Frequently Asked Questions

THE LEADER IN MORTGAGE SERVICES

 Using Your RRSP to Purchase Your 1st Home?
  When is GST Payable on a Home?
  What Should I know about Mortgage Insurance?
  How does the 5% Down Payment Program Work?
  Is it worth it to early renew a mortgage?
  Should I pay off my mortgage before the term matures?
  Should I consolidate my bills into my mortgage?
  Should I Rent or Buy?
  Should I Buy Revenue Property?

Using Your RRSP to Purchase Your 1st Home?   

• The amount you withdraw must be replaced within 15 years.
• The minimum annual payment is 1/15th of the amount withdrawn.
• If you make no payment to your RRSP in a given year, the minimum repayment will be treated as income on your tax return.
• You cannot have participated in this plan before unless you have repaid all amounts previously received, and you have not owned a home in the past 5 years.
• You must be a Canadian resident.
• You must make the withdrawal from your RSP in the same year that you are participating in this plan and you must enter into a written agreement to purchase or build a qualifying home.
• Multiple withdrawals are permitted to a maximum of $20K, however, both spouses can withdraw up to $20K each.
• You must be a First Time Home buyer – (Definition – You have not owned a principal residence in the past 5 years).
• CCRA (Canada Customs and Revenue Agency) stipulates your RRSP must be existing for a minimum of 3 months before withdrawing funds for a down payment on a house.
• The funds which are contributed to the RRSP cannot have been borrowed funds. If there is a related loan, the balance must be retired prior to withdrawal.
• Should you sell your home before paying off he RRSP loan, you do not have to repay the debt, nor do you have to purchase another home.
• If you cease to be a resident of Canada, the unpaid balance must be repaid within 60 days or it will be included as income for that year.
• Should a person die with an outstanding Home Buyers Plan balance, the funds still owed will be included in the deceased person’s income for that year.
• When you turn 69 and your RRSP matures, you must pay off any outstanding balances owed to this plan or report it as income for that year.

When is GST Payable on a Home?   

• GST (Goods and Services Tax) is currently collected at the rate of 7% on the sale of specified goods and services as outlined below:

NEW HOME PURCHASES
• A new home purchase is generally subject to GST but may qualify for a partial GST rebate:
a) if it is purchased to be a primary residence and
b) depending on the sale price.

Example:
• If your primary residence costs $350,000 or less, you will qualify for a rebate of 36 % of the GST paid, to a maximum of $8750.00. This translates to a GST payment of approximately 4.5% on the purchase price. 7% GST on $350,000 amounts to $24,500 less a maximum rebate of $8750, for a net GST payable on that amount of $15,750.

• For each $1000 of purchase price above $350,000, the maximum rebate of $8750 is reduced by 1%. For example, if your home costs $400,000 you are $50,000 over the maximum and the $8750 rebate is reduced by 50%, to $4375. You would then pay GST of $28,000, less $4375, for a net of $23,625. The rebate adjustment continues at the rate of one percent per $1,000 until an amount of $450,000 is reached, at which point there is no rebate and the full 7 % is taxable.

RESALE HOMES
• Resale Homes are exempt from GST.

• CCRA (Canada Customs and Revenue Agency or Revenue Canada) defines “used residential property” to include an owner occupied house, apartment, summer cottage, condominium, vacation property or noncommercial hobby farm. Essentially, used residential property is considered to be property that has been occupied as a residence before you bought it.

• Used property can include a recently built house that is substantially completed and has been sold at least once before it was purchased by you. For example, if a new house is purchased and resold before being occupied and lived in, the home’s resale price will normally be exempt from GST.

REVENUE PROPERTY
• If you purchase a newly constructed home, condominium or townhouse, the entire purchase price, including land is taxable at 7%.

OTHER COSTS OF REAL ESTATE TRANSACTION
• GST also applies to the some of the other costs of the real estate transaction, including legal fees, surveys and appraisals.

What should I know about Mortgage Insurance?   

• Mortgage Insurance is usually required for residential mortgage requests greater than 75% of the value of the property.
• It also may be required for residential mortgages on homes in small towns where the lender perceived there may be an element of risk.
• Mortgage Insurance is available through Canada Mortgage and Housing Corp. (CMHC) or Genworth Financial Mortgage Insurance Canada.
• The mortgage insurance premium can be added to the mortgage directly or can be paid up front, and is based upon the value of the mortgage relative to the value of the property.
• This insurance is for the benefit of the lender in the event of a default of payment by the purchaser.

The fees are as follows:
Up to 80% of value – 1.00%
Up to 85% of value – 1.75%
Up to 90% of value – 2.00%
Up to 95% of value – 2.75%
Up to 100% of value – 2.9%

How does the 5% Down Payment Program Work?   

• Whether it be your 1st, 2nd, or 3rd, home you are purchasing, you have the right to purchase this home with only 5% down payment in certain cities.
• There are maximum home prices that CMHC and Genworth Financial have stipulated.
• We can help you by contacting our local CMHC or Genworth Financial representative in your area to determine the maximum house price and if you reside in one of the designated cities.
• The CMHC or Genworth Financial premium applicable would be 3.75% of the mortgage amount, which can be added to the mortgage directly or paid up front.

Is it worth it to early renew a mortgage?   

• The answer to this question rests entirely on the cost to break your current mortgage contract as the cost is determined by considering your existing interest rate versus the new interest rate, less any prepayment fees and any applicable administration fees.
• We can help you examine your current mortgage contract and compare rates to ensure that the cost of breaking your current contract will not outweigh the benefit of obtaining a new contract.

No Down Payment Mortgage
Created to assist homebuyers who have established an excellent credit history but have not accumulated the down payment. These select lenders will advance the required 95% on your mortgage plus the required 5% down payment on your closing day.

Self Employed & Declared Minimal Income
Self employed and commissioned sales people that cannot provide traditional income verification documentation, can obtain 90% financing to purchase a home, or refinance their existing home for select purposes.

Vacation Home Program
For as little as 5% down, this program will allow you to purchase that 2nd home. So purchase that home away from home and enjoy it now. Don’t wait until you retire. The home must be available for year round occupancy.

Should I pay off my mortgage before the term matures?   

Questions you should ask yourself before making that decision:
1) How much is the interest penalty?
2) Will I miss those funds that I used to retire this debt?
3) Will I miss the interest or dividends those funds were providing me if I retired this debt?
4) Can I put these funds to work for a better return than the cost of the mortgage considering the income tax ramifications of my investments?
5) Is the existing mortgage interest tax deductible? And, if so, should I eliminate that advantage?
6) If I am retiring, do I want to carry any debt?

These are some of the questions that could be relevant to your situation. We can help you find the answers to these questions and others questions that you might have.

Should I consolidate my bills into my mortgage?   

• If you are struggling to put any money aside for a “rainy day”, one of the challenges you could be experiencing is too many payments. If this is the case, you may want to consolidate your debts into one monthly payment on your mortgage, or loan, or line of credit which can be secured by your home. We can help by answering questions that you may have regarding this type of refinance.