Category Archives: home buyers

Everything you need to know about CMHC’s First-Time Home Buyer Incentive

Article image

The federal government wants to make home ownership more affordable for young people and to do that it’s introducing the First-Time Home Buyer Incentive (FTHBI) this September. The $1.25 billion program, announced as part of the March federal budget, involves the government buying equity stakes in homes purchased by qualified home buyers, allowing for smaller mortgages that will keep monthly payments lower.

But how will the plan work? Below, we break down all the key details and take a look at who this new program is right for.

How the FTHBI works

The program will be administered by Canada’s housing agency, Canada Mortgage and Housing Corp. (CMHC), which will pay 5% of the purchase price for an existing home, and up to 10% for the value of a new home, in exchange for an equity stake. Once the homeowner sells, they’re obligated to repay the CMHC.

The fine print includes the following:

  • To qualify, you must be a first-time home buyer.
  • Buyers must have a down payment of at least 5% of the total purchase price, up to 20%.
  • The household’s income must be under $120,000, and the mortgage and incentive amount together can’t be more than four times the household income.
  • Only insured mortgages will be eligible, meaning this will be restricted to those with a down payment worth less than 20% of the purchase price.
  • Buyers will not be exempt from federal “stress test” regulations (a mandatory mortgage qualification using the five-year benchmark rate published by the Bank of Canada or the customer’s mortgage interest rate plus 2%)

Who is this for?

The program is for purchasers looking for a starter home but aren’t able to afford the monthly payments needed for a mortgage below $500,000. To qualify for mortgages in the $400,000 – $500,000 range, the household income would have to be close to six figures. Buyers would have to be willing to give up at least 5% of the value of their home to the federal government in exchange for lower monthly payments.

As an example, a couple earning up to the household income cap of $120,000 with a down payment of 5% on a new home would be entitled to an additional $48,000 provided by CMHC, as below:

Couple earning $120,000
$480,000 total purchase
-$24,000 down payment
-$48,000 matched by CMHC (10% for a new home)
= $408,000 mortgage

As both the household income and total purchase price are capped under the program, it’s worth noting that buyers with good credit and low debt might actually be able to borrow more money than the FTHBI would allow.

In this scenario, “the program forces you to buy less home than you otherwise would be able to. Whether consumers are disciplined enough to take part of that or not is the real question,” says Paul Taylor, president and CEO of Mortgage Professionals of Canada.

Buyers in the program will also want to consider the future value of their home over time. Is the neighborhood likely to increase in value? With a 5-10% equity stake in the home, CMHC will be along for the ride, both in the case of depreciation or appreciated value of the home.

“Vancouver North Shore is a great example. Now, it’s very much an outlier but if you bought the home in 1986 for $250,000 it’s probably worth $4 million now,” says Taylor.

Comparing markets

The most expensive home you can buy would be about $565,000 a government official told the CBC, which all but disqualifies purchases of detached homes or upscale condos in downtown Vancouver and Toronto. For example, the average home price in the Greater Toronto Area as of May 2019 was $838,540, according to the Toronto Real Estate Board.

CMHC acknowledged earlier this year that the average home in these markets won’t be within reach.

“It may not be a condo in Yaletown or a house in Riverdale, but there are options in both metropolitan areas to accommodate this program,” CMHC said in a press release in April. “In fact, around 23% of transactions in Toronto are for homes under $500,000 and 10% in Vancouver.”

This means that potential buyers will want to be comfortable living in the outer suburbs like Langley or Surrey in Vancouver, or Brampton and Mississauga in Toronto.

Recent residential listings for $472,000 (the average price for a home in Canada) 
*Compiled using listings found on Realtor.ca during the week of May 26th

Downtown Toronto Less than 30 listings
Downtown Vancouver Less than 100 listings
Calgary More than 600 listings
Winnipeg More than 2,000 listings

The program would seem to favour first-time buyers in smaller cities across Canada, at least when comparing options for buyers that tend to want to live in large cities downtown.

What you get for $490,000-$505,000

While this program can get you property up to $565,000 if you put the maximum down payment allowed for an insured mortgage (about 19.99%), we expect many who use this program will have the minimum 5% down payment and are looking to get into the property market sooner with help from the CMHC.

Based on that idea, we’ve compiled a look at some properties you can get in four major housing markets in Canada in the $490,000 to $505,000 price range. Take a look.

In Toronto: No houses listed but one-bedroom condos are available, typically 600-1,000 sq feet. Condos have more rooms and additional bathrooms as you get away from the city core. There is almost no supply below $300,000.

Here’s an example of what you might be able to get in the downtown core (one bedroom) in that price range.

 

 

In Vancouver: No houses listed but one-bedroom condos are available, typically 600-1,000 sq feet. More rooms and additional bathrooms as you get away from the city core.

Here’s an example of what you might be able to get (one bedroom).

In Calgary: You can find listings for two-bedroom bungalow houses downtown, along with two-bedroom condos over 900 square feet.

Here’s an example.

In Winnipeg: Limited supply at this price range. Detached houses are available however, with two-plus stories and multiple rooms. Large condos over 1,000 sq feet are available closer to a $300,00 price point.

Here’s an example.

Listing photos courtesy of Realtor.ca.

Source – LowestRates.ca –  Mike Winters on June 17, 2019

Advertisements
Tagged , , , , , , , ,

It’s going to be hard to own a home in Toronto if you are not part of the 10%: report

In Toronto, you need more than $160,000 to buy a house; meanwhile, in Regina, the most affordable city, you only need $70,000

The Canadian dream of home ownership is slipping away: Tim Hudak5:17

Canadians looking for a home in major cities will likely have to look elsewhere, unless they count themselves among the country’s richest.

New analysis from RateSupermarket.ca shows that only those in the top income bracket can afford to buy homes in many of Canada’s major cities like Toronto, Vancouver and Montreal.

It cites a recent study from Zoocasa, a Canadian real estate website, which places the benchmark prices for Toronto at $873,100 and Vancouver at $1,441,000. Only the top 10 per cent can afford to live in Toronto and only the top 1 per cent can live in Vancouver.

Jacob Black, managing editor of RateSupermarket.ca, had this advice for potential homeowners: “Step one is to have a realistic idea of what you can spend. Step two is look outside the box that you might have looked in before,” said Black. “We’ve seen a trend develop in terms of cohabitation, multi-family homes, looking at options like condos, smaller apartments outside of the major city area.”

The RateSupermarket analysis compares these benchmark prices against the household income needed in order to afford a home in 12 Canadian citiesincluding Victoria, Hamilton, Kitchener-Waterloo, Calgary, Ottawa-Gatineau, London, Edmonton, Saskatoon and Regina.

RateSupermarket’s criteria for determining household income was to assume a 3.25 per cent five-year fixed mortgage rate, $10,000 in debt, a monthly lease vehicle payment of $300, a down payment of 20 per cent, and amortization of 25 years.

Using these figures, one’s household income in Vancouver would need to be above $240,000 in order to afford a home. In Toronto, a household would need more than $160,000.

A surprising result for Black was the difference between Toronto and Hamilton — a city that’s 70 kilometres away, which requires a more ‘reasonable’ $120,000 household income for a $630,000 home.

“I think that really highlights that there are opportunities in thriving vibrant areas,” said Black. “It’s just not necessarily in the same traditional areas you’ve been looking in or that you’d be expecting.”

This seemingly insurmountable unaffordability applies to starter homes as well. With these homes in Vancouver, only income earners in the top 25 per cent can afford them. The benchmark unit price is $656,900. Toronto is not far behind at $522,300.

Above all else, Black stresses a wise use of resources when it comes to the property market.

“I don’t see (the market) reversing. I don’t see a correction, but I think it’s important people do what they can with the resources they’ve got,” said Black.

Regina emerged as the most affordable city in the study, with a benchmark price of a home of $275,900 and a minimum household income of $70,000.

Here’s the full list:

  • Vancouver: House price: $1,441,000. Household income needed: $240,000
  • Toronto: House price: $873,100. Household income needed: $160,000
  • Victoria: House price: $741,000. Household income needed: $140,000
  • Hamilton: House price: $630,000. Household income needed: $120,000
  • Kitchener-Waterloo: House price: $523,720. Household income needed: $110,000
  • Calgary: House price: $467,600. Household income needed: $100,000.
  • Ottawa-Gatineau: House price: $444,500. Household income needed: $90,000
  • London: House price: $426,236. Household income needed: $90,000
  • Montreal: House price: $375,000. Household income needed: $80,000
  • Edmonton: House price: $372,100. Household income needed: $80,000
  • Saskatoon: House price: $301,900. Household income needed: $70,000
  • Regina: House price: $275,900. Household income needed: $70,000
Source: Financial Post Staff Nicholas Sokic May 30, 2019

Tagged , , , , ,

A first-time buyer’s guide to choosing a mortgage plan that’s right for you

I used to think I had a pretty good understanding of mortgages — you contribute a downpayment (a minimum of five percent of the property value if you’re in Canada) and someone (usually a bank) lends you the rest. If you fail to pay your mortgage back, your lender can take your house away. Ouch.

When I started looking into buying a cottage, I realized my mortgage knowledge fell seriously short (by the way, the cottage is the inspiration behind our brand new newsletter called The Ladder, about the climb on and up the property ladder). Early on, I jumped on an online calculator and immediately had a lot of questions. How can these interest rates vary so wildly? What is a fixed versus variable mortgage? What does amortization mean? If I put down less than 20 percent will terrible things happen to me and everyone I love? They don’t teach this stuff in school and I learned there is no one-size-fits-all mortgage plan that will work for everyone.

Photo: Romain Toornier 

Enter Matt Yakabuski, an Ontario-based mortgage broker — here to break it all down and help you, me, all of us— understand the variables to help pick the best mortgage plan. If you’re Oprah, or just won the lottery — feel free to stop reading. Everyone else, buckle in!

And if you’re curious, I’ll be sharing more about my cottage mortgage in the next newsletter, landing in your inbox on Wednesday, April 3rd — sign up here!

Um, where do I get a mortgage?

Mortgages usually come from either a bank or a broker.

Think of your mortgage broker as your personal mortgage shopper — they are provincially licensed professionals who have access to multiple lenders, including all of the major banks. They will listen to your needs and goals, analyze the numbers, help you through the qualifying process and find a mortgage product that fits just so.

“Online, you’ll get an idea of what the rates are generally, but they vary based on the downpayment amount, the location, your credit, your income and more. No two deals are alike, no two clients are alike, no two properties are alike,” says Yakabuski.

Banks are trusted, federally regulated lenders that can only access and offer you their own rates and products. You can also get a mortgage from a credit union (an increasingly popular option ever since the mortgage stress test was introduced) or a non-traditional Mortgage Investment Corporation. MICs are typically used by Canadians who have not qualified with traditional lenders and are willing to gobble higher interest rates to get into the property game.

Photo: CreditRepairExpert

How do I qualify for a mortgage?

To qualify for a mortgage, you have to prove to your lender that you can afford it and have a steady stream of income to keep up with payments. They will take a look at your income before taxes, living expenses, your credit score and all of the debts you carry. They will also look at your downpayment amount and the terms of your mortgage.

“Your debt servicing ratio is the main measure we use to qualify people for their mortgage,” says Yakabuski. “Depending on your credit score, you’re allowed to put a maximum of 44 percent of your total income towards debt servicing. This covers your mortgage, your property tax, credit card bills, car loans and any lines of credit.” If your debt eats up more than 44 percent of your income, you won’t be approved by traditional lenders.

Will I pass the mortgage stress test?

As of January 1st, 2018, you also have to pass the mortgage stress test — a calculation used by federally regulated lenders to determine if homebuyers can keep up with their mortgage payments if interest rates were to rise. If you can demonstrate that you can withstand your mortgage at the Bank of Canada’s benchmark qualifying rate (at 5.34 percent at the time of writing) or your interest rate plus two points — whichever amount is greater — you pass.

The mortgage stress test has reduced purchasing power by just under 20 percent. But as Yakabuski puts it, “If interest rates do go up, you know you can afford it.”

Photo: adventures_of_pippa_and_clark/Instagram

Should I take the biggest loan I can get?

Your lender will tell you the maximum loan you can qualify for (and they can help you find ways to increase that amount). But the maximum isn’t necessarily the loan you should take.

“Instead of my clients asking me what they can afford, I ask them what they’re comfortable spending on a monthly basis on their mortgage, property tax, heat, hydro, that kind of thing. And then we’ll work backwards,” explains Yakabuski.

Everyone has different comfort levels. “Some people are conservative and some people just want to hit their maximum,” he says. In the end, it all comes down to budgeting and making sure you don’t completely wipe out your bank account and end up house poor. If you have to beg your in-laws to cover the closing costs, can’t afford to hire movers or even get the nice coffee beans you like — you may want to consider getting less house than you can actually qualify for, but more financial freedom.

Photo: mandimakes/Instagram

Finding the “best rate” is not as easy as it looks

You may have seen a low rate on a website or on the window at the bank, but not every rate is for you and you have to read the fine print. There are rates for refinancing, rates for rental properties, rates if you’re putting more than 20 percent down (uninsured) and rates if you’re putting less (insured), and on and on.

“Your friend who got a 2.49 percent interest rate six months ago, sorry to say — that’s just not available today — and even if it was, it doesn’t mean you could have gotten it. If you find a rate that seems like a much better deal than everywhere else, there’s probably a reason for that,” explains Yakabuski.

For example, restricted mortgages, which often have lower rates but inflict painful penalties if you break them and prohibit you from refinancing elsewhere before your term is up. “If I sell you a restricted mortgage and then in two years, you have to sell the property, I don’t want to say, ‘Sorry, your penalty is going to be triple the amount of a regular penalty because it was a restricted deal.’ Anyone who is looking out for your best interest is going to take into consideration the portability of the mortgage.”

Photo: James Bombales

How long should my term and amortization be?

The term you choose will have a direct impact on your mortgage rate and how long you’re locked in to the rate, lender, and various terms and conditions of your mortgage product.

“A shorter term length has historically proven to have a lower interest rate. Right now, not so much,” explains Yakabuski. Terms can range from six months to 10 years. “Most people choose a five-year because it’s often the longest term for the best rate.”

Your mortgage amortization period is the length of time it will take you to pay off your entire loan. In Canada, the maximum amortization period is 35 years — but you’ll only have access to this timeframe if you’re putting down more than 20 percent. If you’re putting down less than 20 percent and have an insured mortgage, the maximum amortization period is 25 years.

If you go with a longer amortization period, you will have smaller monthly payments, but keep in mind: you’ll pay more in the long run in interest over the life of your mortgage.

Depending on your mortgage commitment, lenders will only allow you to pay so much extra towards a mortgage before they start penalizing you. How’s it’s calculated depends on the product you’re in and what lender you’re with, but in many cases you will have the opportunity to make lump-sum payments towards your mortgage, to double up payments or to increase the payment amount.

“I suggest taking the highest amortization possible, but if you have the affordability to pay more, make sure you do,” says Yakabuski. “Even with a longer amortization, you effectively could pay at the rate of a 15- or 20-year amortization, saving you thousands of dollars in interest by paying the principal off that much quicker. But should your financial situation change, you could scale back your payments all the way to the 25-year if you have to.”

Photo: James Bombales

Should I get a fixed or variable mortgage?

Fixed mortgages mean the rate you settle on will be your rate for the entire term of your mortgage. A variable rate is going to fluctuate based on what the prime rate is doing (at the time of writing, it’s currently sitting at 3.95 percent). If the prime rate goes down, your rate and payment will go down and vice versa. With a variable rate, there is often an opportunity to save money, but you have to be comfortable with some risk.

Choosing the right strategy often comes down to flexibility. Many Canadians default to a five-year fixed rate mortgage, but if there’s a possibility you may be moving on before then, the penalty for breaking the term can get costly, whereas a variable mortgage will cost you three months of interest.

“Variable is a good option because they traditionally have a lower interest rate and you have flexibility should you need to get rid of it quicker with the smallest penalty possible,” says Yakabuski.

Should I go for an open or closed mortgage?

Let’s say you come into a large inheritance and want to pay off your mortgage in full or you unexpectedly have to ditch your property before the term is up.

With a closed mortgage, you cannot repay, renew or renegotiate before the term is up without incurring penalties. With an open mortgage, you can do all of the above without penalty — but the interest rates are often much higher.

“I rarely recommend an open mortgage, even when people say they’re going to flip the property,” says Yakabuski. “The reason is because an open mortgage right now has an interest rate of about six percent (all open terms are variable). Whereas the interest on a closed, variable mortgage is, let’s say, three percent less. If you’re going to sell the place inside two, maybe three months, then open makes sense. But if you’re going to keep it for four months plus, generally the three-month interest penalty on breaking a closed, variable mortgage can save you thousands in just six months.”

Photo: alyssacloud_/Instagram

Now for the fun part — finding a home

Before you even start looking at properties, it’s important to get your finances in order so you can crunch the numbers when you do find places you like. You’ve saved for a downpayment, qualified for a loan and have chosen a mortgage plan that is right for you. You’re officially a mortgage badass and it’s time to start house hunting. You’ve got this.

Source: Livabl.com –  

Tagged , , , , ,

Homebuyers to get new mortgage incentive, Home Buyer’s Plan boost under 2019 budget

Homebuyers to get new mortgage incentive, Home Buyer’s Plan boost under 2019 budget

 

 

 

WATCH: Federal budget 2019: Incentives for first-time home buyers, skills training

– A A +

Can’t afford to buy a house? The government may take on part of the cost.

That is the gist of the boldest proposal that Budget 2019 puts forth to help more middle-income Canadians fulfill their homeownership dream.

Under the new CMHC First-Time Home Buyer Incentive, the Canada Mortgage and Housing Corporation would use up to $1.25 billion over three years to help lower mortgage costs for eligible Canadians.

 

The money would go to first-time home buyers applying for insured mortgages. Borrowers would still have to pony up a down payment of at least five per cent of the home purchase price. On top of that, though, they would receive an incentive of up to 10 per cent of the house price, which would lower the amount of their mortgage.

For example, say you’re hoping to buy a $400,000 home with the minimum required five per cent down payment, which works out to $20,000. With the new incentive, you could receive up to $40,000 through the CMHC. Now, instead of taking out a $380,000 mortgage, you’d need to borrow only $340,000. This would lower your monthly mortgage bill from over $1,970 to less than $1,750.

The incentive would be 10 per cent for buyers purchasing a newly built home and 5 per cent for existing homes. Only households with an annual income under $120,000 would be able to participate in the program.

Watch: Finance Minister Bill Morneau presented the 2019 federal budget in the House of Commons Tuesday.


Home owners would eventually have to repay the incentive, possibly at re-sale, though it’s unclear yet how that would work.

Also, mortgage applicants still have to qualify under the federal stress test, which ensures that borrowers will be able to keep up with their debt repayments even at higher interest rates.

However, the incentive would essentially lower the bar for test takers, as applicants would have to qualify for a lower mortgage.

On the other hand, the amount of the insured mortgage plus the CMHC incentive would be capped at four times the home buyers’ annual incomes, or up to $480,000.

This means the most expensive homes Canadians would be able to buy this way would be worth around $500,000 ($480,000 max in insured mortgage and incentive, plus the down payment amount).

The government is hoping to have the program up and running by September.

Home Buyer’s Plan gets a boost

As was widely anticipated, the government would also enhance the Home Buyer’s Plan (HBP), which currently allows first-time buyers to take out up to $25,000 from their registered retirement savings plan (RRSP) to finance the purchase of a home, without having to pay tax on the withdrawal. The budget proposes raising that cap to $35,000.

The new limit would apply to HBP withdrawals made after March 19, 2019.

New measures would encourage more borrowing, possibly drive up home prices

Economists said the new CMHC incentive and the enhanced HBP would encourage Canadians to take on more debt, stimulate housing demand, and possibly push up housing prices.

“It’s a different kind of borrowing,” David Macdonald, senior economist at the Canadian Centre for Policy Alternatives, said of the CMHC incentive.

And with a home-price limit of around $500,000, the program is unlikely to help middle-class millennials buy homes in Vancouver and Toronto, where average property values are far higher, said TD economist Brain De Pratto.

 

Those taking advantage of the higher HBP limit, on the other hand, would have to keep in mind that the government is not extending the program’s repayment timeline, said Doug Carroll, a tax and financial planning expert at Meridian.

Home buyers must put the money back into their RRSP over 15 years to avoid their HBP withdrawal being added to their taxable income. Now Canadians will have to repay a maximum of $35,000 – instead of $25,000 – over the same period, Carroll noted.

In general, the economists and financial experts Global News spoke to saw the budget as being focused on demand-side housing measures, rather than policies that would encourage the construction of new homes.

And while the budget does earmark $10 billion over nine years for new rental homes, it does not propose major tax breaks for homebuilders.

Tax incentives proved to be an effective way to stimulate residential construction in the past, said Don Carson, tax partner at MNP.

“They really drove supply,” he said.

Source: Global News –

Tagged , , , , , , , , , ,

A first-time buyer’s guide to becoming a landlord

Photo: James Bombales

Buying a home isn’t always about finding the perfect place to raise a family or host those summer barbecues — for some first-time buyers, owning real estate is the gateway into the realm of landlordship.

Becoming a small-scale landlord can look easy, but there’s more to it than collecting the rental cheques every month. Whether you lease out an individual property or have a self-contained rental unit in your home, such as a basement apartment, buying to become a landlord requires you to be a hands-on business owner.

“I tell my clients upfront [that] you’ve got to think of it as a business,” says Nawar Naji, a Toronto real estate investor and broker at Chestnut Park Real Estate. “It’s not just about, ‘Let’s go buy a condo and rent it out.’ You’ve got to think of it from a business perspective. Think of the operation side of it, taxation aspect of it, and the other part of it — the exit.”

Want to buy your first home?

With television shows like HGTV’s Income Property showcasing the benefits of owning a rental property, like easy income and a boost in property value, renting out your basement looks appealing. Yet, without proper preparation or knowledge of provincial landlord and tenancy laws, the landlord dream can quickly go sour.

“If people have a bad experience in the first year [of landlording], and the first tenancy is problem-ridden, nine times out of 10 I would think they would get out of the business,” says Susan Wankiewicz, executive director of the Landlord’s Self-Help Centre, a non-profit legal clinic for Ontario’s small landlords.

If you do your homework and plan accordingly, becoming a small landlord can be rewarding. As Naji and Wankiewicz tell it, here’s what you can expect if you’re working towards that first investment property.

Put your back into it

Landlording isn’t a passive investment — it requires maintenance, time and experience to nurture into a successful money-maker. As with any business, being present and aware of your investment’s unique needs will start you on the path to being a successful landlord.

“You’ve got to be active in the business,” says Naji. “It’s not just paying the mortgage, getting the rental cheque and calling it a day. There’s more work to be done to it.”

Naji, who has been investing in real estate since 2006, says a new landlord can expect the operation stage of landlording — running the property — to be the longest and most cumbersome. Semi-annual inspections, repairs, collecting rent and regular maintenance are the landlord’s responsibility. You could hire a property management company to take care of this for you for a percentage of your rental earnings, but Naji advises not to within the first year of a new investment property.

Photo: Julien Dumont/ Flickr

“[That way] when you pass it on to a property manager, and they call you [about a house issue], you’ll understand if it makes sense or doesn’t make sense,” he says. “If you haven’t done it by experience, somebody can call you and can come up with explanations that don’t necessarily make sense — it might not need any repairs.”

Naji also recommends building a team of professionals that specialize in residential investments. Your accountant, repair person or real estate agent, he says, should have knowledge of landlording in order to fully understand your needs.

Know it like the back of your hand

Legal jargon may be a dry read, but understanding tenancy laws in-depth before you become a landlord could save you a whole lot of trouble down the road.

“Usually we meet landlords once they’ve rented and they’re in trouble,” says Wankiewicz. “If they were to do the front-end research and understand what they’re getting into before they rent, I think they’d be better off.”

Wankiewicz has seen every kind of problem come through the LSHC office: tenants that default on rent; pets that suddenly appear unannounced; damage to the property; and tenants that decided to move their whole extended family into the unit. Whatever the issue may be, Wankiewicz explains that landlords who familiarize themselves with the provincial landlord and tenancy laws beforehand have a better understanding of what their rights are. For instance, she still encounters landlords who haven’t fully read Ontario’s Residential Tenancies Actand don’t understand that the law equally applies to both high-rise and second suite rentals.

“Landlords are surprised because they think that [because] they’re renting in their home and they’re the king of the castle. That’s not the case. They’re subject to the same legislation as if it were a high rise rental,” she says.

Photo: James Bombales

If a tenancy isn’t working out and an eviction is required, Wankiewicz warns that the process isn’t a quick fix. If a tenant stops paying rent, a landlord will need to give a termination notice and apply for a court hearing to the Landlord and Tenant Board as soon as possible.

“What we are seeing now is that it’s taking anywhere from four to six months for a landlord to terminate the tenancy and recover possession of the rental unit,” she says.

The price is right

Buying a house ain’t cheap, nor is saving for a downpayment, so you’ll want to ensure that you can get a return on your first investment property, and it starts with picking the right rental unit.

Naji says to follow the money — wherever there’s construction for a master-planned community or an injection of government funding into infrastructure, there will be a demand for rental housing. Highlights of a specific neighbourhood — proximity to transit, a family-friendly community, lots of amenities — will entice tenants over more space. As Naji explains, buying the largest rental unit on the market might allow you to charge slightly higher rent, but it will cost you more to purchase.

Photo: James Bombales

“If you’re buying the largest two-bedroom, two-bathroom condo, it’s not necessarily the best idea because the tenants are not going to pay more rent,” explains Naji. “They might pay a little more rent, but not enough to justify the additional cost of acquisition for that larger, or extra large, unit.”

Instead of focusing on big bedrooms and living areas, Naji says to look for smaller spaces with appealing characteristics. Tenants are feature focused; they’ll value better appliances or a shorter commute time over a bigger kitchen. A semi-detached could bring you in the same amount of money as a fully-detached home with the same number of bedrooms, but will cost you less to buy.

“It might be a little bit smaller, but your cost of acquisition is less, and the numbers are going the be in your favour because your rent is going to be pretty much the same with a lower purchase price,” he says.

When pricing your rental unit, Naji says to compare current neighbourhood rental prices with seasonal demand to determine the right price.

Meet and greet

With a tenant living on your property, you’ll get to know all of their quirks very quickly. Some landlords aren’t prepared for the extra smells, sounds and interesting habits on display that go hand in hand with having a tenant.

“Landlords in a smaller situation, were they’re renting part of their home, they become consumed with tenant behaviour, like if the tenant has an overnight guest and, ‘They didn’t tell me’, ‘The tenant’s taking too many showers’, or ‘The tenant’s leaving the lights on’, or ‘They brought in a pet and I didn’t approve a pet’— issues like that, small-living landlords are unprepared for,” says Wankiewicz.

The landlord-tenant relationship can sometimes be a rocky one. Wankiewicz emphasizes that in addition to good communication and responding to issues quickly, landlords need to conduct a comprehensive screening process to find a trustworthy tenant. She advises that going off face-value alone won’t provide enough information about a person. Using a rental application, speaking to references and checking a tenant applicant’s credit score are good methods to finding a quality tenant.

“So many times the small landlord will just make their decision on how their tenant appears, but they need to dig in and check with previous landlords, not just where they’re living now, but where they lived prior to that, because that’s where they’re going to get accurate information about what their behaviour was like,” says Wankiewicz.

Naji likes to take a personal approach to rental applications; he strongly recommends meeting prospective tenants in-person not only to check for that gut-feeling, but to get to know the person.

“At the end of the day, this is a people business. You’re renting your property to a person or a couple. It’s good to meet them, get to know who they are.”

Source: Livabl.com –  

Tagged , , , , , ,

The 7 Most Common Mistakes Home Buyers Make

 

1
Not Getting Pre-Approved Before You Shop

The more experience you have with buying real estate, the more you’ll learn about the complicated process. Between the confusing terminology and the logistics of buying a house, it’s all-too-easy to make the wrong move or wind up in an unwise investment. If you’re a first-time home buyer, skip the buyer’s remorse by learning about some of the most common pitfalls and how to avoid them. To find out what not to do, we reached out to Tracie Rigione and Vicki Ihlefeldthis link opens in a new tab, Vice Presidents of Sales at Al Filippone Associates/William Raveis Real Estate in Fairfield, Connecticut, to get their best advice.

Tagged , , , ,

Down Payment Assistance Programs Across Canada

Canadian down payment assistance programs help first-time home buyersSo many young people want to build home equity and get out from under their landlord’s thumb.

But they can’t. They don’t have the down payment to qualify for a mortgage.

For many modest-income Canadians, saving up the 5 percent minimum down payment (or 20 percent if you want to avoid CMHC insurance) can take years—many, many years.

While some are able to rely on gifts from parents/family (39% of first-time buyers according to a 2018 Mortgage Professionals Canada study) or loans from family (25%), or RRSP withdrawals (38%) to make their down payment, those options aren’t available to everyone.

That’s where government down payment programs come in. Scattered across Canada, these little-publicized municipal and provincial programs are helping first-time home buyers fund their down payments and make the transition from renter to owner.

Since most people don’t know about them, their uptake is typically low. When the B.C. government launched its program in 2017, for example, it thought 42,000 residents would participate in the first three years. After nine months, only 1,400 had done so.

To some onlookers, giving buyers government money to buy a house may seem a bit too socialist, but municipalities have an interest in transitioning financially stable renters from apartments to houses. Among other reasons, it frees up rental units and grows their property tax base.

To help homebuyers find such assistance, the Spy has rounded up some of the more popular programs. What follows are grant or loan programs that provide a portion of the down payment to qualified borrowers. Note that this list isn’t exhaustive and that the status of these programs change regularly. Moreover, once quotas are reached many such programs end, so contact the source for the latest info.

 

Alberta

Program: PEAK Housing Initiatives (formerly PEAK Program)
Provider: Joint initiative between Trico Residential, the Government of Alberta Municipal Affairs, CMHC and Habitat for Humanity
Details: PEAK housing units are priced at market value and recipients must be able to qualify for and hold a mortgage. Once approved for the program, PEAK provides a second mortgage for either a partial or full down payment up to a maximum of 5 percent of the purchase price. PEAK has so far helped 111 individuals and families purchase a home of their own.
How to apply: http://www.peakinitiative.ca/

Program: Attainable Homes (specific to Calgary only)
Provider: The City of Calgary
Details: This program has been in place since 2009 and is geared towards moderate-income Calgarians. Successful applicants must be able to contribute $2,000 towards the downpayment of their home, and the Attainable Homes program contributes the rest.  If and when the homeowner sells the home, the growth in the home’s value is split between the homeowner and the program, with that money reinvested to assist other homebuyers. The longer the homeowner remains in the house, the more their share of the appreciation increases.
How to apply: https://attainyourhome.com/

 

British Columbia

The province of B.C. ended its Home Owner Mortgage and Equity Partnership on March 31, 2018. It has no widely available down payment assistance programs at this time.

 

Manitoba

Program: Rural Homeownership Program
Provider: Manitoba Housing
Details: This program is limited to those renting a home owned by Manitoba Housing in selected rural communities or those who would like to purchase a vacant home owned by Manitoba Housing. Applicants must have a maximum household income of $53,441 if they don’t have children, and $71,255 if there are children or dependents. The program has two components, a loan worth 10 percent of the purchase price, which is forgivable on a pro-rata basis over five years. Another 15 percent loan is forgivable after 15 years of continuous ownership and occupancy of the property.
How to apply: http://www.gov.mb.ca/housing/progs/homeownership.html

 

Saskatchewan

Program: 3% Down Payment Assistance Program
Provider: National Affordable Housing Corporation
Details: Provides Saskatchewan homebuyers with a 3 percent non-repayable down payment assistance grant towards the purchase of a home from one of the NAHC’s partner housing providers. Saskatchewan households with incomes less than $90,000 per year are eligible for financial support under this program.
How to apply: http://nahcorp.ca/assistance/nahc-3-down-payment-assistance-program/

Program: Mortgage Flexibilities Support Program
Provider: City of Saskatoon, CMHC and the Saskatchewan Housing Corporation
Details: This program is for designated projects in the city of Saskatoon and provides qualifying homebuyers with a 5 percent down payment grant for the purchase of a home. The household income limit must be less than $69,975 for one person and $74,640 for two people. Their maximum net worth must also be less than $25,000.
How to apply: https://www.saskatoon.ca/services-residents/housing-property/incentives-homebuyers

 

New Brunswick

Program: Home Ownership Program
Provider: Government of New Brunswick
Details: This program offers assistance in the form of a repayable loan worth up to 40 percent of the purchase price of an existing home, or a maximum of $75,000 for new builds. It’s available to those with household incomes below $40,000. Applicants must be first-time homebuyers or be living in a sub-standard housing unit; have been living in New Brunswick for at least one year prior to application; and have a good credit rating and meet all financial institution lending requirements for obtaining a first mortgage.
How to apply:http://www2.gnb.ca/content/gnb/en/services/services_renderer.8315.Home_Ownership_Program.html

 

Newfoundland & Labrador

Program: Home Purchase Program (HPP)
Provider: Government of Newfoundland and Labrador
Details: This program will remain open over 2018/19 until funding has been fully committed to up to 330 homebuyers. Grants of $3,000 are available to qualifying individuals and families to assist with the down payment of a new home valued up to $400,000 (including HST).
How to apply: http://www.nlhc.nf.ca/programs/programsHpp.html

 

Nova Scotia

Program: Down Payment Assistance Program
Provider:
 Housing Nova Scotia (Government of Nova Scotia)
Details: This is a pilot program to assist Nova Scotians with a household income of $75k or less. The program offers an interest-free loan of up to 5 percent, to a maximum purchase price of $280,000 in the Halifax Regional Municipality and $150,000 elsewhere in the province. The loans will range from $7,500-$14,000 and must be repaid in 10 years. More than 150 first-time buyers benefitted from the program in its first year, and it will remain open until March 31, 2019.
How to apply: https://housing.novascotia.ca/downpayment

 

Ontario

Housing programs in Ontario are administered by municipalities based on the premise that they know their community’s needs best. Below is a selection of just several first-time homeowner assistance programs from some key municipalities.

Barrie (Simcoe County)

Program: Homeownership Program
Details: This program offers 10 percent down payment assistance in the form of a forgivable loan.
There is presently a waiting list, but applicants are still encouraged to apply. A percentage of available funding is designated for applicants currently living in Social Housing or those who self-identify as Aboriginal households.
More details: http://www.simcoe.ca/dpt/sh/apply-for-the-homeownership-program

Hamilton

Program: Homeownership Down Payment Assistance Program
Details: This program provides support to low- and moderate-income residents who qualify for a mortgage with a maximum home price of $375,000. To qualify, applicants must have a maximum household income of $80,000,
More details: https://www.hamilton.ca/social-services/housing/homeownership-down-payment-assistance-program

Kitchener (Region of Waterloo)

Program: Affordable Home Ownership program
Details: This program provides individuals and families with a loan of up to five percent of the purchase price of a home (up to a value of $386,000). Applicants must currently renting in the Region of Waterloo, be able to qualify for a mortgage, and have a maximum household income of $90,500.
More details: https://www.regionofwaterloo.ca/en/living-here/funding-to-help-buy-a-home.aspx

 

Prince Edward Island

Program: Down Payment Assistance Program
Provider: Government of Prince Edward Island
Details: This program assists Prince Edward Islander’s with modest incomes by providing a repayable loan of up to five percent of the purchase price of a new or existing home to a maximum price of $11,250. The loan amount must go towards the down payment and not towards financing or other closing costs. The loan bears a fixed interest rate of 5% per annum. The purchase price of the home must be no more than $225,000.
How to apply: https://www.princeedwardisland.ca/en/information/finance-pei/down-payment-assistance-program

 

Quebec

Program: Accès Condos
Provider:
 Société d’habitation et de développement de Montréal (SHDM)
Details: Launched in 2005 by the SHDM, Accès Condos has provided more than 3,600 affordable units that promote home ownership throughout Montreal. Qualifying buyers must make a minimum $1,000 deposit and receive a 10% purchase credit, which is used for the down payment on the house in an approved development.
How to apply: https://accescondos.org/en/

 

financial support

National Non-Loan Programs

First-Time Home Buyers’ (FTHB) Tax Credit

Provider: Government of Canada
Details: The FTHB Tax Credit offers a $5,000 non-refundable income tax credit amount on a qualifying home acquired after January 27, 2009. For an eligible individual, the credit will provide up to $750 in federal tax relief.
Link: http://www.cra-arc.gc.ca/gncy/bdgt/2009/fqhbtc-eng.html

 

Home Buyers’ Plan (HBP)

Provider: Government of Canada
Details: The Home Buyers’ Plan (HBP) is a program that allows you to withdraw up to $25,000 in a calendar year from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability.
Link: http://www.cra-arc.gc.ca/hbp/

 

GST/HST New Housing Rebate

Provider: Government of Canada
Details: You may qualify for a rebate of part of the GST or HST that you paid on the purchase price or cost of building your new house, on the cost of substantially renovating or building a major addition onto your existing house, or on converting a non-residential property into a house.
Link: http://www.cra-arc.gc.ca/E/pub/gp/rc4028/rc4028-e.html

Source: RateSpy.com – By  on November 26, 2018

Tagged , , , , , , , ,