How to Use New Home Buying Incentives to Your Benefit!

Incentives for first time home buyers, or for home owners to make improvements on their homes were included in the 2009 Federal Budget. Here are some examples of what is being offered:

RRSP Home Buyers Plan Improved

First time home buyers have had an increase in the withdrawal amount allowed from their RRSPs, from $20,000 to $25,000.

Money withdrawn from the RRSP is to be paid back within 15 years. If it is not, it will lose its tax deferred status, and if scheduled annual payments cannot be paid in full, the unpaid amounts must be reported as income.

Tax Credits For Home Buyers

First time home buyers have also seen some relief on a tax credit that can provide up to $750 in tax relief on the purchase of their first home. To qualify neither the homeowner, their spouse or common law partner can have owned and lived in another home in the year of purchase or any of the four preceding years.

Green Grants

Home and property owners can apply for grants of up to $5000 for making eligible energy-efficient improvements, such as upgrading furnaces, increasing insulation etc.

Tax Credits for Home Renovations

Now through January 31, 2010, homeowners can claim a tax credit for up to 15% of renovation expenses between $1,000 and $10,000. Listed below are some examples of what does and does not qualify:

Eligible
*renovating a kitchen, bathroom or basement
*new carpet or hardwood floors
*building an addition, deck, fence or retaining wall
*a new furnace or water heater
*painting the interior or exterior of a house
*resurfacing a driveway
*laying new sod

Ineligible
*purchase of furniture and appliances (e.g. refrigerator, stove, and couch)
*purchase of tools
*carpet cleaning
*maintenance contracts (e.g. furnace cleaning, snow removal, lawn care, and pool cleaning)

For more information on housing related stimulus in the 2009 Budget, visit the Canada Revenue Agency website at www.cra-arc.gc.ca and search for “Home Buyers Plan.”

The Effects of the Land Transfer Tax on Real Estate Sales in Toronto

You’ve probably seen the news lately: real estate sales down by 50% compared to this time last year! Although there are many things to take into consideration like the changing economy and hesitation on behalf of Canadians while watching the real estate market in the states, there are still more sides of the story…

Take, for example, the effects of the Land Transfer Tax, a levy of up to 2% in addition to the province’s taxes, which took effect Feb. 1, 2008.

The C.D. Howe study, “Sand in the Gears”, reported a drop in the number of houses sold in Toronto from February, when the tax was implemented, until August, when the real estate market began to falter. Comparing Toronto sales with those in the suburbs, there has been a 16% decrease in sales and a 1.5% reduction in house prices.

City Councillor Shelley Carroll, the mayor's budget chief, is predicting that the effects felt by the land transfer tax should stabilize in a year or so, but added that the market was artificially inflated when some buyers hurried to purchase their property before it took effect.

None of us has a crystal ball to look into the future, but it will be interesting to see what the real estate numbers in February 2009 will look like. A little less askew?

Top Reasons to have your Mortgage Pre-Approved

If you still aren’t convinced about the importance of pre-approved mortgages, take a look at the U.S. subprime loan crisis and their high ratio of defaulted mortgage loans. Country Wide Financial (one of America’s major leading mortgage lending firms) posted in their 4th quarter that 19% of subprime borrowers had missed a payment.[i]

The advantages of pre-approved mortgages far outweigh the hassle that some home buyers believe that it can be. For instance, many home buyers are not aware that when you are pre-approved, you can be guaranteed an interest rate for a period of time and for the pre-approved amount.

Another advantage is ease of convenience. Based on your pre-approved amount your realtor can search for properties within your “set budget”, therefore, saving time by narrowing the search. Once you and your realtor have found a property that you would like to make an offer on, pre-approval comes in handy when in a bidding war with other potential buyers for home. Some sellers are more likely to accept an offer from a buyer who has been pre-approved as it
cuts down on the wait time to move their home from conditionally sold to a firm sale.

Pre-approval puts you in the driver’s seat because now you can confidently search for a home that you know that you can afford. Let’s not forget about the ease of mind that this provides. So many times, home buyers search for homes that they believe that they will be mortgage approved for, make an offer, only to find out the deal fell through because their financing wasn’t secured.

The best advice that I can give anyone, is to do your homework before picking up the phone to call a realtor. There are various types of mortgages and terms that you should become familiar with and it helps when you know what the mortgage specialist is talking about. Remember, buying a home can be a daunting task but by being organized and prepared you can be one step closer to your new home.

[i] http://www.canadianmortgagetrends.com/canadian_mortgage_trends/2007/04/