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RBC First Home – Real Estate Pros

Pressure for winning bid on a home purchase leads some to waive ‪#‎HomeInspection‬. Home purchase subject free is it a good idea?

Ask us questions at ‪#‎RBCFirstHome‬ Twitter Chat on Tuesday August 18th @ 5:30 PM PST. Team of Real Estate Professionals across Canada ready to help. Chance to also win $100 Visa Gift Cards. Don’t miss this event courtesy of RBC Royal Bank.

Follow me on Twitter:  HomeInspector88

 

RBC First Home  Real Estate Professionals across Canada

RBC First Home
Real Estate Professionals across Canada

 

Home Purchase Down Payment with RRSP

DID YOU KNOW? Home Purchase Down Payment with RRSP

I’m sure most people know that there is a government program that allows you to take money from your RRSP without tax implications in order to use it as a down payment on a property but did you know the following:

1. The money must be there for at least 90 days in order to qualify for taking out.
2. The allowable withdrawal has been increased in the past few years from $20,000. to $25,000.00
3. If you have a spouse you can both take $25,000.00 out
4. You have the year you took the money out plus 2 additional years before you have to start paying it back into your RRSP.

5. You have 15 years to pay it back into your RRSP
6. I would advise transferring the balance into something that does not fluctuate as you move closer to the possibility of using it.

7. It can take anywhere from 2 days to over a week to get the money out. Very important to know as you may need the money even sooner than this if you have to put a deposit on a property in order to purchase it.

8. The easiest way to get it back into your RRSP is through an automatic savings plan.
9. The property must be your principal residence.

The Homebuyer’s withdrawal plan is a government program so please check out their website for the latest on the details as well as other qualifications in order to take advantage of it if it makes sense for you.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/menu-eng.html

 

A special thank you to Tony Marchigiano | Mortgage Specialist, RBC Royal Bank for sharing this article. Should you have any questions please contact Tony Marchigiano at 604.505.7109 or tony.marchigiano@rbc.com

 

Strategic Housing | Lease-Option Solutions for Buyers, Sellers and Investors

Create Passive Income While Making a Difference for Others

 

 

Investing in real estate can be a great way to increase wealth and establish financial security, and many real estate investors are turning to lease-option investments because it creates passive income without the risks and hassles associated with owning typical rental properties. For home buyers, lease-options provide a stepping stone that helps them meet the qualifying requirements to get a mortgage. With strict changes in the mortgage industry, lease-options provide a win-win opportunity for investors seeking secure investments and home buyers seeking ownership.

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Understanding Mortgage Penalties

Understanding Mortgage Penalties

If you’re planning on taking out a longer term mortgage, especially if it’s a fixed rate the odds are that you’ll make some changes before the term has matured or expired. Changes such as increasing the amortization, porting your mortgage to a new home, adding a line of credit or refinancing to get a better rate. Some of which may result in being charged a prepayment penalty. To get advice about penalties, and which of these scenarios they might apply to, is crucial from the first meeting with your mortgage advisor. In the past penalties or prepayment amounts & calculations have been very hard to understand but they can result in 4 or 5 figures once calculated. Because of this the Department of Finance has asked banks to make them easier to understand and to calculate. Most banks now agree to a voluntary Code of Conduct that requires them to post plain English explanations of prepayment charge calculations.

According to a recent article in the Globe & Mail the following 10 questions would be very good ones to ask a mortgage advisor when discussing the best options for you regarding your home financing. They are:

1. Is your fixed-rate mortgage penalty based on posted rates, bond yields or discounted rates?
The logic: Some lenders – including the Big Six banks – base penalties on posted rates, which can drastically inflate your penalty. Other lenders use bond yields, which can also cost you a small fortune, depending on bond performance. A few are even bold enough to use posted rates when calculating simple “three-month interest” penalties.

2. If I break the mortgage and stay with you, will you forgive a percentage of my penalty or apply unused prepayment privileges, to reduce my penalty?

The logic: More lenders are doing this as competition grows.
3. If not, can I make a prepayment a few weeks before breaking my mortgage to lower the balance used to calculate my penalty?

The logic: When determining a penalty, some lenders refuse to consider prepayments 30-90 days before you request discharge.

4. What term do you use to calculate the nearest comparison rate for an IRD penalty?
The logic: Some lenders use a shorter term than the nearest term, which can significantly increase your prepayment costs.

5. Can I increase my mortgage without a penalty?
The logic: This is important if you ever upgrade your home or need additional funds.
6. If I sell my home and port my mortgage to a new property, how long can I take to close on that new property and still avoid a penalty?

The logic: Some lenders unreasonably require you to close your old and new home on the same day.
7. If I break the mortgage early, do I have to pay “reinvestment fees” on top of the penalty, or pay back any cash incentives that I’ve received?

The logic: Other things equal, why pay a reinvestment fee on top of your penalty? The latter answer is usually “yes.”
8. Can I get out of my fixed mortgage early if I pay a penalty?
The logic: Some “low frills” closed mortgages don’t let you out before maturity – no matter what – unless you sell your home.

9. Do you charge IRD penalties on your variable-rate mortgage, as opposed to the standard three-month interest?
The logic: Despite being highly unorthodox, a few lenders actually do this and it can cost you.
10. How long will you honour your IRD penalty quote?
The logic: This is relevant if you’re trying to discharge a fixed-rate mortgage while rates are dropping. Falling rates can increase your IRD penalty.

Penalties are a realm where borrowers need knowledgeable advice. Sadly, many advisers are inexperienced with penalty calculations and give you a blank stare when you ask too many questions. (That’s a good clue that you should deal with someone else.)

Fortunately, the Financial Consumer Agency of Canada is doing a noble job encouraging clarity with mortgage penalties. By March 5 of next year, it will go a step further by requiring banks to provide: annual information to help consumers calculate their penalty, written penalty statements upon request with clear calculation explanations, and access to exact prepayment penalty  quotes by phone.

These initiatives will encourage fairer penalties and help homeowners minimize them, saving many individual Canadians thousands over time.

 

A special thank you to Tony Marchigiano | Mortgage SpecialistRBC Royal Bank for sharing this article. Should you have any questions please contact Tony Marchigiano at 604.505.7109 | tony.marchigiano@rbc.com |  www.mortgage.rbc.com/tony.marchigiano

 

What is Property Transfer Tax?

Property Transfer Tax

There are several names for it, Property Transfer Tax, Land Transfer Tax, Property Purchase Tax, but, unfortunately, they all add up to the same and that is an additional expense when purchasing a home. And if nobody tells you about this tax or additional closing costs you could end up very surprised and/or not have enough money to complete on the purchase of your new home.

The Property Transfer Tax is applicable in most provinces within Canada however you can be exempt from this tax. If you are a first time home buyer and the purchase price for an eligible residence is $425,000.00 or less than you are exempt from the tax. The definition of a first time home buyer, by the government, is if you have never owned a property anywhere in the world previously. A proportional exemption is provided for eligible residences with a fair market value of up to $25,000 above the threshold (i.e. up to $450,000).

The actual tax amount is 1% of the first $200,000.00 and 2% for everything thereafter. An example of this would be if someone purchased a home for 500K they would have to pay $2000.00 on the first 200K and $6000.00 on the remaining 300K.

I always advise anyone purchasing a home that you should have about 1.5% of the Purchase Price to cover closing costs in addition to your down payment. These closing costs would include the Property Transfer Tax. There are a number of other things to consider as well. They include:

  • Home Inspection
  • Lawyer or Notary fees
  • Insurance Premium for mortgages with less than 20% down payment (Please note: this cost can be added to the mortgage instead of paying for it up front
  • Moving Costs
  • Utilities switch over to new property
  • Home Insurance
  • Moving Costs
  • Utilities switch over to new property
  • Home Insurance

Below are 2 links to the Government Websites which explain some of this information in greater detail

 

A special thank you to Tony Marchigiano | Mortgage Specialist, RBC Royal Bank for sharing this article. Should you have any questions please contact Tony Marchigiano at 604.505.7109 or tony.marchigiano@rbc.com