June 10, 2021

How to Decorate for Outdoor Entertaining

by Stephen George

Even though you don’t have a sprawling backyard, that doesn’t mean you can’t enjoy entertaining outdoors. Make the most of your petite patio and turn it into a pocket-sized paradise. Here are our tips for how to decorate small spaces for outdoor entertaining.

● Arrange furniture the right way: The best way to maximise space is to arrange your furniture around the perimeter of the deck or patio. Think twice before placing a table in the centre, and instead give your guests plenty of room to stand or move around.

● Add extra seating with large pillows: Get a few extra spots for guests to sit without taking up too much space by throwing in some large floor pillows. They add an extra element of cosiness, plus they’re easy to add or subtract.

● Use colour wisely: Colour can make all the difference when decorating, especially in such a small space. Keep things fresh and airy by sticking to a monochromatic palette in whites or greys. Or add a bit of fun by using colourful accents in eye-catching patterns.

● Be strategic when choosing furniture: Save space by investing in two-for-one pieces of furniture, such as nesting tables, storage ottomans and benches (which can also be used for seating), and folding tables and chairs.

● Bring on the plants: There may be plenty of foliage outside already, but use it strategically in your entertaining area. Plants are a simple way to liven things up and make your modest space feel like an exotic retreat.

● Hang up lights: Strings of bistro lights can instantly open up a small space. Plus, that warm glow will give things a cosier vibe.

Get ready for a summer full of outdoor entertaining!

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Closing Costs • Mortgages • March 31, 2021

Closing Costs

by Stephen George

Closing Costs Overview

Closing costs, ranging from 1.5 to 4% of the purchase price, are the legal and administrative costs you will need to pay when your house closes. In addition to closing costs, there are other expenses and/or events that may require a cash outlay before, on or after your house closes. We will outline these in detail to ensure these often unexpected costs do not sneak up on you.

Cash outlays required before your mortgage closes

Home Inspection Fee. It is highly recommended that you contract a home inspection as a condition of your Offer to Purchase. Home inspectors assembles reports on the condition homes for of around $500, depending on complexities of the inspection.
Deposit. A deposit that counts towards your down payment is required when you make an Offer to Purchase. A deposit shows the seller you’re serious and committed to buying their property. It signals that you have the financial means to make the purchase and you’re comfortable taking on some level of risk until the deal closes. Unlike your down payment, there is no minimum required amount for the deposit.

Costs financed in your mortgage

Mortgage default insurance, or CMHC insurance, is not normally considered a traditional closing cost as it is added to the total mortgage you require and amortised over the life of your mortgage. We have chosen to include it here to point out the major difference between it and traditional closing costs: it does not require a cash outlay upon closing.

Mortgage default insurance. If you purchase a house with less than a 20% down payment, you will be required to buy mortgage default insurance, commonly referred to as CMHC insurance. This protects the lender in the case the borrower, defaults on the loan.

Mandatory closing costs covered by the home buyer

The following is a list of closing costs that are incurred by the home buyer

Land Transfer Tax. Calculated as a percentage of the purchase price of your home, all provinces have a Land Transfer Tax (LTT) payable on closing, with the amount varying in each province. Some cities, such as Toronto, also have a municipal LTT.
Legal Fees and Disbursements. You can expect to incur a minimum of $750 (plus GST/HST) on legal fees, which account for the preparation and recording of official documents. Find a residential real estate lawyer with MyClosingCosts.ca.
Title Insurance. Today, most lenders require title insurance to protect against losses in the event of a property ownership dispute. This is purchased through your lawyer/notary and costs $100 – $300.
PST on CMHC insurance. Though CMHC insurance itself is financed through the mortgage, PST on the insurance must be paid in cash at the time of close.

The following is a list of closing costs that are incurred by some home buyers as they are only applicable to certain properties

Septic tank. If the house has a septic tank, it should also be tested to ensure it is in good working order. Once again, you can negotiate the cost with the previous owner and list it in your Offer to Purchase.
Water Tests. If the home has a well, you will want to test the quality of the water and ensure there is an adequate supply, as well if the water is potable. You can negotiate these costs with the previous owner and list them in your Offer to Purchase.
Estoppel Certificate Fee (does not apply in Quebec). A certificate fee may be payable if you are buying a condominium or strata unit, and could cost up to $100

Mandatory closing costs often covered by the lender

Appraisal Fee. An appraisal, which is an estimate on the value of your home, is often covered by your mortgage lender. An appraisal is performed to certify the lender of the resale value of the home in the case you default on the mortgage. The cost is usually between $250 and $350.

Other costs to consider

Property Insurance. Property insurance, which covers the cost of replacing your home and its contents, must be in place on closing day. This insurance is often paid in monthly or annual premiums.
Prepaid Utility Bills. You may need to reimburse the previous owner of your property for prepaid costs such as property taxes, utilities and so forth.
Property taxes. Property tax is calculated as a percentage of your home value, varies by municipality and must be paid each year. The residential property tax rate in Toronto for example is 0.83%, and on a $400,000 home, would be equal to $3,320 per year. You may need to reimburse the previous property owner if he/she has already paid property taxes for the full year. You are also given the option to set-up an automatic payment plan with you lender. Your lender will set up an account for you, collect an additional $277 per month ($3,320 / 12 months) and then pay property taxes on your behalf. Though by no means necessary, some homeowners find this service extremely valuable for budgeting purposes.

Closing Day

Closing Day is the day you finally take legal possession of your home. It’s important the bulk of your administration is completed by this point including transferring your down payment to your lawyer. Transferring down payment funds, especially from your RRSP can take time, and should be done several days before close.

On closing date, the following events will take place:

Your lender will provide the mortgage funds to your lawyer/notary.
You must provide, your down payment less the deposit, to your lawyer/notary along with the closing costs.
Your lawyer/notary pays the previous owner, registers the home in your name, and gives you the deed and keys to your new home.

Congratulations! You are now ready to move in.

Real Estate Talk • March 26, 2021

A capital gains tax is not a panacea

by Stephen George

There has been a lot of talk of a possible capital gains tax on principal residences lately, I just wanted to share an article written By John DiMichele ( CEO of the Toronto Regional Real Estate Board) and Michael Bourque (CEO of the Canadian Real Estate Association)

The CREA, the Toronto Regional Real Estate Board and other boards across the country publish extensive resale housing market statistics. We also analyse trends and identify factors driving significant shifts in unique markets across the country. We are constantly considering a wide array of policy options to address trends that are unsustainable or pose a threat to the stability of housing markets in Canada.

When it comes to housing policy, taxing capital gains on principal residences is often raised as a solution. But a tax on Canadians’ homes is not the silver bullet some would have you believe. In fact, the introduction of a tax would be excessively complicated with far reaching implications and would likely backfire.

To return to first principles, consider the simple economics of supply and demand. In 2020, home sales continued trending upward to reach a record high, while new listings sunk to an all-time low. The current sales-to-new-listings ratio is trending at historically elevated levels, resulting from an unprecedented level of soaring demand that is far outstripping any influx of new supply. Taking this, and historically low interest rates into consideration, the rapid increase in home prices is not the puzzling outcome that some make it out to be.

Population growth is outpacing housing completions and the shortage of housing supply is not an unexpected consequence. Even with the pause on immigration we had this past year due to COVID restrictions, there just aren’t enough homes to keep pace with demand. We can’t tax our way out of a housing supply shortage. Nor should we pump the brakes on the immigration driving population gains that grow our economy. The only answer is to create housing supply, across the entire housing spectrum at a rate that meets demand. It is not a simple answer, but it has the benefit of being the right one. And one that is good for growing our economy.

Creation of new housing supply requires a co-ordinates effort between the federal government, provinces, territories and municipalities. Addressing construction restrictions at the municipal level plays a far larger part in making housing more affordable than a potential new tax would.

All Canadians need to somewhere to live. In most cases, a principal residence is someone’s only residence. If you purchased a house 25 years ago for $250,000 that is now worth $1 million, it is probably still the same home you bought, with some upgrades. Introduce a capital gains tax on principal residences, and just like that, you are now taxed as a millionaire.

A capital gains tax would effectively create a disincentive for anyone to ever list their home, and further exacerbate the already dire lack of housing supply across Canada. The tax could very well put upward pressure on housing prices rather than cool them.

The spin-off effects are myriad. Canadians would think twice before moving within the country for an employment opportunity, putting more pressure on major urban centres while thwarting the efforts of smaller communities to grow. Retirees would have no incentive to forgo their equity, and therefore would not downsize unless absolutely necessary. Most Canadians have made assumptions about their retirement based on the value of their homes. This proposed change would disrupt those assumptions overnight, while very possibly shattering their presumed financial stability.

It was also suggested that capital gains from housing be treated like other forms of investment, such as stock. While that may appeal from a uniquely financial perspective, you can’t live in your stock portfolio. Capital gains on principal residences are treated differently because they serve the far more important purpose of providing a place for us to live and enabling freedom of labour mobility.

Attempting to extract additional tax revenue from Canadians through their homes would be wildly unpopular for good reason. There are other avenues to pursue: targeting speculation in the market; incentive’s other classes of investment; and most importantly, building more housing supply.

Realtors help people find homes, and we want to continue working toward real solutions that make it easier for Canadians to find a home they can afford. A capital gains tax on principal residences simply isn’t the answer.