Tag Archives: new to canada

How housing is helping immigrant families close the wealth gap

Housing is more than just an asset class. Homeownership provides shelter and the opportunity to grow equity over time.Lars Hagberg/The Canadian Press

The recent slump in real estate sales and prices in Canada has led some to question whether housing remains a good investment. For immigrant families in Canada, the stakes may be particularly high.

That’s because new research from Statistics Canada shows that investment in housing by immigrant families has been a major factor in helping them plug the wealth gap that exists between them and their Canadian-born compatriots.

Whereas the study found wealth growth for Canadian-born families has in recent years been driven both by increases in housing and registered pension plan assets, for immigrant families, housing alone has been the primary driver of wealth growth.

René Morissette, a senior economist with Statistics Canada, in a report released this week used data from several waves of the Survey of Financial Security to compare the wealth growth of immigrant and Canadian-born families. The designation of a family being immigrant or otherwise was based on the immigration status of the major income earner.

 

The report generated synthetic cohorts in order to compare similarly structured immigrant and Canadian-born families over time. The benchmark cohort comprised recent immigrant families whose primary income earner in 1999 was 25 to 44 years old and had been in Canada for fewer than 10 years. The other cohort comprised established immigrant families whose primary income earner in 2016 was 42 to 61 years old (on average 17 years older relative to 1999) and had been in Canada for 18 to 26 years. The comparable Canadian-born cohorts were of the same relative age groups.

Interestingly, while immigrant families started at lower rates of home ownership in 1999, by 2016 the homeownership rates between comparable immigrant and Canadian-born families converged.

On average, 31 per cent of the benchmark cohort of recent immigrant families in 1999 owned a principal residence compared to 56 per cent of comparable Canadian-born families. By 2016, established immigrant families led by a primary earner of 42 to 61 years of age reported a homeownership rate of 78.7 per cent compared to 74 per cent for their Canadian-born counterparts.

A key finding of the report is how the immigrant families caught up to their Canadian-born counterparts in growing wealth over time. In 1999, the median wealth of Canadian-born families with the major income earner aged 25 to 44 years old was 3.25 times higher than that of comparable recent immigrant families. However, when the two synthetic cohorts were compared 17 years later, the difference in median wealth between the immigrant and Canadian-born families almost disappeared.

Canadian-born and immigrant families relied on different asset classes for wealth growth. The wealth composition of families in 2016 revealed that housing equity explained about one-third of the average wealth of Canadian-born families. By comparison, housing equity was responsible for a much larger share of immigrant families’ wealth, accounting for anywhere between one-half to two-thirds.

The wealth growth observed for immigrant families has a side story of high indebtedness. The report found that in 2016, immigrant families, in general, had “markedly higher debt-to-income ratios than their Canadian-born counterparts.”

Immigrant families often, but not always, are larger in size. This is partly because immigrants are more likely to live in multi-generational households or to have siblings and their respective families occupy the same dwelling.

The unit of analysis in Statistics Canada’s report is economic family, which “consists of a group of two or more people who live in the same dwelling and are related to each other by blood, marriage, common law or adoption.” An economic family may comprise of more than one census family.

The expected differences in family size and structure between immigrants and Canadian-born families could have influenced some findings in the report. For example, the family wealth held in housing by immigrant families might lose its significance when wealth growth is compared at a per capita basis.

Housing is more than just an asset class. Homeownership provides shelter and the opportunity to grow equity over time. Canadian data shows that rising home prices over the past two decades has helped immigrants bridge the wealth gap even when the gap between the average incomes of immigrants and Canadian-born has persisted.

Source; The Financial Post – Murtaza Haider is an associate professor at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at www.hmbulletin.com.

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A first-time homebuyer’s guide to Canadian government programs and incentives

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Photos: James Bombales

Whether you want to stop paying skyrocketing rental rates, start building equity, or own property that can be passed down to your children, purchasing a home is likely a long-term goal of yours. However, with rising home costs and the mortgage stress test introduced in 2018, achieving that goal can be a challenge for many Canadians. Fortunately, there are a number of programs and incentives offered by the federal government that first-time homebuyers can apply for.

“First-time homebuyers in Canada have the opportunity to take advantage of some great federal government programs to assist them when purchasing their first home,” says Michael Therriault, Financial Advisor at Scotiabank. “They can apply for multiple programs as long as they are eligible, so it is strongly recommended for potential first-time homebuyers to meet with a financial advisor at their bank to go over their individual circumstances and to help determine the best program(s) for them.”

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1. Home Buyer’s Plan

Early withdrawals from an RRSP are usually considered taxable income, but with the Government Home Buyer’s Plan, you can apply your RRSP savings toward the price of your home — tax free.

“The Home Buyer’s Plan (HBP) is a program that allows you to withdraw up to $25,000 ($50,000 per couple) 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,” says Olga Coulter, Senior Account Manager at the Canada Mortgage and Housing Corporation (CMHC). “To be eligible, you must be a first-time homebuyer (ie. you haven’t purchased a home or lived in a spouse’s home within the last four years) and have a written agreement to buy or build a qualifying home for yourself or for a related person with a disability.”

However, it’s important to note that that these funds must have been in your account for at least 90 days before the purchase of your home and they do have to be paid back within a 15-year timeframe. “Essentially, you are ‘borrowing’ these funds from your RRSP as they need to be repaid over a 15-year period beginning the second calendar year after the withdrawal,” adds Therriault.

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2. First-Time Home Buyers’ Tax Credit

Introduced in 2009, the First-Time Home Buyers’ (FTHB) Tax Credit helps to make purchasing a home more affordable by allowing Canadians to claim a portion of their home purchase on their personal tax return that same year. This helps to offset expenses like legal fees, home inspections and other closing costs.

“The FTHB Tax Credit offers a $5,000 non-refundable income tax credit amount on a qualifying home acquired after January 27, 2009,” says Coulter. “For an eligible individual, the credit will provide up to $750 in federal tax relief.”

To be eligible, you, your spouse or common-law partner must have acquired a qualifying home (a unit located in Canada purchased after January 27, 2009) and cannot have lived in another home you or your partner owned in the year of acquisition or in any of the four preceding years.

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3. GST/HST New Housing Rebate

If you are purchasing a new construction home, performing substantial renovations to an existing home, or rebuilding a home that was destroyed by fire, you will want to apply for the GST/HST New Housing Rebate. Filling in this form can save you thousands of dollars, as it recovers a portion of the goods and services tax (GST) or the federal part of the harmonized sales tax (HST) if all eligibility conditions are met.

“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, or on converting a non-residential property into a house,” explains Coulter. “You may also be eligible if you are doing substantial renovations or have hired someone to complete substantial renovations to an existing home, such as an addition.”

CMHC Mortgage Loan Insurance Programs

In addition to tax-related programs, first-time homebuyers have access to several CMHC Mortgage Loan Insurance Programs that can help them achieve the dream of homeownership. Listed below, these programs offer flexible terms and conditions to meet a variety of financing needs and are available throughout the country.

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4. CMHC Purchase

While it’s ideal to put at least 20 percent down, home prices in cities throughout Canada are rising faster than many homebuyers can save. “CMHC Purchase can help open the doors to homeownership by enabling homebuyers to buy a home with a minimum down payment of 5 percent,” says Coulter. “The premiums can either be paid up front in a lump sum or incorporated into an applicant’s mortgage loan payments.”

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5. CMHC Improvement

With such tight housing markets throughout the country, homebuyers may be interested in purchasing a fixer-upper that needs a little TLC. “CMHC Improvement allows the purchase of an existing residential property with improvements and new construction financing,” explains Coulter. “Features include flexible financing options with the option for CMHC to manage up to four advances at no cost to the borrower.”

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6. CMHC Newcomers

Obtaining a mortgage can be especially difficult for newcomers to Canada. If you’re a permanent resident with a strong credit rating you may be able to qualify for a typical bank mortgage, however, if you don’t meet all the criteria, the CMHC Newcomers program can help.

“We have helped newcomers with permanent resident status become homeowners with a minimum down payment starting at 5 percent – regardless of how long they have been in Canada,” says Coulter. “Non-permanent residents can also purchase a home with a minimum down payment of 10 percent of the value of the home.”

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7. CMHC Self-Employed

Homebuyers who are self-employed may have difficulty qualifying for a mortgage given that their monthly income may be less predictable. CMHC’s Self-Employed program allows business owners with proper documentation to access mortgage loan insurance under the same criteria and insurance premiums as those with more calculable income.

“Self-employed Canadians make up about 15 percent of Canada’s labour force,” says Coulter. “CMHC facilitates access to mortgage loan insurance for business owners by providing enhanced flexibility for satisfying income and employment requirements for all self-employed borrowers at no additional cost.”

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8. CMHC Green Home

“CMHC Green Home encourages homebuyers to choose more energy-efficient housing options to increase comfort and healthier living, while reducing greenhouse gas emissions,” says Coulter. “The program offers a partial premium refund of up to 25 percent directly to borrowers who either buy, build or renovate a home to make it more energy-efficient using CMHC insured financing.”

The amount of the refund varies depending on the level of energy-efficiency achieved by your home as assessed by Natural Resource Canada (NRCan). Condo buyers are also eligible for the CMHC Green Home refund if the building is built to the LEED Canada New Construction standard.

Source: Livabl.com –  

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New Canadians’ Mortgage Guide

Starting a new life in Canada? Buying your first home is one of the best ways to put down roots and establish yourself in your new country. According to Genworth Canada’s 2017 First-Time Homeownership Study, a full 19% of first-time homebuyers were born outside of Canada, 10% of whom arrived in the past decade. Wondering how to start your journey to homeownership? Read on for our New Canadians’ Mortgage Guide.

Step 1: Study your options

Responsible homeownership is about buying a home you can afford, so for starters, take a look at our library of articles about affordability. Read up on topics such as how to choose the right home for your budget and learn about financing options for new Canadians.

Genworth Canada’s New to Canada program can help you buy your first home with a down payment of as little as 5%. See how it works in this short video.

Share the knowledge with your family, too. Our New to Canada microsite offers content in Chinese, Punjabi, Korean, Spanish and French.

Step 2: Establish credit history in Canada

Banks and other lenders look at your credit score to determine your level of financial responsibility. Your credit score is determined by your financial behaviour: Do you pay your monthly bills (including cell phone) on time, or have you skipped payments? Do you have credit cards or lines of credit, and if so, how much do you have left to access?

TIPS: Never skip a payment (always pay at least the minimum),  and keep your credit utilization– the amount of your credit limit that you actually use–low. Don’t carry a balance over 30% of your credit limit; the lower the better.

The better your credit score, the more likely you are to be approved for a mortgage – and at a more favourable interest rate.

Because your Canadian credit history starts in Canada (foreign credit history isn’t taken into consideration by lenders), it’s important to establish positive patterns as soon as possible:

  • Open a savings or chequing account at a Canadian bank or credit union, and use it for your payroll deposits, as well as withdrawals and transfers.
  • Apply for a small loan or credit card. Make some purchases each month, and pay off the balance or make regular payments each month, to prove you are responsible with credit.

Step 3: Build your savings

Use a separate high-interest savings account, investment account or set aside funds in a TFSA (tax-free savings account) to build toward your home down payment. You can purchase a home with as little as 5% down, but in high-demand cities like Vancouver, Calgary and Toronto, a competitive real estate market means it can take longer to save for an adequate down payment.

TIP: First-time homebuyers can borrow RRSP funds to help towards a down payment under the federal government’s Home Buyers’ Plan.

Check out our Financing hub for an entire section of articles about saving for a down payment, including this video on how to set financial goals.

Step 4: Research neighbourhoods and communities

While you’re saving and working on building your credit history in Canada, take some time to daydream! Checking out neighbourhoods and communities where you might like to live is a great way to stay motivated. It can also help ensure that you have a smooth transition to your new home.

Think about where you’d most like to live. Would you prefer the excitement of a big city, the quiet family vibe of the suburbs, or the natural splendour of the rural countryside?

Research the amenities you’ll need, whether that’s public transportation, walkable communities, schools, places of religious worship, shops and other priorities.

Consider making weekend excursions to potential communities to explore the local amenities. Since Sunday afternoons are a traditional time for open houses, think about scheduling your visits so you can squeeze in a couple of house or condo tours, too.

Step 5: Start assembling your real estate team

Finally, as you get closer to house-hunting time, start building your real estate team. Ask friends, colleagues and neighbours for recommendations on professional REALTORS®, real estate agents, mortgage specialists, real estate lawyers and home inspectors.

It’s important to hire professionals who are familiar with the real estate market in your preferred neighbourhood or community. Interview a few candidates and research customer reviews online, so you can find the right pros to help you embark on your journey to homeownership in Canada. 

Source: Homeownership.ca

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New to Canada? Three tips to start your finances off right

New to Canada? Three tips to start your finances off right

Moving to a new country can be overwhelming but starting your finances off right can make all the difference as you build your new life.

 

As you begin your new life in Canada, here are three tips can get you headed in the right direction.

  1. Connect with resources that can help your family get settled.

There can be so much to do when you arrive in Canada—find a home, a job, schools, a bank—it can be hard to know where to start.

Scotiabank’s Newcomer Handbook gives you quick and easy access to things you need to know as you build a new life here. It’s available for free online and includes advice on:

  • 10 Things You Need to Know About Banking in Canada
  • Top 10 Tips for Settling in More Easily
  • Government Information and Assistance
  • Jobs and Careers
  • Health, Safety and Your Rights
  • Education and Training
  • Entrepreneurship
  • Embassies in Canada

After friends and family, a good place to begin when looking for a job is the Service Canada website as well as online job boards. If you need Canadian work experience, consider volunteering in your community.

The federal government also offers other newcomer support, to help get a language assessment and finding a language class, finding a place to live, signing up kids for school and learning about community services.

Your province is responsible for providing services like health care. All Canadian citizens and permanent residents are eligible for public health insurance, which provides most services free of charge (health care in Canada is paid for through taxes). Information about your province’s health care program is available through the government of Canada website.

  1. Learn how to manage your money.

Building a relationship with a financial advisor at a bank in Canada is an important step in creating your new life. Start by visiting your local branch to open chequing and savings accounts and consider applying for a credit card. Your advisor can help you understand your needs and suggest the products that are right for you and your family. Check out the popular credit cards that the Scotiabank StartRightprogram has to offer. With more rewards than any other bank, you’ll be sure to find a card that meets your needs and rewards you in the process.

A credit card not only lets you charge purchases rather than pay cash, it also helps you establish a credit history in Canada. This will be crucial when you need to get a loan to start a business or buy a home. Banks learn a lot about your financial health by accessing your credit history and use it to decide whether they should lend you money.

More important information about credit history:

  • It’s your responsibility to review your credit report and ensure it doesn’t contain any errors
  • Try to pay your bills on time and in full to avoid a negative rating
  • Make sure you understand the terms and conditions
  • Never go over your credit limit
  • Make sure to contact local credit agencies if you need help managing debt
  1. Plan for your future.

Before long, you’ll find that you and your family have settled into your new life in Canada and will start thinking about buying a home or car, putting money aside for your children’s education and investing for your retirement. Having a financial plan is an important element to help you take control of your finances.

One of the first things you can do is evaluate your day-to-day cash flow and think about spending only on things you really need or value. Cutting a few dollars here and there from your daily expenses, even if it’s just $5 a day, can add up to big savings year over year. Where can you start? Cut out your daily luxury coffee, bottles of water, or lunch out once a week. If you saved and invested that daily $5, in 20 years you would have more than $50,000!1

A “Mapping Tomorrow” session with a Scotiabank advisor will go a long way in helping you achieve your unique goals in Canada. Want to learn more? Our expert advisors can offer practical advice and smart solutions to help you have the life you want in Canada.

Source: by Scotiabank  Learn more about Scotiabank’s StartRight Program.

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