Federal Budget 2019- What’s changed?

General 27 Mar

Our take on the March Federal Budget Announcement for Grande Prairie Homebuyers

  March 27, 2019. Our office has received a ton of questions about the March Federal Budget Announcement for Grande Prairie. This included incentitives planned for first-time hombuyers.

  The only immediate change, is that first time buyers can use up to $35,000 in RRSP money for down payment, up from the previous $25,000 allowed.  You will still need to re-invest this into an RRSP within a 15 year time frame.  If you take out $35,00 that means you should put at least $2,333 back into your RRSP each year. Should you forget to return money to your RRSP, the goverment will have you pay tax for each forgotten portion.

First Time Home Buyer Incentitive 

  The second announcement by our federal government introduced the First-Time Home Buyer Incentive.  The Canada Mortgage and Housing Corporation will provide first-time buyers up to 10% of the purchase price of a new construction home. They will also give 5% of the purchase price for a resale.  There’s no clear plan for how you the borrower will be required to pay for the loan. This leaves many questions unanswered, and makes it impossible to predict the benefits of this incentive.  It remains very unclear if the government will take an equity position in your home or if you would have an interest-free loan.

You need to understand how this loan will be repaid

  For borrowers, understanding how this loan is required to be repaid is important.  If the government is taking an equity stake in your home, the amount that you the homeowner would have to repay will grow as the value of your home increases.  In this case, I question if this is a good thing for borrowers at all? Potentially you are giving up a lot of your equity at sale time. 

DLC’s Economist, Dr. Sherry Cooper, had this to say about the budget announcement,

“It’s all about increasing demand for housing without doing much to increase supply, and you don’t need to be an economist to know that if you increase demand without increasing supply, you’ll end up with higher house prices, which is the oppose of the intention.”

Encouraging new construction would have been better

  Rather than encouraging more buyers to compete for inadequate housing inventory, Cooper believes construction inducements would have been more beneficial.

“The government could have done things to increase supply, like changing the rules around zoning and the Greenbelt to open up more land,” she said. “They could even subsidize housing construction or eliminate some of the red tape and other delays in construction. There are other things that could have been done to incentivize the construction of new housing.”

March 2019 Mortgages Rates started Falling!

This week our 1 year mortgage rate, 2 year mortgage rate and 5 year mortgage rate all dropped here in Grande Prairie. Watch out for those falling rates!This week we are excited to share that rates are falling! Our 1 year, 2 year and 5 year rates have all dropped!

  The March Federal Budget Announcement for Grande Prairie has also placed limits on the First-Time Home Buyer Incentive:

  • Maximum household income of $120,000
  • At this time only purchase price’s below $400,000 will qualify.

These will further limit how useful this program is for you!

 As we are made aware of updates to this announcement, we’ll let you know!

 

 

Grande Prairie mortgage broker answers questions on the federal budget and it's impacts on buying a home in 2019

Megan Lemay, managing Broker at HT Mortgage Group has had many clients contaact her with questions since the federal govement announced the 2019 Federal Budget!

FEDERAL BUDGET 2019–ACTIONS FOR HOMEBUYERS

General 20 Mar

19 MAR 2019

FEDERAL BUDGET 2019–ACTIONS FOR HOMEBUYERS

In its fourth fiscal plan, the Trudeau government spent its entire revenue windfall leaving the deficit projection little changed. In this election budget, Finance Minister Bill Morneau announced $22.8 billion over six years in new spending initiative mostly for homebuyers, students and seniors. Trudeau promised in his first budget to have eliminated all red ink by this year. He will instead head for an October election with an annual deficit of nearly $20 billion. Ottawa is projecting a string of double-digit deficits through the end of 2022.

The key debt-to-GDP ratio is expected to be 30.8% this fiscal year and edges downward only very slowly to 30% over the four-year forecast horizon.

Today’s budget offered help to young homebuyers, many of whom find it very difficult to afford to purchase in some of our more expensive cities. There were two measures targeted at first-time homebuyers:

Maximum Withdrawal from RRSPs Is Increased

The simplest to understand is the $10,000 increase in the federal Home Buyers’ Plan (HBP) maximum tax-free withdrawal from RRSPs to $35,000, effective immediately. This allowable withdrawal for first-time buyers will now also apply to people experiencing the breakdown of a marriage or common-law partnership who don’t meet the usual requirement of being a first-time homebuyer.

The new limit would apply to HBP withdrawals made after March 19, 2019.

Those taking advantage of the higher HBP limit will have to keep in mind that the repayment timeline is unchanged. Home buyers must put the money back into their RRSP over 15 years to avoid full ordinary income taxation on HBP withdrawal. Now Canadians using these funds will have to repay a maximum of $35,000 – instead of $25,000 – over the same period.

The Boldest Move: The CMHC First-Time Homebuyer Incentive

A $1.25 billion fund administered by the Canadian Mortgage and Housing Corporation (CMHC) over three years will provide 5% of the cost of an existing home and 10% of the price of a new home through what amounts to an interest-free loan to be repaid when the property is sold. The money would go to first-time home buyers applying for insured mortgages. The key stipulations are:
• Users must have a downpayment of at least 5%, but less than 20%;
• Household income must be less than $120,000;
• The purchase price cannot be more than four times the buyers’ household income.
For example, say you’re hoping to buy a $400,000 home with the minimum required 5% down payment, which works out to be $20,000. With the new incentive, you could receive up to $40,000 (for a new home) through the CMHC. Now, instead of taking out a $380,000 mortgage, you’d need to borrow only $340,000. This would lower your monthly mortgage bill from over $1,970 to less than $1,750. The incentive is 10% for buyers purchasing a newly built home and 5% for existing homes.

Homeowners would eventually have to repay this so-called ‘shared mortgage,’ likely at resale, though it is unclear how this would work. CMHC might share in any capital gain (or loss)– receiving 5% or 10% of the sale price (not the purchase price). At the time of this writing, these details had not been hammered out.

These stipulations effectively limit purchases under this plan to properties priced at less than $500,000 ($480,000 maximum in insured mortgage and incentive, plus the downpayment), which is close to the national average sales price of $468,350 (which is down 5.2% from the average price one year ago). However, the national average price is heavily skewed by sales in Greater Vancouver and the Greater Toronto Area, two of Canada’s most active and expensive markets. Excluding these two markets from the calculations cuts close to $100,000 off the national average price, trimming it to just under $371,000. What this tells us is that the relief for first-time homebuyers is pretty meagre for young people living in our two most expensive regions.

Arguably, the max price point of $500,000 for this plan is where the affordability challenge only really begins in our higher-priced housing markets. The most acute affordability problems surround medium-sized and larger condo units or single-detached homes in the GTA and GVA; yet, most of these are beyond the price range covered by the CMHC plan. The impact, of course, would be broader in other regions, but affordability in many of those is historically quite normal. The most significant impact will be in low-priced new builds.

Also, mortgage applicants under this plan still have to qualify under the federal stress test, which ensures that borrowers will be able to keep up with the payments even if interest rates rise by roughly two full percentage. The incentive, however, would substantially lower the bar for test takers, as applicants would have to qualify for a lower mortgage.

Before the budget, many stakeholders had been arguing that with the rapid slowdown in the economy and the Bank of Canada unlikely to raise interest rates this year, the B-20 stress test is too onerous and should be eased.

The government is hoping to have the plan up and running by September.

Bottom Line: These housing measures are focused on the demand side of the market, rather than encouraging the construction of new affordable housing. And while the budget does earmark $10 billion over nine years for new rental homes, it does not propose tax breaks or reduced red tape for homebuilders.

Dr. Sherry Cooper

DR. SHERRY COOPER

Chief Economist, Dominion Lending Centres
Sherry is an award-winning authority on finance and economics with over 30 years of bringing economic insights and clarity to Canadians.

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How does getting my dream home built & financed in Grande Prairie Work?

General 13 Mar

Getting your dream home financed in Grande Prairie?

Ready to build the home of your dreams & get your dream home financed in Grande Prairie? Here’s how to make the process smooth with your mortgage broker.  Hopefully reading this article, along with tips from our mortgage brokers here at DLC in Grande Prairie, we can get your home mortgaged smoothly for you!

First, go get a pre-qualification

 

First step, go get a pre-qualification with your mortgage broker.  To do this visit one of our qualified mortgage brokers at Dominion Lending Centres HT Mortgage Group.

 

Come prepared with:

 

  • Letter of employment and current pay stubs
  • Last two years of T4’s and Notice of Assessments
  • 3 months banks statements confirming down payment verification
  • Floor plan and building specifications, along with your contract from your New Home Warranty Builder
  • If self-employed, we’ll also need your last two years of company financials, and your last 2 years of T1 Generals

 

A pre-approval will give you an idea of what your total build budget will be, and ensure that your new home matches your wish list. Remember this is all to get your dream home financed in Grande Prairie.

 

“Getting a Pre-Approval is super important!” Kaitlyn Moore – Mortgage Broker

Plan your dream home to get a mortgage broker in Grande Prairie's help financing it!

Getting your dream home financed in Grande Prairie? (Your building a new dream home of course) Let’s talk about how to arrange a mortgage for that!

 

Plan your build

Now that your pre-qualified to build a new home, it’s time to investigate who will build your home for you.  We are lucky enough to have several local home builders with loads of experience, all that carry new home warranty.  Many of these builders will help you to purchase the town lot you’d like to build on as well.  Or perhaps you already own an acreage with an older mobile home and you’d like to build a new house on the property?  Last, maybe it’s your dream to be out of town, and the goal is to buy and build on bare land.  We’ve got a mortgage for all 3 options to get that dream home financed in Grande Prairie!

 

“Make sure your builder is NHW registered.”Gert Martens, Mortgage Broker

Research, Research

Don’t go with the first builder you speak to, or the cheapest builder! Do your research, whoever is building your home will impact your life for many years to come! Jodi Scotton, Mortgage Broker

Here are some of the details that will need to be hammered out before you visit your mortgage broker again:

  • Where is your home going to be built and what is the address and legal land description of this location
  • Do you have your house plans complete
  • What type of finishing are going into your new home and does your builder’s contact include all of these things
  • Timeline about when the builder expects to start and finish the build
  • New Home Warranty registration number

 

“Get Quotes for Utilities! You can mortgage the cost of utilities, such as putting in a well, or getting a powerline out to your acreage, but you need quotes to ensure this will be included in your financing. Utility hook-ups can cost a lot, so it’s important to plan them into your build.”Doria Zacharia, Mortgage Broker

“Be really specific about what type of finishes you expect your home to have, so that the original contract matches your expectations and prevents cost overruns over time.” Megan Lemay, Mortgage Broker

You may wonder, if I’ve already gotten a pre-approval, why do I still need a financing condition on my purchase contract?

 

A mortgage lender needs to confirm they are comfortable with the home your building, along with the cost of this construction. To do this they have an independent appraiser review your purchase contract, plans and location. The appraiser confirm that the market value of your home, is greater than, or equal to , the cost of this construction at completion.  If a home is too custom, it’s market value may be less than the cost of your build and the lender may make you do a larger down payment.  The lender also wants another chance to double check your down payment and ensure you have enough assets to get a build done.

 

Dream home financed in Grande Prairie – You’ve done it!

Congrats! Now that your build has been approved, your lender will advance the draw money directly to your lawyer, who will then pay your builder along the way.  You are that much closer to having that dream home financed in Grande Prairie. You won’t make mortgage loan payment until your home is 100% complete.  Be sure not to make any changes to your financial situation between starting your build, and your move in date.

 

“Be aware of your current debts and don’t apply for any credit until the build is done” Alycia Larocque

More questions?

There a million different scenarios we could discuss when it comes to building a home.  For example: How is the building process different when I buy a pre-built manufactured home, is this the same process as getting a local builder to construct my home on site?

To make a plan for your specific building situation, give us a call here at DLC HT Mortgage group today!

Updated March 14th, 2009

 

What’s the difference between a broker and a bank in Grande Prairie?

General 6 Mar

What’s the Difference between a Broker and a Bank in Grande Prairie?

Choice! Your mortgage broker will help sort through a variety of lenders, to find the lender that suits you best. Different lenders will accept different types of income, have different underwritting policies or different ways of lending. And of course, since we work for you, not the banks – we negotiate a better mortgage rate for you.

 

Different Lenders Accept different types of income

Getting the best mortgage in Grande Prairie, go to a mortgage broker to be given options

What’s the difference between a broker and a bank Grande Prairie? Well a broker gives you a host of different lenders and rates to choose from, the bank just offers rates itself. (And often not as good of a rate as they could offer – how do you get that bonus otherwise?)

Have you ever gong to a bank for a mortgage and heard, ” I’m sorry your dream home is out of reach given your income?”. Although you might be out of luck at that bank, it doesn’t mean you should stop trying! There are a variety of incomes that some banks will not use to qualify you for loans. Child tax benefit, rental income, vehicle allowances are just a few types of incomes that not every lender will accept.

Let’s look at rental incomes.

My Home in Grande Prairie has a $200,000 mortgage, so $1250 a month, and I have a lease for $1800 a month.

  1. Lender 1 – $1700-1250 = $450 x 50% = net rental income $225 a month
  2. Lender 2    – $1250 x 1.4 = $1750      $1700- $1750 = net rental income $-50 a month
  3. Lender 3 – Only considers rental income as a valid income with two years history of rental income on T1 general tax documents. You have a good accountant who has made it possible to record a capital loss both years. Averaging out the rental income reported to the govement over two years…. Net rental income $-100 a month.

Given a choice rental property owners would choose Lender 1.  “But how do I find out which lender has the best rental income formula?” Well that’s where calling your broker comes in. We spend all week, week after week understanding and learning which lender is best for various situations. Your banker… may be able to expain how they calculate rental income, but they will not have any indepth or accuate knowledge on how the competitors calculate rental income. So call a broker, they specalize in this sort of comparision.

Child Tax Benefit Income

Truthfully there are very lenders who will accept child tax benefit income, but if you need just a little more income to qualify for that dream home we know of a couple that lend in Grande Prairie. The same applies to how much overtime you can use to qualify, or if you can use a vehical allowance. Not every lender accepts ever income type, so trust your broker to find a lender that maximizes and makes use of multiple income sources.

 

Different Mortgage Types Between lenders

Fixed Rate or Variable? Reverse mortgage or a Home Equity Line of Credit? Manulife One account or a flex down mortgage? Interest Rate adjustible Penalty or three months interest? Open mortgage or closed? Portable? Able to end mortgage term without fee’s if I’m dead?

The Canadian mortgage space has many unique products. One great example is the CHIP Home Equity Reverse mortgage, which can help lower income seniors solve cashflow issue’s. (A senior with lowered income may not qualify under normal refinance programs.) We also have access to flex-down mortgages which can allow a portion of your mortgage to be interest only. Ideal for rental property owners trying to lower borrowing cost’s in the short term.

 

We work for you, not the banks!

 

Working hard to increase our website SEO in Grande Prairie

Jillian Napen, Office Manager at HT Mortgage Group, Part of Dominion Lending Centres in Grande Prairie