Durham Region Real Estate Blog

I know it’s a little past April 19th, but we are all so busy trying to get our taxes filed on time, that we may not have taken full notice of the three new mortgage rules that came into effect, as announced by federal Finance Minister Jim Flaherty.

The good news, and yes, there is good news, is that most of us will not be significantly impacted by the latest changes. The intention of the new rules is to curb speculation housing and encourage homeowners to use their homes as a savings tool, rather than borrowing home equity to pay down loans and credit cards.

The first new rule is that minimum down payment requirements for non-owner-occupied homes will increase to 20% from the previous 5%, and the way that rental income is considered will be scaled back from a maximum 80% offset to 50% added to income. With 20% down, most rental property applications will be approved with conventional guidelines, so it will ultimately come down to the lender’s own policy.  This rule is expected to have the most dramatic impact of the three changes, but only applies to the real estate investor.

All borrowers will have to meet qualification standards for a five year fixed rate mortgage even if they choose a mortgage with a lower interest rate and a shorter term. This is the second new rule. Previous standards for mortgage qualifying were typically based on a lender’s three year fixed rate (if you were opting for a variable rate, home equity line of credit, or a 1 or 2 or 3 year fixed rate product. This qualifying standard has, in the past, been sufficient to protect consumers from rates increasing over the term. Essentially, the governments is forcing people to prepare for a likely rate hike over the next five years. Considering that the average different between discounted three and five year fixed rates is only .3 and .49 %, this should not have a drastic impact on the average mortgage applicant. However, if the banks are forced to use the posted five year rates, we will see a difference of more than 2% and that could impact qualifying for buyers.

The final new rules is a change in the maximum amount Canadians can withdraw when refinancing their mortgages. This amount has been reduced from 95% to 90% of the value of their homes. This final change will likely have the most impact on those Canadians who have a current government-backed insured mortgage and would like to take advantage of the equity in their homes to consolidate debt in their future. In recent times, it’s been advantageous for homeowners to roll their unsecured debt into their mortgage to decrease monthly payments – so much so that the government has sought an end to this trend of high loan-to-value mortgages.

Only time will tell if the governments measures to curb spiking house prices and encourage equity savings will be a positive change for Canadians.

As energy conservation becomes more of a concern for both government and consumers, we can all be served by knowing more about heating system upgrades and government grant programs for them.

Homeowners who are interested in upgrading their heating systems can take advantage of the Ontario Home Energy Savings Program and the federal ecoEnergy Retrofit program which provide grants for retrofitting their homes. Homeowners can receive up to a combined maximum of $10,000 from both the provincial and federal government in grant money.

Only homes that have undergone a residential energy efficiency audit by an energy advisor certified by Natural Resources Canada (NRCan) will be eligible for grants under the ecoEnergy Retrofit program. So what’s involved?

To qualify for federal grants and provincial rebates homeowners must complete two home energy assessments: one pre-renovation and one post-renovation. Only renovations that begin after the initial assessment qualify and they must be completed by the earlier of either 18 months of receiving the pre-retrofit evaluation report or by March 31, 2011.

Once the initial audit is completed, the homeowner can choose which (or all) of the recommendations he wishes to implement. On completing the renovations, the homeowner should contact the energy advisor to perform the post-retrofit evaluation and then submit the grant application. You cheque should arrive within 90 days of submitting the form.

Remember to document all renovations whether completed by a contractor or by yourself. Retain all receipts and product literature and take photos to ensure full credit is received.

Grants vary based on the energy efficiency and the type of equipment purchased, however, each upgrade qualifies for a flat incentive amount. For example, replacing an existing heating system with an ENERGY STAR® qualifies gas furnace with a 94% annual fuel utilization efficiency (AFUE) rating or higher and a brushless DC motor qualifies for $1,300 in rebates ($650 federal + $650 provincial).

A table of grants available can be found at www.nrcan.gc.ca .  Aside from the rebates, the actual savings from participating in the program depend on the home’s condition and the types of upgrades chosen Participants typically reduce their energy use by up to 30%. This relates into a savings of $450 on a $1,500 annual heating bill!