A Look At Canadian Real Estate And The Changes Which Are Currently Taking Place
For people who are interested in Canadian real estate, some factors which affect the sale and purchase of property has changed radically in the last few years. There have been a number of changes that people need to be aware of whether they are looking at buying and selling a residence as an investment or on a straight residential basis. Changes have taken place or are taking place in lending practices and taxation methods. Learning what these changes are can prevent you from making costly mistakes.
Some of these changes have been brought about by the CMHC. The CMHC is the ruling body that basically sets lending practices for mortgages in Canada. They provide mortgage insurance and set housing related policies. Because they provide mortgage insurance for lending institutions, if they determine that lending practices have changed, many banks will go along with the decision. There are times that this has benefited people who want to invest in homes and commercial buildings as well.
It is the CMHC that caused two significant changes to property buying procedures for first time home buyers. Usually, a certain percentage of the property’s purchase price must be furnished by the buyer separately in order to qualify for a mortgage. This is something which had held many first time buyers back from purchasing property. The CMHC changed lending practices and waived this need. Suddenly, the entire purchase price could be financed.
It led to a real estate boom in Canada. There were similar opportunities in the USA and this led to a huge increase in property sales there as well. Unfortunately, in the States, other factors such as credit history were ignored and many unsuitable individuals were allowed to purchase properties. Many of these ended up going through foreclosure and losing their properties. This is one factor that upset the economy. Therefore, to prevent the same problems from happening here, the CMHC canceled the no down payment program, something which many buyers may still be unaware of.
Another way that home buying was made more affordable was a longer time period in which to pay back the money. Usually the money to buy a home is paid back over a period of twenty or twenty-five years. This was extended and mortgages of up to forty years were available. This lowered the overall monthly payment so that people could afford a better home than otherwise would be possible. The forty year amortization period was also canceled by the CMHC in October of 2008.
There is a change which is coming for residents of Ontario. The government will be introducing a new Harmonized Sales Tax in July of 2010. This will combine the GST (goods and services tax) and the PST (provincial sales tax). It will mean that items which are currently not being charged PST will suddenly increase in price by eight percent. This is not as big a deal on smaller purchases but will affect the cost of buying a new home significantly. Unfortunately, it will also affect the cost of other house related expenses such as utility bills as these will now suddenly be subject to an eight percent increase as well.
As you can see, there have been some fairly significant changes to property investment in general. There will continue to be changes and so it is important to look into buying property well in advance of deciding whether or not to invest.
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