Maximizing RRSPs for Down Payment

First Time Home Buyers Victor Anasimiv 28 Feb

When buying a home, contributing to your RRSP can help you increase your funds available for your purchase. Follow the 7 steps below so you can maximize your available funds to purchase your first home.

Step 1: Check to see if you fit all the Home Buyers’ Plan (HBP) requirements at www.cra-arc.gc.ca/hbp/. If you do continue to the next step.

Step 2: Consult with me, Victor Anasimiv, to review your credit and income and plan ahead so you are mortgage ready. I will help you figure out what you qualify for as well as help you navigate all the first-time home buyer programs such as the new BC Home Owners Mortgage and Equity Program.

Step 3: Contribute to your RRSP to top it up to $25,000 (check your contribution room to confirm the maximum you can contribute) for each buyer. Contribute to the highest income earners RRSP first to maximize your tax refund. If you don’t have the cash to contribute, then it may be beneficial to borrow funds to contribute to your RRSP but talk to your mortgage broker first to ensure your credit is in line to do so.

Step 4: Do your taxes as soon as possible so you can get your tax refund in your bank account.

Step 5: If you didn’t maximize your RRSP to $25,000 put your tax refund into your RRSP (highest income earner first) to help reduce your taxes next year.

Step 6: Now that your funds are in your accounts review your options with me.  Be sure to let your RRSP contributions stay in your account for 90 days for the withdrawal to qualify under the HBP.

Step 7: Begin searching for your first home. Be sure to plan the closing date to be after the minimum 90 days required for the funds to be in your RRSP and allow time for funds to transfer out of your account.

Important 2017 Dates:

March 1 – the 2016 RRSP Contribution Deadline

February 20 – the first day you can file your 2016 income taxes

May 1 – the deadline to file your taxes if you are not self-employed

April 30 – all income taxes must be paid to CRA by all tax payers

June 15 – the deadline to file if you are self-employed

Other important bits of info:

Funds withdrawn from your RRSP before they have been in your account for 90 days are not eligible under the HBP and income tax will be withheld from the withdrawal
You can use your RRSP withdrawal for anything related to the cost of buying or building your first home, as long as you’re in a contract to purchase your first home
You must repay the withdrawal amount over 15 years starting the second year following your withdrawal.  Any amount of required 1/15th not repaid will be added to your income on your tax return.
As your Dominion Lending Centres Mortgage Professional, I can help you plan to buy your first home. It’s never too early to start your mortgage application. Contact me today to get started!

So You Want to Port Your Mortgage…

Mortgage Tips Victor Anasimiv 24 Feb

Perhaps you’ve seen a video or advertisement recently about porting your mortgage, and making it sound like the easiest thing in the world, requiring little to no effort.  However, if you’ve ever s had to port your mortgage, you know it’s anything but.  With this post, my intention isn’t to cause any worry or concern that porting is impossible.  But it is important that you’re aware of the steps involved, and I’m only a phone call or email away should you want to discuss the process.

The ad talks about the client moving to a new town and just porting their mortgage along with them – quick and painless. Yet porting is not much different than qualifying for a brand new mortgage.  You’re moving to a new town, right?  If you’re lucky, maybe you have a job transfer set up.  Odds are you’re probably starting a new job, so you may be on probation or you may not have the required tenure to re-qualify with your new lender.  Your current lender will also want to know everything about the new property.  In essence, everything needs to be approved all over again.  There are a lot of factors that need to be considered.

If the new house is identical in value to the old house, and you don’t need any more money, the port will be easier, still subject to the above re-qualifications.  What if the new home is more expensive and you need to increase the mortgage amount?  Some lenders will do what is called a ‘blend-and-extend’.  They can blend your existing mortgage rate with the current rate on your new term, factoring in the amount of new money required, to come up with a new monthly mortgage payment.  On the other hand, what if the new home is less expensive?  If you need to reduce the mortgage amount, then you may also face a penalty on the amount reduced.

Another factor sometimes overlooked is that a minimum down-payment will still be required on this new purchase.  Also, since you are technically breaking your original mortgage, the lender will likely charge you the full penalty.  Once the new purchase completes, and your new mortgage has been registered with the existing lender, they will refund the penalty.  This process could take weeks or months though, so it’s important to note that you’ll need to cover the shortfall at closing and wait for the refund.

And last but not least how long of a period do you have to port your mortgage.  It could be anywhere from 1 day to 120 day max.  It’s important to get that info from your current lender before you dive head-first into the process.

Overall its prudent to get professional advice from a mortgage broker if you find yourself in this situation.  I’m available anytime to help you out.

Contact me today – 250-338-3740 or anasimiv@gmail.com

What is a HELOC?

General Victor Anasimiv 17 Feb

The Home Equity Line of Credit (HELOC) lets you split up your mortgage debt and borrow against your equity at low rates.

The unique feature of this type of mortgage product is that you can slice the pie (the mortgage balance) into various segments, yet all of it is registered against the subject property title as just one charge. This gives you the ability to diversify your risk in the marketplace.

If you had a $480,000 outstanding mortgage against a property (with 20% equity or a value of $600,000) you could divide it up into different segments. For example, you might place $200,000 in a variable-rate mortgage, $200,000 as fixed term and $80,000 line of credit.

Spreading the risk across different markets helps you plan for the future, as there are different governing bodies controlling different aspects of the marketplace.

Variable-rate mortgages and lines of credit (LOCs) are based on the prime lending rate and controlled by the Bank of Canada. Fixed rates are based on bond yields and dictated by the lenders themselves. Most other lenders follow the trends of the major chartered banks in Canada.

There are two types of line of credit in Canada: secured (registered against real estate) and unsecured (guaranteed by one’s promise to repay). As a mortgage broker, I can only assist you with secured LOCs. The secured LOC means less risk for the lender as it is based on the market value of the home to a maximum of 80% loan-to-value. Therefor the rate is lower and the borrowing ceiling is higher. On secured LOCs the rate is typically Prime (2.70%) +0.50% which is 3.20%. This means that if you had a primary residence with a market value of $500,000 free and clear of any other type of mortgage then you could secure a $400,000 HELOC against it at 3.20%.

Unsecured LOC rates vary depending on lender, but a safe starting range is 5-7%. And on unsecured LOCs, lenders tend to forward much less than secured LOCs; they range from $5,000-$40,000.

A HELOC is also not available to all homeowners. There must be enough equity in the home before a lender will consider it.  However, if you are eligible, it is definitely worth investigating.

Please contact me today to discuss the potential of structuring a HELOC mortgage product against your home.

No Frills Mortgages

General Victor Anasimiv 16 Feb

What You Need to Know About No Frills Mortgages

You’ve been offered an amazing rate and you just can’t believe how much you will save. You’re super excited and getting ready to go sign off on the papers when you randomly run into a mortgage broker and mention the deal you scored. The broker says to you that’s an awesome rate, any idea what the penalty calculation is if you need to refinance in the future?. Wait what…isn’t it the same as the last mortgage I had?

Maybe but maybe not. There are a lot of new mortgage products available on the market that offer lower rates while giving up other benefits. These mortgage options may have higher penalties, lower prepayment privileges or even worse they could have a bone fide sale clause.

I don’t blame a consumer for always thinking rate first. The industry as a whole is guilty of shoving rates in our face anytime they possibly can. It’s the easiest part of a mortgage to compare and easiest to advertise. But definitely not the most important part.

Being aware of all the terms and conditions is the key to finding your best mortgage option. You should be aware that there are mortgages that may come with one or more of the following terms:

* Sales only clause, meaning you may not be able to refinance your mortgage until your term is up

* A higher set pay out penalty. Meaning you may have to pay more than the standard 3 months interest or Interest Rate Differential penalty.

* Smaller prepayment options

* and more!

Always ask these 5 Questions when offered a mortgage:

1. How is the pay out penalty calculated if I break the mortgage?

2. Can I refinance with another lender before my term is up?

3. Is the mortgage registered as a Standard or Collateral charge on my land title?

4. What are my prepayment privileges?

5. Is the mortgage portable and assumable?

Bottom line is that knowing all the fine print is essential in making an educated mortgage decision. We never know what is going to happen in life and saving a little bit on your mortgage rate may cost you more in the long run.

Contact me today to discuss your mortgage options!

-contributed by Kathleen Dediluke, fellow DLC broker

Using RRSPs for Down Payment

General Victor Anasimiv 15 Feb

Using RRSPs for Your Down Payment

Are you a first time home buyer and looking to use your RRSP’s as a down payment? Here’s a few things you need to know:

1. To use this program you must have not owned a home in the last 4 years but did you know that if your spouse owned a home previously and you didn’t live in the house then you may still qualify.

2. RRSP contributions need to be in the RRSP account for at least 90 days before they can be used. If you are a monthly contributor to the account then only the amounts there for more than 90 days can be used for down payment.

3. You can borrow money to put into an RRSP and have it be there 90 days to use for down payment. Using this method of acquiring the RRSP means that you must be sure of two things, one being that the lender is ok with you taking it out in 90 days. Secondly that it isn’t put into an account that will not have fees to take the money out, money market funds or simple 90 day term certificates shouldn’t cost you any penalty.

4. You can withdraw up to 25000 dollars from your RRSP to put down on a home. Locked in LIRA’s are not eligible for this program so make sure before you start down this path that you know what type of account you have your money located in at the bank.

5. You have to pay the amount you borrowed back to the RRSP account over the next 15 years. If you took 15000 dollars out you would need to repay $1,000 a year to the account. Failing to pay this money back may result in CRA taxing it as income.

6. You can contribute to your 2016 RRSP up until March 1st and receive a tax deduction for the contribution, this also applies if you borrowed the money to contribute. Theoretically you can also take the tax refund and apply it back to the loan or use it for your new home.

Contact me today so we help you take advantage of this opportunity to enter the home owners market…We’ve got a mortgage for that!

-contributed by Len Lane, fellow DLC broker

Top 5 Home Renovations That Increase Property Value

Mortgage Tips Victor Anasimiv 14 Feb

Looking to increase your home’s property value? Here are five of the best renovations you can do to your home to increase property value. These five renovations can sometimes have a return on investment 5-6x what they cost.

# 5 Flooring

Flooring is one of the most important aspects of your house. You will see an immediate rise in property valuation with the installation of hardwood floors. Existing hardwood floors that you can refinish are ideal as they are less costly to restore and in higher demand than new flooring materials. For the bathroom, tile will always be in demand and retain value exceptionally well.

# 4 Fixtures

Kitchens often look tired and dated, in large part due to old fixtures. Replacing or updating cabinet hardware, light fixtures, countertops and faucets will result in an immediate increase in your home’s value. This small, but effective upgrade will also revitalize the entire home. Pot lights are in high demand in open concept style homes.

# 3 Bathroom

The bathroom is the second most important room in the home in terms of valuation. If you can add a three-piece bathroom to a home with only one full bathroom, you will see a dramatic rise in the market value of your home. While you should never compromise bedroom space for a bathroom, try sneaking one in dead space in the home. Scott managed to fit in a 3-piece bathroom under a staircase – the width of the room measured just 44 inches. As an added tip, use glass for the shower to make the bathroom feel more spacious.

#2 Kitchen

Kitchens are the single most important room in the home relating to valuation. The kitchen can make a significant difference in the value of your home. As such, it is crucial that you invest in having a modern, fresh and desirable kitchen. Modern cabinetry, under cabinet lighting and new appliances will all significantly increase the value of your home on the market. To save on cost without compromising construction and desirability, look at options like Ikea cabinets as opposed to custom cabinetry.

#1 An Income Suite

No surprise, but the single biggest way to increase the value of your home is to build an income suite within the property. Whether this is converting your basement into a rental, or another floor in the home, an income property will increase your home’s worth. The main reason for this is that it covers a portion, or sometimes all of your mortgage payments, and results in your home being cash flow positive – which creates real wealth that can supplement your income.

Call me today to discuss how Genworth Canada can help qualified home buyers make their new home just right for them, with tailored improvements, immediately after taking possession of the purchased property.

-contributed by Marc Shendale of Genworth Canada