analysis, Jason Mercer, takes a look back at the 2011 real estate market and a look forward to what we can expect in 2012. Warning: the video is over 25 minutes long! Not to worry - I sat through the entire thing myself and have summarized the main points below (you're welcome).

1.  Where We Are At

• We've seen of approximately 8-10% of price growth over the course of the year.
• Inventory has been tight, resulting in a Seller's Market.
• Record-low interest rates have fuelled a very active market.

2.  Interest Rates

• Rates are likely to remain somewhat flat in 2012.
• This is a reaction to what's happening, economically, south of the border and in Europe.

3.  Jobs And Income Growth

• The unemployment rate has been moving lower, but this trend is flattening.
• A 2% growth in income is expected in 2012, roughly in line with inflation expectations.
• The average Toronto household income will increase from approx $102,000 in 2011 to approx $104,000 in 2011.

4.  Resale Market Outlook

• An increase in the number of sales, from 90,000 in 2011 to 92,000 in 2012.
• This increase in the number of sales is in line with the long-term trend for population growth.
• The number of new listings should rise from 145-150,000 in 2011 to 160-165,000 in 2012.
• More sellers will decide to list their homes in reaction to the strong price growth seen in 2011.
• More listings = more choice for buyers = slower price growth than what we saw in 2011.
• An increase in the average price from $460,00 in 2011 to $485,000 in 2012.
• This amounts to approx 4.5% price growth, year-over-year.
• Moderate price growth will keep affordability in check.

If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.

Say No To Status Quo And Repeal The Toronto Land Transfer Tax

A few months ago I wrote a BLOG post titled, "How Much Can You Expect To Pay In Land Transfer Taxes?" (read it here).  I provided a breakdown of how the various provinces calculate these taxes.  I even linked to a handy little calculator that shows just how much a resident of Toronto has to pay.  Let's just say... it's not chump change.

Today, the Toronto Real Estate Board posted the above video on their YouTube channel. The message is simple: "Mayor Rob Ford made a promise to repeal the Toronto Land Transfer Tax.  Let's help him keep it."

From the Toronto Real Estate Board's website:

Say No To Status Quo!

Mayor Ford and City Council were elected with a clear mandate to change the way City Hall operates, including repealing the Toronto Land Transfer Tax. Unfortunately, some City Councillors are getting cold feet and would prefer to maintain the status quo. You can help make sure that City Council moves forward with changing City Hall.  Use the links below to:

• Send an email to the Mayor and City Council (click here)
• Email your contacts to take action as well (click here)
• Send a letter to the editor of selected media (click here)

For access to a Land Transfer Tax Calculator and other financial tools, visit my website here.

If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.

Five For Friday

     It's roundup time!  Let's take a look back at some of the more interesting articles, videos, and photos that popped up over the past two weeks... 

#5.  Photos Of The Supermoon Above Toronto

     On the 20th, Derek Flack of blogTO posted a choice selection of photos of Saturday's supermoon.  Stunning photos aside, I think David did a good job of summing up this rare natural wonder when he wrote, "Impressive, yes. Jaw-droppingly amazing, not so much."  Read the full article here.

#4.  Green Roofs Toronto

     On the 15th, Jessica Lemieux of Spacing Toronto took a look at some of the city's best know green roofs.  The ESRI building, Mountain Equipment Co-op, the Hugh Garner Co-op, and our very own City Hall were featured.  Read the full article here.

#3.  Despite Stress, No Crash Seen In Housing

     On the 14th, Steve Ladurantaye of the Globe and Mail outlined a number of reasons why, despite signs of stress, the Canadian real estate market won't crash.  Read the full article here.

#2.  World's Richest Man Buys Manhattan's Most Expensive Townhouse

     On The 17th, Cliff Peskin of BuzzBuzzHome wrote about the recent $44 million sale of a 20,000 square foot Manhattan townhouse.  Listed in the spring of 2010 for $50 million, the property was finally purchased by a man named Carlos Slim Helu (he holds the #1 seat on Forbes' "Richest People" list).  Read the full article here.

#1.  Nostalgia Tripping: Canada's First Subway System

     On the 19th, Agatha Barc of blogTO looked back to the March 30th, 1954 opening of the country's first subway line.  It stetched between Eglinton and Union stations and a single fare was $0.10 (tokens were 3 for $0.25)!  The article paints a good picture of the events leading up to that historic day (and there are a handful of great photos to boot).  Read the full article here.

If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.

Federal Government Changes Mortgage Rules, Again

       It's been almost a year since the Feds last tightened lending rules (you can read my BLOG post from last February here).  Last week, Jim Flaherty and the Government of Canada announced three further changes to the standards involved in Government backed mortgages:

• The maximum amortization period will be reduced from 35 years down to 30 years.
• The maximum amount Canadians can borrow in refinancing their mortgages will be reduced from 90% of the value of their home down to 85% of the value of their home.
• Government insurance backing on lines of credit that are secured by homes (eg. a home equity line of credit) will be withdrawn.

Realistically, it's the first one on the list that'll have the most significant effect (at least from my perspective as a Realtor working in downtown Toronto).  I'm sure there'll be a push in the coming weeks as buyers are motivated to secure a property before the mortgage changes take effect (March 18th).  The line of credit changes come into effect a month later (April 18th).

Following is last week’s release from the Department Of Finance Canada:

The Honourable Jim Flaherty, Minister of Finance, and the Honourable Christian Paradis, Minister of Natural Resources, today announced prudent adjustments to the rules for government-backed insured mortgages to support the long-term stability of Canada’s housing market and support hard-working Canadian families saving through home ownership.

“Canada’s well-regulated housing sector has been an important strength that allowed us to avoid the mistakes of other countries and helped protect us from the worst of the recent global recession,” said Minister Flaherty. “The prudent measures announced today build on that advantage by encouraging hard-working Canadian families to save by investing in their homes and future.”

“The economy continues to be our Government’s top priority,” continued Minister Paradis. “Our Government will continue to take the necessary actions to ensure stability and economic certainty in Canada’s housing market.”

The new measures:

• Reduce the maximum amortization period to 30 years from 35 years for new government-backed insured mortgages with loan-to-value ratios of more than 80 per cent. This will significantly reduce the total interest payments Canadian families make on their mortgages, allow Canadian families to build up equity in their homes more quickly, and help Canadians pay off their mortgages before they retire.
• Lower the maximum amount Canadians can borrow in refinancing their mortgages to 85 per cent from 90 per cent of the value of their homes. This will promote saving through home ownership and limit the repackaging of consumer debt into mortgages guaranteed by taxpayers.
• Withdraw government insurance backing on lines of credit secured by homes, such as home equity lines of credit, or HELOCs. This will ensure that risks associated with consumer debt products used to borrow funds unrelated to house purchases are managed by the financial institutions and not borne by taxpayers.

Our Government’s ongoing monitoring and sound underlying supervisory regime, along with the traditionally cautious approach taken by Canadian financial institutions to mortgage lending, have allowed Canada to maintain strong and secure housing and mortgage markets.

The adjustments to the mortgage insurance guarantee framework will come into force on March 18, 2011. The withdrawal of government insurance backing on lines of credit secured by homes will come into force on April 18, 2011.

For access to a Mortgage Calculator and other financial tools, visit my website here. 

If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.

Looking Forward: What's In Store For The 2011 Real Estate Market?

     The Toronto Real Estate Board recently weighed in with their outlook for 2011/2012 by posting the above video to their YouTube channel.  This video is the latest from TREB in a series featuring their Senior Manager of Market Analysis, Jason Mercer.

In his presentation, Mr. Mercer focuses on 3 key factors in his analysis of where we've been and where we're going:

• Average home price
• Average household income
• Average 5 year fixed mortgage rate

For those of you unwilling to sit through the 20 min video (I don't blame you - 20 min is long...), here's a quick summary of his outlook:

• The pace of economic recovery has slowed NOT STALLED in Canada. 
• The market consensus is for fewer rates hikes than originally expected through the end of 2012.
• Wages and salaries will reach an inflation-level of growth.
• There'll be an inflationary increase in utilities costs and taxes.
• Right now affordability remains in check, thus the current average selling price is justified.
• Price growth will be slower in 2011/2012 (3% growth).

If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.

Looking Back: The 2010 Real Estate Market In Review

           One of my favourite Real Estate blogs, BuzzBuzzHome, posted a great recap a few days ago of all the craziness that the Canadian real estate market experienced this past year (read it here).  Looking back, there’s no doubt 2010 was a remarkably eventful year.  Here’s my own breakdown of some of the highlights:

• The first half of the year was characterised by multiple-offers and steadily increasing prices (a continuation of what began in earnest in the fall of '09).  The flourishing of this seller's market was due in part to low inventory, high demand, and historically low interest rates.
• New mortgage rules were implemented by the federal government in April.  These changes effectively made it more difficult for some buyers to obtain financing. 
• Easter weekend ushered in the Spring market, along with a noticeable increase in listing inventory.
• July saw the arrival of the Harmonized Sales Tax (HST).  Purchasers of new homes would feel the sting more than others.
• The Summer market was slower than that of years past.  Fears of a bubble and uncertainty were in the air.  A number of buyers chose to sit on the sidelines.
• The Fall market saw an increase in activity following the slower summer.  No bubble?  Multiple offers seemed to be making a comeback...
• The Competition Bureaus vs CREA.  A settlement was finally reached - one that ultimately provides consumers with more choice.  How will the new rules affect the industry?  Only time will tell.

So, what can we expect in 2011?  A number of industry leaders are predicting more stability for the real estate market over the next few years.  I don't know about you, but more stability sounds just fine to me...

If you’re thinking of making a move and would like to know how I can help, feel free to contact me for more info.