Mortgage Education Centre

Increase down payment power! Combine together with RRSP Home Buyers Plan (HBP) or use it alone. Are you a first time home buyer in Canada aiming to secure your down payment while enjoying tax benefits? Understanding its contribution limits, eligibility criteria, and strategic advantages can help pave your way to home ownership. Maximizing FHSA Contributions for a Tax Free Down Payment FHSA allows eligible individuals to contribute a tax-deductible amount of up to $8,000 annually, accumulating to a maximum contribution limit of $40,000 within five years, assuming maximum annual contributions. Important note, that annual unused contribution room is capped at $8,000, restricting the maximum yearly contribution to $16,000 (current year's limit + previous year's carry-forward). Tax Free Savings and Withdrawals Saving within an FHSA offers tax advantages, enabling growth on contributions tax-free. Additionally, withdrawals made for a qualified home purchase remain tax-exempt, including accrued interest from FHSA investments. FHSA Eligibility and Account Details To qualify for an FHSA, certain criteria must be met: Being at least 18 years old (or 19 in some provinces) Holding Canadian residency Meeting the Canadian government's definition of a 'first-time homebuyer' As a first-time homebuyer, you must not have owned or jointly owned a qualifying home in the current calendar year or the preceding 4 calendar years. Utilizing FHSA Funds for Home Purchase FHSA withdrawals for a home purchase can be used towards various expenses beyond the down payment, such as closing costs, legal fees, and moving expenses. What Happens If You Don't Buy a Home? If funds remain after 15 years from the opening date (or upon reaching 71 years of age), transferring the amount to an RRSP or RRIF maintains the tax-deferred status. However, not using the funds for a home purchase forfeits the tax-free withdrawal benefit. Combining FHSA and Other Homebuying Options Consider combining FHSA benefits with other programs, such as the Home Buyers' Plan (HBP), allowing withdrawals from RRSPs for a home purchase, maximizing your down payment potential. Funds withdrawn from RRSP through the home buyer plan must be repaid within 15 years to keep the tax deferral benefits. Once you’ve built savings in your FHSA and are ready to buy, it may also be worth exploring whether now is the right time to refinance your mortgage in Alberta to take advantage of changing rates. Ready to make the most of the First Home Savings Account for your first home? Contact me today and let’s build the best strategy for your down payment.

What's the difference? Which one should you choose? Let's explore the key differences between these two popular options and help you make an informed choice tailored to your financial goals. Fixed Rate Mortgage Fixed rate mortgages provide stability and predictability, making them a popular choice among risk-averse borrowers, providing a peace of mind. Interest rate and mortgage payments remains constant throughout the mortgage term. This can be beneficial in a market with fluctuating rates. Depending on the mortgage product, the penalty for fixed rate mortgages are generally higher between the interest rate differential (IRD) or 3 months interest. Therefore, penalty may usually higher compared to variable rate mortgages. Variable Rate Mortgage Variable rate mortgages come with a level of flexibility tied to market conditions. Flexibility can lead to potential savings during periods of lower interest rates, this also has an element of uncertainty. If rates go up, then more interest is paid. Interest rate fluctuates based on changes to the mortgage prime lending rate. Depending on the mortgage product payments may change when mortgage prime rate changes. Some products will adjust the amortization until rates reach a trigger rate before the mortgage payments are adjusted. The penalty for variable rate mortgages are generally 3 months interest. Therefore, penalty may usually be lower compared to fixed rate mortgages. Factors to Consider Mortgage Product: There are many different types of mortgage products available. Lowest mortgage rates may not always be the best options. Some products may have less flexibility, restrictions, fees, etc. It is best to understand the product rather than just shopping for the best rate. Sometimes borrowers may end up paying more on lower rate products, due to fees and/or penalties. Comfortability: Understanding your risk tolerance is key. If you prefer a steady, unchanging payment structure, a fixed rate might be your preferred choice. If you're comfortable with some level of rate changes and want to take advantage of potential interest rate drops, then a variable rate could be appealing. Financial Planning: Getting the right mortgage is an important part of your financial goals. If knowing the exact mortgage payments for the entire term, a fixed rate aligns with stability. Conversely, if you are comfortable with some variability and seek potential cost savings, a variable rate might be worth considering. If you’re carrying multiple debts, another factor to consider when choosing your mortgage type is how home equity can help with Calgary debt consolidation. Choosing between a fixed or variable rate mortgage ultimately depends on your unique financial situation, preferences and market conditions. Assess your comfortability, consider your financial goals and stay informed about market trends to make a decision that aligns with your homeownership journey. When in doubt, consulting with a knowledgeable mortgage professional can provide valuable insights tailored to your specific needs. Let us help guide you through your search. Understanding the nuances of fixed and variable rate mortgages empowers you to make a decision that supports your financial well-being. Not sure which is the best fit? Lets connect today to find the option that best suits your needs!

What is the minimum down payment to buy a house? Property Purchase Price Minimum Down Payment Up to $500,000 5% $500,001 to $1,499,999 5% of the first $500,000 + 10% for the amount over that $1,500,000 and above 20% (may vary depending on purchase price, location and lender) ​Rental Property 20% or more (may vary depending on purchase price) For down payments less than 20%, mortgage default insurance will be required. Commonly known as CMHC insurance. There are three mortgage insurers in Canada. Canada Mortgage and Housing Corporation (CMHC), Sagen and Canada Guaranty. Default insurance premiums are generally added on top of the mortgage amount. Some borrowers choose to pay it out of pocket. Down Payment Default Insurance 5% 4.00% 10% 3.10% 15% 2.80% 20% - Down payment for a home Advantages of a Larger Down Payment: Some benefits include Lower mortgage payments: Putting a bigger down payment means borrowing a smaller mortgage, resulting in lower mortgage payments Reduced interest costs: Smaller loan amount means you'll pay less interest over the life of your mortgage Easier mortgage approval: Less income is needed for a smaller mortgage, the more equity in the home means lower risk Strategies to Save for Your Down Payment: Set Clear Goals: Determine the amount you'll need for your down payment based on your target home price. Set a savings goal and create a budget to help you reach it. Automate Savings: Consider setting up automatic transfers to a dedicated savings account. This ensures that a portion of your income goes directly toward your down payment fund. Reduce Unnecessary Expenses: Take a close look at your spending habits and identify areas where you can cut back. Redirect those funds into your down payment savings. Additional Income: Explore ways to increase your income, such as taking on a part-time job or freelancing. Extra income can significantly accelerate your savings. Gifts and Windfalls: If you receive gifts or unexpected windfalls, consider directing a portion of these funds into your down payment savings. Assistance with down payment? Are you a first time home buyer? If so, there are programs such as first home savings account, RRSP home buyer plan, incentives and rebates that can help. If you’re a first-time buyer, you may also benefit from exploring first-time home buyer programs in Edmonton that can help boost your down payment and make homeownership more affordable. Non-repayable gifted down payments from a close family member. Borrowed down payment is accepted by some lenders. Is your deposit part of your down payment? Absolutely! When making an offer for a home, providing a deposit is customary and is considered a component of your overall down payment. For instance, if your total down payment is $50,000 and you've offered a deposit of $10,000, you'll be required to provide the remaining $40,000 at the time of signing. When do you need to provide your down payment when purchasing a home? At the time of your mortgage application, your down payment needs to be verified. However, you won't need to transfer the funds until your signing appointment with your lawyer to finalize the home purchase. For ease of documentations, it is best not to move down payment funds around until your signing appointment. No Down Payment Mortgages Setting the record straight, there is no such thing as a $0 down payment mortgage or buying a house with no down payment. Some of the mortgage options that make it appear like a no down payment mortgage would be borrowed down payment or equity take-out from an existing home. Some lenders have programs where borrowers can borrower the down payment as a loan, then use the funds as the down payment towards the purchase of a home. Borrowers who currently own a home with equity can also take equity out of the existing home to buy a new home. No down payment? No problem! Let's see if other options work for your scenario :) Unsure of where to start? Let's connect, we can make a plan together!