Ontario Residential Property Taxpayers Will See Average Assessment Increase of Approximately 5% in 2009

Assessment value of properties wioll be increasing but this doesn't necessarily mean that your property taxes will too!

Read below to find out how this may impact your real estate!

Gian-Piero

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September 17, 2008

Market increases in values since 2005 will be phased in over the next four years with new provincial policy as mailing of Property Assessment Notices for Ontario’s nearly 4.7 million properties begins

Pickering, Ontario, September 17, 2008 – Ontario property taxpayers will see an average assessment increase of five per cent in 2009 with a four-year phase-in introduced by the Provincial Government to add stability and predictability to the assessment process.

“Residential property values have increased by an average of approximately 20 per cent across Ontario since 2005, when the last assessment update was done. Because of the four-year phase-in, property taxpayers will see an average assessment increase of five per cent next year,” Carl Isenburg, President and Chief Administrative Officer of the Municipal Property Assessment Corporation (MPAC), said.

An increase in assessment does not necessarily mean an increase in property taxes. If the assessed value of a home has increased by the same percentage as the average in the municipality, there might be no increase in the property taxes paid by a property taxpayer.

The phase-in program does not apply to decreases in assessed value. The full amount of a decrease will be applied during the 2009 tax year.

“Our values are based on actual sales and trends in real estate markets across the province,” Isenburg said. Municipalities establish tax rates that are applied to assessed values to pay for local services and the Provincial Government sets rates for the education portion of the tax.

Property Assessment Notices will begin arriving in the homes of property taxpayers this week.

“We have made a number of changes to improve customer service and to provide property taxpayers with more information so they can decide if their assessment is accurate,” Isenburg said. The changes include:

1) Redesigning the Property Assessment Notice to make it easier to understand and provide more information, including the assessed value of a property for each of the next four tax years; and
2) Online videos explaining how MPAC assesses property and how to resolve assessment concerns on the MPAC website at http://www.mpac.ca/.

“MPAC’s role is to assess property accurately. If we don’t have the right information about a property or if a property taxpayer feels that his or her property would not have sold for its assessed value as of January 1, 2008, we want them to call us. If a mistake has been made, we’ll fix it,” Isenburg said.

Hours will be extended at each of MPAC’s 33 local offices across the province during the Notice mailing period this fall, as was done in 2005. Property taxpayers can also call MPAC’s Customer Contact Centre, which can be reached toll-free at 1 866 296-MPAC (6722).

“We have almost 500 customer service representatives across the province who will be available to answer questions or deal with concerns,” Isenburg said, adding:

“We strive for accuracy, but when you assess nearly 4.7 million properties, errors can be made. If any property taxpayer has a question or concern, we want them to call us or visit one of our local offices. We are committed to working with property taxpayers to make sure that their assessment is correct.”

For more information, please call:
Michael Jacoby, Director, Communications,
Municipal Property Assessment Corporation,
(905) 837-4209

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THE NEW PROPERTY ASSESSMENT NOTICE BACKGROUND INFORMATION

The Municipal Property Assessment Corporation (MPAC) has improved the 2008 Property Assessment Notice to make it easier to read and understand. This year’s Property Assessment Notice will include:

1) The assessed value of the property for each of the next four tax years;
2) The percentage by which the property has increased or decreased in value since the last assessment update in 2005 and the average percentage by which properties across the municipality have changed in value. If the assessed value of the property has changed by the same or a lower percentage than values in the municipality as a whole, property taxes may not increase;
3) A history of past adjustments, if any, made by MPAC through the Request for Reconsideration process or the Assessment Review Board to the assessed value of the property and whether these are reflected in the current assessment;
4) Details about the property including lot size, square footage, and year of construction used by MPAC to help determine the assessed value of a property;
5) A User ID and Password that can be used to access AboutMyProperty™;
6) The address of the nearest MPAC local office where questions can be answered and concerns addressed in person; and
7) The toll-free phone number for MPAC’s Customer Contact Centre.

Property Assessment Notices will be mailed for Ontario’s nearly 4.7 million properties in 2008.

Mailed with the Property Assessment Notice will be:

1) A brochure explaining how property owners can determine if their assessment is accurate and, if they feel it is not, what options are available to have it corrected; and
2) A brochure describing the new Ontario Senior Homeowners’ Property Tax Grant to help eligible senior homeowners with low and moderate incomes pay their property taxes.

An interactive Property Assessment Notice with details on each section has been posted on the MPAC website at www.mpac.ca

For more information, please call:
Michael Jacoby, Director, Communications,
Municipal Property Assessment Corporation,
(905) 837-4209

Buying a Home and Planning to Renovate? You may be eligible for a GST Rebate!

Have you just renovated your home? Or, if you are planning to purchase a home to renovate you may be eligible for a G.S.T. rebate! Below are the guild lines and pertinent information that help you determine how to and or whether to apply for the rebate.

Gian-Piero

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G.S.T. Rebate Program

You may be eligible to claim a rebate for a part of the GST you pay on the purchase price or cost of building your home if:

• you buy a new or substantially renovated home (including the land or if you lease the land) from a builder;
• you buy a new mobile home (including a modular home) or a floating home from a builder or vendor;
• you buy a share of capital stock of a co-operative housing corporation;
• you construct or substantially renovate your own home, or carry out a major addition (or hire another person to do so); or
• your home is destroyed in a fire and is subsequently rebuilt. Details
• Resale homes are exempt from the GST.
• New homes are subject to the GST. New home buyers can apply for a 36% rebate of the GST applicable to the purchase price to a maximum of $6,300 for homes costing $350,000 or less before GST.
• For new homes priced between $350,000 and $450,000 before GST, the GST rebate would be reduced proportionately.
• New homes priced $450,000 before GST or higher would not receive a rebate.
• NOTE: In the Greater Toronto Area, most builders include the GST in the price of the house, and any rebate would be assignable to the builder as they would be absorbing the net GST cost.

More Information:
http://www.servicecanada.gc.ca/en/goc/gst_new_housing.shtml

Application:
http://www.cra-arc.gc.ca/E/pub/gp/rc4028/README.html

Using Your RRSP's To Buy or Build Your Home!

A little known resource for first time buyers to help with the purchasing or building of their home!

Gian-Piero

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The Canda Mortgage National Network
http://www.mortgageloancanada.com/


The Federal Home Buyers Plan allows first time home buyers to withdraw up to $20,000 from their RRSP for the purpose of buying or building a qualifying home. The primary benefits are that the RRSP issuer will not withhold tax on the amount nor will you have to claim the amount as income. The amount must be repaid to the RRSP within 15 years with a minimum annual payment of 1/15th of the amount withdrawn. If a repayment is not made for a given year the minimum repayment is included as taxable income for that year.

Participation
To participate you have to withdraw the amount from your RRSP using form T1036 Applying To Withdraw An Amount Under The Home Buyers Plan. Give the completed form to the RRSP issuer along with the certification that you meet or intend to meet certain conditions as follows:

Conditions:You have to make your withdrawal request in the same year you wish to participate in the Home Buyers Plan


1) You cannot have previously participated in the plan in previous years.
2) You have to be a resident of Canada
3) You have to enter into a written agreement to buy or build a qualifying home
4) You can withdraw a total of $20,000. Multiple withdrawals are allowed. Each of you and your Spouse can participate in the Plan and withdraw $20,000 from your own RRSPs.
5) You have to be considered a First Time Home Buyer

A qualifying home is a housing unit located in Canada. Existing homes and homes under construction are both qualifying homes and can be either:


1) Single Detached Family Homes
2) Semi Detached
3) Town Home
4) Mobile Home
5) Condominium Unit
6) Apartment in a Duplex, Triplex, Fourplex or apartment building.
7) A Share in a Cooperative Housing Corporation, provided the share entitles you to posses, and gives an equity stake in, a housing unit.

First Time Home Buyer
You are considered a first time home buyer if you have not owned a home while you occupied it as your principal place of residence for five years. At any time in the fifth calendar year since you last owned a home you can qualify.

Should You Take Money Out of Your RRSP For A Home Purchase?
Withdrawing $20,000 from your RRSP under the "Home Buyers Plan" can be viewed as a loan from your RRSP to yourself. Some call this a zero interest loan but of course the actual cost of the loan is exactly what the funds would have earned if they had remained in your RRSP. You will forego these earning if you take the funds out and use them for a down payment. On the other hand if you don't withdraw these funds you will be forced to borrow the required down payment.

Lets assume you have $20,000 in your RRSP at an average annual rate of return over the next 15 years of, say 8%. In 15 years your $20,000 will have grown to $63,443, an increase of $43,443. As such if you withdraw these funds under The Home Buyers Plan, while you won't suffer taxes, you will forego these earnings.

Most financial advisors will counsel you to borrow to invest in your RRSP because the "overall" rate of return from your RRSP is greater than the cost of borrowing the money. The cost of borrowing $20,000 in a catch up loan over 15 years is usually in the neighborhood of Prime, plus or minus a percentage point, depending on the risk of the RRSP investment. Assume a cost of 7.5% over the 15 year amortization of the loan. The interest paid to borrow $20,000 would be $13,372. If we also assume a 35% tax rate, you would have to earn $20,572 of gross income in order to net out these interest costs.

We can now compare the before tax cost of borrowing - around $20,572 - with the before tax return this $20,000 would earn in your RRSP - around $43,443. Clearly it makes sense to borrow to invest in your RRSP. Conversely, it should also make sense to leave the money in your RRSP and borrow your down payment, one being the same as the other.

In reality, no mortgage lender will finance 100% of your purchase price. In addition, your lender will qualify you for a larger mortgage, based on gross income, if your debts are lower and don't include a large personal loan for the down payment. A personal loan or second mortgage is a debt that squeezes the maximum mortgage amount you will qualify for if it puts you above the lenders target debt service ratios.

In addition withdrawal under the Home Buyers Plan may be more cost effective than borrowing if this borrowing cost also includes a CMHC fee. This fee can dramatically push up your effective interest rate. If you're just shy of a conventional down payment of 25% it may be wise to withdraw the remainder from your RRSP to avoid paying mortgage insurance fees.

The best approach is to withdraw from your RRSP under the Home Buyers Plan, get all the financing you qualify for, and then once the mortgage is funded borrow to replenish the RRSP if you can afford the payments. Remember you'll also have to pay back your RRSP 1/15th each year.