11 Feb

Navigating First-Time Home Buyer Programs in Canada: Your Key to Homeownership

General

Posted by: Morgan McAlpine

In the dynamic landscape of Canadian real estate, aspiring homeowners, particularly first-time buyers, often face challenges in navigating the path to homeownership. However, with the availability of various first-time home buyer programs across Canada, the dream of owning a home becomes more attainable for many. In this blog post, we’ll explore the different first-time home buyer programs available in Canada, shedding light on eligibility criteria, benefits, and how they can pave the way to your dream home.

 

1. Home Buyers’ Plan (HBP):

What is it?
The Home Buyers’ Plan (HBP) is a federal program that allows first-time home buyers to withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSP) to purchase or build a qualifying home.

Eligibility:

  • You can only use your own RRSPs for an HBP withdrawal.
  • The maximum withdrawal is $35,000 per eligible person.
  • The house you’re buying or building must be in Canada.
  • You must be a first-time home buyer (or not have been a homeowner within the previous four years).
  • You must be a resident of Canada.
  • The property must become your principal residence before October 1 of the year following the RRSP withdrawal.  (Be careful if your property is under construction, because delays might prevent you from meeting the deadline.)
  • The money you withdraw under the HBP must have been contributed to your RRSP at least 90 days before withdrawal.
  • You can’t use the HBP for a second home, like a cottage. But the property you’re buying doesn’t need to be a single-family home. You can also take advantage of the HBP to buy a unit in a triplex or a high-rise.
  • You have to repay the money you withdraw within 15 years. (The 15-year period begins in the second calendar year after the withdrawal.)

 

 

2. First-Time Home Buyer Incentive (FTHBI):

What is it?
Introduced by the Canadian government, the First-Time Home Buyer Incentive (FTHBI) aims to make homeownership more affordable by providing shared equity mortgages with the government.

The incentive amounts to 5% of the property’s value for an existing home and 5% or 10% for a new home. The incentive is an interest-free loan. It must be reimbursed when the property is sold or within 25 years of purchase. The amount repaid will be based on the value of the property at that time.

A clear example
A couple wants to buy a new condo for $400,000. They saved $20,000 for a 5% down payment and receive a $40,000 incentive (10% of the condo’s value). Their mortgage therefore equals $340,000, to be paid in monthly instalments of $1,745. Without this incentive, they would have paid $1,973, or an extra $228 per month. When they decide to repay the incentive, the couple will have to pay 10% of the condo’s market value.

 

 

3. Land Transfer Tax Rebates:

What are they?
Many provinces and territories in Canada offer land transfer tax rebates or exemptions for first-time home buyers. This rebate can significantly reduce the upfront costs associated with purchasing a home.

Eligibility:
Eligibility criteria for land transfer tax rebates vary by province or territory. Generally, first-time buyers are defined as individuals who have never owned a home or have not owned one in the last several years.

Beginning January 1, 2017 for Ontario residents, no land transfer tax would be payable by qualifying first‑time purchasers on the first $368,000 of the value of the consideration for eligible homes. First‑time purchasers of homes greater than $368,000 would receive a maximum refund of $4,000.

 

 

4. First-Time Home Buyer Grants and Programs:

What are they?
Several municipalities, provinces, and non-profit organizations offer grants, incentives, and programs specifically designed to assist first-time home buyers with down payments, closing costs, and homeownership education.

Eligibility:
Eligibility criteria for these programs vary widely and may include factors such as income level, residency status, and property location. It’s essential to research and inquire about available programs in your area.

 

 

5. The Tax-Free Home Savings Account (FHSA)

The FHSA is a new account that allows you to save for your first home. It also allows you to make tax-deductible contributions of up to $8,000 per year, up to a lifetime maximum of $40,000. Your contribution room starts to accumulate as soon as you open your first account. You can carry forward your unused FHSA contribution room, up to a maximum of $8,000, to use in the following year.

Eligibility:

To open a tax-free First Home Savings Account (FHSA), you must meet the following eligibility criteria:

  • You must be a resident of Canada.
  • You must be between 18 and 71 years old*
  • You and your spouse must not own a home in Canada. This means you must be a first-time home buyer.

 

 

Conclusion:

Navigating the realm of first-time home buyer programs in Canada can be daunting, but with the right knowledge and guidance, aspiring homeowners can unlock a world of opportunities to achieve their homeownership dreams. From utilizing the Home Buyers’ Plan and First-Time Home Buyer Incentive to exploring land transfer tax rebates and local grants, there are various avenues to make homeownership more accessible and affordable.

At DLC Forest City Funding, we specialize in helping first-time home buyers navigate the complexities of the Canadian real estate market and leverage available programs to their advantage. Contact us today to learn more about how you can take advantage of first-time home buyer programs and embark on your journey to homeownership with confidence.

 

Cheers,

Morgan McAlpine

 

7 Feb

Unlocking the Value of Your Home: Understanding Mortgage Refinance in Canada

Mortgage Tips

Posted by: Morgan McAlpine

In the realm of financial management, homeowners often explore avenues to optimize their assets and make the most of their investments. One such avenue is mortgage refinancing, a powerful tool that enables homeowners to leverage the equity in their homes for various financial objectives. In this blog post, we’ll dive into the fundamentals of mortgage refinancing in the Canadian context, bringing light to its mechanics and potential benefits. This read is approximately 3 minutes long!

 

What is a Mortgage Refinance?

Mortgage refinance involves replacing an existing mortgage with a new one, typically with altered terms and conditions. This process allows homeowners to access the equity accumulated in their homes by borrowing against it. Equity, in simple terms, represents the difference between the current market value of the property and the outstanding mortgage balance.

How Does the Mortgage Refinance Work?

1. Assessment of Equity:
Before initiating a refinance, it’s crucial to assess the equity in your home. Lenders typically require homeowners to maintain a certain level of equity, often around 20%, to qualify for refinancing. This level of equity can also be known as the loan to value. When refinancing your home, we can’t exceed 80% loan to value with traditional lenders in Canada.

2. Application Process:
Upon determining eligibility, homeowners can apply for refinancing through a mortgage broker or directly with a lender. The application process entails providing necessary documentation, including proof of income, credit history, and property appraisal. Although you can work directly with a lender like your primary banking institution, it is strongly advised to work with a mortgage professional considering their vast access to a multitude of different mortgage lenders.

3. Evaluation of Options:
During the application process, homeowners have the opportunity to explore various refinancing options tailored to their financial objectives. These may include switching from a fixed-rate to a variable-rate mortgage, extending or shortening the loan term, or consolidating debt through cash-out refinancing.

4. Approval and Closing:
Once the application is submitted, the lender evaluates the homeowner’s financial profile and the property’s value to determine approval. Upon approval, the closing process involves finalizing the new mortgage terms, paying off the existing mortgage, and disbursing any additional funds if applicable.

Benefits of a Mortgage Refinance:

1. Lower Interest Rates:
Refinancing presents an opportunity to secure a lower interest rate, thereby reducing monthly mortgage payments and potentially saving thousands of dollars over the loan term.

2. Debt Consolidation:
Homeowners can use the equity in their homes to consolidate high-interest debt, such as credit card balances or personal loans, into a single, more manageable payment with a lower interest rate.

3. Home Renovations:
Refinancing provides access to funds for home improvements or renovations, enhancing the property’s value and comfort while potentially increasing its resale value.

4. Financial Flexibility:
By refinancing, homeowners can adjust their mortgage terms to better align with their financial goals and circumstances, whether it involves shortening the loan term to build equity faster or extending it to reduce monthly payments.

Conclusion:

Mortgage refinancing is a versatile financial tool that empowers homeowners to unlock the hidden value in their properties and optimize their financial situations. Whether it’s reducing interest costs, consolidating debt, funding renovations, or adapting to changing financial needs, refinancing offers an array of benefits tailored to individual goals. However, it’s essential to approach refinancing with careful consideration and guidance from an experienced mortgage professional to ensure it aligns with your long-term financial objectives.

At DLC Forest City Funding, we specialize in helping Canadian homeowners navigate the process of mortgage refinancing, providing personalized guidance and tailored solutions to maximize their financial well-being. Contact me today to explore how mortgage refinancing can work for you and take the first step toward unlocking the full potential of your home equity.

 

Cheers,

Morgan McAlpine