Thinking about buying your first home? Wish you had saved up a good down payment? Maybe you have, but didn’t know it.

 Designed to help first-time buyers get into home ownership, the federal Home Buyers’ Program lets you access tax-free monies for use towards the purchase or even construction of your first home.

Why tap into your RRSP? The most common reason is to boost the down payment on a home. The bigger your down payment, after all, the smaller your mortgage. And you may qualify for better interest rates too; your healthy down payment shows the lender that you are a low risk candidate for a mortgage loan.

Here’s how it works. If you’ve been contributing to an RRSP, then you already know that the program is designed to set aside money for retirement, with the money going into the program taxfree (paying taxes on the funds when they’re withdrawn later). But there are some valid reasons why you may want to access these funds earlier. A home purchase may be one of them. As a first-time homebuyer, you are allowed to withdraw money tax-free, provided you adhere to the repayment plan. (Just make sure, of course, that your RSP is not a locked-in plan.) You can withdraw up to $25,000 from your plan. If your spouse qualifies as a first-time homebuyer, then he or she will also be able to withdraw $25,000. Between the two of you, you could possibly have a hefty down payment sum of $50,000. That’s enough to make a substantial difference in the affordability of home ownership!

There are some conditions that you should know about. For example, you must enter into a written agreement to buy or build before you can withdraw money. And you are expected to complete the home purchase no later than October 1 of the year following your withdrawal. In addition, all HBP-eligible withdrawals must be made in the same calendar year, and you can’t have owned the home more than 30 days before the date of withdrawal. Above all, you must meet certain repayment terms. Repayment to your RSP begins the second year following the year of withdrawal. You have up to fifteen years to repay, and each annual repayment must be at least one-fifteenth of the total withdrawal, otherwise you have to include each repayment amount as income for that year.

A common question: so who exactly qualifies as a first-time homebuyer? What if one partner has owned a home before, for example? Well, it often happens that only one partner qualifies as a first-time homebuyer, so only one RRSP can be tapped for funds. But if either of you has not owned a home for the past five years, then you meet the description of a firsttime homebuyer for RRSP purposes!

Any kind of home qualifies for the program – detached, semi-detached, mobile, condominium, etc. – as long as it is located within Canada and will be your principal residence within one year. A detailed booklet is available on the Canada Revenue Agency website. Look for T1036, which is the form required for requesting a withdrawal.

If you’re thinking of using your RRSP for your first home purchase, consider meshing your RRSP strategy with your down payment savings. Putting away funds in your RRSP not only saves you the current income tax, but any tax refund translates into more dollars towards your down payment. If you have RRSP contribution room, you can make your contribution now and then after 90 days you can redeem your RRSP under this plan, using your tax refund to bolster your down payment.

Let’s have a conversation about your future plans for home ownership. A good plan is always a great beginning.

Wouldn’t spring cleaning be so much more gratifying if – somewhere under dusty barbecue parts and outgrown hockey skates you found an envelope with, say, $5,000 in cash? Wouldn’t that make spring cleaning worthwhile? Of course it would!

Well, you may not uncover a financial windfall when you’re cleaning the garage this spring, but a little time and attention to the task of spring cleaning your financial house can be very rewarding. This spring, dust away the cobwebs and take a hard look at your debt servicing costs.

Are you continuously carrying a large monthly balance on your credit cards? Take some comfort in knowing that you’re not alone. However, this particular kind of financial clutter – ongoing, unsecured consumer debt – is both confusing and costly. Guess what? It’s time to spring clean your debt!

Begin by making a quick list of the interest you are being charged on your loans, credit cards or other unsecured debts. What are you paying in debt servicing costs? Do you have tax bills piling up? Don’t forget to include that debt in your spring cleaning project.

Next, take a look at our historically low mortgage rates, and contact me tyler@tylerwilson.ca for a review of your situation. You have a golden opportunity right now to give yourself a tremendous financial boost. By rolling your other debt into a mortgage – either new or existing – you can reduce the number of payments you’re making each month, save big on interest costs, be mortgage free quicker, and greatly improve your cash flow. Most of all, you’ll be able to start building wealth.

Worried about penalties? Don’t think it can make much difference? Think again. It can be as good – or better – than finding the $5,000 envelope of cash in your garage. Why? As an example, assume you have a $175,000 mortgage at 4.5%, high interest credit cards and other loans of $50,000, and a total monthly payment of $2,119.

Now if you took that $225,000 and added on an approximate $8,000 penalty to refinance your mortgage, you could roll that $233,000 into a 3.5% mortgage (OAC, rates subject to change) that would reduce your overall monthly payment to $1,163. That’s a monthly savings of $956. Your monthly payment has been reduced, you’re saving on interest charges, and all of your high interest credit card debts are gone. Imagine if you funneled some of that cash flow back into your mortgage, or invested in RRSPs, TFSAs, or RESPs!

Regardless of where you are in the life of your mortgage, if you have equity in your home and your cash flow has slowed to a trickle because of your debt, feel free to contact me and I can analyze your situation and outline your spring cleaning options.

So as you polish the windows, shake out the carpets and clear out the garage, don’t forget the most rewarding task of all: spring cleaning your debt. Your financial house will enjoy the fresh beginning too!

With a lot of first time home buyers getting into the market place it is important that you understand all of the benefits that first time home buyers in BC receive. Recently the government announced a new incentive for first time home buyers who were looking to purchase newly constructed homes. This new credit is often confused with the previous tax credit that first time home buyers also receive.

Here is the difference between the two:

BC First-Time New Home Buyers’ Bonus, effective February 21, 2012, to March 31, 2013, the bonus is a one-time refundable personal income tax credit worth up to $10,000

Important points:
 Only applies in British Columbia
 5% of the purchase price to a maximum of $10,000 bonus payable
 Applies only to purchase of new construction or substantially renovated property
 Purchase must close prior to April 1st, 2013.
 All buyers must be first time home owners
 There is a separate form to complete and apply to Government with
 Funds sent directly to buyer upon Government approval

First Time Home Buyer’s Tax Credit, is a new non-refundable tax credit, based on an amount of $5,000, for certain home buyers that acquire a qualifying home after January 27, 2009.

Important points:
 Canada wide
 Non-refundable tax credit applied against taxable income using the lowest marginal tax rate (15% in 2009 = $750 maximum tax refund) to calculate
 Apply using line 369 of Schedule 1 on the Federal tax form
 Only reduces taxes payable by that amount, not a bonus or grant
 Applies to purchase of new and existing homes
 Applicant or spouse (or common law) must be first time home buyers, ie not have lived in a home owned by self or spouse in any of the 4 preceding years
 Apply when filing income taxes in the year of purchase

Contact me if you have any additional question or are interested in how this bonus could assist with getting you into your first home.

WITH THE ONCE POPULAR VARIABLE MORTGAGE NO LONGER OFFERING SIGNIFICANT DISCOUNTS OFF THE PRIME RATE, WE’VE SEEN A TURN OF THE TIDE OVER THE LAST SEVERAL MONTHS AS CANADIANS CONCLUDE THAT LONG-TERM FIXED-RATE MORTGAGES LOOK VERY ATTRACTIVE AGAIN. AND FOR SOME, THE LONGER THE BETTER.

A longer term mortgage offers the security of knowing exactly what your rate will be for the term chosen, which means that whatever happens to the rate environment, you can plan your payments until the end of the term. Typically, the majority of those who lock in to a fixed-rate mortgage choose a five-year term, although some are now taking a look at the security of longer terms. With today’s opportunity to lock in rates that are among the lowest in history, some homeowners who locked into a very good rate a few years ago are even willing to pay an interest penalty to lock into a new mortgage at today’s rates.

I can do a review of your situation to see if you can benefit. Other homeowners are putting this historic opportunity to use for other money-saving reasons, which include:

• consolidating more than $25,000 in high-interest loans or credit cards and rolling those bills into a lower-rate mortgage to boost monthly cash flow, have one monthly payment and save on interest costs; or,

• taking equity out for a renovation or home repair project, an investment opportunity, or a large looming expense – tuition, wedding, or dream vacation.

If you are wondering whether it is time to lock in your variable rate, contact me for a review of your situation, especially if it has been over a year since your last mortgage review. I can help you make sure your mortgage continues to meet your needs.

The right mortgage, of course, depends on many factors: including your personal financial situation, goals and risk tolerance. That’s why it’s a great time to talk.