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.

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:

  1.  HELOC at Prime
  2.  Holdco
  3.  New to Canada
  4.  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


Latest News

Posted by: Kim Seifert


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.

  1. MICS are receiving redemption requests from investors and need to raise cash to pay them out.
  2. Property Values have fallen and the Lender wants their money back before property values fall further.
  3. 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


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 Government Programs to help with Your Home Purchase

Let’s Talk Mortgages… Contact

15 Jan

Canada Greener Homes Loan


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

Let’s Talk Mortgages… Contact

15 Jan

Consolidate Debt Into a Mortgage

Mortgage Tips

Posted by: Kim Seifert

Is It a Good Idea to Consolidate Debt Into a Mortgage?

With Blue Monday (January 16, 2023) tomorrow we need to address if it is a Good Idea to Consolidate Debt Into a Mortgage. Building up a case to refinance your mortgage for debt consolidation purposes can depend on a number of key factors. The amount of equity you’ve got in your home can dictate the total amount of debt you’ll be able to pay off.
Blue Monday is the name given to a day in January, typically the third Monday of the month as it is the most depressing day of the year. It is also around the time people start receiving the Christmas Credit Card Bills, returning to their regular work schedule.

Here are a Few Reasons to Consider Refinancing:

  1. HELOC/ Unsecured Lines of Credit interest rates have increased significantly (variable-rate)
  2. Having trouble making the minimum Credit Card Payments, Personal Loans or paying your Vehicle Loan?
  3. Need to Free up funds to purchase life necessities like food, utilities, schooling, etc. (Monthly Budget)
  4. Currently in a variable-rate mortgage, want to stabilize your payments
  5. Lower Interest Rates then on LOC’s (average 7.5%-9%) and Credit Cards (average 17%-21%)
  6. Ease Money Stress on Close Relationships. Money issues often are one of the top disputes in a household. Especially, if one person is a spender.
  7. Considering missing mortgage payments or defaulting on your mortgage.

Below are Good Guidelines to Follow:

When it comes to your home expenses and overall monthly budget, the goal is the costs to maintain your home do not exceed 35% of your total monthly income.
Monthly Budget: To help you keep track of your finances, consider breaking up your monthly budget into the following categories.
  1. Housing – 35% of your monthly income
  2. Transit – 15% of your monthly income
  3. Debt – 15% of your monthly income
  4. Savings – 10% of your monthly income
  5. Life – 25% of your monthly income

Because everyone’s debt is a little different, you’ll need to put together an accurate monthly budget to know how much cash is coming in and going out.
CMHC Debt Service Calculator — Compare your monthly debt payments and housing expenses to your gross household income. Here 

Your Next Steps for Debt Consolidation: It’s key to remember that even though your consumer debt may feel overwhelming, there are options available to help reduce that monthly burden.

Consolidate Debt Into a Mortgage – Other Steps You Should Consider:

  1. Research all your financial options thoroughly before taking any action
  2. Review your monthly cash flow and trim away any unnecessary spending first
  3. Talk to a Mortgage Broker about current refinancing rates, product options, potential early payout penalties, etc.
  4. Build a realistic plan that gets you out of debt in the least expensive way

Let’s Talk Mortgages… Refinance Calculators