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2019 Federal Budget

The Federal Government announced their official 2019 budget and affordable housing was certainly a high priority topic.

First, the Canada Mortgage and Housing Corporation (CMHC) First Time Home Buyers Incentive Plan. This could give first time homebuyers the option to share the cost of purchasing a home with CMHC. This will be done through cash/equity that would cover a portion of the purchase price. For existing homes, up to 5% of the purchase price; for newly built homes up to 10%.

In order to quality for these benefits in the 2019 Federal Budget, borrowers must not have a total household income over $120,000. Further, borrower cannot borrow more than 4 times their annual household income. So, if your total household income were $100,000, then the maximum mortgage amount you could obtain would be $400,000.

Secondly, a Home Buyers Plan RRSP Increase from $25,000 to $35,000 for an RRSP withdrawal.

For now, these had been no official statement relating to adjustments to the B-20 Stress Test. OSFI does recognize that a number of changes have occurred over the past 18 months.  The federal government’s October 2016 qualification rate changes apply to insured mortgage loans, a different group of loans from the Guideline B-20 changes, which focus on uninsured mortgage loans.

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Don’t Forget About Closing Costs

You saved enough for a down payment, found your perfect home, negotiated the purchase price and made an offer subject to financing, and have now gotten approved! You’re all set, the hard part is done, right? Not in reality, there are quite few other fees that need to be considered – closing costs.

Closing costs are often hidden and often overlooked one time expenses due on the completion date. A rule of thumb is to budget 1.5% to 4% of the purchase price to cover closing costs. However, other factor such as taxes, the type of home, or if it’s a new build can impact the amount you need to account.

Some fees that you are fairly guarantee to face:
  • Legal Fees  Your lawyer will explain all of the paperwork. They will make sure what you are signing is binding, legitimate, and all items agreed to have been met. In addition, you are liable to repay the lawyer for any searches, registrations, and incidentals due on closing day.
  • Title Insurance: Lenders will require title insurance as a condition to their mortgage. This will protect from fraud, identity theft and forgery, municipal work orders, zoning violations and other property defects.
  • Fire/Home Insurance: Lenders also require fire/home insurance in place by the time of purchase completion, which covers replacement cost of the home.
  • Adjustments: When possession takes place mid month, and the seller has already paid fees such as taxes, utilities, and strata. So, the amount you owe is based on the portion of that month you will have possession and prorated on the date of completion.
  • Property Transfer Tax: First time home buyers are exempt if purchasing property under $500,000. All home buyers are exempt if they are purchasing new property under $750,000. Property Transfer Tax is calculated as 1% on the first $200,000, 2% over $200,000 and 3% on any value over $2,000,000.
  • GST: Is not charged if someone has previously lived in the home, but charged on all new home purchases.

The list is not extensive, as each purchase has its own set of costs. As your broker, I make sure to explain each one and assure you are fiscally prepared an that you Don’t Forget About Closing Costs



Assessments and Appraisals

The value on an assessment notice may vary quite a bit from a mortgage or real estate appraisal. One reason for this may be the timing that the assessment was done. Versus, the appraisal done reflecting the most recent value based on the current market conditions.

Home Appraisal

The appraisal provides you with a document outlining an estimate of a property’s current fair market value. An appraisal and an assessment are not definitively connected, most lenders will require an up to date appraisal report. Lenders use this valuation to base the size of mortgage they are comfortable lending.

Appraisers are highly regulated and provide unbiased valuations. They take into consideration the property, home, location, conditions and many other external factors. Nearby amenities and access to public transportation. Some lenders will provide a list of approved appraisers they accept.

Often the borrower that is responsible for the cost of the appraisal, which upon completion is sent directly to the lender. The lender will confirm they are making a good investment for the value of the subject property.

Even though the borrower has paid for the appraisal, they are often not able to view the report. The appraiser will perform the report following the parameters defined by the lender. As a result, it is the choice of the lender to allow the borrower to see the report. Incidentally, the reason for this strict access on the lenders part is to avoid the borrower taking the report to multiple lenders in search of the best deal.

Some lenders may offer to refund the cost of appraisal after funding your mortgage.

Preparing for an Appraisal
  • Appraisals do include pictures of the exterior and interior of a property, so clean up and consider the curb appeal of your property.
  • Make sure to note all upgrades that you have done and the costs associated to assure they are not overlooked.

Look for any small repairs that may affect the value and make repairs before the appraisal is done. It is likely that the appraiser may over estimate the cost, thus having a significant effect on your value. These are the key differences between Assessments and Appraisals.