4 Ways Home Buyers Will Be Affected By The New Mortgage Rules

4 WAYS HOME BUYERS WILL BE AFFECTED BY THE NEW MORTGAGE RULES ON JANUARY 1, 2018

Feeling stressed about the new “stress test”? Here’s what you need to know…

As of January 1st, 2018, all home-buyers will be required to undergo a new “stress test” – regardless of your down payment amount.

This will not only reduce how much financing you qualify for on your next purchase, but it will also limit affordability on the refinance of your existing home. In fact, some scenarios show Canadians will be able to afford 20 percent less house once the new rules come into effect.

Securing your mortgage before the January 1st deadline could potentially save you tends of thousands of dollars.

-- From: www.msavvy.ca

THE QUESTION IS: HOW DO THE NEW RULES AFFECT YOU AND YOUR FINANCIAL GOALS?

While the industry is undergoing a massive shift, you always have options. We’re happy to walk you through them. In the meantime, here are four reasons you may want to take action before the new rules set in…

REASON #1: You’re a few months away from buying your first home.

For years now, you’ve been working hard to cut down on expenses and save up for that down payment. The fact is, you’re tired of paying someone else’s mortgage and you’re ready to start investing in your own financial future. If you’ve been thinking about purchasing a home in the coming year, you may be closer to your goal than you realize.

Wondering how much house you can afford? We break it down in the chart below. For more specific numbers, try using our savvy calculator to determine affordability based on your current income and budget.

Of course, these numbers are all about to change. As of January 1st, 2019, your maximum mortgage affordability will drop. We summarize the impact in our affordability chart here.

Wondering if this is the time to make the leap into home ownership? Fill out our online application to determine if now is the time to buy your first home.

 

REASON #2: You have some debt to pay off (or large expenses coming up).

Perhaps your kids are heading off to university, or you are looking to free up some extra cash to cover home renovation expenses. Refinancing allows you to tap into your home’s equity to pay off debt while taking advantage of lower interest rates. In fact, you can refinance up to 80% of your home’s value to pay off unsecured debts, renovation debt, or to simply access cash.

If your debt is weighing you down, this may be your best opportunity to make a change. Fill out our quick and easy online application form and we’ll help you determine if refinancing before the January 1st deadline is the right option for you.

Of course, these numbers are all about to change. As of January 1st, 2019, your maximum mortgage affordability will drop. We summarize the impact in our affordability chart here.

Wondering if this is the time to make the leap into home ownership? Fill out our online application to determine if now is the time to buy your first home.

 

REASON #3: You’re ready to upgrade.

As your family grows, so does your lifestyle. Right now, mortgage rates are at a historical low – we’re talking 1.99% for a variable five-year mortgage rate in Ontario. At this rate, a family buying a home for $500,000 with a $125,000 down payment could expect to have a monthly mortgage payment of $1,743.

But as of January 1st, that same buyer will have to undergo a stress test prior to qualifying in order to ensure they can afford to pay their mortgage at two percentage points higher (3.99%). This means they would have to show they can afford to pay a mortgage of $2,165 per month. That’s a difference of $422 a month – or $5,064 a year!

(Refer to “Chart B” above for the full breakdown of the impact on affordability). If you’ve been thinking about making a move, it may be in your best interest to secure a mortgage pre-approval before the new mortgage rules kick in.

 

REASON #4: You’re looking to make an investment purchase.

By now you know, it’s about to become tougher to qualify for a mortgage. No matter how you look at it, your purchasing power will decrease when the new rules come into effect January 1st.

If you’ve been considering financing an investment property, doing so before the deadline could mean the difference of owning up to 20 percent more house (as opposed to waiting until 2018 to purchase). Take a few minutes to fill out an online mortgage application today, and we’ll get back to you right away with the answers you’re looking for.

While the January 1st deadline is fast approaching, we want you to remember: it’s not just about the numbers. Even if you’re not in a position to purchase before the January 1st deadline, you still have options.

We’re here to discuss your short and long-term financial plan, so we can help you make the decisions that are right for your personal situation. And we promise we would never make a recommendation we wouldn’t suggest for our own family members. Get started by filling out an online mortgage application, and we’ll take it from there.

 

Have the paperwork ready? Let's get started. Click here to apply with our partners at Mortgage Savvy.

8 Reasons Why I Love Investing in Real Estate

Here are 8 reasons why real estate is an "able" investment. Try finding any other asset class that has all of these benefits, that the average consumer can easy purchase and understand.

For more blog posts, click here.

Transcript:

If you're not investing in real estate, you're missing out!  Let me share with you 8 reasons why I love investing in real estate. 

1. It's Accessible.

 Anyone can buy it. As long as you're over the age of 18 years old, whether you're a Canadian resident or not, you can buy real estate.  Now recently Ontario implemented a "Non-Resident Speculation Tax", which honestly is just a tax grab.  I've noticed that our foreign clients have not cared. At the end of the day, Canada is an economically AND politically stable country.  Anyway, that's a whole other topic and I'll make a video about it sometime.

2. It's Appreciatable

Real estate typically will increase in value over time. One thing's for sure, there's only so much of it, and when something comes in limited supply, the price is bound to go up over time.

3. It's Leverageable.

You can buy on margin, and borrow against your equity. When you buy a home, you typically don't buy the place in cash. Usually you get about 20% down, and then you finance the rest through a mortgage (you can actually go less than 20% down). However, any gains that you make on the property will be real, so if you think about it, here's a simple example. You buy a $1,000,000 home with 20% down, that's $200,000 in cash. But the value of the home goes up by 20% every year, which is pretty realistic, even in today's market. So basically, you've just made $200,000 on your $200,000 down, or double of you've put down, in one year only. Now I know it's a very simplistic example, as there's closing costs, transaction fees, taxes that you have to pay, and you really don't see the gains until you actually sell. But you can always re-mortgage the property and take the equity out to use towards other investments. Anyway, imagine what would happen if you held it longer than a year!

4. It's Rentable.

Chances are, whatever you invest in will be rentable. Now there's different schools of thought of owning vs. renting, and how to use your money, but let me tell you this. With vacancy rates hover around 1% in Toronto, you'll typically see bidding wars for properties for tenants to live in. But tenants don't care about the real estate market, they just want a place to rest their heads! And the average rent for a one bedroom condo is over $2,000, that's crazy! Two bedrooms are just around $3,000, and that's just the average! And if you have a tenant in there, even if the rents aren't cashflow positive after expenses, they're still paying down your equity, and paying down your mortgage. I'm sure you've heard it before, tenants are always paying off the landlord's mortgages.

5. It's Improvable.

If you purchase a place that's a dump, you're probably going to get a discount on it. But even if it isn't, you can always improve the property and increase the value over time. You want to be careful not to over-improve the property and not get the returns, unless you're using it for your own enjoyment.

Number 6, and this is my favourite, there's great tax benefits to owning real estate. I don't know how long this is going to last, but currently if you're a resident of Canada, let's say you made $200,000 on your $1,000,000 property in one year, and you sold it, if it's your own primary residence, you don't pay any tax on that, that's great! And if it's not your primary residence, because I always say, you're home is not an investment because you're always going to need somewhere to live, somewhere equal or greater than where you currently live now, then you only pay tax on 50% of that. So in that example, $100,000 of that goes towards your income and you pay your taxes as you normally would. That's great! What other investment class do you know that can do this for you? Because typically you have to pay taxes on all of the gains. In addition to this, you can write off all the expenses to rental properties. If you purchase the property in a holding company, you can always defer the income.

7. It's Stable.

 It's slow to rise and slow to fall. Now the number one complaint I hear about investing in real estate is that it's not liquid, but is that a bad thing? I don't want to have sleepless nights and lose my investment in a blink of an eye. Even if the real estate market does drop quickly, there won't be mass panic and it won't go to zero. And really, it won't affect you unless you sell. Your mortgage is commonly locked in to a five year term in Canada, so either you (or your tenants) would be paying it off, and they'll be paying the same monthly payments, regardless of what the market is doing. As long as you can hold on, you can probably weather any storms, and more importantly, ride the waves.

8. It's Liveable.

At the end of the day, someone is going to want to live in that property, even if the market tanks. Try living in your BlackBerry or Nortel stock. So I hope that opens your eyes, and I challenge you to find a better investment class. If you're already convinced and you don't know what to invest in, you can always give us a call, we'll find the right investment for you. And don't forget, subscribe to our channel, and stay tuned for our next video. Until then, happy investing!