The CMHC Improvements Program — Making Toronto Real Estate More Affordable for Home Buyers
CMHC Helps Buyers Transform Fixer-Uppers into the Homes of their Dreams.
It wasn’t long ago when a home that “may need a little TLC” was enough to make a homebuyer turn the other way. Now, in Toronto’s tight market, where affordability is a growing concern for home buyers, even homes in dire need of repair and renovation are stirring up bidding wars.
CMHC’s Improvements Program, (formerly known as the Purchase Plus Improvements Program) is a little-known option that qualified buyers can take advantage to improve their odds of affording a fixer-upper. How does it work? The program allows you to tack the cost of renovations to the overall purchase of the home and include it in their mortgage loan amount. Qualified buyers have that ability to borrow up to 10 per cent of the estimated value of the home after renovations.
To give you a better idea of how the program works, let’s say you’re interested in purchasing a home listed at $650,000. The home has great bones, however, would require renovations to the kitchen and washrooms. It’s estimated that this home’s value, once improved would have a market value of $700,000. As a result of the estimated increase, you can borrow up to 10 per cent, or $70,000 of the new value. This is a great program for first-time buyers who would otherwise be unable to afford renovations because the majority of their money was used toward a down payment.
To qualify for the program, borrowers must provide a quote from a contractor and submit it to the CMHC and their mortgage lender before closing on the house. In order for the CMHC and lender to approve the amount, your Agreement to Purchase must include the condition that states you would like a contractor to perform an inspection of the home. Once approved, the amount will be added to the mortgage loan. Upon closing, the improvement amount is forwarded to your lawyer who is authorized to release the funds when the proposed renovations are complete. Because buyers do not have immediate access to the funds, it is recommended they open an unsecured line of credit in the interim.
There are a few provisos that buyers need to keep in mind—things that are not permanently affixed to the structure of the home, such as appliances are not covered under the program. Additionally, the CMHC would not approve a renovation that would convert a section of the home into a separate apartment.
For new homebuyers, the Improvements Program is a fantastic opportunity to build up thousands in equity instead of purchasing a more costly renovated home—and transform that fixer-upper into a dream home.
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In 2015, the average price of a detached home in Toronto surpassed the $1 million mark. Now that 2016 is here, many of us are considering selling our homes while the market is still red hot. If Selling your house is on your list of New Year’s resolutions, here is a list of helpful tips that will make the process of selling your home quicker and also less stressful.
Tips for Selling Your House in 2016
1. If the end of your mortgage term is drawing near, consult a mortgage professional about your options. Rates will probably not be this low for some time, so now is the time to seize the opportunity. If you’re in your first year of your term, review your agreement with your lender or financial institution. There might be a hefty payout penalty, so make sure the pros outweigh the cons before making any decisions
2. Are you downsizing? If you plan on using the proceeds of your home’s sale toward a new property, you will need to crunch the numbers and possibly review your budget. If you’re planning on upsizing, prepare for the increase in your mortgage payment. If you’re planning on a mortgage payment increase from $2300 to $2900, try taking an additional $600 a month from your income and put it in a savings account. Do this for three consecutive months and make this account off limits; this is an excellent way to test the waters to see if you’re ready for an increase in your expenses. If you find yourself stressing about the additional cost, you may want to rethink upsizing.
3. How have recent home sales in your neighbourhood been? Market conditions can change in the blink of an eye, so it’s wise to assess comparable homes anywhere between 2-3 months before putting it on the market. If homes sold over asking, find out what features or selling points that home had, and use the same approach when selling yours.
4. Clean and declutter your home a few months before listing. A crowded or cluttered space isn’t very appealing to potential buyers. A large storage room is a great selling feature, but if it’s jammed with things from the late 80’s, buyers won’t be able to assess the actual amount of space available. Sell things you don’t use on Kijiji or donate them to a great cause. The more you give away, the less you will have to pack, move and unpack.
5. Consult a professional home stager. Investing a bit of extra money in home staging can go a long way. Simple things like painting your walls and organizing furniture in a certain way can increase list price significantly, and possible draw multiple offers.
6. Stay focused on your goals. Indecisiveness can impair the selling process, which might cost you time and money in the long run. Get your planning team together and set clear goals and a timeline. Less stress should be on everyone’s New Year’s resolution list for 2016. Happy Selling!
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GTA Real Estate Sales Soar, Toronto Luxury Real Estate Market Hottest in the World
Peak selling season is off to a great start in Toronto, and judging by April’s figures, we’re in for one hot summer. In an announcement made last week by Toronto Real Estate Board President Paul Etherington, GTA REALTORS® reported 11,303 sales through Toronto MLS®. This is an astounding 17 per cent increase in comparison to the same time last year. New listings were up five per cent—a modest number, however, still an increase compared to last year.
The overall average selling price of a GTA home was $635,932, up 10 percent in a year-over-year comparison. The MLS® Home Price Index (HPI) composite benchmark, which estimates the price of a benchmark home with the same attributes from one period to the next, was up by 8.4 per cent over the same period—although the HPI saw a healthy increase, it did not leep up with the growth of the overall average selling price.
Source: Toronto Real Estate Board
The margin supports the recent buzz regarding Toronto as the “Hottest Luxury Market” with a significant surge in higher-end houses being sold. Luxury homes in Toronto acquire their name when their list price exceeds $3 million USD.
The demand for low-rise homes in the city is not being met, withrare new listings being snatched up by eager homebuyers. According said Jason Mercer, TREB’s Director of Market Analysis “Demand for ownership housing was very high relative to the number of homes available for sale in April. This situation is not expected to change markedly as we move through the remainder of 2015. Until we experience a sustained period in which listings grow at a faster pace than sales, annual rates of home price growth will remain strong,”
There were increases in the condominium market as well, which unlike detached homes in the GTA, are more accessible to buyers. The high activity in the Toronto Real Estate Market, as well as in the GTA is proof that people still consider real estate as a dependable, long-term investment.
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