Investing in a Home: Programs Available to Help You Investing in a home Investing in a home is a big venture. The Canada Revenue Agency administers various programs and incentives that can make buying or renovating a home easier. Buying a home Home Buyers’ Plan First-time home buyers, people with disabilities or people buying a home on behalf of a related person with a disability can withdraw up to $25,000 from their registered retirement savings plan (RRSP) to buy or build a qualifying home without paying tax at the time of the withdrawal. Amounts withdrawn are repayable and subject to certain conditions. First-Time Home Buyers’ Tax Credit* First-time home buyers, people with disabilities or people buying a home on behalf of a related person with a disability can claim a non-refundable tax credit of up to $750 on their 2009 income tax and benefit return for the purchase of a qualifying home acquired after January 27, 2009. GST/HST New Housing Rebate You may qualify for a rebate of part of the GST or HST that you paid on the purchase price or cost of building your new house, on the cost of substantially renovating or building a major addition onto your existing house, or on converting a non-residential property into a house. Renovating a home Home Renovation Tax Credit* Claim a non-refundable tax credit of up to $1,350 on your 2009 income tax and benefit return based on eligible expenses incurred for work performed or goods acquired between January 28, 2009, and January 31, 2010, in respect of a renovation or alteration to an eligible dwelling. The credit applies to eligible expenses that are of an enduring nature and integral to the eligible dwelling, and that total more than $1,000 but not more than $10,000. Medical Expense Tax Credit Claim a non-refundable tax credit on your income tax and benefit return for certain amounts paid for renovations or alterations to give a person who has a mobility impairment access to (or greater mobility within) the dwelling. The costs may be incurred in building the principal residence of the person, or in renovating or altering an existing dwelling. * Announced in the Economic Action Plan; subject to parliamentary approval. back to top
Buying a Home Are You Financially Ready? To help you determine if you are financially ready to buy a house, CMHC offers a number of simple calculations that you can do to evaluate your current financial situation, how much house you can afford and the maximum home price that you should be considering. If you’re like most Canadians, your home is probably the most important investment you will ever make. But how do you know if you are financially ready for all the responsibilities that come with homeownership? To help you avoid any unpleasant surprises, Canada Mortgage and Housing Corporation (CMHC) offers the following tips on how to assess your current financial situation, calculate your monthly expenses and determine how much house you can afford: First, calculate your net worth. Your net worth is the total of all of your assets (including any investments, savings, properties, vehicles and other assets you own) minus your liabilities (such as any mortgages, car loans, personal or student loans, credit cards or other debts). Your net worth will give you an accurate snapshot of your current financial situation, as well as an idea of how large a down payment you can afford. Next, calculate your current monthly expenses to determine what kind of mortgage payment could comfortably fit into your budget. Your monthly expenses include your current housing expenses (such as rent, utilities, parking and other fees) as well as all other regular, non-housing related costs (such as cable TV/Internet, debt payments, insurance, car fuel and repairs, clothing, medical and dental costs, child care expenses, groceries, entertainment and other expenses). Once you have a clear picture of your financial situation, figure out how much you can afford in monthly housing costs. As a general rule, your total monthly housing costs (including mortgage principal and interest, taxes and heating) shouldn’t exceed 32 per cent of your gross household monthly income. In addition, your entire monthly debt load (including mortgage payments, car or student loans, and credit cards) shouldn’t be more than 40 per cent of your gross household monthly income. If you have made all the necessary calculations and feel you are ready, it can be a good idea to select a lender and ask them to pre-approve you for a mortgage. Getting pre-approved lets you know in advance what price range you should have in mind when you are shopping for your new home. For most people, the hardest part of buying a home — especially a first home — is saving for the down payment. With CMHC mortgage loan insurance, you can purchase a home with a down payment of five per cent of a home’s price. To find out more, contact CMHC or talk to your lender. For more information related to buying a home, visit www.cmhc.ca and search keyword: Step by Step for the Homebuying Step by Step Consumer Guide and Workbook. For the largest collection of housing-related information in Canada on buying, renovating or maintaining your home, visit www.cmhc.ca or call 1-800-668-2642. For more than 60 years, Canada Mortgage and Housing Corporation (CMHC) has been Canada’s national housing agency and a source of objective, reliable housing expertise. For story ideas or to access CMHC experts or expertise, contact CMHC Media Relations — National Office at: 613-748-2799 or by e-mail: media@cmhc-schl.gc.ca. back to top
Understanding Your Mortgage Options How to Choose a Mortgage That’s Right for You CMHC’s Homebuying Step by Step guide has the answers you need to your mortgage financing questions. Congratulations! You’ve decided to begin your search for a new home, or perhaps you’ve already found the home of your dreams and are ready to make an offer. It’s now time to consider your mortgage options. But with so many different choices available, how can you select the right kind of mortgage for your needs? To help you make an informed decision, Canada Mortgage and Housing Corporation (CMHC) offers the following answers to some of the most common questions Canadians have about choosing a mortgage: What is the difference between conventional and high-ratio mortgages? A conventional mortgage is a mortgage loan up to a maximum of 80 per cent of the lending value of the property. This means that the home buyer has made a down payment of at least 20 per cent of the purchase price or market value of the home. If your down payment is less than 20 per cent of the purchase price, however, you will typically need a high-ratio mortgage. A high-ratio mortgage is a mortgage loan which is higher than 80 per cent of the lending value of the property up to a maximum of 95 per cent. High-ratio mortgages normally have to be insured (by CMHC, for example) against payment default. What are fixed, variable or adjustable interest rates? When you choose a mortgage, you have to decide whether you want the interest rate to be fixed, variable or adjustable. A fixed rate is locked-in for the entire term of the mortgage. With a variable rate, the payments remain the same each month, but the interest rate fluctuates based on market conditions. For adjustable rate mortgages, both the interest rate and the mortgage payments vary based on market conditions. Talk to your mortgage professional to find out which option is right for you, and be sure to evaluate the impact of an increasing interest rate on your monthly payment. Should I choose an open or closed mortgage? With a closed mortgage, you pay the same amount each month for the entire term of the mortgage. Some flexibility to repay principal through lump sum payments is allowed. Closed mortgages can be a good choice if you want a fixed payment schedule, and you don’t plan on moving or refinancing before the end of the term. An open mortgage allows you to make a lump sum payment at any time. This type of mortgage can be paid off prior to maturity without penalty. An open mortgage can be a good choice if you’re planning to sell your home in the near future, or if you want the flexibility to make large lump sum payments. An open mortgage generally carries a higher interest rate than a closed one. The term is the length of time (usually from six months to 10 years) that the interest rate and other conditions of your mortgage will be in effect. Amortization is the period of time (such as 25 or 30 years) over which your entire mortgage will be repaid. Lastly, the payment schedule sets out how frequently you will make payments on your mortgage — usually either monthly, biweekly or weekly. Accelerated payments are also an option. These are available for weekly and bi-weekly payment schedules and are generally equivalent to one extra monthly payment per year. With accelerated payments the home owner is able to pay off his/her mortgage faster while decreasing the overall interest cost. For more information or a free copy of CMHC’s Homebuying Step by Step guide, or for information on any other aspect of owning, maintaining or buying a home, visit our Web site at www.cmhc.ca or call CMHC at 1-800-668-2642. As Canada’s national housing agency, Canada Mortgage and Housing Corporation (CMHC) has been a source of objective, reliable housing expertise for more than 60 years. For story ideas or to access CMHC experts or expertise, contact CMHC Media Relations — National Office at: 613-748-2799 or by e-mail: media@cmhc-schl.gc.ca. Published: April 20, 2010 back to top

Investing in a Home: Programs Available to Help You

Investing in a home

Investing in a home is a big venture. The Canada Revenue Agency administers various programs and incentives that can make buying or renovating a home easier.

Buying a home

Home Buyers’ Plan

First-time home buyers, people with disabilities or people buying a home on behalf of a related person with a disability can withdraw up to $25,000 from their registered retirement savings plan (RRSP) to buy or build a qualifying home without paying tax at the time of the withdrawal. Amounts withdrawn are repayable and subject to certain conditions.

First-Time Home Buyers’ Tax Credit*

First-time home buyers, people with disabilities or people buying a home on behalf of a related person with a disability can claim a non-refundable tax credit of up to $750 on their 2009 income tax and benefit return for the purchase of a qualifying home acquired after January 27, 2009.

GST/HST New Housing Rebate

You may qualify for a rebate of part of the GST or HST that you paid on the purchase price or cost of building your new house, on the cost of substantially renovating or building a major addition onto your existing house, or on converting a non-residential property into a house.

Renovating a home

Home Renovation Tax Credit*

Claim a non-refundable tax credit of up to $1,350 on your 2009 income tax and benefit return based on eligible expenses incurred for work performed or goods acquired between January 28, 2009, and January 31, 2010, in respect of a renovation or alteration to an eligible dwelling.

The credit applies to eligible expenses that are of an enduring nature and integral to the eligible dwelling, and that total more than $1,000 but not more than $10,000.

Medical Expense Tax Credit

Claim a non-refundable tax credit on your income tax and benefit return for certain amounts paid for renovations or alterations to give a person who has a mobility impairment access to (or greater mobility within) the dwelling.

The costs may be incurred in building the principal residence of the person, or in renovating or altering an existing dwelling.

* Announced in the Economic Action Plan; subject to parliamentary approval.

back to top

Buying a Home

Are You Financially Ready?

To help you determine if you are financially ready to buy a house, CMHC offers a number of simple calculations that you can do to evaluate your current financial situation, how much house you can afford and the maximum home price that you should be considering.
If you’re like most Canadians, your home is probably the most important investment you will ever make. But how do you know if you are financially ready for all the responsibilities that come with homeownership?

To help you avoid any unpleasant surprises, Canada Mortgage and Housing Corporation (CMHC) offers the following tips on how to assess your current financial situation, calculate your monthly expenses and determine how much house you can afford:

First, calculate your net worth. Your net worth is the total of all of your assets (including any investments, savings, properties, vehicles and other assets you own) minus your liabilities (such as any mortgages, car loans, personal or student loans, credit cards or other debts). Your net worth will give you an accurate snapshot of your current financial situation, as well as an idea of how large a down payment you can afford.
Next, calculate your current monthly expenses to determine what kind of mortgage payment could comfortably fit into your budget. Your monthly expenses include your current housing expenses (such as rent, utilities, parking and other fees) as well as all other regular, non-housing related costs (such as cable TV/Internet, debt payments, insurance, car fuel and repairs, clothing, medical and dental costs, child care expenses, groceries, entertainment and other expenses).
Once you have a clear picture of your financial situation, figure out how much you can afford in monthly housing costs. As a general rule, your total monthly housing costs (including mortgage principal and interest, taxes and heating) shouldn’t exceed 32 per cent of your gross household monthly income. In addition, your entire monthly debt load (including mortgage payments, car or student loans, and credit cards) shouldn’t be more than 40 per cent of your gross household monthly income.

If you have made all the necessary calculations and feel you are ready, it can be a good idea to select a lender and ask them to pre-approve you for a mortgage. Getting pre-approved lets you know in advance what price range you should have in mind when you are shopping for your new home.
For most people, the hardest part of buying a home — especially a first home — is saving for the down payment. With CMHC mortgage loan insurance, you can purchase a home with a down payment of five per cent of a home’s price. To find out more, contact CMHC or talk to your lender.

For more information related to buying a home, visit www.cmhc.ca and search keyword: Step by Step for the Homebuying Step by Step Consumer Guide and Workbook. For the largest collection of housing-related information in Canada on buying, renovating or maintaining your home, visit www.cmhc.ca or call 1-800-668-2642. For more than 60 years, Canada Mortgage and Housing Corporation (CMHC) has been Canada’s national housing agency and a source of objective, reliable housing expertise.

For story ideas or to access CMHC experts or expertise, contact CMHC Media Relations — National Office at: 613-748-2799 or by e-mail: media@cmhc-schl.gc.ca.

back to top

Understanding Your Mortgage Options

How to Choose a Mortgage That’s Right for You

CMHC’s Homebuying Step by Step guide has the answers you need to your mortgage financing questions.
Congratulations! You’ve decided to begin your search for a new home, or perhaps you’ve already found the home of your dreams and are ready to make an offer. It’s now time to consider your mortgage options. But with so many different choices available, how can you select the right kind of mortgage for your needs?

To help you make an informed decision, Canada Mortgage and Housing Corporation (CMHC) offers the following answers to some of the most common questions Canadians have about choosing a mortgage:

What is the difference between conventional and high-ratio mortgages?
A conventional mortgage is a mortgage loan up to a maximum of 80 per cent of the lending value of the property. This means that the home buyer has made a down payment of at least 20 per cent of the purchase price or market value of the home. If your down payment is less than 20 per cent of the purchase price, however, you will typically need a high-ratio mortgage. A high-ratio mortgage is a mortgage loan which is higher than 80 per cent of the lending value of the property up to a maximum of 95 per cent. High-ratio mortgages normally have to be insured (by CMHC, for example) against payment default.

What are fixed, variable or adjustable interest rates?
When you choose a mortgage, you have to decide whether you want the interest rate to be fixed, variable or adjustable. A fixed rate is locked-in for the entire term of the mortgage. With a variable rate, the payments remain the same each month, but the interest rate fluctuates based on market conditions. For adjustable rate mortgages, both the interest rate and the mortgage payments vary based on market conditions. Talk to your mortgage professional to find out which option is right for you, and be sure to evaluate the impact of an increasing interest rate on your monthly payment.

Should I choose an open or closed mortgage?
With a closed mortgage, you pay the same amount each month for the entire term of the mortgage. Some flexibility to repay principal through lump sum payments is allowed. Closed mortgages can be a good choice if you want a fixed payment schedule, and you don’t plan on moving or refinancing before the end of the term. An open mortgage allows you to make a lump sum payment at any time. This type of mortgage can be paid off prior to maturity without penalty. An open mortgage can be a good choice if you’re planning to sell your home in the near future, or if you want the flexibility to make large lump sum payments. An open mortgage generally carries a higher interest rate than a closed one.

The term is the length of time (usually from six months to 10 years) that the interest rate and other conditions of your mortgage will be in effect. Amortization is the period of time (such as 25 or 30 years) over which your entire mortgage will be repaid. Lastly, the payment schedule sets out how frequently you will make payments on your mortgage — usually either monthly, biweekly or weekly. Accelerated payments are also an option. These are available for weekly and bi-weekly payment schedules and are generally equivalent to one extra monthly payment per year. With accelerated payments the home owner is able to pay off his/her mortgage faster while decreasing the overall interest cost.

For more information or a free copy of CMHC’s Homebuying Step by Step guide, or for information on any other aspect of owning, maintaining or buying a home, visit our Web site at www.cmhc.ca or call CMHC at 1-800-668-2642. As Canada’s national housing agency, Canada Mortgage and Housing Corporation (CMHC) has been a source of objective, reliable housing expertise for more than 60 years.

For story ideas or to access CMHC experts or expertise, contact CMHC Media Relations — National Office at: 613-748-2799 or by e-mail: media@cmhc-schl.gc.ca.

Published: April 20, 2010