Toronto Income Property Newsletter: March 2016

Starting this past February, CMHC now requires a 10 per cent down payment on the portion of any mortgage it insures over $500,000. The five per cent rule remains the same for the portion up to $500,000.

"We recognize that, specifically in the Toronto and Vancouver markets, we have seen house prices that have been elevated," newly appointed Finance Minister Bill Morneau commented, "and we want to make sure we create an environment that protects the people buying homes so they have sufficient equity in their home."

With these new rules, someone looking to buy a $750,000 home would need to have a minimum down payment of $50,000, which is what you get when you add five per cent of $500,000 and 10 per cent of the remaining $250,000. Banks are forbidden to provide "high-ratio" mortgages — when the amount being borrowed is more than 80 per cent of the home's purchase price — without taking out insurance for it.

As many of you know we have been in a Sellers’ market for a couple of years now. In multiple offer situations some buyers elect to purchase a home without getting a home inspection. Or they rely on some abridged version provided by the Sellers. Often there is sufficient time for the buyer to do their own inspection in advance of the offer date. It may be a shame to do an inspection on a property that you will not own, but that is better than buying a place without knowing for sure that there aren’t any major deficiencies.

You cannot rely solely on how nice a place appears to have been renovated. It’s the stuff that you don’t see that concerns me. Last year a client of mine almost bought a completely renovated house with a basement suite. The Seller was

hoping for multiple offers so that an inspector wouldn’t walk through the place and find the hidden deficiencies. More than half the house was still wired with knob & tube even though the panel looked completely clean. Also, the flat part of the roof was completely shot. Mind you, the sloped part which was visible to the eye had been replaced. Luckily, we didn’t get caught because we took the time to check things out.

Remember that all due diligence is on the buyer’s shoulders. Don’t trust Sellers or their agents. The Seller isn’t warranting anything when you buy a property so please be careful and get your property inspected so you know precisely what you are dealing with.