Money for Nothing and a Loan for Free

(Not quite for nothing or free – but nearly!)

The cost of money is still cheap - mortgage rates have been at historical lows, providing great savings for home buyers over these past few years.  In fact, one of Canada’s big banks has recently lowered its mortgage rates to 2.99%.

Low mortgage rates are great for both current home owners and first time home buyers. Current home owners that have already entered the market and are building their net worth. They have already dealt with one of the biggest barriers to purchasing a home – the down payment.   A down payment is a great challenge for first time home buyers.  Most first time home buyers are currently renters, and likely have been for some time.  Much of their income goes into rent payments, monthly bills and possibly even the repayment of student loans. 

The banks typically require a 20% down payment to qualify for a mortgage.  Therefore, to buy a home at $250,000, you would need at least $50,000 to qualify.  Thankfully you can turn to the Canadian Mortgage and House Corporation (CMHC) to back your mortgage. If you qualify, you can even reduce the required down payment to around 5% or in this case, $12,500.  

Still - $12,500 can be a significant challenge to overcome - but there are even more incentives to help first time home buyers beyond reducing the required down payment.   Currently the following programs and incentives are available:

First-Time Home Buyers' Tax Credit

• The First-Time Home Buyers’ Credit provides a 15 percent credit on a maximum of $5,000 of home purchase costs (e.g. legal fees, land transfer taxes, etc.), providing a maximum tax relief of $750.

RRSP Home Buyers' Plan

• This gives you access to use up to $25,000 of your RRSP to build or buy a home with 15 years to repay your RRSP.

HST New Housing Rebate

• This program provides a rebate on part of the GST or the federal part of the HST paid on the construction or purchase of most newly constructed or substantially renovated houses used as a primary place of residence.

5 per cent Down Payment Program

• Already mentioned above, this program enables those who qualify to purchase homes with a minimum down payment of 5%. 

Land Transfer Tax Rebates

• First-time buyers of new and re-sale homes are eligible to receive a rebate of the provincial land transfer tax. The maximum Ontario land transfer tax rebate for first-time buyers is $2,000.

The programs and rebates available to first-time home buyers can really go a long way to making that first house achievable.  Combine that with historically low mortgage rates and now may be the best time for you to jump into home ownership.  If you are thinking about entering the real estate market, or want more information on how you can take advantage of these programs, don’t hesitate to contact me and I can put you in touch with some great Mortgage People!

(the information provided above is for information only, and all financial questions should be directed to a mortgage professional who can accurately assess the best financing option for your situation)