Tag Archives: home buyers

5 questions every first-time homebuyer should ask their mortgage advisor

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Photos: James Bombales

Between considering mortgage terms and insurance to viewing properties with your realtor, buying your first home is a busy and stressful time. And when you’re talking about the biggest financial commitment you’ll probably make in your life, it can be pretty intimidating too. While there are mortgage professionals available to provide advice on your home purchase and help find the best mortgage solution for your specific situation, you’ll still need to go into the meeting with your advisor prepared with questions. So even if you’re totally mystified by the mortgage process, these five questions will help set you on the right track.

1. How do I know if I’m ready to buy a home?

“Knowing if you’re ready to buy a home could mean a lot of things and ultimately depends on the person’s own situation,” Wan Li, Mortgage Specialist at TD Group Financial Services, tells Livabl. “Potential homebuyers need to consider how much they’ve saved up for a downpayment, whether they have stable, continuous income and if they anticipate any large purchases or major life events in the future.”

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2. What factors determine my eligibility for a mortgage loan?

Unless you’re rolling in cash, most homebuyers will need to apply for a loan from a bank or mortgage broker. However, whether or not you’ll be approved for a loan and the amount you’re eligible for depend on many factors.

“Even if you have a large down payment and have cash available, a bank will not lend you money without a job and stable income.” says Li. “It’s also better if you’ve worked for the same company for over half a year or at least have passed your probation period.”

Your credit rating is another important factor that can mean the difference between getting approved or denied for your loan. Credit scores range from 300 to 900 and are affected by late payments and debt level. The higher your score, the better chance of being considered for a mortgage.

“Ideally, you’ll want to have a credit score of at least 600 to be approved by a bank,” explains Li. “Any less and you’ll likely need to go to a private B-lender which aren’t as strict, but have higher interest rates and charge administration fees.”

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3. How much do I need for my down payment?

Depending on where you live and the total cost of the home, the minimum down payment you need can vary from 5 per cent to 20 per cent. However, if you have less than 20 per cent, you’re going to have to pay for mortgage insurance which protects your lender in the event that you can’t pay your loan.

“In Canada, those who put less than 20 per cent down will have to pay for the Canada Mortgage and Housing Corporation (CMHC) mortgage loan insurance,” says Li. “It’s typically calculated as a percentage of your mortgage and is added to your regular mortgage payments.”

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4. What does pre-approval mean and should I get pre-approved?

Before you head out and start viewing properties for sale, it’s highly recommended that you first get pre-approved. A mortgage pre-approval will help you determine your maximum budget for your new home and can also give you an edge on the competition should you find yourself in a bidding war. Plus, once you do find your perfect home, you’ll be able to move on it quickly since you know you’re already pre-approved on your finances.

“Getting pre-approved involves filling out a mortgage application and providing documents on your financial history to your bank or lender,” says Li. “The bank will then look at your current income and credit history to determine if you qualify for a mortgage loan. The assessment will usually include a specific term, interest rate and mortgage amount depending on your situation.”

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5. What’s the difference between the term and the amortization?

The mortgage term and amortization period are two common phrases in the homebuying process that often cause confusion for first-time homebuyers. The mortgage term refers to the period of time that you have locked in the agreed upon terms and conditions, including the interest rate and monthly or bi-weekly payments towards your mortgage. Five-year mortgage terms are the most common, however they can range from three to 10 years. By contrast, the amortization period is the total number of years that you choose to pay off your mortgage and can be up to 30 years depending on your down payment.

“If you put less than 20 per cent down, your maximum amortization period is 25 years, but if your down payment is more than 20 per cent, you can have an amortization period of up to 30 years,” says Li. “However, while a longer amortization may result in lower monthly payments, you’re also going to end up paying a lot more in interest.”

Source: Livab.com –  

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Canada’s Top 25 Best Places to Live in 2018

25. Whitby, Ont.

Rank in 2017: 103
Population: 136,657
Estimated Unemployment Rate: 5.7%
Median Household Income: $101,792
Average Household Net Worth: $817,453
Property Tax: 11.1%
Total Days Above 20°C: 100
Crime Rate Per 100,000:* 3,251
Family Doctors Per 100,000:* 81
See more stats about Whitby, Ont. here.


24. New Tecumseth, Ont.

Rank in 2017: 170
Population: 36,745
Estimated Unemployment Rate: 5.7%
Median Household Income: $96,041
Average Household Net Worth: $755,965
Property Tax: 20.5%
Total Days Above 20°C: 122
Crime Rate Per 100,000:* 2,906
Family Doctors Per 100,000:* 95
See more stats about New Tecumseth, Ont. here.


23. Newmarket, Ont.

Rank in 2017: 56
Population: 90,908
Estimated Unemployment Rate: 5.7%
Median Household Income: $95,636
Average Household Net Worth: $947,429
Property Tax: 16.1%
Total Days Above 20°C: 107
Crime Rate Per 100,000:* 2,749
Family Doctors Per 100,000:* 95
See more stats about Newmarket, Ont. here.


22. Bonnyville No. 87, Alta.

Rank in 2017: 228
Population: 14,658
Estimated Unemployment Rate: 3.9%
Median Household Income: $103,652
Average Household Net Worth: $789,157
Property Tax: 94.0%
Total Days Above 20°C: 86
Crime Rate Per 100,000:* 4,899
Family Doctors Per 100,000:* 93
See more stats about Bonnyville No. 87, Alta. here.


21. The Nation, Ont.

Rank in 2017: 123
Population: 13,275
Estimated Unemployment Rate: 5.1%
Median Household Income: $88,088
Average Household Net Worth: $478,620
Property Tax: 54.9%
Total Days Above 20°C: 113
Crime Rate Per 100,000:* 2,186
Family Doctors Per 100,000:* 142
See more stats about The Nation, Ont. here.


20. Whistler, B.C.

Rank in 2017: 84
Population: 13,193
Estimated Unemployment Rate: 4.3%
Median Household Income: $86,423
Average Household Net Worth: $1,460,422
Property Tax: 98.6%
Total Days Above 20°C: 83
Crime Rate Per 100,000:* 14,137
Family Doctors Per 100,000:* 159
See more stats about Whistler, B.C. here.


19. St. Albert, Alta.

Rank in 2017: 7
Population: 70,874
Estimated Unemployment Rate: 6.8%
Median Household Income: $123,948
Average Household Net Worth: $900,192
Property Tax: 66.3%
Total Days Above 20°C: 84
Crime Rate Per 100,000:* 5,313
Family Doctors Per 100,000:* 129
See more stats about St. Albert, Alta. here.


18. King, Ont.

Rank in 2017: 68
Population: 26,697
Estimated Unemployment Rate: 5.7%
Median Household Income: $110,816
Average Household Net Worth: $2,655,435
Property Tax: 18.1%
Total Days Above 20°C: 114
Crime Rate Per 100,000:* 2,749
Family Doctors Per 100,000:* 95
See more stats about King, Ont. here.


17. Lévis, Que.

Rank in 2017: 9
Population: 147,403
Estimated Unemployment Rate: 3.4%
Median Household Income: $79,323
Average Household Net Worth: $387,146
Property Tax: 65.1%
Total Days Above 20°C: 94
Crime Rate Per 100,000:* 2,784
Family Doctors Per 100,000:* 106
See more stats about Lévis, Que. here.


16. Toronto, Ont.

Rank in 2017: 129
Population: 2,933,262
Estimated Unemployment Rate: 5.7%
Median Household Income: $55,945
Average Household Net Worth: $906,663
Property Tax: 66.0%
Total Days Above 20°C: 117
Crime Rate Per 100,000:* 3,847
Family Doctors Per 100,000:* 75
See more stats about Toronto, Ont. here.


15. Fort St. John, B.C.

Rank in 2017: 160
Population: 21,251
Estimated Unemployment Rate: 5.7%
Median Household Income: $106,327
Average Household Net Worth: $440,481
Property Tax: 99.5%
Total Days Above 20°C: 64
Crime Rate Per 100,000:* 14,000
Family Doctors Per 100,000:* 104
See more stats about Fort St. John, B.C. here.


14. Saugeen Shores, Ont.

Rank in 2017: 17
Population: 14,109
Estimated Unemployment Rate: 4.9%
Median Household Income: $105,210
Average Household Net Worth: $777,845
Property Tax: 14.2%
Total Days Above 20°C: 110
Crime Rate Per 100,000:* 5,113
Family Doctors Per 100,000:* 107
See more stats about Saugeen Shores, Ont. here.


13. Mont-Royal, Que.

Rank in 2017: 8
Population: 21,172
Estimated Unemployment Rate: 6.3%
Median Household Income: $145,853
Average Household Net Worth: $2,392,238
Property Tax: 1.4%
Total Days Above 20°C: 117
Crime Rate Per 100,000:* 4,594
Family Doctors Per 100,000:* 124
See more stats about Mont-Royal, Que. here.


12. Red Deer, Alta.

Rank in 2017: 330
Population: 107,564
Estimated Unemployment Rate: 4.9%
Median Household Income: $90,844
Average Household Net Worth: $628,900
Property Tax: 86.7%
Total Days Above 20°C: 83
Crime Rate Per 100,000:* 19,460
Family Doctors Per 100,000:* 99
See more stats about Red Deer, Alta. here.


11. Camrose, Alta.

Rank in 2017: 216
Population: 19,488
Estimated Unemployment Rate: 3.9%
Median Household Income: $61,873
Average Household Net Worth: $519,846
Property Tax: 74.9%
Total Days Above 20°C: 83
Crime Rate Per 100,000:* 9,520
Family Doctors Per 100,000:* 99
See more stats about Camrose, Alta. here.


10. Halton Hills, Ont.

Rank in 2017: 24
Population: 65,782
Estimated Unemployment Rate: 5.7%
Median Household Income: $108,410
Average Household Net Worth: $1,190,923
Property Tax: 24.3%
Total Days Above 20°C: 120
Crime Rate Per 100,000:* 2,133
Family Doctors Per 100,000:* 91
See more stats about Halton Hills, Ont. here.


9. Saint-Lambert, Que.

Rank in 2017: 55
Population: 22,432
Estimated Unemployment Rate: 4.9%
Median Household Income: $83,626
Average Household Net Worth: $881,272
Property Tax: 12.5%
Total Days Above 20°C: 118
Crime Rate Per 100,000:* 3,724
Family Doctors Per 100,000:* 96
See more stats about Saint-Lambert, Que. here.


8. Westmount, Que.

Rank in 2017: 52
Population: 21,083
Estimated Unemployment Rate: 7.5%
Median Household Income: $117,755
Average Household Net Worth: $3,953,205
Property Tax: 8.9%
Total Days Above 20°C: 117
Crime Rate Per 100,000:* 4,594
Family Doctors Per 100,000:* 124
See more stats about Westmount, Que. here.


7. Canmore, Alta.

Rank in 2017: 29
Population: 14,930
Estimated Unemployment Rate: 5.1%
Median Household Income: $75,848
Average Household Net Worth: $1,478,315
Property Tax: 99.0%
Total Days Above 20°C: 64
Crime Rate Per 100,000:* 7,482
Family Doctors Per 100,000:* 138
See more stats about Canmore, Alta. here.


6. Milton, Ont.

Rank in 2017: 151
Population: 120,556
Estimated Unemployment Rate: 5.7%
Median Household Income: $111,875
Average Household Net Worth: $1,129,276
Property Tax: 67.7%
Total Days Above 20°C: 120
Crime Rate Per 100,000:* 2,133
Family Doctors Per 100,000:* 91
See more stats about Milton, Ont. here.


5. Lacombe, Alta.

Rank in 2017: 299
Population: 13,906
Estimated Unemployment Rate: 4.9%
Median Household Income: $97,800
Average Household Net Worth: $754,291
Property Tax: 76.6%
Total Days Above 20°C: 81
Crime Rate Per 100,000:* 7,932
Family Doctors Per 100,000:* 99
See more stats about Lacombe, Alta. here.


4. Saint-Bruno-de-Montarville, Que.

Rank in 2017: 6
Population: 27,171
Estimated Unemployment Rate: 4.9%
Median Household Income: $96,757
Average Household Net Worth: $864,221
Property Tax: 18.8%
Total Days Above 20°C: 118
Crime Rate Per 100,000:* 3,724
Family Doctors Per 100,000:* 96
See more stats about Saint-Bruno-de-Montarville, Que. here.


3. Russell Township, Ont.

Rank in 2017: 21
Population: 17,155
Estimated Unemployment Rate: 5.1%
Median Household Income: $112,644
Average Household Net Worth: $509,564
Property Tax: 50.1%
Total Days Above 20°C: 78
Crime Rate Per 100,000:* 2,540
Family Doctors Per 100,000:* 142
See more stats about Russell Township, Ont. here.


2. Ottawa, Ont.

Rank in 2017: 1
Population: 999,183
Estimated Unemployment Rate: 5.1%
Median Household Income: $93,975
Average Household Net Worth: $695,242
Property Tax: 39.3%
Total Days Above 20°C: 117
Crime Rate Per 100,000:* 3,782
Family Doctors Per 100,000:* 142
See more stats about Ottawa, Ont. here.


1. Oakville, Ont.

Rank in 2017: 15
Population: 209,039
Estimated Unemployment Rate: 5.7%
Median Household Income: $112,207
Average Household Net Worth: $1,742,036
Property Tax: 21.4%
Total Days Above 20°C: 107
Crime Rate Per 100,000:* 2,133
Family Doctors Per 100,000:* 91
See more stats about Oakville, Ont. here.

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Affordability: What first-time homeowners need to know

Affordability. It’s a word that gets tossed around a lot when people talk about homeownership, but what does it really mean? Affordability is a term that’s both quantifiable (lending institutions use a formula) and a little bit subjective (lifestyle considerations factor in, too). Here’s what you need to know about affordability, and what it means for you.

AFFORDABILITY, AS DETERMINED BY LENDERS

For lending institutions and mortgage insurers, affordability can be summed up by the debt service ratios, as indicated by your gross debt service ratio and total debt service ratio.

Gross debt service (GDS) ratio
  • Homeownership costs (mortgage payments, property taxes, heating and, if applicable, 50% of condo fees), relative to household income
Total debt service (TDS) ratio
  • Homeownership costs (as outlined above) plus debt payments (credit cards, lines of credit, student loans, car loans, etc.), relative to household income

To qualify for mortgage insurance (mandatory for any home purchase with a down payment of less than 20% of the cost of the home), the highest allowable GDS ratio is 39% and the highest allowable TDS ratio is 44%.

TIP: Get a quick snapshot of your current debt service ratios via Genworth Canada’s What Can I Afford? calculator.

AFFORDABILITY, AS DETERMINED BY LIFESTYLE

Although debt service ratios are an indicator of bottom-line affordability, other real-world factors should be considered up front by potential homeowners.

Expenses like groceries, child care, transportation, and mobile phone and Internet services, for instance, are not covered by TDS, but they’re more or less fixed costs for many households. While they don’t affect debt service ratios, they should be included in your own budget calculations, as they eat up a large chunk of income.

Discretionary expenses like clothing, entertainment, memberships and kids’ extracurricular activities should also be factored into affordability considerations. Are there any areas where you could cut back? Or will some expenses disappear, such as when a car is paid off or when a child leaves daycare for full-time school?

SET A BUDGET YOU CAN AFFORD

Between the numbers-driven debt service ratios used by banks, trust companies and mortgage insurers and the discretionary lifestyle expenses that also affect your bottom line, you will find what affordability means for you.

It’s never too early in your homeownership journey to speak with a mortgage professional or financial planner to determine how much mortgage you can comfortably carry. This will help you assess your financial fitness and also help you set realistic goals on an achievable timeline.

Source: Genworth.ca (Homeownership.ca) 

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Crucial inspections coverage

“Whether you’re thinking of buying or selling, a home transaction can be an extremely stressful process,” said Jackie Chetcuti, head of Home Protection Solutions at FCT. “Buyers often fear that they may have to incur significant expenses soon after acquiring a home, and sellers may be hesitant to get an inspection at the risk of significant repair costs prior to listing their property.

“These products seek to reduce this anxiety by assessing over 400 features around the house through an

independent home inspection, and provide warranty coverage on a property’s larger, stress-inducing blind spots that are often expensive to fix.”

FCT is offering one product for buyers and another for sellers that offer comprehensive third-party home inspections with warranties that are transferable, and that cover up to $20,000.

Home purchases are usually characterized as the most expensive purchases of people’s lives, and with good reason. However, that could become compounded by something a home inspector might miss.

 

“When you go in as a buyer, you get a home inspector, but there’s not such a paradigm shift with a product like that because people are doing home inspections on the buy side,” said Chetcuti. “You get a full home inspection with over 400 points of data on the home, and that comes with a 21-month warranty.”

Real estate sales representatives, in particular, can save themselves headaches will unhappy clients by informing them about their different options, particularly if they’re millennials, she added.

“For a real estate agent, it’s important that people let their clients know that this is an option available in the market. It also provides more transparency around what people are buying,” said Chetcuti. “There’s a demand for information with millennials. A lot of the time, for a realtor with millennial clients, they’ll show up already knowing more about the house before you even take them through it. It puts the information out there before someone gets attached to a home and then finds something out about it.”

Source: Canadian Real Estate Wealth – by Neil Sharma 04 Jul 2018

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Mortgage 101: 10 Mortgage terms every first-time homebuyer should know

Getting started on your homeownership journey? Familiarize yourself with the “local language,” a.k.a. mortgage speak. This introduction to 10 key mortgage terms and phrases will boost your homebuying IQ and have you ready to meet with a mortgage broker to talk about your options.

Amortization period

The amortization period refers to the number of years it will take to pay off your mortgage through regular payments. Most mortgages, including Genworth Canada-insured mortgages, are amortized over 25 years.

DID YOU KNOW? You can pay off your mortgage sooner (saving interest in the long run) by:

  • Making payments biweekly instead of monthly;
  • Making an extra principal or lump sum payment on the anniversary date of your mortgage;
  • Boosting your payment by 10-20% on the anniversary date;
  • Making the same payments each month (or better yet: biweekly), even as your principal borrowed amount gets lower.

Fixed rate mortgage

With a fixed rate mortgage, the interest rate on your home loan is set for the term of the mortgage. Fixed rate mortgages offer the peace of mind of consistency: you’ll know exactly how much you’ll owe at the end of each mortgage term.

See also: Variable rate mortgage

Gross debt service (GDS) ratio

GDS refers to the percentage of your household’s gross monthly income that goes toward your housing payments – mortgage (principal + interest), property taxes, heating and, if applicable, 50% of condo fees. Lenders use your GDS and TDS (total debt service) ratios to assess your mortgage application and to determine how much to loan you and what interest rate to apply. Genworth Canada programs require a GDS ratio of no greater than 39%.

See also: Total debt service (TDS) ratio

High-ratio mortgage

A high-ratio mortgage is one for which the homebuyer makes a down payment of less than 20% of the cost of the home. All high-ratio mortgages must be covered by mortgage loan insurance (also known as “mortgage insurance”).

See also: Low-ratio mortgage

Low-ratio mortgage

Also known as a conventional mortgage, a low-ratio mortgage is one where the homebuyer has made a down payment of 20% or more of the home’s purchase price. No mortgage insurance is required for this type of mortgage.

DID YOU KNOW? You can use your retirement savings to help buy your nest egg. The federal government’s Home Buyers’ Plan lets you borrow money from your RRSP to put toward the down payment for your first home.

See also: High-ratio mortgage

Mortgage loan insurance

Also known as “mortgage default insurance” or just “mortgage insurance,” this financial product is mandatory on all high-ratio mortgages. Your mortgage lender pays the insurance premium and then passes the cost on to you; you can pay it in one lump sum or carry it on your mortgage for monthly payments.

Mortgage term

Not to be confused with amortization, mortgage term refers to the time period covered by your mortgage agreement. It can range from one to five years or more. After each term expires, the balance of the mortgage principal (the remaining loan amount) can be repaid in full, or a new mortgage can be renegotiated at current interest rates.

Principal

The amount initially borrowed for your home purchase. The balance of this amount will go down as you make regular mortgage payments. (Your mortgage payments go toward a portion of the principal, as well as the loan interest and, for those with high-ratio mortgages, mortgage insurance.)

Total debt service (TDS) ratio

TDS refers to the percentage of your household’s gross monthly income that goes toward housing costs (i.e., mortgage, property taxes, heating, etc.) plus your other debts and financing (i.e., car loans, credit cards, etc.). Banks use this calculation, along with your gross debt service ratio, when assessing your mortgage application. Genworth Canada programs require a TDS of no greater than 44%.

See also: Gross debt service (GDS) ratio

Variable rate mortgage

Also known as a floating rate mortgage or adjustable rate mortgage, this type of mortgage has an interest rate that fluctuates with the prime lending rate. The main benefit of variable rate mortgages is lower interest rates, but in return, mortgagors (homeowners) take on risk: if the prime rate goes up, a larger chunk of your mortgage payment will go toward the interest, not paying down your principal. The result: your mortgage could take longer to pay off and cost you more in interest.

See also: Fixed rate mortgage

Read on! You can enhance your Mortgage 101 education with these Homeownership.ca feature stories:

Source: HomeOwnership.ca

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Mississauga condos becoming an increasingly popular purchase option

Mississauga condos becoming an increasingly popular purchase option 

A new analysis from brokerage and real estate information portal Zoocasa showed that Mississauga is increasingly seen by starter home buyers as a reasonable destination away from the overheated Toronto market.

Mississauga’s average condo prices saw a 5.5% increase over the last year, up to $435,254. In its report, Zoocasa stated that the highest-priced condos and buildings – many of which saw double-digit positive value changes – were mostly situated around the city center, with some veering closer to Lake Ontario.

“None of the buildings were located north of Eglinton Avenue,” according to the Zoocasa report. “In addition, the buildings skew newer, with the oldest one having been registered in 2004, and the majority after 2012.”

Read more: Toronto’s monthly rents saw a sharp upward spike in Q1

Analyzing sales in over 100 developments where at least 5 transactions occurred over the past year, and averaging the square foot based on TREB sold data for the year to date, Zoocasa ranked the most valuable condo buildings in Mississauga as of present:

Rank 5: One City Centre

Location: 1 Elm Dr.

2018 price/sq. ft.: $584

2017-18 change: 20.5%

Rank 4: Limelight

Location: 365 Prince of Wales Dr.

2018 price/sq. ft.: $599

2017-18 value change: 14.7%

Rank 3: Pinnacle Grand Park

Location: 3985 Grand Park Dr.

2018 price/sq. ft.: $610

2017-18 value change: 20.1%

Rank 2: No. 1 City Center Condos

Location: 33 Elm Dr.

2018 price/sq. ft.: $610

2017-18 value change: 10.3%

Rank 1: North Shore

Location: 1 Hurontario St.

2018 price/sq. ft.: $674

2017-18 value change: 7.4%

Source: MortgageBrokerNews.ca – by Ephraim Vecina 28 May 2018

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Is co-ownership a good idea?

As co-ownership becomes a popular antidote to unaffordability, expect to hear about ensuing acrimony.

“On paper, it seems like a great idea, but in reality…”

Steve Arruda, a Century 21 Regal Realty sales rep, agrees that unaffordability in cities like Toronto and Vancouver is catalyzing creating living arrangements, but he can see myriad problems arising from ones like co-ownership.

“Everybody has the best of plans, and on paper it looks perfect, but when they move in with each other, who’s responsible for what? What if one person wants to sell early because they got a job on the other side of the country or far outside of the city?”

While co-ownership between friends can be tricky, it becomes amplified when more than one family owns and shares a home.

“I’ve had ones where two friends bought a place together and thought it’d be a great idea and good for their families, but they didn’t buy a mansion,” said Arruda. “It was a crammed space for two families and four children. With the respective families or events they host, there will be issues that way. They have the best intentions, but when you’re living in a crammed space, function becomes a different story.

“It could be happy when two friends share but when you start bringing in partners—more personalities under one roof could cause a problem.”

Arruda concedes, however, that the arrangement has better likelihood of succeeding if a duplex is the shared abode. Not to say it won’t have its share of problems.

“I find the best option for that is if the home is divided equally into a duplex, each with its own kitchen and bathroom, and maybe they have a shared living space,” he said. “But if one person wants to sell, the other has to sell or buy that person out.”

Manu Singh, a broker with Right At Home Realty, doesn’t recommend co-ownership but nevertheless suggests both parties draw up an exit strategy.

“They should have an agreement in place, an exit strategy,” he said. “Just a simple contract, not a complicated one, that lays out what the exit strategy is should one party decide to move on. If it’s for investment purposes, maybe the appreciation rate reaches such and such level and only then can the partner decide to sell.”

Singh also recommends a minimum hold period of five years “to recoup a lot of costs of the transaction, like the Land Transfer Tax.”

Source: Canadian Real Estate Wealth – Neil Sharma 25 May 2018

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