31 Jul

Converting Your Basement to an Income Suite

Posted by: Kim Seifert

With the current interest rates and economic scenarios, many Canadians may be looking for ways to bring in some extra cash. One option for this is to put your home equity to work and consider renovating/ converting your basement into a legal income suite!

You can do this by using a secured credit line (home equity line of credit or HELOC) to help fund the upfront cash to make changes to your home.

A few things to consider before you invest in renovating to create an income suite include:

Zoning: Before looking into doing anything with an income suite, always double-check if you are zoned accordingly for a smooth renovation. If your zoning does not allow for secondary suites, see if you can rezone.

Local Regulations: Depending on your location, there may be particular regulations that you need to follow or be aware of regarding your suite.

A few examples of how the regulations can differ between provinces or cities include:

In Coquitlam, you cannot have a suite that is more than 40% of the main house floor plan. You are also required to offer a parking spot for tenants.
In Kelowna, you can only have one secondary suite and the home must have an “S” designation.
In Calgary, updated zoning legislation has now made it easier to add income suites.
Toronto has also proposed reforms that will make it easier to add suites.
In Montréal, anyone carrying out a project involving the addition of at least 1 dwelling and a residential area of ??more than 450 m² (equivalent to approximately 5 dwellings) must enter into an agreement with the City of Montréal in order to contribute to the supply of social, affordable and family housing. It can be a new building, an extension, or the conversion of a building.

Visit the official municipal websites or consult local building departments to obtain accurate and up-to-date information on the rules and requirements in your area BEFORE getting started.

Insurance & Legal Considerations: Before adding your secondary suite, ensure that you have proper insurance coverage or the ability to add additional coverage to protect both the primary residence and suite. In addition, you will want to consult a lawyer and draw up a tenant or rental agreement for any potential tenants. Ontario has a mandatory standard lease agreement that all landlords must use.

Unit Layout and Design: If the zoning and regulations in your area allow you to build an income suite, the next steps are to look at the suite layout and dimensions. Confirm any size restrictions or minimum ceiling height requirements as you are laying out the design for the unit.

The unit should have, at minimum the following:

A separate parking space for the renter.
A separate entrance, kitchen, bathroom, and living/sleeping areas.
Ventilation and soundproofing measures to enhance livability.
Consideration of natural light.
Interlink smoke detectors for primary and secondary residences.
Separate, independently-controlled ventilation and heating system.
Proper drainage, sewage connections, and utility separations.
Outlets, circuits, and lighting that meet electrical code requirements.

Ensure that however your income suite is designed, you are hiring the appropriate building, plumbing, and electrical experts to ensure your suite is up to code and avoid any potential disasters.

Building & Trade Permits: Once you have confirmed that you are properly zoned and able to add an income suite and understand all the regulations for your area, you will want to draft your blueprints and submit a permit application, along with the fee, before you get started. For instance, in B.C. you are required to have a Building Permit for any suite to be considered legal.

IMPORTANT: Even if you are not required to have a building permit, it is important to get these permits for other aspects including insurance coverage should anything happen. Having a building permit will help protect your investment. In addition to your building permits, you will need to get permits for any plumbing, electrical, and gas renovations prior to beginning your work.

Inspections & License: Once you have your permits and have begun construction, make sure you understand what inspections are required throughout the process and you schedule them accordingly with local authorities to ensure compliance with building codes, fire safety standards, and health regulations.

If the work meets all requirements, your suite will be approved. The last step is determining if you need a business licence. This is not required if your family (parents, children, etc.) will be living in the suite. In Vancouver, for example, if you intend to rent out your suite long-term, you DO need a license. Be sure to check any rules on this in your area.

Beyond the ability to earn extra income per month, there are a few additional government incentive programs when it comes to suites including:

First Nations: If you live on a First Nations reserve, you may be eligible for federal funding that will provide up to $60,000 to help you build an inexpensive secondary suite rental linked to your principal home. If you live in a northern or remote area, this amount is increased 25%. This is a 100% forgivable loan that is not required to be paid back assuming all guidelines are followed.
Residential Rehabilitation Assistance Program (RRAP) – Secondary and Garden Suites: This program is open to all First Nations or individual First Nation members, particularly those who own a family home that can be converted to include a self-contained suite for a senior or adult with disability.
Multigenerational Home Renovation Tax Credit: A credit for a renovation that creates a secondary unit within the dwelling to be occupied by the qualifying individual or a qualifying relation. The value of the credit is 15% of the lesser of qualifying expenditures and $50,000.
British Columbia: Beginning in early 2024, BC homeowners will be able to access a forgivable loan of 50% of the cost of renovations, up to a maximum of $40,000 over five years, for income suites.
Ontario: There are multiple secondary suite programs throughout Ontario, depending on your region. These loans provide $25,000 to $50,000 in funding and are forgivable assuming continuous ownership for 15 years.

While it is important to look online and do your research. Your best resource will be visiting local authorities at the “City of” to confirm that you completely understand the considerations before moving forward with implementing an income suite.

12 Apr

HOW PERSONAL TAXES WORK IN CANADA

General

Posted by: Kim Seifert

How Personal Taxes Work in Canada — They contain 3 calculations. If you look at your actual personal tax return, you will see it essentially follows this format.

Add: Income Minus: Deductions Equals: Taxable Income
Add: Taxable Income Times: Tax Rates Equals: Tax Otherwise Payable
Add: Tax otherwise Payable Minus: Tax Credits & Payments Equals: Tax Owing/Refund

HOW PERSONAL TAXES WORK IN CANADA — So How Do You Pay Less Tax?

If you follow the formulas, you would see that any of these will have you pay less tax.

Earn Less Income or Earn Income That is Exempt From Tax
- Earn investment income through TFSA/RRSP/FHSA/RESP so that it’s not reported on your return
- Have someone else earn income (income splitting)
- If you have self employment income, considering earning that income through a corporation
Increase Deductions
- Deductions reduce your income and as such, you will pay less tax.
- Take advantage of employment expenses, negotiate with your employer to make it a condition of employment
- Make RRSP contributions – Claim child care expenses if you’re eligible
- Earn (legitimate) business income so that you can deduct business related expenses
- If you sell as part of your work, negotiate some commission income as commissioned employees can deduct more expenses
Lower Your Tax Rate
- Different incomes have different tax rates. Dividends & capital gains are taxed at lower rates than employment income. There is a lot less flexibility here. You should also strive to max out RRSP/TFSA/FHSA before earning capital gain/dividends personally
Increase Your Tax Credits
- Make eligible donations
- if you have a disability, apply for the disability tax credit
- claim medical expenses
- There are a bunch of tax credits, take a look through them to make sure you’re taking advantage of all of them.

Here is a list of all the tax credits and deductions, scroll through them to see if you are eligible for any that you might not have claimed. Click Here

I hope you find this information on HOW PERSONAL TAXES WORK IN CANADA helpful.
Source: Canadian Tax Guy @TheTaxHeroes

Every Canadian who pays taxes should know how to access to their CRA My Account.

So. what is the CRA My Account?

This is an online portal that summarizes your current standing with the Canada Revenue Agency. If this is your first time using CRA My Account, here’s a thread on how to register.

Using the “Sign-In Partner” (Signing in through your online banking)
Signing in with your official CRA login details. (Press CRA register) *The following steps apply to both options when initially signing in*

PS – there’s a 3rd option which is signing in through a Provincial partner. At the moment, this is only available in Alberta and BC using your “MyAlberta Digital ID” or your “BC Services Card.” For simplicity, Let’s walk through the “Sign-In Partner” option using your online baking details. This is the easiest method because you don’t have to create and remember a separate login. Hit this link and follow the steps below: Link

Step 1: Press “Sign-In Partner” and select your bank *Please note you’re only limited to the banks available on this list. If your bank is not on this list you’re limited to Option 2 (To register for a login with CRA).

Step 2: Once signed in, Enter your Social Insurance Number, press “Next”. This is the start of a few steps to verify your identity.

Step 3: Enter in the following details: – Postal Code – Birthday – The requested line item from your most recent tax return. In this example it’s line 20700: (If you don’t know this information, go check your files or ask your parents).

Step 4: The next page explains that the CRA will send you a letter with a security code, via snail mail to your house within 5-10 business days. Press “Next” The next page will ask you to verify that the postal code provided is correct. Once confirmed, hit “Next” again.

Step 5: At this point you’ll have limited access to your My CRA Account until your letter comes (5-10 business days). Once your letter arrives, log back in and enter the security code to gain full access.

Once you have full access, CRA My Account also allows you to track your refund, view or change your tax return, view contribution limits, check your benefit/credit payments and much more. NOTE: Especially important for business owners. It’s so easy and helpful to have direct access to your own records. The instructions above from Jordan Dawit @JordanDawit are only breaking out the personal side of the CRA My Account. KNowing how to Create a CRA MY ACCOUNT and HOW PERSONAL TAXES WORK IN CANADA should come in extremely handy.

The CRA My Account comes in extremely handy when applying for a mortgage. So, make sure you sign up before you apply for a mortgage as it could take 2 or more weeks to get full access to the site.

Well you are here check out the most current rate specials: Here

7 Apr

Can Investing in Real Estate Through a Corporation Reduce Your Tax Bill?

Mortgage Tips

Posted by: Kim Seifert

Can Investing In Real Estate Through a Corporation Reduce Your Tax Bill?

Quick Answer “No”…

Can Investing In Real Estate Through a Corporation Reduce Your Tax Bill? — Common Mistake, because people look at tax rates as active business income (for example: 12.2% on the first 500k and 26.5% thereafter in Ontario) and then compare them to personal rates which exceed 26% at over $53,000. IMPORTANT POINT: Rental income is not considered active business income. It’s considered passive investment income, which is instead taxed at 50.2%, a rate that the personal tax brackets in Ontario don’t exceed until you hit over $235,675.

Rental Income Paid Out As A Dividend?

Paying your rental income out as a dividend to yourself — there is a system called integration built into the tax code that results in you paying about the same amount of tax corporately and personally as you would have had you owned the property personally. So in the end, it’s basically a tax-neutral play, that comes with a higher cost of tax filing.

Now does that mean incorporation is pointless? Well no, there is the added benefit of creditor protection to consider in that if a tenant or vendor sues you, they will sue your corporation. Protecting your personal assets not held in the corporation. But overall, the real estate holding company being a tax play is nothing but a myth in Canada.

Dividends From Canadian Corporations Are Tax Preferential (ie: you pay less tax than income on them).

To understand this concept you need to first understand two things:
1. Dividends are paid from after-tax corporate profits.
2. Corporate Taxation is based on a concept called ‘integration.” Integration’s key principle is that no matter how much money comes out of a corporation, the tax result is the same. To demonstrate how this all comes together, let’s compare bondholders being paid interest to shareowners being paid dividends.

Interest: Is tax-deductible to the corp and fully taxable to the bondholder as income. For example, in Ontario, this means a tax bill up to 53.53%. Therefore for every $100 paid in interest, the government collects up to 53.53% and leaves you with as little as $47.47.

Dividends: Come out of after-tax earnings. That means $100 pre-tax pays corporate tax first before it comes out as a dividend. Rates vary based on the province, but let’s assume 26% for a publicly-traded Canadian Corporation. That means the $100 pre-tax is $74 after tax that can be paid as a dividend. Once received the individual pays tax on the dividend through a system that involves a gross-up and a credit. This is intended to reflect the fact that the corporation already paid some tax and give you credit for it. The end result, you receive $74 and pay up to approximately 37% and leaves you with as little as $47.47. The exact same as fully taxable interest! In the end, the government gets the same amount of money and so do you.

Why should I Care What The Corporation Paid In Tax? If you paid less tax, they could pay you a larger dividend equal to the tax savings and have no adverse impact on the business. However, if that was the case then tax rates would be adjusted and it would still equal the same. Arguing that corporation taxes don’t matter is like arguing it doesn’t matter that someone ate a quarter of your pizza before it was delivered to you. With pizza, you can see the difference. With a dividend, you don’t but that doesn’t mean a portion is not gone.

Foreign Dividends: Is considered fully taxable income. However, it can be even higher than 53.53% for stocks traded in countries in which Canada has a tax treaty – any withholding tax paid on dividends by their companies / you typically receive credit for that withholding tax / which then reduces your Canadian tax bill by the same amount. For stocks traded in countries without a tax treaty, it could result in no recognition of withholding tax and a higher total rate of taxation than the top marginal.

In Canada There Is No Cheap Way To Get Money Out Of A Corporation:
Interest = Fully Taxable
Dividend = Integrated to the same as Fully Taxable
Foreign Dividends = Fully Taxable (and maybe worse)
REIT Income Distribution = Fully Taxable
Employment Income = Fully Taxable

The only real break in income taxes is on Capital Gains which are half taxable currently in Canada. More Here:

If you are over 65 and receiving OAS, dividends are the worst form of income to receive. The problem is OAS is clawed back at a rate of 0.15% on incomes above ($81,761 in 2022). The problem is this threshold is based on gross income. Dividends get grossed up by a rate of 38% meaning that $1.38 of gross income is added to this test. While you get a credit later on for tax purposes, it doesn’t help with the OAS clawback. Simple example: income of $82k + dividends of $10k. This will cost you $2,070 in OAS. Which means, for those in the clawback zone, the effective tax rate on dividends is actually 15% higher than other forms of fully taxable income.

Does it help if these dividend paying stocks are reinvested ie through a drip? How about held in a TFSA?

Drip: No, still taxable.

TFSA: Corporation tax still applies and you may be worse off with foreign dividends as the tax treaty may not recognize TFSA’s. This is the case with US stocks; meaning you are subject to withholding tax and don’t benefit from the foreign tax credit.

Article Source: Jason Pereira @jasonpereira – This is one of the best threads I have seen on this topic. Well laid out, explained at a level even the casual investor/ rental property owner could follow and understand. It was too good not to share here.

1 Mar

Tax-Free First Home Savings Account FHSA

Latest News

Posted by: Kim Seifert

Tax-Free First Home Savings Account (FHSA) arrives on April 1st, 2023.

What is the Tax-Free First Home Savings Account (FHSA)?
How does it work?
Benefits of the FHSA?
What strategies can you use to make the most of it?

What is the Tax-Free First Home Savings Account (FHSA)?

A brand-new type of account called Tax-Free First Home Savings Account (FHSA) Canadian residents can use to save for their first home in Canada. It blends characteristics of both RRSPs and TFSAs and, when used correctly, can fully bypass income tax.

How does it work?

Contributions are tax-deductible – just like an RRSP. And withdrawals can be tax-free – just like a TFSA. The lifetime contribution limit is $40k, and the annual contribution limit is $8k. Unlike the HBP, you don’t need to pay it back.
The Contributions do not impact your RRSP room, and they do not need to be deducted in the year they are made. Like an RRSP, if you contribute but want to carry the deduction forward to a year when you’re in a higher tax bracket – you can.
You can invest your FHSA in stocks, bonds, mutual funds, ETFs, GICs, and savings accounts. Like a TFSA, there is no limit on how much you can withdraw, only how much you can contribute. And investment income earned while in the plan is tax-free.

Your FHSA must be closed by December 31st on the soonest of:

15th year after you open it.
The year you turn 71.
The following year of your qualified home purchase. The balance can be taken as taxable cash or rolled over, tax-deferred, to your RRSP.

Who can open Tax-Free First Home Savings Account (FHSA)?

First-time home buyers between the ages of 18 and 71.
A first-time home buyer means you cannot have lived in a home that you or a spouse/common-law partner owned in the current year or the previous 4 calendar years.
You can only use the FHSA once. Like the RRSP, TFSA, and RESP, if you over-contribute, there are penalties.
It’s 1% of the excess amount per month until withdrawn. Unless you know a way to get guaranteed 13% annualized returns (you don’t, even with dividend stocks), don’t over-contribute.

How do I withdraw money from my Tax-Free First Home Savings Account (FHSA)?

To qualify as tax-free, you must buy the home by October 1st of the year after the withdrawal. So, if you withdraw it in 2026, you must buy the home by October 1st, 2027, regardless of the month you withdraw the funds in 2026. You can also withdraw funds from your FHSA up to 30 days after you purchase the home. If not, the withdrawal will be fully taxable. You’ll need to provide purchase details to your financial institution.

Can it be used with the RRSP Home Buyers’ Plan?

Yes! The first draft of the legislation specifically said no – you would have to choose one or the other. However, in the final version, this language was omitted. You can use both for the same home purchase.

What about incorporated professionals and business owners?

If you pay yourself only dividends, you don’t generate any RRSP room. But with the FHSA, you’re given $40k in free room to transfer to your RRSP later. If you qualify, max it out.

Even if you do pay yourself a salary and have RRSP room – consider the FHSA first. Since you can always transfer the FHSA to an RRSP later, this preserves your RRSP room and takes advantage of the $40k in FHSA room while you qualify as a first-time home buyer.

What are the downsides of a Tax-Free First Home Savings Account (FHSA)?

Honestly? None that we can think of. At best, it fully bypasses income tax to buy your first home. At worst, it’s a free $40k in RRSP contribution room. My guess is they will slowly phase out the Home Buyers’ Plan in favour of the FHSA.

Any tips and tricks? Yes. Many, in fact. (courtesy of @markmcgrathcfp)

Think about filling your FHSA before your RRSP since you can always transfer the FHSA to the RRSP if you don’t use it. Once maxed, any remaining savings for your home purchase can go to a TFSA, RRSP, or non-registered account, depending on your circumstances.

Consider transferring money from your RRSP to your FHSA up to the annual & lifetime limits. Useful if you’ve been funding an RRSP, won’t be able to max both the HBP and the FHSA, and don’t want to repay the withdrawal from the HBP. You won’t get a tax deduction, though.

If you’re gifting money to your adult kids, consider funding an FHSA for them. There’s no tax on cash gifts to adult kids. They can carry the deductions forward and use them in years with higher tax brackets. This will preserve their RRSP room for use in later years.

Fund your spouse or common-law partner’s FHSA too. While you can’t fund a spouse’s RRSPs without invoking the attribution rules, you can fund a spouse’s FHSA. No tax will be attributed back to you on the withdrawal, regardless of whether you use it for your first home.

Use the HBP and the FHSA together if you can. With a spouse, this could be over $150k in total funding for a down payment. The HBP portion will be required to be paid back over 15 years at most, starting the second year after the withdrawal.

Open an FHSA even if you don’t plan on buying a home. It’s free RRSP room in that case. You can preserve your RRSP room for later use. Why not take it?

It can be used if you have a rental that you never lived in If you bought a rental but never a primary residence, you might still qualify under the definition of a first-time home buyer. Remember, to qualify, you cannot have lived in a home you or your spouse owned.

Lastly, here is a great chart courtesy of @aaronhetorcfp that breaks down some of the similarities and differences between RRSP’s, TFSA’s and the FHSA:

The FHSA should be high on your consideration list as the first option for funding a home purchase. When used properly it combines the best parts of the RRSP and the TFSA. And at worst – it’s free RRSP contribution room. For more information: Click Here

Looking to start the process of applying for a mortgage? Click Here to get started.

UPDATE April 2023:

All of the Big 6 banks confirmed that they won’t be in a position to offer the new account to clients until later in the year.

However, the country’s largest banks say they are still working to finalize the logistics of offering the account to clients, including obtaining the required government authorizations and awaiting tax reporting guidelines from the Canada Revenue Agency. Most expect to offer the account later in the 2023 tax year. Here are the official responses from each of the six banks, along with their FHSA pages where they will share more information once the accounts become available:

BMO

Tax-Free First Home Savings Accounts (FHSA) will be available to BMO customers including BMO Wealth clients, starting with an offer through our retail bank and wealth advisory channels for the 2023 tax year. We’ll be expanding the offer to other channels in the future and updates will be posted to BMO’s FHSA website.
BMO’s FHSA webpage

CIBC

“We are excited to bring another savings opportunity to our clients later this year and, as information becomes available, plan to share an update regarding timing in the coming months.”
CIBC’s FHSA webpage

National Bank of Canada

“We’re working to make the FHSA available to our clients as quickly as possible after the legislation comes into effect on April 1. At this time our team is making every effort to complete the necessary technological development.”
NBC’s FHSA webpage

Scotiabank

“In addition to the wide variety of savings products we offer our customers today, we’re targeting to offer the new first-time homebuyer’s savings account to customers in the 2023 tax year.”
Scotiabank’s FHSA webpage

Royal Bank of Canada

“We expect to launch FHSA this spring, but we don’t have further details to share at this time.”
RBC’s FHSA webpage

TD

“TD understands that saving for your first home is one of the most important financial journeys for Canadians, so we are working to ensure the FHSA has the features and benefits that Canadians need when we launch it later in 2023.”
“In the meantime, customers can visit our public webpage to learn more about it, and once the FHSA becomes available, we encourage those interested to book an appointment with a TD Personal Banker at any of our branches across the country.”
TD’s FHSA webpage

31 Jan

HSBC Partners With Dominion Lending Centres

Latest News

Posted by: Kim Seifert

HSBC is now lending THROUGH THE BROKER CHANNEL in B.C., Alberta, Saskatchewan, Manitoba, and Ontario EXCLUSIVELY through Dominion Lending Centres.
HSBC brings their industry leading mortgage rates directly to the Broker Channel. this is exciting news as adding lenders to the already strong stable of lenders helps bring more options directly to the mortgage consumer.

“Adding Desjardins, together with the HSBC program, provides Velocity mortgage professionals with greater lender access across Canada and the ability to access exclusive preferred rates,” said Geoff Willis, president of Newton.

HSBC NICHE Products:

HELOC at Prime
Holdco
New to Canada
Net Worth Wealth Product

HSBC Bank of Canada is the seventh largest bank in Canada with a network of 130 branches and a contact centre available 24 /7 to assist our clients. HSBC Bank
Canada is also the leading international bank in the country and for almost 40 years.

Let’s Talk Mortgages… Apply Here

30 Jan

Finance Restructure

Mortgage Tips

Posted by: Kim Seifert

KDK Financial can help with Finance Restructure of your Vehicle/Trailer/RV/Boat. They help you keep your assets and drop your payments, and remove co-signers. They can also help with Auto/Trailer/RV/Boat acquisitions. They can help with Credit Rebuild and also offer Cash-back options well consolidating debt. Finally they can also do lease buyouts.

1. They’ve helped clients gain cash for their down payment of their forever home.
2. They’ve helped clients payout high interest credit card/line of credit debt. Cashflow.
3. They’ve helped clients cut their existing vehicle payments in HALF. Cashflow.
4. They’ve helped clients rebuild their credit.
5. They’ve helped clients purchase a new RV/Boat/Car/Truck.
6. They’ve helped clients remove a co-signer from a loan.
7. They’ve helped clients obtain lump sum cash payments for some of life’s more expensive roadblocks.

Below Are the Finance Restructure Program Features:

1. No client fees.
2. KDK doesn’t charge taxes – dealerships must charge taxes to perform our service.
3. Multiple Lenders – KDK has over 22 lenders that bid for the contract = better chance at approval/better terms
4. KDK is Nationwide – most other companies are region specific.
5. KDK Customer Service – KDK is the only 5-star Google rated auto-brokerage in Canada.
6. KDK has an Interactive Portal – the only company in Canada with a user-friendly portal that allows the broker to easily submit leads and follow the progress.
7. Our Approval Ratio – Over 20 years of dealer financing experience. Kevin, who heads our underwriting, formerly worked for Canada’s largest Auto Group as Director of Finance. He has relationships with lending institutions that allow KDK to get deals approved where others can’t.
8. KDK Speed to Having the File Approved – Average file is 24-48 hours from start to fund finish.
9. KDK rates and terms – We get dealer rates, so the lowest in the industry and we can also get much longer terms and have income waived approvals.
10. Our rates and terms vs bank branches – 2-3% lower than bank branches off and twice the amortization.

Automotive Lending parameters as of January 1, 2023:

Advances: KDK can get as high as 180% advance of the assets value — (on excellent A+ credit we can get up to 180%)
Amortization: 2020 and newer — up to 96 months *OAC 2017- 2019 up to 84 months 2016 up to 72 months 2014 – 2015 – B Lending – Contact KDK for details.

Coles Notes On What Makes KDK Financial Different:

• No charge for services (some companies charge up to $1,499).
• Customer Service/Consumer confidence (Fast responding to inquiries).
• Over 20 years working in the automotive finance industry.
• Broker Control (Everything is run by the Mortgage Broker in depth before processing the final contract with a mutual client).
• Speed – Time kills deals. We pride ourselves on a 24-48 turnaround and have done files within 2 hours.

Contact me for to Learn More.

30 Jan

PST REBATE FOR NEW HOME CONSTRUCTION

Latest News

Posted by: Kim Seifert

PST REBATE FOR NEW HOME CONSTRUCTION:

The PST Rebate for new home construction is for the use of new home purchasers that claim the Provincial Sales Tax (PST) rebate on a newly-constructed home that is owner-built. The PST Rebate provides a rebate of up to 42% of the PST paid on the purchase of a new, previously unoccupied home (newly-constructed home), where the purchaser takes possession of the home after March 31, 2020 and before April 1, 2023, or meets all of the following criteria:

1. The construction phase defined in Information Bulletin PST-75, PST Rebate for New Home Construction as “new housing start” is complete before April 1, 2023.
2. The purchaser takes possession before April 1, 2024.

The rebate is available on newly-constructed homes with a total price of less than $450,000. The amount of the rebate is reduced for homes with a total price between $350,000 and $450,000, with no rebate available for newly-constructed homes with a total price of $450,000 or more.

Please see Information Bulletin PST-75, PST Rebate for New Home Construction, for more information on the rebate program and for details on how the rebate is calculated.

Application Form

Looking for a mortgage for your newly built home, apply here.

16 Jan

Power of Sale

Latest News

Posted by: Kim Seifert

What is a power of sale?

A power of sale essentially allows the lender – not a homeowner – to sell the home if the borrower defaults on the mortgage or the lender chooses not to renew at end of term. A power of sale is a clause that is written into a mortgage that gives the lender the authority to sell the property.

In terms of mortgages, a power of sale is very similar to a foreclosure. In fact, both terms are often used interchangeably. In the case of a mortgage foreclosure, the lender takes total control over the property and owns it completely, then is allowed to sell it without having any obligations to the owner as far as resale price is concerned. With a power of sale, the lender must sell the property for the highest price possible with any proceeds coming out of the sale going towards paying off the remainder of the loan and any interest arrears or commissions associated with the default. If there are any funds leftover, they go back to the homeowner as title still remains with them.

When it comes to dealing with outstanding mortgages, each province and territory in Canada either uses the power of sale or foreclosure. The foreclosure route is used in Quebec, British Columbia, Alberta, Manitoba, Saskatchewan, Nova Scotia and the three territories. On the other hand, Ontario, Prince Edward Island, New Brunswick and Newfoundland and Labrador use the power of sale.

Why are the Private Lenders asking for their mortgage money back?

Most Power of Sales today are coming from Private Lenders — either individuals or MICS. 85% of Private Mortgages are 1-year terms. Private Lenders can decide NOT to renew at end of term. At this point a demand for repayment goes out to the borrower. If the borrower can’t find another source of financing they are left in a bind.

MICS are receiving redemption requests from investors and need to raise cash to pay them out.
Property Values have fallen and the Lender wants their money back before property values fall further.
Private Lenders funded from HELOCS on their homes and Rates have risen to the point they simply want their money back to pay down that HELOC.

Pro Tip: Make sure you have an exit strategy when dealing with Private lenders. And follow your plan so you can move your mortgage back to regular lenders and avoid this scenario.

What Can Borrowers Do When Facing a Power of Sale?

If you are a homeowner who has fallen behind on your mortgage payments and are facing a potential power of sale process, there are some options available. A power of sale can often be a time-consuming and complicated process for lenders, so they may often be willing to come up with a different plan of attack to get their loan money back if you are willing and able to meet them in the middle.

If you default on your mortgage, be sure to get in touch with your lender/ mortgage broker right away to discuss any possible alternatives so that you can bring your mortgage payments back up to par and avoid a power of sale or another process that will leave you without a home.

One option that you may want to consider is to secure another mortgage from another lender. This mortgage can then be used to pay off your original mortgage and any arrears that come with it or to bring the arrears up-to-date with a second mortgage. This option might even allow you to spread out the rest of your mortgage repayment over a longer time frame and even reduce your monthly mortgage payments.

Let’s Talk Mortgages… Contact

15 Jan

Government Programs to help with Your Home Purchase

General

Posted by: Kim Seifert

Government Programs to help with Your Home Purchase

The Government of Canada offers a number of homebuyer assistance programs that can make the financial pain of that big purchase a little easier to handle. Below are some of the Government Programs to help with Your Home Purchase.

First-Time Home Buyer Incentive

First-time homebuyer? There are several programs designed to assist you, like the First-Time Home Buyer Incentive. This incentive offers 5% or 10% of the home’s purchase price toward a down payment. As a result, you have a lower carrying cost on your mortgage. You’re eligible for the incentive if, as the name suggests, you’re a first-time homebuyer in Canada. (You can also take advantage of it if you’ve recently ended a marriage or common-law partnership.)

You do have to pay the incentive back, however, when you sell your home, or within 25 years of purchasing it — whichever comes first.

Buyers in Toronto, Vancouver, and Victoria Census Metropolitan Areas are also eligible for an increased qualifying annual income of $150,000 instead of $120,000, and an increased borrowing amount of 4.5 times their qualifying income.

Once you’ve been pre-approved for a mortgage and you’ve found the home for you, you fill out the Shared Equity Mortgage Information Package and the Shared Equity Mortgage Attestation and Consent Form, for your lender to submit for you. If you’re approved, call FNF Canada at least two weeks before your closing date to activate the incentive.

Home Buyers’ Amount

One of the benefits of being a first-time buyer is that when tax season rolls around, you can apply for a healthy deduction. The Home Buyers’ Amount — also referred to as the first-time homebuyers’ tax credit — allows first-time home buyers in Canada to claim a $5,000 tax credit for the purchase of a qualifying home, which includes existing homes and those under construction. However, the budget proposes increasing the credit to $10,000.

The amount you get back from the CRA is dependent on the lowest personal income tax rate for the year you bought your home. According to the Government of Canada, the current rate for 2022 is 15%, which would result in a rebate of $750.

To claim this tax credit as a first-time homebuyer in Canada, fill out line 31270 on your yearly income tax return.

Home Buyers’ Plan (HBP)

If you have a Registered Retirement Savings Plan (RRSP) and you are a first-time home buyer, you can dip into it tax-free to buy your home via the Home Buyers’ Plan. In 2019, the federal government increased the withdrawal limit to $35,000. But keep in mind, you have 15 years to pay back the withdrawn funds.

GST/HST New Housing Rebate

People buying a new build, or even building their own home in 2022, can take advantage of the GST/HST New Housing Rebate. The rebate will cover some of the GST or the federal part of the HST you paid.

You can apply for the rebate by filling out the New Housing Rebate Application for Houses Purchased from a Builder, and filing it with Revenue Canada. Those living in Ontario also need to fill out the Ontario Rebate Schedule . If you are building your own home, you’ll also need to submit a construction summary worksheet. And you have to include supporting documents if a vendor didn’t charge you HST or GST on your invoice.

CMHC Eco Plus

An energy-efficient home doesn’t just help the environment — it also nets you some savings. If your newly purchased house or condo is built to certain energy standards, you can claim a CMHC Eco Plus rebate of up to 25% on your mortgage loan insurance premium.

“The CMHC Eco Plus qualifying criteria currently consists of a list of third-party energy efficiency certifications and targets based on energy consumption and greenhouse gas emissions levels using Natural Resource Canada (NRCan)’s EnerGuide rating system,” says Peter Mapendere, senior specialist of client relations at CMHC.

The rebate is currently meant for newer and newly constructed homes. So, if you’re looking for a new home, consider choosing one that’s been certified by a program recognized by the CMHC Eco Plus program, and with a recent EnerGuide rating provided by an NRCan approved energy advisor.

However, “a retrofit criteria is currently being considered and may be part of a subsequent round of enhancements for the CMHC Eco Plus program,” says Mapendere. Until then, you can refer to the Government of Canada’s Greener Home Loans program for tips on decarbonizing an existing home.

To apply, fill out the application and send it to the Canada Mortgage and Housing Corporation.

“Borrowers have two years from the date closing of the mortgage loan insured with CMHC to apply for the refund,” says Mapendere. “Once received, processing of the refund can take up to 20 business days.”

Government Programs to help with Your Home Purchase — Other down payment assistance programs

Maybe you don’t qualify for one or more of Canada’s homebuying programs because your income is too low. The good news is: there are still options. Most provinces, and even some municipalities, have some sort of down payment assistance in place.

In Prince Edward Island, for instance, eligible buyers can get a conditionally interest-free loan of 5% of the purchase price. And in Manitoba, the Rural Homeownership Program creates pathways that make it easier to purchase a home outside of major cities.

First-time home owner grants

If you’re new to homebuying, you might be asking yourself: are there any grants available for first-time homebuyers in Canada?

While Canada’s homebuying programs aren’t technically considered home buying grants, per se, they can significantly help lower the amount you’ll pay for your home. Make sure to consider all homeownership assistance programs in your province to ensure you’re not leaving any money on the table when it comes time to buy a home.

Government Programs to help with Your Home Purchase

Let’s Talk Mortgages… Contact

15 Jan

Canada Greener Homes Loan

General

Posted by: Kim Seifert

Canada Greener Homes Loan

What is the Canada Greener Homes Loan? It is a Major home retrofit program through grants and interest-free loans that make your home more energy-efficient.

The Canada Greener Homes Loan helps Canadians make their homes more energy efficient and comfortable. The loan is offered in conjunction with the Greener Home Grant under this Initiative to help Canadian homeowners across the county. They are working with their partners at Natural Resources Canada to deliver this initiative to provide $4.4 billion in interest-free loans, of up to $40,000 per household, helping up to 175,000 homeowners complete extensive home retrofits on their principal residence.

To apply for the Canada Greener Homes Loan:

You need to apply first and be approved for the Grant. If you have already completed your grant process through this Initiative, visit their portal to start your loan process. More Information