Posts Tagged ‘interest rate trends’
Land Transfer Tax / Property Transfer Tax in Canada
If you decide to purchase a property, in Canada, you will be required to pay a tax to the Ministry of Revenue/Finance, in the province where you are buying.
This tax is commonly referred to as the “Land Transfer Tax” or the “Property Transfer Tax”.
The tax is usually paid to the Ministry of Revenue, within the Province and the tax is calculated based on the fair market value of the property, using a certain formula. The formula used to calculate the land transfer tax portion varies greatly from province to province. I used Ontario’s formula, as an example. Here is how the Land Transfer Tax is calculated for a property purchased in Ontario:
The first $55,000 is taxed at 0.5%
The next $195,000 is taxed at 1%
The next $150,000 is taxed at 1.5%
And the remaining $250,000 is taxed at 2%.
So if you purchased a home for $300,000 in Ontario, your Land Transfer Taxes payable would be calculated as follows:
The first $55,000 is taxed at 0.5% or 0.005 * $55,000 = $275
The next $195,000 is taxed at 1% or 0.01% * $195,000 = $1,950
The next $150,000 is taxed at 1.5% or 0.015 * $50,000 = $750
And the remaining $250,000 is taxed at 2% or 0.02 * $0 = $0
The total Land Transfer tax payable is: $275 + $1,950 + $750 = $2,975
If you decide to purchase a property in Ontario, and within the City of Toronto, you will be required to pay an additional tax, called the Toronto Municipal Land Transfer Tax and this is calculated as follows:
The first $55,000 is taxed at 0.5%
The next $345,000 is taxed at 1%
And 2% on the entire portion over $400,000.
So using the above formula, a home valued at $300,000 will result in an additional tax of:
The first $55,000 is taxed at 0.5% or 0.005 * $55,000 = $275
The next $345,000 is taxed at 1% or 0.01% * $245,000 = $2,450
And 2% on the entire portion over $400,000 is taxed at 0.02 * $0 = $0
The total Toronto Municipal Land Transfer Tax payable is: $275 + $2,450 = $2,725
Land Transfer tax payable $2,975 + Toronto Municipal Land Transfer Tax payable is $2,725 = $5,700 !!
I decided to do some research to just compare all of the provinces and territories to see which provinces/territories had the highest and which provinces/territories had the lowest land transfer taxes.
The table below is based on a $300,000 purchase price and the data was collected as of July 31, 2010.
I was very surprised (well actually not) that the results show Ontario (Toronto buyers) are paying the HIGHEST land transfer taxes, compared to any other city in the country!!
| Provinces and Territories | Estimated Land Transfer Tax Payable |
| Home Purchase Price = $300,000 | |
| Ontario (city of Toronto area*) | $5,700 |
| Nova Scotia (Halifax county) | $4,500 |
| British Columbia | $4,000 |
| Manitoba | $3,150 |
| Prince Edward Island | $3,000 |
| Quebec | $3,000 |
| Ontario (not the city of Toronto) | $2,975 |
| Newfoundland | $1,250 |
| Saskatchewan | $915 |
| New Brunswick | $805 |
| Yukon | $750 |
| Northwest Territories | $490 |
| Alberta | $335 |
| Nova Scotia (not Halifax county) | $150 |
Information gathered as of July 31, 2010. This information is not guaranteed and therefore should not be relied upon without verification. E.&O.E. * Those who purchase in the City of Toronto, are also required to pay the Toronto Municipal Land Transfer Tax
This article written by Elizabeth Blair on July 31, 2010. Elizabeth is 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 any of her active websites at:
http://www.burlington-mortgage.ca
http://www.oakville-mortgage.com
http://www.streetsville-mortgage.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.
Value of Home Improvements
You may be thinking about those spring-time projects that you will need to tackle this year, like landscaping the garden, rebuilding a patio or fence, changing older windows and doors, a new roof, or even remodeling your basement, kitchen or bathroom. If you tune in to some recent popular TV programs like “Extreme Makeover – Home Edition”, you will surely catch the home makeover bug. If you live in a freehold house, you should be spending an average of 1% of your home value annually, on maintenance, just to keep it in good repair and to prevent it from declining in value, according to “Home Buying for Dummies” by Eric Tyson and Ray Brown.
Renovating a home, may also be an important consideration for you in 2010, if you are thinking of listing your home for sale. Remember that the right renovations can help you to maximize the resale value of your home. The renovation payback statistics were extracted directly from the Appraisal Institute of Canada’s website and the data is current as of January 2010:
To see the table, please click on the link:
You can check your renovation investment plans using the Appraisal Institute of Canada’s on-line tool. The name of this tool is RENOVA and it is an excellent resource for homeowners. You may visit the site by going to this website:
http://component.aicanada.ca/e/resourcecenter_renova_all.cfm
Remember that the referenced website link is only a guide, and you should always carefully consider that proper appraisal values and returns can be provided by an accredited appraiser holding a CRA or AACI designation. It is also important to mention that an appraiser will also assess other factors, about the home to complete accurate appraisal results, for example, the neighborhood, recent real estate activity, lot, location, etc.
Canada AM has been running an informative real estate market series that commenced on January 25, 2010. Featured on Tuesday’s program was Mr. Ed Saxe of Edjline Appraisal Services. Mr. Saxe is a certified Canadian Residential Appraiser as well as the President of the Ontario Association of the Appraisal Institute of Canada. Mr. Saxe discusses that the number one investment returns come from kitchen and bathroom renovations, however, as a homeowner, he advises that discretion is required when spending. Mr. Saxe advises homeowners to carefully consider just how much they are spending and where they are spending. For example, he mentions that you would not be wise to spend $50,000 on a kitchen renovation if you are living in a home that is only worth $200,000. A home renovation should be relative to the market and the neighborhood in which you live. You can view the current live video clip at the following link:
http://watch.ctv.ca/news/top-picks/added-value/#clip259603
This blog was written by Elizabeth Blair of Mortgage Edge.
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
Lic # M08005880 / Brokerage Lic # 10680
HOT News: Lenders slashing variable discounts
Hot news for those who are looking for variable rate mortgages. Here is the best deal available today:
Prime Rate plus 0.15%. —> 2.40%
Wow, this is an excellent rate and is only available for mortgage terms of less than 3 years.
You pick a renewal date between March 19, 2012 and May 31, 2012.
This blog post 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.
Mississauga – What exactly is mortgage loan insurance?
As a first time home buyer, you may have heard that you may have to pay a mortgage insurance premium.
You will have to obtain mortgage loan insurance when you purchase a home and if your downpayment is LESS than 20%. Remember that lenders do reserve the right to insure your mortgage even if your downpayment is greater than 20% and this decision is often based on the risk associated with the financing. The key players that provide mortgage insurance in Canada today are CMHC, Genworth and AIG United Guaranty. The newest insurer to join is AIG United Guaranty. There may be more mortgage insurers joining the industry who may apply to the OFSI (Office of the Superintendent of Financial Institutions) to become mortgage insurers in Canada. More competition will result in more choice and lower premium costs for Canadians who want to purchase a home.
Here is a sample breakdown to help you understand how a mortgage insurance premium is calculated for a buyer who wants to purchase a home with a 5% downpayment.
|
Price of home being purchased |
(A) $242,000 |
|
Your saved 5% downpayment |
(B) $12,100 |
|
Price less downpayment (A) – (B) = |
(C) $229,900 |
|
Insurance Premium calculated for a 5% downpayment is 2.75% of amount $229,900
Total mortgage loan insurance premium is à |
(D) $6,322.25 |
|
Total amount advanced to you by the Lender total mortgage amount (C) + (D) = |
$236,222.25 |
|
The lender who is reviewing your mortgage application will include the mortgage insurance premium (on your mortgage commitment) as part of your total mortgage loan and this is repaid over the term of your mortgage loan. You can also pay this premium up-front, on closing date, if you prefer.
|
|
It is also important to point out that the mortgage loan insurance premium (calculated in example above) is also subject to provincial sales tax and this tax amount is not included in the total loan amount therefore you would have to pay this sales tax on your closing date.
Here below is a table that gives you an idea on what the typical mortgage loan insurance premiums are, but you should go directly to the various insurer websites to check the current insurance premiums when you are ready to buy.
The mortgage loan insurance premium charges are calculated as follows:
|
Financing Needed on the Purchase |
Insurance Premium
|
|
Up to and including 65%
|
0.50 %
|
|
Up to and including 75% |
0.65 %
|
|
Up to and including 80% |
1.00 %
|
|
Up to and including 85% |
1.75 %
|
|
Up to and including 90%
|
2.00 %
|
|
Up to and including 95%
|
2.75 %
|
You may be asking, so why do I need mortgage loan insurance, is it mandatory, and who does it protect?
Why do I need mortgage loan insurance? It is the lender who requires the mortgage loan to be insured. The mortgage lender passes along the cost of insuring that mortgage, along to the consumer.
Is mortgage loan insurance mandatory? No. There are a few mortgage lenders, on the market, who may provide you with mortgage financing without mortgage loan insurance but there will most certainly be a much higher interest rate offered as well as other administrative fees that could be added to the mortgage loan amount. These other mortgage lenders can be accessed through the mortgage broker community.
Who does mortgage loan insurance protect? Mortgage loan insurance is required by the mortgage lender because it protects the lender, if, the borrower, for some reason, cannot pay their mortgage.
This blog was written by Elizabeth Blair, a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario. Elizabeth services 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: 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
Mississauga – Pay off high interest debts
If you are already a home owner, you will likely have equity in your home. Using that equity to pay off your consumer debts may be an option that will ease some of the stress of paying high interest debts over a long term. Instead of paying your credit card debts at 18 – 28% interest, you may be able to consolidate that debt into your mortgage and pay it off at less than 6%.
|
Current Debt Position |
Balance |
Monthly Payment |
|
1st Mortgage at 5.7 % (amortization 19 years) |
$220,000.00 |
$1,573.78 |
|
2nd Mortgage at 14% |
$40,000.00 |
$469.55 |
|
Car Loan and Credit Cards |
$18,857.00 |
$915.71 |
|
Total Mortgages + Car Loan + Credit Cards |
$278,857.00 |
$2,959.04 |
|
|
|
|
|
New Debt Position |
Balance |
Payment |
|
New Mortgage at 5.25% (amortization 19 years) |
*$278,857.00 |
$1,926.60 |
|
2nd Mortgage at 14% |
$0.00 |
$0.00 |
|
Car Loan and Credit Cards |
$0.00 |
$0.00 |
|
Total Mortgage + Car Loan + Credit Cards |
$278,857.00 |
$1.926.60 |
|
Total Monthly Saving: $2,959.04 – $1,926.60 = |
$1,032.44 |
|
|
*CMHC insurance fees and cancellation penalties may apply. This example is illustrative only. Interest rates are subject to change without notice. |
||
Consider above, a recent client with a mortgage balance of $220,000, a second mortgage at $40,000 and other debts totalling $18,857. By consolidating the two mortgages, the car loan and the high interest credit cards, the client was able to reduce monthly payments and save $1,032.44 per month. It is important to note that for this exercise to bear real financial fruit, this monthly saving should be applied to either an investment or as additional principal payments against the new mortgage. All too often, the additional cash flow is consumed resulting in a similar crisis a few years down the road.
Such a consolidation will not only reduce monthly debt load but will improve and protect your credit rating, a major consideration for any Canadian seeking future loans. Missed or late payments are not the only factors that can reduce your credit rating in the eyes of financial institutions, credit cards and lines of credit that are “maxed out” have the same negative impact. You should always know, validate and protect your credit rating as much as your SIN number and credit cards. When it comes time to renew your mortgage finance, you will be glad you kept your credit rating in good standing.
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: 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
Keeping up with your growing list of contacts
When I decided to move into the mortgage financing business, I realized very quickly that there were a good number of people that I would be interacting with, on a daily basis……..lenders, clients, prospects, lawyers, appraisers, lenders, property inspectors, financial planners.
It was after my first year, that my husband asked me how I was keeping track of everyone. I pulled out the piles of business cards that I had been collecting over that first year and my husband shook his head in disbelief. He told me that we were going to purchase a database management software program to help me get organized and I must admit that I was delighted to know that my own memory was going to finally get a break.
We purchased a software called ACT. I went ahead and downloaded their 30-day trial version and by the 2nd week of utilizing the software, I was hooked. It was no longer a “nice to have” but moved to a “must have”. Now in my third year of business, I know that I could not have possibly managed the contacts I have today. I now have just over 600 contacts in my database and each day I add another name or two. The software has allowed me to organize the data to retrieve customized reports and also help me to keep in touch with business partners, clients and prospects.
As my business continues to grow, I know that it was one of the best purchases I have ever made for my own business.
This blog was written by Elizabeth Blair, a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario. Elizabeth Blair 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
Using your home equity for home improvements
You may be thinking about the projects that need to be completed around your home; landscaping the garden, rebuilding a patio or fence, changing older windows and doors, a new roof, or even remodeling a basement, kitchen or bathroom. Tune in to some of the recent popular TV programs like “Extreme Makeover Home Edition” and you will surely catch the bug.
If you live in a freehold house, you should be spending an average of 1% of your home value annually on maintenance just to keep it in good repair and to prevent it from declining in value, according to “Home Buying for Dummies” by Eric Tyson and Ray Brown. Professional home improvements and renovations, according to the Appraisal Institute of Canada’s 2004 Home Renovation Survey, can provide homeowners with the following return on their investments:
|
Top Four Renovations that will give you the Highest Payback Potential
|
|
Bathroom renovations (75-100%) Kitchen renovations (75-100%) Interior painting (50-100%) Exterior painting (50-100%) |
|
Other Renovations Payback Potential
|
|
Roof shingle replacement (50-80%) Furnace/heating system (50-80%) Basement renovation (50-75%) Recreation room addition (50-75%) Installing a fireplace (50-75%) Flooring (50-75%) Constructing a garage (50-75%) Window/door replacement (50-75%) Building a deck (50-75%) Central air conditioning (25-75%) |
|
Six Renovations that will give you the Lowest Payback Potential
|
|
Landscaping (25-50%) Interlocking paving (25-50%) Building a fence (25-50%) Asphalt paving (20-50%) Adding a swimming pool (10-40%) Installing a skylight (0-25%)
|
How do you find the cash to pay for these various projects? If you are already a homeowner, you will likely have equity in your home. Equity is the present fair market value of the property less your outstanding mortgage amount. Using that equity to finance home renovations is a real option. You may borrow up to 100% of the value of your home, based on certain criteria. Contact Elizabeth to find out how you can access your home equity to pay for projects you may have this year.
This article was written by Elizabeth Blair, a Licensed Mortgage Agent with Mortgage Edge in Richmond Hill, Ontario. Elizabeth Blair 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
Watch that mortgage renewal date
Watch your mortgage renewal statement and ensure your renewal does not sneak up too quickly or you will not have time to negotiate the best deal !
Did you know that your current lender must send you a renewal statement at least 21 days before the end of your mortgage term. I suppose that lenders wait this late to send you a renewal notice so that you have little time to negotiate or shop around for a better mortgage rate. When you receive your renewal, you will probably be very surprised to see that the rates offered are not the lowest or most competitive rates in the market.
Give yourself more than 21 days to explore your mortgage renewal.
Find your mortgage contract or your latest annual mortgage statement to find out what your exact renewal date is then mark your calendar to begin looking about 120 days before your renewal date. If your bank has not given you the most competitive or lowest rate, you do have the option to leave that lender.
If you are seeing higher rates on that renewal statement, ask yourself this question……why would you spend your time badgering your bank for a better rate when you are entitled to the best rate the first time? Please call me so I can show you how you can SWITCH your mortgage to a new lender and at no cost to you.
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) http://www.imba.ca
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