3 minute read
How much can they afford?
Canadians place high value on homeownership, but recent changes to mortgage rules may have some firsttime buyers concerned that home ownership is beyond their reach. However; you can provide valuable insights in those conversations about how much your clients can afford and what options are available to them. First-time buyers are often looking for more from their REALTOR® than help finding a new home. Staying well-informed about the options contributing to responsible homeownership will help you build lasting relationships. Here are some of the options you can bring to the proverbial ‘kitchen table’ conversation.
Mortgage insurance
Mortgage insurance is required by most lenders on all high-ratio mortgages (less than 20 per cent down payment). This insurance protects lenders from financial losses in the event that the homeowner defaults on their mortgage payments. It also allows qualified homebuyers to purchase a home with as little as five per cent down. As a result, lenders are able to offer the same competitive interest rates as they would offer to borrowers with more equity.
Changes to mortgage rules in July 2012 reduced the maximum amortization period from 30 to 25 years. This may lead some prospective homebuyers to think they can’t yet afford a home. But, according to Genworth Canada, over 80 per cent of Genworth-insured homeowners who qualified for a 30 year amortization would have qualified at 25 years. While this shorter amortization requires larger monthly payments, the benefits of building equity in a home sooner, or taking advantage of a good opportunity when it presents itself, can far outweigh the higher monthly costs.
There are also other benefits that come with mortgage insurance such as rebates for buying energy-efficient homes, making energy-efficient upgrades or for undertaking home improvements upon purchase. Another benefit is access to homeowner assistance programs and, exclusive to Genworth Canada, access to a Homebuyer Privileges Program, which provides discounts with select retailers across Canada.
Government incentive programs
While mortgage insurance makes purchasing a home with as little as five per cent down possible, the cost of homes in some cities makes it difficult to save even that amount. Recognizing the challenges faced by first-time buyers, and the importance of enabling responsible homeownership, the Government of Canada offers a number of incentives to help buyers with their down payments. Here are some of the most popular:
• Home Buyers’ Plan (HBP): allows eligible homebuyers to withdraw up to $25,000 tax-free from their Registered Retirement Savings Plan (RRSP) to purchase or build a qualifying home.
We’re pleased to announce that Genworth Canada is now Royal LePage’s preferred supplier for mortgage insurance.
Genworth Canada is the largest private Canadian mortgage insurer. Through this new relationship, Royal LePage REALTORS® will have access to innovative tools and resources to help educate homebuyers, expand their sales potential and add value to their client relationships.
• Tax-free Savings Account (TFSA): a great way to save for a down payment since no tax is paid on interest accrued and the money is more accessible than an RRSP.
• GST/HST New Housing Rebate program: eligible buyers of new homes may be able to claim a rebate for a part of the tax paid on the purchase price or cost of building a home. On homes purchased for less than $350,000, the maximum rebate is $8,750.
It is reduced proportionately on homes priced in the $350,000 to $450,000 range and is not available on new homes priced at $450,000 or higher (before tax).
• Home Buyers’ Tax Credit (HBTC): This program is designed to help first-time buyers with costs associated with the purchase of a home such as legal fees and land transfer taxes. Eligible buyers can claim $5,000 for this tax credit, providing up to $750 in federal tax relief. Please visit rlpNetwork to find out more about what Genworth Canada can do to help you help Canadians achieve their homeownership dreams.
For more resources to help homebuyers make informed decisions and help you sell more homes, visit www.genworth.ca.
Kiki Sauriol-Roode is Vice President, Strategic Alliances at Genworth Canada, the leading private sector supplier of mortgage default insurance in Canada. She can be reached at 905-287-5379 or kiki.sauriol-roode@genworth.com.
©iStockphoto.com/kupicoo
