How do housing bubbles work? A look at Toronto and Vancouver’s Real Estate Market.
Credit: Vancouver Sun
One of the questions that I get asked regularly is “Why Use a Realtor?”
This video from the Real Estate Board of Greater Vancouver explains why you should use a Realtor in the purchase or sale of your next home
So why should you use me as your Realtor? I understand that in buying or selling your home you are making one the biggest decisions of your lifetime, and I will be with you every step of the way! My passion is real estate, and my hope is that once we’ve worked together, the next time you go through one of these big life transitions, you won’t want to do it with anyone else. For me, there is no bigger compliment than when a client sends their friends or family to work with me.
The program offers first-time home buyers who have saved a down payment:
A down payment loan of up to 5% of a home’s purchase price to a maximum of $37,500, on a home with a maximum price of $750,000.
This loan matches the buyer’s down payment and is interest-free and payment-free for five years. After five years, buyers can either repay their loan or enter into monthly payments at interest rates that are current five years from the date of the loan. Loans through the program are due after 25 years – the same length as most mortgages.
To qualify for the program, home buyers with a registered interest on title must reside in the home and be a:
1. Canadian citizen or permanent resident for at least five years;
2. Resident of BC for at least one year immediately preceding the date of application; and
3. First-time buyer who has not owned an interest in a residence anywhere in the world at any time.
The first-time home buyer must:
1. Use the property as their principal residence for the first five years;
2. Obtain a high-ratio insured first mortgage on the property for at least 80% of the purchase price; and
3. Have a combined, gross household income of all individuals on title not exceeding $150,000.
First-time home buyers can begin gathering the documents they’ll need to submit an online application.
Buyers will need:
1. Proof of status in Canada and residency in British Columbia.
2. Secondary identification (must include your photo).
3. Proof of income and tax filings.
4. Insured first mortgage pre-approval.
Reported by REBGV
If you’ve decided to buy a home, it’s important you understand all the costs involved in addition to the price you’re paying for the property.
Lenders may charge a mortgage application fee, which will vary depending on the lending institution.
The federal government requires high-ratio mortgages with less than 20 per cent down payment to be insured against default. The cost ranges between 0.60 to 3.85 per cent of the mortgage amount which is added to the mortgage principal.
As of February 15, 2016, the federal government requires a 10 per cent down payment requirement on homes valued at $500,000 – $1 million, that need mortgage insurance. Homes valued at $1 million+ require a minimum down payment of 20 per cent. Mortgage insurance is not available for homes in this price range. Learn more.
Before your lender approves your mortgage, you may be required to have the property appraised. Sometimes your lender will cover this cost. If not, you’re responsible. The fee ranges from $300 to $450 plus GST.
Land survey fees
Lenders may require a survey of the property. The fee ranges and is typically $500 plus GST.
Home inspection fees
A home inspection is a report on the condition of the home and includes structural and moisture problems, as well as electrical, plumbing, roofing and insulation. The fees range and is typically $500-$900 depending on the size of the home and the complexity of the inspection. Some inspectors also charge an additional fee for an older home or a home with a secondary suite, a crawlspace, or a laneway home.
Goods and Services Tax (GST)
The GST on a new home is 5% of the price. A GST rebate equivalent to 36% of the GST paid is available for new homes priced up to $350,000 and a partial rebate on new homes priced up to $450,000.
Buyers also pay the GST on fees for services from appraisers, home inspectors, lawyers, Notary Publics and REALTORS®.
Provincial Sales Tax
The PST is generally not payable on services except for legal and notary fees. Both the GST and PST are paid on legal and notary fees.
Property Transfer Tax
Home buyers in BC pay a provincial Property Transfer Tax (PTT) when they buy a home. The tax is charged at a rate of 1% on the first $200,000 of the purchase price and 2% on the remainder up to and including $2 million. The PTT is 3% on amounts greater than $2 million..
Qualifying first-time home buyers may be exempt from paying the PTT if the purchase price of their home is priced up to $475,000. There is a proportional exemption for homes priced between $475,000 and $500,000. At $500,000 and above the rebate is nil.
Qualifying buyers of new homes may be exempt if the purchase price of their home is priced up to $750,000. There is a proportional exemption for homes priced between $750,000 and $800,000. At $800,000 and above there’s no rebate.
Adjustments (see details in the Contract of Purchase and Sale)
Depending on the Contract of Purchase and Sale, a property buyer will likely be required to reimburse the seller for any prepaid property taxes. The lender may require the buyer to add property tax installments to monthly mortgage payments. See also Why do I have to pay property taxes on the house I’m buying.
A buyer is typically required to reimburse the seller for any prepayments for municipal swer and water fees.
Rent and security deposits
If there is a secondary suite or a laneway home rental and the tenancy continues, the buyer receives the security deposit from the seller with accrued interest because the buyer is responsible for reimbursement when the tenant leaves.
Mortgage life insurance
If the owner dies, this type of insurance will pay off the balance owing on their mortgage.
Fire and liability insurance
Most lenders require property buyers to carry fire and extended coverage insurance and liability insurance.
Lenders typically require home buyers with a mortgage to buy home insurance. The insurance should be effective on the earlier of either the completion date or the date that the balance of funds is placed in trust.
Legal or Notary Public fees
Buyers typically hire a lawyer or Notary Public to assist with drafting documents and ensuring the title of the home is properly transferred. Likely fees include a:
title search for a property, this costs up to $11
land title registration fee, which is about $75
For more information about land titles, visit the Land Title and Survey Authority of BC at www.ltsa.ca.
Moving fees vary depending on the distance moved and whether professional movers do all of the packing. Rates vary.
Utility hook ups
There are fees for hydro, gas, water and sewer, cable, and phone connections.
New owners should always have door locks rekeyed. Costs depend on whether the locks are standard or electronic.
Strata maintenance fees
Typically paid on the first day of each month.
What does it cost to hire a Realtor you may also ask?’ There is no set commission rate in the real estate profession. Most Realtors are paid after ownership is transferred. Fees are typically paid to the real estate company by the lawyer or notary in the transaction from the sale proceeds.
Compensation is always agreed to beforehand between you and your Realtor. There is no such thing as an average commission. The Commission paid depends on the services provided by your Realtor, which can vary significantly depending on your needs as a client or the business model employed by the Realtor.
When does a commission become payable?
The standard Multiple Listing Contract provides that commission is payable on the earlier of the following: completion date under the Contract of Purchase and Sale, or the actual date the sale completes.
Please see the chart below describing the Market Trends for December 2016 on the Sunshine Coast BC.
When buying or selling a home, everyone wants the most advantageous situation. Both buyers and sellers want “the best price,” but this definition varies: Home buyers want to purchase the desired property at a good deal, while sellers want to receive their asking price.
A Balanced Market is a perfect solution being that you sell and buy within the same market (which is a huge advantage for those who are risk adverse in the Real Estate Industry).
The Sunshine Coast market activity by the end of November 2016, continued to demonstrative above average levels of sale activity and steady increases in value, compared to the same period in 2015.
Current market activity trends indicate that 2016 has been the busiest year for transactions since 2003.
With high levels of buyer interest combined with historically low levels of properties being offered for sale, the market continues to move in favour of sellers in all segments of the market place as of the end of November 2016. The number of transactions have increased by 43% in 2016, when compared to the same period last year, resulting in average sales prices increasing of: $487,000 for detached homes (a 19% increase in 11 months); $297,500 for attached (a 10% increase in 11 months); and $198,000 for land sales ( a 5% increase in 11 months).
As a result of the consistently strong levels of activity for the last 12-18 months, the number of properties being offered for sale has fallen during the third quarter of 2016. Looking forward in 2017, we expect the market to continue being a sellers market. With the increase of sales volumes and prices from this year, we expect that the 2017 market will demonstrate the characteristics of a low supply – high demand marketplace with strong support for prices at current or higher price levels.
The latest assessed values of properties on the Sunshine Coast are now available online with estimated increases of up to 40 per cent in some cases:
“The 2016 assessments are indicating significant increases from 2015,”says Assessor Jason Grant. “Increases of 15-25 per cent will be typical for single-family homes in Vancouver, North Vancouver, West Vancouver, Burnaby, Tri-Cities, New Westminster and Squamish. Single-family market movement in Whistler, Pemberton and the Sunshine Coast is less dramatic, with typical increases in the zero to 15 per cent range. Typical strata residential increases throughout the region will be in the five to 10 per cent range.”
The assessed values of houses in B.C. can be found at E-Value BC.
On October 3, 2016, the federal government released new rules that apply to your ability to qualify for a mortgage. The following statements will be released.
To help ensure new homeowners can afford their mortgages even when interest rates begin to rise, mortgage insurance rules require in some cases that lenders “stress test” a borrower’s ability to make their mortgage payments at a higher interest rate. Currently, this requirement only applies to a subset of insured mortgages with variable interest rates or fixed interest rates with terms less than five years. Effective October 17, 2016 (TOMORROW), this requirement will apply to all insured mortgages, including fixed-rate mortgages with terms of five years and more. Homeowners with an existing insured mortgage or those renewing existing insured mortgages are not affected by this measure.
What does this mean?
1. As of October 17, 2016, any arranged mortgage that is an insured mortgage has to qualify at 4.64%. This means:
How this affects you?
Your purchasing power will likely decrease. Historically, clients have been able to qualify at the 5 year discounted rate (for example, current 5 year rates are at about 2.49%).
2. As of November 30, 2016, any mortgage that is back end insured (regardless of down payment amount or equity) has to qualify at 4.64%.
How this affects you?
The amount of equity that you can take from your owner occupied home could decrease, based on you ability to debt service. Although you can still mortgage up to 80% of the appraised value of your home, you will have to qualify at 4.64%.
3. As of November 30, 2016, any low-ratio insured loans (mortgages with more than 20% down) will have to comply to new criteria. Monoline lenders are notably lenders that do low -ratio insured mortgages.
How this affects you?
Property has to be owner occupied. No rental properties
Maximum amortization of 25 years
Maximum property purchase of $1,000,000
Minimum credit score of 600
For more information on these announcements please click on the following link:
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