February 23, 2012
BCREA Delivers Overview Of New BC Budget
On February 21, BC Minister of Finance Kevin Falcon released the 2012-2013 provincial budget.
With a theme of fiscal discipline, this budget doesn’t offer a lot of new spending. In addition to some hikes in fees for MSP and ICBC, the government plans to raise more than $700 million in the next three years by selling government-owned properties that aren’t needed now or in the foreseeable future. Minister Falcon projects budget surpluses for 2013-2014 ($154 million) and 2014-2015 ($250 million)—government forecasts continue to be conservative, with growth forecasts coming in below the consensus of the independent economic forecast council, of which BCREA Chief Economist Cameron Muir is a member. Jobs, health and education were emphasized throughout the minister’s speech.
Here are the new pieces relevant to the real estate sector:
• Property Transfer Tax
o BC First-Time New Home Buyers’ bonus – Pending approval by the legislature, a temporary (Feb. 21, 2012-Mar. 31, 2013), refundable income tax credit of up to $10,000 will be available to first-time buyers of newly-built homes.
o Fact sheet: www.bcbudget.gov.bc.ca/2012/homebuyers/2012_First_Time_Home_Buyers_Fact_Sheet.pdf.
o Web page: www.sbr.gov.bc.ca/individuals/Income_Taxes/Personal_Income_Tax/tax_credits/fthb_bonus.htm
This is a win for BCREA and member boards, and this measure should be considered with the HST relief measures announced on Feb. 17. While it’s difficult to determine the stimulus effect this bonus will have, and it remains to be seen whether financial institutions will create financing products that take the tax credit into account, this is an indication that the minister has heard organized real estate’s concerns.
o New General Refund Provision Introduced – Bill 21 (introduced on Feb. 21) proposes amending the Property Transfer Tax Act to provide the administrator with authority to refund an amount paid under the Act in circumstances where there was no legal obligation for the tax to be paid (in effect upon Royal Assent).
o Re-registration of Certain Life Estates Exempted – Bill 21 proposes amending the Property Transfer Tax Act to provide an exemption for the re-registration of a life estate following the registration of a mortgage. The exemption only applies if the re-registration of the life estate involves the same owner, the same life estate holder, the same property and the same terms as the initial life estate (in effect upon Royal Assent).
• Home Owner Grant Act
o Low-Income Veteran’s Supplement Introduced – Bill 21 proposes amendments to enact this measure, as announced on Nov. 10, 2011, effective for the 2012 and future tax years. This supplement is for qualifying low-income veterans under the age of 65 who have served in the Canadian Forces as officers or non-commissioned members. Tax Information Sheet:www.sbr.gov.bc.ca/documents_library/brochures/Info_Sheet_2012-01.pdf.
o Home Owner Grant Extended for Individuals Moving into a Residential Facility – Effective for the 2012 and future tax years, the Act is amended to allow qualifying homeowners who have moved into a residential facility to apply for the Home Owner Grant for one additional year. The grant can only be claimed on the home that they continue to own and that qualified in the previous year. Tax Bulletin (see p. 7) :www.sbr.gov.bc.ca/documents_library/bulletins/hog_001.pdf.
• BC Seniors’ Home Renovation Tax Credit – Pending approval by the legislature, effective for the 2012 and future tax years, the credit will be a new refundable personal income tax credit to assist with the cost of permanent home renovations that provide individuals age 65 and over with increased independence, allowing them the flexibility to remain in their own homes longer. The maximum credit will be $1,000 annually calculated as 10 per cent of eligible expenditures. The credit will be available to individuals who incur eligible expenditures on or after April 1, 2012. The credit can be claimed by seniors, whether they own their home or rent, and by individuals who share a home with a senior relative. Web page:www.sbr.gov.bc.ca/individuals/Income_Taxes/Personal_Income_Tax/tax_credits/seniors_home_reno.htm.
• Taxation (Rural Area) Act
o Exemption for Property Held in Trust for a First Nation Clarified – Effective for the 2012 and future tax years, Bill 21 proposes amendments to the Act to clarify that the exemption for property held in trust for a First Nation only applies with respect to property held by the Crown.
• Land Tax Deferment Act
o Fire Insurance Requirement Removed for Homeowners with Sufficient Equity – Homeowners must have a minimum amount of equity in their property to be eligible to defer their property taxes under the province’s property tax deferment program. Currently, homeowners must also have fire insurance on their home to be eligible for the program. Effective for the 2012 and future tax years, the Act is amended to remove the fire insurance requirement and to replace it with a more general requirement. In calculating whether the homeowner has a minimum amount of equity in the property, the calculation will now exclude uninsured improvements to the property.
o Eligibility of Leaseholders to Defer Tax Clarified – The property tax deferment program is intended to apply to property owners who have sufficient equity in their property to secure the deferred taxes. Some leaseholders on Crown or municipal land have qualified to defer taxes in the past. The Act is amended to clarify that beginning in 2012 no new leaseholders will be eligible to defer taxes. Any leaseholders who currently defer taxes will be grandparented and will not be affected by this change.
o About the Property Tax Deferment program: www.sbr.gov.bc.ca/individuals/Property_Taxes/Property_Tax_Deferment/about.htm.
• The LiveSmart program was mentioned in the minister’s speech as a component of the Climate Action Plan that would continue to move forward, though details are lacking. The program supports homeowners making energy-efficient home renovations. Website:www.livesmartbc.ca.
Government budget documents are available online here: www.bcbudget.gov.bc.ca/2012.
British Columbia Real Estate Association
1420 – 701 Georgia Street West | PO Box 10123, Pacific Centre | Vancouver, BC V7Y 1C6
604.742.2789 | firstname.lastname@example.org
Visit BCREA Online: www.bcrea.bc.ca | www.twitter.com/bcrea
January 12, 2012
Mortgage Rates Reduced to an ALL TIME LOW (for a limited time)
Lots of buzz today over the Bank of Montreal's reduction of their mortgage rate to 2.99% for a 5 year fixed term. The only catch - it's only available until January 25th.
Likewise, TD Canada Trust is offering teh same rate for a 4 year term.
Why is this important? Well, if you have been sitting on the fence regarding buying a house or remortgaging your current home, it won't get any cheaper than this.
To give you an example:
• Above rates are approximate and based on a 25 year ammortization. May be available as a 30 year ammortization period (resulting in smaller monthly payments) in the next week.
If you are renting and don't currently own your home, NOW is the time to buy. Owning is cheaper than renting! Especially if you are purchasing a property with a suite:
For example, there are many homes with suites in Nanaimo for $350,000. Your monthly financial committment with 5% down would be:
$1624.74 (Home payment )
- $850 (2 bedroom suite rental)
That is CONSIDERABLY CHEAPER than renting a property. Plus you are putting part of that money back in your pocket every month as you pay down the mortgage.
AND . . . properties in the area generally appreciate at about 3% per year. That's $10,500 a year on a $350,000 house. $10, 500 that you could be putting back into yourown pocket outside of your mortgage payments.
Watch for other banks to introduce low rates as well in the next few days. But keep in mind that you have to apply for and be approved for the mortgage at these special rates BEFORE JANUARY 25th. I can introduce you to mortgage brokers or account managers at any of these banks to get you started.
Contact me today to start looking for a house. email@example.com
or call me at 250-758-3700
Wes Smith, RE/MAX OCEAN POINTE
November 26, 2011
MORTGAGE INSURANCE: BEWARE!
See the full video from CBC News MARKETPLACE here:
Mortgage insurance: Not always a sure thing
If you have a mortgage on your home, chances are good you also have mortgage insurance. The idea is that if you should become seriously ill or die before paying off the mortgage, the coverage will kick in and pay it off for you. It’s meant to offer peace of mind and to reassure you that your family will be able to stay in your home if anything should happen to you.
The reality falls a little short of that. In this week’s Marketplace investigation, we meet two families who bought the coverage and thought they were protected, only to have their claims denied when they became sick or died. In each case, the insurer said the applicant person had lied on their initial application form.
It turns out a routine test at the doctor could be reason to deny your claim, if you don't mention it. Had a cuff inflated on your bicep? That counts as being tested for high blood pressure.
As Erica Johnson reports, the bank staffers selling mortgage insurance are unlicenced and rarely trained to explain the details and legalities of those insurance products. The result is people who pay premiums and think they are covered, only to realize later that they are not.
Be sure you qualify.
- There are many terms and exclusions associated with credit insurance policies. Learn what they mean and how they apply to you.
- Call the insurance company directly (NOT the bank that sold you the coverage) for clarification about pre-existing medical conditions.
- Call your doctor to clarify details of any pre-existing medical conditions you may be concerned about.
Know that you can get out.
- You usually have 10-30 days to review your policy after the initial purchase (this is known as a "cool-down" or "free look" period).
- If you have already purchased your credit insurance you can cancel anytime. Keep in mind, however, that you may lose premiums already paid.
- Consider buying from a licensed insurance broker who will explore any medical issues upfront.
- Consider buying or topping up an individual life insurance policy to cover your mortgage.
Know your coverage.
- You may already have adequate insurance coverage through your work or other policies. Insurance experts say it's better to buy one traditional insurance policy than purchase a number of small policies for a variety of products.
Be sure you need it.
- The purpose of credit life mortgage insurance is to protect your loved ones from making mortgage payments if something were to happen to you. This type of insurance may not be applicable if you do not have any dependents who would need to keep your home if something happened.
Alberta is the only province in Canada that requires anyone selling credit insurance, including banks, to be licensed. Under the Alberta regulations, banks are required to follow set requirements for training staff and disclosure to customers. When the Alberta Insurance Council first implemented this regulation in 2001, the banks fought back, pursuing the matter all the way to the Supreme Court of Canada. In May 2007 the Supreme Court ruled against the banks and said the province of Alberta was within its rights to regulate the sale of this insurance and protect the consumer.
A copy of the judgment in the case, Canadian Western Bank v. Alberta, is available online.
To date, no other province requires banks selling insurance to be licensed. This page offers a list of the provincial and territorial regulators who would have that power, if enabling legislation were passed in their respective jurisdictions.
According to insurance and financial experts we spoke with, an individual life insurance policy may be preferable to a credit insurance policy. Here are the key differences between the two types of insurance.
|CREDIT MORTGAGE INSURANCE||INDIVIDUAL LIFE INSURANCE|
|Post-Claim Underwriting: Unlike individual life insurance, credit insurance sold through the bank is usually not underwritten until a claim is made. This means the insurance company may determine you are not eligible for a payout even though you have been paying premiums. For instance, a claim may be denied because an investigation of your medical records indicates you once had high blood pressure or high cholesterol that you did not disclose.
||Underwriting: When you apply for individual insurance through a licensed insurance broker your medical history will be examined before a policy is issued and you start paying premiums. The insurance broker will ask detailed questions and may arrange for a nurse to conduct a physical. You will know upfront whether or not you are covered.
|Standard premiums: The mortgage insurance policy sold at the bank is a one size fits all policy. This means everyone who qualifies is considered to be of equal risk. The premiums you pay on mortgage insurance are a fixed amount based on your age and the amount of your mortgage. There is no discount for non-smokers or for women. The premium does not reduce as the mortgage is paid down.
||Individual premiums: With an individual life insurance policy, the premiums you pay are based on your individual risk. Your health history and exam will help to determine how high or low your premiums are. Non-smokers and women pay a lower premium. The face amount of the coverage remains level.
|Decreasing payout: The Mortgage insurance sold at the bank covers a decreasing amount. While your premiums remain the same the amount left on your mortgage decreases. Mortgage insurance will only pay off the balance of your mortgage when you make a claim.
||Fixed payout: When you purchase an individual insurance policy you pay premiums for a pre-determined amount of coverage. Therefore, if you pay premiums for $100,000 of coverage your beneficiary will receive $100,000.
|The bank gets the payout: Mortgage insurance is designed to pay off the bank if anything happens to you. Therefore the insurance payout will be made directly to the bank.
||You choose who gets the payout: With an individual policy you are free to choose the beneficiary or beneficiaries. If something happens to you, it is up to your beneficiaries to decide what to do with the insurance proceeds.
The mortgage insurance application forms are similar across all the big five banks. In each, there are relatively few health questions, but each question covers a large range of medical conditions, as well as a wide range of situations (ranging from consulting a doctor, to receiving advice, to actual diagnosis.)
Click on a bank's logo to see its mortgage insurance application form. (These will open in a new browser window.)
Several bureaus are set up to receive complaints from and offer advice to consumers about banking and insurance issues.
The Canadian Life and Health Insurance OmbudService (CLHIO) is an independent service set up to assist consumers with concerns and complaints about life and health insurance products and services.
The Ombudsman for Banking Services was set up to resolve disputes between participating banking services and investment firms and their customers if they can’t solve them on their own.
The Financial Consumer Agency of Canada (FCAC) provides consumers with information about financial products and services, and informs Canadians of their rights and responsibilities when dealing with financial institutions. FCAC also ensures compliance with the federal consumer protection laws that apply to banks and federally incorporated trust, loan and insurance. If you are having difficulty finding out about your institution's complaint-handling process or if you are experiencing delays when using it, call FCAC. However, FCAC does not provide redress or compensation and does not get involved in individual disputes.
November 18, 2011
First-time Home Buyer Freebies
Purchasing a home is expensive so any opportunity to regain some of your money should be taken advantage of. For first-time home buyers, there are some options available so make sure you familiarize yourself with these rebates before settling into your new home.
1. First-Time Home Buyer Tax Credit (HBTC)
This is a non-refundable credit issued by the Government of Canada amounting to $750 which is intended to help the buyer recover the cost of closing fees. If you are purchasing a home under co-ownership, the maximum tax credit is still $750 combined. The credit must be included in your personal tax return under œline 369 within a year of purchasing the property.
What are the requirements?
- The property must be a qualifying home*
- You must not have owned a home as a primary residence in last four years
- The home must be registered in your name (or your spouse™s)
*A qualifying home must be located in Canada, whether it is an existing or pre-construction property, which may be a single, semi, town home, mobile home, condo, as well as a multi-person dwelling. In addition, you must intend to occupy the home.
Special notes: If the total of your tax credit is greater than your federal income tax, you will not receive the HBTC.
2. The RRSP Home Buyer™s Plan (HBP)
This plan allows first-time buyers to withdraw up to $25,000 from their Registered Retirement Savings Plan (RRSP) completely tax free. This is a great option for two reasons:
i. The contributions you make to your RRSP are tax-deductible, which helps keep your tax statement in your favour (i.e. It could help reduce the amount owed or increase your tax return).
ii. The withdrawal from your RRSP is analogous to an interest-free loan; after all, you are taking out your money.
However, you must repay the full amount within 15 years time, starting no later than two years after the withdrawal of the funds.
What are the requirements?
- You must not have owned a home as a principal place of residence, four years prior to the withdrawal
- Intend to live in the purchased property within one year of closing
- If you have used the HBP before, there must not be any outstanding balance
In order to apply for the Home Buyer™s Plan, visit Canada Revenue Agencyand print a copy of Form T1036. Section 1 can be filled out by you, however, you will need your financial institution (that holds your RRSP) to fill out Section 2. In your income tax return for the year, you will have to reference the T4RSP from that your financial institution will send you.
3. Land Transfer Tax Rebate
This only applies to the provinces of Ontario, British Columbia, and Prince Edward Island. Also, it™s important to note that Toronto is the only city with a Land Transfer Tax at the municipal level, so likewise, to offset the large tax, a Land Transfer Tax rebate is also available for the City of Toronto in addition to the Province of Ontario. Each province listed above sets their criteria and calculations themselves.
To show you the variance between each region, take a look at our chart below.
For a $200,000 mortgage:
||Provincial Land Transfer Tax
||Land Transfer Tax Rebate
|Prince Edward Island
|City of Toronto*
For a $500,000 mortgage:
||Provincial Land Transfer Tax
||Land Transfer Tax Rebate
|Prince Edward Island
|City of Toronto*
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