CMHC eases down payment rules for properties

CMHC eases down payment rules for properties

Move risks overheating already hot housing market

You have to wonder what David Dodge will be thinking this time. Just over a year ago, the Bank of Canada governor met with Canada Mortgage and Housing Corp. because of his fears exotic mortgages were juicing an already robust Canadian housing market. Now CMHC has decided it is going to let Canadians buy investment properties with no down payment.

The Crown corporation, which controls about 70% of the mortgage insurance market in Canada, has quietly introduced changes that lower the down-payment threshold for an investment property. Instead of needing 15% down, Canadians will be able to buy a second property -- not to mention a third and fourth and fifth -- with no money down.

"These enhancements will ensure continued supply of affordable rental accommodations across Canada," said Pierre Serre, vice-president of insurance products with CMHC.

Critics charge CMHC once again has moved into risky territory, the last time being its decision to allow Canadians no money down on a principle residence. "Look at the fee, anytime it's that high, you know there is a lot of risk," said one senior mortgage industry observer.

The mortgage insurance fee for the new product is 7.25% of the total amount of the loan. So a $300,000 mortgage would have a $21,750 mortgage insurance fee.

Instead of paying the fee up front, CMHC will allow that fee to be added to the overall mortgage which can be amortized over as many as 40 years. Based on 5.8% interest, the current discounted rate for a five-year term, it would cost just over $1,700 a month to carry that $321,750 mortgage.

By law, any consumer with less than a 20% downpayment must buy mortgage insurance if they are borrowing money from a financial institution covered under the Bank Act.

None of CMHC's competitors are coming close to this new offer. Genworth Financial Canada -- the other dominate player with about 30% of the mortgage insurance market -- requires investors to have at least 10% down.

Back in July, 2006, Mr. Dodge demanded a meeting with the federal crown corporation. He was concerned about products like interest-only mortgages which give consumers the option of not making a principle payment for the first 10 years of a mortgage.

Mr. Serre said CMHC did consider the issue of whether the changes could overstimulate the market. "We look at those kind of considerations all the time," he said, adding that to get a loan consumers will have to meet certain criteria in terms of their overall debt load. "We're not trying to get people into situations they can't manage."

Some question whether there was any need for the latest change, given how strong the market in Canada remains.

The Building Industry and Land Development Association said this week condo sales in Toronto - the largest market for new high rises in North America -- were up 31% over the first nine months of the year from a year earlier.

"I'm not sure why CMHC is relaxing the rules, the logic escapes me," said Stephen Dupuis, chief executive of BILD. "The market is strong. I look at what is happening in the United States and wonder if there is a need to be so free with credit."

The real reason for the new program, suggest some commentators, is CMHC trying to fend off competitors in the marketplace. In a constant battle with Genworth, CMHC is also facing up to four new mortgage insurers who have applied to do business in Canada or are already licenced to do so.

"There are competitors in the marketplace that didn't exist before. They are reacting to competition that hasn't even materialized yet," said Mr. Dupuis. CIBC World Markets senior economist Benjamin Tal said the latest changes by CMHC are probably just the beginning. "The genie is out of the bottle, this mortgage market is starting to move. Over the past 16 months we've seen more changes than the past 30 years," said Mr. Tal. Garry Marr, Financial Post
Published: Wednesday, October 24, 2007

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Now's may be a good time to lock in a mortgage - but I still think to go short for the long term

Now's may be a good time to lock in a mortgage - but I still think to go short for the long term, read more here http://www.mississauga4sale.com/Lock-In-Short-Term-Long-Term-Mortgage.htm

Mortgage rates have hit multiyear highs, and there could be worse to come before things settle down.

Call it yet another example of collateral damage from the problems in the U.S. subprime mortgage market.

Simply put, it's costing banks and other lenders more to raise the money they use to finance mortgages, and they're passing the cost on to people buying homes and refinancing existing mortgages.

That's why the posted major bank rate for five-year mortgages is as much as 7.44 per cent right now, which is the highest level since May, 2002, and why new variable-rate mortgages are becoming more expensive almost by the day (existing variable-rate mortgages are unaffected).

A discount of 0.9 of a percentage point off the prime rate used to be a good but attainable deal for borrowers. Today, mortgage broker websites - remember, these guys have access to many lenders - are showing best deals of prime minus 0.6 or 0.75 points.

Alex Haditaghi, CEO of Mortgagebrokers.com, said his contacts with bank representatives suggest that fully discounted five-year rates could go as high as 6.5 per cent from their current level around 6 per cent. He also warned maximum discounts on variable-rate mortgages may shrink further. "Two banks have given the heads-up that if you want to lock up your clients, do it now because by Nov. 15 you're going to see us go to 0.5 below prime."

If you're looking for a house or have a mortgage expiring in the next three or four months, you should talk to lenders right now to lock in the best possible rate. A 120-day rate guarantee is pretty common these days and it offers a shield against further rate increases. Shopping around for rates is more important than ever today because lenders are all taking different approaches to the current mortgage-market uncertainty.

Borrowing costs for mortgages track rates in the bond and money markets, which in turn are a reflection of sentiments about where the economy and inflation are headed. Today, inflation is contained in Canada and recently there have been economic forecasts that call for slower but still solid growth in 2008. Add it all up and you have an environment where rates should be holding tight, not rising.

The reason why this isn't happening is related to the same junk mortgages in the United States that helped pushed the stock market into its summer slump. These mortgages were packaged into investments that were widely purchased by banks, investment dealers and other institutional investors who are now a lot more risk-sensitive than they were before.

One way for investors to manage risk is to demand higher returns, and that's in fact what Canada's lenders are running into when they issue the short-term securities they use to finance variable mortgage loans. If the banks have to pay more, they have to charge more to keep up their profit margins. So it is that we have the incredible shrinking variable-rate mortgage discount in Canada.

Fixed-rate mortgage rates have jumped recently in what can best be described as a catch-up to this past summer's financial market troubles. You'll see this not only in the five-year rate, but also in posted big bank one-year rates that are as high as they've been since early 2001.

Benjamin Tal, senior economist at Canadian Imperial Bank of Commerce, said lenders held mortgage rates steady through August and September, and even cut them a bit at one point. Then, with bond yields on the rise earlier this month, a decision was made to bump up five-year rates significantly. "You might say that consumers got an extra two months of relatively cheap rates," Mr. Tal said.

The biggest victims of the U.S. subprime mortgage situation here in Canada are people with poor credit histories, new immigrants and the self-employed. Their mortgage applications are being scrutinized more carefully than six months ago, and some people are being offered loans at higher rates or are being rejected.

Tighter lending rules are going to be a fixture for a while, but higher mortgage rates may prove temporary. CIBC's Mr. Tal said the factors making variable-rate mortgages more expensive will slowly die away, and he argued that the state of the economy in both Canada and the United States doesn't suggest much risk of rising rates. "Over the next six months, it's very reasonable to think that rates will be stable, with a bias downwards."

If you're in the market for a home, get a rate guarantee and then keep an eye on the housing market. It's been hot, like, forever and high rates are just the sort of thing to cool things down.

Mortgage rates

Big Six banks

Bank of Montreal Mortgage 7.44%
Bank of Nova Scotia 7.44%
CIBC Mortgages 7.44%
National Bank 7.40%
Royal Bank of Canada 7.40%
T-D Mortgage 7.44%

Who has the lowest rates

ICICI Bank Canada 5.75%
Canadian Tire Bank 5.85%
Manulife Bank 5.85%
Citizens Bank of Canada 5.99%
Comtech Credit Union 5.99%
First National Financial 5.99%

SOURCES: BANK OF CANADA AND CANNEX FINANCIAL EXCHANGES

Read more about what my suggestions that you should do here:
http://www.mississauga4sale.com/Lock-In-Short-Term-Long-Term-Mortgage.htm

Search the MLS or read more about Interest Rates, Power of Sale Properties, Price Trends and more at my website.

Thank you for reading my blog and if there is anything else I can help you with please don't hesitate to contact me,

Mark

A. Mark Argentino
P. Eng. Broker
Specializing in Residential & Investment Real Estate

Thinking of Selling? Best Mortgage Rates Current Home Prices Search MLS
RE/MAX Realty Specialists Inc.

Providing Full-Time Professional Real Estate Services since 1987
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The Boomers are coming - watch as affordability crunch fuel highrise sales

Boomers, affordability crunch fuel highrise sales

Industry insiders never thought they would see the day when sales of highrise condo suites outstripped low-rise new home sales; but that day may be just around the corner.

According to RealNet Canada Inc., 49 per cent of total new home sales in the GTA through the first eight months of this year were highrise condo suites.

If the sales trends hold for the remainder of the year, with highrise sales running 25 per cent ahead of last year, compared to 5 per cent growth in low-rise sales, this will be the first – but probably not the last time – that builders will sell (and ultimately produce) more high- than low-rise homes.

It has been fascinating to watch the growth in highrise market share from 25 per cent of the market in the early 2000s, to one-third of the market by 2004, to more than 40 per cent in 2005. Last year, highrise sales spiked to 45 per cent of total sales and this year they appear to be heading north of 50 per cent.

What's happening, and can it continue?

I don't believe this dramatic market shift signals an equivalent shift in consumer preference. I maintain that consumer preference is gradually shifting as more and more retiring baby boomers enter the condo market. But the shift has been exaggerated as the affordability crunch drives more and more first-time buyers into condos, just to get a toehold in the market.

My view is confirmed by a recent report prepared by the Conference Board of Canada for Genworth Financial.

The report looked at condo markets in Canada's eight largest urban areas and asserts that rising prices for single-detached homes has bolstered demand for apartment condominiums, which are a relatively affordable ownership alternative.

"In most markets, condominium starts have risen in tandem with increases in average overall prices," the report states.

As for the longer term, the report states that "an aging population, particularly a growing number and population share of those 55 and over in all major urban areas, provides a solid demographic underpinning that is critical to the market's longer term health."

That's the gradual shift I mention above.

The Genworth view is corroborated by Jane Renwick, editor of Urbanation, which has been analyzing the GTA condo market for more than 25 years. Speaking to a recent meeting of our association's highrise forum, Renwick stressed that affordability attracts first-time buyers to the new condo market but that diverse buyer groups such as upsizing second-time buyers and downsizing baby boomers are beginning to add to the mix.

With respect to the boomers, Renwick notes that the "first wave" of them turned 60 in 2006 and that "there's more downsizing to come" for the next 17 years as the rest of the boomers reach their 60th birthday.

As an aside, Renwick revealed the key market trends in the highrise market, including a shift to tall buildings, master-planned communities, mixed-use communities and green condos incorporating features such as all-off switches, dual-flush toilets and water-saving faucets, EnergyStar appliances, motion-activated common area lighting, green roofs, car-share programs – all good stuff.

Getting back to the market trends, it's clear that the highrise lifestyle is becoming an active and positive lifestyle choice for the boomers, while first-time homebuyers are more or less backing into that market due to the high cost of low-rise homes.

As those first-time buyers begin to start families, I hope the market and our industry will be able to provide more affordable low-rise or mid-rise homes to serve them.

In the meantime, it's make way for the boomers! From Bob Finnigan Toronto Star

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Mark

A. Mark Argentino
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Thinking of Selling? Best Mortgage Rates Current Home Prices Search MLS
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Bank of Canada is expected to "stand pat" on rates

Just a few weeks ago, most economists were expecting the Bank of Canada would again boost its key lending rate at the Sept. 5 policy meeting, following a similar hike in July. Not any more.

Now, the central bank is widely expected to stay on the sidelines when it announces its rate decision at 9 a.m. ET Wednesday. Recent surveys of economists by Bloomberg and Reuters failed to find any who believed the bank would hike rates.

Bank of Canada Governor David Dodge, left, and senior deputy governor Paul Jenkins leave their office for a news conference in mid- July.
(Tom Hanson/Canadian Press) What could cause such an abrupt change of heart, since the Bank of Canada indicated less than two months ago that "modest" rate hikes might be needed to wrestle inflation down?

"The answer is the financial market volatility over the last few weeks, caused by concern about exposure to U.S. subprime mortgages," said TD Securities economist Jacquie Douglas in a commentary issued last Thursday.

Douglas said the central bank's deputy governor, Pierre Duguay, hinted at just such a pause in a speech last week, when he noted that "given recent events in global credit markets, we need to assess the extent to which the risks around our July projection have shifted."

Stock markets in Canada have endured some heart-stopping declines since mid-July's record highs as investors worried about whether exposure to the risky U.S. subprime mortgage market would lead to wider economic fallout and a general tightening of credit and liquidity in Canada.

Given that the Bank of Canada was busy injecting billions of dollars into the fragile financial markets in early August to boost liquidity and keep its key overnight lending rate at 4.50 per cent, observers say it would send a decidedly mixed message to turn around and hike rates just a month later.

"An increase … in the very overnight rate the bank has been working so hard to keep down would badly compromise the clarity of that statement [of support for Canadian financial markets]," C.D. Howe Institute fellow-in-residence David Laidler said in a recent op-ed piece.

Inflationary pressures persist
But it's worth noting that, minus the current volatility in financial markets, the Bank of Canada would likely be raising interest rates.

For one thing, inflationary pressures persist. Core inflation was running at 2.3 per cent in the latest cost of living report — above the central bank's target of 2.0 per cent.

Wages have also been growing faster than inflation, the country's unemployment rate is at a record low, and figures out last week showed that GDP in the second quarter grew at a stronger-than-expected annual rate of 3.4 per cent.

These are not signs of a dramatically cooling economy.

TD Securities, for one, thinks the Bank of Canada will return to rate-hiking mode as early as October, after concluding the U.S. subprime market does not pose "all that big of a risk" to the Canadian economy.

Others don't see the central bank hiking until the new year. "In this environment, it still appears that the next move by the Bank of Canada will be to eventually start hiking rates again, although the depth and duration of the credit squeeze will determine when they get back to the tightening wheel," said BMO Capital Markets economist Doug Porter. "We believe that won't be until early in 2008."

A few economists are even calling for a rate cut by December.

Read more about Interest Rates

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Thank you for reading my blog and if there is anything else I can help you with please don't hesitate to contact me,

Mark

A. Mark Argentino
P. Eng. Broker
Specializing in Residential & Investment Real Estate

Thinking of Selling? Best Mortgage Rates Current Home Prices Search MLS
RE/MAX Realty Specialists Inc.

Providing Full-Time Professional Real Estate Services since 1987
( BUS 905-828-3434
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Buyer Agency in the GTA

“Working with a buyer's agent is like having a real estate advisor, a home finder and a financial consultant--all for free!”

Until recently, real estate agents were legally bound to represent the seller's interests in a real estate transaction, whether they were the "listing agent" or the agent who helped the buyer find the home.

That's all changed. Today, buyer's agents not only help buyers find homes, they can help negotiate price and contract terms on the buyer's behalf; provide information about a home, the sellers, previous offers and counteroffers; and help arrange for financing, among other services. In almost all cases in our area the buyer's agents are paid from the sales commissions offered by sellers.

Read more about Buyer Agency



For more information please contact A. Mark Argentino

A. Mark Argentino, Broker, P.Eng.,
Specializing in Residential & Investment Real Estate
RE/MAX Realty Specialists Inc., Brokerage
2691 Credit Valley Road, Suite 101, Mississauga, Ontario L5M 7A1

BUS. 905-828-3434
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Condo's continue to be very HOT in Canada

It's Still Condo Mania in Canada

Nearly half of all new home sales in Toronto in April were high-rise condominium suites, lofts and stacked townhouses. Across Canada, from 2001 to 2005, condo starts have posted an annual increase of more than 16 per cent, accounting for almost one-third of new home construction. Despite the amount of new product available, in most parts of the country, it's still a sellers' market.

A recent survey by Ipsos-Reid for TD Canada Trust, and a follow-up report by TD Economics, says both the short and long-term outlook for condos in Canada is good. It says Canada's healthy labour market, low interest rates and an aging population will contribute to brisk condo sales.

"The hottest markets, notably Calgary and Vancouver, will see some cooling off from dramatic and unsustainable highs last year, but overall conditions will remain healthy and activity will be high," says Craig Alexander, VP and deputy chief economist for TD Economics, and author of the study.

He predicts that during the next 18 months, the pace of condo starts will decline by about six per cent and resale prices will "cool out, while still remaining quite elevated." He expects Calgary will see price growth drop from 26.6 per cent last year, to 10.5 per cent in 2007/08. He forecasts Edmonton prices to drop from 16.6 per cent to 12.5 per cent, and Vancouver prices to go from a 16.3 per cent increase last year, to 10.5 per cent this year.

In the more stable central and eastern markets, Alexander calls for Toronto condo prices to increase by 4.2 per cent this year, while Ottawa price gains rise from 3.6 per cent last year to 4.5 per cent. Montreal price increases are expected to drop to 3.5 per cent from 6.4 per cent.

The survey found the top two reasons for preferring condos were lower maintenance costs and greater affordability. Alexander says that condo prices are almost half of the average price of detached bungalows in Vancouver, and roughly one-third less than the average price in Calgary and Toronto. "Given the rapid price increases in detached dwellings sustained over the last few years, condos may be the only option for some potential homeowners -- and many first-time buyers -- in selected markets," he says.

Other reasons for preferring condos are good building security, attractive design and environmentally friendly design/energy efficiency. Proximity to public transit, retail outlets and entertainment are also important factors for those looking for a condo.

The survey found that 39 per cent of Canadians would consider buying a new or resale condo, an increase of four per cent from a similar survey taken in June 2006.

"Looking beyond the near-term outlook, there is fundamental support for condos in the major Canadian markets from structural economic trends, including the aging population and the continued urbanization of the country," says Alexander in the report.

Older Canadians are attracted to condos as they downsize and look for less maintenance in their homes. The median age in Canada was 37 in 2001 and is expected to be between 45 and 50 by 2056. "This could create headwinds for real estate, which is influenced by demographic demand for housing, but the aging population could prove positive for condos," Alexander says.

While the demographic trend suggests slower population growth, Alexander says it is evident that cities will continue to grow faster than rural communities. In 1901, 37 per cent of Canadians lived in urban centres. By 1951 it was 62 per cent, and by 2006, 80 per cent of the population was living in an urban centre.

Rising traffic densities has led to urban renewal in the cities, which is expected to intensify in the years to come, Alexander says. "While condos are not solely located in cities, as evidenced by their presence in some resort settings, the bulk of condos are concentrated in urban centres, making them highly likely to benefit from the urbanization trend."

Despite the generally rosy outlook, Alexander says there are some risks for the condo market.

"The explosive price growth and the presence of speculation in the west have been sending off warning signals," he says. "But, if price growth moderates as new supply comes on the market and as eroding affordability dampens demand, a boom-bust cycle can be avoided.

"Meanwhile there is significant additional supply in the pipeline for Toronto from projects that are already underway, but are not yet completed. This could impact price growth, but so long as employment remains solid and interest rates do not rise significantly from current levels, there should be no problem absorbing the additional units," Alexander says.

Read more about Mississauga and GTA Condos



For more information please contact A. Mark Argentino

A. Mark Argentino, Broker, P.Eng.,
Specializing in Residential & Investment Real Estate
RE/MAX Realty Specialists Inc., Brokerage
2691 Credit Valley Road, Suite 101, Mississauga, Ontario L5M 7A1

BUS. 905-828-3434
FAX. 905-828-2829
E-MAIL: mark@mississauga4sale.com
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Mortgage Rates to Remain Historically Low

Mortgage Rates to Remain Historically Low

A combination of a strong Canadian dollar vis-à-vis the U.S. dollar and modest GDP growth will help keep Canadian interest and mortgage rates low over the remainder of this year and in 2008. One, three and five-year posted mortgage rates are forecast to be in the 5.75 - 6.75, 6.00 - 7.00, and 6.25 - 7.25 per cent ranges respectively over the rest of this year and in 2008.

Mortgage rates have moved slightly higher so far this year and are expected to drift-up modestly in the first half of 2008. However, while mortgage rates won’t increase much, higher house prices will push mortgage carrying costs higher. This will ease housing demand, particularly for first-time buyers.

MLS price growth will remain strong in 2007 at 9.6 per cent, pushing the average price to nearly $303,500, reflecting continued price pressures in western Canada. In 2008, the average MLS price will reach about $318,400, an increase of 4.9 per cent.
Source: CMHC - www.cmhc.ca

Most buyers are first time home buyers

Most Intending to Buy a Home in 2007 are First-Time Home Buyers
According to CMHC’s newly released Renovation and Home Purchase Report - Major Market Highlights, a large share of intenders will be first time buyers.

Close to half (48 per cent) of purchase intenders will be first time buyers with the majority of first time buyers between the ages of 25 and 34, with a household income between $80,000 to just under $100,000.

How do home buyers intend to finance their future purchase? Over half of potential home buyers are planning to make a down payment of less than 25 per cent of the expected value of their purchase. The main sources of down payment funds are household savings for 37 per cent of potential home buyers, while equity from the present/previous residence is also a popular option with 27 per cent.

Housing Starts Decrease in June
The seasonally adjusted annual rate of housing starts was 225,500 units in June, down from 235,200 units in May. “Following a significant increase in May, the volatile multiple segment lost most of the ground it gained in June,” said Bob Dugan, Chief Economist at CMHC’s Market Analysis Centre. “Although housing starts will remain high in 2007, they are expected to resume a gradual decreasing trend. This is confirmed by the single detached component, which is slightly below the levels of the last two years.”
Want to read more about housing starts? Visit http://www.cmhc.ca/en/corp/nero/nere/2007/2007-07-10-0815.cfm

Read more about Mortgage Interest Rates




For more information please contact A. Mark Argentino

A. Mark Argentino, Broker, P.Eng.,
Specializing in Residential & Investment Real Estate
RE/MAX Realty Specialists Inc., Brokerage
2691 Credit Valley Road, Suite 101, Mississauga, Ontario L5M 7A1

BUS. 905-828-3434
FAX. 905-828-2829
E-MAIL: mark@mississauga4sale.com
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Should you Live with Your Parents to Save for your Downpayment?

Living with the parents while saving for a home.
A new survey might make parents nervous. A survey of potential first-time homebuyers found that 29 per cent of Canadians between the ages of 21 and 34 are living with their parents while saving for their home down payment. In cities such as Toronto and Vancouver, the numbers are significantly higher, suggesting that staying on at the old homestead is considered the fastest route to jumping onto the property ladder.

The survey, conducted by Decima Research, polled 1,205 young adults aged 21 to 34 from Halifax, Montreal, Toronto, Winnipeg, Calgary and Vancouver who had aspirations to purchase a home in the ‘near’ future. According to the survey, almost one in three are living with their parents while they prepare to make the transition to home ownership. While it is no surprise that Canadians under the age of 30 are staying home longer, whether to attend school or save for a home purchase, what is surprising is the number of Canadians in the 31 to 34 years old category who are also still at home.

The survey says the Greater Toronto Area (GTA), Halifax and Calgary have the highest percentage of ‘stay-at-homes’ who are older than 31 years of age (22 per cent in the GTA and 17 per cent in both Halifax and Calgary). A red hot real estate market and rising home prices have likely contributed to this trend. But these factors may also contribute to a sense of urgency amongst young first-time homebuyers who feel they don’t have the requisite finances and may have to scramble to cobble together a down payment. Some of this anxiety may be avoidable by developing a financial plan early that sets realistic short-term and long-term financial goals.

The survey found a considerable gap between potential first-time buyers’ expectations and their realities when it came to planning and saving to buy a home. Although most young Canadians would like to purchase a home within the next few years, most do not have a practical plan to get there.

According to the survey, Canadians between the ages 21 and 34, on average, have been saving for their down payment for only 1.6 years, yet expect to take only a total of 3.8 years to save enough to commit to a purchase.

On average, young Canadians say they expect to be able to amass a down payment representing 15.4 per cent of the cost of a new home by the time they are ready to make a purchase. These expectations are unrealistically high given their low savings rate and the increasing cost of housing in markets across the country.

Other findings include:
- Thirty per cent of all those with home ownership aspirations intend to take advantage of the First Time Home Buyers RRSP Plan as a major source of funding for the down payment.
- Sixty per cent intend to rely primarily on savings or investments to make the purchase.
- The average reported savings rate (as a percentage of pre-tax income) of young Canadians polled breaks down as follows:
Across Canada, 12.5 per cent. In Toronto, 14.3 per cent. In Vancouver, 13.3 per cent. In Halifax and Winnipeg, 8.8 per cent. Those who live at home with their parents, 16.6 per cent. Those who are currently renting, 11.0 per cent. If the study reinforces one thing it is that more young Canadians need to sit down with a financial planning professional to develop a realistic game plan, if they are going to shorten their stay with their parents and make their home ownership dreams a reality.

There are a number of steps that young Canadians should take in order to reach their home ownership goal sooner. First of all they should consult a financial professional as early as possible to put together a financial plan that addresses both their short and long-term goals. This plan should address steps such as how to pay off debt sooner in order to free up more cash flow for their home down payment and developing a working monthly budget. Article is courtesy of R.Paul Chadwick from TD CT

More information on how to save money in real estate




For more information please contact A. Mark Argentino

A. Mark Argentino, Broker, P.Eng.,
Specializing in Residential & Investment Real Estate
RE/MAX Realty Specialists Inc., Brokerage
2691 Credit Valley Road, Suite 101, Mississauga, Ontario L5M 7A1

BUS. 905-828-3434
FAX. 905-828-2829
E-MAIL: mark@mississauga4sale.com
Website: Mississauga4Sale.com

Advantages of New Home and Resale Home purchase

The Advantages of a New Home

Tips and discussion

NEW: If you purchased your new home prior to July 1, 2006 and will be taking possession after July 1, 2006 click here for transitional GST information and rebate form from the Canada Revenue Agency (Posted June 2006)

If a home comes up for sale in a mature neighbourhood where there’s an established sense of community and a history of strong property values, buying a resale home can be a good choice. However, there are several reasons why buying a new home is often the wiser choice.

We just don’t build homes the way they used to – and that’s a good thing! Today’s homes are built with state-of-the-art technology using lowmaintenance and durable building materials, to save you time and money.

From vinyl-clad windows to aluminum soffits to clay brick, a modern home requires far less upkeep than a resale home, even a fairly modern one. Advanced wiring and Internet-ready cabling means you can work out of your new home about as efficiently as you can in many office buildings.

Modern home design is lightyears ahead of older homes. Indeed, light is one of the main design features of today’s homes. Windows are bigger and better and they’re everywhere. They flood the interior with natural light without letting in the cold or letting out the heat.

Today’s homes also offer floorplans that are very functional, accommodatingyour needs, not the lifestyle of some mythical family from bygone generations. Open concept plans give modern homes a light and airy feeling, yet they can be informal or formal, casual or elegant.

Moreover, you can get exactly what you want, because many builders will customize the model you choose, allowing you to create rooms or styles that meet your personal needs. Options and upgrades provide further flexibility. Modern designs are also very clever when it comes to providing storage space, the lack of which is one of the biggest drawbacks of older homes.

Better insulation, higher efficiency heating systems, better windows and doors, overall tight construction and improved ventilation are hallmarks of homes built in the last few years. That means lower energy costs and a more comfortable home all year round.

With the purchase of a new home also comes peace of mind. Every new home sold in Ontario is covered by one-, two- and seven-year warranties, described in detail later. Safety is also improved, with features such as smoke detectors wired into the home’s electrical system; or video surveillance in condos.

Finally, many new homes are built in new communities, where there is consistent design among the homes and careful attention paid to public elements such as landscaping and street lighting. New home communities generally offer parks, schools, shopping and recreational amenities close at hand.


Advantages of a Resale Home

The major advantage of buying a resale home is that you are moving into an established neighborhood. Your lawn is green, your shrubs are growing, your driveway is paved and your trees are well enough established to give your street a feeling of permanence. Often, most extras are already present, such as appliances, curtains, drapes, central vacuum, humidifiers, decks, fencing, electric garage door openers, finishing the basement, walkways, outdoor lighting, indoor light fixtures, trees, shrubs, gardens and landscaping, children's play sets, swimming pool, air conditioning, etc.

In terms of investment, a resale home will often give you far more value than a brand new home. Many owners put tens of thousands of dollars into home improvements ranging from small items, such as landscaping, to major projects, such as a finished basement or any of the items above. Although these improvements will make the home more attractive to potential buyers, they may not increase the market value of the home. A $35,000 swimming pool or a $15,000 finished basement or even $5,000 worth of landscaping may make the home very attractive. However these additional costs incurred may not necessarily increase the market value of a home, especially if you have to sell it at a time of year where these major items add little or no perceived value. The buyer gets the home at its real fair market value, which is based on comparable homes for sale or sold in the neighborhood. All those expensive extras may be included in the home with benefit to the buyer at little or no extra cost. This can be a substantial savings over buying a new home.

With a resale, the vendor's asking price is almost always negotiable downwards unlike the builders list price which is usually firm. Any extras or changes are added to the list price of a new home and add up quickly.


Read an indepth article about buying new or resale home




For more information please contact A. Mark Argentino

A. Mark Argentino, Broker, P.Eng.,
Specializing in Residential & Investment Real Estate
RE/MAX Realty Specialists Inc., Brokerage
2691 Credit Valley Road, Suite 101, Mississauga, Ontario L5M 7A1

BUS. 905-828-3434
FAX. 905-828-2829
E-MAIL: mark@mississauga4sale.com
Website: Mississauga4Sale.com

Moving Day - When do you receive the keys to your new home?

Moving Day - When do you receive the keys to your new home?

This is another question that I frequently receive regarding when the buyer receives the keys on the closing date and how to organize the move.

Hello Mark,

I just had a question about how things will happen on the closing day. Is it possible that we wrap up the paperwork for the closing of both sale and purchase in the morning or at least by early afternoon?

We can be packed up and out of my condo by noon - 1:00pm. But will we be able to have the keys to our house for that time as well? We just want to be prepared so then if people are helping us move, they do not have to waste their time if we can't get the keys until later in the afternoon.

Please let me know your thoughts.
Thank you!
T

Hello T,

The timing depends mostly upon what your lawyer is planning on the closing day. If your lawyer is planning to close at, say, 1pm, then you could expect to receive your keys an hour or two later. Some lawyers operate differently and have keys for all closings available at 5pm on closing day. In my experience, most buyers obtain keys to their new house between 3 and 6pm on the closing day. Rarely do they get keys earlier than 3pm, from my experience. We agents are not involved on the closing day, unless something is prearranged with keys or delivery of keys, it's the lawyer who closes your sale and purchase.

From a practical point of view, I would plan to have everything out of your condo and the truck packed and ready to go by about 2-3pm, go for lunch and then drive the truck to the new house, wait for the keys to be ready to be picked up and drive to your lawyer's and get the keys with a separate car and then move into the house. This way you will minimize the idle time of your helpers. You may end up waiting an hour or two for the keys or you may have them early, you never know until the actual closing day.

It is best to ask your lawyer what time they are planning to close and what time they expect to have the keys ready for you.

Just in case: moving checklist




For more information please contact A. Mark Argentino

A. Mark Argentino, Broker, P.Eng.,
Specializing in Residential & Investment Real Estate
RE/MAX Realty Specialists Inc., Brokerage
2691 Credit Valley Road, Suite 101, Mississauga, Ontario L5M 7A1

BUS. 905-828-3434
FAX. 905-828-2829
E-MAIL: mark@mississauga4sale.com
Website: Mississauga4Sale.com

Buying versus Renting your Home, which is right for you?

Buying vs. Renting Your Home

Is now the right time for you to buy a home? You have many options to consider and choices to make. Buying a home is a big responsibility, financially and emotionally, but, most people want to own a home. Homeownership often is referred to as "the American dream." Why is it so special? Among the reasons: Real estate often is an excellent investment, perhaps the number one source of wealth-building for families.

Owning a home has many benefits. When you make a mortgage payment, you are building equity - and that's an investment. Owning a home also qualifies you for tax benefits that may assist you in dealing with your new financial responsibilities - such as homeowners' insurance, real estate taxes, and upkeep - which can be substantial. But given the freedom, stability, and security of owning your own home, they are definitely worth it! Owning your own home also can be a great source of pride and stability.

But homeownership may not be for everyone. It's a big financial commitment - starting with the initial shock of your purchase (including a "down payment" and fees paid to a real estate agent, the lender and others) followed by years of monthly mortgage payments, real estate taxes, property insurance and maintenance costs. When you decide to purchase a home, you accept responsibility for paying for these expenses. They are additional costs to your monthly mortgage payment and should be included in your budget estimates: Property Taxes and Special Assessments, Home/Hazard Insurance, Utilities, Maintenance, Home Owner Association (HOA) Fee if applicable.

One of the advantages of renting is being generally free of most maintenance responsibilities and the flexibility of moving almost as soon as you decide. But by renting, you lose the chance to build equity, take advantage of tax benefits, and protect yourself against rent increases. Also, you may not be free to decorate without permission and may be at the mercy of the landlord for your housing needs. There are many considerations in choosing between renting and buying:

Do you want to spend several years in a house and in a neighborhood?
Do you enjoy lawn and garden work?
Might you need to move suddenly to care for family?
Do you want to keep your assets accessible in the bank, or do you want to invest long-term in a home?
There are tax advantages to homeownership in both the short and long terms. The mortgage interest and real estate taxes are tax deductible, which allows you to subtract part of your housing-related expenses from your taxable income, which could reduce your tax bill. In many cases, the amount of money a renter spends on rent can be about the same as or less than the amount a homeowner spends on a mortgage. With the tax benefit for homeowners, the savings can be significant.

Buy vs. Rent: Pros and Cons

. Advantages Considerations
Buy Property builds equity Responsible for maintenance
Sense of community, stability, and security Responsible for property taxes
Free to change decor and landscaping Possibility of foreclosure and loss of equity
Not dependent on landlord to maintain property Less mobility then renting
Rent Little or no responsibility for maintenance No tax benefits
Easier to move No equity is built up
. No control over rent increases
. Possibility of eviction

Buy vs. Rent: Cost Comparison

The chart below shows a cost comparison for a renter and a homeowner over a seven year period. The renter starts out paying $800 per month with annual increases of 5%.

The homeowner purchases a home for $110,000 and pays a monthly mortgage of $1,000. After 6 years, the homeowner's payment is lower than the renter's monthly payment. With the tax savings of homeownership, the homeowner's payment is less than the rental payment after 3 years.

Yrs Rent Mortgage Payment Monthly Diff. After Tax Savings Yearly Diff. After Tax Savings
1 800 1000 -200 -50 -2400 -600
2 840 1000 -160 -10 -1920 -120
3 882 1000 -118 +32 -1416 +384
4 926 1000 -74 +76 -888 +912
5 972 1000 -28 +122 -336 +1464
6 1021 1000 +21 +171 +252 +2052
7 1072 1000 +72 +222 +864 +2664
8-30 . . Savings increase every year


I posted a similar article earlier this year outlining the pros and cons




For more information please contact A. Mark Argentino

A. Mark Argentino, Broker, P.Eng.,
Specializing in Residential & Investment Real Estate
RE/MAX Realty Specialists Inc., Brokerage
2691 Credit Valley Road, Suite 101, Mississauga, Ontario L5M 7A1

BUS. 905-828-3434
FAX. 905-828-2829
E-MAIL: mark@mississauga4sale.com
Website: Mississauga4Sale.com

Is Spring the best time of the year to purchase your next home?

Is Spring the best time of year to buy a home?

This article covers many of the pros and cons to buying at different times of the year. Spring is certinaly the hottest time of the year, but you may consider other times of the year if you are not in a rush.

Ah, glorious spring, a time for fresh starts and positive change.

Across Canada and the U.S., for-sale signs crop up like wildflowers on the lawns of subdivisions. Moving sales proliferate. Moms and dads box up their possessions and ponder what awaits them on a new block or in a new town. Kids finish out semesters, wary that a different school culture and a new set of friends await them in fall. It's a rite of spring and early summer in our transient society.

It's also a time when real estate agents get lightheaded from make-hay fever, as buyers and sellers come out in full bloom.

But is it always the best time to buy or sell a house?

That's a definite maybe, say experts. Like most buy-sell situations, it all depends on motivations.

Indeed, according to historic data from the U.S. National Association of Realtors, April through July outpaces the balance of the year in sales. So there'll surely be more home inventory and variety then. But you better move fast, because that's just what other home hunters are doing.

"It starts building up early in the year but peaks around June," says research economist Jack Harris of the Texas A&M University Real Estate Center. "There's school ending, there's vacation time and the weather is also nicer. It's generally just a good time to get out and look at homes."

Many buyers apply their income tax refunds toward down payments, adding to the spring push.
While the buying frenzy stays steady through most of the summer, it drops off in early fall, says Harris. It usually drags for a month or so, and then escalates briefly again around October. Some of that second spike is attributed to sellers who were overly optimistic pricers in the spring, but who have grudgingly decided to make concessions in the fall, he says.

According to the Canadian Real Estate Association, buying patterns follow a similar trend north of the border, peaking in April and May, as buyers prepare for July 1st, Canada's biggest moving day. Sales then slow during the summer and begin rising again in early fall. For obvious reasons winter months are the slowest.

Some seasonal house-hunting hints:

Be a contrarian. True, there's a greater choice of homes in the spring, but sellers then can better hold to their asking prices because of demand. "If you can stand to be a contrarian, it could pay to wait," says Harris. "Most people don't do that, though. They just get carried along with the crowd." Additionally, when home loans are less in demand, some lenders are willing to forego certain fees typically charged to win off-peak mortgage customers.

Off-season dealing: Sellers in late fall and early winter, especially between Thanksgiving and New Year's Day, are often more motivated to deal, real estate agents say. "I've done my best negotiating from October to December," says Jim Crawford, a real estate agent, lecturer and Web consultant in Roswell, Ga. "You don't want lots of people tromping through your home around Christmas time ... so you're more apt to accept an offer."

Window at summer's end: Sometimes, late summer opens a small window of leverage for buyers dealing with sellers of slow-moving family homes, says Crawford. "You usually find that the family ... is more important than the extra dollar."
Some sellers can wait you out: Empty nesters and single sellers will always account for some off-peak housing stock, but they're often less motivated to sell quickly, Crawford says.

Heed non-cycle or short-cycle markets: Parts of Florida, Colorado and California and other regions of the U.S. that have large resort areas or large numbers of retirees and semi-retirees don't follow the traditional sale season. Winter resort areas peak in sales between January and April, according to agents. In northern climates, the wintry elements can compress the annual peak seasons more to their warmest-weather months.

Tax timing: It can play a role if you plan to buy late in the year. Determine through a tax preparer if the deductions will better fit in the current or future year. If need be, try to close Dec. 31 rather than Jan. 2, or vice versa. (Be sure you know which items of your closing will be tax-deductible and which will be added to the value of the property.)

Opportunism: While it may sound ghoulish, layoff announcements or a planned corporate headquarters move in some markets can soon result in more homes on the market for the short term with a variety of price points and some motivated sellers. Proceed with sensitivity.
Home-buying "seasonality" can vary from market to market and may be slowly shifting, say trend trackers. In recent years, January has seen record or near-record sales for the month, says National Association of Realtors researcher Walter Molony. A buyer's market in a city will mean more inventory is available year round, while a seller's market, generally driven by local employment opportunities, can winnow peak seasons significantly

However, most agents agree on the seasonal axiom that homes generally sell for 3 percent more than the annual average during peak months, at or around the average annual price in very early spring and in fall, and then drop 3 percent below the average annual price during winter.

A few other seasonal-selling strategies:

Sell to a larger market: In most areas, May, June, July and August are considered the high-volume closing months, with about 40 percent of all homes selling during that four-month period.

The sooner, the better: While deed transfers do peak between May and August, most of those sales were actually arranged from one to three months earlier. It takes time to close home transactions.

Holding out: Your wait could be a long one. A home priced unreasonably high can be hard to sell in any season, particularly in a buyer's market. Industry statistics show homes with price tags 5 percent above market value have a 10 times greater chance of selling than those priced 15 percent above market.

Reduce selling stress: Placing your home for sale as far in advance of buying the new one as possible will help remove one component from the already complicated sales equation. You don't want to wind up juggling two mortgage payments in addition to the other exasperation associated with home selling. But don't tarry too long in visiting your targeted buying area, lest you miss its peak inventory season. (You may have to send your spouse out as a scout while you hold down the home fort.)

Get inside the buyer's mind: See seasonal house-hunting tips (above) and adjust strategies accordingly.

Buyers and sellers should also note that 60 percent of all moves in America take place in summer, according to JoyceVanLines.com. Book as early as possible, especially if you have a clear closing date. Joyce and other movers advisehome buyers/sellers to call for an estimate at least 60 days in advance of a move.

Even with reliable spring sales peaks, the Internet has added a non-seasonal dimension to the home-buying mindset. Virtual tours, accompanied by a wealth of neighborhood, school and civic data, can speed along the decision-making process well before a prospective home buyer hits town, agent Crawford says. "It is literally open house, 24-7, on the Web."

In markets such as weather-friendly Southern California, seasonal factors play a much smaller role in home-inventory turnover, agents say. Terri Dillon, who owns four Realty Executive offices in the San Diego area, says house hunting is a year-round sport in her market, although spring still carries a slight edge.

However, at year's end, says Dillon, investors who sold off residential properties midyear are often in a hurry to close on the purchase of another investment residential property to satisfy requirements of a capital-gains deferring 1031 exchange. The IRS gives you 180 days from the date of your last property's closing to close on another real estate investment to defer the previous gains tax. This is less of a factor in Canada where the concept of replacement properties has long been phased out of the tax code.

Knowing the motivation of the seller can be very important in the sales process, says Realtor Susan Marthens of Windermere Services Co. in Portland, Ore. "If they're transferring, they'll want to get it out on the market quickly," she says. "That's something people can't always control. Sometimes they'll have to negotiate accordingly."

She adds: "But if a particular time of year isn't important to the seller ... then I always tell them, 'Right around spring.' "

See our seasonal housing trends in the GTA




For more information please contact A. Mark Argentino

A. Mark Argentino, Broker, P.Eng.,
Specializing in Residential & Investment Real Estate
RE/MAX Realty Specialists Inc., Brokerage
2691 Credit Valley Road, Suite 101, Mississauga, Ontario L5M 7A1

BUS. 905-828-3434
FAX. 905-828-2829
E-MAIL: mark@mississauga4sale.com
Website: Mississauga4Sale.com

Wow - Didn't anyone notice this announcement on Down-payment changes in Canada?

Did you hear the latest on mortgages in Canada?

There was a major change to federal legislation regarding high-ratio mortgages in Canada last Friday April 20th. Effective immediately, residential mortgages with a loan to value ratio between 75 - 80% will no longer require insurance through CMHC or GE. This change was announced by the Finance Minister on Friday.

What this means is that you now only require 20% downpayment to avoid those 'high ratio' insurance fees. This coupled with the fact that 30 and 40 year mortgages are now readily available in Canada means two things:

1- affordability has improved dramatically in the past few months as both of these changes reduce either the fees charged or monthly payments.
2- this also means that prices will rise due to more people being able to afford the entry level properties.

This is a significant change in real estate ownership in Canada. I don't think many people noticed or even gave it much thought, but these two changes alone could increase affordability by as much as 30% which also means that house prices will rise due to these two changes. This certainly makes the banks happy, as they will now be able to loan out more money.

Take a $250,000 townhome as an example. You may now use the premium you would have paid for putting only 20% downpayment, which is 1% of the mortgage, so in this case, the mortgage amount with 20% downpayment is $200,000 (since 20% of $250,000 is $50,000 downpayment) and you save $2,000 insurance premium. Now you take a 40 year mortgage the payment is $1056 per month versus a 25 year mortgage $1250/month and your payment difference is $194 per month. At today's rate of say 5.75% this 194 payment is worth an extra $36,000 in mortgage payment, plus the $2000 fee you saved, this all means that you can afford an extra $38,000 most of which can be put towards your purchase price. The bottom line in this example is that you can afford about a $280,000 townhome with 20% downpayment and 40 year mortgage, that's a huge difference and will help to put upward pressure on prices.

Any comments? email me

This also means that thousands of websites and online mortgage calculators, mine included, must all be changed to reflect these changes, no small task! This change is so new that CMHC has not even updated their site to reflect the new rules, as of April 23rd.

You can do mortgage calculations for your situation at this link.



For more information please contact A. Mark Argentino

A. Mark Argentino, Broker, P.Eng.,
Specializing in Residential & Investment Real Estate
RE/MAX Realty Specialists Inc., Brokerage
2691 Credit Valley Road, Suite 101, Mississauga, Ontario L5M 7A1

BUS. 905-828-3434
FAX. 905-828-2829
E-MAIL: mark@mississauga4sale.com
Website: Mississauga4Sale.com

3 Steps to take before you purchase your first or next home

This article will outline the 3 steps to take before you buy your first or next home

A little time spent shoring up your credit, crafting your budget and organizing financial documents will go far in smoothing the way to a home purchase. Ideally, you can start working on your home-buying project before you even start shopping for homes. Keep in mind that most buyers take eight weeks to actually shop for a home, according to a survey by the National Association of Realtors. Your financial prep work should start well ahead of those eight weeks.

"My advice is to start to talk to your local Realtor six months ahead of time," says Pat Vredevoogd Combs, a practicing residential broker in Grand Rapids, Mich., and president of the National Association of Realtors. "Most have a good handle on mortgage people in the area. And, there are a lot of really cool mortgage programs out there for first-time buyers."

3 steps to take before applying

1. Get your credit in shape.
2. Organize your documents.
3. Check your budget.

For example, Combs says some local governments will offer interest rate or down payment subsidies to buyers who agree to buy a home in certain areas. And governments or employers may subsidize teachers, fire fighters, police officers, nurses and other service professionals who have difficulty affording a home in high-priced communities. A hospital trying to recruit and retain nurses, for example, might offer a down payment loan, which is forgiven and turned into a grant if that nurse remains employed with the hospital for several years, says Combs.

Before you begin your house hunting, there are three important steps to take to make sure you are eligible for the best interest rates and to make the mortgage application process a breeze.

1. Get your credit in shape: Order your credit reports
One of the first steps any prospective buyer should take is to take advantage of the free credit reports everyone is entitled to request annually, thanks to federal law. While there are many sites on the Web offering "free" credit reports, many of those offers require that you sign up for a free trial of a credit-monitoring service that will cost money if you fail to cancel during the free trial period. The official site where you can get free, no-strings-attached credit reports annually from the Equifax, Experian and TransUnion credit bureaus is www.annualcreditreport.com. You can receive one free credit report from each of these three agencies every year.

David Reed, an Austin, Texas, mortgage banker and author of "Mortgage Confidential: What You Need to Know That Your Lender Won't Tell You," says you should review each of those reports for errors. There could be mistaken entries noting late payments or account information that belongs to someone else. Common names sometimes get mixed up on credit reports, as do "Juniors" and "Seniors" in the same family.

"I see that a lot," says Reed.

If you spot an error, you should write to that specific creditor and request a correction. Bankrate has a work sheet to help you request and track corrections on each of your credit reports.

How's your credit?
While paying down your credit card balances will improve your financial picture, this is not the time to close credit accounts because reducing the amount of credit available to you can actually lower your credit score.

"Don't assume you should just get rid of it," says Combs.

If you already own a home and have an existing home equity line of credit, or HELOC, Combs recommends that you not get rid of it in preparation for a new home purchase. "I think you ought to leave it alone. Sometimes buyers are going to need it; they can use it as an easy bridge loan (to cover the down payment temporarily until you sell the old home) so they don't have to go through the trouble of getting one."

2. Organize your financial paperwork
You also should gather up all the financial documents that a lender will need when you submit an application. They include copies of your income tax returns, W-2 wage statements, paycheck stubs, bank and investment account statements, divorce decrees and child support documents and recent credit card statements. Having those documents handy will also help you put together a realistic budget and help you figure out what you really can afford to pay as a down payment and toward subsequent monthly payments for mortgage principal and interest, plus property taxes and insurance.


Documents to gather:

• Tax returns for the past two years.
• Two most recent pay stubs.
• Most recent credit-card statements.
• Most recent bank and investment account statements.
• Divorce decrees and child support documents.
• Your budget.

3. Craft a budget: How much house can you afford?
There is a difference between the maximum payment a borrower can qualify for -- which can sometimes be surprisingly high -- and the amount you can comfortably afford, says Combs.

"Each person has to know the difference in his own mind," she says. "If you're just getting by with your current rent payment, and the lender says you can qualify for more, give it some thought."

However, first-time buyers, in particular, often don't know how the tax-deductibility of mortgage interest and property taxes can help offset a mortgage payment that is higher than their rent. A good real estate agent can help you figure out the bottom line.

Keep it steady
Once you're closing in on your purchase, and especially after you've applied for a mortgage, do your best not to change your financial picture. "When you sit at the closing table, you will be asked to sign a document that says your credit is the same as it was when you originally applied for the loan," says Combs.

If at all possible, put off job changes. Lenders like to see a steady history of employment and frown on job changes while your application is pending, unless the new job is in the same field and at the same or greater pay. By Elizabeth Razzi • Bankrate.com Elizabeth Razzi is a freelance personal finance reporter and author of "The Fearless Home seller." She is based in the Washington, D.C., area.

Read more about the steps to buying a home



For more information please contact A. Mark Argentino

A. Mark Argentino, Broker, P.Eng.,
Specializing in Residential & Investment Real Estate
RE/MAX Realty Specialists Inc., Brokerage
2691 Credit Valley Road, Suite 101, Mississauga, Ontario L5M 7A1

BUS. 905-828-3434
FAX. 905-828-2829
E-MAIL: mark@mississauga4sale.com
Website: Mississauga4Sale.com

Do I have to pay GST on a resale residential Purchase?

GST and the Resale Home

You don't have to pay GST on the purchase price of a used residential home. In other words, the purchase is "exempt" form GST.

Revenue Canada defines "used residential property" to include a previously occupied house, condominium apartment, summer cottage, vacation property or non-commercial hobby farm. They refer to "used" as residential property that has been occupied as a residence before you bought it.

Used property can also mean a recently built house hat is substantially complete and has been sold at least once before you buy it. For example, if a new house is purchased and resold before being occupied, the home's resale price will normally be exempt from GST.

An owner-occupied home is considered a residential property when it's used primarily as your residence. So, if you are self-employed and purchase a resale home that includes a room used as an office, the entire home still qualifies for the GST exception.

However, if your owner-occupied home is not used mainly for residential purposes (for example, a retail store with a small apartment upstairs), only the residential portion is exempt from GST on resale. The non-residential portion of the purchase price is taxable.

If you are planning to purchase a resale home, the seller can supply you with a certificate stating the property qualifies as "used" for GST purposes.

As with most taxes, there are exceptions to the GST rules regarding resale housing. For instance, most sales of real property by charities, non-profit organizations and other public service agencies are exempt form GST. Contact your REALTOR for additional information.

Read more about GST and buyer costs


For more information please contact A. Mark Argentino

A. Mark Argentino, Broker, P.Eng.,
Specializing in Residential & Investment Real Estate
RE/MAX Realty Specialists Inc., Brokerage
2691 Credit Valley Road, Suite 101, Mississauga, Ontario L5M 7A1

BUS. 905-828-3434
FAX. 905-828-2829
E-MAIL: mark@mississauga4sale.com
Website: Mississauga4Sale.com

Variable rate mortgage - Is it right for you?

Is a variable rate mortgage right for you?
(NC)-If you are not a market watcher, a variable rate mortgage may make you nervous. With this type of mortgage, the interest rate payable fluctuates with the prime lending rate. While a variable rate mortgage can save you money when you are financing your home purchase, you need to be comfortable with the associated risks.

As a general rule, variable rate mortgages ordinarily offer lower interest rates than fixed rate mortgages. In the long run, variable rate mortgages have proven to be a good bet to save money. More and more Canadians have been turning to variable rate mortgages to finance their home buying.

Some people may shy away from variable rate mortgages as their monthly payment amount may change. But with products like CIBC's Better Than Prime Mortgage, your monthly payment amount will be the same, even if the prime lending rate fluctuates. This will help you budget effectively and take advantage of lower rates.

There are three basic types of variable rate mortgages available on the market today:

1. Interest rate changes with prime or stays just below prime- these types of mortgages can be either closed or open. If there is a discount on the prime rate, the mortgage is usually closed.

2. Interest rate is discounted and has a special introductory offer- this type of variable rate mortgage carries an introductory rate that is discounted from the prime lending rate for a specified length of time. After the introductory period, a smaller discount may apply for the remainder of the term.

3. Interest rate fluctuates and is capped- this type of mortgage offers the security of a cap on the interest rate, which means that your interest rate will never rise above a certain level, often the 5-year fixed rate. The interest rate is usually higher than the prime lending rate, but this type of mortgage offers protection against rising interest rates. These mortgages are usually closed.

For more information about whether a variable rate mortgage is right for you, contact your local CIBC branch or call 1 800 465-CIBC (2422). You can also visit the CIBC website at www.cibc.com. Credit: www.newscanada.com

More information on Mortgages and Rates

For more information please contact A. Mark Argentino

A. Mark Argentino, Broker, P.Eng.,
Specializing in Residential & Investment Real Estate
RE/MAX Realty Specialists Inc., Brokerage
2691 Credit Valley Road, Suite 101, Mississauga, Ontario L5M 7A1

BUS. 905-828-3434
FAX. 905-828-2829
E-MAIL: mark@mississauga4sale.com
Website: Mississauga4Sale.com