Purchaser's Guide

FIRST TIME HOME-BUYERS PLAN

First time buyers may borrow a maximum of $20,000.00 from their RRSP account under this plan. The funds must have been in your RRSP account for at least 90 days prior to withdrawal to be eligible under the program.

Many people do not know this

Provided you buy or build a home and meet all the conditions for making a withdrawal. Under the Home-Buyer's Plan, you can use the funds for other purposes. Many people do not know this.

For example

Your RRSP funds can be used not only for the down payment of your home.
Your RRSP can also be used for furniture.
Closing costs, such as legal and moving expenses.

This program is available to if you did not own a home as your principal residence in the last 5 years.

This information is current and the program has been extended indefinitely. Repayment of the funds back to your RRSP can be made over a 15-year repayment period.
The repayment is calculated by dividing the amount borrowed by the number of years of repayment. You are allowed a two year grace period before repayment begins.

New Minimum Annual Repayment

If the amount is not repaid in any given year, that year's repayment amount will be added to your income and taxed. If you repaid more in any given year, Canada Customs and Revenue Agency would take the outstanding balance and divide it by the number of years left to repay. This would now be your new minimum annual repayment.
located in Canada

In order for your home to qualify

It must be located in Canada and be used as your principal residence.
This program may be used in conjunction with the 5% down payment program.

If you have other questions about the Home-Buyer's Program you can call the Canada Customs and Revenue Agency.

OWN YOUR BUSINESS?

It's a great time to be the boss! Not only do you get to call the shots but you get to minimize your taxable income by writing off allowable expenses.

It's a great scenario until you try to borrow some money from the banks!

Most Small Business Owners

The banks will ask to look at your financial statements and personal tax returns for the last two or three years. They will quickly look at your net taxable income and average that income over a couple of years.

If you are like most small business owners your net taxable income is very small and the bank tells you that you don't qualify. Sound familiar?

Overall Financial Situation

Fortunately there are alternatives. There are lenders out there who recognize that most small business owners are hard working and dependable people. There are some institutional lenders that will lend you up to 85% of the value of your home as long as you can demonstrate a good credit history. Private lenders may lend you even more depending on your overall financial situation.

The bottom line is that there are options available to you!

NEW TO CANADA?

Buy Your First Home

If you're a recent immigrant or are thinking of immigrating to Canada you may experience some problems arranging a mortgage to buy your first home in Canada. Most banks want to see that you have some stability in Canada before they will consider lending you money for a mortgage.

Arrange Financing

The biggest factor in arranging financing shortly after arriving in Canada will be the size of your down payment. The bigger your down payment the easier it will be to arrange financing. With a down payment equal to 35% of the purchase price you are almost guaranteed to find a lender willing to lend you the money you need. Conversely, if you have less than 15% of the purchase price available for the down payment you will have a very difficult time arranging the financing you need.

Employment Status

Another factor that the banks will be looking at is your employment status in Canada. For instance,

Has a large multi-national company transferred you to Canada, or are you starting a new career with a small company?
Are you working in the same field as your country of origin, or are you in a completely different line of work?

These are just some of the issues that the banks will be looking at to determine your eligibility for a mortgage.

Endeavor To Get You The Best

We deal with mortgages every day and have the expertise you will need to buy your first home in Canada. If you would like our assistance in arranging your mortgage. Just let us know, we would be happy to explain all the intricacies of mortgage financing to you and we will always endeavor to get you the best possible mortgage to meet your needs!

Buying vs Renting

Two Main Reasons To Strive Toward Home Ownership
two reasonsOwning your home is the dream of many Canadians. If you are making this choice for the first time it is particularly exciting and and an important step in life. Historically there has been two main reasons to strive toward home ownership.

First, buying a home has traditionally been a good investment for many Canadians. There is something powerful about owning real estate. Unlike other 'paper' investments a home is tangible.
Secondly, having a place to call your own is unquestionably exciting. You can fix it up as you see fit, and no one can arbitrarily increase your rent.

Another driving force in the last few years has been that with rental vacancies across Canada dropping, rents have increased rapidly. This fact coupled with the historically low interest rates often makes it such that your mortgage payment will be the same or sometimes less than what you pay in rent.

Although the appeals of owning your home are evident one should not rush into if it is your first time. You need to look hard at your budget, possibly make some lifestyle sacrifices, and take a good look at the current stage in your life. Are you in a position to 'settle down'? First let's look at the numbers�

OWNING YOUR OWN HOME

A Good Investment or Not?

If you are looking to get rich quick by investing in a home like your grandparents, and to a lesser extent your parents did in the 70's & 80's then think again. Demographics have shifted such that rapid increases in home prices are gone forever, in fact many home prices took a dive in over heated markets, many of these regions have yet to recover. Even if phenomenal rises in real estate are gone forever, buying a home still has three main advantages, and these following advantages are the primary reason that as soon as your lifestyle warrants you should run to buy a home:

All gains on your principal residence are Tax free!
Buying a home is a perfect forced savings plan, if you do not make your monthly payment then you lose your home and quite often much of the equity you worked so hard to build.
Finally and most obvious is that your monthly payments are going to build equity for you, not your landlord! Consider this if you make payments of $800 per month rent for five years you will pay your landlord $48,000! make an $800 mortgage payment on $100,000 and you will have at least built $13,000 in equity.

When Should You Make the Leap

First, ensure that you are ready. You need to be in the home on average for at least five years. This depends on how much you put down and that your home gets only a moderate increase in value. The costs for CMHC insurance, and all closing fees immediately put you behind. You need to make payments for a few years to ensure you do not sell at a loss.

For Example, let's say you buy a home for $100,000 today with a five percent down payment. Your costs are as follows:

$3,750 CMHC insurance
$1,500 Various closing costs such as legal fees, appraisal fees etc.
$300 Home inspection
$5,550

This is $5,550 dollars more than your down payment!! Now let's say you sell the home in two years and it has made a modest 5% increase in prices in those two years. Therefore you sell it for $105,000. Now let's look at your costs on this side:

$7,864 Real estate commissions
$500 Various legal fees etc.
$8,364

Therefore, your net proceeds from the sale are $96,636. However, your outstanding mortgage to pay off is $95,816! Your net money is a whopping $820. In short buying a home is definitely a rewarding and exciting experience we only want to ensure you consider all the factors, speak to one of our mortgage planning specialists to get a personal counselling session today.

BUYING AN INVESTMENT PROPERTY

Minimum Down Payment Must Be 15%

When buying an investment property your minimum down payment must be 15% and follow the following CMHC criteria Borrower net worth and guarantees:

CMHC requires that the borrower have a net worth equal to at least 25% of the loan amount, with a minimum of $100,000. As the DCR increases, CMHC is willing to allow for some flexibility in the minimum net worth.
When the borrower is a corporate entity, additional personal and/or corporate guarantees are required over and above the loan covenants. The amount of additional guarantee required is 2% of the loan amount for each percentage in LTV ratio above 60%.

For Example

at 78% LTV the additional guarantee is 36% of the loan amount
at 85% LTV the additional guarantee is 50% of the loan amount

For insured loans for the construction of new rental buildings, the additional guarantee during construction will be 100% of the loan amount until stabilized rents (per rental achievement requirements outlined below), are achieved, at which time the guarantee will be reduced to the amount based on the formula described above.
CMHC will permit flexibility in the net worth and guarantee norms for partnership projects involving non-profit borrowers.