Real Estate Professional forum is the place for positive industry interaction and welcomes your professional and informed opinion.

Industry puts up a fight

Notify me of new replies via email
Real Estate Professional | 08 Feb 2017, 08:15 AM Agree 0
Several influential industry players have provided the government with recommendations for future mortgage policy
  • Shawn Laghai | 23 Feb 2017, 01:28 PM Agree 0
    There’s no plan of action, suggestion, or constructive criticism in this article. Sales people, buyers, and the general public would like to see better policies.
    Here’s one suggestion.

    From my understanding, these rules are made to protect both the buyers and lenders. At the same time, the rules protect the economy of our country.
    Nevertheless, some of the rules must be adjusted to achieve these goals and for my recommendation to be effective.

    In the current market, the property is assessed for $500,000.00 for the next few years and the tax is about $450.00 per month. However, the property is sold for $1,200,000.00 or more and the new owner will keep paying the same tax on the old assessed amount until the next assessment day.
    This is my recommendation:
    As soon as the purchased property has closed and the change of ownership happened, the local property tax starts immediately with the new paid price. This will be fair for the buyer, since he/she paid for it, as well as for the government (Revenue Canada) and the rest of Canadian property owners. This will also prove to be safer for the buyers and lenders because they will be better equipped to know what to expect.
    Why? Because the lenders can calculate the mortgage amounts accurately. The rule of calculating the mortgage for buyers is that, the property tax and heating are part of their liabilities. So, as an example, if a buyer’s total income is $10,000.00 per month and they have $130,000.00 cash down payment (which is 20%). The buyer can have a total of $3,000.00 per month payment (GDS of 30%). So we say buyer has a pre-approval of $500,000.00 (mortgage amount) and he can buy up to $620,000.00. But if he goes to buy the above property for $1,220,000.00 and he puts $720,000.00 cash down, with the current policy buyer will have the $500K mortgage. However, if the property tax goes up immediately, the lender can radius the mortgage amount to comply with 30% GDS.
    This action has the following benefits:
    1- The government will make more property tax immediately and no one (including the new owner) can complain that the property is not worth so much, since the buyer himself paid for it.
    2- The lender will reduce the mortgage amount if the buyer purchases more than he anticipated since the property tax is higher and is changing his loan to income ratio.
    In this case, the lender and the buyer are both protected and there will be no surprise in the future.
    3- It is cheaper (more savings) for the government since assessment companies would have less paperwork.

    4- (The best benefit of all: )
    A- This system will be for everyone and not exclusively for people who would be putting less than 20% down.
    B- This will put a positive pressure on the buyers to not pledge absurdly high amounts in their offers.
    C- Eventually, the markets will experience a rest from this price increase problem without crashing the market.

Post a reply