The home buyers’ tax credit provides a $5000 non-refundable income tax credit on a qualifying home bought after January 27, 2009. This is calculated by multiplying the lowest personal income tax rate for the year (15% in 2009) by $5000. This works out to be a tax relief of up to $750. This is a one-time credit only in the tax year you purchase your home.

First -time home buyers  can now withdraw up to $25,000 per person from their RRSP, in order to purchase or build a home after January 27, 2009.
For more information, go to www.cra.gc.ca.

 With drastically reduced prices in certain parts of the U.S., cross-border real estate buying can be very tempting.  To be successful, one needs to have up-to-date knowledge of continually changing border, legal and political issues. (more…)

With current low interest rates, it is an excellent idea to pay off your mortgage faster by making extra payments. 

One strategy is to increase your mortgage payments each year to match the rate of inflation.  Today the inflation rate is quoted at 2 % on average.

If your mortgage payment is $1187, then in year 2 it would be $1211, year 3: $1235 and year 4: $1260., etc.  We are talking about a very minimal monthly increase.

Because of compound interest, this small amount makes a huge difference. With a 30-year mortgage, instead of paying $177,458 in interest, that amount now becomes $135,505 and the mortgage payoff time is reduced by eight years.

If you increase your payments by 3%, you could shrink your amortization down to 19.75 years. (more…)

This month, January 2011, the Government of Canada has changed some mortgage rules.

• Mortgage amortization period of 35 years has been reduced to 30 years.  Mortgages with amortization periods longer than 30 years will no longer qualify for government-backed insurance.  This will affect the amount needed to qualify for a mortgage. 
• Home-Equity Line-of-Credit mortgages can only borrow up to 85% of the value of a home, versus 90% in the past.  In our area of BC, this amount is 75% of house value, so this shouldn’t affect us any.  At 75% of equity, this is not covered by government insurance and never has been.
• Minimum down payment of 5% remains the same to be insured.  However, check out another of our blogs to see how lenders are getting around that.
• Rental properties require a minimum of 20% down payment versus 5%.  Here, it has always been 20-25%, so we will see no effect.

Even though the Federal Government has tightened the mortgage rules , lenders and home buyers have found a way around this down-payment rule.

Who qualifies?  Those with GREAT CREDIT AND INCOME, but who find it hard to save the 5% down payment.  Lenders will give these buyers  5% cash back on closing.  The transfer will happen at the lawyer’s office, with the lender providing the funds at the time of completion.  Should the buyer now have the down payment, the cash back can be used by the buyer for other things, such as renovations.

One point to remember: with no down payment, the monthly mortgage payments will be little higher.

Who should be interested?  Those buyers interested in getting into the real estate market, who can afford the home-ownership costs, but just have trouble saving the down payment.

When the housing market is softening, which way you are moving in the market will decide if you come ahead or go backwards.  A softening market has a greater affect on the higher priced homes.  Whereas a $400,000 house will drop to $380,000, an $800,000 house can go down well over $100,000.  So if your next move is to a higher priced home, now would be an excellent time to make that move.  You would a decent price for your average home, but would get a real bargain on your expensive purchase.

If you are staying in the same area, in the same price range, you should be okay.  If you are downsizing from an expensive home to a lesser one, you will have to take a much bigger hit than the house you are purchasing.

1. Buying more than they can afford!

I know that your mortgage broker figures you can afford that amount, but the payments on that amount, plus your property taxes, plus utilities, and if you bought a condo, your strata fees will probably put you into a position where you are scrambling every month to pay all the bills, especially vehicle costs.  At the very least, you will have to forget about an entertainment fund for the next few years.

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Below are some of the refunds, credits, incentives and rebates you can apply for, concerning energy savings:

1. CMHC Mortgage Loan Insurance Premium Refund

Provides homebuyers with CMHC morgage insurance, a 10% premium refund and possible extended amortization without surcharge when buyers purchase an energy efficient home or make energy savings renovations. (Go to www.cmhc.ca/en/co/moloin/moloin_008.cfm#reno.)

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Here are a few government rebates for buyers :

1. Home Buyers’ Plan

Qualifying homebuyers can withdraw up to $25,000 ($50,000 for couples) from their RRSPs for a down payment.  If you have repaid this RRSP, you may be eligible to use the program a second time. (Go to www.cra.gc.ca, enter “home Buyers’ Plan” in the search box.)

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The government of Canada has just recently increased the withdrawal from RRSPs for the first time buyer.  They can now withdraw $25,000 (up from $20,000) with 15 years to repay.