Category Archives: home ownership

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

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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 –

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Ownership: Joint tenancy, tenants in common and more

Source: MoneySense.ca – by 

Consider alternative ownership options when buying a home

As housing affordability recedes in the rearview mirror of Canada’s fast moving real estate market, it’s time to look at different housing ownership options.

Freehold interest

The term freehold is synonymous with ownership of a property. In a freehold interest, the owner has full use and control of the land and buildings on the property, subject to governmental rights as well as local by-laws.

Leasehold interest

When purchasing a leasehold interest, you are really purchasing the rights and ownership of a building or structure but not the rights or ownership of the land the property sits on. Homes built on Native Canadian or Crown land fall into this categories. Examples of this type of ownership can be found scattered throughout the Greater Vancouver Area.

While leasehold ownership can make owning your home far more affordable there are a number of factors to consider. For instance, you’ll want to determine whether or not the land-owner will more than likely renew the lease once the term expires? Also, if you do decide to vacate the land, does the contract allow you to move the building or must you relinquish all rights? You’ll also want to pay attention to whether or not the lease is fixed or variable. Just like mortgages, a fixed lease means the terms are locked in for the duration for the lease. So, if a leasehold is for 99 years, you or your heirs will not have to go through a review or renewal of the lease until 99 years have passed. A variable lease, on the other hand, will have periodic reviews within the leasehold agreement—the standards is once every 33 years on a 99-year lease.

You can buy a new leasehold contract or you can assume ownership of an existing one. For instance, a seller could list their 99-year leasehold for sale after living in the home for 20 years. This means you would be buying the lease and allowed to live in the home for the remaining 79 years.

Keep in mind, though, that it’s harder to find a lender that will offer a mortgage for this type of ownership—although, credit unions have historically offered favourable rates for leasehold interests.

Co-ownership

If you decide to purchase a property with friends or family this is informal co-ownership—an agreement of responsibility and use must be agreed upon by all those involved. Or you can buy into a co-operative, which is a formalized co-ownership of a building where you have exclusive use and rights to a specific unit.

If you are buying with family and friends you’ll want to pay attention to the type of ownership, and the are two basic types: joint tenancy and tenancy in common.

Joint tenancy is common for anyone purchasing with a spouse or partner. In this type of tenancy, when one of you dies the other becomes the sole owner. That’s because the entire ownership transfers to the surviving owner, without having to go through probate, under joint tenancy. That means neither owner can leave their portion of the property to a third party in their will.

Tenancy in common, however, is where each owner may have equal or different ownership shares in the property. As a result, one party may sell her share without the permission of others. In this type of co-ownership, there can be more than two owners, and the owners may sell their portion of the property to anyone, unless stipulations or restrictions are built into the ownership contract.

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Liberal budget released: These are the housing related promises

Liberal budget released: These are the housing related promises

Cities and affordable housing providers will find themselves with $11.2 billion more to spend on new and existing units over the coming decade, as part of the federal government’s multi-pronged push to help people find homes.

Of that money, which comes from the government’s social infrastructure fund, $5 billion will be allotted to encourage housing providers to pool resources with private partners and to allow the Canada Mortgage and Housing Corp., to provide more direct loans to cities.

The funding falls short of the $12.6 billion the mayors of Canada’s biggest cities requested last year and Wednesday’s federal budget shows that the majority of the $11.2 billion isn’t slated to be spent until after 2022.

Over the next 11 years, the Liberals pledged $202 million to free up more federal land for affordable housing projects, $300 million for housing in the North and $225 million to support programs that provide units to indigenous peoples off reserve.

The money, coupled with $2.1 billion for homelessness initiatives over the next 11 years, sets the financial backbone for the Liberals’ promised national housing strategy that will be released in the coming months. The document will outline how the government plans to help people find affordable housing that meets their needs, and ensure a robust emergency shelter and transitional housing system for those who need it.

Finance Minister Bill Morneau told reporters the spending will make a difference for those who rely on social housing. He said the Liberals want to ensure cities can access funds as quickly as possible to make necessary investments in the country’s stock of aging affordable housing.

Liberal budget released: These are the housing related promises

The details are among many laid out in the budget, which outlines how the government plans to spend the $81 billion it is making available between now and 2028 to address future infrastructure needs and, the government hopes, boost the economy to create new jobs and government revenues.

It also gives $39.9 million over five years for Statistics Canada to create a national database of every property in Canada. This will include up-to-date information on sales, the degree of foreign ownership and homeowner demographics and finances to answer lingering questions about the skyrocketing cost of housing that may squeeze middle-class buyers out of the market.

The Liberals clearly see a need to attract private investors to help pay for infrastructure projects, including affordable housing, given the federal government’s tight fiscal position.

At the centre of that push is a proposed new infrastructure bank that would use public dollars to leverage private investment in three key areas: trade corridors, green infrastructure and public transit.

The government is setting aside $15 billion in cash for the bank, split evenly between each of the aforementioned funding streams, with spending set to start as early as the next fiscal year on projects based on budget projections.

Morneau said that the government wants to have the bank up and running this year, including having some projects that will be identified for investors.

But the budget document again projects that the majority of the bank’s spending won’t happen until after 2022. And in the case of trade corridor infrastructure, spending isn’t expected to start until 2020, even though some experts argue this stream would give the country the biggest economic bump.

The Liberals are also tweaking how much of the bill it will cover for municipal projects under the second phase of its infrastructure plan in order to nudge provinces to pony up more money for work and to prod cities to consider using the bank for projects that could generate revenue, like transit systems.

The government will cover up to 40 per cent of municipal projects under the upcoming phase of its infrastructure plan, 50 per cent for provincial projects and 75 per cent for indigenous projects.

Source:  The Canadian Press 22 Mar 2017

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New down payment guidelines may be in the works

The Department of Finance is reportedly recommending tougher down payment requirements, and initial broker reaction may be softer than expected.

“These changes won’t make a huge difference; we need to stabilize the economy, especially the housing market, and this would help,” Jerry Brar, principal broker with Jerry Brar Mortgages, told MortgageBrokerNews.ca. “These changes would eradicate buyers who shouldn’t qualify.”

Brar also argues the changes will help keep home prices in check, which he says the market needs.

Originally reported by Canadian Mortgage Trends — citing a “high-level lender source connected to the DoF, who declined to be identified” – the Department reportedly may recommend a graduated down payment scale that could be structured like this:

  • Homes costing $0 to $500,000 would require at least 5% down
  • Homes costing $501,000 to $700,000 would requires at least 7% down
  • Homes over $700,000 would require 10% down

When reached for comment, the Department of Finance said it does not comment or speculate on possible policy actions, or discuss anything that might be under consideration.

“The Government continuously monitors the housing market and regularly reviews the merit of actions to support the long-term stability of Canada’s housing market and financial system,” the Department wrote in an email to MortgageBrokerNews.ca. “Mortgage insurance rules have been adjusted in the past to protect Canadian families who hold wealth in their homes, and Canadian taxpayers, who support home ownership through government-backed mortgage insurance.”

If it does come to pass, the new guidelines may be more welcome among brokers than previous rule changes.

“I don’t think it’s an overreaching policy and I don’t think it would hinder business,” Kevin Gillis, a mortgage consultant with Cameron Financial Consultants, told MortgageBrokerNews.ca. “Buyers looking for houses over $500,000 usually have higher incomes and can handle the higher down payments; forcing them to do so will help protect them financially.”

Source: MortgageBrokerNews.ca Justin da Rosa | 03 Dec 2015

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New Condominium Market Snapshot

Toronto

-1.97% month/month
Montreal

-0.24% month/month
Ottawa

+0.07 month/month
Source: BuzzBuzzHome 
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Buying a House Together Before Marriage? Read This First

house keys in a ring box

Love may be blind, but don’t go into a real estate purchase with your eyes closed.

Serious young couples used to mark their commitment to each other with an engagement ring, but now they’re in the market for a bigger asset: a set of shiny new house keys.

One in four couples between the ages of 18 and 34 bought a house together before they were married, according to a study by Coldwell Banker Real Estate. MONEY found in our own poll of 500 millennials’ financial attitudes that 40% think it’s a good idea for a couple to buy a home together before marriage, while 37% think the purchase should take place prior to the wedding.

Low-rate mortgages, rising rental costs, and the ability to deduct mortgage interest from income taxes all make being a homeowner now rather than later seem like an attractive option. And while making that move first can work out well, as it did for Seattle couple Katy Klein and Charles Hagman, not every story has that same happy ending.

In fact, many financial planners advise against it. That’s because buying a home is often the biggest and most financially complicated move a couple makes, and unwinding it can be especially difficult for unmarried partners if the relationship ends. So if you’re buying a home with your beloved before getting hitched, spare yourself any potential financial heartbreak by following these tips.

Compare Credit Scores

You and your partner have probably already shared details about your income and savings when determining if you could afford to buy. But another piece of information you’ll need to share well in advance of closing is your credit report.

“If a couple is entering into a business deal, which is what a home purchase between two non-married people is, they should know the creditworthiness of their business partner. A person’s credit score will impact your ability to obtain a mortgage and the interest rate you will pay,” says Pewaukee, Wisc.-based financial adviser Kevin Reardon.

If you or your mate has a poor score, it could influence how you decide to title the property and who takes responsibility for the loan. Married couples are generally viewed by creditors as a single unit, but unmarried couples are assessed as individuals, even if applying for the loan together.

“This can work to your advantage if you have the person with stronger credit purchase the home,” says Sandra O’Connor, regional vice president with the National Association of Realtors. By eliminating the poorer score from consideration, you can secure better rates. On the flip side, with only one person applying for the loan, and thus one income on record, the amount you qualify for could be lower than what you could get with two incomes. And, of course, only one person’s name will be on the loan and deed, leaving the other partner vulnerable in the event of a breakup.

Open a Joint Account

Consider setting up a joint bank account, if you don’t already have one, that can be used to pay the mortgage, property taxes, insurance, and maintenance, Reardon suggests. Each of you can set up automatic monthly deposits into the account from individual bank accounts; this way neither party can forget. You can further simplify bill paying and budget tracking by having home expenses automatically deducted from the account each month.

Decide How to Manage Costs

When you cosign on a mortgage, you are 100% liable for the debt, which means if the relationship turns sour and your partner stops paying, you must assume the entire obligation. For this reason, financial planner Alan Moore, co-founder of the XY Planning Network, recommends choosing a home with a mortgage you can swing on one income. That can also be a huge help down the road in the event of unexpected illness or injury, since you’ll still be able to afford the monthly payments.

Before setting a housing budget, both partners need to have an honest conversation about the amount of debt they’re comfortable living with. Just because you can borrow the maximum amount doesn’t mean it’s a good idea. Stretch your combined budget too far, and any unexpected expense will likely have one of you coming up short when the monthly payments are due.

Put Your Agreement in Writing

Contact a real estate lawyer to prepare a written document, such as a property, partnership, or cohabitation agreement, that clearly outlines the full details of your arrangement, including what percentage of the home’s equity each partner is entitled to, especially if you contributed different sums to the down payment or mortgage balance, and what will happen to the property if you split up.

“The contract should specify whose name will be on the deed or lease, one or both, who will pay for what—I pay the utility bill, you pay the cable bill—etc.,” says Reardon. “It would be productive to note what happens if one party can’t pay. Will both parties move out? Will one party take over the payments for the other, if they are able to, then create a note receivable from the partner who can’t pay to the partner who can? Will this note be collateralized? It’s great to iron out these details in advance because it removes any doubt or emotions in the event things turn out badly.”

Title It Right

You and your partner must decide how you will own the home or take title. You have three options: One person can hold the title as sole owner, both of you can hold title as “joint tenants,” or you can share title as “tenants in common.”

Typically, you would want both parties to hold title, as putting the property in only one partner’s name leaves the other partner without equity in his own investment. (You’ll certainly want that separate written contract mentioned above if you go this route.)

If both partners sign the title as tenants in common, then each owns a specified percentage of the property. One person may own a 60% interest, while the other owns 40%, for example. This split is specified in the deed. If one partner dies, ownership will not automatically transfer to the other homeowner unless that person is named in the will; instead the deceased owner’s heirs will inherit his or her share.

When you hold title as joint tenants with right of survivorship, you are considered equal owners, and if one of you were to die, the other would automatically inherit the other’s stake and own the entire property.

Bottom line: No matter how you hold title, it is important that you and your partner enter this agreement with a complete picture of each other’s finances and a written contract outlining your desires for the property’s division should the relationship end.

Source: Time.com  July 1, 2015