Canadian government federal budget to help the housing industry

Anxious Canadians have waited to see how our government would tackle a monstrous world economic crisis and its spill-over effects into Canada. It was a year ago, in January 2008, that some economists optimistically announced Canada would experience some pain however we would be immune to any kind of recession here. As the mouse slept beside the elephant, the elephant did roll over and we were also smothered by its weight.

It was in the last quarter of 2008, that the story changed. The housing market continued to slow down, vehicle sales fell and Canadian exports to the USA dropped. Many Canadian companies began to see a decline in their own business and forced many to downsize. As companies began to cut back on their workforce, the overall job losses in Canada have continued to climb. It is estimated that Canada will lose approximately 170,000 jobs, this year alone.

Canada is most certainly in a recession and desperately awaits an injection of hope. In response to this economic crisis, Canadians must now place their faith in the new federal budget which was tabled in the House of Commons, by the Honourable Jim Flaherty, Minister of Finance on January 27, 2009. This very detailed 360-page report entitled: “Canada’s Economic Action Plan – Budget 2009” is available for review at the following link:

http://www.budget.gc.ca/2009/pdf/budget-planbugetaire-eng.pdf

Recognizing that the Canadian housing industry is a significant contributor to our economy and its growth and stability, a swift move to stimulate the housing industry was critical. Canada’s housing industry has experienced a drop in new building permits, housing starts, and a decline in housing sales and home prices. Along with the slow-down has come stricter lending and financing guidelines which have also resulted in many mortgage defaults and foreclosures. The Economic Action Plan promises to provide a total of $7.8 billion in tax relief and funding. The objective is to give much needed support and stimulation to this very important industry where thousands of jobs in real estate, financing, construction, trades, and housing industry suppliers are in jeopardy now.

As the Action Plan is now official, here are some highlights of the Economic Action Plan, of interest to Canadian home owners:

1. Canadians who want to make their homes more energy efficient are able to receive grants from the Federal and Provincial governments. These grants can total, up to $10,000 for energy-saving approved and compliant upgrades. The Action Plan outlines an additional $300 million that will be allocated to this program, over a 2-year period. The program is already known as the “ecoENERGY Retrofit” initiative. You may visit the government website at ecoaction.gc.ca and follow the links to the ecoENERGY Retrofit, or call 1-800-622-6232 to find out how you, as a homeowner, can apply to receive available grants through the program.

2. First time home buyers, will be able to receive a $750 tax credit to offset closing costs. The tax relief will be extended to those first time buyers who acquired a home after January 27, 2009. This is a great incentive especially considering that the Ministry of Revenue extended a refund on the Land Transfer Tax, to buyers of resale homes, back in December 2007. This allowed first-time home buyers to apply for a refund, for up to a maximum of up to $2,000 on the land transfer taxes paid. Details on this previous notice can be found at the following link: http://www.rev.gov.on.ca/english/taxes/ltt/

3. A Home Renovation Tax Credit is being introduced. For eligible home renovation expenses, performed after January 27, 2009 and before February 1, 2010, individual home owners may claim a tax credit up to a maximum of $1,350. The credit must be claimed on your 2009 income tax return and the renovation expenditure must be greater than $1,000 but not more than $10,000 to receive the maximum credit of $1,350.

4. The Canada Revenue Agency Home Buyers’ Plan (HBP) will also be revised to allow first-time home buyers an opportunity to withdraw from their Registered Retirement Savings Plan (RRSP) avoiding the requirement to pay tax on the withdrawal but at a new higher amount. The new withdrawal limit is $25,000 compared with the previous limit of $20,000. An individual, or an individual and their spouse, or common-law partner can combine their maximum limit to make a total HBP withdrawal of $25,000 each, thus bumping the maximum allowed HBP withdrawal to $50,000 for the pair.

This article was written by Elizabeth Blair, a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario. Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area.

You can contact Elizabeth directly by phone at (905) 510-5785

by email at eblair@mortgageedge.ca

or you visit her website at: http://www.missmortgage.ca

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) http://www.imba.ca

Lic # M08005880

Brokerage Lic # 10680

Head office is located at: 15 Wertheim Court, Suite 210, Richmond Hill, Ontario, Canada.

The Financing Clause

If you have been through the process of purchasing a home, you may have remembered a clause, at the back of your purchase agreement, that states something like this:

“ This offer is conditional upon the Buyer arranging financing within FIVE (5) banking days from acceptance of this Offer.”

Sometimes the financing timeframe is extended beyond five banking days, but more often, I typically see a 5-day window assigned.

The requirement to get your mortgage financing sorted out, within a set number of business days, is a very important time for the purchasing clients and for the real estate agents who represent both sides of the transaction, the buyer of the home and the seller of the home. Without financing, the purchase offer would be become null and void and the buyer’s deposit money is returned to the buyer.

As I have carefully navigated through several purchase deals and have organized financing for several clients, let me assure you that the time assigned to obtain the financing is often fully utilized and can even be a tight timeline to fulfill depending on factors which are often out of my own control. Let me take you through an outline of exactly what transpires during this very important timeframe so that you can clearly understand why the process can take this much time. I have allocated the financing process into a 10-step process.

Click here to review the 10-step process.

1. If the buyers have not yet started a mortgage financing application, they will need to make arrangements to provide full disclosure on a formal mortgage application. This would include their residential status, marital status, employment status, income, disclosure of current debts, and all other financial obligations, that the buyers may already have. The application is created and a credit report is retrieved.

2. Once the application is complete, it is then forwarded electronically, along with the attached credit report, directly to the chosen bank/lender.

3. The application is received by the lender and will be assigned to the lender’s underwriter. It is important to mention that underwriters receive many applications and so therefore the timeframe to receive attention on a submitted deal can be a day or two.

Once the underwriter has accessed the application, it is here that the application is carefully reviewed and considered. If the application has been carefully prepared, and there is no missing information, and details regarding the applicants have been carefully and properly documented, and a proper determination was made on the applicant’s ability to receive financing, the application would then receive approval by the underwriter.

4. The underwriter will prepare a mortgage commitment for the applicant(s).

5. Within the mortgage commitment, the underwriter will assign a list of conditions. These conditions will be outlined, within the mortgage commitment. A sample of these conditions might be:

a) applicants to provide proof of income;

b) applicants to provide recent pay stubs;

c) request for a full appraisal on the property;

d) confirmation of proof of downpayment…..etc.

6. Once the mortgage commitment is forwarded back to me, it is at this point that the clients are informed of the list of criteria that the lender has provided. The list of conditions would have to be carefully reviewed and as long as each item can be fulfilled, the possibility of the full approval is almost near. While it is preferable to gather documents before buyers enter into a purchase position, it is not always something the buyers fulfill up-front.

7. All documents required by the lender, per the mortgage commitment, are then forwarded to the lender for review.

8. The lender’s fulfillment administrator, will then carefully review all submitted documents.

9. If the lender’s fulfillment administrator has approved each document, then an approval on the documents would be provided.

10. It is only when the above items have been fulfilled that a decision is made to waive the financing condition, in the purchase document.

This blog was written by Elizabeth Blair, a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario. Elizabeth services mortgage clients in Mississauga and all over the Greater Toronto area.

You can contact Elizabeth directly by phone at (905) 510-5785

by email at eblair@mortgageedge.ca

or you visit her website at: http://www.missmortgage.ca

Elizabeth is licensed with the Financial Services Commission of Ontario and is also a Member of IMBA (the Independent Mortgage Brokers Association of Ontario) www.imba.ca

Lic # M08005880

Brokerage Lic # 10680

Head office is located at: 15 Wertheim Court, Suite 210, Richmond Hill, Ontario, Canada.