Based on current bond yields, we can anticipate futher rate decreases in the near future. No other lenders have followed RBC’s lead thus far but we can expect them to match in the coming days.

Wayne Mah, AMP / Senior Mortgage Planner / mah.w@mortgagecentre.com / 604.880.1899

So if you qualify, why not take advantage of this?

Most certainly if you had to, this is a good new option in what are still hard economic times for many B.C. families. However, I do want to caution you and ensure you take a few things into account before doing so.

Please use this option only if necessary as you will just be increasing your debt load. Deferring the taxes means you will have to pay it back at some point. Interest is being charged (currently at Bank Prime, which is very low but is expected to increase) and accumulating on it. Plan on paying it back as soon as you can.

If you cannot pay it back and defer it each year it will be very easy to accumulate thousands, if not tens of thousands, dollars of additional debt. Some of you may be thinking…I will just pay it all back when I sell the home, whenever that is. Partially true. You may have to pay it back sooner than you think.

Let me explain.

If and when your mortgage comes up for renewal you may want to shop around and see if you can get a better deal somewhere else. This may pose a problem. Most lenders will want to ensure that the property taxes are up to date before approving you. Therefore, if you have deferred the property taxes you will need to bring them up to date at that point. What will you do if this occured? You would have to find the money to pay it or add it to the mortgage (and increase what you owe).

What happens if the equity in your home has decreased due to a drop in market values at that time? Remember, one criteria in this new deferment program is that you only need 15% equity in your home currently. What happens if values dropped when your mortgage came up for renewal? It would not take much of a drop in the market combined with the amount you deferred over more than a few years to create a possible situation where you would have insufficient equity to be able to increase the mortgage to pay the taxes. Each time you apply for a mortgage, the new lender will re-qualify you and an appraisal is one requirement.

Should this happen you will be unable to take advantage of any better deals out there. It may leave you stuck with your existing lender regardless of what they offered you.

And even if you had sufficient equity to add it to the mortgage, think of all the additional interest you would be paying over time.

In the long run you may pay more for the tax deferral than you may have anticipated.

I encourage you to give it a good deal of consideration before jumping in and deferring your property taxes. It is not something to take lightly.

So are you going to do it? Do you like the new program? I would love to hear from you.

Wayne Mah, AMP / Senior Mortgage Planner / mah.w@mortgagecentre.com / 604.880.1899

Now I am not getting into the debate over pot use but wanted to detail the steps required to purchase a property that was a former grow-op. In B.C. there seems to be a huge number of homes that are used for the illegal cultivation of marijuana. Once these places are shut down by the authorities or are known to have contained a former grow-op, selling and buying becomes much more complicated.

To start, the “stigma” of the property being a former grow-op stays with the property FOREVER in B.C. It must be disclosed on the Property Disclosure Statement by the seller regardless of how much time has past.

Now when it comes time to finance such a property there are many lenders that will not provide mortgages on them knowing what they were previously. Also, of the two major mortgage insurers (CMHC, Genworth) Genworth will not insure a mortgage on former grow-ops. They will only if the dwelling is bull-dozed and rebuilt from the ground up.

Luckily, there are still lenders and CMHC that will finance these properties. Here is what is generally needed:

1. If the property was shut down by the authorities, a new occupancy permit must be issued by the city/municipality. Normally this would require that the property be brought back up to building code.
2. An Environmental Phase 1 Assessment, which is an air quality test to ensure that there are no toxic mould or other harmful contaminents in the property.

The above two items are generally what are required. However, some lenders and also in some cases, an Enviromental Phase 2 assessment may be required. This is a much more extensive review of the property and would involve taking drywall samples, flooring samples, etc. Again to ensure no toxic mould or other harmful contaminents are present in the property.

Obviously properties of this type require a lot more work and documentation in order to obtain financing but it is still quite possible.

If you would like to discuss this further or have a comment I would love to hear from you.

Wayne Mah, Senior Mortgage Planner, The Mortgage Centre 604.880.1899 / mah.w@mortgagecentre.com

With this rise I expect all major lending institutions to rate their Prime Rates by an equivalent amount – from 2.25% to 2.50%. This means that if you are in a variable rate mortgage or have a line of credit, you will be paying more.

This is most likely a start of a series of rate increases by the Canadian central bank over the foreseeable future as the economy continues to improve. For some this may be a time to re-evaluate your debt and adjust accordingly.

The next Bank of Canada meeting is July 20, 2010.

Bank of Canada Press Release

Wayne Mah, Senior Mortgage Planner, The Mortgage Centre 604.880.1899 / mah.w@mortgagecentre.com

The Rebate

At this point those of us who have been paying attention to the new HST regulations would know that it is only new homes to which the HST will apply. I repeat, resale homes are NOT subject to the HST. However, there is a rebate of up to $26,250 available for new home purchases. See below for the eligible purchases:

• New homes with land
• New homes with leased land
• New mobile homes or float homes
• New home purchased through shares in housing co-op
• Homes newly constructed, or substantially renovated (90% or more) by owner/builder.

For these purchases, a rebate of 71.43%, or 7% of the 12%, of HST paid on the purchase is available up to a maximum amount of $26,250. NOTE: THESE ONLY APPLY TO PRIMARY RESIDENCES. If this is a vacation property or second home the eligibility does not apply.

Presales

The two key dates for presales are 11/18/2009 and 7/1/2010.

• If your agreement was signed before 11/18, and if you take possession either before or after 7/1, you will not be required to pay the HST. You also won’t be eligible for the HST rebate. You may, however, be eligible for the GST rebate offered.
• If your agreement was signed after 11/18, and if you take possession after 7/1, you are required to pay the HST. You may also be eligible for the HST rebate.

Leased Land

• If you have purchased your primary home or duplex together with leased land from a builder, you may be eligible for a rebate of up to $26,250.

Vacant Land

• If you have purchased from an individual that is not a builder, who has never used it for business purposes, you are exempt from the HST.
• If you have purchased a lot that has been subdivided into 3 or more lots, you are subject to the 5% GST if your possession date is before July 1st, even if the title transfers on or after July 1st. If you take possession on or after July 1st, you are subject to the HST.

Building?

This is where things get really complicated…

• If the majority of your construction (that is, again, 90% or more) on or after July 1st, you will be subject to the HST.
• If you newly construct or substantially renovate a residential property to rent it out, you may be eligible for the rebate of 71.43% of the provincial portion of the HST to a maximum of $26,250 per unit priced up to $525,000. If the unit is worth more than $525,000, there will be a flat rebate of $26,250.
  (To qualify for this rebate, the first use of the housing would be occupancy/use by renter or by builder as primary residence for a minimum of 1 year)

–> Eligible units:

1. Detached, attached or condo with or without legal secondary suite
2. Mobile or float home
3. Units in a multi-unit building (this includes long-term care residential facilities)
4. Land component of a single-unit or multi-unit building where the land is leased or is a co-op.

New Rental Apartment Buildings

• If you’ve bought a new rental building and have rented out all of the units, you would be eligible for a rebate of up to $26,250 per unit.
• If you’ve renovated or built a rental property, you must self-assess the value and pay the GST before July 1st, and HST on or after July 1st.

Rental of Land

Rebates are also available for landlords who make an exempt rental of land for residential use (ex. rent out a residential lot, or site in a mobile home park).

• You must self-assess the land and pay HST under the self-supply or change-in-use rules. Rebate is 71.43% of the provincial component of the HST paid up to a maximum of $8,663 (33% x 26,250) for each lot/site.

Residential Landlords

As a general rule of thumb, if you pay GST now, the HST will apply.

• Maintenance costs, including electricity, TV and other services provided to tenants.
• You will not be able to claim input tax credits
• You will not be allowed to recover the HST from tenants; owning residential rentals is an exempt activity and landlords cannot register for GST/HST.

Parking Spaces

• If you rent one…yep, HST applies.

How the HST will affect the buying/renovating process

• Applies to home renovations
• Appliances, insulation, windows and doors
• Residential utility costs, such as hydro, cable, telephone, electricity…but EXCLUDING natural gas.
• Closing costs including appraisals and inspections
• Moving costs
• REALTOR fees or commissions

Questions? Get in touch. amy@vancouverpowersearch.com

This is super news for both buyers and sellers. Now buyers can go as low as 5% down again!

No updates from the other two insurers as of yet.

Wayne Mah, Senior Mortgage Planner, The Mortgage Centre 604.880.1899 / mah.w@mortgagecentre.com

This is a very recent change!!!

I found this very strange and having been in the industry for many years I decided to find out why. In the past these were not an issue.

Some background on these types of properties. Although strata duplexes are not rare, they are not abundant. I have seen some strata four-plexes as well in the past. As these complexes are small (usually only 2 owners) many do not follow the rules and regulations of the B.C. strata property act (holding meetings, having bylaws, collecting monthly strata fees, etc.). This is called a “non-conforming strata”. Why would they when there are only such a small number of owners? The owners would just have an informal agreement to do what needs to be done.

Apparently, this is the problem and has caused the recent change by the insurers. With no “formal” structure I was told there have been instances of “litigation” between owners in a few complexes. Ultimately this involved the lender and thus the insurers. The insurers do not want to be involved in such incidences and thus are now not insuring such properties.

This is a big problem as this means a minimum of 20% down if you wish to purchase such a property. Ultimately, our client could not make the purchase. They were upset and so were the real estate professionals involved.

I have been told by one insurer that they are working with their legal department to see if there is a remedy and get these properties okayed again. However, in the meantime the only way they will approve loans on such properties is if they fully comply with the B.C. strata property act. This mean to hold meetings, keep minutes, implement bylaws, etc.

Thus far I am not aware of any lenders not approving mortgages on these properties if the client has more than 20% down (bypassing the insurance regulations).

I would love to hear your comments. Are you planning to buy or sell one of these properties? Have you encountered this problem?

Wayne Mah, Senior Mortgage Planner, The Mortgage Centre 604.880.1899 / mah.w@mortgagecentre.com

As Canada and the United States share the largest border in the world, citizens from both sides of the border travel back and forth extensively. And not surprisingly a large number own, or wish to own, properties in the other’s country. Financing for these cross border purchases is quite easy due to the close ties between our two nations.

There a two basic methods to finance a purchase in Canada if you live in the United States:

1. Finance the purchase through a U.S. lender, perhaps using the property you own in the U.S, and buying the property in Canada outright.
2. Obtain financing via a Canadian lender.

As an American citizen, a purchaser is able to finance up to 80% the value of the property in Canada. Qualifications that are used for Canadian citizens would be applied. The approval would be based on your income, credit history, and current debt load.

Documents typically needed:

1. A completed application.
2. Confirmation of your income via a letter of employment, recent paystub or tax filing.
3. Confirmation of your downpayment via 3 months of bank statements. Any irregular deposits would have to be verified as to source.
4. A credit bureau will be obtained and reviewed by the lender.

That is basically it!

Please note that in Canada most lenders do have what we call a “sliding scale” for higher valued properties. You may be able to borrow 80% of the value if qualified for modestly priced homes. However, for properties over $1 million they will be treated to this “scale”. As an example, the lender may only finance 80% of the first $750,000 and 50% of the balance of the purchase price. So the higher the value the less “overall” percentage you will be able to finance.

This information is to be relied upon as a general guideline only.

Please contact me for a more detailed discussion about your specific needs.

Wayne Mah, Senior Mortgage Planner, The Mortgage Centre 604.880.1899 / mah.w@mortgagecentre.com

Expect all other lenders to follow in the next few days. If you are in the market to buy, renew, or refinance it is now more important to book a rate more than ever. A month ago, many qualified clients were able to get a 5 year fixed rate term around the 3.69% mark. Today, it is around 4.50% and with this latest increase it will be even higher once all the changes take place.

These rate increases, along with the recent mortgage rule changes, is quickly eroding the amounts that borrowers are able to get.

Is this effecting you? Changing your mind about buying?

Comments and feedback are welcome.

Wayne Mah, Senior Mortgage Planner, The Mortgage Centre 604.880.1899 / mah.w@mortgagecentre.com

So far no other major lenders have matched these increases but I expect them to follow suit shortly.

Wayne Mah, Senior Mortgage Planner, The Mortgage Centre 604.880.1899 / mah.w@mortgagecentre.com