Good morning everyone, I hope this communication finds you feeling fantastic and excited with the long weekend upon us.
Rental Increase Rates
June 26, 2013 — The Ministry of Municipal Affairs and Housing has released the province’s rent increase guideline for 2014. The 2014 guideline will be 0.8 per cent. The new rent increase guideline applies to a rent increase that begins any time between January 1, 2014 and December 31, 2014.
Important Note: Any Rental Spaces that have come on market Post 1992 are not bound by these rental increase schedules. Landlords are free to set their own rental increases! It’s a balance between collecting max dollars and also not losing quality tenants.
First Time Buyers and Land Transfer Tax Exemption
- In Toronto, first time home buyers who purchase a home under $400,000 are exempt from paying the city of Toronto land transfer tax and can also receive up to a $2000 rebate on the provincial land transfer tax.
- For a home purchase over $400,000, the buyer(s) will pay the land transfer tax on the portion over the $400,000 purchase price.
Key Note: First Time Buyer(s) refers to Buyers who have NEVER bought any other property ANYWHERE IN THE WORLD!
- Although this makes no practical sense at all since this “incentive” is to motivate buyers to purchase property in Toronto/Ontario it still remains to be the case.
- Also, there is virtually no way for any government office to check foreign ownership of property. The resources to track such things would cost way more than the revenue received in the tax itself. Even between provinces it is difficult for any administration to check and follow up on land ownership.
- How about if multiple individuals with the same name exist in other countries that own homes/properties? E.g. Maria Silva – A very common Portuguese name.
- The land transfer credit for first time buyers is basically an honour system. Buyers have to sign an affidavit stating that they have not purchased property before.
Pre-Approved Financing may not be enough for home purchase
Lenders are more frequently asking for an appraisal of a property just prior to closing. If the appraisal is less than what the buyer paid for it, then the lender may either reduce the amount of the mortgage loan or just cancel the loan altogether. Just because you are pre-approved for a mortgage does not mean you will get the full amount. Make sure that your lender has completed its appraisal before you waive any financing condition. I have across several situations myself where this has been an issue but was able to sort things out before waiving a finance condition.
If you have a large line of credit or your own private funds you can purchase property out right.
Below is an article by a good friend Real Estate Lawyer Mark Weisleder
By: Mark Weisleder Real Estate, Published on Fri Jun 14 2013
Many buyers get pre-qualified for financing before they start looking for a home. This means that they find out in advance the maximum amount that a lender will provide to them based on their income. The mistake is thinking that no matter what home you buy, the lender will just give you the money you need, provided that it is within your approval limit.
Buyers need to realize that just because a lender pre-approves you does not mean they will lend you all the money. The property you buy must, in the lender’s opinion, be worth what you paid for it.
Most real estate agreements are conditional for a few days on the buyer arranging satisfactory financing. In many cases, however, the buyer waives the condition before the lender conducts an appraisal of the home itself. Even worse, in most bidding wars, buyers do not even include a condition on financing, hoping that their pre-approval will be enough.
In the last two months, I have seen two situations where lenders requested an appraisal of the property just days before closing, and when the appraisal stated that the house was not worth what the buyers paid, the lender just cancelled the loan. The buyers had already paid the deposits and were preparing to close. Now they faced the possibility of losing their deposits and getting sued.
In both cases, we were initially able to arrange for an extension of the closing date to give the buyers time to solve their problem. In one case, the mortgage broker got creative and was able to find the buyer a new mortgage, albeit at a higher interest rate and for a shorter term than the original mortgage. Still, the deal got done.
In the second situation, the buyer had purchased a brand new condominium from an original investor, who flipped it just before closing. The original price was $200,000 when the development started four years ago, but the buyer today paid $240,000. The problem was that when the bank asked for the appraisal, the appraiser said that since other investors closed at the original price of $200,000, he would not agree that the unit had in fact appreciated to $240,000 today. The buyer was fortunate to have relatives who lent him the shortfall to close the deal.
Buyers, when you are looking at potential lenders to assist with your home purchase, ask in advance how long it takes them to do their appraisals. Many lenders can get this done within 3-4 days, so that you can have assurance that you will get all your money before you have to waive any financing condition.
Be very careful about bidding on a home without a financing condition, unless you budget an additional 10 per cent down payment in reserve, just in case the lender surprises you just before closing with a reduced loan. Being prepared will assist you in closing on time, and with the right amount of money.
Next week I will be able to share the June sales results with all of you.
Over the last 2 weeks I have been involved in another 4 bidding wars. Most recently last night, a condo went on market and my clients and I made an offer the next day. Another competing offer had come in the night before. Unfortunately the competing offer “won”. One day on market and gone!
I invite you all to browse this site. We have recently added many more neighbourhood descriptors for the Toronto central region and will add east and west neighbourhoods in the near future. Also don’t forget to check out the popular tools section (including the land transfer tax calculator).
I always welcome feedback to improve the site!
Have a wonderful weekend and great shortened work week! Anthony