Category Archives: Uncategorized

New Land Transfer Tax Rebate: Thanks for nothing!

There was much hoopla in the media a couple of weeks ago when the provincial government announced it was increasing the rebate on land transfer tax for first time buyers. Almost all of the headlines read, “Provincial Government Gives $4,000 rebate of Land Transfer Tax to First Time Home Buyers”.  A lot of my fellow realtors jumped on the media bandwagon and proclaimed that this was fantastic, that this was really going to help first time buyers get into the market. Well, I believe this is just more smoke and mirrors from the provincial Liberals and it will have little if no effect on our Toronto housing market.
To be clear, there was already a $2,000 rebate available from the province for first time buyers. Finance Minister Charles Souza doubled it to $4,000 and that was the number the media picked up. The rebate only applies to the first $368,000 of the cost of a first time buyer’s home. In Toronto, with the average price of a home at about $760,000, the current provincial land transfer tax, before the rebate if you’re a first time buyer, is $11,675. Add on another $10,925 in municipal land transfer tax and it brings the total to $22,600.
The province is using an antiquated calculation system to levy land transfer taxes. Buyers pay 0.5 percent on the first $55,000 of their purchase, one per cent from $55,000 to $250,000, 1.5 per cent on anything from $250,000 to $400,000 and 2% on anything over $400,000. If the government wanted to really help home buyers, they would lower or get rid of the 2% tax on the purchase price over $400,000.
If you look at our average price of $760,000 in the city of Toronto, the tax alone on the purchase amount over $400,000 is $7,200!
Forgotten in the headlines and in most of the media coverage is the increase in land transfer tax from 2 per cent to 2.5 per cent for houses purchased for $2 million and more. So if you’re fortunate enough to be able to purchase a home for more than $2 million, you get penalized even more.
Souza says they haven’t made any adjustments to the land transfer tax calculation since 1989. Back then, $400,000 was a huge number in real estate markets. With increasing prices over the past 26 years, the provincial government is now reeling in more than $2 billion a year from land transfer taxes.
The city of Toronto jumped on the land transfer tax bandwagon in 2008. Since implementation, the city has averaged an annual revenue of about $300 million from the taxes.
With the combined revenue the city and province have been getting from the real estate market, our property taxes continue to go up every year and our services continue to decline. It makes me wonder how Toronto and Ontario would look today without the billions of dollars from real estate transfer taxes.
So Minister Souza, thanks for the additional rebate. You’ve just helped my first time buyer purchase a cheap appliance.

The New Mortgage Rules: What do they actually mean?

The federal government recently implemented new mortgage rules to reduce the risk of potential buyers losing their homes if there’s a shift in the economy or rise in interest rates.

The new rules are directed at anyone with less than a 20% down payment, where their mortgage is called high ratio, and must be insured versus conventional financing. Leading up to the October 17th deadline, we saw a flurry of activity from mostly first time buyers, as they scrambled to get into the market before the new rules took effect. Here’s a summary of the new rules and how they affect a buyer and the market, courtesy of my in-office Dominion Lending Centres representative.
How does this affect a home buyer with less than 20% down payment? 
 
The biggest effect will be on the amount that the home buyer will be able to qualify for. Previously, qualification was based on the individual lender’s rate, but now the buyer must qualify at the Bank of Canada (BOC) rate. For example, the buyer was previously qualified on the banking institution’s posted five year fixed rate of let’s say 2.4%. Now they must go through what they’re calling a “stress test”, which means they qualify for the mortgage at the BOC’s posted rate, which is currently 4.46%, even though the mortgage will actually be at the lower rate.
How does this affect a home buyer for purchase price of a home?
 
Before October 17th, if buyers with a combined annual income of $100,000 had the minimum down payment of 5%, they would have qualified for a home purchase of approximately $560,000. With the new rules, they now only qualify for a purchase price of $445,000.
 
Do these rules affect home buyers with a down payment of 20% or more?
 
Not at this time. However, National Bank is now using the BOC stress test for all buyers, regardless of how much they have as a down payment. There are fears the other major lending institutions will follow.
My mortgage is coming up for renewal. Will I still be able to refinance my home?
 
Yes! You will still be able to refinance your home up to 80% of the value of your property. Specifics may differ from lender to lender.
Will these new rules lead to a decline in home sales?
 
It’s still a bit early to determine. However, these rules are aimed at the entry level buyer and the high sales we’ve seen in this segment have helped fuel the middle and upper end of the real estate market.
If you have any further questions about these new mortgage rules, or the real estate market in general, please call or email me.
Des

Changes to 30-year Amortization – what could it mean for home buyers?

By Farhaneh Haque, Regional Director – TD Canada Trust

Since 2008, there have been a number of tightening measure in Canadian Lending Rules, and amidst talks of further lending changes.  So, what could the possible 30 year amortization change entail? It could mean:

 

Elimination of the 30-year amortization altogether;

 

Allowing a 30-year amortization where borrowers qualify fully on a 25-year amortization; or

 

Limiting the 30-year amortization to borrowers meeting certain qualifying criteria. For example, higher credit scores, larger down payments or lower debt ratio limits.

 

While there is no clear direction on what is proposed, or whether this will move forward, let’s turn our attention on what potential home buyers should consider as they prepare for home ownership.

 

A shortened amortization of 25 years (from 30 years) will impact potential buyers’ affordability in the same way as roughly a 0.75% increase in mortgage interest rates. Let’s compare:

From a qualifying lens; when qualifying for a mortgage, the monthly mortgage payment, in large part, determines the purchase price that the homebuyer may qualify for. Since the amortization period contributes to the monthly payment calculation, a shortened amortization translates to an approximate 7% decrease in a potential buyer’s buying capacity.

Consider that owning a home means payments in addition to monthly mortgage payments – property tax, home insurance, utilities etc. – reigning in the borrower capacity through the shortened amortization, especially for first time buyers, may make homeownership debt more manageable and may also require new buyers to be more realistic about their borrowing capacity.

To learn more contact your local TD Mobile Mortgage Specialist.

 

Tips on How to Tend Your Credit

Whether you’re applying for a loan to buy a car, a mortgage or applying to rent, your borrowing history is crucial.  Here’s an article written by my regional director at TD that I’m sure you’ll find useful.

 

By Farhaneh Haque, Regional Director – TD Canada Trust

For each article, I look for inspiration in what’s going on in the mortgage or real estate industry, to share some insights for the readers. This month, I wasn’t so much inspired rather distressed about something that happened, and so here I am writing about it!

Last week, I opened up my cell phone bill and was surprised to see that my balance was 3 times my normal monthly bill. At first, I thought perhaps I had forgot to pay last month’s bill – very unlike me – but about 2.5 hours and 5 different customer service representatives later, I was informed that someone had used my “excellent account repayment history” to obtain a free hardware upgrade to a smart phone and renewed me into a 3 year contract!

Well as the fraud analyst reversed everything and reset my account, he said to me “Farhaneh, I recommend that you contact Equifax to confirm that your good credit record hasn’t been used to obtain fraudulent credit elsewhere.”

Sound Advice, I thought myself and an appropriate topic for my next issue.

A survey conducted by the Financial Consumer Agency of Canada (FCAC) found that most people (90%) don’t know that you can get your own credit bureau report for free simply by requesting it by mail.¹ Sixty-two percent do not know that you can dispute an entry in your credit report, even though it’s as easy as writing a letter to the bureau.

Who compiles your credit history?

In Canada, credit information is collected by two major credit-reporting agencies, Equifax Canada and TransUnion Canada. They record how you have used credit and whether you pay your loans and bills on time, as reported by your lenders. They may share that information with others only in certain circumstances, one of which is when you have provided your consent, such as when you apply for a loan.

Finding out what’s in your report is easy. You can pay a small fee to request a copy of your credit record online – I paid $15 – or obtain it for free if you send a request by mail or fax. It’s a good idea to check your record once a year to ensure that it’s accurate.

What’s in your report?

Your credit report contains relevant details about your personal and financial situation, such as:

Basic personal history including your social insurance number

Any credit you have such as credit cards, loans or mortgages

Public records such as bankruptcy

Whether a debt was referred to a collection agency

Any inquiries made by you or other institutions about your credit

Mistakes can happen and you have the right to dispute any inaccurate information that may appear on your credit report.

You can find detailed guidance on how to correct an error through the FAQs and resources available on the Financial Consumer Agency of Canada website.

Why it’s important

The information in your credit history is the basis of your credit score, a measure that reflects your current financial situation and your ability to repay a loan.

Lenders take this score into account when you apply for a loan, mortgage or credit.

How to maintain a passing grade

To maintain a good credit rating, or improve one that’s not as good, the following dos and don’ts may help.

 

Do:

Pay your bills on time

Lower your debt ratio — the amount you owe relative to the amount you earn

Keep your credit balances well below their authorized limits

Close or cancel any credit accounts you don’t really need

Don’t:

Constantly max out your credit card limit

Be late with payments

Have your account sent to a collection agency

gnore any debt issues

TIP:

The Financial Consumer Agency of Canada (FCAC) recommends that you not accept or use any form of credit before being comfortable with its terms and conditions, to avoid potential misunderstandings between you and the credit issuer that may end up in negative consequences.

 

Where to get help

 

To obtain your personal credit rating, contact Equifax or TransUnion. For more guidance, read the FCAC publication Understanding Your Credit Report and Credit Score.

How much can I afford?

The TD Canada Trust Mortgage Calculator1

This calculator can show you1

  • How much of a home you may be able to afford
  • The amount of mortgage you may qualify for
  • What mortgage payments to expect based on the results
  • Some strategies on how to save money over the life of your mortgage

You can explore multiple scenarios to help you take a comfortable first step toward home ownership. And, you will be able to print your results when you’re done.

To get started, simply enter your financial details in the fields on the right.
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Malik’s Corner: What’s on my clients minds in 2013? Gold, Interest rates, US markets, real estate and more

 

Good afternoon,

Since the last time I wrote, gold has dropped like a stone while the US stock market and the US dollar have gained nicely. The Canadian stock exchange is under pressure as it is commodity strong and the Canadian dollar is down to around 96 cents. Most Canadian money managers are allowed to hold a percentage in global stocks and they have enjoyed the uptick. As an advisor, it makes more sense for us to have fund managers with global experience and with the leeway to add global stocks to the portfolio. This is one of the major advantages of mutual funds…..you get diversification.

 

Here are some of the more frequently asked questions of me from clients over the past few months:  

 Gold: is it a good time to buy some as the price had dropped from a high of $1800 to $1400?

 There is instability in the world markets and for that reason, holding some gold in either bullion or stock form makes good diversification sense. However, with the US economy showing very good signs of turning around, money is leaving gold for the US dollar and the US stock market. It may be sometime before gold picks up steam. Not more than 3 to 5% in gold, if you are keen to hold it.

 

  1. Real Estate

 

Real estate in Canada is cooling….prices have tapered off but not come down as much. The experts are calling for a flat market for the time being. If you are buying real estate for investment, you may want to hold off.  Buy a real estate investment trust for real estate exposure or a REIT ETF.

 

  1. US market is up 16% in 2013…what next?

 Two schools of thought where one believes that the market is going to correct downwards and the other it is going up to a 20% plus return. Let us not get greedy here. Good diversification in the portfolio is important. My portfolios are approx 40% US, balance in Canada and global markets. I like the US going forward. Some of the major blue chips are reinventing themselves and increasing global exposure to their goods. They are closing plants in developed markets and opening them in the BRIC nations. This will help them access some of the fastest growing consumer society in recent history. Ford recently announced closing plants in Australia to open one in China. Other companies are following suit. Investing in these companies gives you indirect exposure to emerging markets and the growth will be seen in the US stock markets.

 

  1. Interest rates.

 

Quite clear that the Bank of Canada wants to keep the interest rates low and this has been in the press recently. The question is how long can they keep the interest rates at such low rates? They will climb and it is a good idea to be paying off debt in such low interest environment. It will not stay low forever and can be quite painful at rates higher than where they are. Here is an interesting way to play the low interest rates. Use non-RSP equity holdings to pay off mortgage and non-deductible debt. Buy back the same holdings by borrowing the funds at these low interest rates. You have just converted bad debt to good debt, and have a nice tax deduction for the interest charged. The moment interest rates start to rise, sell and pay off the loan.  This is a good strategy for executives of public traded companies.  Call me to discuss.

 

  1. Where should I invest first…..RESP, RSP or TFSA or all three?

 

 RESP should be first because of the 20% from the government, RSP because of the tax deferral and then TFSA as it allows you to build a tax-free income stream. If you have low income in any one year, then carry forward the RSP room and add to your TFSA instead. In future years, you can use funds from your TFSA to contribute to your RSP. TFSA room opens up when you take money from it.

 

  1. You have toned down on emerging markets and especially India….what are your current opinions?

 

I like the emerging markets for their rising middle class and that is it. The stock markets of these countries are quite young and I am not sure about Government due diligence over their operations. The extreme volatility in these markets is too much for me and would rather play these markets through blue chip global corporations.

 

  1. How much insurance should I carry? In addition, should I be concerned about Critical Illness coverage, disability insurance?

 

Insurance is the first thing I look at when taking on clients and the question is what happens if, the key income earner is hit by the bus. Who looks after the kids, the debt etc etc. Same thing with Critical Illness and disability. CI is a personal choice. Disability for a self-employed person becomes a bit more critical and should be looked at as being quite important. Give me a call or drop an email and we can discuss if you are concerned. This is an important segment of a financial plan.

 

 

Enjoy the summer, be safe and thanks again for being clients. Thank you.

 

And lets stay in touch.

 

Cheers,

 

Prem  

 

(Please feel free to share this Malik’s Corner with friends, associates and family.)

 

Disclaimer

 

The information contained herein are obtained from sources believed to be reliable, however, its accuracy or completeness is not guaranteed and Queensbury Securities assumes no responsibility or liability. Neither the information nor any opinion expressed constitutes a solicitation by us of the purchase or sale of any securities or commodities. These comments and opinions are not necessarily the opinions of Queensbury Securities Inc. Securities mentioned may not suit all types of investors. Before making any investment decision, contact your investment advisor to discuss your investment needs.

 

 

 

 

 

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