CMHC to issue first-ever ‘red’ warning for Canadian housing market: What that means for you

Canadian Mortgage and Housing Corporation CEO Evan Siddall said in an op-ed in the Globe and Mail this week that for the first time ever, the federal agency will be issuing a “red” level warning for the entire Canadian housing market.

The announcement will come in CMHC’s quarterly Housing Market Assessment on Oct. 26.

According to CMHC, a “red” warning indicates evidence of problematic conditions in the housing market. To assess the risk, the agency looks at four things:

Overheating of demand, where sales outpace new listings
-Acceleration of house prices
-Overvaluation in house prices, where prices are not fully supported by income, mortgage rates and population
-Overbuilding

These factors have to be strong in order for a high-risk warning to be issued.

But according to TD economist Diana Petramala, home owners shouldn’t be too worried yet about a housing crash.

“It’s very odd to be coming out with a red reading now that the economy is doing well and market activity has slowed,” she said.

http://globalnews.ca/news/3018605/cmhc-to-issue-first-ever-red-warning-for-canadian-housing-market-what-that-means-for-you/

How Much You Need to Make To Buy Average House In This Canada

Can the rent charged in advance?

Can you ask you tenants to pay for, say, 6 months in advance? Ontario’s Residential Tenancies Act says no, but as it appears now, you can charge it, but only if tenants are the ones offering you the upfront payment, as per recent ruling of the court.

A recent decision of the Ontario Superior Court provides important lessons about lease negotiations between landlords and tenants in Ontario.

Here’s what happened:

Alison Corvers agreed to rent a home from Tanveer Bumbia in Mississauga from May 1, 2013 to April 30, 2014 for $7,500 per month. Bumbia initially refused Corvers’ rental application because Corvers was from the UK, was here on a visitor’s visa and was hoping to extend her time here by getting a work visa, according to her lawyer. Bumbia was concerned as to whether she would maintain the payments.

Corvers then paid one years’ rent in advance, $90,000, to demonstrate her good faith. Bumbia accepted this. Corvers also paid a security deposit of $7,500 up front to cover potential damages to the unit. The problem is that under Ontario’s Residential Tenancies Act, a landlord cannot request more than first and last month’s rent before a tenant moves into the property. The Act also states that anything in a lease that violates the Act is void. As such, after moving in, Corvers brought an application to court to pay the extra months’ rent and the security deposit back to her, as she claimed that this was all demanded by the landlord. In an original decision dated October 7, 2013, Judge Kofi Barnes of the Superior Court of Ontario looked at a text sent by the tenant’s real estate agent to the landlord’s agent that said “Alison will pay 12 month’s rent up front.” Based on that, he decided that since the tenant offered the money up-front, it was legal. However, since the security deposit was not offered by the tenant, this amount had to be paid back.

The case was appealed and in a decision dated February 12, 2014, Superior Court judge Frank Marrocco agreed with Justice Barnes and explained that while a landlord could not require a tenant to pay more than first and last month’s rent as a condition of the tenancy, if the tenant offered to pay more money in advance and the landlord accepted the payment, then it would be legal. In addition, the court held that interest on the entire prepayment of rent had to be paid by the landlord, in accordance with the rate prescribed under the Act, which was 2.5 per cent in 2013 and .8 per cent in 2014.

Barnes cited a decision in 2009 of Royal Bank v MacPherson in support of this position. In the MacPherson case, the tenant prepaid a year’s rent of $24,000 to the landlord and then the landlord lost the property to the bank after defaulting on his mortgage. The tenant said he did not owe any rent as he had prepaid it for a year. The bank argued that since the payment was illegal, it should not be binding. The court disagreed, and said that the bank must step into the shoes of the landlord and be bound by the prepayment. It would be unfair to penalize the tenant by not recognizing the prepayment.

As a result of the MacPherson case, lenders who sell a rental property after an owner defaults will typically state that the buyer accepts any tenancy arrangement. A buyer in this situation must do due diligence in advance to try and verify what payments were made by the tenant to the prior landlord so that they are not faced with a similar situation where the tenant has prepaid rent to someone else and now they are stuck with it.

 Here are the lessons to be learned from these cases:

Landlords cannot advertise that they will require more than first and last month’s rent in advance of the tenant moving in. This includes any security deposit.

If the tenant offers to pay extra money up front, make sure that it is clear that the offer is coming from the tenant. This could include a deposit to cover any damages or clean the unit when the tenant wants to bring a pet.

Tenants need to keep a receipt for the payment as proof that the amount was paid, in case it is ever challenged later by anyone.

Source:   Toronto Star

Key points if you want to build a cottage on an empty lot

In your search for the perfect vacation getaway, the most appealing property may turn out to be an undeveloped lot. The lure of inexpensive land can produce sticker shock, however, when it comes time to actually put up a cottage. Invariably, an inverse relationship exists between land cost and construction cost in cottage country. Highly serviced, accessible lots are more expensive than ones that can only be reached by boat or along an unassumed bush road. At the same time, construction costs are going to  be less per square foot for a lot that is easy to drive to and presents no complications for delivery of materials and access for tradespeople and their equipment.

The expenses to-do list below can help you get a handle on costs for the lot you’re considering; it’s excerpted from a book by Douglas Hunter covering all aspects of  cottage real estate, called The Cottage Ownership Guide: How to Buy, Sell, Rent, Share, Hand Down & Retire to Your Waterfront Getaway, published by Cottage Life Books. 

What you need to do

• Determine whether a lot is “finished.” This means some degree of utility service—electricity, water, sewage, land-line telephone—is directly available to the site. Often, it can also mean it is located on an assumed public road.

• If a road doesn’t exist and utilities are not already available to the site, first of all find out whether it is even possible to connect to these services. Then decide which ones you absolutely want and determine how much you will be charged to hook up (if you can hook up at all). An electrical utility may provide free connection within a certain distance of the road, but then start charging hefty rates for the linear distance to the building afterwards. (When additional utility poles are required to bridge the distance, costs can be astronomical.)

• If utilities are not available or are prohibitively expensive, figure out what you’re going to need to provide on your own (such as power, potable water, and a septic bed and tank). Check requirements with the appropriate authorities (for instance, the necessary size and setback of your septic system) and get estimates from local professionals on the costs involved. Water and waste can be big-ticket items. Spending $10,000–$15,000 on a drilled well is not out of the ordinary, and a septic system, depending on the size, style, and the site, can easily top $10,000.

• Get a grip on your design costs. If you’re not working from scratch with an architect and intend to use stock plans, you still have to buy them and then ensure, either on your own or through your contractor, that the specifications satisfy the local building code and zoning regulations.

• If you intend to have someone build the cottage for you, round up the local contractors, get references, and ask for a general estimate of building costs, based on what you envision in terms of square footage, winterizing, and foundations. You don’t need a finished set of plans. A good contractor will be able to tell you the sort of ballpark costs per square foot your dream getaway will command, before you get to a specific quote bid.

• Even if you are determined to build the property yourself, you may want tradespeople for certain phases to speed along the work. Hiring framers is a common strategy for getting together at least the shell of the building. Find out who’s available locally and what they’ll charge. Be prepared to rely on hired help more than you anticipated. Getting the basic structure up and enclosed is a major hurdle, especially before winter sets in. Once you have a roof, windows, doors, and walls, you can work on finishing the interior yourself.

• While it’s true that square footage drives cost, budgets for an individual project will vary tremendously according to labour (how much of the job the owner can take on, the logistics involved for tradespeople to access and work on the site) and materials.

• Consider managing costs by building in increments. A basic cottage can be designed and built, with an add-on wing planned for a few years later. Just be sure that your expansion can be accommodated by the applicable zoning regulations.

Construction Draw Mortgage

Have you ever though of building your own home or cottage? Here is some information on how to finance construction 

Key Features:

Customers receive funds at various stages of completion of the construction of a new owner occupied home

A first advance is available to assist with the purchase of vacant land or as equity take-out when the lot is already owned (up to 65% of the property lending value of vacant land – uninsured only)

Purpose

Customers purchasing land or requiring equity take-out on land for immediate construction of a principal residence or cottage and leisure home for their own personal use

Customers who already own their land and require funds to cover immediate construction costs prior to the first construction advance being available at the airtight stage.

Term

18 Months

Maximum 15 Month Construction Period - Construction must be completed within 15 months from the date of the 1st advance

Pricing

Prime Rate plus 1.00%

Interest Only payments (based on the amount advanced)

End of 15 Month Construction Period

Amount advanced to date will be renewed into a fixed rate or variable rate mortgage

Maximum Loan to Value Ratio

Uninsured: Up to 80% LVR

Insured 1-2 Units: Up to 95% LVR

Insured 3-4 Units: Up to 90%LVR (CMHC Only)

Eligible Properties

Land must be zoned for residential or vacation home use

Owner-occupied or Rental with a maximum of 4 units (CMHC Insured: owner-occupied only; Genworth Insured: owner-occupied only - maximum of 2 units)

Fees

Appraisal and progress inspection fees may be deducted from each draw

Amortization

Insured: Maximum 25 years

Uninsured: Maximum 30 years

Qualifying Rate

Qualifying Interest Rate will be the 5-year benchmark rate

Advances

Optional First Advance Prior to Start of Construction (Uninsured Only): 65% of the lending value of the vacant land

Optional 15% First Advance (Insured Only): At 15% complete; Excavation and foundation complete

40% First Advance Received: At least 40% complete; Roof is on, the building is weather protected (i.e. airtight, access secured)

65% Second Advance Received: At least 65% complete; Plumbing and wiring is started, plaster/drywall is complete, furnace installed, exterior wall cladding complete, etc.

85% Third Advance Received: At least 85% complete; Kitchen cupboards installed, bathroom completed, doors have been hung, etc.

100% Fourth Advance Received: 100% complete

Carbon Monoxide Detector Are Now Mandatory in Ontario

A law making carbon monoxide warning devices mandatory in Ontario homes takes effect this Wednesday.

Community Safety and Correctional Services Minister Yasir Naqvi said the odourless, colourless gas kills about 50 Canadians, including 11 Ontarians, every year.

While there will be an emphasis on public education for the next few months, failure to install a carbon monoxide detector carries a fine of $235.

Bill 77 updates the Ontario Fire Code to mandate the use of carbon monoxide warning devices in houses, condos, apartments, hotels and university residences that have a fuel-burning device such as a fireplace, gas stove, water heater or furnace — or if the home is attached to a garage.

The only residences not affected by the new regulation are those that are all electric and have no attached garages.

The devices range in price from $30-$60 and can be plugged in, hard-wired or battery operated, Naqvi said.

The Ontario Building Code has required detectors in residential construction since 2011, but this bill applies to all homes in the province.

Buying an empty lot. 8 cost considerations to help you turn vacant land into your perfect getaway

In your search for the perfect vacation getaway, the most appealing property may turn out to be an undeveloped lot. The lure of inexpensive land can produce sticker shock, however, when it comes time to actually put up a cottage. Invariably, an inverse relationship exists between land cost and construction cost in cottage country. Highly serviced, accessible lots are more expensive than ones that can only be reached by boat or along an unassumed bush road. At the same time, construction costs are going to  be less per square foot for a lot that is easy to drive to and presents no complications for delivery of materials and access for tradespeople and their equipment.

What you need to do

• Determine whether a lot is “finished.” This means some degree of utility service—electricity, water, sewage, land-line telephone—is directly available to the site. Often, it can also mean it is located on an assumed public road.
• If a road doesn’t exist and utilities are not already available to the site, first of all find out whether it is even possible to connect to these services. Then decide which ones you absolutely want and determine how much you will be charged to hook up (if you can hook up at all). An electrical utility may provide free connection within a certain distance of the road, but then start charging hefty rates for the linear distance to the building afterwards. (When additional utility poles are required to bridge the distance, costs can be astronomical.)
• If utilities are not available or are prohibitively expensive, figure out what you’re going to need to provide on your own (such as power, potable water, and a septic bed and tank). Check requirements with the appropriate authorities (for instance, the necessary size and setback of your septic system) and get estimates from local professionals on the costs involved. Water and waste can be big-ticket items. Spending $10,000–$15,000 on a drilled well is not out of the ordinary, and a septic system, depending on the size, style, and the site, can easily top $10,000.
• Get a grip on your design costs. If you’re not working from scratch with an architect and intend to use stock plans, you still have to buy them and then ensure, either on your own or through your contractor, that the specifications satisfy the local building code and zoning regulations.
• If you intend to have someone build the cottage for you, round up the local contractors, get references, and ask for a general estimate of building costs, based on what you envision in terms of square footage, winterizing, and foundations. You don’t need a finished set of plans. A good contractor will be able to tell you the sort of ballpark costs per square foot your dream getaway will command, before you get to a specific quote bid.
• Even if you are determined to build the property yourself, you may want tradespeople for certain phases to speed along the work. Hiring framers is a common strategy for getting together at least the shell of the building. Find out who’s available locally and what they’ll charge. Be prepared to rely on hired help more than you anticipated. Getting the basic structure up and enclosed is a major hurdle, especially before winter sets in. Once you have a roof, windows, doors, and walls, you can work on finishing the interior yourself.
• While it’s true that square footage drives cost, budgets for an individual project will vary tremendously according to labour (how much of the job the owner can take on, the logistics involved for tradespeople to access and work on the site) and materials.
• Consider managing costs by building in increments. A basic cottage can be designed and built, with an add-on wing planned for a few years later. Just be sure that your expansion can be accommodated by the applicable zoning regulations.