Hold backs: who receives hold back money when there is a dispute?
Hold back clause
When buying a home sometimes buyers will use a “hold back” clause. In which they would require the buyer’s closing lawyer (or notary) to set aside an agreed upon amount of “hold back” money from the seller’s sale price.
The most common hold back clause we see is with sales in stratas. The buyer and seller agree to set money aside in case a special levy is approved. Or proposed after the offer is accepted but before the buyer closes. The strata laws require the current owner to pay any levies. Even if that levy is due after the new owner moves in!
Aside from strata levies, a hold back could be for other items. For example, sometimes buyers will request a hold back for cleaning to ensure the seller passes on the property to them in a tidy fashion. In this case the clause should not be left open ended. It should include an “end date” or expiry date. At which time the hold back money would be released to the seller. It should also include a specific method. How the buyers would get access to the hold back money before the end date. For example, by submitting cleaning receipts for the exact amount of cleaning costs.
Without these aspects of the hold back made specific the buyer could have an issue gaining access to the money that is rightfully theirs. The seller may have trouble receiving the amount that is rightfully theirs.
If the method for access to the hold back and hold back release date are not in place. A dispute may arise. The lawyer responsible for the hold back may not be able to release the money to either the buyer or seller. They would need to seek a judgement and order for payment through the legal court system.
New mortgage rules January 2018-simplified
Starting in January 1st 2018 all borrowers applying for a mortgage will need to qualify based on the Bank of Canada’s pre-determined qualifying rate. This is regardless of the actual interest rate the borrower has been offered!
The Bank of Canada determines the qualifying or bench mark that all borrowers will need to use. They will need to use this when they apply for a mortgage approval. In the past borrowers would have been able to qualify based on the actual mortgage interest rate they were paying.
Right now the qualifying rate is 4.99%. Where as the actual rate a borrower could secure is as low as 2.89%. That is a difference of over $100 per each $100,000 of a mortgage loan. As a result most buyers qualifications are already very tight. Especially in the ever increasing housing market. Therefore this makes a big difference.
The introduction of a universal qualifying rate all borrowers need approval for to qualify is commonly called the “stress test.” Meaning if rates were to rise could a buyer withstand the additional financial stress. (i must say rising rates does sound stressful!).
The stress test has been brought in gradually over the past 10 years. In the wake of the 2008 lending crisis and economic down turn.
Last year mortgage borrowers who had a 20% or greater down payment did not have to qualify with the benchmark rate. This gave people with larger down payments more options. In 2018, the mortgage qualification process will be more equalized for all people applying for a mortgage.
The housing market in Vancouver and the lower mainland in general, is a hot topic! With the cost or real estate and rent at all-time highs, many renting, or would-be-renters are thinking about becoming first time home buyers instead. If you’re in this situation, the BC government has created several programs to help you buy your first home.
Need help getting your down payment together? Many first-time home buyers rely on help from their parents or relatives for the down payment; but did you know, that you may also qualify for a down payment loan. If you qualify the program will help you with your down payment – up to 5% of the value of your home!
First time property transfer tax exemption:
If you are purchasing a home you will be living in, the BC governments’ First Time Home Buyers’ program can reduce or eliminate the amount of transfer tax you pay. If you qualify you may receive either a full or partial exemption from the tax. This is a once in a life time tax credit so make sure to take advantage of it if you can. More information can be found here.
First time buyers RRSP’s down payment:
Have money already saved in your RRSP for your down payment, you may be able to use these funds without a tax penalty, read more and see if you meet the criteria:
Considering buying your first home? get in touch today to learn more!