House of Horrors – Cautionary Tales of Home Purchases Gone Wrong

General Nathan Lawrence 28 Oct

In honour of Halloween next week we compiled a couple spooky home purchases for you (all based on true stories of course)! Here are 2 short stories of home purchases that went wrong, they should make you squirm a little but keep in mind that not every home purchase ends up in nightmares like these!  These stories, although very rare occurrences as part of the home buying process, highlights the reason why working with a Real Estate Professional and hiring a home inspector is incredibly important.

This Home Renovation Went Nuclear

Wally Davis a resident of Port Hope, ON wanted to build a room in the attic of his home. However, where he lives is the location of a former radium and uranium refinery that left contamination spread around the town. When testing the home for contamination it was discovered that there was contamination in the roof, on the floors, in the walls, and everywhere else in the home. Wally who bought the house in the 90s paid just $130,000 for his home, a decade later it cost the town of Port Hope $464,615 to clean up the house. The Davises were well taken care of while their house underwent renovations but it was a long drawn out process that kept them away from their home for some time.

(Source)

Sometimes you need Spidey Senses when Buying a Home

This house isn’t haunted but it would sure be scary to live in! Brian and Susan Trost purchased their home in the summer of 2007. A 2,400 sq.-ft home over-looking a beautiful country club. Shortly after they moved in Susan started noticing webs and then started to see spiders every day. The Trosts then called pest control who identified the spiders as brown recluses (they have a venomous bite and can sometimes leave a person with what looks like a flesh eating disease). The home had drywall and insulation removed and they both sprayed and put down pesticide powder. When that didn’t solve the problem the Trost took the previous owners and State Farm Insurance to court. During the trial a University professor estimated the spider population to be “immense” with a total of 4,500-6,000 spiders. The house was then put into foreclosure and unfortunately the Trost have not been living in it for over 2 years.

(Source)

Monday’s Federal Rule Change – What Buyers & Seller’s Need to Know

Latest News Nathan Lawrence 12 Oct

There has been much speculation and debate the past 10 days about the pending Mortgage Rules changes and the potential impact that those changes will have on the Real Estate Market, but more importantly on you as current/future home owners!  At the end of the day, these are significant lending changes, but the impact on the Canadian Real Estate market will takes weeks, if not months to really play out.  However, it is important to know that that the Canadian Mortgage lending market has seen numerous “significant” mortgage lending rule changes over the past decade…and what were the results of those changes?…The Canadian Real Estate Market continued to remain strong.

At the end of the day, here are the important takeaways that you need to be aware of as current/future home owners…

Changes to Mortgage Qualifying Guidelines –

Effect Monday October 17th, all new mortgage applications will need to be qualified based on the Bank of Canada Posted rate.  As of today, the Bank of Canada Posted Rate is 4.64%.   Whereas previous to October 17th, 2016, 5 year fixed rate term mortgage applications would have been qualified using the contract rate (the actual rate the client was getting i.e. 2.39%).

The change to how home purchasers are qualified will have a direct impact on how much they can afford to purchase.  This will have the biggest impact to those purchasers which are currently shopping at the top end of their purchase price approval range.   The rule change will reduce a client’s Max Purchase price by approximately 20%.

If you have previously been pre-approved, make sure that you take the time to call your Mortgage Broker and chat with them about the rule changes.  It is important that you have your mortgage pre-approval updated based on the new lending guidelines.   Important Note:  Having a pre-approval prior to the October 17th deadline does not qualify you based on the old rules.  Avoiding the new rules is only possible for those that had a full mortgage approval prior to October 17th.

Capital Gains Changes –

If you were/are a Canadian Citizen or are considered to be a Canadian Resident based on CRA guidelines, at the time of your home purchase, then these changes will have no real impact on you.  You will now be required to report your Primary Residence for Capital Gains tracking purposes.  You would still have access to the Capital Gains exception rules.  **Please make sure to speak with your accountant for full clarification on how these changes could impact you**

If you are not a Canadian Citizen or are not a Canadian Residence based on CRA guidelines when you take ownership of your new home, then these rule changes may potentially have an impact on you at the time of sale.  ***I recommended that you seek advice from your accountant or tax specialist to determine the actual impact that this change may have on you***

Furnish & Decorate Your Home on a Budget!

First Time Home Buyers Nathan Lawrence 12 Oct

After buying your first home there is a good chance your piggy bank is running low and you might not have the budget to spend money on lavish furniture and décor. The most important thing to keep in mind is that everything will come together with time. Here are our top tips for making your home yours on a budget:

  1. Do one Room at a Time

Rather than trying to decorate your whole home at once focus on doing one room at a time. Focus on the rooms that you entertain in first, these include your living room and dining room. After this you can tackle your kitchen, bedrooms, rec room, etc.

  1. Paint, Paint, Paint

Make your home yours by painting it colours that you love! Painting is one of the most inexpensive upgrades you can make. Make sure the colours you choose flow throughout your home and don’t clash. If you own furniture and décor already you can choose a colour that complements it so you don’t have to buy new things. Also try painting cabinets to give your kitchen or bathroom an updated look for a lot less than purchasing new cabinets (make sure to research how to do this properly though or hire a professional!).

  1. Thrift Stores are your Friend

Look in thrift stores or on Kijiji for second hand furniture that is in good condition for your home. You’ll be amazed at how many people are selling their furniture to upgrade and you will be able to get it for a fraction of the cost of new furniture. Eventually you will be able to get your dream living room suite but for now just find something functional that matches your home and style.

  1. Simple Accents

Dress up your second hand furniture by splurging on some throws and pillows that you love, this will pull the look of your room together and give it a more polished and finished look. Find some drapes or blinds to hang on the windows or make your own by visiting a fabric store. Invest in a couple of wall art pieces to really give your home a wow factor, this can get expensive quickly so look for clearance items or if you’re creative make your own!

  1. Organization

Focus on the organization of your home. Make sure you invest in closet and cupboard organization. If everything has a place to go it means chances are it will more likely get put away. This will help keep the clutter out of sight and give your home a neater and cleaner feel!

Changes Coming to Mortgage Lending Guidelines – Federal Announcement

Latest News Nathan Lawrence 4 Oct

If you have watched any major Canadian News outlet over the past 24 hours, you have likely heard that the Federal Finance Minister Bill Morneau announced some rather unexpected changes to mortgage lending guidelines which will have a significant impact on Canadian Home Buyers.

Presently, the current lending rules for Default (CMHC/Genworth) Insured Mortgages in Canada requires that any home buyers applying for a 5 year fixed rate mortgage, must qualify for that mortgage based on a mortgage payment calculated at the rate being offered to the client.  Based on current mortgage lending guidelines, here is what a current mortgage qualifying scenario would look like:

 

  • Annual Household Income: 100,000.00
  • 5 Year Fixed Rate:  2.39%
  • Qualifying Rate: 2.39%
  • Amortization: 25 Years
  • Potential Max Purchase Price:  $525,000.00
  • Down Payment: (5%) $26,250

 

The new rules that come in to effect on October 17th 2016, would require that any home purchaser looking to qualify for a 5 year (or longer) fixed rate mortgage must now qualify for that mortgage based on a qualifying rate stress test.  The qualifying rate used for qualifying purposes will be the Bank of Canada Qualifying Rate, which as of today sits at 4.64%.   Here is what a home buyers new potential max purchase price will look under the new guidelines announced today:

 

  • Annual Household Income: 100,000.00
  • 5 Year Fixed Rate:  2.39%
  • Qualifying Rate: 4.64%
  • Amortization: 25 Years
  • Potential Max Purchase Price:  $425,000.00
  • Down Payment: (5%) $21,250

 

The effective impact on home buyers in Canada can and will be significant.  The scenario listed above shows how requiring home buyers to qualify based on the qualifying rate, rather than the contract rate, reduces the purchasing power of the buyer by upwards of 100,000.00.

 

 There are two very important dates to note with respect to these changes:

October 17th 2016   – Any mortgage application approved prior to this date, can qualify for a mortgage based on existing mortgage lending guidelines.  Any application submitted and approved on or after October 17th, 2016 will be required to qualify for a mortgage based on the newly announced mortgage lending guidelines

March 17th, 2017  –  Any mortgage application that is approved prior to the cutoff date of October 17th 2016, must also close on or earlier than March 17th 2017.   If you are approved for a mortgage prior to October 17th 2016, however you do not take possession of your new home until after March 17th 2017, you will be required to qualify based on the new lending guidelines.

 

Once again, these changes will impact any Default Insured Mortgage Application anywhere in Canada.  A default insured mortgage is defined as a mortgage where the client has less than 20% of the purchase price as their down payment.  Any mortgage in Canada with less than 20% down must be insured by a Default Insurance Company such as CMHC or Genworth.  These recent changes will directly impact those application.

 

If you are currently in the process of house hunting or are thinking about house hunting, it is important to touch base with your Mortgage Broker to find out more about how the changes may impact your pre-approval or application.

 

**The Above mortgage scenarios assumes the following:  1. the clients are not carrying any monthly debt requirements outside of the potential mortgage.  2. It also assumes a max Gross Debt Servicing of 34% 3. Down payment of 5% of the purchase price coming from their own resources.  4. That the clients have adequate credit and credit history.