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Mortgage-Matters

Home-buyer incentive

The First-Time Home Buyer Incentive program to assist first-time home buyers was announced with the last federal budget.

The intention of the program is to assist qualified first-time home buyers to reduce their monthly mortgage payments.

A few more details about the program have been released recently.The program is scheduled to commence on Sept. 2, (barring any unforeseen circumstances) with the first closings on Nov. 1.

Here a few of the qualifiers for the program:

  • you need to have the minimum down payment to be eligible (currently 5% of the purchase price)
  • your maximum qualifying income can be no more than $120,000
  • your total borrowing is limited to four times the qualifying income

The program effectively limits the amount of the mortgage and the CMHC incentive to $480,000, and with a 15% down payment, this would mean the value of the home cannot exceed about $565,000.

Buyers can receive an interest-free loan of up to 5% on an already-built home and up to 10% for a newly-constructed home.

The program will not be available for those with a down payment of 20% or more.

This is a loan and not a grant or subsidy. It’s not free money. The amount borrowed must be paid back at some point.

The incentive would be a second mortgage on the title of your property. The loan has no interest and does not require any regular principal payments.

You must repay the loan after 25 years or when you sell the house, whichever comes first. You can also repay the loan at any point before that with no penalty.

This is an equity share program which means CMHC will own a share of equity in the value of the home, regardless of whether the value of the property goes up or down.

When you sell your home, you will pay back the equity share the government has in your home. If your home increases in value, you will pay back more than you initially received under the plan.

If your home decreases in value, you will pay back less than you received under the plan.

This new program may help some first-time home buyers, but it is debt that has to be paid back.

As with any programs, it’s important to fully understand the pros and cons both for the short-term and also for the long-term so you can make an educated decision.

Participating in the program could actually reduce a buyer’s purchasing power is some instances. The program may assist in some areas of the country but not in areas with the higher average home prices.

There are still some unanswered questions regarding this incentive and no doubt will be more as the program rolls out on Sept. 2. Please reach out if you have questions.





Solutions for self-employed

Self-employed mortgage solutions

It is no longer as easy as it once was for the self-employed to obtain mortgage financing.

If you have tried to secure a mortgage recently with an institutional lender, you may have already found that out for yourself.

In the past, all you had to do was state your income to your lender without any third party verification. As long as you had a great credit rating, that was good enough then, but not any longer. Now, you have to provide documentation to prove that you have the ability to make your mortgage payments.

There are still good options available with traditional lenders such as banks or credit unions but you will have to prove that you are declaring a ‘reasonable income’ for your profession on your tax returns and also have a great credit rating.

These two factors combined could be a challenge for many who are self-employed as their accountants may be minimizing their income declared for tax purposes which is great unless you are planning to secure new mortgage financing.

With these standard mortgage programs you will either require a minimum 35% equity or if you have less than a 20% down payment, a lender will require a minimum of two years proof of income as self-employed.

The good news, there are many alternative lender options for self-employed clients who no longer qualify with a traditional lender. These lenders are the market’s response to consumer demand spurred on by the tighter mortgage regulations.

These are reputable companies who offer alternative mortgage products to consumers who can no longer qualify with conventional lenders. They fill an important role in fulfilling the dreams of home ownership for Canadians or have assisted with financing needs in other ways such as accessing equity or refinancing to pay off high interest debt.

Many of these lenders, who currently offer prime mortgages, are now expanding their offerings beyond traditional mortgages to fill this gap in the market and are generally only accessible through mortgage brokers.

My best piece of advice for someone who is self-employed and looking to obtain a mortgage whether it is to purchase a property for the first time or moving up, refinancing a mortgage or looking to purchase an investment property – be prepared!

Meet with your mortgage broker well in advance to discuss what is required to obtain a pre-approval for your financing.

You may have to work a little harder and provide more documentation but there are still many options available to the self-employed so please give me a call 1-888-561-2679 to ensure that you are in the very best position when it comes time to arrange your mortgage financing.



Reverse mortgage FAQs

Reverse mortgages are quite often misunderstood and there are always lots of questions.
Here are some of the most frequently asked questions with the answers.

How does a reverse mortgage work?

A reverse mortgage is secured by the equity in your home. Unlike a traditional mortgage in which you make regular payments, no monthly payments are required.

The big advantage with a reverse mortgage is you do not have to make any regular mortgage payments for as long as you or your spouse lives in your home.

Who is it for?

A reverse mortgage is designed exclusively for homeowners age 55 and older. This age qualification applies to both you and your spouse.

How much can I get and how is it calculated?

You can receive up to 55% of the value of your home. The specific amount is based on your age and that of your spouse, the location and type of home you have, and your home’s current appraised value.

You can contact me and I can quickly give you an estimate of how much you may be approved for.

How do I receive the money?

You can choose how you want to receive the money. A reverse mortgage gives you the option of receiving all the money you’re eligible for in one lump sum advance, or you can take some now and more later, or you can receive planned advances over a set period of time.

Will the homeowner owe more than the house is worth?

The homeowner keeps all the equity remaining in the home. In my many years of experience, more than 99% of homeowners have money left over when their mortgage is repaid.

The equity remaining depends on the amount borrowed, the value of the home, and the amount of time that’s passed since the reverse mortgage was taken out.

Will the bank own the home?

No. The homeowner retains title and maintains ownership of the home.

It’s required for the homeowner to live in the home, pay taxes on time, have property insurance, and maintain the property in good condition.

What if the homeowner has an existing mortgage?

Many of our clients use a reverse mortgage to pay off their existing mortgage and debts.

Should reverse mortgages only be considered as a last resort?

No. Many financial professionals recommend a reverse mortgage to supplement monthly income instead of selling and downsizing, or taking out a conventional mortgage or a line of credit.

What fees are associated with a reverse mortgage?

There are one-time fees to arrange a reverse mortgage such as an appraisal fee, fee for independent legal advice as well as a fee for administration, title insurance, and registration.

With the exception of the appraisal fee, these fees are paid for with the funding dollars.

What if the homeowner can’t afford payments?

There are no monthly payments required as long as the homeowner is living in the home.

If you are interested in more information about a R reverse mortgage we have a new website resource at reversemortgage-experts.ca where you can request

The Complete Reverse Mortgage Guide or please give me a call if you have any questions at 1-888-561-2679.



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Buying a vacation home

Are you dreaming of a summer cottage on the water for weekend getaways?

According to a recent Re/Max market survey, retirees and baby boomers are driving vacation property purchases, but here in B.C., professional couples and families are also buying vacation homes.

Many are accessing equity in their primary residences to make these purchases but there is also a great insured mortgage program available to make your dream of owning a vacation property a reality with a little as a 5 per cent down payment required.

Here are the types of properties that can be covered under this program.

Type A Properties:

  • Must be owner-occupied or occupied by an immediate family member
  • Located in good marketable areas with evidence of re-sale demand.
  • The property value must be less than $1 million
  • The maximum mortgage amount allowed is $600,000 for most of Canada
  • Maximum of one unit
  • For properties valued up to $500,000 a minimum down payment of 5 per cent is required.
  • For properties valued over $500,000 and less than $1 million – 5% down payment is required up to $500,000, with an additional 10% down payment on the portion of the home value above $500,000

As a side note, this program can also have other uses. Perhaps you are considering a place for your children to live while they attend university, a condo in the city to avoid the hectic commute or to help buy a home for your elderly parents who are on a fixed income.

This is possible as long as the family members are living there on a rent-free basis.

Up to 95% financing is available for owner occupied properties all across Canada. (A quick note here: These programs are not available to purchase investment properties, time-shares or similar properties that offer rental pools for the owners.)

Type B Properties:

The same details are required for these properties as above except for the following:

  • The property does not need to be winterized
  • Seasonal access is permitted (IE: road not plowed during the winter)
  • A minimum of a 10% down payment is required for these types of properties.
  • Properties located on an island must have year-round bridge or ferry access.
  • The maximum mortgage amount is $350,000.

Investment properties or rental pool or timeshare properties are not eligible for this low down payment program.

There are many financing options available through a wide range of lenders.

The requirements for mortgages on secondary and vacation home properties can vary greatly from lender to lender so you will want to make yourself aware of all of the choices available in the mortgage marketplace.

You’ll want the best possible financing options for your new real estate investment. 

Instead of waiting many years to save enough to purchase a vacation home, you may be able to access the equity in your principal residence to finance the purchase.

This involves a cash-out refinance of your property and there again are many options available.

Other down payment options may include a second mortgage on your current property, personal savings or gifted funds (Type B property purchases do not allow for gifted down payments.) 

With our current interest rates very low, now might be the time to get serious about your dream to own a vacation property.

If you would like to explore your options so you can enjoy a new vacation home this summer please give me a call to discuss.



More Mortgage Matters articles

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About the Author

April Dunn is the owner and a Mortgage Broker with The Red Door Mortgage Group – Mortgage Architects. She has been assisting clients to purchase, refinance or renew their mortgages for over 20 years.

April has experience as a Credit Union manager, a Residential Mortgage Manager with a large financial institution and as a licensed Mortgage Broker. By specializing in Strategic Mortgage Planning she has the tools available to build a customized mortgage plan, with the features and options that meet your needs.

April provides a full range of residential and commercial mortgage financing options for clients all over the province of British Columbia and across Canada through the Mortgage Architects network.

Contact e-mail address: [email protected] or by phone at: 888-561-2679.

Website:  www.reddoormortgage.com



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The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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