Double first-time homebuyer tax rebate and other homebuyer incentives

In an effort to help first-time homebuyers—but not hurt the equilibrium of housing markets outside of Toronto—the Ontario Liberal government announced that they’ll double the first-time homebuyers’ maximum Land Transfer Tax refund to $4,000. 

This increased rebate will take effect January 1, 2017 and will mean that eligible homebuyers in Ontario would pay no Land Transfer Tax (LTT) on the first $368,000 of their home’s purchase price.

With the doubled refund, more than half of first-time homebuyers in Ontario would pay no LTT on the purchase of their first home.

Former Ontario Land Transfer Tax Rates:

Home Purchase Price             Tax Rate
Up to $55,000                              0.5%
$55,000 to $250,000                    1.0%
$250,000 to $400,000                  1.5%
Above $400,000                           2.0%

When the price brackets were first created, a $400,000 was considered the starting point for a luxury property. These days, however, a $400,000 home is no longer considered the benchmark for a luxury property in most parts of Ontario.

Under the new “modernized” land transfer rates, buyers of detached or semi-detached homes or condos or townhomes should expect to pay the following:

“Modernized” Ontario Land Transfer Tax Rates

Home Purchase Price             Tax Rate
Up to $55,000                              0.5%
$55,000 to $250,000                    1.0%
$250,000 to $400,000                  1.5%
$400,000 to $2-million                 2.0%
$2-million and over                     2.5%

Keep in mind, however, that buyers of multi-residential buildings (such as triplexes), commercial, industrial or agricultural properties will be required to pay 2% tax rate on any purchase price over $400,000.

Help for renters, too
To help the tight rental market, the Ontario government also announced that it will be freezing the property tax on apartment buildings. While this freeze is in place, government officials will be reviewing how the high property tax burden on these buildings affects rental market affordability.

Current programs to help first-time homebuyers
There are already a few programs in place to help first-time home buyers. These include:

Home Buyer’s Plan
First-time homebuyers have an opportunity to use their RRSP contribution towards a down payment, using the Home Buyer’s Plan (HBP). Under the federal HBP, you can withdraw up to $25,000 from any RRSP account, as long as those savings were deposited more than 90 days before your request to withdraw. Keep in mind, you have to pay back this interest-free loan over a 15-year period and any year you don’t make a payment, that annual sum is added to your income and taxed at your marginal rate. The good news is that couples can withdraw a total of $50,000 combined from their RRSP accounts, which can make a huge contribution towards a down payment. To qualify for the HBP you and your spouse must not have lived in a home owned by either person for the five years prior to using the HBP.

First-Time Homebuyer’s Tax Credit
Homebuyers who have not owned a home within the last four years may be eligible for the first-time homebuyer’s tax credit (HBTC) through the Government of Canada’s Economic Action plan. The credit is based on $5,000 multiplied by the lowest federal income tax rate for that year. For example, the lowest federal income tax rate for 2014 is 15%, so the value of the credit would be $750. You can learn more about the first time homebuyer’s tax credit on the Economic Action Plan website.

Land Transfer Tax (LTT) Refund
As a first-time homebuyer, you can receive a refund from the Ontario government of up to $4,000 of the land transfer tax you paid on your first home, effective January 1, 2017. Previously, the amount was $2000. 
To qualify for this refund, you must be 18 or older, you cannot have previously owned a home or an interest in a home, anywhere in the world. Typically, your lawyer will apply for the fee as you finalize your real estate purchase, but if that doesn’t happen you have 18 months after the registration date of the sale.

GST/HST New Housing Rebate
First-time homebuyers residing in provinces that have combined provincial and federal sales tax, which includes Nova Scotia, New Brunswick, Newfoundland, Ontario, and B.C., are eligible for an HST tax rebate through the federal government.

While rebates and conditions vary from province to province, the program is designed to help with the federal portion of the HST new homebuyers have to pay. You can find out if you’re eligible for an HST New Housing Rebate, as well as all necessary application forms on Service Canada’s website.

Energy Efficient Housing
Finally there’s the Energy Efficient Housing rebates. While not restricted to first-time homebuyers, these rebates can certainly help first-time buyers.

There are a variety of rebates both at the federal and provincial levels. For instance, Genworth offers the Energy-Efficient Housing program. Available across Canada, this rebate provides a partial refund of up to 25% of the Genworth Canada insurance premium, based on the date of application for the mortgage insurance. If you bought a $300,000 home with only 5% down, you would have to pay $10,800 in insurance premiums. Under the Energy-Efficient refund program, you could save $1,620 off those premium rates. For eligibility requirements, see Genworth’s website. The Canada Housing and Mortgage Corporation offers a similar rebate and can apply to a purchase or a renovation.

Source, Moneysense

Posted by Steven Porter. Steven is a licensed Mortgage Agent with Mortgage Architects and retired, licensed, real estate broker with 30 years experience in residential real estate. Certified Reverse Mortgage Specialist (CRMS); Seniors Real Estate Specialist (SRES) and Accredited Buyer Representative (ABR). Steven can be reached at 1-905-875-2582; steven.porter@mtgarc.ca or online at 1800Mortgages.ca

How can mortgage prepayment charges be avoided?

 

You have a number of options available to prepay your mortgage and avoid prepayment charges:

Portability

If you’re selling and buying a new home, your mortgage may have a portability option that allows you to Port your existing mortgage term, outstanding principal balance and maturity date to a new property.

Assumption

If you’re selling your home, the purchaser may have the option of applying to assume your mortgage with the existing terms and conditions on closing.

Open mortgage

Enjoy the flexibility to pay off as much of your mortgage any time without paying a prepayment charge.

Subject to approval and eligibility based the terms of the mortgage.

Contact me to learn more about assuming someone else's CIBC mortgage, or having a potential purchaser assume your CIBC mortgage.

There are also ways to save thousands of dollars in interest payments breaking your mortgage early, paying the discharge penalty, and not being "out of pocket" for the expense.

Steven Porter, Mortgage Advisor - CIBC, 1-888-885-8962, steven@stevenporter.ca

6 Things to Consider Before Applying for Debt Consolidation

For a great many people who happen to be in financial difficulty, debt consolidation might seem to make perfect sense.

If you happen to be one of these people, you will probably be familiar with the claims that debt consolidation is a fast and easy way to get out of debt.

However, it could be the case that you end up in deeper trouble than ever, possibly even losing your home in the process. It is not without good reason that debt consolidation has developed a pretty bad reputation in recent years.

Alleviating Your Financial Problems

In this article we will be exploring how debt consolidation could work for you. Naturally, we will also be exploring some of the pitfalls. Listed below are 8 points that, if carefully heeded, might just be of help in finding a good debt consolidation loan and thereby alleviating your financial problems:

1. Credit Report

If your credit rating has actually improved since taking out the loans, you might well be able to consolidate your loans at a much lower rate. It is for this very reason that you should start by getting your credit report. Study your credit report carefully and keep an eye out for any inaccuracies that might damage your score and prevent you from getting a decent rate.

2. Get Credit Counselling

A reputable credit counselling agency would be able to provide helpful advice, often free or at minimal cost. A good agency would assist you with preparing a budget as a means of getting your finances under control. However, it is extremely important that you exercise caution in this endeavour, as some less than scrupulous credit counselling agencies might attempt to take advantage of your situation.

3. Pay Off Your Debt Quickly

When consolidating your debts, try to pay off the loan as quickly as possible. Reduced monthly payments could merely be the result of your debt being spread over a lengthy period of time, meaning that it could end up costing you far more in the long run. If at all possible, try to get your monthly repayments as high as you are reasonably able to afford in order to clear the debt quickly.

4. Getting the Right Loan

When applying for a debt consolidation loan, be sure that it is the right one for you. You could opt for a home equity loan as a way of keeping the interest rate down, although you should seek advice from your mortgage broker before going down this particular path. Any default on repayment could potentially lead to the loss of your home. A less risky option would be to take out an unsecured loan, although you would be required to pay a significantly higher interest rate.

5. Get Quotes

Before committing yourself to a particular credit consolidation loan do a bit of shopping around first in order to compare interest rates. What you will probably discover is that your own bank or credit union would be prepared to offer the best deals.

6. Read the Loan Contract

This might sound obvious but it is vital that you fully understand every single line of your loan contract before signing on the dotted line. The slightest missed detail could possibly end up costing you a fortune or even your home.

Summary

If you happen to be in serious difficulty, consolidating your credit card debts and high interest loans might seem to make sense. Unfortunately, a great many people end up worse off. By exercising caution and taking stock of your situation, it might be possible to make debt consolidation work for you.

Author: Economic Voice Staff

Black Belt Negotiating for Homebuyers

How would you like to save $10,000 or more off your next house? It's really quite easy if your real estate agent has a black belt in negotiating. The challenge is that most people in general and real estate agents in specific rarely take advantage of the power of bargaining, except on rare occasions when making large purchases like cars and houses. In other countries, like Asia, people there negotiate everything everyday and save thousands.

Negotiating is like a martial arts contest where power, leverage and timing can mean the difference between winning and losing. For instance, a martial artist would never go into a contest without first spying on his opponent to find weaknesses. In the same way, you can gain bargaining power by doing your homework. When buying a house find out how long it's been on the market, why the owner is selling, if there have been previous offers and if you will be the only one making an offer at this time. Obviously, finding the answers to questions like these could save you a lot of money.

First, make sure that your agent presents your offer in-person, if possible. It's very difficult to negotiate a good deal by fax.

Before engaging in contest, a martial artist warms up by stretching. Likewise, a savvy negotiator warms up by building rapport and finding common ground with the other party, because people like to do business with people they like. In real estate, a smart agent will try to get the seller emotionally involved with you before he brings out your offer. He should have you compose a hand-written letter about why you want the home and perhaps even show a few photos of you and your family. When faced with several competing offers I know of instances when a client's contract has been accepted even when it didn't present the highest price because the seller took a likeness to the buyers.

Next, fighters will cautiously probe each other looking for weaknesses. In bargaining this is done by throwing offers onto the table to see how the other party reacts. Experienced fighters often use guile to lure their opponents into range by pretending a blow has hurt them more than it really did. Similarly, your agent could pretend to be shocked by a seller's counter to your offer to get him to come down in price. Visibly showing surprise or hurt is called flinching and it used by master bargainers to gain concessions without giving up anything.

Martial artists are taught to read the body language of their opponents so they can see a blow before it is unleashed. Experienced negotiators can literally read the other party's mind by watching body language and listening carefully. If a seller says, "Make us an offer" you know their price is flexible before you even start. Also, without saying a word their body language can also tell you if they like or dislike any offer you make so be sure your agent watches very carefully as they show the seller your purchase contract. If the pupils of the owner's eyes get larger as they read the price you are well on your way to a deal but if his pupils get smaller your agent will have to do a lot of selling.

Martial artists do not believe in win-win and neither should you. Even when sparring with their best friend they want to give their best effort. Expect and demand your agent fight for the best deal possible assuming that the seller and his agent will take care of themselves because they will.

Fighters are supremely aware of time and try to use it to their advantage by saving as much energy as possible for the last few seconds of a round when they can score points against a tired opponent. Black belt negotiators put their opponents under time pressure by setting deadlines. Be sure that your agent mentions to the seller that you are considering several other similar properties in the area and that the seller must give a prompt response to your offer.

In martial arts, as in life, there are unfair fighters who will do anything to win, so you must protect yourself at all times. Negotiators must be aware of unfair tactics such as nibbling, which is asking for concessions after an agreement has been reached. If this happens to you just remember this blocking technique, "Before you give a concession - get a concession." For example, if a seller suggests that to hold the deal together that you'll have to pay for the transfer tax or other fee, simply respond with, "If we did, what can you do for us?" When a nibbler realizes that every time they ask for something you will respond in kind they will stop nibbling.

Finally, when a contest ends, fighters will bow to each other in mutual respect.  You should congratulate the seller for having done good deal  otherwise he might change his mind and try to find a way to wiggle out of the agreement.

So, how do you find a real estate agent who is a black bet in negotiating? Just ask these hypothetical questions and see how he or she answers them:

   1. What information do we need before making an offer and how would you get it?
   2. What's your experience with negotiating?
   3. What's your philosophy of negotiating? (If the answer is "win-win" find another agent!)
   4. Do you prefer to present offers in-person or send them in?
   5. How can we make sure the seller responds to our offer right away?
   6. When you sit down with the seller what's the first thing you do? (If the answer is "I pull out the contract" keep interview agents. You want someone who knows that closing a deal begins with building a relationship.)
   7. How can you tell if the seller immediately likes or dislikes our offer?
   8. How would you react if the seller gives us a full price counter-offer?
   9. What would you do if the seller asks for something additional after the contract has been signed?
  10. If the we were five hundred dollars apart from having a ratified contract what would you do? (If the answer is, "I'd give it to you from my commission" find another agent. Anyone who cannot negotiate their own fee will have difficulty protecting your interests.)

Steven Porter ABR CNE SRES
is a Real Estate Broker of 27 years with
RE/MAX Aboutowne Realty Corp. Brokerage.
Steven is an Accredited Buyer Representative,
Certified Negotiation Expert and has been student of
Japanese Martial Arts for 46 years
Steven can be reached at 905-875-2582, email: steven@stevenporter.ca
Or www.PorterRealEstateSystem.com

Literary credit to Michael Soon Lee

To rent or to buy? 8 questions Canadians should ask before taking theplunge

Should you rent or buy?

Conventional wisdom suggests it’s a no-brainer – buying real estate is a worthwhile investment with a high return.

Despite record low interest rates,  the sky high prices and carrying costs are causing many to rethink the allure of home ownership.

When you factor in the costs of repair, maintenance and other expenses associated with owning a home, Toronto-based financial planner Shannon Simmons argues that renting and putting saved money into another investment – such as a stock portfolio – could earn more in the long run.

Simmons gives new clients a questionnaire asking where they see themselves in 10 years. Many answer “buying a house.”

“Then we meet in person, and they say, ‘Oh I don’t really care if I buy a house, but shouldn’t I want to?’”

Based on advice from financial planners—both independent and those employed by banks—Global News has compiled a list of questions (and some context) to help you decide whether buying or renting is the right move for you.

You can also use our affordability calculator to figure out where you rank when it comes to affording a house:

1) Do you have 10-20 per cent of the home’s purchase price saved for the down payment?

While it’s possible to purchase a home with as little as five per cent down in Canada, big banks prefer first-time home buyers to have an average of 10 per cent.

“If this is the property of your dreams and it’s a really good buy, and you don’t have the full 20 per cent down,” says Royal Bank of Canada’s Rachel Wihby, it may make sense to pay the mortgage loan insurance charged to anyone who doesn’t put 20 per cent or more down on the home.

But “the less you put down, the higher the amount that you’re actually being charged,” Simmons said. That could mean you end up paying an additional $10,000 or more.

2) Do you have another 1.5-5 per cent saved for closing costs?

First-time home buyers don’t have to pay realtor fees, but there’s a number of other closing costs that need to be taken into account.

Depending where you live, land transfer taxes can carry a “significant” price tag, said Farhaneh Haque, director of mortgage advice for TD Canada Trust.

“Lawyer fees, seller/buyer property tax adjustment, appraisal fees, home inspection fees, even just your moving costs,” Haque said.

David Stafford, Scotiabank’s managing director of real estate secured lending, added fire and loss insurance to the list, suggesting $50-$100 per month as a ballpark figure.

Stafford also stressed the value of a building inspection, particularly for first-time home buyers, who may be easily impressed by granite countertops and hardwood floors but miss such other details as an old furnace, a leaky roof, or electrical wiring that’s in need of repair.

“Given you’re contemplating a multi-hundred thousand dollar purchase, a building inspection for a couple hundred dollars isn’t a bad idea.”

3) Can you keep debt servicing below 40 per cent of your income?

Your total debt service ratio measures the percentage of your gross annual income needed to cover housing payments (principal, interest, property taxes and heat, known as “PITH”) plus registered debts like car loans, personal loans and credit cards if applicable. Simmons says this 40 per cent rule is “specifically to please the bank” and is the general eligibility criteria when applying for your mortgage at most financial institutions.

So if you add it all up, housing payments and other debts should be between 35 and 40 per cent of your gross annual income.

4) Are your monthly fixed costs at 50-60 per cent of your after-tax income?

These “fixed costs” include housing and transportation, groceries, toiletries, and “everything you have to pay every month whether you like it or not,” Simmons said.

“When the money hits your bank account, if more than 60 per cent is tied up in things that you can’t get out of every single month, then you have no room after that for spending money which is not a fixed cost – things like going out for dinner, going out with friends, weddings, anything else that’s not just a bill.”

Keeping this ratio under control ensures you have enough money left over to keep saving, and avoid becoming “house poor.”

“Once you buy a house, it’s not like retirement’s done; you still have to save for other things,” Simmons added. “You also want to make sure that you have enough cash flow every single month that you don’t have to go into credit card debt – and that’s what I see: house broke, all the time.”

5) Can you save 1-2 per cent of your income in a “housing maintenance fee” each year?

The top mistake Canadian homebuyers make? Underestimating “significant renovations needed to the property,” according to a recent RBC poll.

Stafford suggests asking your realtor, and getting a home inspection.

“Even if it’s in pretty good shape, most homes of any age, there’s something you’ve got to do every year…and you need to factor that into your cash flows,” he said.

Simmons advises setting aside 1-2 per cent of your after-tax income each year to what she calls a “house maintenance fund” to avoid going into debt.

“When there’s not that extra cash sitting in an emergency fund, if there’s a $10,000 renovation or if you get cockroaches … It has to go on debt, because you’re not going to live in a place with cockroaches,” she said. “That can take a long time to pay off if you don’t have flexibility with your cash flow.”

6) Do you plan to stay in your home for at least three years?

Haque said TD advises clients to think about their life in three- to five-year chunks when considering purchasing a home.

A young couple buying a condo, for example, should consider how soon they’ll need a bigger space if they want children in the near future.

Wihby suggests regarding a home as a long-term investment – it might not be worth it if you buy a home and sell it a year later.

7) Is your job stable?

Are you planning to stay in your field? What would happen if your income decreased?

These are some of the questions RBC planners ask clients to determine how monthly payments and lifestyle would change as a result of job fluctuations.

“So you need to think of things like, will you be on a single income household instead of two?” Wihby said. “Maybe that means you won’t be taking those trips you thought you’d be taking or maybe you won’t be going to the gym as often.”

8) Are you emotionally ready to own a home?

It may sound hokey. But this is a big lifestyle leap to take.

“A lot of people heard that it was almost a no-brainer to go into property, especially when we saw property prices rising like we did in the past,” Wihby said. “But I think a lot of people got into purchasing a home before they were ready emotionally.”

The impact of what Stafford calls the “single biggest financial commitment for most people” includes the mental shock of going from a tenant to a homeowner.

“When you’re a tenant, the month that cheque goes out, it clears your account, and then you don’t think about it for the next 30 days,” Haque explained. “But when you’re a homeowner, you have those multiple payments like home insurance, maintenance fee, utilities, property taxes, that you have to account for on an ongoing basis. And sometimes it’s very much a shock to your system.”

Simmons emphasizes that homeownership is a personal choice, and isn’t the imperative it was 30 or 40 years ago.

“I know a lot of professionals who just don’t want to be bothered cutting the grass on Saturday, and doing the gardening. … They would much prefer to rent and save a bunch of money, so they can travel every weekend,” she said. “If you’re not actually going to enjoy the house, what’s the point in buying it?”

Global News - Erika Tucker, Nov 27, 2013