Tag: real estate

Categories
Cottage Life

How much are closing costs when you buy a cottage?

Photo by fizkes/Shutterstock

If you’re looking to buy or sell a cabin or cottage, you may be wondering what exactly you can expect in terms of closing costs. While the standard closing process is similar to that for other property types, there are also cabin-specific closing costs that both buyers and sellers should be prepared to incur—things such as taxes, insurance, leasing, and licensing, along with anything else that comes out in the due diligence process.

Legal fees

Each party will hire legal representation for the property transfer and will incur fees for their lawyer’s time. The seller will also pay for clearing title, discharging liens, any encumbrances, prepayment of any mortgage penalties, and paying real estate commissions and any tax that might apply to the transaction (which is mainly on real estate fees).

For buyers, lawyers are there to act as their stakeholders and ensure the title is clean, the documents needed are complete, and the land title and mortgage (if financing is required) are registered. If the bank requires an appraisal, survey, title insurance, or other items, these would also be additional costs.

Insurance

The biggest expenses for buyers today are insurance and applicable taxes. “Sometimes, buyers go into these transactions assuming that insurance is a no-brainer,” says Jason Zroback of LandQuest Realty in New Westminster, B.C. But, it should be part of the due diligence process. These days, insurance can be very tough to obtain and quite costly, much more so than in the past and more than people anticipate, says Zroback. This is especially true for secondary residences located in unserviced fire districts, which is the case for many cabins or cottages, especially if your property is remote, water-access, off-grid, and tougher to get to. This can have an enormous impact on your insurance premiums.

Taxes

Property transfer tax

Land transfer taxes vary from province to province. B.C.’s property transfer tax, for example, works on a sliding scale as a percentage of a property’s purchase price. So, if you’re looking at a cabin priced at, say, $200,000 or so, the tax will be nominal, but properties in the millions of dollars are subject to much higher amounts.

Provincial sales tax

It’s important to remember that provincial sales tax can apply to some properties. Unfortunately, many people aren’t aware of this and only find out right before closing or, worse, when the lawyers are doing the property transfer. In extreme cases, accountants need to get involved or tax rulings need to be made. So, do your due diligence and ask about provincial sales tax early on. Like other transaction items, who pays the tax is always negotiable between the buyer and seller.

Scenarios where provincial sales tax may apply include a new build owned by a development company (most realtors know this) or a property owned by a corporation or individual who deferred the tax at purchase (meaning the property is usually registered in a company name). For example, say a new landowner has no intention of developing their property but wants to use it recreationally and may have deferred provincial sales tax when they purchased the property. They would still be liable for the tax when they attempt to sell.

Leases and licenses

Different tenures may be part of your cottage or cabin closing costs. Sometimes, there will be a lease or license for remote, rural recreational properties, which you don’t have for other property types. These can include, for example, a foreshore lease, a water license (i.e. if water for your cabin comes out of a creek), a land lease, or a grazing lease on a farm or ranch. The cost typically includes a lawyer’s time to do the assignment and annual lease dues, both of which should be fairly nominal.

Due diligence

When it comes to who pays for what, some fees are very straightforward. For example, each party will pay for their own lawyer’s time, sellers typically pay for all real estate commissions, and buyers typically pay for appraisals. But, if and when market conditions change and problems arise, the market also dictates how deals are done and fees are charged.

For example, say it’s a seller’s market. Each party gets advice and it may be determined that if the seller wants out of a deal at any point, it’s allowed. In a hot market, the buyer will likely have to concede or back out of the deal themselves, yet be responsible for any difference in property value that the seller lost out on while the property was tied up with the buyer. Similar circumstances can be true in the reverse situation, where a seller must concede to a buyer’s requests in a buyer’s market.

However, anything is negotiable. While both parties can get their backs up, most people are reasonable. If, say, a provincial sales tax liability wasn’t disclosed, typically the party that should have known will take responsibility.

The due diligence process before closing is very important, and there’s one thing you can do to help you navigate the pitfalls of the closing process: having a good realtor you can trust.

Buy, sell, rent, dream

Get The Key, our weekly newsletter on all things cottage real estate

Sign up here

Categories
Cottage Life

Mortgage stress test remains unchanged (for now) despite high interest rates

Photo by Puttachat Kumkrong/Shutterstock

High interest rates over the last 12 months have reduced purchasing power and made borrowing more expensive for Canadians. But the outlook isn’t all doom and gloom for cottage owners and cottage buyers to-be.

Last year, the Bank of Canada raised its key interest rate seven times to 4.25 per cent, its highest level since 2008, in effort to cool consumer spending and lower inflation. Canada’s five major banks moved to increase their prime lending rates 50 basis points, which increases borrowing costs for anyone with a variable rate loan.

In December, the Office of the Superintendent of Financial Institutions (OSFI) announced it would keep the minimum qualifying rate—a mechanism to test whether borrowers will still be able to afford their mortgage if interest rates rise—for uninsured mortgages unchanged at 5.25 per cent.

“In an environment characterized by sustained high inflation, rising mortgage interest rates, and potential risks to borrower income, it is prudent that lenders continue to test borrowers for adverse conditions,” said Tolga Yalkin, the OSFI assistant superintendent for Policy, Innovation, and Stakeholder Affairs, at a media briefing last month.

While the federal banking regulator’s stress test still hovers around 5 per cent, cottage buyers must show they can pay interest payments at 7 per cent—which reduces the size of a mortgage buyers can qualify for, says Ottawa-based mortgage broker Andrew Thake.

Experts say that the high interest rates have worked as intended to slow the demand for big ticket items such as housing and vehicles. Home sales in Canada declined by 3.3 per cent from October to November in 2022, according to CREA.

However, high interest rates have made paying off home and cottage mortgages a strain for those who have them and made it even more difficult for those who want to secure one.

For those looking to buy

Buyers looking for cottages who don’t qualify for a mortgage that is large enough to purchase the type of property they’re interested in may be able to qualify in a year and a half when the stress test rates go down. Those applying for a mortgage today will qualify for less than they would have, had they applied a few years ago.

“You’d either have to put more down, or you just have to settle for a smaller place,” says Thake.

Thake suggested that people looking to buy while interest rates are high could also look at a fixed-rate mortgage for a shorter period of time—think two or three years—and if rates settle down after that, they could look at renewing.

Sometimes, when rates go up, cottage buyers can find savings elsewhere. “Even though interest rates are a bit higher, the price of the cottage is probably substantially lower than what you paid a year or two ago in some markets.”

This month, the OSFI is reviewing Guideline B-20, which includes the minimum qualifying rate (MQR) and other mortgage lending measures. The office launched a public consultation on January 12, which will take place until April 14, 2023.

Among the measures the OSFI is considering are restrictions on how much banks can lend to people whose mortgage exceeds a certain percentage of their gross income. This is something banks already do, but the changes may include tightening up the restrictions, says Thake.

Other changes may also include new debt servicing coverage restrictions, which would limit how much borrowers’ mortgage payments comprise a percentage of their income. Currently, most banks limit a borrowers’ housing obligations to 39 per cent of their gross income, but some major banks push that to 49 per cent.

Additionally, the OSFI is considering implementing a new minimum interest rate that is applied in debt servicing calculations.

“They want to reduce risk in the industry. The OSFI is worried about exposure to heightened risk from a lot of debt, plus a potential recession and high interest rates,” Thake said. “They want to reduce the probability of borrower default.”

Buy, sell, rent, dream

Get The Key, our weekly newsletter on all things cottage real estate

Sign up here

Categories
Cottage Life

New policy allows B.C. buyers three days to back out of a sale

Photo by Shutterstock/EB Adventure Photography

As of January 3, British Columbia is requiring a three-day “cooling off” period for real estate transactions after the buyer has signed a contract.

The B.C. government introduced the new policy in response to the staggering real estate demand seen throughout 2020 and 2021. To stay competitive, buyers were omitting home inspections and other requirements from their offers. The three-day period should provide buyers with extra time to complete home inspections and arrange financing, the government said in a statement.

“Lack of time for buyers to complete due diligence can exacerbate risk or be used to hide property defects that otherwise may have been discovered,” said housing analyst Leo Spalteholz, in the statement. “Though the market has cooled dramatically in recent months, it’s good to proactively put buyer protections in place.”

The buyer can back out of the sale at any time during the three-day period, which doesn’t include weekends or holidays. If the buyer does back out, they’re required to pay the seller 0.25 per cent of the purchase price. This cancellation fee is meant to prevent buyers from placing offers on multiple properties and then backing out last minute. Prior to the new policy, if a buyer backed out after signing a purchase agreement, they could be sued by the seller for money lost on the sale of the home.

The three-day period applies to almost all real estate transactions, including detached homes, townhouses, condos, and cottages. The only exemptions are real estate on leased land, real estate bought at auction, or real estate bought under a court order. Otherwise, the cooling off period is mandatory and can’t be waived.

But with changes to the market, experts are questioning whether the new policy will have any impact.

After hitting a peak in 2021, the province’s real estate market has seen significant drops in recent months. The B.C. Real Estate Association reported 4,512 sales this past November, a 50 per cent decrease from last year. And prices are trending downwards. In November 2021, the average B.C. home price was $992,245. In November 2022, it was $906,785.

This drop in competition is what’s allowing buyers to include home inspections once again in their offers, not the addition of three extra days, said B.C. Real Estate Association CEO Trevor Koot.

“Anybody that’s bought a house in the last 10 years can tell you, you can’t get an appraisal or an inspection done within three days of an accepted offer. The resources are just not there,” he said. “It’s our concern that it then provides a false sense of security to buyers in a heated market, that they go in thinking, ‘Oh, I’ve got time to do my due diligence,’ when really, what realtors will suggest, is that due diligence is done in advance.”

There’s also concern that the three-day policy puts sellers at a disadvantage. “Very often sellers are buyers themselves,” Koot said. “They’ve got a purchase going on that they’re going to be moving into, and all of a sudden, for three days, they have uncertainty. They don’t necessarily know whether the buyer will follow through.”

When the government introduced the three-day policy in 2021, the B.C. Real Estate Association responded by creating a list of 34 recommendations they felt could help improve the province’s real estate market. Koot said the association worked closely with the B.C. Financial Services Authority (BCFSA), the industry’s governing body, to develop the list. But when the list was passed on to the Minister of Finance, it was ignored.

This is where the government dropped the ball, Koot said. Rather than a three-day cooling off period, the B.C. Real Estate Association had proposed a five-day pre-offer period. This would require all listings to advertise for five days before accepting an offer. The five mandatory days would prevent bully offers where buyers swoop in with aggressive bids, telling sellers they only have a few hours to respond.

“That disrupts everything,” Koot said. “It changes the dynamic, it creates pressure, and it pushes the market into an unhealthy environment.”

A five-day pre-offer period would prevent bully offers and provide buyers with time to assemble their bids without leaving sellers in the dark for three days.

“We shouldn’t have to implement policy and adhere to new rules that don’t have any relevance and impact,” Koot said. “We need policy that’s based on good information, good data, and good research.”

Buy, sell, rent, dream

Get The Key, our weekly newsletter on all things cottage real estate

Sign up

Categories
Cottage Life

Fake rental listings skyrocket after City of Toronto makes registration numbers public

Photo by Shutterstock/Daniel Krason

A short-term rental advocacy group is claiming that online “pirates” are stealing registration numbers from the city of Toronto’s website and using them to post fake listings on Airbnb.

“The city attempts sweeping enforcement actions to take down pirates, but pirates easily repost fake listings by reusing the permit data the city leaves unprotected,” contests Fairbnbhosts.ca on its website. “Visitors can’t be sure if they are booking a pirate space or a legal operator.”

Since September 2020, Toronto has required all short-term rental operators to register with the city. This is to “prevent the proliferation of ‘ghost-hotels’ and protect critical rental stock by maintaining access for tenants to long-term accommodations,” the city said in an email.

Airbnb rolling out ‘anti-party’ technology in Canada and U.S.

As part of this process, operators receive a registration number from the city, which they use to set up their listing. But all 6,277 of these registration numbers are publicly available online, along with the first three digits of the short-term rental’s postal code. Scammers can access the registration numbers and use them to set up fake listings.

There’s a simple solution, says George Emerson, director of Fairbnbhosts.ca, which describes itself as a travel industry trade association protecting the interests of Toronto’s Airbnb operators. “The city says [the registration numbers are] how they verify with the booking platforms,” he says. “But if your website and my website want to exchange information, we don’t have to do that in a way that’s exposed to the public finding it. We do it on a secure shielded website. We would use a database. Every website has a database, and we would use that method to exchange information.”

Emerson adds that this is commonly done. “Computers verify large datasets all the time through secure ways without revealing identities.” But when he asked the city whether it could privately exchange registration information with booking sites, staff told him it wasn’t a priority.

The city is aware of the fake listings being posted. To combat the issue, it performs compliance audits using data discovery techniques. “The city compliance audits flag listings that have missing, inaccurate, or incomplete information that prevents the city from verifying registration status and operators who are not in compliance with the bylaw,” the city said.

But these compliance audits are part of what’s wrong with Toronto’s short-term rental regulations, Emerson argues. When setting up a listing, the rental’s information must match the city’s registration data. “The address mismatches are so tiny, like whether there’s a ‘St.’ or ‘St’,” he says.

Other incorrect listing information includes operators using nicknames instead of their full name as listed on government-issued IDs, using incorrect postal codes, adding in building names rather than street addresses, not including unit numbers, or placing unit numbers in the wrong field.

If a listing’s information is flagged as incorrect during a compliance audit, the city will take the listing down. When the city flags a “pirated” listing, it may also take down the legitimate listing, penalizing an operator who’s following the bylaws.

“No other type of business gets this kind of a shakedown, this kind of level of harassment,” Emerson argues.

Buy, sell, rent, dream

Get The Key, our weekly newsletter on all things cottage real estate

Sign up here

Categories
Cottage Life

Buy the Way: An unusual mortgage arrangement allowed this writer to buy a 320 sq. ft. getaway

Photo by Jim Moodie

The search: As the child of canoe-toting itinerants, sharing a tent with my sisters or the back of the Volvo wagon with our epileptic dog, I dreamt as a kid of a cabin to one day call my own. There was a secluded point on one of the Algonquin lakes we frequented in my youth where you could make out the remains of an old ranger’s abode.

I paced it off one time, two feet per step. It was 16-by-20. That, I thought, would be perfect for me.

Finding my 320 sq. ft. of bliss, on a 2.6-acre nook of Panache Lake, Ont., turned out to be a cinch. It popped up immediately in an online search in the fall of 2017 and, within a week, the owners had accepted my $180,000 offer (about 10 per cent less than the asking price)—conditional on financing. That’s when the real hunt began.

The first banker I approached advised me to “walk away from it,” citing the lack of amenities and a driveway as cons. Needless to say he wouldn’t give me a mortgage; nor, he predicted, would any other institution. That proved true when the credit union also shot me down.

My dream shack, I learned, fell into the category of a Type B cottage, being wood-heated, uninsulated, and unequipped with a water filtration system. These types of rustic getaways are trickier to mortgage than a Type A, which have permanent foundations and heat sources, along with year-round access. It’s okay if your Type B sits on blocks—or even rocks, as is the case for mine—but most banks will balk if you don’t have a proper chamber for ablutions (a.k.a. an outhouse won’t cut it).

I turned to Durham-based broker Steve White, who looked far and wide, including among B- and C- lenders—outfits or individuals who might not be so picky about things like a three-piece bathroom, the absence of which was a sticking point for the A contingent, owing to mortgage insurance rules.

The compromise: White exhausted all his options but suggested, as a last-ditch, I might propose a vendor take-back mortgage. “A what?” I said. This alternative, he explained, is like an owner holding a mortgage, except that the buyer in a VTB scenario obtains title to the property and can put it back on the market, if so desired, at any point, as long as they pay off the balance owed to the previous owners. In a nutshell, it involves the seller agreeing to become the lender, and getting paid off, with interest, over a period of time, instead of all at once.

The concept was new to the sellers too. They hadn’t done anything like it, or even heard of it for a cottage. The couple gave me a tour of their Panache Lake place before I made my offer. Because they were selling privately and they had met me, our arrangement seemed trustworthy.

The owners confessed that they still did a bit of digging on me (thankfully I only have one speeding ticket and have mostly made fans through my journalism) before agreeing to the scheme, which effectively made them my bank.

They had to assume a certain risk, but they said that they wanted to sell to a nice person who would enjoy it. In the end, it’s still a business transaction, so the couple had to do their homework. Having a formal mortgage agreement in place was important to ensure both parties had some security.

The silver lining: I got my cabin on a secluded point. The sellers got a smaller capital gains hit, as the gain gets spread out over a period of years. I didn’t have to install a septic field or holding tank, as a traditional lender would have required. The previous owners got a pretty good sense that I was in this for the long haul and wasn’t going to rent the place or flip it.

The interior of Jim Moodie's cabin
Photo by Jim Moodie

Bonus: They left behind a bunch of cassette tapes and don’t mind that I am enjoying them to this day.

Owner advice: The pros and cons of a vendor take-back mortgage

PRO: A vendor take-back mortgage will only intrigue those sellers who can afford to get their money over time. They will get extra income, but may not want the spectre of their borrower potentially defaulting.

CON: For the buyer, it is typically more costly; the interest rate and repayment schedule are up to the people who are willing to back you. (I got 6 per cent over 20 years.) But if done correctly, a VTB is really no different than a bank mortgage.

PRO: You hold the deed, and the deal can be structured so that you can pay out the lender at any time, without penalty.

Have you recently purchased a cottage? Tell us about it: edit@cottagelife.com.

Buy, sell, rent, dream

Get The Key, our weekly newsletter on all things cottage real estate

Sign up here

Categories
Cottage Life

A master collector’s tips for decorating with your best finds

Photo by Derek Shapton

Dyan Kirshenbaum, collector extraordinare, is responsible for all of the treasures that bring her cottage to life, including her decades-old collection of handmade miniature houses and cabins. Here are her best tips for finding and decorating with objects and art you love.

ON COLLECTING…

  • Trust your taste. “Buy what you like.”
  • Be spontaneous. “I’m into instant gratification. If you see something you like, get it. You may find a better one if you keep looking. But this one works for you—now go enjoy it.”
  • Don’t focus on monetary value. “Anything can be considered valuable.
  • Live with what you love, and it will always have value.”
  • Don’t assume that you need big bucks to collect. “Over the years, I’ve collected at every price range. I never went above my station.”
  • No price tag? No problem. “Even if it doesn’t look like something is for sale, ask. Great acquisitions happen that way.”
  • Don’t sweat the bartering. “Before I start, I’m okay with the price. Then I usually take one stab at it, and a deal is struck. Everyone’s happy. You bring the karma with the object; you don’t want to taint it.”
  • Have a sense of humour. “Don’t take collecting too seriously. Enjoy it, but don’t let it grip you.”

…AND DISPLAYING

  • Mix it up. “It’s more fun if the collection isn’t together.” Five ’60s pop-art lamps in one room make it look like the cottage needs redecorating; one looks stylish.
  • Instead of lining up like with like, link pieces visually using colour, shape, or a common element. “Putting together the puzzle is fun.”
  • Think contrast too. Evocative blackand- white photos of Dyan’s parents jump out when hung in a grouping that includes other things. She mixes in a classic Mountie shot, a naive painting of a fisherman, and a Snakes-and-Ladders board.
  • Use what you collect. Her “bucket benches”—originally used for milk pails—are pressed into service to hold everything from books to blankets. The dogs snooze on collectible quilts. “And you might not even notice I collect hooked rugs because they’re on the floors.”
  • Don’t be a slave to your things. “If something gets damaged or breaks, it’s just stuff.”
  • Edit. “I tell friends who can’t bear to part with anything they’ve inherited, ‘Choose the one you love the best and let go of the rest.’ ”
  • Relax. “Our bedside tables aren’t beautiful, but they work. It all doesn’t have to be perfect.”
  • Lose the fear. “People ask me if I think something will work in their place. If you love it,get it. There are no mistakes.”

See more of Dyan’s cottage finds and read the full story from our Spring 2016 issue.

Buy, sell, rent, dream

Get The Key, our weekly newsletter on all things cottage real estate

Sign up here

Categories
Cottage Life

Should Ontario regulate short-term rentals? Here are the pros and cons

Photo by Billion Photos/Shutterstock

Municipalities from across Ontario have taken different approaches to regulating the short-term rental industry, and now, with many local governments taking action, some are wondering if it’s time for the province to get involved. The move to provincially regulate short-term rentals wouldn’t be entirely unprecedented—Nova Scotia and Prince Edward Island have both implemented their own form of short-term rental regulations. 

Jelena Vuckovic, a short-term rental owner in Tiny, Ont., says she would like to see short-term rentals regulated at a provincial level as a way for the government to eliminate unnecessary confusion between jurisdictions.

“Currently each municipality has the ability to regulate STRs in any way they see fit and regulations range from complete bans of STRs, to no regulation at all,” she said, in an email. Ontario could implement province-wide short-term rental health and safety standards to fill in regulatory gaps among municipalities, says Vuckovic. 

Steve Pomeroy, a senior research fellow at the Centre for Urban Research and Education at Carleton University, says there could be pros and cons to Ontario introducing province-wide short-term rental regulations. 

The main benefit, Pomeroy says, is that the province would have stronger authority to back up the legislation. “If someone is contravening a provincial law, the recourse is usually a little bit stronger than it would be for breaking a municipal bylaw,” says Pomeroy.

Provincial regulations could also ease the financial burden for municipalities, says Pomeroy. For instance, the province could absorb the responsibilities and costs of operating a short-term rental licensing program. While local governments typically charge fees to offset the cost of licensing programs, Pomeroy says he suspects the revenues generated by licensing fees often don’t cover the cost of running and enforcing the program itself. 

While the potential for the province to absorb responsibilities from the municipalities exists, Pomeroy says the inverse has been more common of late. “The provinces are downloading responsibilities to municipalities, particularly Ontario,” he says, noting that most municipalities lack the financial resources to take on extra duties. 

A lack of resources among local governments means enforcement of short-term rental regulations could still remain an issue, regardless of the province’s involvement, says Pomeroy. 

“It’s not the kind of thing we want to have the RCMP or provincial police coming around enforcing. It’s a bylaw enforcement kind of function, which tends to be staff at the municipal level,” he says. “The challenge really for the municipalities is having the resources to do it.”

Nova Scotia currently operates a provincial short-term accommodation licensing program. The province works with private hosting sites to ensure compliance and collects the data for municipalities to use while enforcing their own short-term rental and zoning bylaws.

Vuckovic says she thinks the Nova Scotia system would be fitting for Ontario, and could potentially take a load off overburdened municipalities. “I honestly think that’s gonna solve so many problems,” she says. “Not just for us, but for the smaller townships and towns. They don’t have the money, they don’t have the manpower to be doing this. And honestly, they should not be doing it themselves, this is too big.”

Feature Video


Categories
Cottage Life

More than 300 students cheated on their Ontario real estate license exam, says Auditor General

Miha Creative/Shutterstock

A new report found that more than 300 students in Humber College’s Real Estate Education program cheated on their licensing exams, much higher than the 34 initially discovered when the story broke last fall.

The report was conducted by Ontario’s Auditor General as a price performance review of the Real Estate Council of Ontario (RECO), the province’s regulatory body for the profession. When the cheating was first unveiled, both RECO and Humber didn’t specifically indicate how it happened, but the report found that the exam proctoring software was a key culprit. Most exams were done online and remotely, and the software couldn’t prevent screen-sharing or maintain supervision if there were technical issues, the report stated.

At the time the report was released, some of the students had already been working as real estate agents, mostly in the Toronto area. Ultimately, more than 50 were stripped of their licenses. With the revelation that there were hundreds more students who also cheated, a representative from RECO said they are working with Humber College to hold each one accountable. 

Anyone can check the status of a brokerage or salesperson through RECO’s online search tool, said Joseph Richer, RECO’s registrar. If someone does not come up, that means they are not registered to work in Ontario—the names of individuals who had their registration voided are also available on the site.

Richer stated that employers were also notified and are expected to take disciplinary steps in addition to reviewing deals that the individuals were involved in. He also recommended that buyers and sellers ask their respective lawyers to review transactions for errors. “If any transactions occurred after RECO registration was voided, this could be subject to prosecution,” he said. He reiterated that most of the Humber students were caught before they were able to register with RECO and start working.

In a statement, a media representative from Humber College said that the Auditor General “is reporting on a specific point in time and did not directly contact Humber for information.” They added that when the issue first arose, the college investigated students, worked with RECO, and “continues to ensure high standards around exam security and integrity.”

Upon the report’s release, a representative from Humber told The Globe and Mail that the school has added stricter measures for online exams, such as requiring students to have a second camera, and more rigorous security checks before the exam starts. However, the report alleged that RECO “has taken no steps to independently verify that the issues that led to the breaches have been satisfactorily addressed.”

With the reporting being an overall audit of the organization, several concerns were raised about its processes, such as the rigorousness of criminal background checks on realtors, the reporting system for ethics violations, or the ability to flag suspicious transactions.

Richer said the organization is committed “to increasing consumer confidence in the real estate industry,” and that the individuals who cheated “should not be allowed to compromise the integrity of the real estate profession as a whole.”

Buy, sell, rent, dream

Get The Key, our weekly newsletter on all things cottage real estate

Sign up here

Categories
Cottage Life

Mortgage payers are shifting unpaid interest onto their principal—but experts caution against it

Photo by Monster Ztudio/Shutterstock

As the Bank of Canada hits cottage owners with another rate hike, many cottage owners are either fast-approaching or have hit their trigger rate—the point at which their monthly mortgage payments only cover interest, and none of the principal loan. 

The key interest rate jumped from 0.25 per cent during the early days of the pandemic to 4.5 per cent on December 7, at the Bank of Canada’s last policy decision meeting of the year. Climbing interest rates have made it harder for cottage owners whose variable-rate mortgages fluctuate with the overnight rate. One option that is becoming more popular with property owners is having lenders shift some of their interest costs onto their principal. 

While the option is not new, Kim O’Grady, a real estate broker with Chestnut Park Real Estate in Huntsville, Ont., explains that this strategy has come up more frequently in conversations with mortgage brokers in her network.  

But O’Grady says there are downsides to this option. “It’s like paying just the interest on your credit card because if you’re only paying the interest, you’re really not getting further ahead on your payments,” she says. 

“Now you’re looking at extending the term of your mortgage just so you can continue to afford to live there,” says O’Grady. “Increasing your amortization beyond 25 years could force you into a longer-term mortgage.” In other words, rolling interest onto the principal loan means it will take longer for individuals, including some cottage owners, to pay down their mortgage. 

Advice to new entrants in the cottage real estate market

“First, speak with a mortgage broker before you even start looking for a property—that should be your first conversation,” says O’Grady. “That conversation should be with your mortgage broker, not a real estate agent, so that you can find out what you actually qualify for.”

While it sounds obvious, O’Grady says it’s important to find a home you can comfortably afford. “If rates continue to go up—even with the stress test and whatnot—you’re going to feel good knowing that you can afford this property.” 

“My advice to buyers in this market right now is to work with a trusted mortgage broker who can advise you in what’s the best plan for you, and then work with a real estate professional who’s going to help guide you to stay within your means without overextending yourself,” says O’Grady. 

Categories
Cottage Life

Pending amendments to the Conservation Authorities Act would allow developers to build on floodplains without permits

Photo by Shutterstock/Wang Sing

On November 28, the Ontario government passed Bill 23 dubbed the More Homes Built Faster Act, a far-reaching piece of legislation that eliminates development fees and downloads a lot of the permitting responsibilities to the municipalities. The objective of the bill is to speed up the development planning process and create affordable housing.

Ontario Premier Doug Ford has committed to building 1.5 million new homes in the next 10 years.

In hand with Bill 23, the Ford government is also looking to open sections of Ontario’s Greenbelt for development—with some of those sections located in wetlands and floodplains.

During an interview with the Canadian Press, Steven Guilbeault, Canada’s Minister of Environment and Climate Change, criticized the plan, saying that the federal government would not provide disaster compensation to developments built in floodplains.

Premier Ford responded to Guilbeault’s statement during a press conference in Clarington, Ont. on Dec. 2. by putting the onus on the developers.

“It’s the responsibility of any builder, no matter where we build, to make sure that they protect any floodplains,” the premier said.

Rhonda Bateman, the chief administrative officer for the Lower Trent Conservation Authority, confirms that as of right now, this is true. “Currently, everything is status quo as far as our permitting goes,” she says, meaning Ontario’s conservation authorities still have jurisdiction over natural hazards, such as floodplains, and have the power to prevent developers from building near these areas by denying them permits.

But that could change. The provincial government added two amendments to the Conservation Authorities Act, a set of regulations Ontario’s conservation authorities use to “maintain the vitality of our watersheds and protect people’s lives and properties from natural hazards such as flooding and erosion.”

The two amendments have yet to be enacted, requiring a proclamation from the Lieutenant Governor. But if they were enacted, Bateman says that developers would not need a permit from their conservation authority to build on a hazardous area, such as a floodplain or wetland.

“If [developers] don’t require a permit from us, it will end up causing a lot of extra responsibility and liability for development on the municipality,” she says, “and they count on us for expertise to be able to identify all of those hazards and how to mitigate them or prevent them from happening.”

Bill 23 has already stripped conservation authorities of the ability to partner with municipalities to review and comment on development applications. The Ford government has reasoned that by removing stakeholders from the planning process, more development will happen faster. But many municipalities have said that without the expertise of conservation authorities, the planning process could take longer to properly assess an application.

It’s also unclear who would be liable if a developer built in a floodplain and the development flooded. “I think lawyers are going to be competing over the answer to that,” Bateman says. “The municipalities will have limited mechanisms to ensure that outside compliance can be reached because we’re the compliance in the permitting process.”

The dangers associated with building in a natural hazard are obvious, Bateman says. Homes built on a wetland could see extensive property damage from flooded basements. “The other part of the wetland issue is that wetlands are flood attenuation. If they’re paved over or built over, then the water that’s normally stored in there has to go somewhere, and it could cause surface flooding.”

Building in a floodplain is even worse. “People’s homes can get washed away. Or people could die,” Bateman says.

Featured Video