Home ownership a passion for Canadians

Canadians have a love affair with their homes, stretching their finances to buy them, sacrificing other things to have a house or condo and remaining deeply in debt even when the numbers suggest they would be better off renting.

North American stock markets continue to reach new highs every day but don’t tell anybody in organized real estate about it. It’s not something the industry wants to hear. But here you go: By the end of last year real estate prices had climbed about 85% over the previous decade, according to the Teranet/National Composite Bank House Price Index.

It is a passion for ownership that has put Canada in the elite company of countries with estimates that more than 70% of households now own their own home. Even young people have caught the housing bug. Statistics Canada says much of the increase in home ownership — the number was 68.4% in 2006 — has been from young people buying condos.

In the dozen years since the beginning of the millennium, home prices rose 225%. Those prices were largely financed by household debt which rose to 160% of family income in 2012 from 100% in 2000, says Benjamin Tal, deputy chief economist for CIBC in Toronto. “House prices in Canada continue to defy gravity.”

There is good reason for that.

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Canadians Are Paying Off Mortgages Quickly

Garry Marr | 13/05/22 | Last Updated: 13/05/22 6:53 PM ET - Canadians end up paying off their mortgages in about two-thirds of the time originally intended, according to a new survey which questions whether Ottawa’s crackdown on the real estate market is needed.

The Canadian Association of Accredited Mortgage Professionals predicts Toronto faces an especially big slowdown, with construction to drop off more than 50%

A report by the Canadian Association of Accredited Mortgage Professionals released Wednesday paints us as a very conservative lot not in need of increased government regulation.
The group notes of the mortgages paid off in 2010-2013, the original amortization length was on average 17.9 years but ended up with an actual amortization length of 11.7 years.

Despite the fact Canadians pay off their mortgages quickly, the federal government has continually cracked down on amortization of insured mortgages it backs. The length of amortizations — a longer amortization lowers monthly payments and allows consumers to qualify for larger mortgages at the expense of paying more interest — has been dropped from a high of 40 years to the present 25 years.

Consumers may have gotten the message. Amortization lengths have shrunk since Ottawa started dropping the maximum length. From 2005-2009, mortgages paid off during the period had an average original amortization lengths of 19.9 years compared with an average actual amortization length of 12.8 years.

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The five most important things to know before you reno

By Noel Hulsman | GoldenGirlFinance.com – Fri, 17 May, 2013 4:29PM EDT

Home renovations rarely go as planned. The job always takes longer, costs more and makes you waaay crazier than your HGTV-fueled dreams can ever account for. Maybe that explains why, according to a recent TD poll, many homeowners forget one very important thing. No, we’re not talking about the latest fixtures or low VOC paint. What most of us are actually forgetting is how renovations will affect our home insurance policy.

Research from TD Insurance found that only 6 percent of homeowners checked their policies before pulling out their toolkits. Unfortunately, this means you may be putting yourself at risk if you have to file an insurance claim. So, in honor of renovation season, let’s take a look at some of the insurance issues homeowners should be aware of – and what can go wrong if you get too focused on design and forget about the bottom line.

From renovation dream to financial nightmare

According to Dave Minor, a vice president at TD Insurance, homeowners should contact their insurance provider before they start swinging a hammer. Why? Because if you hit something you shouldn’t (ahem, a pipe), you might not be covered.

Here are a few things you need to know about insurance when you’re looking to renovate…

1) Beware of exclusions

Most of us probably don’t read our insurance policy, but if you did (and should), you’d find a few clauses about renovations. Exclusionary clauses. To be specific, your policy is likely to exclude certain kinds of coverage when your home is under construction.

“Insurance is all about risk. When a home is under renovation, that risk will change or increase depending on the magnitude of those renovations,” Minor said. “Many companies will change the coverage during the course of the renovations and may exclude certain perils, such as glass breakage or water damage.”

What that means is if you’re demolishing your bathroom and hit a pipe in the process, it might just be your problem. The same thing can happen if you leave your house vacant while having the work done; not being home can negate some of your coverage. To avoid this, consult with your insurance provider before you dig in, to ensure you’re covered.

2) It won’t cover you for amateur mistakes

We’re all for DIY. Putting in a little sweat equity can be a great way to cut your renovation costs and boost the value of your home. But some things are better left to licensed professionals. This is most important for tasks where building codes apply - think plumbing, electrical and construction. Not only are these jobs often technical and complicated, but the stakes are high: Do them yourself and you may end up in a scene from the “The Money Pit” – with no insurance coverage to take care of the damage (and no Tom Hanks to hold you tight and tell you everything will be okay). If you want to get your hands dirty in your own house, choose something where the consequences will be less catastrophic (say, with a paintbrush).

3) You should be concerned about contractor injuries

Speaking of professionals, you should look for one when it comes to any kind of contractor you hire, preferably one with liability insurance, Minor said.

“If they or one of their employees gets hurt while working on your property, their insurance should cover any liability,” Minor said. “If they don’t have that, you as a homeowner may be responsible for the liability costs associated with a contractor’s injury.”

Don’t leave this to chance, Minor said. Ask to see your contractor’s certificate of coverage.

4) A fresh look may require a fresh insurance policy

We often renovate our homes for the thrill of tossing ugly old decor away in favor of something we love, but there’s often a financial motivation as well. A more updated, better maintained home can be worth a lot more when you go to sell. But what many people forget is that when their homes are worth more, this can mean they need more insurance coverage too. When you ditch linoleum in favor of hardwood and replace laminate with granite, the value of your home increases, which means any insurance claim you may have to make is likely to be higher as well. This is especially true with major renovations, like additions. You may not have to pay higher premiums, but it’s a good idea to check with your insurance provider to ensure your home’s fresh new look has a policy to match.

5) Some renos can cut your premiums

While many home improvements have the potential to boost your insurance premiums, there are some that can reduce them. These may include installing a security system, waterproofing the basement, replacing your roof, or updating outdated plumbing or wiring.

“Insurance premiums are related to risk, so think about the things that will reduce that risk,” Minor said. “Every company is a bit different, but wherever you can reduce the probability of having to make a claim, there’s a good chance that will help reduce your premiums.”

Go forth and renovate

Whether you’re looking to take on a small update or a major renovation, add insurance to the list of things you need to tackle. It might not be as exciting as drafting plans and picking out paint colors, but if there’s anything a home renovation doesn’t need, it’s an unpleasant surprise. Renovating provides enough of those as it is.

Updating your home means updating your insurance policy

Christina Pellegrini FP

When you add an extension to your home, install new security devices or replace your weathered roof, your insurance policy may also need a makeover.

A new TD Insurance poll suggests that the majority of Canadian homeowners don’t disclose home improvements their insurer, even though it could mean a reduction in your premium. It could also leave you underinsured or not insured at all if it invalidates your existing policy.

“People buy insurance to have a safety net in case they ever need to make a claim,” Dave Minor, vice-president of insurance distribution at TD Insurance, said. “Once you make the claim, you don’t want any disappointing surprises. So before you pick up a hammer or hire a contractor, contact your insurance provider.”

The poll released this week suggested 6% of the 2,748 adults checked their policy to ensure their home was covered during the renovations and just 16% contacted their insurer to see if their existing policy needed to be revised. Nearly one-quarter of respondents weren’t aware that electrical upgrades could decrease their premiums while more than half didn’t know that installing granite countertops could have the opposite effect.

If you’re spending a significant amount of money on anything that may impact the value of your home, it’s likely the insurer wants to know about it. So, no, you won’t have to disclose that you’re changing your wallpaper or replacing your old carpet.

Since the likelihood that a claim will be made increases during the construction process, the pre-renovation policy often doesn’t insure some damages relating to it. These losses can include: basement flooding caused by the contractor breaking a water main, theft or vandalism to the property that took place while you weren’t living there (vacating the property for more than 30 days requires a policy update), or a broken glass window resulting from poorly operated machinery.

Forty-one per cent of homeowners incorrectly believe that if a contractor is hurt on their property, they will not be liable. But that’s not true: you could be liable for their medical bills, lost wages or damages for pain and suffering. That’s why it’s important to ensure that the contractor provides documentation of their current insurance policy.

“While speaking to your insurer should be on your pre-renovation to-do list, it’s never too late to make the call, assuming nothing’s been destroyed and you’re not trying to make a claim,” Mr. Minor said.

Pete Karageorgos, manager of consumer and industry relations at the Insurance Bureau of Canada, agrees and says the sooner you disclose the improvements, the better. Doing so will help you get the right amount and type of coverage.

“People aren’t aware that in many cases, doing renovations to their home would require an update to their policy,” Mr. Karageorgos said. “If the home isn’t insured to value, you may not have enough coverage and you won’t be completely protected.”

Existing homeowners aren’t the only ones making home-related blunders: 60% of Canadian homeowners in another poll admitted they’ve made at least one mistake when they bought a home.

According to the RBC Home Ownership Poll, purchasing a property that requires significant renovations (15%), not having a bigger down payment (14%) and skipping a home inspection (13%) are the top three mistakes.

Younger homeowners were more likely than the average Canadian to list not having a bigger down payment and to not consider future family and space needs.

Get ready condo flippers, Canada Revenue Agency is hunting you

Garry Marr | 13/04/20 | Last Updated: 13/04/20 11:09 PM ET - You just sold your condo, you made a hefty profit and know you have to pay your taxes.

The bill might be more than you think.

If it’s your principal residence, there’s no tax, as long as you have the paperwork to prove it. The Canada Revenue Agency is taking a closer look at the condominium sector in what some in the industry have dubbed the “Condo Project.”

You might want to think very carefully about how you record that housing sale you made in 2012
Even if you own up to it being an investment property, you may not be allowed the capital gains tax break and that means a bigger hunk of your profit going to Ottawa.

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