buyer

Reverse Mortgage: What You Need to Know

Are you planning to purchase a Halifax Condo in the next 6 months? It is CRUCIAL to have a pre-approval in place before viewing properties! Contact us to get your pre-approval started!

It has been our (and most people's) longstanding understanding that after age 75, you cannot get a mortgage.

 

So, when a buyer reached out to us early last month to purchase a condo in her late 70s, we immediately thought that it would be impossible without paying in cash.

 

As part of our due diligence, we reached out to our trusted mortgage broker Neil Keeping with The Mortgage Group to confirm what we thought we already knew.

 

To our surprise, Neil stated that is it actually illegal to deny someone a mortgage on the basis of age. 

 

If you are 55 years or older, lenders will look at your assets, credit history and income, just like any other applicant. The only difference is your income may be your pension versus your salary.

 

Our buyer was relieved to hear that she had options: one of them being the reverse mortgage.

 

When Neil told us that a reverse mortgage would be perfect for our buyer, we had never heard of such a thing. That is why we asked Neil to write this article explaining exactly what a reverse mortgage is for our audience! 

 

Take it away Neil!

One of the most common observations made concerning the financial profile of average baby boomers is: too much of their net worth is tied up in their primary residence. 

 

While real estate investments have served boomers well over their lifetimes with steadily appreciating values and tax free capital gains, this asset class is also relatively illiquid, and has a future that some fear may not be as bright as its past.

 

Reverse mortgages offer Canadians over the age of fifty-five the opportunity to tap into their existing home equity without having to sell and move. The proceeds are tax free and the loan does not require any scheduled repayment. A reverse mortgage is simply a loan that is paid back with home equity, instead of with ongoing cash flow.

 

Homeowners (and spouses) must be at least fifty-five years of age and the maximum amount of home equity that can be withdrawn is set on a sliding scale according to age (55 yrs = approx. 25%, 70 yrs = approx. 40%, 80 yrs = approx. 55%). Canadian reverse mortgage transactions have until very recently been funded under the Canadian Home Income Plan (CHIP) brand, which has been around for 25 years and is now part of HomeEquity Bank, a Schedule One Canadian bank.

Here are the primary advantages of using a reverse mortgage:

  • There is no ongoing monthly payment obligation. Your interest charges are added to the outstanding mortgage balance. (That said, you have the option to pay all or part of each year’s interest charges on the anniversary date of your mortgage if you wish.)

  • You can’t be forced to move or sell your property, as long as it is maintained and all property taxes and associated fees are kept up-to-date. If your interest payments eventually eat through all of your equity, you (and your spouse) can remain in the house until death and the total amount owed is capped at the fair-market-value of the property at the time of sale. In fact, the longer you live, the more the reverse mortgage numbers start to tilt in your favour. (Approximately two-thirds of CHIP mortgage holders stay in their homes for the remainder of their lives.)

  • You still benefit from future increases in your home’s value, which can offset some or all of your borrowing costs. Of course, you have to sell your house to realize the gain, so this is only a paper profit which can disappear if your property value decreases in subsequent years. (CHIP says that to date, 99.9% of their customers have money left over when the loan is repaid.)

  • The money advanced to you is tax-free and is not counted as income when determining eligibility for Old Age Security (OAS) and Guaranteed Income Supplement (GIS) benefits. Also, if the proceeds are used to buy registered investments, mortgage interest costs can often be deducted from any income earned.

  • It’s easy to qualify. reverse mortgages don’t require any health or income information, so if your property is deemed suitable, you are more than likely eligible.

 

Here are the primary disadvantages of a reverse mortgage:

  • Borrowing back your home equity includes an interest cost that would be eliminated if you sold your home outright. People typically pay interest because they don’t have money, and in this case, you do. Financially, it makes much more sense to sell your house (any capital gain is also tax-free) and to then use the equity to generate future income.

  • The interest rates charged are high. Reverse mortgage lenders are advancing you money, foregoing any repayment and giving you unfettered use of the collateral security for an extended period of time with no set date for recovering their principal and interest, so it’s not surprising that their rates are higher. But the bottom line is that a 5 year loan at 6.75% (today’s typical rate) is still very expensive.

In summary, a reverse mortgage may be a good solution for two types of borrowers.

 

1. Borrowers who can’t bring themselves to sell – If your house is important to you on an emotional level, then paying a premium for a solution that helps ensure you never have to leave it, is worth considering. (Even if from a purely financial standpoint a reverse mortgage is more expensive than the alternative of selling your home and downsizing.)

 

2. Borrowers who think their house price may decline – if you think house prices have peaked and want to hedge against a significant reduction in value, then monetizing your home equity at today’s values is a way to “sell high” without having to hire a moving van.

 

For everyone else, selling your house and cashing out is the way to go.

 

Searching for pre-approval to begin your condo buying journey?

 

Neil Keeping

Associate Mortgage Broker

The Mortgage Group

902.402.3505 

neil.keeping@mortgagegroup.com  

 

& 

 

Jordan Gunn

Licensed Real Estate Assistant

Keller Williams Select Realty

902-401-0373

jordan@andrewperkins.co

8 Questions to Ask Before Buying a Halifax Condo (#5 is a must!)

Are you planning to buy a Halifax Condo? Request our FREE Halifax Condo Buyer’s Guide for all the information you need to set yourself up for success!

It’s no secret that Halifax Condo living has its perks: less maintenance, added amenities, increased security and more. 

 

More and more we see Halifax residents catching on to these benefits, and broadening their property search to include condos. We expect this to only increase with Halifax’s population growth. 

 

Condominiums are, in our opinion, one of the best types of property to own in Halifax. Now, this doesn’t mean we suggest you buy into just any Halifax Condo building. You should understand that condos run like a corporation, and condo buildings cannot fail.

 

What do we mean by saying, they cannot fail?

 

We mean, if the roof needs replacing, it will be replaced. If a pipe bursts and causes damage, repairs must happen. And in these cases, the money for these repairs can come from two places:

 

  • The reserve fund that you as an owner contribute to monthly (via your condo fees)

  • If there are not enough reserves in the reserve fund, it comes out of owners’ pockets through a special assessment.

 

This is one of the biggest concerns Halifax Condo buyers come to us with. They are worried their condo fees will increase dramatically due to a building repair.

 

While we do not have a crystal ball to predict your building's future repairs, we do understand condo documents thoroughly and know the questions to ask to ensure you are buying into a secure and sound condo corporation. 

 

Buying into a secure and sound corporation = less chance of special assessments, and less chance of dramatic increases in condo fees.

 

Read through to equip yourself with 8 essential questions you must ask before you purchase a Halifax Condo to set yourself up for success.

1. Does the declaration prohibit any particular occupation or use of the units?

 

Common examples are the prohibition of pets and of conducting business from the unit. Time and time again, Halifax buyers come to us interested in purchasing a condo for Airbnb purposes, and we have to break the bad news to them: the majority of condo buildings in Halifax do not allow Airbnb, and the ones that still do are in the process of phasing it out. Condo buildings are typically ok with long-term renters, but most buildings are not comfortable with multiple, new, short-term residents coming and going. 

 

Some condo buildings also have restrictions on what kind (if any) businesses can be run from their units, and what kind of pets owners are allowed to have.

2. Is the project registered as a condominium corporation? If not, when is registration anticipated?

 

This only applies to brand new buildings. Sometimes, there is an interim phase in which the condo building is being registered as a corporation, and owners begin to move in. If a new builder allows for occupation before registration, you may be subject to an interim occupancy fee. The fee can be made up of three parts: interest on the unpaid balance of the purchase price of your condo, an estimate on the municipal taxes for your unit, and a projected common expense contribution to keep the building running. The fee is usually charged monthly and requested in the form of post-dated cheques made out to the developer or vendor. This does not always occur, and new condo buildings are rare nowadays in Halifax, so most buyers will not have to think about this, however, it is worth noting if you are moving into a brand new building before it is registered.

 

It’s good to note, that developers cannot force you to move into the building before condo registration. Moving in early can be given as an option, but is not mandatory. If you wish to avoid these fees, you can wait to move in until registration is complete.

3. How many of the units are owner-occupied versus rented?

 

Knowing what percentage of a building is being rented can give you insight into the community atmosphere of the building. Generally, renters take a shorter-term perspective on issues that can affect condo living, versus owners who live in the building, who may see things more long-term. Renters are also less likely to conduct regular maintenance in their units in comparison to owners. 

 

Condo buildings in Halifax that are close to universities typically have large numbers of renters, as opposed to condo buildings in, for example, Bedford. It’s not to say having a building with a lot of renters is always a bad thing: If you are looking for a condo as an investment opportunity, you may want a building that has many renters as it may be easier to find a tenant. 

 

Knowing the percentage of renters in a condo building you are interested in is good knowledge to have to evaluate whether you may want to purchase. Most buildings with professional property management will have this information available, whereas, in smaller buildings that are not professionally managed, it may be harder to find out.

4. If the unit is presently occupied by a tenant, how much notice to quit is required by the Residential Tenancies Act?

 

If you are purchasing a condo that is tenant occupied in Halifax, you have a few options:

 

  • If you are moving into the unit and the tenant is on a periodic lease, then the owner must give the notice to quit with a move-out date no earlier than 2 months after the date the tenant receives the notice.

  • If you are moving into the unit and the tenant is on a fixed-term lease, the seller must give the notice to quit with a move-out date no earlier than the date specified on the lease as the end of tenancy

  • If you are purchasing an investment condo with a tenant that has a periodic lease, you cannot evict the tenant unless they do not adhere to the lease agreement.

  • If you are purchasing an investment condo with a tenant that has a fixed lease, you can choose to not renew the tenant’s lease when the fixed end of tenancy date arrives.

5. Has a reserve fund study been conducted? Is the corporation's budget and financial status in keeping with the recommendations of the study?

 

The financial status and reserve fund are very important factors for owners in a condo building. Essentially, your condo corporation should be taking a percentage of your monthly condo fees and contributing those to a reserve fund for when (not if) repairs need to be made. 

 

If the condo corporation is not following suit with the recommendations of a reserve fund study, and a large repair needs to be made, your condo fees may increase substantially, or a special assessment will need to be done. Either way, it would be unexpected money out of your pocket.

6. Are any major renovations or repairs anticipated?

 

This question coincides with question #5: If there are major repairs anticipated, where is the money coming from for them? Does the building have ample reserve funds to cover the costs? Repairs will inevitably happen at some point in every Halifax Condo building, so it’s crucial to understand how prepared your condo corporation is to handle this.

7. How much are the condo fees? What expenses do they cover?

 

Some condo newbies are shocked to hear that condos require a monthly condo fee on top of their common living expenses. Condo fees typically cover maintenance of the building, landscaping, snow removal, common areas and amenities. Understanding what your condo fees cover can help you budget what you can afford. Some Halifax condo buildings include heat, hot water, or even property taxes in their monthly fees. If these fees are not paid, a lien can be issued against the condo owner.


8. Is the corporation self-managed or managed by a professional management company?

 

Generally speaking, in Halifax, large buildings are almost always professionally managed, whereas small condo buildings may or may not be. It’s always a bonus when a condo building is professionally managed, as the condo board does not get burned out, and the professional management has access to things like full-time superintendents, additional staff and are experts in building laws and regulations. 

 

Knowing the answers to these questions before deciding if you are going to purchase a condo in a given building will help you form a solid picture of whether this building is for you. As condo experts, we understand condo documents through and through and can help you navigate these and other questions before purchasing. The more informed you are, the greater the chance of a successful purchase.


Ready to purchase a Halifax Condo?

 

Jordan Gunn

Licensed Real Estate Assistant

Keller Williams Select Realty

902-401-0373

How to Combat Buyer's Remorse

So you did your research, you looked at condos, you investigated neighbourhoods and school districts, you made an offer, and—voila!—you’re a condo owner! This should be one of the happiest days of your life…so why do you feel like driving off a cliff ala Thelma and Louise? Did we pay too much? Did somebody pay off the inspector not to disclose some massive underlying damage and faulty wiring? Is this the true right condo for us? How will we ever scrape up enough to pay the mortgage payments? How can I get out of it?

Well, it’s called buyer’s remorse, and it’s as universal as the common cold. So take a deep breath, do a few yoga poses and relax. It’s going to be okay. Everyone goes through it. Statistics are on your side: 74 percent of first-time buyers say they like their new home better than their previous residence, and 67 percent of repeat buyers like theirs better.

And anyway, you legally have three days to change your mind and cancel the contract. Right?

Wrong! No such law exists. Generally, a buyer can cancel only for failure to qualify for mortgage financing after a diligent and good-faith effort, or based on the reasonable disapproval of some aspect of the home. What constitutes “reasonable disapproval of some aspect of the home”? Read on and find out.

Notice of violations of building, zoning, fire or health laws.

  • Flood hazard designation (resulting in the cost of flood hazard insurance).

  • The title commitment report from the title company (which may indicate liens, unpaid taxes and easements restricting the use of the property).

  • The Seller's Property Disclosure Statement.

  • Condo Corporation/Board disclosures (such as the restrictions contained in your community's covenants, conditions and restrictions or other governing documents).

  • Cost to repair any septic or other waste-disposal system.

  • Lead-based paint information (for condo constructed prior to 1978).

  • Wood-infestation reports.

  • Damage to the condo by fire, flood, earthquake or act of God.

  • Information obtained from the condo inspection and investigation (which may reveal adverse property conditions).

If a buyer tries to cancel the contract just because of cold feet, the buyer is in breach of the contract. The seller is then entitled to request mediation, file a lawsuit, keep the buyer's earnest money as damages or ask a court to order the buyer to purchase the condo.

You're less likely to suffer from buyer's remorse if you have a real estate agent you trust who can help you evaluate your housing needs. But the best way to prevent (or at least mitigate) buyer’s remorse is to prepare yourself in advance, long before you ever sign on the dotted line.

First, draw up a pro and con list. We’ve given you one to get you started below.

Advantages of Renting

  • Usually costs less than buying

  • You can usually move more easily

  • Little responsibility for maintenance

  • No responsibility for repairs

Disadvantages of Renting

  • No tax benefit

  • No investment in or from the property

  • No equity is building

  • Rent payment can increase frequently

  • Possibility of eviction

Advantages of Buying

  • Greater stability

  • Usually good investment

  • Your equity builds

  • First property often leads to better one

  • Greater individuality in décor/space arrangement

  • Greater sense of security

Disadvantages of Buying

  • You are responsible for property taxes

  • You are responsible for the maintenance (within your unit for condos)

  • You are responsible for repairs (within your unit for condos)

  • Possibility of foreclosure

  • In foreclosure, loss of equity

  • Monthly housing usually costs more

  • Your cash is tied up

  • You have less mobility

  • Payment on some mortgage types can increase.

After you’ve looked over your list, compile the costs of buying a condo, of which there are two types: upfront costs (down payment and closing costs) and ongoing costs (monthly mortgage payment, condo ownership expenses, taxes, insurance, etc.)

So when buyer’s remorse hits, remind yourself why you wanted to buy a condo in the first place. Now pop open the bubbly and congratulate yourself.

Let's Talk Property Deeds

It used to be that all you had to do to sell your house was give the buyer a handful of dirt from the property and say a few legal words in front of witnesses to symbolize the transfer. How times have changed! Nowadays, there is an entire selling process, lawyers and fees needed to complete a real estate transaction. Selling a home also requires the transfer of property deed.

Property deeds are written documents used to transfer real estate from a seller (grantor) to a buyer (grantee). They include the actual transfer of the property, called the granting clause, a description of the property being transferred, called a habendum clause* and, usually, a warranty. Deeds also must be signed by the grantor. It is the warranty or lack thereof, that defines each type. Different types of deeds provide different assurances to the grantor and grantee and are used in different situations. 

General warranty deed

This kind of deed guarantees that the grantor is the owner of the property and has the right to sell it to the grantee. It also guarantees that there are no debts on the property or defects in structures other than those that are recorded in the deed. Lastly, it guarantees that should any unforeseen problems arise with the title, the grantor will reimburse the grantee for any losses. All of these guarantees extend to before the grantor owned the property; the grantor is responsible for title problems that arose before their ownership.

For this reason, title insurance is used to protect against possible claims and liens. A title company provides a full title search and explores any other possible breaches before the property is transferred. This is typically done through your lawyer during the buying process.

Special warranty deed

This warranty is extremely similar to the general warranty deed. This deed also includes the warranty that the grantor has the legal right to sell the property. However, it differs in that it only guarantees that there are no debts on the property or defects in structures other than those stated in the deed during the period of the grantor’s ownership. This kind of deed makes no guarantees outside of what the grantor had knowledge of or caused. For example, if the grantor sells a house in which the plumbing was working fine while he owned it, and the plumbing breaks after the sale as a result of a prior defect, the grantor cannot be held responsible. Other warranties can also be included in the deed if so stated.

Grant deed

This kind of deed implies that the grantor has the right to sell the property and that the property itself is unencumbered. However, it does not make explicit warranties like the above deeds.

Quitclaim deed

This kind of deed has no warranty at all. The purpose of a deed of this type is for one party to release any interest that they had in a piece of property. The deed doesn’t warrant that the grantor had any legal right to the property at all. Quitclaim deeds are usually used in divorce cases, in which one party releases any claim to the property. This party may not have any legal interest in the property, but it prevents them from, for example, claiming a right to money from the sale of the property somewhere down the road. Quitclaim deeds are also used in foreclosure cases.

Deed-in-lieu of foreclosure

When a homeowner misses several payments and defaults on a loan, sometimes they will transfer the deed of the house to the lender to avoid foreclosure. This can use any of the above deed types in the transfer. There is no transfer of money because the homeowner owes the lender; the lender sells off the house to recover at least part of what the homeowner owes. The lender also provides the borrower with a form that states the debt is cancelled and another that states that the lender cannot ask for what remains of the debt after the property sale.

 

Have any questions about deeds? Reach out! We would be happy to chat!

 

*habendum clause: the part of a deed or conveyance which states the estate or quantity of interest to be granted, e.g. the term of a lease.

 

Jordan Gunn
Licensed Real Estate Assistant
902-401-0373

Federal Aids for First-Time Home Buyers!

Buying your first home is one of the biggest milestones in your life. It’s something that most people dream of from a very young age. With big milestones come big challenges: one of the biggest challenges that come with purchasing your first home is saving for a downpayment. 

The conventional downpayment for a home is 20% of the purchase price. For example, your mortgage lender would expect a 60K downpayment for a property worth 300K. The minimum downpayment in Canada is 5% of the purchase price, however, with downpayments less than 20%, you must purchase mortgage default insurance. Keep in mind, 5% of 300K is still 15K, which is a significant amount of money. 

In the early years of adulthood, it can be very difficult to save this kind of money without exterior influences such as trust funds or gifts from relatives. Luckily, Canada and Nova Scotia offer various supports that allow first-time homebuyers assistance in making a downpayment. In this article, we will dig into the Federal Programs that are in place to assist buyers. Tune in next month as well, when we dig into the provincial programs that are available to Nova Scotia Residents!

The Government of Canada has three programs to help first-time home-buyers: the Home Buyers’ Amount tax credit, the Home Buyers’ Plan (HBP), and the First-Time Home Buyer Incentive. We will detail each of these programs below to help you or someone you know achieve their real estate goals.

The Home Buyer’s Tax Credit

 

Eligible first-time homebuyers can claim a $5000.00 non-refundable income tax credit on a qualifying home. To qualify for this tax credit, you must:

 

-buy a new or existing property that is either a single-family home, townhouse, condo, or certain multi-unit properties.

-Be a first-time home buyer: this can apply to those who have not resided in a home they own for the past 5 years.

-The property must be your principal place of residence.

 

This credit does not need to be applied for or approved, you simply put the Home Buyer’s Amount of $5000.00 on Line 31270 of your income tax return. You can split this amount between you and your spouse, but it cannot exceed $5000.00 total. 

 

The credit results in a 750$ rebate on the taxes you owe for the year. Which will not pay out any money to you, but may reduce your income tax owing to zero if you owed less than $750.00. This may help alleviate the financial burden of added income tax, and allow you to use that money towards real estate.

The Home Buyer’s Plan

 

The Home Buyer’s Plan is a federal program that allows first-time homebuyers to withdraw up to $35,000 per individual from their Registered Retirement Savings Plan tax-free to put towards their first home. To qualify for this incentive, you must:

 

-Be a resident of Canada

-The home in question must be your principal residence

-You must be a first-time homebuyer

-Applicants must have a written agreement to buy or build a home

 

To apply for the Home Buyer’s Plan, simply download and fill out form T1036 here which is entitled ‘Home Buyers’ Plan (HBP) Request to Withdraw Funds from an RRSP’.

 

Once you are approved for the Home Buyers’ Plan, you can withdraw up to $35,000 from your RRSP without paying any withholding taxes. You should know that participants in the Home Buyers’ Plan must repay the amount they withdrew from their RRSP within 15 years.

First-Time Home Buyer Incentive

 

The First-Time Home Buyer’s Incentive was introduced by the Federal Government to make first-time home-buying more achievable for the middle and lower class. The incentive acts as a shared equity loan, where the government lends first-time home buyers 5-10% of the purchase price to put towards the downpayment. This must be repaid either in 25 years or when the home is sold.

 

First-time Homebuyers can apply for this incentive after they have been pre-approved for a mortgage. We should note that the purchase price of the home cannot exceed four times your qualifying income. When you pay back this loan, the amount may be greater than what you originally received, as the government owns equity in 5-10% of your home, which will go up in value the longer you own it. To qualify, you must:

 

-Be a Canadian Resident

-Be a first-time homebuyer

-Have a total qualifying income below $120,000

-Borrow no more than 4 times your income

-Have enough funds to make the minimum downpayment

-Be pre-approved for a mortgage

 

To apply, fill in the forms on the FTHBI website. You then give the forms to your lender who will submit them on your behalf.

 

When you are in the beginning stages of purchasing your first home, speak to your trusted real estate professional and mortgage advisor about these options. These are great programs you should take advantage of to begin owning real estate! Tune in next month when we dig into three programs for first time home buyers in Nova Scotia!

Thinking of Moving to Halifax?

Halifax Waterfront

One of the hardest parts about moving to a city that you are unfamiliar with is picking which part of the city you will call home.


It can feel overwhelming browsing through so many unfamiliar neighbourhoods, schools, clinics and shops. You almost wish that there was a guide to each city, breaking down its most appealing attributes, exploring its unique characteristics, and narrowing down the choices for you.

We are positive that you are not the only one looking for guidance.

This is why we developed this free and comprehensive e-book detailing everything you need to know about relocating to Halifax, Nova Scotia. We know there is nothing worse than moving to a new city and finding out later that you should have bought a house in the west end rather than the east end, to be near a particular school, job, or club you are a part of.

One of the most important steps in moving to a new city is deciding on what it is that you need to live near. This is different for everyone. We hope that this informative guide about Halifax, Nova Scotia will make it a bit easier for you, and save you hours of scrolling through Google. With this guide, you can easily learn about your new home town, and focus on finding your dream home or condo instead.

Browse through this free guide to learn about everything from Halifax’s taxing system to local festivals that grace our downtown. Discover our beautiful beaches and educate yourself on our current government. We are certain that all of your questions will be answered.

Click here to receive our Halifax Relocation Package!

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