New Rules for Mortgage Loan Insurance

New Rules for Mortgage Loan Insurance

 

The Government of Canada introduced new rules for mortgage loan insurance .

These rules will affect the qualifying interest rate for all loans and the eligibility requirements for loan with a loan-to-value ratio of 80% or less.

 

-Qualifying Interest Rate = greater of the mortgage contract rate or the Bank of Canada’s conventional five-year fixed posted rate

 

Starting November 30,2017 there will be 7 new eligibility requirements for loan with a loan-to-value ratio is 80% or less.

-Loan Purpose                                                   purchase of a residential property. No refinance

-Maximum Amortization                                 25 years from when the loan was originally made

-Maximum Purchase Price                              less than $1,000,000

-Variable Rate Loan                                           if the loan agreement allows the fluctuations in the amortization period      as a result of a variable rate of interest during the term, the loan payment must be recalculated at least every five years to conform to the original amortization schedule

-Credit Score                                                       at least one borrower ( or guarantor) must have a minimum credit score of 600

-Debt Service Guidelines                                  max 39%/44% based on the greater of mortgage rate or the Bank of Canada conventional five-year fixed posted rate

-Occupancy                                                         if the property is single unit, it will be owner occupied 

 

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Selling your home? Don't do these mistakes!

Presently , even with a hot seller's market in Toronto if you are serious about selling your house it's important that you know some facts and do not do costly mistakes. You could end up losing your sale or worse .

 

To sell your home fast at the best possible price and to reduce stress I suggest you to avoid the following mistakes:

 

1. Selling before you get qualified to buy your new home and guessing your mortgage payoff

The bank might not qualify you for a loan you want or might not qualify you at all due to changes in your financial circumstances .

Find out what would be your pre-payment penalty ( if any) for paying off your loan too soon.

 

 

2. Pricing your home incorrectly

Pricing is one of the most important aspect of your offer, to get right.

An overpriced house scares away potential buyers. A go-low pricing strategy can be a gamble .

In residential real estate the asking price is often as much about psychology as it is reality”. Work with your agent to chose the best strategy .

 

3. Not knowing your closing costs to sell

 

4. Failing to “exhibit” your home

Not making the necessary repairs, cleaning the house inside and out, landscaping it might make your sell lose a potential buyer.

 

5. “Stalking” your buyers

Best is to leave the house during showings. If you must be home,try to have a low profile and answer questions only when asked. It's the agent job to show buyers around!

 

6. Avoid over-improving your home

Of course it is important to fix , update and upgrade whatever need to be done to get your house ready to sell but before taking on a big project talk to your agent to find out the likely return on your investment.

 

7. Go in it alone

Selling a home can be one of the most stressful thing in your life that is why it should be a team effort among you and your listing agent . It's the agent duty to track many of the day-to day details from bringing the buyers to keeping a close eye overall process till closing .

 

8. Choosing an agent for the wrong reasons

You want to trust the Realtor who will represent you , to believe in her/his competence . A good agent will explains you clearly the entire selling/buying process and have a large exposure to potential buyers.

The money is yours , the choice of your Realtor is up to you. Do not be influenced by others and make the selection carefully!

 

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Why working with a real estate agent

 

First of all let see what is a real estate agent?

A real estate agent is a person with a license to represent a buyer or a seller in a real estate transaction in exchange for commission.

Real estate agents are people you deal face to face , the ones that are in the front lines of the real estate market.

 

In a seller market sellers come under the impression that it would be easy to sell “ by owner” and buyers think that they will save more money by going it alone.

Lots of websites now contain DIY stories about buying and selling real estate so it's understandable why some people may not think they need a real estate agent .

While doing the work yourself can save you some money , for many , being on their own could end up being more costly than a Realtor's commission on the long run.

Even thought the interests of a real estate agent may conflict with your interest you shouldn't discard the option of hiring a real estate agent.

 

How a good real estate agent help sellers

 

  • real estate agents have a more realistic view of what a home is worth and good agents will get that price

  • a real estate agent act as a liaison between sellers and buyers

  • they help you find your real estate team of professionals -lawyer, lender, home inspector. ( if needed)

  • they list your home in MLS ( Multiple Listing Service)

  • market your home through online and traditional advertising with a bigger exposure

  • a real estate agent should work for you full time giving you constant information about other properties and competition in your area

  • tells you what it's wrong with your house and make suggestions for improvement

  • it will save you time by showing your home thought open house or individual appointments without interrupting your schedule

  • a good real estate agent will make sure that the contracts and other legal matters are in order

 

How a good real estate agent helps buyers

 

  • the agent will pre-screen homes on the market and pick the one she thinks meet your wants and needs

  • the real estate agent will be your eyes and ears during the buying process

  • the agent will get in touch with seller's agent and make appointments for you to view the houses

  • the real estate agent will help you put together the offer,will negotiate the deal in order to protect you and ensure that you are able to back out of the deal if certain conditions aren't met.

 

A good real estate agent should act as a liaison between you and your real estate team of professionals.

A good real estate agent should own an undivided loyalty to the client ( seller or buyer) and put's the client's interest above her own.

While the commission do take from your bottom line , the advice and due diligence of a good, loyal agent is worth your money.

Make sure you find a good agent and that your interests are in line.

 

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Interim Occupancy, Occupancy Fee and What You Need to Know

In one of my previous posts I was telling you that one of the disadvantages of buying a pre-construction condo is having to pay occupancy fee.

 

What is interim occupancy and occupancy fee?

 

When buying a new condo, the agreement you'll sign with the developer will have two “closing “ dates.

The first date is the estimate date that you will be able to occupy the unit but you will not own it . During this time,the building might not be complete but you will be required to take possession of the unit. This is called interim occupancy.

The second date is the final closing which occur at the time of registration and title is transferred to you. Most of the time this date is unknown because, any delays, due to various factors, can hold-up the registration.

Interim occupancy might take longer than the estimated date given by the developer but the higher up you are in the building , the shorter the occupancy period will be. However you should be notify in writing about the various date changes, if any.

During the interim occupancy the buyer is effectively renting the unit from the developer and has to pay monthly an occupancy fee.

The occupancy fee does not accrue to the mortgage so you basically pay rent know also as “ phantom rent” or “phantom mortgage”.

Payments will be made to the developer until the units are registered.

The amount is calculated based on:

  1. interest on the unpaid balance of the price of the unit

  2. estimated property taxes for the unit

  3. estimated common elements fee

Occupancy fee will have to be paid when you buy a new condo and is no way around but knowing all these this should not stop you buying a pre-construction condo.

Being knowledgeable about the process and how it affects you, it will hep you in finding the best way to handle the interim occupancy.

 

 

 

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Investing in real estate-part II

Over the years, growth on an investment in real estate has been faster and had good return on the money.

I think everyone should consider investing in real estate but of course this is just my opinion.

We all know that while investing in real estate can be financially rewarding there are also downsides.

Investing in real estate is not for everyone and it should not be treated as a get rich quick scheme.

However if you are in for the long haul, real estate can be a good strategy for your retirement planning .

Many people already own their own home and paying off a mortgage so a portion of their net worth is already tied to a hard asset.

If you still consider investing there are several ways to invest in real estate including secondary properties, real estate income trust, real estate partnership or team.

As a Realtor I am only going to talk about investing in secondary properties.

First of all , to profit on real estate, investors must determine the value of the property they buy and make an educated guess of how much profit through appreciation and cash flow (rental income) will have over a period of time .

As an example , if you own a rental property you'd earn the appreciation when you sell the property and earn cash flow from rental income while you own the property.

Buying a rental property is the basic way to invest in real estate.

Other types of investment in real estate properties are :

  • fix and flip

  • rent to own

  • assignment

Here are few tips for a smart real estate investment on a secondary property:

  • check the current real estate value in the area and the price trend

  • look for signs of growth as job growth, GDP growth , economic growth

  • check ranking of schools in the area

  • check your taxes

 

Get a good Realtor that is knowledgeable and knows the market and start making money in real estate.

 

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Principles of investing in real estate -part I

 

Warren Buffett says: ” You don't need to be an expert in order to achieve satisfactory investment returns”

Many of us are looking for income replacement when we retire. Over the long term , real estate investments seems to be a safe way to go. The important thing to consider is the return on investment ( ROI)

 

Some of the key principle in investment are:

  • invest don't speculate

  • keep a close eye on your property,learn more about real estate local market so you can maximize your profits

  • focus on what an investment will produce ( ROI), not it's price

  • check an unchecked market, don't follow the crowd, make your own decision

  • don't get excited when other people get excited and don't let emotions affect your decisions

  • if you have money to invest don't be afraid to put your money to work for you. Set a goal and work toward that goal

  • believe in you and don't let the opinion of other people influence your decisions

 

Robert G Allen said: “ Don't let the opinion of the average man sway you. Dream and he thinks you're crazy. Succeed and he thinks you're lucky. Acquire wealth and he thinks you're greedy. Pay no attention! He simply doesn't understand.

 

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Government financial incentives for first- time homebuyers ( programs)

Some of you are still renting and never bought a home but you're thinking of buying or even have in plan to buy one in the near future .

Owning a home is a rewarding experience , an efficient way to invest for long term as you are building equity by paying off your mortgage.

In buying a new home , not matter if you are a first-time home buyer or not, there as some costs involved.

To make it easier for first-time homebuyers to purchase a property , the government provides several programs that can help.

These programs are:

  1. Home Buyer's Plan

  2. First -Time Home Buyers Credit

  3. Land Transfer Tax Rebates

  4. CMHC 5% Down Payments

  5. Energy Efficient Housing Rebate ( available to all homebuyers)

  6. HST New Housing Rebate: http://www.lilianasellsrealestate.com/hst-and-hst-new-housing-rebate

 

As a first-time home buyer there are three programs that you shouldn't ignore :

 

  1. Home Buyer's Plan

You have the opportunity to use up to $25 000 from your RRSP contribution against the down payment for the home without paying taxes .Couples can withdraw a total of $50 000 combined.

There are several conditions you have to meet in order to qualify . An important one is that you have to pay back over a 15 year period .

 

  1. First-Time Home Buyer's Credit

This tax credit helps first time home buyers with the financial burden of the closing costs .Is a $5000 tax credit and provides a rebate of $750.

 

      3.  Land Transfer Tax Rebate

Land transfer tax applies to all conveyances of land in Ontario. First-time homebuyers may be eligible for a refund of all or part of the tax payable .

Qualifying tax payers may claim and immediate refund at time of registration . If the refund is not claimed at registration , the tax must be paid and a claim for the refund may be submitted directly to the Ministry of Finance .

The maximum amount refundable is $2000 .

 

Sources:  http://www.cra-arc.gc.ca

                  http://www.fin.gov.on.ca

 

 

    

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HST and HST new housing rebate

In July 1,2010 the HST ( harmonized sales tax) replaced the 5% GST and 8% PST and blended the two into a single 13% sales tax.

In terms of a real estate transaction there are two ways the HST will apply:

 

1. - on a new home purchased from the builder

2. - on commission payable on resale homes

  1. In case of a new home purchase if the home will be used as your primary residence you might qualify for a rebate.

Other qualifying homes are:

  • building or substantially renovate your own home or hire a contractor to build one

  • buying a new constructed or substantially renovated home from a builder, which could include housing on a lease land

  • building a major addition to a home

  • purchase shares in a co-operative housing ( co-op) for use as your primary residence

  • buying a new condominium unit, mobile homes , modular homes and floating homes

     

To be able to qualify for a rebate the new housing purchase price should not exceed $450,000 and the maximum Ontario HST rebate amount that is available is $24,000.

 

The rebate would cover 75% of the provincial component of the HST paid.

 

Builders can pay or credit the new housing rebate directly to you. If a builder did not pay or credit the rebate to you at the time of purchase, you have two years from the possession or ownership transferred date to you to apply for the new housing rebate with CRA.

 

For an investor, on closing, they would be required to remit the $24,000 in additional HST and then apply for the rebate of that HST amount and requires that the property be leased to a tenant for a minimum of 1 year.

For more info on how to calculate the HST rebate go to : http://www.cra-arc.gc.ca/E/pub/gi/gi-085/gi-085-e.pdf

 

     2. For resale homes HST apply to real estate commission only.

There is NO HST on the price of the resale residential purchase. Buyers that are purchasing a resale home DO NOT pay tax on it.

To learn more about HST visit: http://www.fin.gov.on.ca/en/

 

 

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Pros and cons in buying a pre-construction vs a resale condo

 

If you decided to buy a condo, one of the question you might have is “ what should I go with; a pre-construction or a resale condo?”.

Well, there are few aspects to consider before making this decision .

Here are some advantages and disadvantages for the two options .

 

Pre-construction condo advantages

  • being first owner you can discuss the design plans and customize certain things as appliance, flooring, painting

  • pre-construction condos may offer a good value compared with other investment options, but is not always the case

  • builder have a set time frame to complete the project( 1,2,3 years) which gives you time to save up for your condo. Depending on the builder deposit structure , you will have to pay 20-25% of the purchase price as deposit

  • you will buy new, modern project with more upgrades and better amenities than a resale condo

  • you might have for awhile a low maintenance fee

  • you have a cooling period of 10 rescission days . You can cancel the purchase within 10 days of receiving the fully signed purchase agreement and disclosure statement from the condo corp. A qualified real estate lawyer should review the docs to better protect your interests.

 

Resale condo advantages

  • you can walk through the unit , see the layout, the shared common elements

  • while you have to wait for the project to complete,when buying a pre-construction , with a resale condo there is no move-in waiting period. You move in as soon as you close .

  • You are able to calculate your expenses and monthly mortgage based on the current rate , as soon as you are pre-approved

  • you can speak to your neighbors to see if they are happy with the building , the condo management

     

     

    Pre-construction condo disadvantages

- having only a floor plan , you will not be able to see the details or the outside view of the building . Builders can make alterations to the building even after the units were pre-sold

- prepare to pay occupancy fee

- there might be delay in completion. A condo building takes 3-4 years to complete . Despite the set time frame given by the builder to finish the construction many times , due to various reasons, they will delay the completion.

- an important disadvantage in buying a pre-construction unit is that you will not be able to use a large amount of your capital for 2-4 years until the project completes

- builders don't know the exact cost of the project so the maintenance fees in the new buildings are likely to increase significantly especially in the first 1-2 years

- pre-construction sales are subject to HST. If you will occupy the unit yourself most likely you'll qualify for a rebate. If you are an investor ,you might have to pay a substantial amount in HST. A good real estate lawyer will be able to advise you.

 

 

         Resale condo disadvantages

- the unit might not be in such a good condition so you will have to spend some money to renovate

- due to high demand in certain areas you might get involved in bidding wars and drop out when the price go over your limit

- if is an older building certain amenities might not be so modern or might not exist at all

 

 

 

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Getting your home ready to sell

 

 

Prospective buyers will react when walking through a home to what they see,feel and smell even though you may have priced your home to sell.

Appearance is very critical so you need to be objective about your homes' condition.

Here are few tips to prepare a house for a good impression and turn it into a marketable home.

 

When preparing your home to sell there are two places you have to consider : the outside and inside of your house How many times we've heard “ first impression is the key”? Well, it applies to your house as well.

 

No matter how good the interior of you house looks, if a buyer doesn't like the exterior , he/she may not even want to get inside .

 

A. Outside

Check curb appeal

  • keep the lawn mowed and edges trimmed

  • keep the sidewalk clear

  • if necessary paint the faded color on garage /entrance doors and window trim

  • add seasonal urns by the front door for some color

  • if you have a concrete walkway or driveway power washing it can make it look like new

     

B. Inside

Fix what need to be fixed

  • fix doors and kitchen drawers that don't close properly
  • replace torn screens
  • make sure the faucets don't drip and the toilets don't run
  • replace all burnt out bulbs
  • replace cracked floor or counter tiles

 

Paint

Peeling paint makes the house looking in need of repair and this might get the buyers anxious.

Also re-painting will give the house a lean ,fresh look that's appealing to everyone.

Tip: * keep the ceiling white to make the walls looking tall

       * choose neutral colors

 

Depersonalize

Pack-up personal photographs, family photos or other personal items. Buyers have to image themselves living in the house.

 

De-clutter

  •  get rid of anything in your home that makes it look cluttered
  •  clean off everything on kitchen counters
  •  clean off the fireplace mantel ( if you have a fireplace)
  •  rearrange bedroom closets and kitchen cabinets
  •  put items used daily in a box that can be stored in a closet

 

Clean – Make your house sparkle

  •  clean out bathrooms and kitchen
  •  clean out the refrigerator
  •  clean out the stove
  •  wash the windows
  •  vacuum and wax the floors
  •  replace worn rugs
  •  dust
  •  shampoo the carpets

 

Let the light in – Maximize the light on your house

If you have dark hallways or rooms with little natural light, a minimum of 2 bulbs or adding a lamp can transform a dark area and will brighten up any room .

Make sure you have clean windows. Cut the bushes that covers your windows outside to let in the sunshine.

 

Kitchen and bathrooms are rooms worth investing in.

Repairing, upgrading or remodeling completlyyour kitchen and/or bathroom will get you 75% -100% of your money back when your house it sells .

Fixing your home to sell doesn't mean always a big investment of time and money. A house that looks good inside and outside will likely sell at a slightly higher price but most of all it will sell faster.

 

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