The New Tax-Free First Home Savings Account

General Trish Pigott 29 Mar

The Government has confirmed that as of April 1, 2023, financial institutions will have the ability to start offering the new Tax-Free First Home Savings Account (FHSA). This program allows prospective first-time home buyers the ability to save $40,000 on a tax-free basis and, like a Registered Retirement Savings Plan (RRSP), contributions will be tax deductible. When a client makes a withdrawal from the plan to purchase their first home, that withdrawal is non-taxable, just like a TFSA. This plan includes an $8,000 annual contribution limit and a $40,000 lifetime contribution limit.

For those purchasing with a partner/spouse who is also eligible under this program, both applicants will have access to the $8,000, thus doubling their lifetime contribution limit to $80,000.

Program Highlights

  • The FHSA and HBP (Home Buyers’ Plan – RRSP down payment program for First Time Buyers) can now be combined on the same qualifying purchase.
  • Applicants must be a resident of Canada and between the age of 18 and 71 years old.
  • Must be a first-time home buyer, defined as someone who has not owned a home in which they have lived at any time during the calendar year before the account is opened, or at any time in the preceding four years.
  • Owner of the plan would have the ability to hold a broad range of investments, just like an RRSP or TFSA.
  • Unlike an RRSP, contributions made in the first 60 days of a calendar year cannot be applied to the previous tax year.
  • Home buyers have up to 15 years from their first contribution or until their 71st birthday, whichever comes first, to use the funds to purchase a home.
  • Home buyers can carry forward unused portions of their annual contribution (up to max. $8,000) to subsequent years, as long as they do not exceed the lifetime limit of $40,000.
  • Funds that are not withdrawn from the plan to purchase a home can be transferred to an RRSP or RRIF on a tax-free basis.
  • Non-qualified withdrawals from the plan are permitted but will be subject to a withholding tax, just as they apply to taxable RRSP withdrawals.

For complete information, please click the link to view the Government Tax-Free First Home Savings Account web page.
If you have any questions on what this means for you, never hesitate to contact our office. Or you can click here to book a Mortgage Consultation call with Trish 🙂
Trish & The Primex Team

 

4 Key Things to Know about a Second Mortgage

General Trish Pigott 22 Mar

A second mortgage is a mortgage that is taken out against a property that already has a home loan (mortgage) on it. Generally people take out second mortgages to satisfy short-term cash or liquidity requirements, have an investment opportunity or to pay off higher-interest debts (such as credit cards and student loans) that a second mortgage might offer.

If you are considering a second mortgage for any reason, here are a few key points to keep in mind:

Second Mortgages and Home Equity: Your second mortgage and what you can qualify for hinges on the equity that you have built up in your home. Second mortgages allow you to access between 65 and 80 percent of your home equity, depending on your qualifications.

For example, if you seeking 80% Loan-to-Value loan (“LTV”):

House Value =                                                  $850,000

80% LTV (maximum mortgage amount)           $680,000

less: First Mortgage                                           ($550,000)

Amount Available Through Second Mortgage     $130,000

Second Mortgages and Interest Rates: When it comes to a second mortgage, these are typically higher risk loans for lenders. As a result, most second mortgages will have a higher interest rate than a traditional first mortgage. There is also the option of working with alternative and private lenders depending on your situation and financial standing.

Second Mortgage Payments: One advantage when it comes to a second mortgage is that they have attractive payment factors. For instance, you can opt for interest-only payments, or you can select to pay the interest plus the principal loan amount. Work with your mortgage broker to discuss options and what would work best for your situation.

Second Mortgage Additional Fees: A second mortgage often comes with additional fees that you should be aware of before going into the transaction. These fees can vary widely but often range from 1-2% of the mortgage amount.  These fees are in place as they are higher risk loans that do not make you qualify with the stress test guidelines with traditional mortgages. Other fees to consider include appraisal fees, legal fees to set up the second mortgage and any lender or broker administration fees (particularly with alternative or private lenders).

Second mortgages are a great option for many homeowners and, in some cases, may be a better solution than a refinance or a Home Equity Loan (HELOC). This allows you to keep more favorable terms in place with your current mortgage and avoid penalties to access your equity.

If you are interested in finding out if a second mortgage is right for you, contact us at Primex Mortgages today! We are more than happy to crunch numbers to figure out what would work best for you.

Trish & The Primex Team

 

Do you need title insurance for a new-build home?

General Trish Pigott 15 Mar

The housing supply shortage is one of the top issues in Canada’s real estate market. But, cities are seeing a massive boom in new-build housing.

New construction offers many advantages, like more energy-efficient heating and cooling systems. Their titles can also feel less risky to transfer. After all, if the land was previously vacant, there’s no chance of unpermitted work from a previous owner causing losses for new buyers.

But did you know that new builds carry most of the same title and off-title risks as existing homes? Here’s why.

The home may be new, but the land isn’t

Even unimproved land belongs to someone. The land for the new construction may have changed hands several times before the developer bought it. Every transfer of the land can add defects to the title. Those defects can cause losses for the people who buy homes built on that land. On top of that, both the municipality and the developer might make a mistake or miscommunicate, which can end up causing a problem with the property.

Here are just some of the issues that can cause losses for owners, even on new constructions:

  • Zoning mistakes, which can happen on either the municipality or the developer side.
  • Setback agreements the developer didn’t know about, which results in homes built too close to the road.
  • Pre-existing liens, for example from property tax still owed by the previous owner.
  • Errors in the registration of the title.
  • Pending legal action against the property that the developer didn’t know about.
  • Builders’ liens, if the developer wasn’t able to fully pay a supplier or contractor.

Subdivisions can add extra complications

When an owner buys a property in a subdivision, they’re getting the title to that specific property. But all the land in that subdivision would have been under one original title before it was parceled out. The problem is, if someone has a claim against that original title, every property in the subdivision could be subject to it.

If the land for the subdivision was assembled from existing properties, that can add complications to the title of the assembled land. Those issues can then impact the new properties parceled out of that assembled land.

The developer could also make mistakes setting the property lines in a subdivision. If that happens, or if there are issues with the Real Property Reports/surveys conducted for any of the properties, the owners of those properties could have to deal with the consequences down the road.

How can title insurance help new housing starts?

Title insurance is a great solution for new construction because it can cover homebuyers for the risks associated with all properties, risks introduced by subdividing land, and even title fraud. A title insurance policy protects the insured for as long as they have an interest in the property. It also works as a better closing solution than Western Conveyancing Protocol alone, or gap-only insurance.

Builders help with some of the risks of new construction by issuing a Real Property Report to the owner. It’s a useful document, but it has a limited scope and doesn’t offer owners any recourse if an issue comes up. It also becomes obsolete if an owner puts up a new exterior structure, like a fence or a deck. A title insurance policy covers the outside elements of a property as well as the home itself, which means it still provides protection to future buyers if the current owner adds structures.

Post construction endorsement

FCT, The First Canadian Title Company, offers more protection on new construction with our Post Construction Endorsement. It advances the policy date by one year for 14 covered risks, including encroachments, work orders and zoning bylaw violations.

That means the policy covers any later improvements to the property the developer had contracted for before the closing date. Owners can take possession of their new-build home knowing that FCT is here to help handle surprises down the road.

If you have any questions on how this may affect your home, don’t hesitate to contact us! Our job is to ensure your mortgage process goes smoothly.

Trish & The Primex Team

 

Bank of Canada Announcement and What This Means For You.

Latest News Trish Pigott 8 Mar

Earlier this year we expected a .25% increase at the January announcement and saw exactly that. This next rate announcement is expected to not increase or decrease. After 8 consecutive rate hikes over the past year, the Bank of Canada is expected to leave rates unchanged. The Governing Council expects to hold the policy rate at its current level while it assesses the impact of the cumulative interest rate increases.

 

This morning, March 8th, it was announced exactly what was widely expected by economists. They have decided to hold the rate at 4.5% for the first time in a year, while reiterating its wait-and-see approach. The Bank of Canada says it still expects the annual inflation rate to fall to around 2-3% by mid-year.

 

Which leads economists to question what is going to happen after the March announcement.

 

“The U.S. Federal Reserve is probably going to be tightening at least two more times, if not more. For the Bank of Canada, if inflation remains sticky and if the economy does not break down, are they going to be able to sit there with the policy rates they have and pause as they suggested?” said Robert Kavcic, director and senior economist at BMO Capital Markets.

 

Since March of last year, the bank has raised its rate from near- 0% to 4.5%, the highest it’s been since 2007. Making it the fastest rate tightening cycle in its history, in hopes of tamping down on inflation. Although they announced this pause in rate hikes, they stressed it was conditional, making it clear that they will be ready to raise interest rates further if inflation doesn’t come down quickly enough.

 

“They wouldn’t want to announce a pause and then immediately not go through with (it),” said Karyne Charbonneau, CIBC’s executive director of economics.

 

Most recent inflation data suggests that the country is inching closer to normal price growth. Canada’s annual inflation rate slowed to 5.9% in January, down from its peak of 8.1% it reached last summer. With interest rates now at a 16-year high, most economists anticipate a mild recession sometime this year.

 

The market is a little volatile so our advice is that anyone shopping for a home currently, should get a pre-approval to hold today’s rate for up to 120 days. This will allow you to secure today’s rate, and if rates were to drop any further, you will still be eligible for lower interest rates. Don’t hesitate to reach out to us at Primex if you have any questions or concerns regarding your mortgage.

 

Trish & The Primex Team

 

What to Know Before You Sell Your Home

General Trish Pigott 1 Mar

So, you are thinking about selling your home? Whether you are down-sizing or upgrading, selling your home can feel like a big project – that’s where we come in. To help make this process as smooth as possible, we have put together a list of a few things to consider before you sell:

Improve Your Curb Appeal: When it comes to selling your home, first impressions matter. If a potential buyer first sees overgrown weeds, clogged gutters or cracked concrete, they may have a negative first impression of the home, making it harder to impress them once they are inside. Investing into your landscaping, any outdoor maintenance or repairs will go a long way in making your home more appealing. A pressure wash and new coat of exterior paint can also do wonders to give your home a facelift!

Get Rid of Clutter: In addition to updating your home’s curb appeal prior to sale, you also want to ensure that you are decluttering, and depersonalizing your space. Removing personalized photos, collectables, memorabilia and other knick knacks will help open things up and allow potential buyers to envision their own belongings in those spaces. Major renovations are not necessary, but fixing any minor repairs and a fresh coat of paint will also help to ensure the best first impression!

Set a Reasonable Asking Price: One of the most important aspects for the successful sale of your home is to price accordingly. Even though it can be difficult, when selling your home it is vital to avoid emotional decisions or anchoring your listing price to your home’s previous value.

Choose the Right Real Estate Professional: A real estate agent can help you maximize the sale of your home by working to get you the best asking price and help you walk through the sales process. Once you have a realtor in mind, it is best to conduct an interview to ensure they are the right fit for the job and that their interests align with yours. We have some great ones we work with and would be happy to connect you.

Understand the Costs: Before you get to the point of reviewing a purchase offer, you should have a reasonable understanding of potential gains (or losses) within your acceptable price range. To do this, you need to understand the costs of selling your home, which include: real estate sales commissions, closing fees, title charges, transfer and recording charges, additional settlement charges if applicable, and debt obligations related to existing mortgages.  We have some great tools in our office and are happy to provide you with these numbers.

If you’re looking to sell your home and need mortgage advice, or want to get pre-approved for your next home, be sure to reach out to us first. We will get you started with all the numbers you need to make the best choice.

Trish & The Primex team