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Month: April 2024

Home Energy Loan Program
CategoriesUncategorized

Home Energy Loan Program

By Vergil,

Improving your home’s energy efficiency is a significant step in reducing emissions linked to climate change. With the Home Energy Loan Program (HELP), Toronto homeowners can borrow up to $125,000 to finance various energy-saving upgrades. These upgrades include air-source heat pumps, window/door replacements, insulation for the basement/attic/exterior walls, air sealing, geothermal systems, high-efficiency water heaters, furnaces/boilers/air conditioners, tankless water heaters, drain-water heat recovery systems, toilet replacements, solar hot water systems, rooftop solar PV panels, electric vehicle charging stations (Level 2), and battery storage. HELP offers homeowners an accessible and cost-effective way to fund home improvements over time, while also providing access to rebates from utility companies and the federal government. Funding approval allows homeowners to select their preferred contractor and complete the necessary renovations. Additionally, projects involving solar, windows, geothermal, or heat pumps qualify for a 20-year term.

To be eligible for a low-interest loan through HELP, you must meet the following criteria:

  • Own a detached, semi-detached, or row house located in the City of Toronto, with a postal code beginning with an “M”;
  • Obtain consent from all property owners listed on the title to participate in the program; Have had no more than three instances of property tax or utility accounts being 60 days past due within the last three years;
  • Obtain written consent from your mortgage lender if applicable.

You have the option to combine HELP with energy efficiency rebates and incentives offered by the City of Toronto, the Province of Ontario, the Government of Canada, and utility companies.

Step 1: Fill out an Application Form

Complete the online application form.

Upon receiving and approving your application, the City will send you a funding offer detailing the maximum amount your property is eligible to receive through the Home Energy Loan Program (HELP). If your property is mortgaged, we will provide a letter and form for you to present to your mortgage lender. Approval from your mortgage lender is necessary before the City can issue a funding offer.

Step 2: Conduct a Home Energy Assessment and Submit a Funding Request

A. Schedule a home energy assessment with an Energy Advisor certified by Natural Resources Canada. The assessment will evaluate your home’s insulation, heating and cooling systems from the basement to the attic, and identify any air leaks or drafts.

Upon completion of the assessment, you will receive:

  • A Renovation Upgrade Report with recommendations for specific improvements
  • An EnerGuide¹ rating based on your home’s current energy performance
  • Information on available incentives and rebates For a list of Energy Advisors and details on incentives and rebates for home energy assessments, visit Enbridge Gas (opens in new window).

B. Submit your funding request Determine the improvements you wish to undertake and obtain quotes from contractors of your choice based on your objectives, budget, and recommendations from the Energy Advisor.

Your funding request should include:

  • A list of the intended improvements
  • Details and cost estimates based on contractor quotes
  • Estimated incentive and rebate amounts from utility companies
Step 3: Agree to the Property Owner Agreement

Upon approval of your Funding Request by the City, you will receive a Property Owner Agreement (POA), the funding agreement between property owner(s) and the City.

Sign and return the POA to the City. Once approved, the City can provide up to 30 percent of the funds, if requested, to assist with starting your project.

Step 4: Complete Improvements and Submit a Project Completion Report

Homeowners are responsible for selecting, hiring, and compensating contractors² and obtaining all necessary municipal and/or provincial permits.

After completing your project, schedule a post-retrofit home energy assessment with your Energy Advisor. The Advisor will verify the improvements and assign a new EnerGuide¹ rating to your home.

Submit a Project Completion Report signed by your Energy Advisor, along with contractor invoices and your new EnerGuide rating label. The City will release the remaining funds for your project.

Step 5: Repay the Loan Over Time Through Property Tax

After your project is finished, the City will inform you about when your loan payments will commence. You will be enrolled in the City’s Pre-Authorized Tax Payment program and repay the loan through 11 monthly instalments annually over the loan term via your property tax bill. Loan payments made through property tax bills are subject to the same penalties, remedies, and lien priorities.

You have the option to settle the outstanding balance and remove the loan from your property at any time during the loan term. Early repayment is subject to a Revenue Services service fee.

The current estimated processing times from the date of email or submission of all necessary program documents are as follows:

Email correspondence  2 business days

Application review and response from the City 5 – 7 business days

Funding offer after the City receives your approved Lender Consent 5 – 7 business days

Creation of the Property Owners Agreement after the City receives your funding request up to 15 business days

Project Completion review, final disbursement payment and file closure 10 business days

Repayment of HELP 60 days after file closure

  • Benefit from low-interest rates and repayment terms extending up to 20 years.
  • Eliminate the need for significant upfront costs associated with home energy improvements by spreading payments over time while saving on energy bills.
  • Repay the loan through installments included in your property tax bill, with the flexibility to settle the loan at any point.
  • Access ongoing assistance from the HELP team and guidance in accessing additional rebates and incentives from various governmental and utility sources.
  • The loan will be tied to your property, not to you personally. Therefore, if you sell your home before the loan is fully repaid, the new homeowner will inherit the remaining loan balance.

  *Disclaimer: The information presented serves as a general overview and may not cover all aspects of the topic. Please note that certain details may have changed or may no longer be current. For a comprehensive and up-to-date understanding, please consult authoritative sources such as the Ontario Government’s website or seek advice from a qualified professional. The user is responsible for conducting due diligence to verify the accuracy and relevance of the information before relying on it for decision-making.

Home Energy Loan Program
CategoriesReal Estate Education Uncategorized

Home Energy Loan Program

By Vergil,

Improving your home’s energy efficiency is a significant step in reducing emissions linked to climate change. With the Home Energy Loan Program (HELP), Toronto homeowners can borrow up to $125,000 to finance various energy-saving upgrades. These upgrades include air-source heat pumps, window/door replacements, insulation for the basement/attic/exterior walls, air sealing, geothermal systems, high-efficiency water heaters, furnaces/boilers/air conditioners, tankless water heaters, drain-water heat recovery systems, toilet replacements, solar hot water systems, rooftop solar PV panels, electric vehicle charging stations (Level 2), and battery storage. HELP offers homeowners an accessible and cost-effective way to fund home improvements over time, while also providing access to rebates from utility companies and the federal government. Funding approval allows homeowners to select their preferred contractor and complete the necessary renovations. Additionally, projects involving solar, windows, geothermal, or heat pumps qualify for a 20-year term.

To be eligible for a low-interest loan through HELP, you must meet the following criteria:

  • Own a detached, semi-detached, or row house located in the City of Toronto, with a postal code beginning with an “M”;
  • Obtain consent from all property owners listed on the title to participate in the program; Have had no more than three instances of property tax or utility accounts being 60 days past due within the last three years;
  • Obtain written consent from your mortgage lender if applicable.

You have the option to combine HELP with energy efficiency rebates and incentives offered by the City of Toronto, the Province of Ontario, the Government of Canada, and utility companies.

Step 1: Fill out an Application Form

Complete the online application form.

Upon receiving and approving your application, the City will send you a funding offer detailing the maximum amount your property is eligible to receive through the Home Energy Loan Program (HELP). If your property is mortgaged, we will provide a letter and form for you to present to your mortgage lender. Approval from your mortgage lender is necessary before the City can issue a funding offer.

Step 2: Conduct a Home Energy Assessment and Submit a Funding Request

A. Schedule a home energy assessment with an Energy Advisor certified by Natural Resources Canada. The assessment will evaluate your home’s insulation, heating and cooling systems from the basement to the attic, and identify any air leaks or drafts.

Upon completion of the assessment, you will receive:

  • A Renovation Upgrade Report with recommendations for specific improvements
  • An EnerGuide¹ rating based on your home’s current energy performance
  • Information on available incentives and rebates For a list of Energy Advisors and details on incentives and rebates for home energy assessments, visit Enbridge Gas (opens in new window).

B. Submit your funding request Determine the improvements you wish to undertake and obtain quotes from contractors of your choice based on your objectives, budget, and recommendations from the Energy Advisor.

Your funding request should include:

  • A list of the intended improvements
  • Details and cost estimates based on contractor quotes
  • Estimated incentive and rebate amounts from utility companies
Step 3: Agree to the Property Owner Agreement

Upon approval of your Funding Request by the City, you will receive a Property Owner Agreement (POA), the funding agreement between property owner(s) and the City.

Sign and return the POA to the City. Once approved, the City can provide up to 30 percent of the funds, if requested, to assist with starting your project.

Step 4: Complete Improvements and Submit a Project Completion Report

Homeowners are responsible for selecting, hiring, and compensating contractors² and obtaining all necessary municipal and/or provincial permits.

After completing your project, schedule a post-retrofit home energy assessment with your Energy Advisor. The Advisor will verify the improvements and assign a new EnerGuide¹ rating to your home.

Submit a Project Completion Report signed by your Energy Advisor, along with contractor invoices and your new EnerGuide rating label. The City will release the remaining funds for your project.

Step 5: Repay the Loan Over Time Through Property Tax

After your project is finished, the City will inform you about when your loan payments will commence. You will be enrolled in the City’s Pre-Authorized Tax Payment program and repay the loan through 11 monthly instalments annually over the loan term via your property tax bill. Loan payments made through property tax bills are subject to the same penalties, remedies, and lien priorities.

You have the option to settle the outstanding balance and remove the loan from your property at any time during the loan term. Early repayment is subject to a Revenue Services service fee.

The current estimated processing times from the date of email or submission of all necessary program documents are as follows:

Email correspondence  2 business days

Application review and response from the City 5 – 7 business days

Funding offer after the City receives your approved Lender Consent 5 – 7 business days

Creation of the Property Owners Agreement after the City receives your funding request up to 15 business days

Project Completion review, final disbursement payment and file closure 10 business days

Repayment of HELP 60 days after file closure

  • Benefit from low-interest rates and repayment terms extending up to 20 years.
  • Eliminate the need for significant upfront costs associated with home energy improvements by spreading payments over time while saving on energy bills.
  • Repay the loan through installments included in your property tax bill, with the flexibility to settle the loan at any point.
  • Access ongoing assistance from the HELP team and guidance in accessing additional rebates and incentives from various governmental and utility sources.
  • The loan will be tied to your property, not to you personally. Therefore, if you sell your home before the loan is fully repaid, the new homeowner will inherit the remaining loan balance.

  *Disclaimer: The information presented serves as a general overview and may not cover all aspects of the topic. Please note that certain details may have changed or may no longer be current. For a comprehensive and up-to-date understanding, please consult authoritative sources such as the Ontario Government’s website or seek advice from a qualified professional. The user is responsible for conducting due diligence to verify the accuracy and relevance of the information before relying on it for decision-making.

Co-Ownership Housing
CategoriesUncategorized

Co-owning a home

By Vergil,
The Problem?

Ontario is grappling with a housing crisis, as illustrated in this infographic. The root of the problem lies in the lengthy and expensive process of constructing homes. The bureaucratic red tape, unforeseen alterations, and government charges result in extensive paperwork and significant additional costs, sometimes amounting to tens of thousands of dollars for an average home. These regulatory layers, coupled with opposition from existing residents, hinder the construction of diverse housing options like townhomes, mid-rises, and spacious apartments that cater to people’s needs. Consequently, rental prices soar due to the challenges and expenses associated with building new rental units and managing rental properties.

While the province itself doesn’t engage in housing construction, it can streamline regulations to facilitate housing development and implement policies that promote densification. Additionally, optimizing infrastructure investments and encouraging increased density around major transit hubs are viable strategies. These efforts can be undertaken while upholding crucial safeguards for established communities, preserving agricultural areas, protecting employment zones, maintaining the integrity of the Greenbelt, safeguarding cultural heritage, and preserving the environment.

Ontario’s housing crisis
“Archived - More Homes, More Choice: Ontario’s Housing Supply Action Plan.” Ontario.Ca, 4 Apr. 2024, www.ontario.ca/page/more-homes-more-choice-ontarios-housing-supply-action-plan.
So, What is a Co-ownership housing?

Introduction Co-ownership housing involves a collaborative living arrangement where multiple individuals jointly own and reside in a single home. This arrangement may entail sharing common living areas like kitchens and living rooms, or the property may be divided into distinct units. Responsibilities for maintaining the property and certain amenities are typically shared among co-owners.

For those interested in exploring co-ownership housing, this guide offers practical insights to:

  • Explore available co-ownership options
  • Understand the necessary steps to safeguard oneself in co-ownership agreements
Benefits Co-ownership housing offers a range of advantages

Affordability: By pooling resources, individuals can collectively purchase a home, making homeownership more financially feasible. This approach also allows for equity building and the stability associated with homeownership.

Access to diverse neighborhoods: Co-ownership expands housing location options within budget constraints, providing access to various residential communities, including those with predominantly single-detached homes.

Optimized housing utilization: Co-owners can maximize the use of space in larger houses and heritage properties, allowing smaller households to benefit from shared ownership arrangements.

Community: Co-ownership facilitates the creation of voluntary community environments with shared facilities, indoor and outdoor common areas, and tailored services to meet the needs of residents.

You can access this guide provided by the Government of Ontario to obtain comprehensive information on the mechanics of co-ownership housing.

Download

  *Disclaimer: The information presented serves as a general overview and may not cover all aspects of the topic. Please note that certain details may have changed or may no longer be current. For a comprehensive and up-to-date understanding, please consult authoritative sources such as the Government of Ontario website or seek advice from a qualified professional. The user is responsible for conducting due diligence to verify the accuracy and relevance of the information before relying on it for decision-making.

Co-Ownership Housing
CategoriesReal Estate Education Uncategorized

Co-owning a home

By Vergil,
The Problem?

Ontario is grappling with a housing crisis, as illustrated in this infographic. The root of the problem lies in the lengthy and expensive process of constructing homes. The bureaucratic red tape, unforeseen alterations, and government charges result in extensive paperwork and significant additional costs, sometimes amounting to tens of thousands of dollars for an average home. These regulatory layers, coupled with opposition from existing residents, hinder the construction of diverse housing options like townhomes, mid-rises, and spacious apartments that cater to people’s needs. Consequently, rental prices soar due to the challenges and expenses associated with building new rental units and managing rental properties.

While the province itself doesn’t engage in housing construction, it can streamline regulations to facilitate housing development and implement policies that promote densification. Additionally, optimizing infrastructure investments and encouraging increased density around major transit hubs are viable strategies. These efforts can be undertaken while upholding crucial safeguards for established communities, preserving agricultural areas, protecting employment zones, maintaining the integrity of the Greenbelt, safeguarding cultural heritage, and preserving the environment.

Ontario’s housing crisis
“Archived - More Homes, More Choice: Ontario’s Housing Supply Action Plan.” Ontario.Ca, 4 Apr. 2024, www.ontario.ca/page/more-homes-more-choice-ontarios-housing-supply-action-plan.
So, What is a Co-ownership housing?

Introduction Co-ownership housing involves a collaborative living arrangement where multiple individuals jointly own and reside in a single home. This arrangement may entail sharing common living areas like kitchens and living rooms, or the property may be divided into distinct units. Responsibilities for maintaining the property and certain amenities are typically shared among co-owners.

For those interested in exploring co-ownership housing, this guide offers practical insights to:

  • Explore available co-ownership options
  • Understand the necessary steps to safeguard oneself in co-ownership agreements
Benefits Co-ownership housing offers a range of advantages

Affordability: By pooling resources, individuals can collectively purchase a home, making homeownership more financially feasible. This approach also allows for equity building and the stability associated with homeownership.

Access to diverse neighborhoods: Co-ownership expands housing location options within budget constraints, providing access to various residential communities, including those with predominantly single-detached homes.

Optimized housing utilization: Co-owners can maximize the use of space in larger houses and heritage properties, allowing smaller households to benefit from shared ownership arrangements.

Community: Co-ownership facilitates the creation of voluntary community environments with shared facilities, indoor and outdoor common areas, and tailored services to meet the needs of residents.

You can access this guide provided by the Government of Ontario to obtain comprehensive information on the mechanics of co-ownership housing.

Download

  *Disclaimer: The information presented serves as a general overview and may not cover all aspects of the topic. Please note that certain details may have changed or may no longer be current. For a comprehensive and up-to-date understanding, please consult authoritative sources such as the Government of Ontario website or seek advice from a qualified professional. The user is responsible for conducting due diligence to verify the accuracy and relevance of the information before relying on it for decision-making.

Second Suites
CategoriesUncategorized

Second Suites in Ontario

By Vergil,

Second suites, also referred to as basement apartments or auxiliary dwelling units, are independent residential rental units within homes. They offer homeowners the opportunity to generate additional income to cover housing expenses. Recognized by CMHC as vital rental housing, regulations for second suites are mandated by the Planning Act, 2011, effective January 1, 2012. However, not all Ontario municipalities have implemented regulations yet. Municipalities determine standards and zoning provisions for second units, including minimum unit size, licensing, and parking requirements. FAQs about new and existing second suites are provided below.

  • Second suites are self-contained residential rental units located within dwellings or accessory structures, like a carriage house.
  • Commonly known as basement apartments, they may also be called granny flats, second units, in-law suites, or accessory apartments.
  • No, many municipalities in Ontario, including Toronto, have had established second suite by-laws for years.
  • Second suites aren’t universally allowed in all dwellings. Municipal regulations vary, so homeowners should inquire with the municipal planning department.
  • Some municipalities may require registration or licensing of the second suite, with associated fees.
  • The amended by-law permits second suites in all single-detached, semi-detached and townhomes throughout the new City of Toronto – with certainconditions.
  • Establishing a second unit may necessitate a building permit, especially if alterations to the house are required. Therefore, homeowners contemplating a second unit should contact their municipality beforehand.
  • Homeowners should inform their insurance provider about adding or having an existing second suite on their property to ensure proper coverage, as advised by the Insurance Bureau of Canada. For further information, homeowners can contact their insurance provider.

Typically, there will be minimal effects on property taxes. However, an exception arises if the second suite is established through building an extension, substantially increasing the property’s value.

  • Homeowners who rent out their second suite are considered landlords and must adhere to regulations outlined in the Ontario Residential Tenancy Act. All tenancy agreements must comply with rules and regulations regarding discrimination under the Human Rights Code. For additional information on the rights and responsibilities of landlords and tenants, homeowners can visit the Landlord and Tenant Board of Ontario’s website at www.ltb.gov.on.ca.
  • Second suites must be self-contained with kitchen and bathroom facilities. All new second suites must adhere to the Ontario Building Code, while existing and new ones must comply with the Ontario Fire Code. Additionally, all new and existing second suites must conform to municipal zoning and property standard by-laws.
  • Second suite’s floor area should be smaller than the remaining unit.
  • Parking spaces must be provided at a minimum rate of 1.0 for each secondary suite exceeding one.
  • Prior to planning exterior alterations, homeowners should reach out to the City of Toronto’s Urban Planning and Development Services Department.

The Fire Department staff will need to inspect the unit, and there will be a fee associated with the inspection. Depending on the findings, you might need to upgrade the suite to comply with code requirements and other standards. For further details, please reach out to the City’s Urban Planning and Development Services Department.

  *Disclaimer: The information presented serves as a general overview and may not cover all aspects of the topic. Please note that certain details may have changed or may no longer be current. For a comprehensive and up-to-date understanding, please consult authoritative sources such as the Government of Ontario’s website or seek advice from a qualified professional. The user is responsible for conducting due diligence to verify the accuracy and relevance of the information before relying on it for decision-making.

Second Suites
CategoriesReal Estate Education Uncategorized

Second Suites in Ontario

By Vergil,

Second suites, also referred to as basement apartments or auxiliary dwelling units, are independent residential rental units within homes. They offer homeowners the opportunity to generate additional income to cover housing expenses. Recognized by CMHC as vital rental housing, regulations for second suites are mandated by the Planning Act, 2011, effective January 1, 2012. However, not all Ontario municipalities have implemented regulations yet. Municipalities determine standards and zoning provisions for second units, including minimum unit size, licensing, and parking requirements. FAQs about new and existing second suites are provided below.

  • Second suites are self-contained residential rental units located within dwellings or accessory structures, like a carriage house.
  • Commonly known as basement apartments, they may also be called granny flats, second units, in-law suites, or accessory apartments.
  • No, many municipalities in Ontario, including Toronto, have had established second suite by-laws for years.
  • Second suites aren’t universally allowed in all dwellings. Municipal regulations vary, so homeowners should inquire with the municipal planning department.
  • Some municipalities may require registration or licensing of the second suite, with associated fees.
  • The amended by-law permits second suites in all single-detached, semi-detached and townhomes throughout the new City of Toronto – with certainconditions.
  • Establishing a second unit may necessitate a building permit, especially if alterations to the house are required. Therefore, homeowners contemplating a second unit should contact their municipality beforehand.
  • Homeowners should inform their insurance provider about adding or having an existing second suite on their property to ensure proper coverage, as advised by the Insurance Bureau of Canada. For further information, homeowners can contact their insurance provider.

Typically, there will be minimal effects on property taxes. However, an exception arises if the second suite is established through building an extension, substantially increasing the property’s value.

  • Homeowners who rent out their second suite are considered landlords and must adhere to regulations outlined in the Ontario Residential Tenancy Act. All tenancy agreements must comply with rules and regulations regarding discrimination under the Human Rights Code. For additional information on the rights and responsibilities of landlords and tenants, homeowners can visit the Landlord and Tenant Board of Ontario’s website at www.ltb.gov.on.ca.
  • Second suites must be self-contained with kitchen and bathroom facilities. All new second suites must adhere to the Ontario Building Code, while existing and new ones must comply with the Ontario Fire Code. Additionally, all new and existing second suites must conform to municipal zoning and property standard by-laws.
  • Second suite’s floor area should be smaller than the remaining unit.
  • Parking spaces must be provided at a minimum rate of 1.0 for each secondary suite exceeding one.
  • Prior to planning exterior alterations, homeowners should reach out to the City of Toronto’s Urban Planning and Development Services Department.

The Fire Department staff will need to inspect the unit, and there will be a fee associated with the inspection. Depending on the findings, you might need to upgrade the suite to comply with code requirements and other standards. For further details, please reach out to the City’s Urban Planning and Development Services Department.

  *Disclaimer: The information presented serves as a general overview and may not cover all aspects of the topic. Please note that certain details may have changed or may no longer be current. For a comprehensive and up-to-date understanding, please consult authoritative sources such as the Government of Ontario’s website or seek advice from a qualified professional. The user is responsible for conducting due diligence to verify the accuracy and relevance of the information before relying on it for decision-making.

CMHC Mortgage Loan Insurance
CategoriesUncategorized

Requirements for Government-Backed Mortgage Insurance

By Vergil,

Mortgage loan insurance is generally required by lenders when home buyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protect lenders against mortgage default, and enables consumers to purchase homes with a minimum down payment starting at 5%. The Government of Canada offers government-backed mortgage insurance with restrictions through its crown agency, Canada Mortgage and Housing Corporation (CMHC).

  • Minimum down payment requirement for government-backed insurance is 5%.
  • Maximum mortgage amortization period is 25 years.
  • Maximum home price eligible for government-backed insurance is $1 million.
  • Mortgage insurance is available for both first-time and repeat home buyers.
  • For home purchases under $500,000, minimum down payment is 5%. For purchases over $500,000, minimum down payment is 5% for the first $500,000 and 10% for the remainder.
  • Gifted down payments from immediate relatives are acceptable for 1 to 4 unit dwellings. Other down payment sources like lender incentives and borrowed funds may also be permitted.
  • Total monthly housing costs, including principal, interest, taxes, heating, lease fees (for leasehold tenure), and 50% of condo fees, should not exceed 32% of gross household income.
  • Total debt load should not exceed 40% of gross household income.
  • Closing costs, typically 1.5% to 4% of the purchase price, are in addition to the down payment and cover expenses like lawyer fees, taxes, and land transfer fees.
  • Other requirements may apply and are subject to change. For details, please contact a lender or mortgage broker.

The CMHC Mortgage Loan Insurance premium is calculated as a percentage of the loan and is based on a number of factors such as the intended purpose of the property (owner occupied or rental), the type of loan (e.g., purchase/construction or refinance loan), and the size of down payment. See chart for premium details.

Financing Required                     Premium % of Loan
Up to and including 65%                     0.60
Up to and including 75%                     1.70
Up to and including 80%                     2.40
Up to and including 85%                     2.80
Up to and including 90%                     3.10
Up to and including 95%                     4.00
90.01% to 95%                                         4.50
Non-traditional Down Payment

* Premiums in Manitoba, Ontario and Quebec are subject to provincial sales tax. The provincial sales tax cannot be added to the loan amount.

  *Disclaimer: The information presented serves as a general overview and may not cover all aspects of the topic. Please note that certain details may have changed or may no longer be current. For a comprehensive and up-to-date understanding, please consult authoritative sources such as the CMHC website or seek advice from a qualified professional. The user is responsible for conducting due diligence to verify the accuracy and relevance of the information before relying on it for decision-making.

CMHC Mortgage Loan Insurance
CategoriesReal Estate Education Uncategorized

Requirements for Government-Backed Mortgage Insurance

By Vergil,

Mortgage loan insurance is generally required by lenders when home buyers make a down payment of less than 20% of the purchase price. Mortgage loan insurance helps protect lenders against mortgage default, and enables consumers to purchase homes with a minimum down payment starting at 5%. The Government of Canada offers government-backed mortgage insurance with restrictions through its crown agency, Canada Mortgage and Housing Corporation (CMHC).

  • Minimum down payment requirement for government-backed insurance is 5%.
  • Maximum mortgage amortization period is 25 years.
  • Maximum home price eligible for government-backed insurance is $1 million.
  • Mortgage insurance is available for both first-time and repeat home buyers.
  • For home purchases under $500,000, minimum down payment is 5%. For purchases over $500,000, minimum down payment is 5% for the first $500,000 and 10% for the remainder.
  • Gifted down payments from immediate relatives are acceptable for 1 to 4 unit dwellings. Other down payment sources like lender incentives and borrowed funds may also be permitted.
  • Total monthly housing costs, including principal, interest, taxes, heating, lease fees (for leasehold tenure), and 50% of condo fees, should not exceed 32% of gross household income.
  • Total debt load should not exceed 40% of gross household income.
  • Closing costs, typically 1.5% to 4% of the purchase price, are in addition to the down payment and cover expenses like lawyer fees, taxes, and land transfer fees.
  • Other requirements may apply and are subject to change. For details, please contact a lender or mortgage broker.

The CMHC Mortgage Loan Insurance premium is calculated as a percentage of the loan and is based on a number of factors such as the intended purpose of the property (owner occupied or rental), the type of loan (e.g., purchase/construction or refinance loan), and the size of down payment. See chart for premium details.

Financing Required                     Premium % of Loan
Up to and including 65%                     0.60
Up to and including 75%                     1.70
Up to and including 80%                     2.40
Up to and including 85%                     2.80
Up to and including 90%                     3.10
Up to and including 95%                     4.00
90.01% to 95%                                         4.50
Non-traditional Down Payment

* Premiums in Manitoba, Ontario and Quebec are subject to provincial sales tax. The provincial sales tax cannot be added to the loan amount.

  *Disclaimer: The information presented serves as a general overview and may not cover all aspects of the topic. Please note that certain details may have changed or may no longer be current. For a comprehensive and up-to-date understanding, please consult authoritative sources such as the CMHC website or seek advice from a qualified professional. The user is responsible for conducting due diligence to verify the accuracy and relevance of the information before relying on it for decision-making.

Mortgage Stress Test
CategoriesUncategorized

Decoding Mortgage Stress Tests

By Vergil,
What is a Mortgage Stress Test?

A mortgage stress test serves as a financial litmus test, evaluating a borrower’s ability to manage mortgage payments under adverse conditions, such as higher interest rates or financial downturns. Since June 2021, borrowers are required to prove their eligibility for a mortgage based on a stress-tested rate, which is either the interest rate offered by their lender plus 2%, or 5.25%—whichever is higher. This ensures borrowers can weather potential rate hikes and economic uncertainties, safeguarding both lenders and borrowers.

Who Needs to Undergo the Mortgage Stress Test?

The mortgage stress test applies to all default insured and uninsured borrowers in various scenarios, including purchasing a home, refinancing, changing lenders, or acquiring a second mortgage. However, renewal with the same lender typically exempts borrowers from undergoing the stress test. Implemented to mitigate the risks associated with burgeoning mortgage debt, the stress test is a preventive measure aimed at promoting responsible lending practices and bolstering economic stability.

Calculating Maximum Borrowing Capacity

Determining the maximum borrowing capacity involves intricate calculations based on two key ratios: the Gross Debt Servicing (GDS) ratio and the Total Debt Servicing (TDS) ratio. The GDS assesses the proportion of housing costs relative to income, while the TDS considers housing debt along with other existing debts. Typically, lenders cap the GDS at 39% and the TDS at 44% of the household’s gross annual income. Incorporating the stress test into these calculations reduces the available borrowing capacity, necessitating a more cautious approach to mortgage financing.

Impact on First-Time Homebuyers

First-time homebuyers often bear the brunt of mortgage stress tests, given their smaller down payments and limited equity. With the stress test constraining borrowing capacity, many first-time buyers may face challenges in entering the real estate market. However, exploring options to increase down payments, improve credit scores, or consider more affordable properties can help mitigate the impact of the stress test on their homebuying journey.

Mortgage Stress Test Calculator

Empowering borrowers with insights into their borrowing potential, mortgage stress test calculators by the Canadian government offer a glimpse into their eligibility based on prevailing financial parameters. For instance, a hypothetical scenario featuring a $500,000 property, a 20% down payment, and a 5.25% annual interest rate yields a GDS of 21.87% and a TDS of 25.47%, indicative of successful mortgage qualification.

Navigating Beyond Rejection

In the event of failing to qualify for the desired mortgage amount post-stress test, borrowers can explore alternative avenues. Strategies such as augmenting down payments, enhancing credit scores, opting for more affordable properties, or seeking avenues to boost income can help bridge the gap between aspiration and affordability, ensuring a smoother homebuying experience.

In conclusion, mortgage stress tests serve as a cornerstone in the homebuying process, underscoring the need for prudent financial planning and strategic decision-making. By understanding the intricacies of stress tests and proactively addressing their implications, homebuyers can navigate the real estate landscape with confidence and resilience.

  *Disclaimer: The information presented serves as a general overview and may not cover all aspects of the topic. Please note that certain details may have changed or may no longer be current. For a comprehensive and up-to-date understanding, please consult authoritative sources such as the Canada Revenue Agency (CRA) website or seek advice from a qualified professional. The user is responsible for conducting due diligence to verify the accuracy and relevance of the information before relying on it for decision-making.

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Mortgage Stress Test
CategoriesReal Estate Education Uncategorized

Decoding Mortgage Stress Tests

By Vergil,
What is a Mortgage Stress Test?

A mortgage stress test serves as a financial litmus test, evaluating a borrower’s ability to manage mortgage payments under adverse conditions, such as higher interest rates or financial downturns. Since June 2021, borrowers are required to prove their eligibility for a mortgage based on a stress-tested rate, which is either the interest rate offered by their lender plus 2%, or 5.25%—whichever is higher. This ensures borrowers can weather potential rate hikes and economic uncertainties, safeguarding both lenders and borrowers.

Who Needs to Undergo the Mortgage Stress Test?

The mortgage stress test applies to all default insured and uninsured borrowers in various scenarios, including purchasing a home, refinancing, changing lenders, or acquiring a second mortgage. However, renewal with the same lender typically exempts borrowers from undergoing the stress test. Implemented to mitigate the risks associated with burgeoning mortgage debt, the stress test is a preventive measure aimed at promoting responsible lending practices and bolstering economic stability.

Calculating Maximum Borrowing Capacity

Determining the maximum borrowing capacity involves intricate calculations based on two key ratios: the Gross Debt Servicing (GDS) ratio and the Total Debt Servicing (TDS) ratio. The GDS assesses the proportion of housing costs relative to income, while the TDS considers housing debt along with other existing debts. Typically, lenders cap the GDS at 39% and the TDS at 44% of the household’s gross annual income. Incorporating the stress test into these calculations reduces the available borrowing capacity, necessitating a more cautious approach to mortgage financing.

Impact on First-Time Homebuyers

First-time homebuyers often bear the brunt of mortgage stress tests, given their smaller down payments and limited equity. With the stress test constraining borrowing capacity, many first-time buyers may face challenges in entering the real estate market. However, exploring options to increase down payments, improve credit scores, or consider more affordable properties can help mitigate the impact of the stress test on their homebuying journey.

Mortgage Stress Test Calculator

Empowering borrowers with insights into their borrowing potential, mortgage stress test calculators by the Canadian government offer a glimpse into their eligibility based on prevailing financial parameters. For instance, a hypothetical scenario featuring a $500,000 property, a 20% down payment, and a 5.25% annual interest rate yields a GDS of 21.87% and a TDS of 25.47%, indicative of successful mortgage qualification.

Navigating Beyond Rejection

In the event of failing to qualify for the desired mortgage amount post-stress test, borrowers can explore alternative avenues. Strategies such as augmenting down payments, enhancing credit scores, opting for more affordable properties, or seeking avenues to boost income can help bridge the gap between aspiration and affordability, ensuring a smoother homebuying experience.

In conclusion, mortgage stress tests serve as a cornerstone in the homebuying process, underscoring the need for prudent financial planning and strategic decision-making. By understanding the intricacies of stress tests and proactively addressing their implications, homebuyers can navigate the real estate landscape with confidence and resilience.

  *Disclaimer: The information presented serves as a general overview and may not cover all aspects of the topic. Please note that certain details may have changed or may no longer be current. For a comprehensive and up-to-date understanding, please consult authoritative sources such as the Canada Revenue Agency (CRA) website or seek advice from a qualified professional. The user is responsible for conducting due diligence to verify the accuracy and relevance of the information before relying on it for decision-making.

Ready to explore your options and take the first step towards homeownership?  Contact us now to schedule a personalized consultation.

Connect with us