I came across a great tip from our neighbourhood law firm Cassady & Company today.  Many people are searching for new ways to save, benefits for buying a home, incentive programs and tax credits for first time homebuyers. Well this is one tax credit that is overlooked probably a lot of the time, and that is due to it’s relatively new presence in our market. This might not mean that it will be available forever as a simple government budget cut can change all of this, but be sure to know your benefits available and do the leg-work of applying and registering for your applicable credits now!

New Home Buyers Save $750

Now this tax credit is not the same as your property transfer tax, or RRSP First Time Homebuyers credit.  This is a personal income tax credit which you receive when filing your personal income tax return, which generally also means you have until April 30th of the year following your property purchase to claim the credit on your tax return.

The History

Beginning in 2009, a new line was incorporated in the personal income tax return form to allow the buyer to claim the Federal Government First Time Home Buyer’s tax credit. This is a non-refundable tax credit for first-time buyers who acquire a qualifying home after January 27, 2009.

The Maths

The Credit is calculated by multiplying the lowest personal income tax rate for the year by $5,000 and is claimable for the taxation year in which the home is acquired. The maximum amount of the Credit in 2012 will be $750.

The Details

A qualifying home is a housing unit located in Canada. This includes existing homes and those being constructed. Single-family homes, semi-detached homes, townhouses, mobile homes, condominium units and apartments in duplexes, triplexes, fourplexes or apartment buildings, all qualify. A share in a co-operative housing corporation that entitles the buyer to possess and provides an equity interest in a housing unit located in Canada also qualifies. A share that only provides a right to tenancy in the housing unit does not qualify.

An individual will be considered a first-time home buyer if neither the individual nor his or her spouse or common-law partner have owned a principal residence in the calendar year of the new home purchase or in any of the four preceding calendar years. The buyer must intend to occupy the home as a principal place of residence no later than one year after buying it.

Any unused portion of an individual’s Credit may be claimed by the buyer’s spouse or common-law partner. Where more than one buyer is entitled to the Credit (for example, where two friends jointly buy a home), the amount claimed cannot exceed the maximum amount of the Credit claimable by any one of those individuals.

The Credit will also be available for certain home purchases by or for the benefit of an individual eligible for the disability tax credit. If the buyer is a person with a disability or is buying a house for a related person with a disability, they do not have to be a first time home buyer. However, the home must be acquired to enable the person with a disability to live in a more accessible dwelling or in an environment better suited to the personal needs and care of that person.

Still Confused?

For further information, please consult Canada Revenue Agency’s website at:

http://www.cra-arc.gc.ca/gncy/bdgt/2009/fqhbtc-eng.html

It’s already near the end of November, Black Friday is here and from the looks of the snowy covered mountains out my office window…the Winter season is officially upon us!

See the full gallery on Posterous

Thus I thought we’d all be interested with a quick refresher on our housing market and Canadian economics and financials for the month of October 2011! The monthly indicator recap is from Canada Guaranty, follow the links below to go to their website directly to find more information and the indicators for all other months as well.

October 2011: Monthly Indicator Recap

November 22, 2011 | Monthly Indicator Recaps, News Releases

Presented below are figures for the month ending October 31, 2011.
(Download to print PDF)

HOUSING INDICATORS*	DIRECTION	% CHANGE (vs. last month)	OCTOBER LEVELS
Volume of MLS® Home Listings		0.26%	72,739
Volume of MLS® Home Sales		1.26%	38,819
Average MLS® Sale Price (Canada)		0.65%	$363,504
ECONOMIC INDICATORS**	DIRECTION	% CHANGE (vs. last month)	RATES
Unemployment Rate (October 2011)		0.20%	7.30%
GDP (August 2011)		0.30%	N/A
Retail Sales (August 2011)		0.50%	N/A
Consumer Price Index (September 2011)		3.20%  (Year‐o‐year, September)	N/A
FINANCIAL INDICATORS	DIRECTION	% CHANGE (vs. last month)	RATES
Prime Rate**		0.00%	3.00%
5 Year Fixed Posted Mortgage Rate***		0.10%	5.29%

MLS® is a registered certification mark owned by The Canadian Real Estate Association. 
*Seasonally adjusted month-to-month results; Source: The Canadian Real Estate Association
** Source: Statistics Canada
*** Source: RBC

Mortgage Penalties

Today I am here to chat about mortgage penalties. Why I’m getting a lot more questions about mortgage penalties from clients in the past couple of months? What is the normal mortgage penalty range you could expect? Also, will it be worth it for you to cancel your current mortgage, pay the penalty, and get something at today’s lower rate?

1. How come mortgage penalties seem to be coming up in the news?

You may have heard your friends and family talking about this. That’s because interest rates have remained so low for such a long time. Alot of people thought that interest rates were going to be rising back up over the past years and the economic situation just hasn’t allowed for that. Interest rates are still super low and people are finding that it’s a great time to be refinancing or to be switching out your mortgage. If you’ve got a higher interest rate of 4 or 5% and you’re looking at today’s interest rates at 2 or 3% and thinking “why am I paying 2% extra”?

An average mortgage penalty depends on the mortgage that you have. Every bank and lender is different in how they calculate mortgage penalties. They should have explained it to you when you got your mortgage and they should have gone through exactly what your needs are. If you wanted a long term mortgage, they should have explained exactly how the mortgage penalty is calculated, and that it could be a large penalty or if it’s only going to be very small, then you might be in something that’s perfect. If you’re now going to your bank and you’re checking and you’re surprised to find that you’ve got a really large mortgage penalty, something has gone wrong. You shouldn’t be caught off guard like that.

In general, for a variable rate mortgage you might get a 3 month’s interest penalty. So that’s just maybe 1.5 mortgage payments as a sort of a ballpark of what your penalty would be. For a fixed rate mortgage nowadays, it’s usually the interest rate differential, not always, sometimes it’s also the 3 months of interest. The interest rate differential is exactly what the name implies. It’s the difference between your interest rate and the current interest rate. If you’ve got a higher interest rate, you’re basically paying the difference to cancel your mortgage so your penalty could be as small as a couple thousand dollars and as high as 15-18 thousand dollars. Very large penalties could occur.

We did a blog post in the past regarding a poor gentleman who had an incredibly large mortgage penalty, so go back in the archives and look for that if you want to see what the upper limit of this is and be aware when you’re getting a mortgage. When you’re signing it on, exactly what penalties are calculated and if you’re ever going to run into the scenario, if you’re ever going to be susceptible to paying mortgage penalties, maybe you should be looking at a different mortgage product or term.

2. How do you know if your mortgage penalty is worth to pay off?

It’s pretty easy for us to calculate. I do suggest you contact your local mortgage broker to get the proper calculation or call us here at Finder Financial Services because you want to make sure that you’re taking into account the penalty itself as well.

If your penalty is going to be added into your mortgage, so even if you’re paying a lower interest rate, you’re now paying a larger mortgage amount, you’re paying more interest each payment, and each payment is going to be larger because you’re paying an extra 10 or 15 thousand dollars on the total mortgage.

A lot of people forget this. If you go to your bank and they do a comparison, a lot of times, this is missed out and you think that you’re getting a great deal, you’re going to be paying off your mortgage really quick, and your penalty is going to be paid off soon, but a lot of people have completely forgotten to take into account the penalty as well. It’s got to come from somewhere.

If you’re interested in this, just give us a call at 1-866-924-5244. I will be free to do a comparison calculation for you.

SMP: Theresa’s Soap Box – Bank of Canada Benchmark Rate Drop

Welcome to the Sutton Member Program booth at the Sutton National Conference in Las Vegas at The Mirage!

I just wanted to invite you here and give you a glimpse of what we’re doing with Finder Financial Services. We’ll put clips of the different booths that are going on. There’s lots of fun to be had and it’s really quite interesting!

Today I have some mortgage news for you guys. The benchmark rate in Canada, the Bank of Canada benchmark rate, should be dropping down to 5.19%. That’s a drop from 5.39% down to 5.19% which is quite a big difference. For those of you qualifying for mortgages and you have a smaller down payment, you could actually qualify for a larger mortgage right now.

If you would like more information, give us a call at 1-866-924-5244.

SMP: Theresa’s Soap Box: RRSP home buyer plan credit

Today we are here to talk about the RRSP home buyer plan credit that you can apply for. If you are looking for a property, it’s your first time buying a house, or you’ve owned a house in the past and you’re waiting to see how long you have to wait until you can use these credits again.

RRSP is one of the more popular home buyer plan credits that you can get. It’s very different from the other first time home buyer credit, which is the property transfer tax credit. Not only do they cover different things, but the qualification is completely different.

First thing about RRSP is that you can take out up to $25,000 from your RRSP account and use that to buy your property. It’s a nice savings, you put the money into RRSP, it is tax free so you have your tax money back, and now you can take it back out tax free and use it for your down payment.

The one thing to note is that it is $25,000 per person. If one spouse has been contributing money into the RRSP, but the other has not, then you can only take out $25,000 from the one person’s name. The other spouse cannot tag along and also take out $25,000 from that person’s account. Chat with your financial advisor and talk about setting up spousal RRSP accounts. Something where the funds that you have in RRSP are more equally divided amongst the different people so when you do need to take out the money, you can apply for $25,000 here and $25,000 there and receive $50,000 in total.

Qualification:

The qualification to be eligible to withdraw home buyer plan funds is very different. There is a 4 year limit. If you or your spouse have owned property in the last 4 years that you live in as your residence, then you are not eligible. It also encompasses you and your spouse together. So if you own the property, your spouse is not on title, but they are your spouse at the time and is within the last 4 years, then you are both not eligible for the RRSP homebuyer plan program. If 4 years has gone by, you sold all of your property, neither of you owned your residence, then you are eligible again to use this program.

This is quite intricate. If you’re curious about that or you’re not sure if you qualify or not, feel free to give us a call at 1-866-924-5244 and we’ll be happy to walk you through the steps. We’ll also let you know about some Government of Canada websites that can walk you through the requirements as well.

SMP: Theresa’s Soap Box: Home Inspections and Appraisals

Today I’m here to chat about a question I received from a client recently: how do home inspection and appraisal relate to a mortgage? Are they required, can you skip one if you have the other…basically, what’s involved there?

Home inspection:

Home inspection is pretty self explanatory. This is when you hire a licensed inspector to assess the property. They’re going to look at the condition of its parts, of what they can see, the mechanics of it: so the water heater (how good is it? Is it going to last?), the plumbing, maybe the roof (how long is it going to last and how old is it?), and make assessments based on that suggestion. If they know the roof is 20 years old, they may suggest that you will need to replace it in the next 2 to 5 years. All of these changes would affect the value of the property in your eyes.

In terms of a mortgage, home inspection does not usually come up unless there is something odd about the property that we notice or if there’s some interesting history that the lender or the insurer knows about. Even if you just have a purchase agreement and there have been a lot of price adjustments afterwards and there are notations for repairs or improvements. The lender might want to see a home inspection report just to make sure that these are regular maintenance items or just improvements and not indications of bigger problems in the future.

Appraisal:

An appraisal seems like it is more common in relation to mortgages, but that might not be the case. For an appraisal, you’re getting a licensed appraiser, they usually compare the value of this property to neighbouring properties to give you an objective third party assessment of what the value of this property should be.

You may have experienced this in the past where a lender asked you to get an appraisal for the property. We’ve actually now been able to negotiate with our lenders here at Finder Financial Services, that we do not need an appraisal in every single case. It use to be the norm, and now we’re trying to get away from that to pass the cost savings onto you. Lenders now have ways to do automatic valuations or computerized valuations so they generally know based on all the statistics what the value should be.

In more unique circumstances, for example, a foreclosure, if you’re bidding on a foreclosed property, an appraisal would be necessary and you would be required to provide that. Other than that, usually we can get rid of that process and save you some time and money.

If that’s interesting to you or you wanted to know more, just give us a call at 1-866-924-5244.

SMP: Theresa’s Soap Box – Meetup! You’re Invited: Thursday, September 15, 2011

Today I am here to invite you to our next meet-up. We’re coming up to September 15, which is our next meet-up date.

We will be chatting about the first time home buyer process. As you know in the past, we’ve been chatting about things like leaky condos, condominium developments, landlord highs and lows if you are buying a place to rent out. A lot of the topics were more for people who are already in the home buying market, people who are already searching for a property.

After our last meet-up in July, we actually received quite a few requests for a first time home buyer seminar. So people who are wanting to know what are the home buying steps, what things to look out for, what you’re suppose to do before, during and after the process so that you don’t miss anything. You know where to ask questions from an expert if needed and where you should be doing your own research ahead of time.

First Time Home Buyer
Thursday, Sept 15, 2011
2nd Floor – 3012 Boundary Road Burnaby, BC
Visit our website!

 Come join us in this Meetup as we look at the highs and lows of being a landlord.  This evening will be a great chance to share experiences and stories. We will go through what things you should watch out for when dealing with tenanted properties!

RSVP on Meetup.com or Facebook – in order to be eligible for the prize draws at the end of the evening!

Through our discussion on the highs and lows of being a landlord we will learn: should you charge the maximum rent, how to screen tenants properly, when not to use a property manager, is the Residential Tenancy Office friend or foe, why can it take up to 6 months to remove a tenant that doesn’t pay rent, and much more.

Back by popular demand! Our special guest speaker this week will be:
Vic Jang
Real Estate Broker, Project Marketing

Vic Jang will be on hand to share his experience in real estate letting us know the common trouble spots when dealing with tenanted properties.  Vic has been in the real estate business for 25 years, is a Partner at Sutton Group – West Coast Realty and Managing Partner at Focus Marketing Systems.  We will benefit from his insight accumulated starting from his first project, completed in 1986, to the present day.

Some of Vic’s notable projects include:

• Residences at Richmond Inn, the first high rise tower in Richmond forefront of the area transformation in 1994.
• Savoy, again one of the first high rise towers in Downtown Yaletown, and
• Worked with London Drugs to transform the West Broadway & Arbutus previous ICBC site to a mixed use residential / commercial community incorporating a London Drugs and IGA. The concept was designed with groceries and amenities on site promoting a no-commute neighborhood years ahead of the green lifestyle movement.

Today we’re going to be talking about “How can I figure out if I qualify for a mortgage?” Part II. Today’s focus is more on pre-qualification and pre-approvals and I just wanted to let you know that there’s a lot of lingo and no standard definition for each of these things, so a pre-approval from a bank may mean something different than a pre-qualification or a pre-approval from me. So I’ll let you know what the actual aspects within a pre-approval are or a pre-qualification that you should look for in order to determine if what you have in your hands is actually sufficient for your needs.

1. Pre-qualification:

If you watched or read our last blog you know we’re looking for things like your income, your debts, and your credit history. We take all that information to form a picture of how much money you will be able to borrow and what interest rate you can get, and also the amortization period your payments will be structured within.

So to determine if you have a full pre-approval or pre-qualification done you will be able to get a piece of paper that says something like, based on all the information you actually qualify for a mortgage x amount. There is no range and there are no conditions, either you qualify for x amount or you don’t and maybe you’ll be provided with some suggestions for how you can become qualified for the amount you’re looking for.

2. Rate Hold:

A lot of you out there may have rate holds, but a lot of you may not because you might be thinking if interest rates go up a little bit you’ll get a rate hold then, but you won’t really bother to do it now.

There’s two things you’re risking without a rate hold. Number one is if interest rates are higher you pay more in your mortgage, but number two, I find a little more important, is that if interest rates are higher you actually qualify for a smaller mortgage amount. So think about this, if you’ve been out shopping and finding a house and you finally find your dream home and you go to finalize your mortgage, but interest rates are a little bit higher and you come up $10,000 short what are you really going to do at that time? You can’t get as much mortgage as you originally thought you could

3. Documentations:

You’ve provided all this information about your income, your debts, and your downpayment you do need to provide documentation in order to confirm these facts and if you wait until the very end, like a lot of people, to provide these documents and we find any surprises like if the numbers weren’t coming up the way we thought they were in our application and your employment status is a little bit different than you thought it was then at that point it’s too late you’ve already jeopardized your entire mortgage application if we cannot confirm these documents the way we think they should be written.

So if that’s confusing to you or you have additional questions give us a call and we’ll let you know if what you have in your hands is sufficient, or if it’s a pre-approval or pre-qualification or if you really need a second opinion.