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Mortgage-Matters

Using the Home Buyers' Plan for your downpayment

Home buyers' plan

Are you considering purchasing your first home next year?

If so, prior to March 1, 2025 could be the best time to implement this strategy if you are thinking about buying in the spring.

If you need a source for your down payment, the Home Buyers’ Plan will allow you to withdraw up to $60,000 from your RRSP to use in assisting with the purchase of your first home, tax-free. If you are purchasing with someone who is also a first time home buyer, that amount can be increased to $120,000, $60,000 each.

You can use any amount up to $60,000 to add to any down payment amount you may have saved or use towards other expenses for purchasing a home.

To help Canadians maintain homeownership, individuals who experience the breakdown of a marriage or common-law partnership are also permitted to participate in the Home Buyers' Plan, even if they do not meet the first-time home buyer requirement.

The amount you have withdrawn from your RRSP must be paid back into your RRSP account in annual payments and you have 15 years to repay them. If you don’t make your annual payment, it will be added to your annual income and you will be taxed accordingly.

If you make a withdrawal from your RRSP, but do not meet the first-time homebuyer eligibility requirements, the withdrawal will be taxed and you must include it in your income tax return as taxable income.

Temporary repayment relief is available to defer the start of the 15-year repayment period by an additional three years for participants making a first withdrawal between January 1, 2022, and December 31, 2025. Accordingly, the 15-year repayment period would start the fifth year following the year in which a first withdrawal was made. For example, if you made your first withdrawal in 2022, your first year of repayment will be 2027.

So what if you don’t have any RRSP savings? You can get your savings working for you in a tax free and efficient way. The strategy might be right for you. If you have room under your RRSP contribution limit, you could secure a RRSP loan and contribute those funds and then later use them towards your down payment. If you have funds sitting in unregistered savings you could also move those into a registered account. Please check with the financial institution regarding their policies for withdrawing for the HBP prior to the loan being paid in full.

Any tax refund generated by contributing to your RRSP could also be put towards your down payment funds.

If you aren’t sure whether you have room to contribute, check your Notice of Assessment for last year. Each year you are allowed a percentage of your income to contribute to a RRSP and the amount is carried forward and added to the next year’s total either partially or in full if you haven’t contributed.

It’s important to note the funds you plan to withdraw and put towards the purchase of your home, must be in your account for 90 days prior to your withdrawal.

You do not need to use the withdrawn funds for only your down payment. They can also be used for any purpose that assists with the purchase of your first home—closing costs, paying off outstanding debt, renovations, etc. You must have a written contract in place agreeing to purchase a home and the home must be owner-occupied within one year.

If you have used the Home Buyers’ Plan in the past but have not owned a home for four years, you may qualify to withdraw from your RRSP again as long as you or your common-law partner or spouse did not occupy a home that either of you owned in that four year period.

If you would like more information on the RRSP Home Buyers’ Plan, please email [email protected] and I can give you some guidance and help you decide what is right for your situation or book a time for a chat here on my calendar at www.calendly.com/april-dunn

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.





It's worthwhile taking a look at your mortgage each year

Mortgage check-up time

I get it. Mortgages are boring. Why would you want to revisit your mortgage every year?

Your mortgage is likely the largest investment you will ever make but most Canadians don’t even think about it after first signing off until renewal time is approaching or they are considering a refinance to access equity.

About 80% of Canadians visit their doctor at least once a year to help ensure they remain physically fit but far less are checking their financial fitness annually.

It’s time for a mortgage check-up. Thankfully, this check-up doesn’t require you to face your weight on that maddeningly accurate doctor’s scale, or sit in a cold and drafty little room with an open hospital gown.

Actually, it’s a mortgage check-up that’s in order, and making time for a quick review may yield some amazing results.

Life changes, families grow, job’s move, retirement objectives shift. There are any number of reasons why your mortgage and possibly your entire financial picture should be evaluated from year to year. Maybe there are no changes needed but if there are it’s better to identify them early.

The mortgage you signed up for a few years ago may no longer be the best fit for you. Doing a financial check-up is a very smart thing to do annually. Many often just wait for the renewal letter before they look at their mortgage and then go back to their current lender without considering whether that mortgage meets their current needs.

There are so many things that a mortgage can do for you. It can help you become more tax efficient, build wealth for retirement, renovate your home, consolidate high interest credit card debt or perhaps invest in a business, purchase a vacation or rental property and so much more.

When you obtain a mortgage it is most likely the largest financial transaction of your life. Here’s a thought for you, instead of focusing solely on the interest rate perhaps it might be important to consider various strategies that you can utilize within your mortgage that will assist you with your goal of ‘mortgage freedom’ and ‘financial freedom’ when you are ready to retire.

Having the same mortgage strategy your entire life is not always the best financial decision. If you are applying different mortgage strategies at different stages of your life, just like your other investments, it can lead to the financial wealth and the independence you are hoping for in retirement.

Don’t wait for your mortgage to come up for renewal and don’t wait until after you have made a major change in your personal situation. By reviewing annually you will ensure you stay financially fit.

You can email me [email protected] for a review or you can book a time here on my calendar for a chat. calendly.com/april-dunn.

I promise it won’t hurt.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



Questions to ask if you are planning to renew your mortgage

Renewing your mortgage

The Office of the Superintendent of Financial Institutions has announced that starting Nov. 21, it would no longer require a “stress test” (qualifying at 2% over the contract rate) for uninsured mortgages when borrowers make a straight switch between lenders, meaning they aren't changing things like their amortization or borrowing amount.

Approximately half of all mortgages in Canada are set to renew in 2025 or 2026 due, in part, to the real estate frenzy that transpired over the course of the COVID-19 pandemic along with record low interest rates.

Analysts estimate $251 billion in mortgages will have come up for renewal in 2024 and another $352 billion next year. Most borrowers will face higher interest rates with increased mortgage payments, so, it’s smart to have a plan for managing your mortgage going forward.

When your current mortgage is getting close to its maturity date, you will need to re-negotiate your mortgage. This is the opportunity to decide on the new term length, negotiate the new mortgage interest rate and even move your mortgage to a new lender.

Most lenders (federally regulated) are required to provide you with a new mortgage offer at least three weeks before your maturity date, if they are interested in renewing your mortgage. They are not obligated to offer you a renewal should there be a change in your circumstances or a late payment history.

Statistics show more than 50% of homeowners renew their mortgage with the current lender without negotiating the terms. That doesn’t give the lenders much incentive to offer the best rates at renewal time. They are betting on the fact you won’t shop around or won’t want to go through the hassle of applying for a mortgage with a new lender.

Signing the mortgage renewal offer without exploring other options is not in your best interest. Yes, it’s easier to remain with your current lender as you don’t have to go through the hassle of providing new documents etc. But you could find better rates and terms with another lender, perhaps saving you thousands of dollars in interest costs.

Here are a few questions to ask yourself before you sign that mortgage renewal offer:

• Have you explored all your options? A mortgage broker can look for opportunities that could better meet your needs right now.

• Do you need cash flow for other things? Your priorities may have shifted since you first bought your home, and your cash flow needs can shift too. Things like paying for a child’s university education, planning a career change, or a major purchase such as a vacation property may call for spending money on things other than your home. You may be able to refinance your mortgage to take this into account.

• Can you handle fluctuating rates? Some homeowners are nervous about any hikes in interest rates, while others are comfortable to go with the flow. Rates are tough to predict. It’s best to base your decision on your personal situation, not what you read in the news, and tailor your mortgage renewal around your needs. A mortgage broker can help you decide whether to opt for fixed or variable rates.

• Will you sell soon? If so, you might want to consider a shorter-term mortgage or one that has flexible terms so you’re not penalized if you sell your house before the mortgage comes due. Not all mortgages can be moved to a new property.

• Are you thinking about a major renovation? Before you renew, look at all your financing options, which may include getting an additional line of credit or keeping your monthly mortgage payments low so you have money on hand to finance the renovations.

• When do you want to be “mortgage-free”? If you’re planning extended time away from work or perhaps an early retirement, it may make sense to pay down your mortgage sooner rather than later or re-structure your current mortgage so you have access to your home equity once you retire as you may not qualify for mortgage financing at that time.

• Could you use your home equity to fulfill other goals? Refinancing a mortgage can be one way to free up cash you need for other things, which could even include buying another property. Mortgage renewal time is an ideal occasion to review all your options.

• Are you getting the best rates and terms? In a competitive mortgage environment, your good credit history can make refinancing work to your advantage. A mortgage broker can analyze mortgage markets daily to ensure you don’t miss any money-saving opportunities.

By working with a mortgage broker, you gain access to a wide range of mortgage options from various lenders. A mortgage broker can help you shop around for the best rates and guide you in understanding the different terms and conditions associated with each mortgage product. This ensures that you can make an informed decision, aligning your mortgage choice with both your short-term and long-term financial goals.

If you would like to discuss your upcoming mortgage renewal and explore the possible options available to you, please feel free to book a convenient time on my calendar for a quick chat. You can find my calendar here: calendly.com/april-dunn or you can email me at [email protected]

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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Important to know if your mortgage is portable before looking to move

'Porting' your mortgage

Are you thinking about moving up or perhaps downsizing you home?

If so, there are several things you should consider regarding your financing for planning the move.

You may believe your mortgage is portable (you can take it with you) should you decide to move to a new property but did you know both you and the new property must requalify for the mortgage.

You should speak to your mortgage broker to find out if you qualify to port your mortgage before you start shopping for a new property or list your current property.

Porting your mortgage is an option that allows you to transfer the interest rate and all the existing terms and conditions of your current mortgage over to your new property. The advantage is you automatically avoid any prepayment fees for breaking your existing mortgage.

But not all mortgages are portable and every lender has different policies regarding the porting of their mortgages. As an example, most variable rate mortgages and home equity lines of credit are not portable, which means you may not be able to take your current great rate with you to a new property and will be required to qualify for new mortgage financing. If you stay with your current lender they may waive penalties.

Here are a few other points you should consider to prevent any surprises.

• Mortgage penalties—Most mortgages are portable but some lenders may not be willing to approve the moving of your current mortgage to a new property. You may have to seek new mortgage financing with another lender as your current lender may have issues with the property – self-managed strata properties, former grow-ops, age restricted properties, etc. Or you may no longer qualify for financing with this lender due to all of the changes to mortgage qualifications in recent months or changes in your own circumstances.

• There can be a limited window of time for you to complete the porting of your mortgage. Some lenders only allow 15 days to complete while others will go up to 120 days. It’s important to know this information in advance as you plan your move.

• If the sale of your current home completes before the purchase of your new home, a lender is going to collect any penalties that are owing and will not reimburse you until the purchase of your new home is complete. This needs to be included in your financial budget for the purchase of your new home.

• Many lenders will not allow you to port and increase your mortgage so you may be actually looking at today’s rates on a new mortgage financing rather than porting the rate on your current mortgage.

• If you currently have your mortgage with a credit union and you move out of their trade area or out of province, you most likely cannot take your current mortgage with you to a new property.

So whether you are moving up or moving down, with a little bit of planning and budgeting all can go smoothly. You may not be planning for a move when you initially secure your mortgage but a little planning for the future may save you thousands of dollars should you want or need to make a move to a new property. Every lender has different policies regarding the porting of their mortgages and it’s important to secure your mortgage with a lender that not only has great rates but also the most flexible terms and conditions.

Your first call should be a chat with your mortgage broker to ensure you qualify for your financing before listing your current home and then you can move forward with confidence to your new home.

Please give me a call at 1-888-561-2679, or you can book a time for a chat on my calendar at calendly.com/april-dunn if you would like to do a review prior to making a big move.

This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.



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About the Author

April Dunn is the owner and a Mortgage Broker with The Red Door Mortgage Group – Mortgage Architects. For over two decades, she has been helping clients to arrange their financing to purchase a home, refinance, or renew their mortgages. Drawing from her extensive experience as a Credit Union manager, a Residential Mortgage Manager with a large financial institution, and as a Mortgage Broker, April has the necessary expertise to design a tailored mortgage plan with features and options that cater to each client's individual needs. April offers a complete range of residential and commercial mortgage financing services to clients throughout British Columbia and the rest of Canada through her affiliation with the Mortgage Architects network.

Contact e-mail address: [email protected] or by phone at: 1-888-561-2679.

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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