If you were on the fence about buying a house, do it before PST added onto CMHC!
Buying a home is one of the most important and exciting steps in your life…. found the home you want now you need a mortgage. Deal with people who can offer you and your family the best options. Devin Cristo and Wes Will of Your Mortgage Now are Trusted Saskatoon Mortgage Experts and they have many years of experience helping individuals and families in Saskatoon and area by offering mortgages from a variety of lenders . Their latest article is about upcoming changes in August when PST added onto CMHC Premiums
PST added onto Mortgage Insurance Premiums as of August 1st 2017
CMHC has recently advised us that there will be a 6% PST charge on all Mortgage Default insurance premiums (CMHC/GE/Canada Guaranty) as of August 2017.
CMHC will be required to collect 6% provincial sales tax (PST) on premiums and surcharges for full or partial loan advances made on or after August 1, 2017.
The Saskatchewan PST will be payable on premiums paid for all mortgage loan insurance transactions. The provincial sales tax cannot be added to the loan amount.
What does this mean for YOUR Mortgage?
If your possession date is on or after August 1/2017 there will be a 6% PST charge on your CMHC premium
At YourMortgageNow.ca, we are always ready to answer any questions you may have about buying your first home in Saskatoon and area. But for some people, saving to buy their first home may seem daunting and they don’t quite know where to start. Here are some great money-saving tips to get you started:
Set a long-term goal: “I want to buy a home by the age of 30” or “I want to buy a home within five years of graduation from college”.
Determine how much you can afford: Be realistic about where you want to live and what type of home you will likely be able to afford. Consulting a financial advisor or mortgage professional early on will put you on the right path to fulfilling your goal.
Create a budget: Keep track of all the money that comes in and all the money that goes out. Balancing expenses against income will help you determine what, if any, adjustments you need to make to your spending habits in order to build savings.
Pay yourself first: Open a separate savings account and deposit a set amount of money every month through an automatic withdrawal from your paycheque or other bank account.
Live on cash: Every pay day give yourself an allowance in cash to get you through to the next pay day. If you don’t have cash handy you might think twice before buying something you don’t really need.
Build your savings account: Live off your day-to-day earnings and make the most of every unexpected inflow of cash. If you work overtime or receive a bonus, put that money right into your savings account.
Party at home: Going out for dinner, clubbing or a movie can really add up on your monthly expenses and kill your budget. Host movie nights or potluck dinners at home and see your savings grow.
Earn extra income: Sell unused items online through sites such as eBay, Craigslist or Kijiji; take on a second job; work part-time and summers if you’re a student.
Open an RRSP account early on: The Federal government’s Home Buyer’s Plan allows you to withdraw up to $20,000 from a Registered Retirement Savings Plans (RRSP) for a down payment on a first home. Consult with a financial advisor or mortgage professional to grow you investments wisely.
Do your homework: Before making any big investment or purchase, do some research. Avoid spending on impulse or emotion. If it sounds too good to be true, chances are it is.
For you savvy investors out there — or those planning on investing this year– now is a great time to think about your TFSA contribution for 2015. As of January 1, eligible Canadians (residents over 18) can contribute an additional $5,500 to their TFSAs. That brings the total contribution room to $36,500.
The Tax Free Savings Account (TFSA) is a fantastic way to save to achieve your financial goals in the future. However, only 19% of Canadians are aware of TFSA contribution limits, and only 11% of Canadians could correctly identify the investment types eligible to be held in a TFSA.
A Simple Introduction To Tax Free Savings Accounts The TFSA was created in 2009 as another investment vehicle to help Canadians save. The money you deposit into the account allows you to earn interest, dividends, and capital gains tax free! That’s huge because taxes can quickly eat up your hard earned investment returns.
Let’s highlight a few key rules…
Unlike a RRSP, TFSA contributions are not tax-deductible but the contributions and the investment earnings are exempt from tax upon withdrawal.
Do not over contribute! You are liable to a tax of 1% on your highest excess TFSA amount in that month. That cost can quickly get expensive, so be prudent when depositing. You can have more than one TFSA account at two different financial institutions, but be sure to not go over the total limit.
If you withdraw money, you must wait until the following calendar year to recontribute.
You never lose your contribution room if you miss a year. So for those of you who haven’t opened one yet and have been living in Canada, start making those deposits!
Remember to declare a beneficiary to avoid estate issues at death.
What is the difference between a TFSA and RRSP?
An RRSP is primarily intended for retirement savings. Tax assistance provided by a TFSA complements that provided through RRSPs.
RRSP contributions are tax-deductible while RRSP withdrawals are added to income and taxed at regular rates.
Unlike an RRSP, which must be converted to a retirement income vehicle at age 71, a TFSA does not have any minimum withdrawal requirement.
There is no TFSA spousal plan. Individuals can provide funds to their spouse or common-law partner to invest in their TFSA, up to the spouse’s or common-law partner’s available room, and the income earned on the contributed amount is generally not attributed back to the spouse or partner who provided the funds.
So, what can you do with your TFSA?
Use it to trade If you keep your TFSA in a high interest savings account (HISA), your returns will be anemic. To energize your TFSA, you need a more pro-active strategy – like trading.
Use it as a retirement fund We’re not saying to pull everything out of your RRSP—it’s still a great way to save for retirement. But TFSAs are becoming serious competition. They are especially important once you turn 71 when mandatory RRIF withdrawals kick in. If you’re over the $71,000 income threshold, you’ll possibly lose government income benefits. Since TFSA withdrawals are not taxed, you can use them to supplement your income without adding to your taxable income numbers.
Use it as your emergency fund Say your roof caves in or your car starts making that funny noise again, you’re going to need some access to cash. TFSAs are the best umbrella for the proverbial rainy day. You can withdraw as much or as little as you need to keep your budget balanced. And in the following year, you’ll be able to put any withdrawals back in. [Remember, the money in your TFSA is as liquid as the investments you hold. If you want to withdraw, you’ll have to factor in settlement time for the cash to appear in your account.]
Use it to pass on wealth TFSA beneficiary are two words your loved ones want you to know. Straight from the CRA’s rulebook: any money passed down to a beneficiary does not need to go through your estate. That means your family won’t get dinged on probate taxes from capital gains. If you can’t remember whether you designated a beneficiary when you opened your TFSA, check your account documentation.
Use it as collateral It’s nice to see a big number at the bottom of your statement but that money can do more than look pretty. Put it to work. Your TFSA can be used as collateral when you’re trying to secure a loan, like a mortgage. Better yet, you can build up your savings for the down payment of your home. Then build it up again to make larger payments on your mortgage.
Whatever you decide to use your TFSA towards, we can direct you to our network of Financial Advisors.
You’ve been saving money to buy your first home for so long and it’s one of the most significant purchases you’ll make in your life. But with all the details and parties involved, it’s easy to get confused or blindsided by hidden costs and fees. We can help – here are some tips to ensure you get the most for your money.
Resolve credit issues before applying for a mortgage Your mortgage rate is partially determined by your consumer credit score, so fix what you can before you apply. Even little things like late payments or errors on your record (it happens!) can jack up your mortgage payments.
Budget wisely and save for a down payment…even if it means waiting a little longer to buy It’s hard to be patient, but a decent down payment means more reasonable payments, saving you thousands over the duration of the mortgage.
Shop around for mortgage rates Don’t assume the offer made to you by your bank or broker is set in stone. It will vary, especially if you make it clear that you’re comparison shopping! Closing costs and fees can also be negotiated – use them as bargaining chips.
Don’t take listing prices at face value Found something you like? Research house values in the neighbourhood to be sure you’re dealing with a fair price. Your real estate agent can help, but you can also search for nearby listings online or attend open houses in the area.
Use your RRSPs In Canada, first-time homebuyers can take advantage of a federal government program called the Home Buyers Plan (HBP) which allows you to take up to $25,000 from your RRSPs, tax-free.
Don’t be scared to low-ball your offer New buyers can be timid when it’s time to buy, but unless you know you’re headed for a bidding war, low offers can be countered. So you may as well give it a shot!
Make your offer contingent on closing dates It’s easy to overlook small details like closing dates in the rush of making an offer. But don’t risk the cost of paying for temporary accommodation and putting items in storage if you run into last minute changes.
Get a list of fixtures and fittings included in the sale Check the details to avoid opening the door to your new home and finding it stripped of light fittings, cables and appliances. Also, pay attention to what you’re paying for: the seller may list the price they paid for an appliance, but from how long ago? Would it be more cost-effective for you to exclude it from the offer and buy a new one?
Review your closing statement carefully With all the details that go into buying a home, it’s not unusual to find mistakes in the fine print. Be sure you check the math prior to closing, so you don’t overpay based on a simple clerical error.
Opt for bi-weekly mortgage payments Paying monthly means that you make 12 payments per year. But if you pay half that amount every two weeks, you’ll make 26 payments, which means you’re paying down your mortgage faster.
With house prices rising, it can difficult to afford a home on your own. You and a friend might be in the same situation and feel that if you pool your resources, you can invest in a home instead of throwing your money away by paying rent. What all parties have to realize is that this is a business partnership and should be treated as such.
What is involved with Buying a House With a Friend
Before you buy, it is important to look at the big picture and answer these questions:
Are my friends in a stable financial situation? Can they afford to split mortgage payments, utilities and come up with their share of a down payment? Ask them straight out, to avoid any issues in the future.
Do we share the same values? Are you both neat freaks? Couch potatoes? This can lead to tension as unlike a traditional business you are living with each other. People are used to doing things a certain way, are you ready to compromise?
Does everyone agree that this is an investment? Eventually, people’s lives change, they meet someone, relocate for a job. Have you talked about what will happen to the property when one person inevitably needs to sell their share?
Now that you have decided that this deal is going to work, you have to look at getting a mortgage. Is everyone involved going to be listed on the mortgage? All parties will have their credit ratings looked at and generally the person with the lowest credit rating will set the bar as to what a mortgage will be approved for.
After all of these questions have been answered and you have decided to go forward it is recommended that you find a lawyer. Once again, treat this investment as a business arrangement. Sit down with legal council and have a written agreement compiled that includes things such as:
Who will cover the down payment, property taxes, bills, and repairs when they are needed.
What will happen to the home if one of the owners is killed or incapacitated.
When can someone sell or leave the partnership? Do they need to give notice? Can the other partners buy out their share?
Sitting down with a lawyer will make sure that everyone fully understands how situations will be handled as they come up.
The last thing you may want to talk to your new business partner about are the house rules. Set out guidelines regarding pets, parties, noise and guests.
Purchasing a home with a friend can be an excellent way to start building your equity. As long as all of the people involved have been upfront with each other, there should be no surprises along the way to jeopardize the partnership. Let us help you when it is time to apply for that mortgage. We are here to answer any other questions that you may have when planning on buying a home with friends.
You have just found the home of your dreams and can’t wait to make an offer but you still have your own home to sell. There are options as to what you can do so that you don’t miss out on this opportunity, depending on your situation.
What is Bridge-Financing
One of those options is called bridge financing, and it is useful when a person needs funds to close the deal on a new home but have not closed the sale on their current home. This option can be expensive if you are not in a position of having a lot of money saved but can also be worth it as a short-term solution. Bridge financing usually carries a higher borrowing rate than your traditional mortgage (ex. prime + 1 or 2%). But remember, this loan should be paid in full in only a few days or weeks which means your expenses could range from hundreds to a couple of thousand dollars depending on the amount borrowed.
Not all banks allow for bridge financing and you should check into this before adding this to your options. If this sounds like an option you can afford, you should also keep in mind the costs of having to carry two mortgages, property taxes, home insurance and utilities on both properties as well as the temporary bridge loan. The only problem that could arise in this situation is if the sale of your house falls through and you have to deal with all of these expenses on a long-term basis.
With all of this in mind, bridge financing can still be the best way to deal with two different closings that don’t match up. If this is something that might work for you please contact us so that we can help you make that decision or find an option that will work for you.
The challenge today is saving for a sizable deposit for a down payment and closing costs. Credit scores are critical, but so are income and assets when you are applying for a mortgage.
Home buyers are required to have at least 5% deposit of the home purchase price, although if you don’t want to purchase default insurance, then you’ll need at least 20% for a conventional mortgage.
There are several benefits to waiting until you have enough for a down payment of 20% or more before you purchase a home.
Reduced mortgage payments The more you put down on your home upfront, the smaller your mortgage payments will be. That could help your monthly budget. More important, you could save thousands of dollars in interest in the long run. For example, on a 30-year mortgage at 5% interest, putting an extra $10,000 into the down payment will save you $9,325 in interest payments over the life of the loan.
Lower interest rate Lenders often offer better interest rates to borrowers with a lower loan-to-value ratio, or the percentage of the purchase price that you’re financing. An increase in your down payment lowers the ratio and reduces the risk to the lender that you will be unable to pay your full loan balance. Lower interest rates can also save you money over the life of the mortgage.
No mortgage-insurance fees If you want to contribute a smaller down payment than the traditional 20%, most lenders require that you take out mortgage insurance. This insurance protects the lender in case you cannot pay your mortgage.
Instant Equity Building A significant down payment builds instant equity in your home. A 20%t down payment immediately puts equity into a property when you purchase it.
So, if you’re a first-time home buyer, how do you save for a down payment?
As a first-time buyer, you’ve got other things to consider, including:
Your rental costs. (Are they higher or lower than your potential ownership costs?)
Alternative uses for your down payment money. (Can you get a better return by investing down payment funds elsewhere?)
The size of your emergency fund. (Home ownership comes with a laundry list of unexpected expenses.)
Your economic stability and future earning power.
There are several ways to piece together a bigger down payment. You can:
Cut your spending and reduce your credit card limits. You might want to consider asking your credit card company to reduce your overall limit as this will help boost the overall amount lenders will be willing to offer you.
Get rid of debit! Carrying high levels of debt will reduce the overall amount lenders will be willing to offer you for a mortgage. Demonstrate to the lenders that you have responsibly made repayments on your credit cards.
Sell old, unwanted items.
Tap into the bank of mom and dad. Gifts from parents get a lot of young people started as home owners.
With the availability of credit, you may have a car loan, credit cards or other debt starting to mount, and maybe taking a toll on your budget. For some, it can be easy to max your credit card, get that new car loan, but then find it hard to keep your payments under control. You may want to consider increasing your mortgage to pay these debts out. This will not only reduce your monthly commitments, but also ease the strain on your monthly budget. If you are thinking about consolidating other debts with your mortgage, you may have questions like:
Can you consolidate your current debts into your mortgage?
Will my current bank or lender allow me to do that?
What will be my monthly repayments on my increased mortgage?
Banks or lenders lend against the value of your home, do you have enough equity in your home to increase your mortgage to pay out those debts?
There are many options if you are thinking about consolidating your current debt into your mortgage. It is important to speak to a qualifiedMortgage Broker to see which option suits your financial situation. A Mortgage Broker will look at your current bank or lender, and if that doesn’t suit, look at different banks and lenders they deal with, so they can explore many different options, and find one that suits you best.
What Type Of Debts Can You Consolidate With Your Mortgage?
All banks and lenders have different rules about what you can consolidate into your mortgage. It is important to get some information from your Mortgage Brokerfirst, so you can learn what you can do, and then make an informed decision on what is the best option for you. Some of the types of debt you can consolidate are –
Credit Card Debt.
Car loans or personal loans.
What Are The Advantages and Disadvantages Of Consolidating Other Debt With Your Mortgage?
Some advantages and disadvantages of consolidating your current debts with your mortgage may include –
Your interest rate on your mortgage is more than likely cheaper than credit cards and other loans, saving you money.
You monthly commitments (repayments) may be reduced, helping your monthly budget out.
You may want to make a plan paying that debt down faster by consolidating it into your mortgage, and paying more than the minimum repayment, thus saving you money and interest charges.
Although the your minimum monthly repayments may of been reduced, some of the debt in the longer term may cost you more money. For example: a car loan may of been taken over a 5 year loan term, but on your mortgage, even though the interest rate may be cheaper, your mortgage may be over a term of up to 25 years, therefore increasing the amount of actual interest you pay on the original car loan, as it is now paid over the remainder of your mortgage term.
Reduces the equity in your home. This may be an issue in the future, if you want to buy another home, investment property etc.
There maybe a fee to increase your mortgage or refinance your mortgage to another bank or lender.
It is important to talk to a Mortgage Broker , and determine what may be best for your financial situation before you make any decisions. This way you can learn the pro’s and con’s of consolidating other debts into your current mortgage, and make an informed decision.