4 Nov

Condo in Crisis: What to Do if Your New Purchase Faces Receivership

Posted by: Michael Greene

Is Your Condo Project Facing Receivership?

Picture this: You’ve been excitedly waiting for your new condominium to be completed in just a few months. All day, you’ve been imagining how you’ll decorate it, learning about local shops, and planning your housewarming party. Then, suddenly, the builder stops sending updates. You turn on the news and discover that your condo project has gone into receivership.

This exact situation happened to one of my clients, someone I had been working with on other pre-construction purchases. Unfortunately, it’s becoming an all-too-common story as real estate receiverships increase across Canada.

But before you panic, let’s break down what this means for you.

Understanding Receivership: What It Means for Your New Condo

Receivership occurs when a secured creditor appoints a receiver to take control of a property, typically to sell it and recover the funds owed by the developer. A receiver is usually a property expert who steps in to manage the project’s finances and steer it back on track.

Think of receivership as a financial lifeline for a troubled project. If a developer can’t meet its debt obligations, a court appoints a receiver to take control of the situation. Receivership is serious and not every developer qualifies for it, but when granted, the receiver analyzes the project’s finances to determine whether it’s feasible to complete it. If the costs are too high, drastic measures may follow.

Types of Receivership

There are two types of receivers:

Court-appointed receiver: A court officer who must report to the court throughout the process. The receiver’s fees usually take 25% of the collected funds, plus expenses, paid by the judgment debtor.
Privately-appointed receiver: Appointed by a secured creditor, this type focuses on recovering debts.

One Example:

Last year, the Iconic “The One” skyscraper project at Yonge and Bloor in Toronto entered receivership due to $1.6 billion in unpaid debt. A court-appointed receiver took control after the developers defaulted. Today, construction continues, with an expected completion date in March 2025.

What Happens When Your Condo Goes Into Receivership?

When a condo project enters receivership, the future of pre-sale contracts depends on the receiver’s decision. They can either continue or cancel the project:

Continue: If the receiver chooses to proceed, existing agreements remain in effect.
Cancel: If the project isn’t financially viable, the agreements may be terminated. In this case, buyers might claim their deposits and potentially take legal action, but recovering funds can be difficult given the developer’s insolvency.

A receiver, not the developer, has the authority to sell the project to another builder or take control of the assets. They may also seek Debtor-in-Possession (DIP) financing, allowing the developer to remain in control while restructuring to complete the project.

DIP loans, though regulated and costly, give developers the funds and time to finish a project in receivership. These loans are more likely to be approved for developments in high-demand areas, as stopping construction in such locations reflects poorly on local governments.

Protecting Your Financial Interests

When you enter a new construction property agreement and provide a deposit, programs like Tarion in Ontario offer protection. According to Tarion’s website, protection applies if:

The builder goes bankrupt.
The builder fundamentally breaches the purchase agreement.
You have a statutory right to treat the agreement as terminated.

For freehold homes purchased after January 1, 2018, Tarion covers deposits up to $50,000 or 10% of the purchase price (to a maximum of $100,000 for homes over $600,000). Condo buyers enjoy extra protection under the Condominium Act, which mandates that developers hold deposits in trust.

Developers must also provide a Delayed Occupancy Warranty, ensuring your condo is ready for occupancy by a specified date. If the developer misses this deadline due to construction delays or receivership, they must compensate you. A PDF copy of the warranty can be downloaded here for your reference.

Steps to Take When Your Condominium Goes Into Receivership

If your condo goes into receivership, here are steps to safeguard your investment:

Contact the Receiver
Reach out to the court-appointed receiver to get updates on the project. They can inform you about the next steps.
Review Your Purchase Agreement
Carefully examine your contract for any clauses about delays, receivership, or deposit protection. This helps clarify your rights.
Check for Deposit Protection
Verify whether your deposit is covered by programs like Tarion, and file a claim if necessary.
Consult Your Real Estate Lawyer
A lawyer specializing in real estate or condominium law can guide you through your legal options, including deposit recovery or claims against the developer.
Stay Informed
Keep up with updates from the receiver. They may attempt to sell the project to another builder or secure additional financing to complete it.
Prepare for Delays
Be ready for significant delays or, in the worst case, the cancellation of the project.
Understand the Possible Outcomes
If the project continues, expect delays. If it is canceled, you may be eligible for a refund, though recovery amounts will vary based on the developer’s financial state.
Consider Legal Action for Damages
In rare cases, buyers may pursue additional damages beyond their deposits. However, this depends on the developer’s solvency and the available assets.

To Sum It All Up

Receivership is often a temporary measure, aimed at getting the project back on track. While dealing with a property receivership can be overwhelming, staying informed, seeking legal advice, and understanding your rights can help protect your investment. Whether the project moves forward or gets canceled, having a clear plan will ensure you’re ready for whatever comes next.

If your condo project is in receivership or you have questions about real estate investments, reach out to Mortgage With Mike today. Our team is here to help you through every step of the process, protecting your financial interests. Schedule your free, no-obligation 15-minute consultation now!

3 Nov

Boost Your Income and Property Value with The Secondary Suite Refinance Program

Refinancing

Posted by: Michael Greene

Ontario’s New Secondary Suite Refinance Program is designed to expand the availability of affordable housing by offering financial aid to homeowners interested in adding secondary suites. These suites, commonly referred to as accessory dwelling units (ADUs), can be a great asset to your property, providing extra income while helping address the housing shortage.

Program Highlights

The Secondary Suite Refinance Program provides several important benefits to qualifying homeowners:

Up to $40,000 in forgivable loans, covering 50% of the costs to build new secondary suites.
Homeowners can now refinance up to 90% of their home’s value, including the potential value of the secondary suite they plan to build. This allows them to borrow a larger sum of money by tapping into the increased value of their property.
The refinanced mortgage can be amortized over a period of up to 30 years, making monthly payments more manageable for homeowners. This longer amortization period spreads the loan out over a longer time, reducing financial strain.
To ensure that homeowners across all regions can take advantage of the new regulations, the government has increased the mortgage insurance limit to $2 million. This applies to those who are refinancing specifically to build a secondary suite, providing flexibility for homeowners in higher-priced housing markets.
Supports the creation of basement apartments, laneway houses, and garden suites.
Encourages affordable rentals by requiring units to be rented below market rates.
Promotes accessible housing by providing support for building suites that cater to seniors and people with disabilities.

Who Can Apply

To be eligible for the Secondary Suite Incentive Program, homeowners must meet the following conditions:

Must be the registered owner and occupy the property as their main residence.
Have a combined annual income of less than $209,420 for all property owners.
The property’s assessed value must be below the homeowner grant threshold (set at $2.15 million in 2024).
Acquire all necessary building permits from local authorities before starting construction.
Rent out the unit at a rate below the market average for a minimum of five years to receive loan forgiveness.

How to Apply

Follow these steps to successfully apply for the Secondary Suite Incentive Program:

Assess Your Property: Evaluate the potential for adding a secondary suite and consult local zoning regulations to ensure compliance.
Secure Funding: Explore financing options to ensure you can cover your portion of the construction costs.
Obtain Permits: Submit the necessary permit applications to your local municipality, ensuring your plans meet all zoning and building code requirements.
Submit Your Application: Complete the program’s application form, providing all required documents, including income proof, property ownership details, and building permits.
Build the Suite: Once your application is approved, begin construction. Ensure all work is inspected and meets required standards.
Rent the Unit: Upon completion, rent the suite at the below-market rate for at least five years to qualify for loan forgiveness.

What is a secondary suite?

A secondary suite is a self-contained living space located within a single-family home or on the same property. It typically includes its own separate entrance, kitchen, bathroom, and living areas, making it independent from the main household. These suites are often referred to as basement apartments, in-law suites, or granny flats.

Secondary suites can be created by converting existing spaces, such as basements, garages, or attics, or by building a new structure like a coach house or laneway home on the property. They provide additional housing units within a residential area and can be rented out to generate extra income or used to accommodate family members, such as elderly parents or adult children.

In many cities, the construction of secondary suites is regulated by local bylaws, which specify requirements such as minimum size, zoning, and safety standards. These units are increasingly popular as a solution to housing shortages and as a way for homeowners to make more efficient use of their properties.

Primary unit and secondary unit examples.

Why Build a Secondary Suite?

There are several benefits to adding a secondary suite to your property:

Extra Income: Generate rental income to help with your mortgage or other expenses.
Boost Property Value: Increase your home’s value by adding a rentable unit.
Contribute to Affordable Housing: Help provide affordable housing options within your community.
Housing Flexibility: Use the unit to accommodate family members, like elderly parents or adult children, while maintaining privacy.

Questions to ask when Considering Building a Rental Suite?

Is there demand for rental housing in your neighborhood?

Have you researched how much it will cost to build your suite?

Have you spoken to your lender about financing options?

Can you afford to build a suite, even if there are delays or additional costs?

Can you meet all zoning requirements?

Can you meet all building code requirements?

Do you want to be a landlord and rent the suite out long-term?

Can you afford the mortgage or loan payments if the suite is not rented for a few months?

Conclusion

The Secondary Suite Incentive Program in Ontario provides a valuable opportunity for homeowners to improve their financial situation while making a positive impact on the community. By understanding the program’s requirements and following the application steps, you can successfully develop a secondary suite that benefits both your family and the wider community.

Thinking of taking on a project like this?

Partnering with a knowledgeable mortgage broker like Mortgage With Mike will empower you to make informed decisions. Your mortgage is a fundamental aspect of your financial future, and it’s essential to ensure it’s built on solid ground.

Get in touch with us today to discover how we can assist you on your journey to homeownership.

18 Oct

Federal Housing Measures Support Secondary Suites, Vacant Land Taxes, and More Homes on Public Lands

Easier Refinancing for Secondary Suites

If you’ve ever thought about turning that empty basement or unused garage into a rental suite, this one’s for you. One of the most exciting changes is the recent municipal zoning reform that makes it easier to refinance your mortgage to fund these kinds of projects. This is made possible through Housing Accelerator Fund agreements.

Here’s the deal: you can now access up to 90% of your home’s value, including the value of that future rental suite, through refinancing. This means more cash in hand to get your renovations going!

On top of that, you can now stretch the loan out over 30 years. Longer amortization = lower monthly payments, which is always a win. Oh, and if you’re worried about mortgage insurance limits holding you back, don’t be. The government has bumped the mortgage insurance limit up to $2 million, so homeowners in pricier markets won’t get left behind.

As Deputy Prime Minister Chrystia Freeland said, “We’ve got to use every tool in the box to make housing more affordable for Canadians.” And this is definitely one of those tools!

Tax on Vacant Land to Spur Development

Now, onto the vacant land tax. If you’re sitting on some unused land, the government is about to give you a nudge to do something with it. The idea here is simple: introduce a tax on vacant land to push landowners into developing residential properties, instead of just letting the land sit there.

The feds are working with local governments to figure out how this could work in different areas. So, don’t be surprised if you start hearing more about it from your local city hall.

To take advantage, Canadians can participate in consultations with municipalities and the federal government to help shape the implementation of vacant land taxes, ensuring fair regulations while incentivizing new development in local communities.

Repurposing Federal Properties for Housing

Last but not least, the government is making more federal properties available for housing development. We’re talking about 14 new properties, from places like Ottawa to Cape Breton. These properties will join the Canada Public Land Bank, which already has 70 spots ready to be turned into homes.

Public Services and Procurement Minister Jean-Yves Duclos summed it up nicely: “We’re unlocking public lands for housing at a pace we haven’t seen in generations.” Translation: they’re serious about tackling the housing crisis and creating more affordable housing options across the country.

In conclusion, the federal government’s new housing measures represent a significant step towards addressing Canada’s housing challenges. By making it easier for homeowners to build secondary suites, taxing vacant land to encourage development, and unlocking federal properties for housing, these initiatives aim to increase housing supply, improve affordability, and create stronger communities. For homeowners, these changes provide new opportunities to maximize their property’s potential, generate additional income, and contribute to the solution for Canada’s housing crisis. Together, these measures reflect a proactive approach to making housing more accessible and affordable for Canadians, now and in the future.

As we continue to navigate this unpredictable journey of interest rates, our commitment to your financial success remains steadfast. Whether rates rise or fall, the Bank of Canada rate cut impact on mortgages will influence your decisions. Partnering with a knowledgeable mortgage broker like Mortgage With Mike will empower you to make informed decisions in this evolving landscape. Your mortgage is a fundamental aspect of your financial future, and it’s essential to ensure it’s built on solid ground.

Get in touch with us today to discover how we can assist you on your journey to homeownership.

1 Aug

New 30-Year Amortization Incentive for First-Time Home Buyers in Canada

General

Posted by: Michael Greene

Advocates are commending Ottawa’s Department of Finance decision to extend the amortization period on insured mortgages for some homebuyers, while suggesting that expanding this policy to all Canadians would enhance home ownership affordability.

During a speech in Toronto on Thursday, Finance Minister Chrystia Freeland revealed that the federal government will now permit a new 30-year amortization incentive for first-time home buyers of newly built homes. This policy will be effective from August 1.

Presently, if a down payment is less than 20% of the home’s price, the maximum amortization period allowed is 25 years.

Freeland acknowledged the housing challenges faced by young Canadians, stating, “With a lack of housing options and soaring rent and home prices, younger Canadians feel disadvantaged. Extending amortization will make monthly mortgage payments more manageable for those aspiring to own their first home.”

Lauren van den Berg, CEO of Mortgage Professionals Canada, praised the initiative as a positive development and emphasized that extending the amortization period will create more opportunities for first-time homebuyers and stimulate economic recovery. However, she argued for a broader application of the policy to include all homebuyers, not just those purchasing new builds.

Van den Berg pointed out that in regions like Greater Vancouver and Greater Toronto, where vertical construction is more common, new builds are less prevalent, thus necessitating a broader policy application.

Victor Tran, a mortgage and real estate specialist at Ratesdotca, expressed concerns about the limited impact of the policy due to its specific eligibility criteria, noting that insured mortgages for new builds are uncommon. Tran also highlighted that many properties in high-cost areas such as Vancouver and Toronto exceed $1 million, leading buyers to opt for uninsured mortgages.

Conversely, Kevin Lee, CEO of the Canadian Home Builders’ Association, deemed the announcement transformative, arguing that longer amortization periods would aid affordability and encourage more construction. Lee noted this policy could also assist in meeting the government’s objective of building 5.8 million new homes in the next decade and alleviate the rental market by transitioning renters into homeowners.

In addition to the amortization changes, Freeland announced an increase in the amount first-time homebuyers can withdraw from their RRSPs, raising it from $35,000 to $60,000, effective April 16, coinciding with the federal budget release. This change reflects the growing size of down payments and the longer time required to save for them. Individuals who have made or will make withdrawals between January 1, 2022, and December 31, 2025, will now have up to five years to begin repayment, instead of two.

These amendments are designed to complement the First Home Savings Account, introduced last year, which allows prospective homebuyers to save up to $8,000 annually with a lifetime limit of $40,000. To date, over 750,000 Canadians have opened an FHSA since it became available last year.

Ottawa also announced modifications to the Canadian Mortgage Charter, including provisions for permanent amortization relief for eligible homeowners, allowing them to reduce their monthly mortgage payments to a more affordable level indefinitely.

Get in touch with us today to discover how we can assist you on your journey to homeownership.

20 Jun

Unlock Savings: Top Refinance Options for Homeowners in 2024

Refinancing

Posted by: Michael Greene

Unlock Savings: Top refinance options for homeowners to consider in 2024. Hey there, fellow homeowners! If you’re reading this, you’re probably wondering if refinancing your mortgage is the way to go. Spoiler alert: it just might be! As a friendly mortgage broker who’s seen it all, I’m here to guide you through the maze of refinancing options. According to reports Mortgage delinquency rates in Ontario exceed $1B. Should we be concerned? This is a sign the more Canadian households than ever before, need help to navigate this interest rate environment and making an informed decisions that will save them money. Believe me, you don’t want to be one of those Canadians leaving money on the table by not negotiating their mortgage renewal rates

So, let’s dive in and find the perfect solution for you. And don’t worry, I promise not to bore you with too much mortgage jargon—unless you’re into that sort of thing!

1. Rate-and-Term Refinance

Think of this as the “classic combo” of refinancing. You’re simply swapping out your current mortgage for a new one with a different interest rate or term. It’s like upgrading your old phone without changing your number—same house, just better payments.

Why You’ll Love It:

Potentially lower monthly payments (more money for that Tim Hortons run!).
Or, you could speed up your loan payoff—because who wants a mortgage forever?

Why You Might Not:

There are some closing costs, kind of like paying for a nice meal out. However, some banks do give you a credit of up to $3,000 to go towards your total costs.
You’ll need a decent credit score—time to pay those credit card bills!

Perfect For: Homeowners looking to save on interest or those eager to get rid of their current bank mortgage faster because of a not so favourable renewal rate coming up. Who doesn’t like the sound of that?

2. Equity Refinance Option

Need to consolidate your high interest credit cards or some extra cash for that kitchen reno or maybe a dream vacation? With an equity refi, you borrow more than you owe and pocket the difference. Think of it as turning your house into an ATM—but one that actually improves your financial picture (unlike the usual ATMs that just eat your card).

Why You’ll Love It:

You get a chunk of cash for whatever you need—renovations, debt consolidation, tuition, or maybe that classic car you’ve been eyeing.
It’s often at a lower interest rate than your average credit card or personal loan. Who needs high-interest debt, anyway?

Why You Might Not:

It increases your mortgage balance and monthly payments. Remember, you’ll have to pay it back!
It taps into your home’s equity. So if the housing market takes a dip, you might owe more than your home’s worth. Yikes!

Perfect For: Homeowners with significant equity who need a hefty amount of cash for big expenses. Just remember, this isn’t Monopoly money—spend wisely!

3. Home Equity Line of Credit (HELOC)

Imagine having a financial safety net that you can dip into whenever you need. A HELOC lets you borrow against your home’s equity up to a certain limit, much like a credit card. The best part? You only pay interest on what you borrow, not the whole shebang.

Why You’ll Love It:

Flexibility to borrow only what you need, when you need it. It’s like having a secret stash of cash for emergencies or spur-of-the-moment splurges.
Lower interest rates compared to personal loans or credit cards. Those home projects just got a little cheaper!

Why You Might Not:

Variable interest rates mean your payments can go up and down like a roller coaster. Hold on tight!
Your home is on the line. If you can’t repay, you risk foreclosure. Not exactly a pleasant thought.

Perfect For: Homeowners who want access to funds for ongoing expenses like home improvements or unexpected life events. It’s like having a rainy-day fund, but better.

4. Interest-Only Refinance

Looking for a way to lower your monthly payments temporarily? An interest-only refinance lets you pay just the interest on your mortgage for a set period. It’s a bit like taking a financial breather—giving you some extra cash flow when you need it most.

Why You’ll Love It:

Lower monthly payments during the interest-only period mean more money in your pocket for the fun stuff.
Great for managing finances during tough times or if your income is temporarily lower.

Why You Might Not:

You’re not reducing your loan’s principal, so you’re not making a dent in the overall balance.
Payments will jump once the interest-only period ends. Be prepared for that!

Perfect For: Homeowners who need temporary payment relief and expect their financial situation to improve in the future. Just don’t forget that the mortgage principal isn’t going anywhere!

5. Reverse Mortgage Refinance

For my seasoned homeowners aged 55 and up, this one’s for you. A reverse mortgage lets you convert your home’s equity into tax-free cash without selling or moving. It’s like turning your home into a pension plan!

Why You’ll Love It:

No monthly mortgage payments. You heard that right—you stay in your home and get paid.
Provides a steady income stream during retirement, making those golden years a little shinier.

Why You Might Not:

It reduces the equity in your home, which might affect how much you leave to your heirs. Sorry, kids!
Fees and interest can pile up over time, which can shrink your nest egg.

Perfect For: Senior homeowners looking to supplement their retirement income while staying put. It’s a great way to enjoy the fruits of your lifelong investment—your home.

6. Mortgage Switch Refinance

Feel like your current mortgage is more of a bad romance than a perfect match? Maybe it’s time for a mortgage switch. This option lets you switch to a new lender with better terms or lower interest rates. It’s like breaking up with your old mortgage for a better one. No hard feelings!

Why You’ll Love It:

You might snag a lower interest rate, reducing those monthly payments. More savings, less stress!
Some lenders offer cash incentives or cover the switching costs. Free money? Yes, please!

Why You Might Not:

There could be prepayment penalties for ditching your current lender. Always read the fine print.
You’ll need to qualify for the new mortgage, so make sure your credit and finances are in good shape.

Perfect For: Homeowners who aren’t happy with their current mortgage terms and want to shop around for a better deal. Think of it as trading up to a better mortgage relationship.

Things to Consider Before Refinancing

Before jumping into any refinancing options, homeowners keep these in mind:

Closing Costs: Just like moving, refinancing can come with costs—appraisals, legal fees, and sometimes penalties for breaking your current mortgage. Make sure the benefits outweigh these expenses.
Credit Score: A good credit score is your ticket to better rates. Check your score and clean up any issues before applying. Pay those bills on time, folks!
Financial Goals: Your refinancing choice should align with your long-term goals. Want lower payments now or to pay off your mortgage sooner? Choose wisely based on your life plans.

Conclusion on Refinance Options

With income challenges and home values being the leading factors to getting approved, any good news are welcomed. Especially if values are starting to stack up in your home Bank of Canada officials worry that rate cuts may overheat the housing market this means more equity for you to work with. Also, keep in mind that your income will affect your qualifications, in a previous post in break all that down. Check it out here Mortgage Debt Ratios: Basics of GDS & TDS

Refinancing your mortgage in 2024 can be a game-changer for your finances, and by utilizing some of these refinance options homeowners can get ahead. Whether you’re looking to lower your interest rate, access your home’s equity, or adjust your payment structure, there’s an option that’s right for you. Take the time to explore these refinance options and choose the one that best fits your needs and future goals.

Need help figuring out which refinance options suits you best? Reach out to me today, and we’ll find the perfect refinance solution for your situation. Let’s make 2024 the year of smart financial moves and a mortgage that works for you!

Get in touch with us today to get started.

7 Dec

Top 5 Most Affordable Housing Market in Ontario

First-Time Homebuyers

Posted by: Michael Greene

When it comes to affordable housing there is only one questin that comes to mind. Where in Ontario can you currently get the most bang for your buck?

As the Ontario real estate market bounces back from the coronavirus pandemic, many homebuyers may think they may have missed out on the brief opportunity at the height of the public health crisis. In March and April, many of the province’s housing markets experienced modest price declines, offering discounts on detached, semi-detached, townhomes and condominiums.

Prices and sales quickly increased again through the summer in what proved to be a delayed spring market. However, that does not mean all of Ontario’s housing markets are out of range for first-time buyers, families, and newcomers when immigration to Canada eventually resumes its typical pace. With a little bit of due diligence, you can find a region or a city in the province that can present you with the property of your dreams.

DETERMINING AN AFFORDABLE HOUSING MARKET

First, it is important to understand what determines an affordable market. Contrary to popular belief, it goes beyond the average home price. An affordable market takes into account the level of income necessary to afford the purchase of a house, as well as the current home price. For example, the median income in London,ON is approximately $54,000 and the average home price is a little more than $440,000. This makes London an affordable market.

Here are the top five most affordable Ontario real estate markets to consider in 2021.

North Bay, ON

Home Price: $286,114 (CREA NOBA July 2020, year-to-date average price)

Income Required: $39,893

For a long time, homebuyers have overlooked northern Ontario in favour of its southern urban counterparts. Unlike other rural areas, access to typical amenities is not as easy and development is more limited compared to the rest of the province. That said, real estate sales have been climbing in cities like North Bay, possibly because of greater infrastructure investment, improved land development, and lower taxation. With the combination of incredibly affordable homes and the increased flexibility of telecommuting employees, this trend is likely to continue through the rest of 2020.

Sudbury, ON

Home Price: $297,938 (CREA SUD June 2020, year-to-date average price)

Income Required: $33,749

When Sudbury witnessed an uptick in confirmed COVID-19 cases, officials were forced to implement strict safety measures for people buying and selling their homes. That did not stop real estate activity in the area as home sales have been on the rise – and for good reason. Sudbury is one of the province’s most affordable cities to live in in Ontario. As more people exit the big cities amid the work-from-home trend, cities such as Sudbury have a become a prime location for families looking to move, offering more space and an affordable cost of living.

Windsor, ON

Home Price: $383,521 (CREA WIND July 2020, year-to-date average price)

Income Required: $52,192

Windsor is one of Ontario’s best-kept secrets. You can purchase a large property for the average price of a one-bedroom apartment in Toronto, and many young couples are following the smell of savings! The Windsor housing market continued to sizzle even during the coronavirus pandemic, and now that the city has joined the rest of the province by officially moving into stage three or reopening, this boom is expected to intensify. CBC News writes:

“In addition to the lower housing prices… Windsor makes it an attractive city to buyers and investors because of its close proximity to Detroit, low traffic, relatively warm weather and views, the casino, and the imminent construction of the Windsor-mega-hospital.”

Niagara, ON

Home Price: $493,007 (CREA STCA June 2020, year-to-date average price)

The Niagara Home Builders’ Association (NHBA) said in Statistics Canada’s monthly survey of home builders that retirees and remote workers have amplified demand for new housing in the Niagara region, which elevated prices by one percent last month.

“As working from home becomes more prevalent, we may see an increase in the demand for larger living spaces that single-family homes can offer, causing a shift in demand from condominium apartments towards single houses,” the NHBA noted in the monthly survey.

Peterborough, ON

Home Price: $505,998 (CREA PETE July 2020, year-to-date average price)

Income Required: $69,072

Sales activity has been strong in Peterborough and the Kawartha Lakes in the aftermath of the peak COVID-19 period. In April, residential home sales plummeted 58.1 per cent, but they have rebounded as much as 34.5 per cent since. The contributing factor has been GTA buyers fleeing the region and seeking homes in smaller, quieter cities like Peterborough. The problem? Not enough supply, says Chiarina Payne, president of Peterborough and the Kawarthas Association of Realtors, in an interview with MyKawartha.com.

With interest rates at historic lows and demand expected to remain healthy, residential prices in the region are expected to rise by three per cent by the end of 2020.

CONCLUSION

Ontario’s slogan is “Yours to discover,” but the concept is more than just a garnish on our license plates. There is a lot of the province that most people have yet to see, and this is important if you are searching for a property to purchase. For Ontario real estate hunters, Toronto is an ideal location but the cost of a Toronto home is unaffordable for many. Exploring or expanding your home search to other parts of the province is more doable than ever before: public transit routes are expansive, remote work is more common, and a lot of cities in Ontario offer comparable amenities to what you would find in Toronto or Hamilton. Ready to make the great escape from big city life? Time to start discovering Ontario real estate!

22 Jul

How to Get a Mortgage as A Self-Employed Canadian

Mortgage Tips

Posted by: Michael Greene

You may not fit in the neat boxes at the bank. At Mortgage With Mike we don’t have boxes, we have solutions!

Self-employment is becoming more and more popular amongst Canadians, who account for 15% of the population according to Statistics Canada. We have an entrepreneurial spirit and are very hard working. The problem is that it is also becoming more and more difficult for self-employed people to get a mortgage, even with good credit. Typically, the banks will only give you a loan up to 65% LTV maximum as a 1st mortgage.

In Ontario, if you have less than a 20% down payment, you need to prove two years of income. Unfortunately, many self-employed people claim a smaller income for tax purposes. If this is you, the big banks will see you as a risk.

We work with self-employed Canadians every day and come to understand the issues they face when seeking financing. Your dream of homeownership should not be crushed by a decline from the bank.

Self-Employed Mortgage Options

Now when it comes to being self-employed there are two ways to get approved for a mortgage with income validation, and without income validation.

Validated income means you’ve been in business for two full years, the business is registered as a self-employed proprietorship, you have good credit, and you’ve declared income on your tax returns. That doesn’t mean you’ll necessarily qualify for a mortgage with a lender; it just means you have proof of income.

Without income, validation means you can show that you are self-employed and you can’t prove your income but you show enough information for the lender to determine you are making sufficient money.

With proof of income, you would be able to get a mortgage from any one of the three mortgage insurers CMHC, Genworth, and Canada Guaranty. If you cannot validate your income you will have to find a lender that accepts Genworth and Canada Guaranty.

A. Self-Employed with Bad Credit

Having bad credit can make it very difficult to secure a loan from a traditional lender. In addition to being self-employed, which the banks view as risky, bad credit suggests there is an even greater chance you’ll default on a mortgage.

A private lender, on the other hand, is much more concerned with your current and future earnings than past mistakes. Your credit score may be bruised, but private lenders will still help you secure a mortgage if your business is profitable and you have a steady income.

B. Self-Employed with Low Income

If you’re self-employed and report low income, you can still qualify for a mortgage. There are a large number of private lenders that will help you secure a low-income or even no-income mortgage.
Again, private lenders understand that most self-employed Canadians try to minimize their taxable income. Private lenders know the difference between reported income and gross income. In fact, some private lenders will add 10% or 15% onto the reported income if you can show business deductions that are equal to or greater than that. This can significantly increase your mortgage eligibility.

C. Self-Employed and Over 55

One of the largest growing demographics among the self-employed in Ontario are those 55 years of age and older. You might be an entrepreneur but when you hit 55, banks only see that your long-term earnings potential is smaller than it was when you were 45 or 50. At the same time, chances are you’re looking for the same kind of mortgage as someone who is 25 and just getting on the property ladder.
According to the big banks, this means you’re less likely to be able to pay the mortgage off. Fortunately, there are private lenders that specialize in helping those who are 55 and older secure a mortgage.

Self-employed Mortgage qualifications

Credit rating has to be average to excellent.
Down payments can range from 35% for Non-CMHC and 10% down with CMHC
Proof that you are a principal owner in the business. (GST Return, articles of Incorporation, a recent Invoice, a business license, Business brochure)
At least 2 years as a self-employed person.
Stated Income is allowed – Income Verification Not Required.
In some cases need most recent Notice of Assessment to show NO income taxes are owed.
Financial statements for your business.
Proof that your HST and/or GST is paid in full.
Contracts showing expected revenue for the coming years.
Your personal and business credit scores.
Proof that your down payment has not been gifted.

Final Thought: Everyone already knows it makes sense to go to a specialist to get the job done to satisfaction – similar to how you consult other expert advisors, such as lawyers, accountants or financial planners. We are your mortgage professional and will work with you directly. You may have a complex situation – it makes perfect sense to find an experienced mortgage professional who can customize a mortgage product to meet your specific needs while keeping you short-term and long-term financial goals in mind.

Some food for thought

If pays to plan ahead. Speak with a trusted mortgage professional well before seeking to secure a mortgage. What does your debt load look like? What are your plans for business growth? How much income do you plan to declare?
Keep your credit in good standing. This is the most important in obtaining a mortgage as a self-employed individual, you must maintain a sound credit history.
Be Organized. Keep all your financial statements, tax returns, T1 Generals, Notice of Assessments, etc. in good order. It may pay to hire an accountant to help keep you organized.

Securing a great mortgage as a self-employed person should not be a hard task. Consider speaking to your trusted mortgage professional to assess your situation.

15 Jul

Mortgage Debt Ratios: Basics of GDS & TDS

Mortgage Tips

Posted by: Michael Greene

How are GDS and TDS calculated?

You may use a mortgage calculator to determine your qualification when applying for a mortgage, it will give you have an idea of where your GDS/TDS mortgage debt ratios line up. But when applying for a mortgage first step, lenders will use the “Five C” rule when analyzing someone’s ability to afford that mortgage:

1) Capacity to repay (your income)
2) Current economic conditions (your profession’s current economic status as well as your city and country’s economic situation)
3) Capital put down (the down payment you provide, which is the amount of equity you’re offering to secure the asset)
4) Collateral (what the home is worth)
5) Character (your history of paying off debts, otherwise known as your credit history)

The second step is to qualify for a mortgage, so lenders will examine two ratios:

# 1. The GDS: Gross Debt Service is the percentage of the borrower’s income that is needed to pay all required monthly housing costs (mortgage payments, property taxes, heat and 50% of condo fees).

# 2. The TDS: Total Debt Service is the percentage of the borrower’s income that is needed to cover housing costs (GDS) plus any other monthly obligations that an individual has, such as credit card payments and car payments.

Keep in mind, however, that these ratios are used by lenders to assess your debt load potential—it should not be used as a way to determine if your debt load is manageable. That’s because these debt ratios do not take into consideration everyday expenses. So, even if you are comfortably under the 32% GDS threshold or the 40% TDS threshold when it comes to mortgage, property taxes and heating costs, you may still struggle to cover your various monthly expenses.

For both GDS and TDS calculations, you could add up your monthly housing expenses/all of your monthly debts and multiply by 12 to get the total amount for the year, and then divide that number by your annual salary. Multiply that figure by 100 to get your GDS/TDS ratio.

Let’s look at some scenarios:

Tom and Anna want to buy a house. Their combined annual salary is 88,000, which makes their gross monthly income of $7,333. They estimate that their mortgage payment and property taxes will be $2,250, heat will be $75, and they’re making $250 in credit card payments a month, with $375 in car loans.

GDS: $2,325 / $7,333 = .31 x 100 = 31 per cent

TDS: $2,950 / $7,333 = .40 x 100 = 40 per cent

Sam wants to buy a condominium. With an annual salary of $65,000, his gross monthly income is $5,417. He estimates that the mortgage payment on his home will be $1,650, his monthly bill for his property taxes will be $125, heat is $35, and condo fees are $500. He also has a student loan payment of $550.

GDS: $2,060 / $5,417 = .38 x 100 = 38 per cent

TDS: $2,610 / $5,417 = .48 x 100 = 48 per cent

As you can see, Tom and Anna are within the GDS/ TDS standards. Both of Sam’s ratios are too high according to industry standards.

Your GDS and TDS figures don’t tell the whole story – they don’t take other basic expenses into account like transportation or food. So you want the ratios to be as low as possible to leave room for all of your other incidentals. Using a Mortgage Qualifier Calculator to figure out how much mortgage you can actually afford will help you keep an eye on the bigger picture.

If you need assistance, reach out to your local Dominion Lending Centres professional for a free consultation.