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Archive for November, 2016

4 things to know about the new Land Transfer Tax rules

The Provincial government just announced changes to the Provincial Land Transfer Tax rates effective January 1, 2017. Here are 4 things you need to know.

  1. There is an increase in the first time buyer rebate from $2,000.00 to $4,000.00, effective January 1, 2017.

This is the largest benefit to first time buyers. But your deal must CLOSE after January 1, 2017. If you close in 2016, you cannot apply for this credit in next year. Therefore, if your deal is closing in December, 2016 and you are a first time buyer, explore whether your deal can be extended to the first week in January, 2017 and you will then qualify for the rebate.

  1. Who qualifies for the first time buyer rebate?

There is still confusion about this. To qualify for this Land Transfer Tax rebate, you cannot have owned a home previously, anywhere in the world. You must also be making your home your primary residence within 9 months of closing. So if you are planning your first home to be an investment property, you do not qualify for the first time buyer rebate.

In addition, if you are married and if your spouse owned a home while they were married to you, then you are not eligible for any Land Transfer Tax rebate. But if your spouse sold their home BEFORE getting married to you, then you will still be eligible for the full rebate. The tricky part is that you have to apply for half the rebate on closing and the other half within 18 months after closing, once you provide additional documentation proving you qualify. These rules also apply to common law spouses as well.

If you qualify for the rebate and you take title with your parents, who may be assisting with your mortgage, then although your parents may not qualify for the rebate, if you take title 99% in your name and give your parents 1%, this will still satisfy your lender and you can obtain the benefit of 99% of the total rebate.

If you are not a Canadian Citizen or permanent resident, then you will not qualify for the rebate effective January 1, 2017. However, if you become a permanent resident within 18 months after closing, you can then apply for the rebate that you would have been entitled to.

  1. There will be Land Transfer Tax increases taking effect January 1, 2017 as well

There were also increases announced to Provincial Land Transfer Tax rates taking effect January 1, 2017 as well. The biggest one is that now for every commercial, industrial, apartment building or vacant land that costs more than $400,000.00, the tax rate will increase from 1.5% to 2%. This means that for example, a plaza that costs 1 million dollars, the provincial Land Transfer Tax will increase from $13,475 to $16,475, effective January 1, 2017.

In addition, if you buy a house or duplex that costs more than Two million dollars, the tax will increase from 2% to 2.5% for every dollar over two million.

There is a transitional provision that says that if you signed your purchase agreement BEFORE November 14, 2016, then you can still pay the current Land Transfer Tax rate if you close in 2017.

  1. Will these new rules also apply for Toronto’s Municipal Land Transfer Tax rates

If you buy a home in Toronto, you pay a second Municipal Land Transfer Tax at closing. While the City of Toronto has not yet announces whether they will also increase their rates according to the Province increases discussed above, I anticipate that these increases will also take effect in the New Year as well.

If you have any question related to Land Transfer Tax, do not hesitate to contact us.


Mark Weisleder, the author of this item, is a Partner, author and speaker at the law firm Real Estate Lawyers.ca LLP. Contact him at mark@realestatelawyers.ca or toll free at 1-888-876-5529


Ontario helping first-time home buyers


Ontario is doubling the rebate on the land-transfer tax for first-time home buyers to $4,000, but is increasing the same tax on homes that sell for over $2 million.

The government says half of first-time buyers won’t pay any land-transfer tax to the province, while the half-percentage point increase on homes over $2 million will affect less than one per cent of the population.

The province takes in over $2.1 billion a year in the land-transfer tax, and the government says any increase in revenues from the increase on luxury homes will help pay for the doubled rebates for first-time buyers.

Premier Kathleen Wynne had said the government was worried about the difficulty faced by first-time buyers trying to get into the housing market, especially in the Greater Toronto Area where the average price is $762,975.

The government also announced it is freezing the property tax on apartment buildings while it reviews how it affects rental market affordability.

The changes to the land-transfer tax are outlined in the Ontario government’s fall economic statement, which says that home ownership has become a key factor in many people’s long term financial security.

The Ontario Real Estate Association had asked the government to expand the land-transfer tax rebate program for first-time buyers as one way to help more of them get into the housing market.

The city of Toronto has its own land transfer tax, which offers rebates of up to $3,725 for first time buyers.

Ontario’s land-transfer tax rises from half-a-per cent on the first $55,000 of a purchase price to two per cent for everything above $400,000. Toronto’s land-transfer tax is one per cent on the first $55,000 and two per cent on the rest.


November, 2016

Condo sales lead the way to best October on record


Members of the Ottawa Real Estate Board sold 1,214 residential properties in October through the Board’s Multiple Listing Service® System, compared with 1,159 in October 2015, an increase of 4.7 per cent. The five-year average for October sales is 1,130.

“October’s sales continued the record-breaking resale trend for the third straight month,” says Shane Silva, President of the Ottawa Real Estate Board. “While residential sales are identical to that of October 2015, condominium sales have soared – up by 27.2 per cent over last year. Lower inventory levels, combined with adjusting prices, may be creating these higher than normal activity levels in the condo property class.”

October’s sales included 257 in the condominium property class, and 957 in the residential property class.

“The new mortgage rules announced at the beginning of October have yet to have an effect on the Ottawa market, as the announcement only came two weeks prior to implementation,” says Silva. “It’s too early to tell what kind of impact the new mortgage rules will have on the Ottawa market going forward. We know that right now Ottawa continues to be a desirable city to live and work, and consumer confidence and job growth remain positive.”

The average sale price of a residential-class property sold in October in the Ottawa area was $392,579, an increase of 3.3 per cent over October 2015. The average sale price for a condominium-class property was $251,465, an increase of .01 per cent over October 2015.

“The hottest segments in our market for October continue to be two-storey and bungalow residential homes in the $300,000 to $400,000 price range, followed by one-level and two-storey condos in the $200,000 to $300,000 price range” says Silva.

Type October Sales Vol. % Change Average Sale % Change
Condo apartment (1 level) 125 21.4% $276,474 1.1%
Condo townhome (2 storey) 104 26.8% $222,435 -0.1%
Residential home (2 storey) 517 -8.2% $409,571 2.7%
Residential home (bungalow) 252 15.1% $365,874 1.0%

Please talk to me if you are thinking of buying or selling a home or condo. I am always at your service and happy to share my knowledge and experience with you..


CHANGING MORTGAGE RULES

October 12th, 2016

Dominion Lending Centres breaks down the new changes to the mortgage space, answering your most asked questions.

Why is the Department of Finance implementing these new changes?

These new regulations are aimed at protecting the financial security of Canadians and supporting the long term stability of the housing market in Canada.

What is an Insured Mortgage (High Ratio) vs. a Non-Insured Mortgage (Conventional Low Ratio)? An Insured Mortgage is when a home buyer has less than 20% down or the mortgage, is insured by either Canada Mortgage and Housing Corporation (CMHC), Genworth, or Canada Guaranty. The insurance premium is passed on to the borrower. This insurance provides security to the Lender in the event of home buyer default.

A Non-Insured Mortgage is when a home buyer has 20% or more for a down payment and therefore is not required to pay mortgage insurance.

Currently insured mortgages with a term of less than 5 years, and/or a variable rate mortgage had to qualify on the Bank Of Canada (B.O.C) rate. Under the new Department of Finance regulations, all insured mortgages, regardless of term (fixed or variable) will now have to qualify on the B.O.C rate.

 How does this affect a home buyer with less than 20% down payment?

The biggest effect will be on the amount that the home buyer will be able to qualify for. Previously, the five year fixed mortgage qualified at the lender contract rate. Now, the home buyer must qualify at the Bank of Canada Rate.

Previously, for example, a five year fixed rate mortgage at 2.39% rate was qualified at a 2.39% rate. Under the new rules a five year fixed rate mortgage at 2.39% must be “stress tested” by qualifying at the B.O.C posted rate (currently 4.64%)

The net result is an approximate 20% reduction in the amount of mortgage money available.

 How does this affect a home buyer with a down payment of 20% or more?

There is no significant impact anticipated for home buyers placing 20% or more down. Dominion Lending Centres has many different options and there is still a variety of solutions for the majority of home buyers.

Do I still have the option to refinance my home?

Yes, home buyers will still have the ability to refinance up to 80% of the value of their property. Specifics may differ from lender to lender.

The new criteria for low-ratio conventional mortgages will include the following requirements:

  • Property must be owner occupied – rental properties are now excluded
  • A maximum amortization of 25 years
  • A maximum property purchase price of, or below, $999,999.99
  • Minimum credit score of 600
  • Maximum gross debt service (GDS) of 39% of home buyer’s income and a total debt service (TDS) of 44% calculated by using the Bank of Canada conventional 5 year fixed posted rate.

New reporting rules for the primary residence capital gains exemption

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 does it affect?

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 to which they are not entitled.

Why?

While officials say more data is 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.

Now more than ever, home buyers are going to rely on mortgage brokers for their guidance and expertise in navigating through these regulatory changes.

There are differences among the many Lenders that we have access to and the greatest value a broker can provide is the knowledge of the lending environment and in choosing which Lender is best suited for your needs.

These new rules and regulations implemented by the Department of Finance were abrupt and without consultation. Dominion Lending Centres will continue to report and educate our mortgage brokers and our home buyers as new data arises.

For our most up to date blog posts, and industry updates please visit www.dominionlending.ca/newrules

How much home can you afford with a benchmark qualifying rate of 4.64%?

Annual Gross Income Monthly Payment Mortgage Balance  5% down Maximum Home  10% down Maximum Home  20% down Maximum Home
$25,000 $688 $122,487 $6,274 $125,483 $13,343 $133,428 $30,622 $153,109
$30,000 $825 $146,985 $7,529 $150,580 $16,011 $160,114 $36,746 $183,731
$35,000 $963 $171,482 $8,784 $175,677 $18,680 $186,800 $42,871 $214,353
$40,000 $1,100 $195,980 $10,039 $200,773 $21,349 $213,486 $48,995 $244,975
$45,000 $1,238 $220,477 $11,293 $225,870 $24,017 $240,171 $55,119 $275,597
$50,000 $1,375 $244,975 $12,548 $250,967 $26,686 $266,857 $61,244 $306,218
$55,000 $1,513 $269,472 $13,803 $276,063 $29,354 $293,543 $67,368 $336,840
$60,000 $1,650 $293,970 $15,058 $301,160 $32,023 $320,228 $73,492 $367,462
$65,000 $1,788 $318,467 $16,313 $326,256 $34,691 $346,914 $79,617 $398,084
$70,000 $1,925 $342,965 $17,568 $351,353 $37,360 $373,600 $85,741 $428,706
$75,000 $2,063 $367,462 $18,822 $376,450 $40,029 $400,285 $91,866 $459,328
$80,000 $2,200 $391,959 $20,077 $401,546 $42,697 $426,971 $97,990 $489,949
$85,000 $2,338 $416,457 $21,332 $426,643 $45,366 $453,657 $104,114 $520,571
$90,000 $2,475 $440,954 $22,587 $451,740 $48,034 $480,343 $110,239 $551,193
$95,000 $2,613 $465,452 $23,842 $476,836 $50,703 $507,028 $116,363 $581,815
$100,000 $2,750 $489,949 $25,097 $501,933 $53,371 $533,714 $122,487 $612,437
$110,000 $3,025 $538,944 $27,606 $552,126 $58,709 $587,085 $134,736 $673,680
$120,000 $3,300 $587,939 $30,116 $602,320 $64,046 $640,457 $146,985 $734,924
$130,000 $3,575 $636,934 $32,626 $652,513 $69,383 $693,828 $159,234 $796,168
$140,000 $3,850 $685,929 $35,135 $702,706 $74,720 $747,199 $171,482 $857,411
$150,000 $4,125 $734,924 $37,645 $752,900 $80,057 $800,571 $183,731 $918,655
$160,000 $4,400 $783,919 $40,155 $803,093 $85,394 $853,942 $195,980 $979,899
$170,000 $4,675 $832,914 $42,664 $853,286 $90,731 $907,314 $208,228 $1,041,142
$180,000 $4,950 $881,909 $45,174 $903,479 $96,069 $960,685 $220,477 $1,102,386
$190,000 $5,225 $930,904 $47,684 $953,673 $101,406 $1,014,056 $232,726 $1,163,630
$200,000 $5,500 $979,899 $50,193 $1,003,866 $106,743 $1,067,428 $244,975 $1,224,873
$250,000 $6,875 $1,224,873 $62,742 $1,254,833 $133,428 $1,334,285 $306,218 $1,531,092
$300,000 $8,250 $1,469,848 $75,290 $1,505,799 $160,114 $1,601,142 $367,462 $1,837,310

 

NOTES: 32% of the indicated gross income is used to calculate the borrowers maximum shelter expenses such as mortgage payments, taxes, utilities and condo fees. In addition, the chart assumes that borrowers spend no more than an additional 8% to 10% of their gross income on non-shelter debt obligations.

This data is for information purposes only and should not be relied upon without verification by contacting your Dominion Lending Mortgage Consultant.

The above discounted rate is not an offer or a rate commitment. APR assumes no fee(s) apply. Should any fee(s) apply the APR would increase.

The above information is based on a 25 year amortization period.

Note: This information is based on information acquired from Dominion Lending Centres. For more info as it becomes available, please contact Gemma Riley Laurin at 613-845-0786 | info@thelaurinteam.com .