4 May

Why Home Buyers with Job Security in 2020 Should Get Pre-approved now for a Mortgage

Buying a Home

Posted by: Garth Chapman

A good article here in The Globe and Mail here by Rob Carrick

But first, some required prior reading from my blog:

Is Your Mortgage Pre-Approval Really a Pre-Approval?

And now that you’ve read my blog post above (you did read it, right?) back to the article:

Your personal finance to-do list for this week:

  • Get your financing lined up if you want to buy a house;
  • Learn how to have respectful spousal money discussions that don’t escalate into nastiness;
  • File your taxes, even if you have until June 1.
    • You’ll need that to qualify if you are self-employed and your income is higher in 2019 than in 2018 and 2017. Talk to your Mortgage Broker for more on this.  And here is the link to the full article:

With unemployment rising and incomes plunging, expect to see home prices fall in the months ahead. First-time home buyers with job security, this is your time. Get pre-approved for a mortgage while we wait for physical distancing guidelines to be relaxed enough to allow for more normal real estate market conditions.  Read on below…

Pandemic Personal Finance Update No. 6: First-time home buyers with job security should get preapproved for a mortgage

13 Mar

Are You a First Time HomeBuyer? Use Your RRSP for Downpayment

Income Tax

Posted by: Garth Chapman

First, some little-known good news: you don’t actually have to be a first-time homebuyer to qualify.  A first-time home buyer you must not have lived in another home owned by you or your spouse or common-law partner in the year of acquisition or any of the four preceding years.

The Home Buyers’ Plan (HBP) is a program that allows you to withdraw funds from your registered retirement savings plan (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability. You can withdraw up to $25,000 in a calendar year. You must qualify as a first-time home buyer, which generally means you and/or your spouse must not have owned a home in Canada for 4 years.

Your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the HBP, or they may not be deductible for any year – see here http://www.cra-arc.gc.ca/E/pub/tg/rc4135/rc4135-e.html#P233_15310

Generally, you have to repay all withdrawals to your RRSPs within a period of no more than 15 years. You will have to repay an amount to your RRSPs each year until your HBP balance is zero. If you do not repay the amount due for a year, it will have to be included in your income for that year.

All the info here http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/menu-eng.html

And here is some info on how long the money must be in your RRSP before you withdraw it for the HBP. Let’s say a qualified first-time home-buyer contributed to his RRSP near the end of February. The buyer then finds a home with a willing seller, but is unable to get a possession date late enough to meet the following requirement: “Your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the HBP, or they may not be deductible for any year.”

It turns out that the client actually has 30 days after possession to still take out his money from his/her RRSP and use it for the Home Buyer’s Plan.

Surprisingly, CRA does not care if the buyer uses that money to buy a car, go on vacation or spend it on anything else, as long as he/she buys a qualified home and is a first-time buyer.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/cndtns/wn-eng.html

21 Feb

Bruised Credit And Need A Mortgage?

Credit

Posted by: Garth Chapman

Many people think that their credit score will hold them back from obtaining a mortgage. For some, they may have work to do on their debt beforehand, but sometimes people believe their credit is poor, only to find that it isn’t as bad as they thought. It pays to seek help from a Jencor Mortgage Advisor to find out where you stand.
What is bruised credit and how does it impact your ability to obtain a mortgage?
Mortgage lenders use your credit reports to evaluate risk by looking at your repayment history to see how responsible you are with credit. Although a 790-beacon score and zero late payments in the last three years is ideal for all lenders, bruised credit means something slightly different to some lenders. So, what is bruised credit? It can be a result of many circumstances including, late payments on loans, collections & judgements, bankruptcy, consumer proposal or credit counselling, late payments on your mortgage, foreclosure & even identity theft. Traditional mortgage lenders and insurers will not commonly approve applications with credit histories that show challenges with borrowing in the recent past. The good news is that there are still options with alternative mortgage lenders with a minimum down payment of 20% to 30%. With these mortgages, you will be paying higher interest rates, usually for two years, while you rebuild your credit. We can then transition you into a regular mortgage.
Rebuilding credit takes time.
There are some things you can do which will bring your score up substantially in one swoop, but normally it takes time to rebuild. Here are some of the basics to improve your credit:

1. Have at least two credit accounts reporting to your credit report besides cell phone bills, school loans or mortgages. Use your credit cards every month, even just one purchase monthly and pay it in full before the due date. The credit limits should be at least approximately $2000 each.

2. Always pay all your debts on time – making even the minimum payment on time, is better than making a larger payment late. If need be, reach out to the account holder and make payment arrangements. Never ignore a payment and hope for the best.
No Late mortgage payments – these are extremely detrimental to you obtaining a mortgage.

3. Do not max out your credit. Use less than 50% of your limits and never go over the limit. Going over limit impacts your score immediately and severely, and even when you bring it back in line, it still has a lingering effect on your score.

4. Do not apply for too much credit and do not cancel existing credit – both these actions will negatively impact your score – yes, you would think that cancelling existing credit would help, but by doing so, you are reducing the overall credit available to you and therefore immediately increasing credit usage. Also, by cancelling credit, you might be cancelling a credit card that you have held the longest and longevity of credit has an impact on your rating.

5. New loans, such as car loans will have an immediate negative impact on your score – so do not obtain a new car loan if you are thinking about obtaining a mortgage. Because of the size of the loan, your credit usage increases substantially.

6. Do not let anything go to collections – even though some utilities, rental payments, gym memberships and the like, do not report to your credit bureau, when they go to collections, they will be reported.

7. Ensure that everything on your report is correct. If not, you must take steps with the creditor or the reporting agency (Equifax or TransUnion) to correct them.

8. In some cases, if you already own your home, there may be an opportunity to consolidate debt into your mortgage and improve your credit.

Don’t be defeated; get advice, get back on track!

Ultimately, how each item impacts your score, depends on how it interacts with everything else on your report. One late payment, for some with long-held credit and very little past delinquencies, will have less of an impact than for someone with bruised credit or someone with new credit.

If you have bruised credit, don’t write off your dream of home ownership. Contact your Jencor Mortgage Advisor who can advise you on the necessary steps to obtain the mortgage you need.

Written and originally posted here
by Ayashah Kothawala – Mortgage Advisor Jencor Mortgage

4 Feb

4 Easy Steps to Create a Down Payment Using a New RRSP Loan

Mortgage Tips

Posted by: Garth Chapman

First time home buyers can obtain a new RRSP loan and 90 days later use the First Time Home Buyers Plan and withdraw up to $25,000 for a home down payment.

Pro Tip- you are considered a First Time Home Buyer if you have not owned a home in the previous 4 years.

Four Easy Steps

1. Call your favourite Jencor Mortgage Broker.

2. We will arrange an RRSP loan and a mortgage pre-approval as per your financial qualifications. Couples can both do this.

3. 90 days later, you withdraw up to $25,000 (per person) from your RRSP plan(s) for down payment.

4. Work with your favourite Realtor to buy a home.

The key element of this is that our mortgage lender does not require the loan to be repaid when funds are withdrawn for the down-payment. Most lenders do.

13 Jul

How tenants can help pay your mortgage

Buying a Home

Posted by: Garth Chapman

The single most common and often most significant road to financial security for Canadians is paved by home ownership.  And for first-time home-buyers often the largest barrier to getting started is the monthly cost.  So why not consider a home with a rental suite that would allow you to have a tenant who pays rent, which would lower your home ownership costs?  Such a property might not be the home of your dreams, but if it gets you into the game then it might just be a great way in.  After all, down the road you could move up and keep that first property – now with two renters covering all the costs and then some.

And if it works well for you, then why not have 2, or 3 or more such properties.  It doesn’t take many to, once paid off in say 25 years, to fund your financial freedom.

And for seniors and those on fixed incomes, or those living in high-price markets, the rental unit can make it much easier to stay in your home far longer than you might otherwise be able to.

Read more here: How tenants can pay your mortgage

12 Feb

First Time Home Buyer Tax Incentives and Credits

Building a New Home

Posted by: Garth Chapman

The good news begins with a generous definition of who is a first time home buyer: to qualify as a first-time home buyer, which generally means you and/or your spouse (whoever will be on the Title and Mortgage for the home) must not have owned a home in Canada for 4 years. And now, to the two plans currently available to Canadians.

 

First-Time Home Buyer’s Tax Credit (HBTC)

The First-time Home Buyers’ Tax Credit was introduced to assist Canadians in purchasing their first home. It is designed to help recover closing costs, such as legal expenses, inspections, and land transfer taxes, so you can save more for money for a down payment.

The Home Buyers’ Tax Credit, at current taxation rates, works out to a rebate of $750 for all first-time buyers. After you buy your first home, the credit must be claimed within the year of purchase and it is non-refundable. In addition, the home you purchase must be a ‘qualified’ home, described in more detail below. If you are purchasing a home with a spouse, partner or friend, the combined claim cannot exceed $750.

You will qualify for the HBTC if:

  • you or your spouse or common-law partner acquired a qualifying home; and
  • you did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years.

Program in overview http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns360-390/369/menu-eng.html

Fact Sheet http://www.cra-arc.gc.ca/nwsrm/fctshts/2010/m01/fs100121-eng.html

 

The RRSP Home Buyers’ Plan – for first-time home buyers (HBP)

The Home Buyers’ Plan (HBP) is a program that allows you to withdraw funds from your registered retirement savings plan (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability. You can withdraw up to $25,000 in a calendar year. You must qualify as a first-time home buyer, which generally means you and/or your spouse must not have owned a home in Canada for 4 years.

Your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the HBP, or they may not be deductible for any year – see here http://www.cra-arc.gc.ca/E/pub/tg/rc4135/rc4135-e.html#P233_15310

Generally, you have to repay all withdrawals to your RRSPs within a period of no more than 15 years. You will have to repay an amount to your RRSPs each year until your HBP balance is zero. If you do not repay the amount due for a year, it will have to be included in your income for that year.

All the info here http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/menu-eng.html

And here’s some more info on how long the money must be in your RRSP before you withdraw it for the HBP.  Let’s say a qualified first-time home-buyer contributed to his RRSP near the end of February.  The buyer then finds a home with a willing seller, but is unable to get a possession date late enough to meet the following requirement: “Your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the HBP, or they may not be deductible for any year.”

It turns out that the client actually has 30 days after possession to still take out his money from his/her RRSP and use it for the Home Buyer’s Plan.

Moreover CRA does not care if the buyer uses that money to buy a car, go on vacation or spend it on anything else, as long as he/she buys a qualified home and is a first time buyer.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/cndtns/wn-eng.html

19 Jun

On Buying and Financing a Vacation Home

Buying & Refinancing a Home

Posted by: Garth Chapman

Questions to ask before buying a vacation home………

Buying a home is a big step in life that requires financial planning, saving and lots of upkeep. And yet, many people find that they like being a homeowner so much that they want to purchase a second home as a recreational or vacation spot. For those who are financially secure enough to do so, a vacation home can be a great investment for the entire family and increase wealth as property values continue to climb. Before jumping in with both feet, here are a few questions to ask yourself before applying for a loan or making an offer on a second home:
What will I use it for?

If you’re looking to purchase a property that you will only visit a few weeks out of the year, then it might not make financial sense to buy. Instead, you could consider renting during the time that you want to spend away from home. For the person who will be able to spend at least two months or more at their second property, it can be a good investment.

Beyond your personal or family use, you can consider buying a home that will be rented out as a vacation property. Instead of leaving the house vacant all year round, you can lease it to make some money or help pay off the mortgage. However, this may require additional insurance or coverage options to ensure that you are protected when someone else is staying in your second house.

Are you preapproved?
Before shopping for a home, the best way to see if you are financially able to purchase is by getting preapproved for a home loan by a lender. Taking on a second mortgage is a big responsibility, but you may have options to consolidate your debt. If you are financially secure enough for a second mortgage, you may keep them separate. Furthermore, you need to be confident that you can make a down payment. For a second mortgage, you may not have the same types of options for a home loan, which means you may need to make a down payment up to 20 percent. Other costs need to be accounted for as well, including maintenance, homeowners insurance and mortgage insurance (if required).

Are you sharing ownership?
It’s not uncommon for family, friends, or even business partners to go in together on a property for shared ownership. This can help cover all the additional costs if you can’t afford a second recreational house on your own. In theory, splitting up the expenses and sharing property sounds like a great idea. However, in practice, it can be complicated and stressful. For instance, if there are upgrades or repairs that need to be completed on the home, all owners might not agree on what should be done, while others might be unwilling to pay. In these instances, it may be unclear who will cover the cost, which can strain relationships and finances. Carefully consider these situations before agreeing to a joint ownership.