There appears to be a lot of confusion in the market with regards to the recent "rule" changes announced by the Bank of Canada, and the pending introduction of the Harmonized Sales Tax (HST). Unfortunately the press has done a poor job of conveying these changes, therefore there is a lot of confusion with the public that could have a negative influence our economy and our businesses. It is important that all my clients understand all these changes and the impact it will have on them.
While some rule changes have been introduced from the Bank of Canada and CMHC, the most important thing is what has not changed. There is no change to home buyers purchasing with only 5% down. ALL CONSUMERS WHETHER THEY ARE A FIRST TIME HOME BUYER, OR A REPEAT HOME BUYER, THEY CAN STILL PURCHASE WITH ONLY 5% DOWN.
Broadly speaking, the plan unveiled has three components.
1. CMHC will require that all borrowers meet the standards for a five-year fixed-rate mortgage, even if they choose a variable mortgage with a lower rate or a shorter term.
This provision has been put in place to guard against higher rates in the future.
2. The rules would lower the maximum Canadians can withdraw when refinancing their mortgages to 90 per cent of the value of their home, from 95 per cent.
This was done to prevent home owners using their home as an "ATM", or clients who repeatedly refinance their home as they get themselves over-extended on credit
3. CMHC will now require a minimum 20 per cent down payment to qualify for CMHC insurance for non-owner-occupied properties purchased as an investment.
This last rule is aimed at reining in would-be real estate speculators who own multiple properties beyond their primary residence.
New Housing Rebates - Who will pay this new tax?
* HST will not apply on the purchase price of re-sale homes.
* HST will not apply on CMHC premiums. CMHC premium will continue to be subject to PST only.
* HST will apply to services such as moving cost, legal fees, home inspection fees, and Real Estate commissions.
Yes, this tax will affect resale properties indirectly with the additional costs added to the services associated with buying and selling a home. So it's not just a concern for "new home" buyers.
* HST will be applied on the purchase of new homes. However, homebuyers will be able to receive a rebate of a portion of the provincial tax for new homes priced up to $500,000. The rebate for new primary residences under $400,000 will be six percent of the purchase price (or 75 percent of the provincial portion of the tax), with the rebate amount reduced for homes priced between $400,000 and $500,000.
Buyers of new residential rental properties will receive a similar rebate.
If I can be of any assistance to you , your family and friends , please do not hesitate to contact me through the office, or directly at 416-704-5608.
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