Finance Minister Jim Flaherty Tuesday announced tighter lending standards for mortgages to take effect April 19, 2010.
Under the new rules, all borrowers will need to meet standards for five-year fixed-rate mortgages regardless of whether they’re seeking a loan with a lower rate and shorter term.
Also, the government is lowering the maximum amount Canadians can withdraw when refinancing to 90 per cent of the value of their homes, from the current 95 per cent, and requiring a 20 per cent down payment for government-backed mortgage insurance on “speculative” investment properties.
It will also be requirement to have a minimum down payment of 20 per cent for government-backed mortgage insurance on non-owner occupied properties purchased for speculation.
A backgrounder circulated by Finance Department officials explained that the change won’t apply to borrowers who buy residential properties where they plan to live but which also include some rental units.
I have been doing some renovating of my own the last little bit. Anyways I stumbled upon this set of good resources from CMHC, their Renovation fact sheets. There are a lot of other information on the site so take a look around.
“He says the likely measures the government will take is to increase the size of the down payment from 5 per cent “to a higher figure” and to reduce the amortization period “from a maximum of 35 years to something less.”
Those measures would increase the monthly payments, making it more difficult for some people to take on a mortgage and purchase a home, without having to increase the interest rate.
Last week, the central bank warned that when interest rates rise to normal levels, up to 10 per cent of households could face difficulties in meeting monthly payment requirements.”
Thoughts
Its hard to argue the potential reasoning for this move when the US mortgage rules or lack there of has contributed greatly to the housing bubble that just burst. That being said it will make it harder for some people to be able to afford a home. Then again if they can’t meet these new rules then they probably shouldn’t be buying a home in the first place.
It will be interesting to see what the final regulations are.
What do you think of the proposed changes? Will it affect PEI real estate?
There has been a freeze on property tax assessments for the past few years on PEI which is about to change. Not only that, but they seem to have confused everyone on exactly what they are doing… I’m going to try and explain it in simple terms.
The property tax rate is determined by the province for their share and the community your home is located in also submits their amount based upon their budget requirements. Under the changes introduced recently, property tax increases would be tied to the province’s consumer price index to a maximum of 5%.
It is to my knowledge that when a property sells, the assessment for property taxes will NOT be based on the selling price (thus causing huge increases for buyers). It will be based on the market value as noted on your Notice of Assessment. You’ll notice there is a market value and your current frozen residential number on your current assessment.
I know it can be confusing….
PEI Property Tax Example
For instance a house is currently frozen at an assessed value of 90, 000 whereas the market value is 94,500 (according to government) and similar properties in the neighborhood are selling for 130,000 (selling price). You will now have the CPI used to adjust the current frozen rate.
If you sell your house the new buyer will now have to use the Market Value for taxes which the CPI will be used to adjust yearly.
Frozen Rate (Used If You Stay)
$90,000
Market Value (Used If House Sells)
$94,500
Selling Price * Not Used
$130,000
The market value is based on an adjustment multiplier determined by market activity in the area. It is almost always lower than what the house would sell for. This number also adjusts yearly based on the multiplier.
The PEI Property Tax Reactions
Critics argued the changes will raise taxes for every homeowner at a time of recession.
“This was a bit of a blind-side,” said agent Joel Ives.
“No one in our industry, as far as we can tell in our real estate association, was made aware of these changes that are coming and we’re not quite sure how we are to consult with people who are thinking of buying property at this point.”
Provincial Treasurer Wes Sheridan said the difference between market value and assessed value is only about four per cent in most cases.
“Sometimes it will be higher, sometimes less, but this means Islanders are not going to see the huge seven or eight per cent increases they’ve seen in the past,” he said.
The selling price of a house is only one of several factors used to calculate market value, Sheridan said.
And while I can understand how a property tax freeze could not sustain itself forever…it brings back a classic song about taxes. Courtesy of The Beatles - Tax Man
What are your thoughts on the latest tax increase? Did you find it confusing?
Charlottetown was named the most affordable market in Canada by a Coldwell Banker study. Vancouver is home to the most expensive 4-bedroom, single-family homes in Canada with an average price of $1.26 million.
That same house in Charlottetown, PEI would cost $158,667
Vancouver
$1.26 million
Edmonton
$432,250
Saskatoon
$381,975
Winnipeg
$390,368
Toronto
$824,347
Montreal
$469,250
Halifax
$277,302
Moncton
$276,175
Charlottetown
$158,667
St. John’s
$348,750
It’s always good to look at the stats and recognize that the numbers don’t necessarily tell the whole story.
For instance it would be nice to earn Vancouver wages while living in Charlottetown… but that’s not the case.
