At first glance, first-time homebuyers seem to have options for financial assistance and government incentives. But dig a little deeper. What looks like a good deal to underfunded buyers is based on modest or unrealistic conditions.
To disassemble it, we talked to Abdul Safi, a mortgage specialist working at TD in Gilford.
Home Buyer Plan (HBP)
HBP allows homebuyers to receive up to $ 35,000 from down payment plans without the impact of immediate taxes. Of course, the catch is “immediate”. From the second year after the funds are withdrawn, homebuyers must return the money to RRSP within 15 years. Otherwise, the amount for the year is considered income and is taxable. Only funds deposited 90 days or more before withdrawal are eligible.
“If you put in the money, you get a tax cut,” Safi said. “If you take it out, you’re essentially getting a short-term loan. It’s like an interest-free or interest-free loan from RRSP.”
At TD, Safi promotes about 20 to 30 applications a month. Half of them are from first-time homebuyers, and most are couples in their thirties. About half of them are in a position to use HBP.
“It depends on the tax incentives you receive and your investment strategy,” he said.
“HBP is a one-time only. If you have done it once and your investment strategy is to buy a second home, for example after 5 years, it is you to keep putting money in RRSP. May not work because you can only retrieve it once. If your investment strategy is to “buy a house, put money in RRSP, and slowly withdraw at age 65” , It works. “
First-time homebuyer incentive
FTHBI, managed by the Canada Mortgage and Housing Association (CMHC), helps reduce monthly mortgage payments without the additional financial burden of first-time homebuyers repaying RRSP loans. I am aiming for it. Under this program, Canadians can apply for 5% or 10% of the value of a home from the Government of Canada (5% for existing homes, up to 10% for new homes) to increase down payments and increase monthly mortgage payments. I can. Affordable.
Catch: The government wants a pound of drywall, so to speak, when the house is sold or 25 years later. Then an equal percentage (5 or 10%) of the fair market value of the home is paid to the federal government.
British Columbia’s FTHBI eligibility requirements vary slightly depending on where you buy them. In the metropolitan areas of Vancouver and Victoria, homebuyers are eligible for FTHBI if their household income is less than $ 150,000 and their total mortgage is less than 4.5 times their income. In all other parts of the state, eligible income is $ 120,000 and the total mortgage amount cannot exceed four times your income.
These limits create a maximum purchase price. In Vancouver or Victoria, a home must be worth less than $ 675,000 to qualify. The maximum purchase price is $ 480,000 across the rest of the state.
“It’s a less popular program,” Safi said. “I saw it once, perhaps twice in the last four years. I promote more than 200,250 mortgages a year.
“There’s a bit of speculation. In Fraser Valley, a new townhouse that sold for $ 700,000 eight months ago is now selling for $ 900,000. So take this program and get 10%. If you took it, you would have to pay more at home because the value had increased significantly. If they knew this was the rate of increase in value, no one would have done it. “
Property transfer tax
The PTT paid at closing is based on the fair market price of the property. Rates are 1% of the fair market value up to $ 200,000, 2% of the value above $ 200,000 up to $ 2,000,000, and 3% thereafter. (An additional 2% applies to properties over $ 3,000,000.)
Good news: There is an exemption for first-time homebuyers. Bad News: Find a qualified property and do your best.
The tax exemption applies only to resale homes up to $ 500,000, homes between $ 500,000 and $ 525,000 are partially tax exempt, and pre-sale homes are tax exempt up to $ 750,000. Look for properties in Metro Vancouver that list those amounts.
“Not many people use it because it’s not available,” Safi said. “Prices are high, unless you’re going to the entry level in Fraser Valley.”
What’s more, unlike the GST in a brand new home, you can’t incorporate money into your mortgage. “Most lenders will say that they need to have those funds in addition to the down payment.”
Low Burden Conditions: The property must be the buyer’s primary residence and the buyer must be a Canadian citizen or permanent resident.
Mom and dad’s bank
Safi says more than half of his first-time homebuyers receive gifts from their families for their purchases.
“I’m seeing a transfer of wealth. There are a lot of homebuyers who come to me and say,” Hey, I have $ 300,000 or $ 400,000 to use for a down payment. ” They are not their savings. They are given by their immediate family, mainly parents. I have seen this more and more in the last two years. Before that people saved. Gifts are getting bigger and more frequent than they used to be. “
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Financial aid and incentives for first-time British Columbia homebuyers
Source link Financial aid and incentives for first-time British Columbia homebuyers