SUMMARY

Effective July 1, 2010, the Harmonized Sales Tax (HST) in Ontario and British Columbia will apply to residential home purchases from builders closing within 120 days. When completing these applications it is important to ensure the purchase price of the residential property includes the HST minus any applicable rebates.

While most builders include the HST, minus any applicable rebates in the purchase price, not all of them will do this. When the builder does not include the HST, it will result in an uncomfortable customer experience at closing as the customer may have a large outstanding HST amount included on their Statement of Adjustments.

ACTION

When completing a residential home purchase from a builder closing within 120 days, carefully review the Purchase Agreement to determine if the purchase price of the property includes or excludes the HST, minus any applicable rebates.

1.       If the purchase price includes the HST, minus any applicable rebates, use the purchase price as stated on the Purchase Agreement.

2.       If the purchase price excludes the HST and/or any applicable rebates, you should obtain an Amendment/Addendum from the builder reflecting a purchase price inclusive of the HST, minus any applicable rebates.   

ADDITIONAL INFORMATION

·       For questions specific to HST and Federal or Provincial New Housing Rebate eligibility, customers must contact their builder or solicitor directly.

·       The CRA’s current policies’ regarding the application of the GST to housing generally applies to the HST.  Similarly for rebate eligibility, the property must be the primary place of residence of the purchaser or a direct relation of the purchaser.

Click here for examples and more details

Facts about the HST
What is the HST?
How will it affect what I buy?
Click here for more information

CMHC has announced and will be implementing many changes that will impact all Insured mortgages. I have been hearing a lot of confusion regarding these changes and wanted to recap CMHC’s new rules effective April 9th & 19th

1)  All changes are effective April 19, 2010 with exception to change # 7 & 8 which will be effective April 9th.   

2)  Qualifying rate - For Insured loans with fixed term of less than 5 years and for all Variable rate mortgages, regardless of the term, the qualifying interest rate is the greater of:  the benchmark rate and the contract interest rate.  The benchmark Bank of Canada’s 5 year interest rate is the average of the 5 major banks posted 5 year rate and essentially, this will be the new qualifying rate for shorter term mortgages and variable rate mortgages.  It moves the current qualifying rate from 3.40% to 5.39% for those with less than 20% available to use as a down payment.

 

3)  Refinance loan to value maximum will be 90%

 

4)  Maximum loan to value for rental (non owner occupied) will be 80% LTV 1 to 4 units.

 

5)  Rental income qualification.  50% of the gross rental income from the subject property may be included into the borrower’s gross annual income for the purpose of calculating the borrower's Total Debt Service Ratio.

 

6)  Maximum numbers of Units under CMHC Second Home. Second home product only available for 1 unit owner occupied properties. 

 

7)  Changes to CMHC Self Employed Product will be effective April 9.   For purchase and portability the maximum LTV will be 90%.  For refinance the maximum LTV is 85%.  Also qualification rules have changed for this product.  If a client has been self employed in the same business for more than 3 years, they are NOT eligible under the CMHC Self Employed Product without Traditional third party validation of income (qualified deal).  CMHC will continue to require that the borrower have a minimum of 2 years experience in the same field.  This can include time spent working as a non self employed worker in the same field.  Lenders are expected to obtain a copy of the business or GST license or Articles of Incorporation.  Therefore if a client is self employed over 3 years, then you cannot do a self employed product. It must be qualified.  If a client is self employed up to 3 years, you can do a self employed product.

 

8)  Commissioned income will no longer be eligible for the CMHC Self Employed Product without traditional third party validation of income.1)  All changes are effective April 19, 2010 with exception to change # 7 & 8 which will be effective April 9th. 

 

2)  Qualifying rate - For Insured loans with fixed term of less than 5 years and for all Variable rate mortgages, regardless of the term, the qualifying interest rate is the greater of:  the benchmark rate and the contract interest rate.  The benchmark Bank of Canada’s 5 year interest rate is the average of the 5 major banks posted 5 year rate and essentially, this will be the new qualifying rate for shorter term mortgages and variable rate mortgages.  It moves the current qualifying rate from 3.40% to 5.39% for those with less than 20% available to use as a down payment.

 

3)  Refinance loan to value maximum will be 90%

 

4)  Maximum loan to value for rental (non owner occupied) will be 80% LTV 1 to 4 units.

 

5)  Rental income qualification.  50% of the gross rental income from the subject property may be included into the borrower’s gross annual income for the purpose of calculating the borrower's Total Debt Service Ratio.

 

6)  Maximum numbers of Units under CMHC Second Home. Second home product only available for 1 unit owner occupied properties. 

 

7)  Changes to CMHC Self Employed Product will be effective April 9.   For purchase and portability the maximum LTV will be 90%.  For refinance the maximum LTV is 85%.  Also qualification rules have changed for this product.  If a client has been self employed in the same business for more than 3 years, they are NOT eligible under the CMHC Self Employed Product without Traditional third party validation of income (qualified deal).  CMHC will continue to require that the borrower have a minimum of 2 years experience in the same field.  This can include time spent working as a non self employed worker in the same field.  Lenders are expected to obtain a copy of the business or GST license or Articles of Incorporation.  Therefore if a client is self employed over 3 years, then you cannot do a self employed product. It must be qualified.  If a client is self employed up to 3 years, you can do a self employed product.

 

8)  Commissioned income will no longer be eligible for the CMHC Self Employed Product without traditional third party validation of income.

Governor of Bank of Canada Speaks to Carleton University.........Bank places supreme importance on policy measures within a well-
developed framework.

Click here to read speach

With the recent announcement by the government to its changes  in Mortgage Financing  that will take effect on April 19. I thought I would highlight one of the changes in particular.

 

 What will the Posted rate be that will be used to qualify clients on April 19? 

This is still in discussions with the government so it is a great time to act now.

For Example:

Average family income of $80,000

Currently they can qualify at 3.75%

New qualifying rate at April 19,2010 5.5% ( I am using a guess here )

Today they would qualify for approx a $422,000 mortgage

On April 19......

They will only qualify for a mortgage of $339,000 .

That means they are loosing out on 83,000 in purchasing Power.
Get the most purchasing power by acting before April 19, 2010

OTTAWA – The Board of Directors of the Bank of Canada today announced that Tiff Macklem has been appointed Senior Deputy Governor for a term of seven years beginning 1 July, 2010. His selection was made by the independent members of the Bank’s Board and was approved by the federal Cabinet.

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United States - Swifter, Higher, Stronger
Canada - A Battle of Prices
U.S. - Upcoming Key Economic Releases

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Watch CBC Marketplace - " In Denial " - This segment from CBC Marketplace on February 6, 2008 provides you with concise information about bank mortgage insurance and the reasons for consumers to purchase their insurance through a licensed broker.

Click here to watch