About Bekkhu

Posts by :

pre-con 1

Important Tips for Buying a Pre-Construction Condo

Buying a condominium before it is built is a lot different than buying a resale condominium. It is important to have a good understanding of these differences, so you can make the best-informed decision as to whether it is the best option for you.

The Down Payment and Schedule

While you may be able to put as little as a 5% down payment on a resale property, pre-construction developments usually expect you to pay around 20%. You are not expected to pay the whole 20% right away. This down payment is broken down into 3 or 4 scheduled payments. The way these payments are structured varies from builder to builder but usually look something like this: you pay 5% upon signing the agreement, 5% due 120 days after signing, 5% due 270 days after signing, and the other 5% due 365 days after signing to equal 20%.

 

Cooling Off Period

In Ontario, you get 10 calendar days from the day you sign the agreement where you can back out of the agreement anytime with no reason. It is a good idea to get a pre-approved mortgage before or during this timeframe. You would bring the agreement of purchase and sale to your lawyer during this time as well, so they can review it.

 

Levies

Make sure to get a cap on levies. Local governments charge the developer educational and development levies for the infrastructure needed to service the building such as schools, water, parks etc. The builder can then pass these charges onto you, the buyer. You will want to make sure to work with your realtor to negotiate a cap on these levies to limit the amount you will need to pay.

 

Closing Costs

With pre-construction condos there are other closing costs in addition to the closing costs associated with resale condos. These include: the Ontario new home warranty plan, development and educational levies, common expense contribution, utility hook-up fees, occupancy fees (to learn more click here), assignment fees (if you are planning on selling before final closing), and more. These usually amount to 2-2.2% of the purchase price in addition to the other closing costs you would normally know about (for more information on closing costs click here).

 

 

Interim Occupancy Fees

When the building is close to completion and “liveable”, there is a period called the “interim occupancy”. The buyer can move into the unit, but no transfer of land has occurred. Buyers are expected to pay an amount that roughly equals the interest portion of the mortgage payment, maintenance fees and property taxes. The average timeframe is 3-6 months. For more information on this click here.

 

HST

With most builders, the HST will be included in the purchase price if you are planning on moving into the condo yourself. If you are an investor and plan on renting the unit out, you will be expected to pay the HST separately. It will then be up to you to apply for an HST rebate to get the money back afterwards.

 

Change Is Inevitable

It is important to keep in mind that many things change in the process when it comes to pre-construction condos.  For example, the floor plans can change a bit, the maintenance fees you see when the building is advertised is an estimate (they could be much less than the actual amount you will be paying), and property taxes take a while to be assessed, you may not get a bill until 1-2 years after you moved in. Also remember that condos are rarely completed by the projected completion date.

 

Conclusion

Every developer works differently, which is why working with your own real estate agent, as opposed to the sales representative at the sales office will help you tremendously. Remember that the sales representative in the sales office is representing the builder’s best interests. Bring your own real estate agent with you so you have a professional there representing your best interests. Make sure you are working with a real estate agent and lawyer who have a good understanding of pre-construction condominiums, as the process entails many details not necessary in resale properties.

 

For more information contact me anytime.

lease agreement photo

Ontario’s New Standard Lease

Finally! Ontario has a new standard lease document. Staring April 30th, 2018, most residential tenancies must be entered into using this form. Exceptions include care homes, sites in mobile home parks and land lease communities, most social housing, certain other special tenancies or co-operative housing.

This is great news for everyone as the form is easy to understand and lays out many of the rules that were not being implemented properly in previous lease agreements created by landlords themselves. One of the most commonly misunderstood rule is whether landlords are allowed to restrict tenants from having their pets on the premises. Banning pets is illegal. The only exception is in condominiums that have a restriction on pets in their by-laws. The lease document clearly states this rule as well as many of the other misunderstood rules.

Tenants have the right to ask the landlord for a standard lease in writing. The landlord is required to provide one within 21 days of the request. The tenant can withhold one months rent if this is not provided within that time frame.

For more information, feel free to contact me anytime or contact the Landlord and Tenant Board:

Toll free 1-888-332-3234

Toronto Area: 416-645-8080

Website:  www.sjto.ca/ltb

new mortgage stress test

Are You Stressing Over The New Mortgage Stress Test 2018?

 

With interest rates on the rise, new rules have been implemented to go along with it. The new mortgage stress test was put in place on January 1, 2018.  While the mortgage stress test in October 2016 only affected those who require mortgage insurance because they were putting a down payment of 20% or less, this year’s stress test affects even those who do not need mortgage insurance.

This new test along with all the other changes implemented recently, were expected to cause a dampening effect on the real estate market. So far that seems to be true, more so in certain areas. Toronto is usually fast to rebound from any changes, but areas outside of Toronto, specifically the 905 area has felt the impact.

The intention of this test is to ensure borrowers will be able to cope with higher interest rates if they continue to rise. Borrowers will now need to prove that they are able to commit to their mortgage payments if interest rates rise above the Bank of Canada’s 5-year bench mark rate or 2 % higher than their contractual interest rate, which ever is higher. This means that most people planning to purchase a new property will need to settle for a cheaper home, (approximately 20% cheaper). In this market with homes being so expensive, most will find they cannot participate. To put this in perspective, if you qualified for $750,000 before this new mortgage stress test was implemented, 20% less than that would be $600,000 ($150,000 less than before).

These types of tests impact first-time home buyers the most as the majority do not have much room to grow in their purchasing power. This forces many of them to use alternative lenders who are not required to implement the stress test. Current home owners looking to renovate or buy another property using the equity in their property through refinancing will need to qualify according to the new rules as well. Financial institutions will not be obligated to use this test for existing borrowers looking to renew, although they can choose to do so or not.

Buyers need to make sure that they have a very good understanding of their financial obligations. Working with trusted professionals to help you understand what you can afford will help you immensely. Feel free to contact me with any further questions.

closing costs 2

Don’t Forget the Closing Costs!

Many first-time home buyers do not take into consideration all the closing costs associated with purchasing a property. The following is a brief list of the closing costs you can expect to pay. Remember that every situation is different. This list may not cover all the costs you will need to pay for your specific needs. Closing costs usually range from 1.5 – 4% of the purchase price.

  • Home Inspection: $300- $900+ (costs vary depending on the type, size and age of the property.
  • Legal Fees: $500 – $2,000+
  • Land Transfer Tax Ontario: The amount depends on the purchase price. Click here to see how much land        transfer tax you can expect to pay for your purchase price. If you are purchasing property in the city of Toronto, you will have to pay provincial and municipal land transfer tax. If you are purchasing outside of the city you only need to worry about provincial land transfer tax. *Keep in mind that first-time home buyers are eligible for a land transfer tax rebate of up to $4,000* depending on certain criteria. Click here to learn about this and other rebates available to first-time home buyers in Ontario.
  • Mortgage default insurance: (will be rolled into the mortgage). If you put a down payment of less than 20% you will be expected to buy this. Costs vary depending on the purchase price. Click here to find out how much the mortgage insurance will cost for your purchase price.
  • Title insurance: $300- $500. Not a legal requirement in Ontario but some lenders may require it.
  • Property insurance: Costs vary by policy.
  • HST for New Construction: 13% of sale price. There are rebates that buyers may be able to use for this tax.
  • Status certificate: $100 – for the purchase of condominiums only.
calculator

Rising Interest Rates, Now What!?

Can you imagine a 21 % interest rate!? I definitely do not want to, but the reality is that in 1981, interest rates were 21%! That means that even if your house cost $150-200,000 you would be paying more than $2,000.00 per month on your mortgage back then! You could buy close to a half a million dollar home last year and pay that much on your mortgage per month. With interest rates being at an all time low for years now, a lot of people have no idea what its like to have interest rates that high.

Interest rates have been slightly increasing recently. The Bank of Canada decided to raise interest rates for the first time in seven years on July 12, 2017 from 0.5% to 0.75%. With a second hike on September 6, 2017 to 1% and a third on January 17, 2018 to 1.25%. These rate increases have come as a complete shock to some. With Canadian household debt at a record high, it doesn’t take much of an increase to have a big impact. Many Canadians only have $100-$200 left after all their bills have been paid as extra cash. That’s not much room to work with, which is why so many Canadians have become very concerned with this pattern of increasing rates.

With more increases likely to come this year, what should we expect to happen? For those with a fixed mortgage rate, you will not be affected until it is time for renewal. Those who will be affected immediately will be those looking to purchase a new property and those with variable mortgage rates. For someone who bought a property for $750,000 with 20% down, a 25-year amortization period with a variable mortgage rate at 2.7%, the monthly payments would have been approximately $2,748 using the RateHub mortgage payment calculator. With a rate increase of 0.25%, the new mortgage rate at 2.95% would change the monthly payments to approximately $2,824. That is a $76 increase per month. Depending on your situation, that amount could be a lot. Many will be wondering whether they should lock in their variable rate or not. Although variable rates are usually cheaper in the long run, only those who have the extra finances available if rates increases continue should use them. First-time home buyers are usually more vulnerable to the changes that can occur with variable rates which is why they are advised to use fixed rate mortgages.

It is expected that we will go through at least one more interest rate increase this year. With all the changes being implemented recently in the real estate market, it is extremely important to keep up to date on these changes and to make sure that you understand how these changes will affect you personally. Follow me on Twitter and Facebook where I provide updates on changes with the real estate market and feel free to contact me anytime with any of your questions.

Market review jan 2018 2

January 2018 Market Review

As you have probably heard all over the news, this year has started to look very different from last year. With all the negative news out right now on the real estate market it is easy to get discouraged to participate in the market this year. Let me break down the facts and give you some insight as to what has happened in January and what will most-likely happen in the months to come.

 

What Happened Last Year!?

Last year was insane! It was a seller’s market with prices at an all-time high and interest rates at an all-time low!    (To learn more about the rising interest rates click here.) Going to pre-construction offices on sale launch dates were insane, with people screaming, pushing and shoving to be the first in. Since when has there been multiple offer situations with pre-construction condos – nowhere except Toronto that’s for sure!
In the resale market it seemed impossible to put an offer on a property without there being at least 10 other offers. It was very competitive and intense to say the least!

So Now What?

This year it feels like a 360-degree change. With interest rates rising, the new mortgage stress test and rent increase caps, hesitation has set in.

Home Prices:

Home prices have dropped a bit in January adjusting to where they should have been last year, bringing us to a more “normal” state, though this may not last long. Prices are still expected to rise again. In January 2017 the average price of homes sold for $771,000, this January the average price is $736,783.
For those of you who bought in the craziness of last year, don’t panic! As long as you did not buy the property for a quick flip you are still okay. When buying a property, you should look at the long-term benefits. The value of your property will still grow in the long-term.

Inventory Levels:

January 2017 inventory levels were at a record low. This year the inventory levels are up with around 3 months of inventory, which still indicates a seller’s market. The market shifts to a buyer’s market when there is around 5 months of inventory.

Days on Market + Multiple offers:

Re-sale homes are on the market longer with less multiple offers which is good for buyers. In January 2017 homes were on the market for an average of 19 days. This January they are on the market for 32 days. Multiple offer situations are still occurring in the re-sale condo market in Toronto (more on re-sale condo market here).

With all the changes and uncertainty in the market, it is important to look to professionals for advice. Check out my Facebook and Twitter to stay up-to-date on the real estate market. Contact me anytime with your questions, I’m here to help!

Piggy bank

First-Time Home Buyer Plans in Ontario

If you are a first time home buyer there are a couple of rebates/tax credits available to you which are important for you to know about, this way you can plan accordingly.

 

  1.  First-Time Home Buyer Tax Credit
  • This tax credit is designed to help with your closing costs
  • Currently the rebate usually comes up to $750.00 and must be claimed within a year of purchasing the property.
  • In order to receive this tax credit you must file it with your personal tax return.
  • You must meet certain criteria in order to be eligible.

2.  The Home Buyers Plan

  • This plan allows for first-time home buyers to borrow up to $25,000.00 from their RRSP(Registered Retirement Savings Plan) to use as a down payment tax free.
  • If you are buying a home with your spouse who is also a first-time home buyer you both can access $25,000.00 each being a total of $50,000.00.
  • You must pay back this loan within 15 years with your first payment made in year two. The minimum payment must be made every year after that.
  • There are certain requirements that must be met in order to qualify.

      3.  Land Transfer Tax Rebate

  • In Ontario, first-time home buyers can qualify for a rebate of up to a maximum of $4,000.00.
  • If you live in Toronto you can qualify for both the provincial land transfer tax rebate of $4,000.00 as well as the municipal land transfer tax rebate of up to a maximum of $4,475.00.
  • You must apply within 18 months from the time the property is transferred to you.

There are certain criteria you must meet in order to be eligible for either provincial or municipal LTT rebate:

  • You must be 18 year of age.
  • You must be a Canadian citizen or permanent resident of Canada
  • You must live in the home within 9 months of purchasing it.
  • You must be a first-time home buyer – cannot have owned a home or an interest in a home anywhere in the world.
  • Your spouse cannot have owned a home during the time they have been your spouse.

          If you qualify your lawyer will help you file the necessary paperwork.

first time home buyer cropped

First-Time Home Buyer Tips

Oh the excitement, nervousness and pressure that comes with being a first-time home buyer. I can remember my experience like it was yesterday. Actually ….. I can hardly remember a thing. That’s because the process felt like I was thrown into water without knowing how to swim yet. It is hectic to say the least. From searching and going through house after house, condo after condo, remembering what I saw in any of the 10 properties visited was beyond me. As you can imagine there is a lot that goes into purchasing your first property. The following are some tips to remember when starting the process.

1.       First things first: FIND A REALLY GOOD REAL ESTATE AGENT that you trust and feel comfortable working with.

Investing in real estate will be for most the biggest investment in their lifetime, so make sure that you have professionals you feel you can trust, working with you every step of the way! I can not stress this enough because a lot of the time a good agent will be able to turn a very important and stressful event into a smooth enjoyable process. Meet with your real estate sales representative and go over the process before you start so you have a good understanding of what to expect. Make sure you write down any questions that pop up in your mind because you don’t want to forget to ask them. Have a list of your must haves and things that you would love to have in your new home but are not necessities with you so that your agent can have a good understanding of what you are looking for.

2.       Get a pre-approval right away

By doing this you will have a good understanding of your budget. Bringing this to your agent right away will help them get a head start in finding you the perfect property without wasting your time showing you properties outside of your budget. The last thing you want to do is get your hopes up by walking through homes that are way too expensive.

3.       Don’t go through too many properties in one day.

Trust me, it gets confusing! After the tenth property you will be so exhausted you will hardly remember the last property you went through. It makes the decision process too difficult when there are too many properties to choose from. If you cannot narrow down the amount of properties you will go to view, then spread them out in a couple of days rather than just one. This way you can review the properties you went through without being confused. I would say maximum five to seven properties in one day.

4.       Don’t forget the closing costs!

Closing costs can range from 1.5 – 4 % of the purchase price. That can be a lot of money if you don’t expect to pay that much. ( Check out my article on closing costs to learn more here.) As a first-time home buyer you will be eligible for certain rebates which will help with the closing costs. (Check out my article on rebates for first-time home buyers if you live in Ontario, Canada here.)

5.       Repeat this over and over again in your head: Don’t give up your almost there!

Once you finish negotiating the purchase price of the property and sign the acceptant of the agreement, the real stress kicks in. If you have conditions in your agreement, you need to work on fulfilling them. You need to deal with all the closing costs, lawyers and inspectors, etc. Trust me it becomes a lot. Keep focused and before you know it you will be driving to your lawyer’s office to pick up the keys.

 

I could go on and on with information for first-time home buyers. Everyone’s situation is different which means you need specific advice tailored to your needs. If you are planning on buying your first property don’t hesitate to contact me, I would love to help!

Load More