Home Buyers’ Plan (HBP)

Hi Everyone! For the past few weeks I’ve been getting some inquiries on how the Home Buyers’ Plan works so I thought I’d share some key information with you in case you decide to participate.  The Home Buyers’ Plan (HBP) allows Canadians to withdraw up to $25,000 from their personal or spousal RSP on a tax free basis to help buy or build a “qualifying” home. This withdrawal can be a single amount or a series of withdrawals throughout the same year, so long as it does not exceed $25000. One thing to note, if you are purchasing a home with a spouse, you can EACH withdraw up to $25000 tax free from your respective RSPs under the Home Buyers’ Plan. So why do people do this? Well for one thing, using it as a source of down payment will lower the mortgage interest you have to pay, and secondly, it’s tax free! Why wouldnt you? Here comes the most important part of the program. The funds that are withdrawn from your RSP’s under the Home Buyers’ Plan must be paid back each year over a period of 15 years (beginning in the second year following the year of the withdrawal). If a payment is not made in a particular year it will be included in your income for that year. Now there are certain conditions for participating in the Home Buyers’ Plan, and they are noted below in point form.

• You must be a first time homebuyer. You would not be considered a first time homebuyer if you or your partner have owned and lived in a home as a principal place of residence at any time beginning the four previous calendar years and ending 31 days before your HBP withdrawal. So for example, if you owned and sold a home in 2005,  you have to wait until 2010 in order to qualify.
• You must enter into a written agreement to buy or build a qualifying home before withdrawing funds. Note:  Obtaining a pre-approved mortgage does not satisfy this condition.
• You must intend to occupy the qualifying home as your principal residence no later than a year after buying it or building it.
• You must make all the withdrawals in the same calender year up to and including end of January of the following year.
• RSP contributions must be made more than 89 days in advance of the HBP withdrawal.  Contributions that have not been in the RSP plan for longer than 89 days do not qualify under the Home Buyers’ Plan.
• You have to be a resident of Canada when you receive funds from an RSP under the HBP and up to the time a qualifying home is bought or built.

There is an exception to the “first time” home buyer’s condition and that is if you are a disabled person or a relative of a disabled person and you utilize the HBP withdrawal in order to acquire a home better suited to his/her needs. Earlier I mentioned that you have 15 years to repay the funds you withdrew from your RSP’s for the Home Buyers’ Plan however you may repay more than the required minimum that the CRA will send you as a statement each year. All you have to do is to contribute your repayments to any of your RSP’s. Once the contribution has been made, you can designate all or part of your contribution as a repayment under the HBP. You won’t receive an RSP deduction for your HBP repayments. And remember if you pay less than the minimum required in a particular year, you will have to include the difference as RSP income in that year.

Keep in mind that this program is just an alternative source of cash for funding the down payment on your home. To determine whether this plan is appropriate for you, consult a qualified tax advisor and for more information, refer to the Canada Revenue Agency Site. No matter what type of mortgage financing you are looking for, it makes sense to speak to me first. Thank You!

Sincerely,
Josephine Ng
www.tdmortgage.wordpress.com

Original Source: HomeBuyersPlan_Article

Spring Fever Newsletter

Now that we are into May, Calgary is in full spring fever mode, despite our current weather not being anything spring-like! First time home buyers are abound, seeking deals before their rate holds expire, while variable rates are becoming more enticing with steeper discounts for those ready to take on the added risk.

There have been a multitude of changes over the last several weeks which have come into effect and may affect you in an upcoming purchase. To fully clarify exactly what these changes are, I'll devote this newsletter to explaining the latest changes and how they may affect you.

Higher Interest Rate Used to Qualify Clients

*These rules affect Hi-Ratio Mortgage Holders (ie: those with less than 20% down payment) Old Rules: Previously, if you signed on for a 3 year fixed rate term at 3.65%, I would have qualified you for the mortgage AT 3.65%. The only difference would have been a variable mortgage; those mortgages have always been qualified on higher rates to protect you again future rate increase and most commonly the 3 year POSTED bank rate would have been used to qualify you. New Rules: In order to eliminate a surplus of clients in the next several years who are no longer able to afford their houses as their renewal rate in 3 years is much higher, the new rule is that all clients are qualified on the "benchmark qualifying rate" unless you are signing on for a 5 year or greater fixed rate term, in which case you are qualified at that rate. For fixed rate mortgages with terms of less than 5 years as well as all variable mortgages, you are qualified based on the benchmark qualifying rate. What is the 'qualifying benchmark rate?' As of today, the rate is 6.10%. CMHC defines the benchmark rate as the Chartered Bank - Conventional Mortgage 5-year rate that is the most recent interest rate published by the Bank of Canada in the series "V121764" each Monday. Refer to the official link for the most up to date rate information. Leah's BOTTOM LINE: Based on a higher qualifying interest rate, borrowers will need approximately 25% more income in order to qualify for the same home compared to the old rules.

Rental Properties

Old Rules: Able to purchase a rental property with 5% down payment. New Rules: Requires 20% down payment for rental properties. As of April 19th, CMHC will also be implementing changes to the calculation of a borrower's Total Debt Service Ratio where rental income is generated from the subject property. 50% percent of the gross rental income from the subject property may be included into the borrower's gross annual income for the purposes of calculating the borrower's Total Debt Service Ratio. Leah's BOTTOM LINE: This is a more complex matter to explain, so I invite you to contact me directly to review your situation or alternatively, please read the CMHC link for more specific information.

	Re-financing Your Home
Old Rules: Previously able to re-finance up to 95% of the value of your home. New Rules: May only re-finance up to 90% of the value of your home. Leah's BOTTOM LINE: This will keep an additional 5% worth of equity in the home than before.

Monkey Hunter Winners…

So your Monkey Huntin’ days are over… What are you going to do with your time?

We had 1,545 page views over the last 10 days, so you were really hunting for the monkey hard… and many of you found him, 142 to be exact.

Watch the video below to see who the winners are..

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Self Employed Borrowers

Hi Everyone. Today I wanted to share some information with you about what programs are in place with TD Canada Trust for self employed individuals looking to qualify for a mortgage. Since the new mortgage rules and even more changes to the insured stated income program, I wanted to break it down for you so that you know exactly what TD and other lenders may ask you for prior to getting a mortgage. With numerous write-offs and different ways to pay yourself, TD has programs in place for those who are unable to provide traditional income confirmation.

Income Gross-Up or Eligible Add Backs
As a self-employed borrower, TD allows you to gross-up your 2 year average income from line 150 on your Notice of Assessment by 15% or you may opt to provide 2 years financial statements prepared by a licensed accountant to support a higher income level where eligible add backs exceed the 15% gross-up.  Eligible add backs can include things like business use of home, motor vehicle expenses, and capital cost allowance and must be approved by TD. One thing to note is that if you are incorporated, you are not eligible for the 15% gross up, since you receive a salary from the Corporation. In this scenario you must qualify using your 2 year average from line 150 of your Notice of Assessment.

Self-stated Income/Equity Lending
Using self stated income is exactly what it sounds like. You state your income and we take your word. Now depending on the loan to value, up to and including 75%, there may be other criteria you have to meet including minimum beacon score, proof of 3 year business for self, no previous bankruptcies, no current debt arrears, minimum 3 year credit bureau history etc. Keep in mind that the income you state must be reasonable according to industry standards and like every other credit application, your total debt service ratio and gross debt service ratio should not exceed 40% and 32% respectively. To determine your total debt service ratio, click here. One key point I should note is that non-owner occupied properties are ineligible under this program. To confirm 3 years business for self, TD may ask for things like GST returns, audited financial statements or proof of business account.

Insured stated income program
Applicants under this program are self-employed borrowers who have difficulty providing documentation for their current income level and do not have at least 35% equity. These are often people who have recently begun to work for themselves. On April 9, CMHC made the following changes to the Insured Business for Self program:

• As a self employed borrower, you must be able to demonstrate that you have experience working in the same field for a minimum of 2 years. This can include time spent working as non self-employed in the same field. 
• If you have been self-employed for more than 3 years, you are not eligible under this program and must provide traditional proof of income.
• Commissioned applicants are not eligible for the insured business for self program.
• Purchasers must provide at least 10% down payment and those who wish to refinance will be limited to 85% loan to value.

Under this program, the same criteria mentioned in section 2 of my blog must also be met. To offset the additional risk, the insured Business for Self program comes with higher insurance premiums. Refer to CMHC Insurance premiums for more information.

Remember, no matter what type of mortgage financing you are looking for, it makes sense to speak to me first. I am available outside of normal banking hours, weekends and evenings to suit your schedule.

Sincerely,
Josephine Ng
www.tdmortgage.wordpress.com

Is It Better To Be A Home Owner vs. A Renter For Taxes

Jared Chamberlain video blogs about being a home owner versus a renter in Calgary’s real estate market, specifically for tax purposes. Jared outlines the 3 reasons why it’s better to be a _____! Watch to see which is better. To leave a comment or if you don’t agree with what Jared is saying, please email him at jared@tcgroup.ca or head over to ChamberlainGroup.ca

Is It Better To Be a Home Owner vs. Renter for Tax Purposes

Jared Chamberlain video blogs about being a home owner versus a renter in Calgary’s real estate market, specifically for tax purposes. Jared outlines the 3 reasons why it’s better to be a _____! Watch to see which is better. To leave a comment or if you don’t agree with what Jared is saying, please email him at jared@tcgroup.ca.

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