Ottawa Home and Condo Blog

5 Things to know about the New Ontario 15% Non- Resident Speculation Tax

Although the Province has just announced the 15% Non-Resident Speculation tax, there are already more questions than answers. Here is what you need to know.

  1. The tax is for non-residents of Canada buying 1-6 residential units in the Golden Horseshoe area of Ontario.

This tax is in addition to any Land Transfer Tax payable. It applies only on 1-6 units of residential property purchased by a Non-resident of Canada in the Golden Horseshoe Region of Ontario, including Toronto, Niagara, Hamilton, Peterborough, Simcoe, Waterloo and York. It thus does NOT apply to any apartment building with at least 7 residential units, or any commercial property, industrial property or vacant land.

  1. What if you are a Canadian citizen but also a non-resident?

If you are a Canadian citizen, you do not pay the tax. Even if you are a non-resident, living in the US, Great Britain or Hong Kong, as long as you are a Canadian citizen, you will not pay this tax.

  1. What if there are 3 buyers buying a property that cost $500,000.00, each owning a third of the property, with 2 owners being Canadian citizens and one being a non-resident?

Here it becomes very problematic. Even if the non-resident will own only one third of the property, they must pay 15% on the entire purchase price of $500,000.00, or $75,000.00

  1. Lenders ask for parents to sometimes co-sign a mortgage for their children buying a home and take a small percentage of title, even 1%, to do so. What happens if the children are permanent residents of Canada but the parent is a non-resident?

This is a disaster, because under the new rules, even if the parent was holding the 1% title in trust for the children, they must pay 15% of the tax on the ENTIRE purchase price.  Mortgage brokers, lenders and realtors must be aware of this when qualifying potential buyers. In this regard, lenders will have to start giving serious consideration to accepting a guarantee instead from the non-resident parents, to avoid the non-resident parents having to take any interest in the property, triggering this tax. The issue, however, is that if the children do not qualify based on their income, the parent may have to go on title to satisfy the lender requirements. In addition, the guarantee will likely require the parents to obtain independent legal advice , and permit them to raise more defences if the bank tries to enforce it. As you can see, this is not easy, and this must be determined before anyone in this situation puts in an offer to buy a home.

  1. Rebates

Even if the tax is paid, rebates will be available if the non-resident becomes a resident of Canada or a Canadian citizen within 4 years of closing, or if the non-resident is a foreign student who has been enrolled as a full-time student at an approved Ontario institution for at least 2 years after closing, or the foreign national has worked at a full-time Ontario job for at least one year after closing.

Ottawa Real Estate ready to roll this Spring!

OTTAWA, May 3, 2017 – Members of the Ottawa Real Estate Board sold 1,795 residential properties in April through the Board’s Multiple Listing Service® System, compared with 1,711 in April 2016, an increase of 4.9 per cent. The five-year average for April sales is 1,613.

“The April resale market continued its upward trend in units sold, just shy of a record set in 2010,” says Rick Eisert, President of the Ottawa Real Estate Board. “Sales activity is indicating a trend towards a seller’s market. Lower inventory, combined with increased demand, is creating many more multiple offer situations and quicker moving properties, with the average cumulative days on market dipping to just 71 days.”

7 things a GREAT realtor will provide with EVERY transaction…

A real estate transaction can be an exciting thing to experience, but it can also be nerve-wracking and stressful. Your experience will largely depend on the circumstances surrounding your transaction and, perhaps more importantly, the agent you’re working with.

A great agent will not only get you over the finish line to the best of their ability, but they can also change your life for the better. Here are eight ways:

1. They’ll show you they care

In today’s fast-paced world, it seems like everyone’s attention is in short supply. A great real estate agent will show you that’s not always the case, by listening and caring about you and your needs. Not only will being a good listener help an agent do their job, but it’ll also show you that even in business, there are still people out there who care.

2. They can save you a lot of money

There’s an old expression, “If you think it’s expensive to hire a professional to do the job, wait until you hire an amateur.” Hiring a great agent can save you literally thousands of dollars, as the right agent will not only negotiate effectively, but also know what pitfalls to look for as the transaction moves along, saving you money in the process.

3. They can help you see things in a different way

One of the most overlooked aspects of hiring a great agent is just how much of an effect they can have on your perspective. For instance, you might think that you’re looking for something in particular, but a great agent can take what you asked for and find something that’s even better than anything you’ve ever considered. A great agent is like an expert matchmaker.

4. They’ll do more than help you buy or sell a home

A great real estate agent will go above and beyond for you. They’ll help you find contractors, give recommendations on design (if you’re open to them), and even help you navigate the restaurants in your new neighborhood. Great agents provide so much value because they want to be your go-to resource for anything to do with real estate.

5. They can find you something that no one else can

Great real estate agents aren’t necessarily miracle workers, but they’re close. A great agent will surprise you with something no one’s ever thought of before, whether it’s finding a property that you didn’t know about, or a solution to an otherwise complex problem. A great agent is proactive and instead of sitting around waiting, will make things happen for you.

6. They can take a lot of stress away

One of the best things about a great real estate agent is the peace of mind that comes from working with them. There are lots of things that can go wrong during a real estate transaction, and a great agent knows this and will not only anticipate issues ahead of time, but will shoulder the burden and solve problems for you, making it a low-stress experience.

7. They’ll go to battle for you when it counts

The right agent is like a general you can depend on when the going gets tough. From searching for the right property or buyer, to negotiating, to pushing the deal through despite all obstacles standing in the way… a great real estate agent won’t back down from adversity and will battle for your best interests at all times.

Dug up some old Radio Ads from the Dawg days!

New Mortgage Loan Insurance Premiums are about to hit Ottawa Real Estate!

Effective March 17, 2017, Canada Mortgage and Housing Corporation (CMHC) and Genworth Canada are increasing premiums for mortgage loan insurance. The higher premiums will impact homeowners with an insured mortgage with a loan to value greater than 65%.

 

What you need to know – keeping in mind that loans under 80% loan to value do not HAVE to be insured in most cases…

 

  • CMHC estimates that for higher loan to values, on average borrowers will see an increase of $5/month in payments
  • To qualify for current premiums, there is a deadline of 11:59 pm Eastern Time on March 13, 2017 for you to submit a full application, including resubmits and converting a pre-approval to a full application
  • All new deals submitted after the deadline will be subject to the new premiums
  • Here’s how the most common premiums will change:
Loan To Value Ratio Current Effective March 17th
Up to 65% 0.60% 0.60%
65.01% – 75% 0.75% 1.70%
75.01% – 80% 1.25% 2.40%
80.01% – 85% 1.80% 2.80%
85.01% – 90% 2.40% 3.10%
90.01% – 95% 3.60% 4.00%

 

Note: Premium changes also apply to unique programs such as Genworth’s Alt A and Cottage products or CMHC’s nontraditional down payment.

5 Tips for Buying a Foreclosed Home

For those looking for a deal, distressed and foreclosed properties (called “power of sale” in Ontario) can offer a great opportunity. Lenders are looking to unload the property and will often offer a discount to do so quickly. But the process of buying a foreclosed home can differ a little from traditional home sales. Here are some things to consider before you make an offer on one of these properties.

 “As-Is”

Angry homeowners that are in the process of losing a home can feel like they have nothing left to lose. Faced with the prospect of losing their house, homeowners sometimes leave the place stripped of anything valuable or useful, including door knobs, fixtures and wiring.  While you can get the place at a discount, it might only be a bargain if you’ve got some DIY skills. This shouldn’t necessarily discourage you from buying, but you’ll need to figure out if the cost of repairs will offset the discounted offer price.

Know what to expect

A lender has no history with the home they are selling in these cases, so don’t expect to get a run-down of problems before you move in. A foreclosure might be a good deal, but it can also turn into an unexpected adventure. A good home inspector and/or contractor visits can help sort out the details.

Don’t Assume They’ll Take ANY Offer

While a foreclosed home can often be a bargain, you shouldn’t expect the lender to accept a lowball offer. Even in a market flooded with foreclosures, a bank might balk at a low offer, preferring to wait until housing prices bounce back rather than take a huge hit on the investment. However, you can use other ridiculous offers to your advantage and still land a deal at a good discount.

It Takes Time

Most mortgages are backed by large banks which means you will likely run into a large, slow-moving bureaucracy when trying to buy. With a traditional home sale, you can expect to find out if your offer has been accepted within a day or two. But when buying from a financial institution this process can take weeks. So have patience!

A Different Kind of Sale

Banks have their own processes and procedures for selling a home in foreclosure, which can make the purchasing process feel a bit foreign for  buyers. There are caveats written into sale agreements that protect the bank and these are often long and confusing. I can help sort through these items to make sure you know what you’re getting into!

Ottawa Interests Rates Unchanged – Bank of Canada

The Bank of Canada announced today that it is holding the benchmark interest rate unchanged at 0.5% with an optimistic outlook, noting that “federal and provincial measures are still expected to support growth in 2017” and predicting “a return to full capacity around mid-2018” as earlier projected in October. The Bank factored in Trump’s tax policies i.e. stimulus spending, resulting “in a modest upward revision to its U.S. growth outlook” which should benefit Canada. The Bank did not take into account U.S. policy changes that could negatively impact us, noting that there are “significant uncertainties weighing on the outlook”.

Last fall, the Ministry of Finance introduced four new mortgage tightening measures intended to cool the housing markets (aimed primarily at Vancouver and Toronto), reduce foreign investor home flipping, and control the levels of Canadian household debt. The Ministry also introduced risk sharing on mortgages for the Chartered Banks which puts upward pressure on mortgage rates as lenders need to set aside higher levels of capital for certain types of funds.

We expect to see interest rates staying low in Canada well into 2020. The Bank of Canada believes it must continue its monetary policy of ultra-low rates to control inflation, stimulate other sectors of the economy besides housing and spur our Canadian export market.

First Time Home Buyers REBATE increased to $4000 – Great news for Ottawa Real Estate!

TORONTO — Ontario is doubling the rebate on the land transfer tax for first-time homebuyers to $4,000 in an effort to help them enter the housing market, but it is raising the same tax on homes that sell for over $2 million.

Finance Minister Charles Sousa said first-time buyers won’t pay any land transfer tax on the first $368,000 of a purchase price once the changes take effect Jan. 1.

There will be a half-percentage point increase in the tax on homes that fetch more than $2 million, a measure expected to affect less than one per cent of the population, added Sousa.

“Purchasing your very first home is one of the most exciting decisions in a young person’s life, but many are worried about how they will be able to afford their first condo or house,” he told the legislature Monday. “Improving housing affordability will help more Ontarians to participate (in the housing market).”

The province takes in over $2.1 billion a year in the land transfer tax. Any additional revenue generated by the increase in the land transfer tax on luxury homes will help pay for the doubled rebates for first-time buyers, Sousa said.

The government had promised some sort of action after expressing concerns about the difficulty first-time buyers face trying to enter the housing market, especially in the Greater Toronto Area where the average price for all types of properties last month jumped 21 per cent year-over-year to nearly $763,000.

Over the same time period, home prices in Hamilton grew nearly 20 per cent to an average of $535,000, while prices in Barrie soared 24 per cent to an average of $476,000.

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

The Ontario Real Estate Association said the increased rebate of the land transfer tax will help more young families achieve their dreams of home ownership.

“This tax break will reduce a first-time buyer’s closing costs and help them save more for their down payment,” said OREA president Ray Ferris.

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 0.5 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.

New Democrat finance critic Catherine Fife called the fall economic statement “a distraction” from the top issue facing Ontarians — soaring electricity rates — and said Premier Kathleen Wynne had downplayed expectations of help for first-time homebuyers.

“Quite honestly, she was right to lower the expectations because what we see in this statement is neither new or profound or progressive,” Fife told the legislature.

The Liberal government also announced it is freezing the property tax on apartment buildings while it reviews how it affects rental market affordability. It said the average municipal property tax burden on apartment buildings is more than double — and sometimes triple — that for condominiums.

Property taxes are generally reflected in rents, so the government is concerned that lower-income residents in apartment buildings are facing a much higher tax burden than people who own condos.

Keith Leslie , The Canadian Press 
Published Monday, November 14, 2016 1:25PM EST 
Last Updated Monday, November 14, 2016 2:50PM EST

 

New Mortgage Rules Coming to Ottawa Real Estate

The Federal Government has announced yet another important mortgage rule change in efforts to cool the housing market by implementing what they call a “stress test”.

In other words qualifying for a mortgage just got a whole lot more difficult.

Effective October 17th all insured mortgages are required to QUALIFY for their mortgage using the current Bank Of Canada Benchmark rate of 4.64% compared to using the ACTUAL rate that currently ranges from 2.39% – 2.44%.

Anyone that is currently in the market to purchase a home or refinance a mortgage but have not yet made an offer or committed a live mortgage needs to RE-QUALIFY immediately.

UNDERSTANDING THE NUMBERS

Let’s put this new rule into perspective……

A couple with a $100,000 income, no debts and 5% down payment can currently qualify for about a $484,000 home purchase using the current 5 year fixed rate of 2.44%

That same couple having to qualify at the bench mark rate of 4.64% now qualifies for a $421,456 home.

That is $62,544 less buying power!

All in effect by Oct 17th.

Summer Sales Sizzle in July Ottawa Real Estate!

Members of the Ottawa Real Estate Board sold 1,491 residential properties in July through the Board’s Multiple Listing Service® System, compared with 1,430 in July 2015, an increase of 4.3 per cent. The five-year average for July sales is 1,413.

“Sales continue to outpace 2015 numbers both in monthly and year-to-date comparisons,” says Shane Silva, President of the Ottawa Real Estate Board. “However, we are seeing the typical summer slowdown in July compared to June’s record-breaking numbers. Units listed in both residential and condominium property classes have declined throughout the year, which has affected overall inventory levels. The number of active listings at the end of July 2016 is down about 15 per cent compared to July 2015.”

July’s sales included 277 in the condominium property class, and 1,214 in the residential property class. The condominium property class includes any property, regardless of style (i.e. detached, semi-detached, apartment, townhouse, etc.), which is registered as a condominium, as well as properties which are co-operatives, life leases, and timeshares. The residential property class includes all other residential properties.

“We are just over the mid-year mark for 2016 and our year-to-date sales volume is up by 5.3 per cent over last year, ringing in at a whopping 3.6 billion dollars,” says Silva. “Prices have remained quite steady in comparison to last year, with the increased number of units sold nudging the total sales volume up for the year.”

The average sale price of a residential-class property sold in July in the Ottawa area was $398,608, an increase of 1.1 per cent over July 2015. The average sale price for a condominium-class property was $259,794, an increase of 1.2 per cent over July 2015. The Board cautions that average sale price information can be useful in establishing trends over time but should not be used as an indicator that specific properties have increased or decreased in value. The average sale price is calculated based on the total dollar volume of all properties sold.

“The hottest segments in our market for July were 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. “In addition to residential and condominium sales, OREB Members have assisted clients with renting over 1,800 properties since the beginning of the year.”