30 Sep

Down Payment Options


Posted by: Brent Adair

A down payment is the portion of the purchase price that the homebuyer furnishes. The balance is then obtained from a financial institution in the form of a mortgage. However before you go house hunting, you should first consider what type of down payment you would like to put towards a house. Below you will find some of the most commonly used down payment options.


Conventional Mortgage

This type of mortgage requires the home buyer put down at least a 20% down payment and the mortgage rate is offered at either a fixed or variable basis. This mortgage does not carry any type of high-ratio or lender insurance premium.


Using Your RRSP as a Down Payment

Under the federal government’s Home Buyer’s Plan, first time home buyers are able to use up to $25,000 in RRSP savings per person($50,000 for couples) on a down payment for a home. This can be used to make a down payment on your home without any penalty. There are a few things to note with using your RRSP. You must begin to repay the funds two years after the funds have been withdrawn. This withdrawal is not taxable as long as it is repaid within a 15-year period. To learn more about the Home Buyer’s Plan and using your RRSP talk to your financial advisor today.  


Larger Down Payment

Your main for a down payment should be to save as much as possible and use this amount towards a down payment. It is a huge advantage to put down as much money as possible for your down payment. Interest costs on a smaller mortgage are lower, this then adds up to a more significant amount of savings in the long run.


Also be sure to keep some money in a reserve, as you should be prepared for other costs and expenses that might come up including: home inspection, closing costs, moving and other potential expenses.


Low Down Payment Insured Mortgage

This option allows Canadians who might not have the ability to purchase homes access to the Canadian real estate market. Mortgage default insurance or commonly known as CMHC Insurance, is mandatory in Canada for down payments between 5% and 19.99%. This insurance protects the lender in the event of the borrower stops making payments and defaulted on their mortgage loan.


Mortgage Default Insurance is a one time premium paid when your purchase closes. It can be paid in a single lump sum or added to the principal amount of the mortgage.


However there are some requirements that need to be met before qualifying for Mortgage default Insurance:

  • The maximum amortization for insured mortgages is 25 years
  • If the purchase price is between $500,000 – $999,999 a higher down payment is required. The minimum down payment is 5% of the first $500,000, and 10% of the remaining amount.
  • Mortgage default insurance is not available on homes purchased for more than $1 million; this means that a 20% down payment is required on these homes.

Thinking about which option works best for you? Give me a call today and let me find out which mortgage down payment option works for you!

30 Sep

4 Incentives For Buying a Rental Property


Posted by: Brent Adair

One of the best things about investing in real estate, is that the real estate market is a lot more intuitive than something like owning stocks.  Currently the vacancy rate in London is at it’s lowest in over a decade.  If you are thinking about buying a rental property, there are several incentives for owning a rental property.


1. Pay Less in Taxes


Owning a rental property is an excellent way to invest capital.  The income earned from the rental property is like any other investment which would be subject to taxation and any profits on the eventual gain would only be taxed at 50%.  However, come tax time there are deductions you can make on your taxes to lower your rental income or capital gains;

  • Your insurance on the property
  • Advertising the rental property
  • Office supply costs
  • Bookkeeping/accounting/tax preparation fees
  • The salary/wages of your property manager and any other people you employ to take care or provide services to the property
  • Repairs to the property.
  • Property taxes.
  • The cost of providing utilities if you choose to pay for them on your rental agreement
  • Vehicle expenses driving back and forth to the rental
  • Mortgage interest


2. Ontario New Residential Rental Property Rebate (Federal and Provincial)


If you are buying a new build for rental purposes there is an HST rebate for rental properties offered by the Canada Revenue Agency. It is called the new residential rental property rebate (NRRP Rebate), and any landlord that buys a new home or condo in which the first occupant is a tenant is eligible for the rebate. The buyer of the rental property must pay all the HST upfront and then apply for the rebate on their own.  On average the rebate provides relief for up to 60% of the HST paid depending on the value of the home.


3. Deduct Losses for Tax Purposes


If your rental expenses exceed your gross rental income, you have incurred a loss. Rental losses can be used to reduce income from other sources. If this rental loss exceeds income from other sources and cannot be deducted on the current year tax return, it then becomes a non-capital loss. This can be carried forward or backwards to reduce taxable income in other years.


4. Regular Monthly Income


Unlike other investments that you may have, having a rental property almost guarantees that you will have a regular income, unlike other investments that may pay out less often. Once you find a tenant and have a written agreement about the pricing and payments, you are almost certainly guaranteed that amount each month.


When you’re ready to buy make sure to call the expert.  Brent Adair Email: brentadair@dominionlending.ca
or call: 519-854-8668