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First-Time Home Buyers Month

First-Time Home Buyers

This month is First-Time Home Buyers Month, the Incentive helps people across Canada to purchase their first home. This program offers 5 per cent and 10 per cent off of the home’s purchase price, to put toward a down payment. The program will lower your mortgage carrying costs and makes homeownership more affordable.

What Is The Incentive?

The Incentive makes it easier for a first-time home buyer to purchase their home, allowing their monthly mortgage payments to be lower. It’s a shared equity mortgage, meaning that the government shares in the upside and downside of the property value. Allowing you to borrow the 5 or 10 per cent of the home price. You then have the same percentage of the value of your home when you sell or within a 25-year window.

How It Works

As a first-time home buyer, you receive you 5 per cent of the home’s purchase of $200,000, or $10,000. If your home value increases to $300,000, then your payback would be 5 per cent of the current value, or $15,000.

If you’re receiving a 10 per cent incentive of the home’s purchase price of $200,000, or $120,000 and your home value decreases to $150,000, then your repayment value would be 10 per cent of the current value or $15,000.

Are You Eligible?

There are a few criteria that is used to determine if you’re eligible for the Incentive:

  1. Your total annual qualifying income does’t exceed $120,000
  2. Your total borrowing is no more than 4 times your qualifying income
  3. You or your partner area a first-time homebuyer
  4. You are a Canadian citizen, permanent resident or non-permanent resident authorized to work in Canada
  5. You meet the minimum down payment requirements with traditional funds.

The Incentive act like a second mortgage on your home, and you first mortgage must be greater than 80 per cent of the value of the property. It’s also subject to a mortgage loan insurance program, and it also must be eligible through Canada Guaranty, CMCH, or Genworth.

What Are The Repayment Details?

It’s important to note that the the Incentive must be paid in full after 25 years or when the home is sold. There are also a few ways that the repayment can be triggered; you have separated from your partner and you want to buy them out of their half, porting your mortgage, a partial release of security, or a change in the intended use of the property.

How To Apply To The Incentive

Once you’ve been pre-approved for a mortgage, found the home you want to purchase and that you have determined that you are eligible, you can apply. All you need to do now is apply by filling out the forms, you can find these forms on the first-time homebuyers government website.

After you’ve completed forms, you now need to give them to your lender and they will submit the application. Next you’ll need to give the final signed copy to your lawyer.

Contact Lori VanDinther and Team Today

Make sure you contact Lori VanDinther and her team today if you’re looking to purchase your dream home. Lori will also be happy to answer any questions you might have about the current real estate market.

Buying a Home in Canada in 2018

The bottom line is this, despite the new mortgage stress testing, which took effect on January 1st this year, you can still buy a home!

What’s this stress test?
Stress testing is a best practice risk management tool. Stress tests are used by financial institutions to gauge how their business would fare under extremely difficult conditions. Basically if the Bank of Canada raised the interest rates by say 2% over a short period of time, how would this affect people’s ability to pay off their mortgages? Can they still pay it? or will they default, causing a economic crisis?

Who is dictating this?
The Office of the Superintendent of Financial Institutions Canada (OSFI) is an independent agency of the Government of Canada, established in 1987 to protect depositors, policyholders, financial institution creditors and pension plan members, while allowing financial institutions to compete and take reasonable risks.
On October 17, 2017 OSFI released new guidelines for the mortgage industry in Canada. Guideline B-20 now requires the minimum qualifying rate for uninsured mortgages to be the greater of the five-year benchmark rate published by the Bank of Canada or the contractual mortgage rate +2%.
“These revisions to Guideline B-20 reinforce a strong and prudent regulatory regime for residential mortgage underwriting in Canada,” said Superintendent Jeremy Rudin.

Why is this happening?
Of course this make it harder to be qualified for a larger mortgage (debt), but for good and logical reasons. According to Statistics Canada, household credit market debt as a proportion of household disposable income is 170.4. This means there is a $1.70 in credit market debt for every dollar of household disposable income. So with the Canadians debt to income ratio being historically high, especially in Greater Vancouver Area and Greater Toronto Area, any fluctuations in bank interest rates will shoot up the mortgages and many mortgage owners may not be able to keep their homes. Kind of what happened in 2008 in the US – an economic disaster. So to avoid this, when a bank tries to qualify you for a mortgage, they will offer you a mortgage rate but add 2% to that. Of course this makes your home purchase power less, but it makes your more robust to interest hikes.

So now what?
You can still buy a home. You just have to change your game plan. For one you need to get your finances in order. This means work and save your money, watch your spending. You simply need to make some lifestyle changes to allow you to save more. Don’t buy too much on credit, aka money you don’t have. Do you really need that latest phone or car? Do you really need 10 pairs of jeans? Do you need multiple expensive vacations? In a perfect world, everyone wants everything. But you have to ask yourself, what is more important to you? If having a home is the answer than that is your goal and reason to sacrifice other things to be able to save a larger down payment.
Second, you may not be able to get the newest, biggest, nicest house in the best area in the city. You may have to consider condos and townhouses, instead of fully detached home which tend to run higher in price. You may have to expand your search, which mean checking out suburbs. Sure that extra 10-15 minutes drive from work when you’re already so tired is a major pain but you can get more land and bigger house. So in the end it’s about sacrifice and what’s more important to you.

Lastly, no mater if you’re buying a home or selling a home, you definitely should hire a real estate agent. A trusted professional that will be able to guide your thought the whole process. Buying or selling a home is a serious thing and trying to do it all yourself is highly not recommended. If you’re in the Burlington real estate market, be sure to contact Team VanDinther – Lori and Kim. They provide exceptional service with integrity, experience, knowledge and skilled negotiating.

Major Changes to Mortgage Insurance for Second Home Buyers

Canada Mortgage and Housing Corp. has declared that they will be tightening up the types of mortgage insurance it will offer. The Crown corporation said Friday that it is going to stop offering mortgage insurance on second homes. It will also stop offering mortgage insurance to self-employed people whose income cannot be validated through traditional means.

These changes affecting those who buy second homes also means that if they currently have an insured mortgage; they will not be eligible to act as a co-borrower on another insured mortgage.The CMHC says that its second home program and its self-employed-without-third-party-income-validation programs account for less than 3 per cent of its insurance business volumes in terms of the numbers of mortgages insured. A recent press release stated:

“Given the limited use of these products, their discontinuation is not expected to have a material impact on the housing market.”

The Crown Corporation has been offering insurance on second homes since 2005. This has enabled people to buy more than one home with a smaller down payment than they would otherwise need. It has been offering insurance to self-employed people without strong income validation since 2007. CMHC will cease offering both products as of May 30.The CMHC also noted that

“self-employed Canadians can still qualify for CMHC insured financing through CMHC homeowner products with a validation of their income using traditional methods.”

Those might include a notice of assessment, audited financial statements, or unaudited financial statements prepared by an independent third party.

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