How to avoid owning Two Homes

When your sale closes after your purchase

• to get the best price for your home often you have to compromise and choose dates that may not match
• this means you need to leverage the equity in your home, for the required time between the purchase and sale to fund your down payment into your new home

Example of Bridge Financing

Sold $ 270,000 Purchase $ 450,000

less deposit w/offer $ 15,000

Real estate commission New Mortgage $ 335,000

13% HST Real estate commission

Mortgage balance legal fees on sale and purchase

Equity $ 100,000 Funds to close $ 100,000

SALE closes May 31 PURCHASE closes April 28

BRIDGE FINANCE of $100,000 for 33 days for $750 estimated fee

How can a secured credit line save me money?

• in our previous example some lenders will allow you to register up to 80% of the purchase price.. Let’s say $360,000
• known as a “Collateral Mortgage”, this additional $25,000 could be used as a secured credit line towards your down payment
• Reduces Bridge loan to $75,000 & cost down to approximately $540
• Saving you $210
• Credit line paid to ZERO from the proceeds of the sale in 33 days
• The credit line is available when needed always at a preferred rate
• This allows greater flexibility and reduces interest costs for you

What if you sell before you buy?

• There are still some situations where this happens. Owner is motivated and grabs your offer!
• This means you will have to pay out your mortgage and any penalty, as there will be a shortfall .. until your move in date.
• Most lenders will reimburse the penalty, if you have a move in date within 90 days of your sale & come back with the same terms; conditions to the mortgage

What if you want to keep your property and rent it ... instead?

• If you have considerable equity, you may want to rent out your property as an investment
• Your home can be re-financed to where the rent will carry the mortgage payment, condominium fees and property taxes.
• You could then buy, your new home with less down payment.
• You can always sell your investment at a later date to maximize your sale price.
• Having a plan for your mortgage is key

We give you a Firm Approval

We are able to approve the bridge financing as well as your mortgage at the same time.

This combined approval is unique in Toronto

Peace of Mind & no surprises for you

Things can change quickly between the time you buy, until you move in to your new home.

• … Job change, need credit for new appliances
• … Many lenders pull a second credit bureau, verify your employment or even leave the appraisal till a week before closing date

Ready to get Started?

Contact Lindsay Doke RBC Financial Trusted Mortgage Advisor 416 464 6423

The Harmonized Sales Tax’s Effect on Real Estate

On July 1^st, the Ontario government implemented the HST as part of a tax plan designed to strengthen the economy. While lots of discussion surrounds the changes – let’s cut to the chase. Here’s what people buying or selling a home need to know.

About 93 per cent of all homes sold in Ontario are not subject to an additional tax amount under the HST.

It’s important to note, the HST is not charged on resale homes.

In addition it is not charged on:

• home insurance
• mortgage interest costs

HST is charged on:

• real estate commissions
• legal fees
• new homes

(The full list of what changes and what doesn’t change is available on the website (23 languages), PDF format and for free download as a mobile application. )

New Homes Rebate

Regardless of the price of new homes purchased as primary residences,, buyers may be entitled to a rebate in respect of the provincial part of the HST of up to $24,000, ensuring that buyers of new homes priced up to $400,000 will, on average, pay no more – or possibly even less – tax than under the PST system. The effect of the rebate is that homes valued over $400,000 will be subject to the 8 per cent provincial part of the HST on the amount above $400,000.

New Rental Housing Rebate

New rental housing, including residential investment properties, receive a similar rebate to the new homes reimbursement. This rebate also supports affordable rental housing in Ontario.

Other Tax Credits and Incentives

• Providing up to $1,000 for families (including single parents), or up to $300 for single people, in Ontario Sales Tax Transition Benefits.
• Creating the new Ontario Sales Tax Credit that gives each member of your family up to $260 a year.
• Increasing the energy and property tax relief provided to low- to middle-income people by 70 per cent.
• Delivering an additional $500 a year to help senior homeowners pay their property taxes.

And to leave your readers with some context of how real estate agents are viewing the market, check out http://www.torontosun.com/newhomesandcondos/2010/08/06/14946611.html

I have also provided some additional resources below and if you or any of readers have any questions, just ask

Rachael.MOR@ontario.ca

Some Helpful Links:

Ontario HST Website

Canada Revenue Agency

Helping Homebuyers and the Housing Industry with an Enhanced New Housing Rebate and a New Rental Housing Rebate

Frequently Asked Questions

Builder Disclosure Requirements

Builders of New Housing

New Housing Rebate

Owner-built Homes, Mobile Homes and Floating Homes in Ontario

Purchasers of New Housing in Ontario

Stated Price Net of GST/HST New Housing Rebates

Property Tax Credit

Borrowing trouble – Loans to family

When a relative or friend calls asking for a loan, you want to help. It’s only natural – and you’re far from alone. A recent Investors Group poll found that six in ten Canadians (64 per cent) have loaned or borrowed more than $500 to or from family or friends.

However, your good deed could end up creating a lot of stress for you and placing a great deal of strain on your relationship with the person to whom you made the loan. It could also cost you a significant amount of money.

More than a quarter (26 per cent) of those polled reported that family/friend loans were not fully repaid. One-third (31 per cent) of the money lenders felt pressured to do so, and the majority of those who experienced the greatest feeling of pressure (54 per cent) did not get repaid at all.

The majority of loans between friends or family were for moderate amounts, with two-thirds (67 per cent) borrowing between $500 and $5,000 and 14 per cent borrowing between $5,000 and $10,000. Fifteen per cent borrowed more than $10,000.

For both lenders and borrowers, top loan purposes were financial emergencies (25 per cent), big-ticket purchases (15 per cent), education (13 per cent) and a home down payment (11 per cent). Lesser priorities were house repairs (7 per cent), starting a business (5 per cent), taking a vacation (5 per cent) or another big event (3 per cent).

And here’s the crucial part: The survey found that more than eight in ten (83 per cent of) Canadians who had loaned or borrowed funds from someone close to them did so without a written agreement.

That’s always a mistake. Sure, it can be uncomfortable to make an informal request for a loan into a formal ‘business’ transaction. But loaning money to a loved one shouldn’t preclude asking for specific loan conditions or a pay-back plan, and doing so can reduce the potential for disagreements and long-term future rifts. By having a formal agreement for a personal loan you’ll avoid borrowing trouble.

If you simply can’t bring yourself to request a written agreement, get help. Your professional advisor can provide assistance that won’t get in the way of your relationship. Your advisor can also help you assess how that loan could affect your overall financial objectives.

A total of 2,002 surveys were completed with Canadian adults between September 18th and September 24th 2008, using the Harris/Decima eVox online panel. The

John Scholl B. Mathematics, CGA,

Wealth Management & Financial Planning

Investors Group (905) 450-2891 X529 (866) 799-2223 Cell: (416) 731-3660

Email: john.scholl@investorsgroup.com

Assumable Mortgages as Marketing Tools

With Toronto Real Estate softening and the prices showing signs of adjustment; It might be worthwhile to look at homes for sale that have an existing mortgage that could be assumed, as a marketing tool to get your home sold.

Consider interest rates; they have not increased dramatically in the short term but could and I believe will rise in light of global borrowing as the need to attract investors for bonds and certificates in financial markets becomes interest rate sensitive.



Mortgagors on a property most suitable for this kind of program are already high ratio and have paid the CMHC Insurance fees. (previously added to the mortgage balance) If this mortgage is assumed the NEW borrower is paying CASH to the existing mortgage. They would be required to qualify for the debt at the current rates, credit criteria and guidelines. An additional property appraisal may be required.

Simply put, on a 300K assumption this could be a savings of $8,000, or on a 400K mortgage could be $11,000. CMHC Ratio fees range from 0.65 to 2.75% on a graduated scale based on the level of advance to value.

Briefly, one of the first things to consider is the terms and conditions as contained within the specific mortgage document.Most mortgage documents, although similar in nature are not always identical and even when the terms of a particular mortgage referred to as the mortgages “Standard Charge Terms” is registered with the Ontario Government and assigned a registration number, does not ensure that the lender in question has not attached an Addendum and/or a Schedule to a particular mortgage document thereby amending the “Standard Charge Terms” as was originally recorded.Therefore, prior to making any commitment, a person would be well advised to have the specific mortgage document in question, reviewed by a lawyer familiar with mortgage documents.Today most mortgage documents contain an escalation clause whereby, the full balance of the mortgage becomes due and payable forthwith, should the mortgagor default on any of the terms of the mortgage. The right of the mortgagor / borrower to exercise any or his or her rights as may be contained in said mortgage, begin with the premise “when not in default, the mortgagor may ....”

A significant number of mortgage documents as prepared on behalf of either institutional lenders and/or private lenders do not permit the assignment of their mortgage. Those institutional lenders and/or private lenders that did permit an assignment of their mortgage, would only consent to the assignment or their mortgage, provided the new mortgagor was creditworthy and financially approved by the lender.

Further, such lenders would not release the original borrower (Mortgagor / Chargor) from liability for the debt. Therefore, in the event of a default by the assignee (new borrower) the lender had the option of choosing which of the two parties to pursue (original mortgagor or the assignee) for the repayment of the debt and usually the lender chose to pursue the most financially able of the two parties.

Important Notice: This information is provided as basic educational information by the author and is not a substitute for the advice of an expert and/or the advice of a lawyer. There is NO representation as to legality, accuracy, correctness of the information herein and the reader is strongly urged to consult a lawyer in the relevant jurisdiction to ensure accuracy before acting on this information.