Welcome to the concluding analysis of Canada’s Housing Plan and Budget 2024. This part focuses on the less favorable elements of the plan, including one particularly concerning measure both for the economy and the housing sector. You can also check out the previous parts containing the good (part 1) and the good marketing (part 2).

The Bad

1. Canadian Renters’ Bill of Rights:
   • Rent Payments in Credit Scores: This inclusion might sound beneficial, but it hardly impacts the mortgage approval process due to the low number of rejections based on credit scores. Furthermore, obligating small landlords to report to credit bureaus is poorly conceived and potentially harmful.
   • Historic Rent Prices Disclosure: Despite a high occupancy rate nearing 99% across Canada, this measure won’t empower renters to negotiate better rents. It’s merely a bureaucratic gimmick that could ultimately increase costs for renters.

2. Crackdown on Short-Term Rentals:
   • While initially appearing positive, this government initiative is poorly planned and could lead to numerous unintended consequences, including legal challenges from landlords wanting to convert short-term rentals into long-term housing or use them personally. This could create a legal and operational mess.

The Ugly

• Capital Gains Changes (Effective June 25):
  • For Corporations and Trusts: Capital gains are now taxed at 66%, starting from the first dollar.
  • For Individuals: The 66% tax rate applies to gains exceeding $250,000.
  • This adjustment mainly impacts real estate investors who sell secondary or recreational properties where gains exceed $250,000—raising their tax liability significantly. For instance, selling a property bought for $500,000 at $750,000 would now result in $166,750 taxable income, up from $125,000 under the old rules.
  • Properties owned through holding companies face the new tax rate from the first dollar, while primary residences remain unaffected as they don’t attract capital gains tax.
  This measure appears to specifically target real estate investors, as other types of investments can be structured to keep capital gains under the $250,000 threshold. It risks further alienating investors at a time when property acquisition is already challenging due to supply side issues.

This wraps up our series on Canada’s 2024 Budget and Housing Plan. We’ve uncovered the good, the marketable, and the potentially problematic aspects of the government’s approach to tackling the housing crisis. Stay informed and engaged as these policies begin to take effect.

Conclusion

• The government measures to improve the housing announced over the last few weeks and months, overall are not as bad as the opposition and some people make it out be. Some of the supply side improvement measures are actually good announcements but time will tell how much and how well they get implemented. But even charitably put, these measures are too little and definitely too late to make an immediate or even a medium term impact.

• On the flip side, the measures are also definitely not as good as the government is projecting it to be. There are plenty of filler announcements only designed to by and large sound good – such as the renter’s rights and the mortgage charter. And then there are a few which are quite problematic – such as the capital gains tax hike, the government’s not fully thought out crackdown on short term rentals etc.

• The bottom line is that this govt. was caught completely unawares of how bad the housing situation was in the country over the last several years. It woke up when the polls started looking terrible for them, particularly on housing, and then scrambled.

• And sadly, even the good measures of the govt. which will improve housing supply, add talent for the housing industry, build more rental housing etc. will take years to accomplish even if everything planned does get accomplished.

• Being asleep at the wheel, sucks!

The post 🔴 Canada’s 2024 Budget and Housing Plan – Part 3: The Bad and The Ugly 😧 appeared first on Ron Mortgages.

Following up from the previous discussion on positive governmental measures for housing in Canada, we delve into some actions that, while sounding promising, may not be as impactful as anticipated. Let’s explore these measures, which we’ve aptly named “The Good Marketing.”

The Good Marketing

1. Measures to Increase Housing Supply
   • Canada Secondary Suite Loan Program: Soon, homeowners may access $40,000 in low-interest loans to add a secondary suite. Sounds helpful, right? However, the amount is modest and details remain vague—raising questions about its efficacy.
   • Changing Mortgage Insurance Rules: The government proposes to increase densification by allowing more units in existing homes, but specifics are yet to be disclosed.

2. For Individuals
   • The Mortgage Charter: Originally announced in November 2023, this repackages existing guidelines from the Financial Consumer Agency of Canada. It reiterates measures like amortization extensions and relief measures that already exist, offering little new help, despite its appealing presentation.
   • 30-Year Amortization for New Builds: This allows buyers of new builds to opt for a 30-year amortization with less than 20% down, enhancing affordability. However, it’s limited to insured mortgages for properties priced under $1 million and primarily benefits builders, not broadening its impact in high-cost markets.
   • Halal Mortgages: Although touted as an initiative, there’s nothing new here; these financial products already exist without additional governmental enhancements.

3. Cracking Down on Mortgage and Real Estate Fraud
   • The government plans to consult the mortgage industry about developing income verification tools through Canada Revenue Agency. However, this is just an intention to consult, and actual implementation could be years away, if it happens at all.

4. Taxing Vacant Land
   • With no details provided, the government has only mentioned it will consider introducing a tax following consultations later this year. This remains a vague promise for now.

5. Keeping Corporates Out of Individual Housing
   • This sounds appealing in a sound bite but lacks any concrete plans or announcements, making it more of a marketing statement as of now.

Stay tuned for Part 3, “The Bad and the Ugly,” where we’ll dissect the less favorable aspects of the housing measures.

The post 📜 Canada’s 2024 Budget and Housing Plan – Part 2: The Good Marketing 🤔 appeared first on Ron Mortgages.

The Canadian Federal Government has recently unveiled several key measures impacting Canadians who are looking to buy or already own homes. These measures are part of the newly announced Canada’s Housing Plan and the 2024 Federal budget released on April 16, 2024.

We’re compiling the highlights here, and focusing on the measures which impact housing and home ownership in Canada. As our analysis is fairly long we’re breaking it down into the following 3 parts:

• The Good (Part 1 here)
• The Good Marketing (Part 2)
• The Bad and the Ugly (Part 3)

The Good (Part 1)

1. Increasing Housing Supply
   • 3.87 million new homes by 2031 : An increase of 2 million net new homes on top of the 1.87 million Canada was already on track to build.
   • $400 million boost to the $4 billion Housing Accelerator Fund, aimed at cutting red tape and speeding up construction nationwide.
   • Enhanced rental supply :
     • GST removal for rental, co-op, and student housing to enable cheaper financing for builders.
     • Accelerated capital cost allowance for apartments to boost builders’ after-tax return on investment.
     • Canada mortgage bonds limit increased from $40 billion to $60 billion, facilitating low-cost financing for multi-unit residential properties.
     • $15 billion in additional loans for the Apartment Construction Loan Program, targeting the construction of 30,000 new rental apartments by 2031-32.
     • Canada Builds program : Combines federal loans with provincial and territorial investments to increase rental construction.
     • $477.2 million over 5 years for the Canada Rental Protection Fund to safeguard affordable housing.
   • $100 million from the Apartment Construction Loan program for building homes on top of shops and businesses.
   • Public Lands for Homes Plan: Utilizing vacant public lands to develop 250,000 new homes by 2031.
   • $6 billion over 10 years to support infrastructure in growing communities.

2. Support for Individuals
   • Home Buyers’ Plan limit increased to $60,000 (from $35,000): Assists first-time buyers with tax-free withdrawals from their RRSPs. It also includes an extension of the grace period to start repaying the loan by an additional threa years.
   • Tenant Protection Fund: $15 million over 5 years to support tenant rights and legal assistance.
   • National Flood Insurance Program: $15 million to kickstart flood insurance from 2025.

3. Boosting Skilled Labor
   • $10 million for Skilled Trades Awareness: Encourages high school students to pursue careers in skilled trades.
   • $50 million for Foreign Credential Recognition: Helps skilled trades workers in residential construction.
   • $90 million for the Apprenticeship Service: Creates opportunities for training the next generation of skilled workers.

4. Innovation in Housing Technologies: $50 million over 2 years to foster innovation in housing technologies in Canada.

5. Modernizing Housing Data: $20 million allocated to Statistics Canada and CMHC to enhance housing data collection.

Stay tuned for Part 2, where we’ll delve into measures that appear beneficial in the affordability crisis fight but may have limited impact in their current form.

The post Canada’s 2024 Budget and Housing Plan – Part 1: The Good 🏡 appeared first on Ron Mortgages.

Introduction

The journey of homeownership is filled with numerous challenges, and among the less discussed yet significant hurdles are mortgage penalties. Today we shed light on the often overlooked aspect of mortgage penalties, offering a comprehensive understanding that could lead to substantial savings and reduced stress for homeowners. Let’s delve into the details.

Understanding Mortgage Penalties

Mortgage penalties are fees imposed by lenders when a borrower decides to break their mortgage contract prematurely. This situation arises primarily under two circumstances: exceeding the limits on prepayments and early termination of the mortgage due to refinancing, selling the home, or switching lenders. Grasping the essence of these penalties is the first step toward effective mortgage management.

Decoding Mortgage Penalty Calculations

The calculation of mortgage penalties varies significantly between fixed-rate and variable-rate mortgages. For fixed-rate mortgages, penalties are typically the higher of three months’ interest or the Interest Rate Differential (IRD), which represents the difference between your current interest rate and the rate the lender could charge now for a similar remaining term. On the other hand, variable-rate mortgages usually incur a penalty equal to three months’ interest. Given the complexity of these calculations and the variation in lenders’ formulas, it is crucial to meticulously review your mortgage agreement or consult with a mortgage advisor for precise insights.

Strategic Exit Routes

Exploring early exit from your mortgage requires a strategic approach to minimize penalties. Here are some viable strategies:

• Porting Your Mortgage: This option allows you to transfer your existing mortgage to a new property, potentially avoiding penalties if you’re moving.
• Blend and Extend: A method to combine your current mortgage rate with the new term’s rate, extending your mortgage’s duration without incurring penalties.
• Leveraging Prepayment Privileges: Maximizing your prepayment privileges to reduce the mortgage balance before breaking your mortgage can lessen the penalty.
• Timing: If your mortgage term is close to completion, waiting it out could be the most penalty-averse strategy.

Conclusion

Understanding and navigating mortgage penalties is a critical aspect of mortgage management that requires informed decision-making and strategic planning. Whether you’re contemplating an early mortgage exit or aiming to optimize your mortgage terms, the importance of thorough research and professional advice cannot be overstated. For personalized guidance and strategic solutions to navigate the complexities of mortgage penalties, consider consulting with mortgage experts. Stay informed, plan smartly, and transform your mortgage experience from a burden to a triumph.

Call to Action

Are you facing the dilemma of mortgage penalties? Want to explore the most efficient strategies to minimize your financial burden? Contact us today for expert advice and tailor-made solutions that align with your unique situation. Empower your homeownership journey with informed decisions and strategic planning. Connect with us today!

The post Navigating the Maze of Mortgage Penalties: A Guide for Homeowners appeared first on Ron Mortgages.

Hi and welcome to the latest edition of my newsletter where I cover real estate and mortgage insights & updates for my clients and real estate partners. Previous editions of this newsletter can be found as blogs on my website here. 

As we head off into the last few weeks of summer and get ready to welcome fall, it’s a good time to take stock of how the real estate and mortgage markets are looking currently. I’ll also cover a few noteworthy updates on interest rates, interesting surveys and what can be expected next, particularly on mortgages. Here’s what we’re covering today:

• Housing market overview
• Interest rate & bond yield projections by big banks till end of FY ‘24
• REMIC poll
• Renewals
• Key updates from the mortgage world

Let’s get started, shall we?

• Housing Market Overview

As per the latest (July 2023) data, this is where we stand on the GTA housing market.

As can be seen from the graphic above, month-on-month, prices of all types of properties as well as the number of transactions have fallen. However, if you compare this from last year’s data of the same time period it’s green across the board. 

What that means is, that every type of property in the GTA increased in price year over year, despite extremely challenging headwinds in the real estate & mortgage markets. 

• Interest rate & bond yield projections by the big banks till FY ‘24

This was an interesting chart on the target rate from Canadian Mortgage Trends which I thought of sharing. It shows what the big banks are projecting as expected interest rates & bond yields till the end of FY ‘24. 

Big Banks Interest Rate Projections

The consensus seems to be that interest rates will drop by the end of next year, which is good news. The not-so-good news is that it might not drop by enough to bring back the low 2% and even mid-1 % rates that a lot of people seem to think the rates will go back to. 

• REMIC Mortgage holders poll

Moving on, REMIC recently conducted a poll of 1,000 random Canadians asking them about their mortgages. The survey had a few shockers. I’m highlighting some of its findings here, you can read more using this link. 

• A combined 68.4% of Canadians said they didn’t know what their mortgage payments would be if the Canadian interest rate reached 5%. (5% IS the current interest rate!)
• Only 30.21% of Canadians said they would have purchased a less expensive property if they knew mortgage rates would go up
• Over half of Canadians (57.80%) believe that banks give them the best mortgage rates because they are ‘loyal customers.’ (I can assure you, this is not necessarily true. Banks might give you good rates to get you in, but on average, especially come renewal, they will offer you about 15-20 bps higher than their own best discounted rates)
• Nearly half (45.2%) of Canadians don’t think they will be able to pay off their mortgages until age 60.

What this shows me is that it is imperative for Canadians to have better knowledge and understanding of the biggest liability that they’ll ever have in their lifetimes, which is a mortgage. Without that understanding and knowledge Canadians are leaving money and long-term wealth on the table and not even realising it. 

The easiest way to do that is to work with a trusted and licensed mortgage professional who has your financial well-being in mind while recommending mortgages and mortgage strategies. 

• Renewals

Here’s the current likely scenario for people who might need to renew their mortgages soon  (based on average interest rates for the year): 

• Renewals on Fixed (5.25%)
  • From 2018: +2.25%
  • From 2019: +2.75%
  • From 2020: +3.25%
  • From 2021: +3.50%
• Renewals on Variable (Prime -0.90% at 6.3%)
  • From 2018: +4.00%
  • From 2019: +3.00%
  • From 2020: +4.00%
  • From 2021: +5.00%

The situation above doesn’t look good. No matter what, if your mortgage’s current term is ending and you need to renew soon, in almost all cases your new mortgage will end up costing you significantly more. 

As seen earlier, if you need to renew in the next few months, please reach out and speak to me instead of signing whatever renewal terms your current lender is offering you. As a licensed mortgage professional, I can certainly try and help reduce your pain, come renewal. 

• Key updates from the mortgage world
  • Scotia Bank moved back into competitive mortgage lending through the broker channel after intentionally slowing it earlier this year. The bank is still being cautious and is focusing more on customers to whom it can cross-sell its other products and services.
  • BMO is re-entering the broker channel after a gap of over 15 years. The roll out will happen from early 2024. 
  • Both of these are welcome updates for potential mortgage customers as it increases competition and will give borrowers more options.
  • Bank of Canada’s next rate announcement is expected next week on the 6th of September.

As always, please reach out if you or anyone you know has any questions about mortgages. Until next time!

The post Aug 30, 2023 | Ron Siddharth’s Real Estate & Mortgage Insights & Updates appeared first on Ron Mortgages.

Hello and welcome to my latest post on GTA home sales! Let’s dive into the data from Q2 and examine how the Greater Toronto Area’s real estate market performed during this period. In this analysis, I’ll compare quarterly sales data with a 10-year average to provide you with a comprehensive perspective. If you missed my Q1 2023 analysis, you can catch up here.

Why do I look at a 10-year average? By considering a more extended time frame, I can smooth out any irregularities or outliers, allowing for more accurate decision-making based on robust historical data. This in contrast to most other analysis out there which only compares with the last year’s data, which for e.g., indicates that the market is currently down because of listings being down, compared to last year. Is it really the case? Read on.

In this post, I’ll cover the following key points:

• GTA Home Sales in Q2 2023: A Detailed Overview
• A Comparative Analysis: Q2 2023 Actual Sales vs. Q2 Sales over the Past 10 Years
• Examining New Listings: Q2 2023 vs. the Last 10-Year Average
• Analyzing Active Listings: Q2 2023 vs. Historical Trends

Whether you’re a prospective homebuyer or a real estate professional, this analysis will provide you with valuable insights into the current state of the GTA housing market.

Q2 2023 Home Sales (Actuals) vs. Q2 2012-2022 (Average) Home Sales:

Let’s begin by comparing the actual home sales in Q2 2023 with the average sales over the past 10 years. The data reveals a notable decline in monthly home sales compared to the historical trend. While May saw a slight recovery, with sales trailing the average by only 9%, June witnessed a wider gap, down 27% from the 10-year average. We’ll delve deeper into the factors contributing to this drop shortly.

Q2 2023 New Listings vs. Q2 2012-2022 (Average) New Listings:

The comparison of new listings in Q2 2023 with the 10-year average is intriguing. Although April witnessed a significant decline, with new listings only reaching half of the historical average, the market started to rebound as we approached the end of Q2 in June. During this time, new listings nearly caught up with the long-term trend, indicating renewed seller activity.

Q2 2023 Active Listings vs. Q2 2012-2022 (Average) Active Listings:

Looking at active listings, we observe an upward trend, particularly in the latter part of Q2 leading into June 2023. Although active listings remained below the 10-year average, this upward trajectory suggests heightened market activity during the summer months compared to the earlier spring season this year.

Bringing It All Together:

Taking all these factors into account, we can conclude that listings data show an upward trend as we progress through June, especially compared to April. However, home sales data has been more volatile due to various market factors. Overall, this analysis reveals a few key insights:

• Q2 started slowly in April, following a challenging Q1, with both buyers and sellers cautious due to Bank of Canada’s rate hikes and their subsequent impact on the market.
• As we moved into the middle of Q2, the market began to recover, with May showing signs of normalization. While listings were still lower than average, sales saw an increase as pent-up demand started to dissipate.
• However, by the end of Q2 in June, the situation shifted once again. Listings showed signs of improvement, indicating seller interest, but actual sales fell short of the historical trend. Factors such as Bank of Canada’s resumption of rate hikes, overall inflation, and sustained high prices collectively affected affordability and led to lower sales figures.

Insights for potential home buyers:

• As a prospective homebuyer, this analysis highlights the importance of staying informed about market conditions and trends. 
• If you’re considering entering the market, seeking guidance from a trusted real estate professional can help you navigate the current landscape effectively.
• Now, with the market showing increased seller activity, it may be an opportune time for you to embark on your homeownership journey. 

For potential sellers, here are some different insights to consider:

• Take advantage of the rebound in seller activity towards the end of Q2. Be prepared for fluctuations in buyer demand and adjust your selling strategy accordingly.
• Ensure your listing is competitively priced and attractive to potential buyers. Stay informed about market conditions and pricing trends to make informed decisions.
• Work closely with a trusted real estate professional who can provide expert guidance and help you navigate the current market dynamics.

For real estate professionals, here are some additional insights to consider:

• Stay informed about the evolving market conditions and trends to provide valuable guidance to your clients.
• Recognize the rebound in seller activity towards the end of Q2, indicating potential opportunities for property listings.
• Despite the challenges in sales figures, focus on educating buyers about the benefits of homeownership and the available options in the market.
• Continuously monitor the impact of interest rate changes, inflation, and affordability on buyer behavior and adjust your strategies accordingly.

Thank you for reading. Stay tuned for more updates and valuable insights from me.

The post Analyzing Q2 2023 Home Sales in the Greater Toronto Area: A Comparison with the Last 10 Years appeared first on Ron Mortgages.

Canada’s Finance Minister Chrystia Freeland tabled the 2023 federal budget in Parliament on the 28th of March, highlighting steps that the government of Canada is taking to tackle Canada’s affordability crisis.

• A significant step in this regard is a mandate for financial institutions to begin offering the tax-free First Home Savings Account to Canadians starting on April 1. The program will help Canadians aged 18 to 40 years old save up for the down payment on their first home through a deposit of $8,000 annually, with a lifetime contribution of $40,000.

• The government is also introducing guidelines to protect mortgage-holders who are “facing exceptional circumstances.” Federally-regulated financial institutions will have to provide Canadians with “fair and equitable access” to appropriate relief measures, such as “extending amortizations, adjusting payment schedules, or authorizing lump-sum payments.”

• Another point of note, potentially impacting mortgages, is the govt’s announcement that it intends to cut the maximum allowable annual percentage rate (APR) on loans to 35%, down from the current 47 %. This measure does not apply to payday loans, which are short-term, ultra-high-interest loans for smaller amounts that are exempt from the criminal rate and fall under provincial rules.

• However, the budget didn’t contain any comprehensive plan to improve the housing supply crunch which is one of the largest barriers to affordability.

• Last year’s budget set a target of building 3.5 million homes, across Canada, from 2022 to 2031, which meant about 350,000 homes need to be built every year. The govt. well short of its target. In 2022 only 219,942 homes were completed and the projections for 2023 and 2024 are 223,00 and 206,000 respectively. This means within the first 3 years itself the govt will be hundreds of thousands of homes behind.

• Supply side issues are also being exacerbated with the rapid population increase we witnessed last year. Canada’s population is surging, and much of that comes from a rapid rise in the number of international students and other residents on time-limited permits.

• In 2022, the number of non-permanent residents rose by over 600,000 persons, accounting for 60 percent of Canada’s population growth last year. This increase in enrollment has contributed to high – and rising – rental costs in most communities with colleges and universities.

The post Highlights of Canada’s 2023 Budget – Impact on Real Estate and Mortgages appeared first on Ron Mortgages.

Further to my post dated 10 Jan 2023 regarding Canada’s foreign homebuyer ban, govt of Canada has just announced some changes.

Starting from March 27, 2023, some exceptions to the Foreign Buyer ban are now in effect in Ontario, Canada. The following changes have been made:

• Non-Canadians who hold a work permit or are authorized to work in Canada can purchase residential property if they have at least 183 days or more remaining on their permit or work authorization and have not already bought more than one property.
• Non-Canadians and foreign businesses can now purchase residential property if they plan to develop it. Any repairs, renovations, or remodeling will not be considered.
• Non-Canadians can also buy vacant land zoned for residential and mixed-use for any purpose.
• The control threshold for privately held corporations or entities formed under Canadian law has been increased from 3% to 10%.
• The Canada Revenue Agency (CRA) has waived the late fees and interest on the Underused Housing Tax (UHT), which requires non-resident, non-Canadians to pay 1% of the value of any unused or vacant property in Canada. They can now file UHT returns and payments without penalty until Oct. 31.

The post Updates to Canada’s foreign homebuyer ban and underutilized housing tax appeared first on Ron Mortgages.

What does it mean?

With the More Homes Built Faster Act, up to three residential units are permitted “as of right” on most land zoned for one home in residential areas without needing a municipal by-law amendment.

Key Points

• This will allow homeowners and landlords the ability to add an additional 1-2 units for rental or owner-occupied purposes.
• Minimum floor areas for each residential unit within the primary or accessory building cannot be imposed and no more than one additional parking space can be required.
• These new units must be compliant with the building code and municipal by-laws.

Important information to know

• The introduction of this initiative will not bypass the minimum building code requirements required for a multi-unit property.
• The three units could all be within the existing residential structure or could take the form of a residence with an in-law or basement suite and a laneway or garden home.

The post Ontario More Homes Built Faster Act appeared first on Ron Mortgages.

What is it? 

Once passed and officiated, the act would eliminate interest on Federal loans starting on April 1, 2023. 

Key Points

• This only applies to federal loans so provincial loan interest (if applicable) will still be charged. 
• This applies to new loans and graduates who are currently in repayment.

Important information to know:

• Students must confirm enrollment each semester to stay interest-free. 
• The zero-payment income threshold has increased to $40,000 from $25,000 for a family of one. 
• Monthly payments for those who make more than $40,000 a year will now be capped at 10 per cent of their household income.

The post Interest-Free Student and Apprentice Loans appeared first on Ron Mortgages.