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4 Major Changes to Canada's Housing Rules
Posted on Tue, 04 Oct 2016, 03:05:56 PM  in Home buying tips
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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.

houseThe changes are also meant to address concerns related to foreign Buyers who buy & 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% of the purchase price but less than 20% 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% or more for a down payment, the lender or borrower could obtain “Low-ratio” insurance that covers 100% of the loan in the event of a default.

Mortgage insurance in Canada is backed by the Federal Government through the Canada Mortgage & Housing Corp. Insurance is sold by the CMHC & two private insurers, Genworth Financial Mortgage Insurance Company Canada & Canada Guaranty Mortgage Insurance Company. The Federal Government backs the insurance offered by the two private-sector firms, subject to a 10% deductible.

 

The Change

Expanding a mortgage rate stress test to all insured mortgages.

What it is
As of October 17th , 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% 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 September 28th, the posted rate was 4.64%.

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

Who it affects
This measure affects home Buyers who have at least 20% 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 & Vancouver could increase the risk of defaults in the future should mortgage rates rise.

 

The Change

As of November 30th, 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 & 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 Toronto & Vancouver.

Why
Toronto & Vancouver 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.

 

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 & 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 & 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 & media reports showing foreign investors are flipping homes in Canada & falsely claiming the primary residence exemption.

 

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% of an insured mortgage in the event of a default. The Federal Government says this is “unique” internationally & 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.

 

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% of a home’s value, down from 95%. The move also set a new 20% 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%.

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% 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% 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% from 5% for the portion of a home’s value from $500,000 to $1 million.

Source: Ottawa - The Globe & Mail - BILL CURRY - Oct 03/2016

Please feel free to contact me regarding this article or about any real estate needs or questions that you may have. Call me at  416-804-0991 (client line) or 416-441-2888 ext 266 (office) or email for more information.

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The Rising Costs of Toronto's Real Estate
Tuesday, 09 August 2016, 02:25:03 PM

Not so long ago luxury real estate in Toronto started at $1 million. Today, a prestigious address with high-end finished & fittings will cost more than twice as much.

With the average Toronto detached home selling for $1.26 million in June, house hunters seeking real luxury are actually buying well beyond the $2 million range, said managing broker of Sotheby’s International Realty Canada.

Even buyers bidding on homes over $2 million are subject to the heartbreak of Toronto’s bidding wars & bully offers. The number of homes that sold for over $1 million in Toronto during the first 6 months of this year, actually exceeded the only hotter Canadian market in Vancouver.  The strongest sales volume increase in the GTA was in the $4 million plus category. Although it accounts for a relatively small number of sales, the category increased 81% in the first 6 months of this year. That is 134 super luxury homes between January & June, compared to 74 in the same period last year, including detached & attached homes as well as condos.

Sales of detached single family homes that cost over $4 million were up 79% year over year. It’s not a matter of buyers in the lower price category being pushed past the $2 million mark.  If a buyer can’t afford the luxury they want in the city they will move further out or find an alternative such as a high end condo.

Simply but there are people that have a lot of money & consumer confidence is high. People today are used to living well because we’ve had such a good economy for so long & they can afford it. There are a lot of people who are getting these huge inheritances. They have their own money plus they have money trickled down from family inheritances. 

Foreign investment & a relatively low Canadian dollar are expected to continue driving the scorching Toronto & Vancouver property scenes. This, along with the persistence of low interest rates & continued local consumer confidence & activity, will drive the $1 million plus real estate market into the second half of 2016.

If we had more inventory the industry would feel a lot better about people being able to purchase homes comfortably. It doesn’t look like we’re going to get a lot on the market going into the fall. For every house on the market you’ve got 10 buyers.

Source: MetroNews – July 2016

Please feel free to contact me regarding this article or about any real estate needs or questions that you may have. Call me at  416-804-0991 (client line) or 416-441-2888 ext 266 (office) or email for more information.

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Most Not Ready For Rate Hike
Posted on Wed, 11 Nov 2015, 12:08:47 PM  in Home buying tips,  Home selling tips, etc.
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Survey finds 16% couldn't pay $500 more in mortgage

Nearly one in six Canadians would not be able to handle a $500 increase in their monthly mortgage payments, a new survey from the Bank of Montreal suggests.
According to the bank, 16% of respondents said they would not be able to afford such an increase, while more than a quarter, or roughly 27%, would need to review their budget.

Another 26% said they would be concerned but could probably handle it. Such an increase would be generated in the case of a 3% point hike in interest rates - from 2.75% to 5.75% - on a $300,000 mortgage with a 25 year amortization period.

The report by BMO's Wealth Institute found that almost half of Canadians, 47% believed that the high level of debt in Canada has been influenced by soaring real estate values, while 40% believed it has been influenced by low rates.

BMO noted that when interest rates are low, it is a good time to make aggressive principal repayments on loans. Its survey found that 35% of respondents are looking to pay down their mortgage sooner.

"However, statistics have shown that debt service rates have not changed very much from the early 1990's, when interest rates were much higher," the report said.

"It appears that many Canadians have used low interest rates to get larger loans on more expensive houses rather than to aggressively repay their debt."

Source Metronews -Business -Wed October 7, 2015

Please feel free to contact me regarding this article or about any real estate needs or questions that you may have. Call me at  416-804-0991 (client line) or 416-441-2888 ext 266 (office) or email for more information.

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Market's Still Too HOT for First Timers
Posted on Wed, 11 Nov 2015, 12:06:41 PM  in Home buying tips,  Home selling tips, etc.
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Analyst sees price growth slowing down....eventually

Growth in house prices is expected to "flatline" in Toronto in the coming months, but first-timer home Buyers may still find themselves priced out of the market.

"If you were thinking about buying next year, your're more likely looking at town years down the road," said Dana Sanagama, a market analyst with the Canada Mortgage & Housing Corporation.

The CMHC released its forecast for 2016-2017 which highlights real estate trends across the country.

In the GTA, a combination of surplus stock & lack of affordability should put a stop to "unsustainable" price growth. In a nutshell, a lot of these indicators are going to slow down over the next couple of years. That's not necessarily a bad thing, it's the market adjusting to imbalances that we've seen over the past 12 months.

That doesn't mean prices are going to go down, it means that they won't increase as fast.

As a result rental vacancy rates in the city will remain low, as prospective Buyers hold out for something better.

There's still very strong rental demand. Why is that? It's simply because it's less & less attractive for first-time Buyers to enter into home ownership.

Unfortunately, CMHC expects mortgage rates may start to rise by the end of 2016, meaning even if prices do drop, the actual cost of the home may remain the same.

Lowered Expectations?

Those still looking to buy in the next year may need to adjust their expectations. You still have choices. It's just about where you compromise. 

Maybe you were thinking about a townhouse, but that's out of your price range, so you buy a condo. And maybe that condo isn't in downtown Toronto, but out perhaps in North York. Any young Buyers set on a single detached home will likely have to look as far out as Whitby & Markham.

Buying a single detached house in the city of Toronto is not really at the level of the first time Buyers - you're looking at millions of dollars.

Source: MetroNews - Housing -Luke Simcoe Nov 2015

Please feel free to contact me regarding this article or about any real estate needs or questions that you may have. Call me at  416-804-0991 (client line) or 416-441-2888 ext 266 (office) or email for more information.

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Dress Up your Deck
Posted on Tue, 02 Jun 2015, 12:11:55 PM  in Home improvements
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Its deck season - at home & at the cottage - time to spend as much time outside as possible enjoying the weather & the scenery with friends & family. But our climate can take a toll on decks, even well-constructed ones made from material designed to withstand Canadian snow, sun, wind & rain.

If your deck is looking a little dreary, why not wake it up with an update or two?

There are a number of interesting ways to give your deck a new look & improve its functionality. Some of the following ideas can be applied in a weekend with basic tool experience, while others may be best left to a professional. All of them can bring new life to your deck.

Furniture: Never has there been so many options for outdoor furniture, with a dizzying array of styles, finishes, fabrics & price ranges from which to choose. Whichever style you opt for, be sure it is comfortable & sturdy. When arranging new furniture, consider the sun by providing ample shade & respite from the afternoon heat.

Railings: As with furniture, railing options have never been better. Exchange a bulky wooden railing with one of the sleek new designs. Glass panels are a popular choice, providing a clear view to the backyard or lake. Metal tubular spindles are another new trend that provided better sight lines & a clean modern look.

Surface: There are stain & deck paint options available to suit any & all tastes, whether you are trying to make an impact with a bold colour or looking for a the serene earthy feel of traditional wood stains. Apply caution if staining a wooden deck made from pressure treated wood as some areas may take the stain much better than others, resulting in a blotchy look. But they can be painted. Start with a low pressure power wash or scrub with soap & water. Once thoroughly dry, prepare the surface by sanding lightly. If your deck surface is well worn, a brush may be the better application method.

Cover: Having a top to your deck can provide welcomed shade during the sunnier periods of the day. It doesn't have to be a complete roof, just a framework - a pergola - is often enough to break the heat & add dramatic height to your deck. Designs can also incorporate a removable cover that can extend the enjoyment of your deck & eliminate cancellation of a get together due to rain.

Screening: Are mosquitoes cutting into your deck time? Shut them out by adding screening. Not only will you be able to eliminate the bussing & bites, but it will also dampen strong summer breezes.

Lights: Since it attracts pesky insects, use lighting sparingly unless you have a screened in deck. Best application is task lighting, to illuminate  steps & walkways. Choose styles that do not produce unwanted glare, or position your lighting accordingly.

 

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Mortgage Insurance Premium Rates
Tuesday, 28 April 2015, 03:30:44 PM
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Genworth follows CMHC, raises
Mortgage Insurance premium

Rate will go up 15% June 1, 2015

TORONTO – Genworth Canada says it will be increasing the premium for some of its mortgage insurance, starting June 1, matching a move announced last week by Canada Mortgage & Housing Corp (CMHC).

The rate will go up by 15% for Buyers who have a down payment of 10% or less.

Mortgage insurance provides protection for Lenders who provide money to home Buyers & Owners.

The home Buyer’s or Owner’s premium is determined by several factors including how much is borrowed & how much the property is worth.

Genworth says it believes the higher premiums for people with small down payments won’t have a major impact on home affordability but the higher pricing will support the long-term health of Canada’s system for financing housing.

The new rate for a loan-to-value ratio up to 95% is 3.6%, up from 3.15%. For a loan-to-value ratio from 90.01 to 95%, but a non-traditional down payment, the premium climbs to 3.85% from 3.35%.

by The Canadian Press  April 6th, 2015
MoneySense Online only

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Five Tips to Survive Selling Your Home
Tuesday, 28 April 2015, 03:00:18 PM
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Five Tips to Survive showing
your home & making the sale

You have made the decision to sell your house & now you have people walking through every inch of it.

Here’s what to do & expect when showing your home.

Move Out, if possible

It’s usually less disruptive for clients with children & pets to temporarily move out when selling their home.

Your not always able to keep on top of making your house sparkle all the time with kids & pets in the house.

One Toronto couple in the midst of listing their home, plan to move their young family out of the house for two weeks while their home is staged, photographed & shown.

It’s so much easier to not be around so the agent has free reign to book appointments as needed, it just makes life much easier when there’s little ones.

Moving out is ideal & but not always possible, it could be a great time to take a family vacation…..

 
Stop Cooking

If a family is staying in their home while they are selling, they should not cook.

Ideally, a house should smell fresh, clean & free of scents, including perfume, air fresheners, or cooking odours.

If you have a HOT property, you’re hoping for lots of action, which generally means evening showings. So, sometimes, it’s best to plan to eat out.


Board the Pets

Scent can also be an issue when it comes to pets. Pets can often complicate the showing process if a prospective Buyer is allergic or nervous around animals.

Showings can also be hard for pets.

Sometimes using a doggie daycare is recommended. When the weather is nice, putting the dog in the backyard during a last-minute showing is also an option.


Keep it Kid-Friendly

For clients with infants, Agents recommend restrictions on showing hours, such as no showings after 7 p.m., so there is as little disruption as possible to baby routines.

A tip for Sellers with kids is to keep a basket of toys that’s easily accessible when they are home but also easy to tuck away in a hurry.


De-Clutter/Professional Staging

Whether you hire professionals or self-edit your furniture & furnishings, staging will make your place more attractive to Buyers, & easier to keep clean & tidy.

When a couple listed their home in Toronto in late 2012, the family packed up half of the house to get it ready for sale. All non-essential items — including clothing, coats, shoes & furniture — were boxed up & placed in a storage facility.

When it came time to pack up for moving, half the work was already done, win win situation.

MetroNews - Henrietta Walmark - April 8, 2015

 

 

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Sales & Prices
Tuesday, 28 April 2015, 12:39:19 PM
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Sales & Price Up Year-Over-Year in March 2015

TORONTO, April 7, 2015 – Toronto Real Estate Board President Paul Etherington announced that Greater Toronto Area REALTORS® reported 8,940 sales in March 2015. This result represented an 11 % increase compared to March 2014. Sales were up for most major home types, both in the City of Toronto & the surrounding regions. New listings were also up, but by a lesser 5.5%, indicating tighter market conditions. “Home sales increased compared to last year as the cost of home ownership remained affordable, with lower interest rates going a long way to mitigate the effect of rising home prices. However, a substantial amount of pent-up demand remains in place, especially as it relates to low-rise market segments. This suggests that strong competition between buyers, which has fuelled strong price growth so far this year, will continue to be experienced throughout the spring,” said Mr. Etherington. In March, the average selling price for all reported transactions was $613,933 – up 10% year-over-year. The MLS® HPI Composite Index, which tracks benchmark homes with the same attributes from one period to the next, was up by 7.9%. Average price growth was strongest for detached homes in the City of Toronto, at 15.9%. Over the same period the detached MLS® HPI in the '416' area code increased 7.8%. The MLS® HPI provides a clear indication of price growth due to market forces - the relationship between demand & supply. Comparing MLS® HPI growth to average price growth provides a sense of the changing mix of home types sold from one period to the next. "It is clear that Seller's market conditions in many parts of the GTA are driving price growth. However, looking at the detached market segment in the City of Toronto in particular, growth in the average selling price outstripped growth in the MLS® HPI. This points to the fact that the mix of detached homes sold this year compared to last has shifted towards more expensive properties," said Jason Mercer, TREB's Director of Market Analysis.

Toronto Real Estate Board - Market Watch Report

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For what it’s worth....
Tuesday, 26 October 2010, 04:43:13 PM

How much to list your home for? Listen to the experts

Putting a price on what is likely your most valuable asset can be tricky, especially if you have lived in your home for a number of years and have done it up just the way you want it. In your eyes, it may be the best home on your street. When it comes time to sell, perhaps to move to a new job or give your growing family more room, it is hard not to take it personally when your realtor rolls up and suggests that it is worth $100,000 less than the sale price you had in mind.

People get it into their head that “My house is worth whatever, I say its worth.” No matter who you are, you always think your home is the best. It’s not a slight against other homes, it’s human nature.

However, if potential Buyers do not feel quite the same way about your magnificent home as you do, you could find yourself waiting in vain to secure a sale.

If you can’t sell your home, it’s usually because of the price, says most realtors. If there is no obvious reason like, needing to de-clutter or bad pet odour then it’s price. What someone is willing to pay is what determines the market value.

Unless your property has a unique feature such as an indoor swimming pool, which may only appeal to a limited number of Buyers, it should be fairly straightforward to pinpoint the value of your property and, subject to market conditions, secure a reasonably quick sale.

If you don’t get a showing in a week, there’s a problem. You should be getting at least a showing a day; if you’re not, then your price is way off. If you are getting 10 a week and 50 people are coming through in a month and it hasn’t sold, then it’s obviously not just the price…they’re coming and looking, but for some reason they’re not pulling the trigger.  There may be issues unique to each property that are putting off the Buyers, but they argue this is usually something obvious such as that old pink carpet, the aging roof or the poor paintwork.  No matter how you look at it… you are really still talking about price.

If you home is not moving for the price you’ve got it at. Start sprucing it up; add value for the money. If you don’t want to change the price, then you have to give people more for the money to justify it.

Realtors warn clients unwilling to drop their price that the longer a home is on the market the less bargaining power they have with Buyers. For those Sellers unwilling to shift on price, there is the option to move to a new home and rent out the old one until it sells at the price they want. However, financial planners caution anyone thinking of going this route to take a hard look at the costs.

The main question to ask is “what does it cost me to keep my existing property and rent it out versus how much would I have had to reduce the price in order to sell it. Potential Sellers much consider capital gains implications when selling a home that is not a primary residence, the time and cost of keeping a second property, as well as whether you can in fact afford to support two mortgages, Your calculations may reveal that the prudent choice is to lower the price of your home, secure a sale and move on.

Helen Morris – National Post Sat Oct 23, 2010

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