First-Time Home Buyers' (FTHB) Tax Credit

The costs associated with purchasing a home, such as legal fees, disbursements and land transfer taxes, can be a particular burden for first-time homebuyers who must pay these costs, as well as save money for a down payment. To assist first-time homebuyers with the costs associated with the purchase of a home, the Government of Canada introduced a FTHB Tax Credit in 2009 — a $5,000 non-refundable income tax credit amount on a qualifying home acquired after January 27, 2009. For an eligible individual, the credit will provide up to $750 in federal tax relief starting in 2009.

How to lower your property taxes

Save thousands by cutting your property tax bill.

Einstein’s general theory of relativity. Lady Gaga’s popularity. Your home’s assessed value. Some things just seem utterly incomprehensible. But solving the property tax assessment mystery is worthwhile: appealing an incorrect valuation could save you thousands of dollars.
Here’s how to do it:

Check for fairness
Property taxes, which pay for most municipal services, are the product of your home’s assessed value multiplied by the local tax rate. You can’t change the tax rate, but you can argue that you have been over-assessed. Begin by checking your home’s assessment report. This is typically a computerized estimate of your home’s selling price, based on sales information from a particular assessment date. Is it fair? If a similar house on your block sold for much less than your valuation around the time of the assessment date, you may have evidence of over-assessment.

Fix factual errors
Assessments are carried out by provincial agencies or municipalities. If you’ve spotted a factual error on your assessment—it claims you have a two-car garage when you don’t—you can often get this fixed by simply calling the assessor. If there are no clear-cut mistakes, but you still think you’ve been over-assessed, you will need to officially appeal your assessment.

Prepare your case
The more unique your house, the harder it is to value—and the better your chances of winning an appeal. “If you live in a cookie-cutter neighbourhood, assessments are usually pretty accurate,” says William Howse, a Toronto tax lawyer. “But as soon as you get anything unusual in features or lots, or get into pricier neighbourhoods, then the computer can have big problems.” An older or smaller house in an expensive area or proximity to a busy road, railway or school can provide a strong case for appeal.

Compare, compare, compare
Find comparable local homes that sold around your assessment date for less than your home’s assessed value. This will be evidence that your assessment is too high. You’ll need to show a minimum 5% difference between your assessed price and the selling price on three comparable houses to have a good chance of winning.

Chose wisely
Selecting the right comparison houses is the true art behind a successful appeal, says Howse. Pick comparables that are within 100 interior sq ft of your own house (30 sq ft for condos), and ensure the houses are the same quality as yours. For a formal appeal hearing, Howse strongly recommends hiring a certified appraiser.

What are your odds?
Few homeowners challenge assessments, but of those who do, many are successful. Roughly 45% of Ontario property owners who submitted evidence of over-assessment last year got their valuations reduced.

10 Reasons to use a mortgage broker

What are the benefits of using a mortgage broker?

1. Advice on your financial options.

Mortgage brokers can make recommendations and draw from available mortgage products that match your needs and help you decide what is right for you.

2. Save time with one-stop shopping.

It can sometimes take weeks to organize appointments with competing mortgage lenders — homebuyers would rather spend their time house-hunting.

Brokers work directly with lenders and can quickly narrow down a list of options that suit you best.

3. Brokers negotiate on your behalf.

Most people are uncertain about negotiating mortgages directly with their bank. Brokers negotiate mortgages every day on behalf of buyers and have a wealth market knowledge to secure competitive rates.

4. More choice means more competitive rates. We have access to a network of major lenders in Canada, so your options are extensive.

5. Ensure that you’re getting the best rates and terms. Even if you’ve already been pre-approved for a mortgage by your bank or another financial institution, you’re not obliged to stop shopping!

6. Get access to special deals and add-ons.

We do the math on which offers might be worth your attention.

7. Things move quickly.

Our job isn’t done until your closing date goes smoothly. We’ll help ensure your transaction takes place on time and to your satisfaction.

8. Get expert advice. When it comes to mortgages, rates and the housing market, we are not limited. We will explain the various mortgage terms, conditions and rates so you can decide confidently.

9. No cost to you. There is (in most cases) no charge for our services.

10. Ongoing support and consultation.

The ABCs of Mortgages in Four Parts

The Financial Consumer Agency of Canada updating mortgage publication

OTTAWA, ONTARIO--(Marketwire - Aug. 10, 2010) - The Financial Consumer Agency of Canada (FCAC) has completely updated The ABCs of Mortgages to take into account the different needs of Canadian consumers. While some are borrowing to buy their first home, others are renegotiating their mortgages. No matter what their needs are, FCAC reminds consumers that it is essential that they get informed before they plunge into the world of real estate. It could save them money … and headaches.

"The financial market is complex. That's why we strive to develop tools and resources that are easy to consult and use," says FCAC Commissioner Ursula Menke. "We cannot stress enough how important it is to shop around before signing a mortgage agreement. The ABCs of Mortgages contains a range of objective information that will help consumers make informed choices about their mortgages."

The revised version of The ABCs of Mortgages is divided into four parts: each one addresses a specific topic, making the publication more concise and easier to read. "Whether consumers are preparing to buy their first home, taking out a home equity loan, renegotiating their mortgage or searching for ways to pay off their mortgage faster, the new version of The ABCs of Mortgages will help them find the information they need more quickly," adds the Commissioner.

If you are planning on buying a home, here are a few key tips.

Pay off your mortgage faster

To save money, plan your mortgage payments so you can pay off your mortgage as quickly as possible. For example, you could increase your down payment, make larger payments or increase the frequency of your payments.

Give yourself a financial cushion for the unexpected

If your mortgage payments and the bills from the purchase of your home are keeping you up at night, your dream home could turn into a nightmare. Make sure that you have a financial cushion to cover unforeseen costs, such as an increase in interest rates or unexpected home maintenance and repair costs.

Shop around before choosing a mortgage

Your home will likely be the biggest purchase you'll ever make. Take time to shop around and negotiate to get the mortgage that best meets your needs. Remember, as a consumer, you have bargaining power.

To find FCAC's interactive tools and publications, visit www.moneytools.ca.

About FCAC

Using educational materials and interactive tools, FCAC provides consumers with objective information about financial products and services and informs them of their rights and responsibilities when dealing with banks and federally regulated trust, loan and insurance companies. Through its financial literacy program, FCAC also helps Canadians acquire the necessary knowledge and confidence to manage their personal finances. FCAC also makes sure that federally regulated financial institutions comply with legislation and agreements intended to protect consumers.

You can reach us through the FCAC Consumer Contact Centre by calling toll-free 1-866-461-3222 (TTY: 613-947-7771 or 1-866-914-6097) or by visiting our website: www.fcac.gc.ca.

Not so Fast

Is your mortgage coming up for renewal?

Don’t be too quick to sign that mortgage renewal letter. Over 70% of Canadian mortgage holders do just that, and what is the usual result? A higher rate and a mortgage product that might not be best suited to your interests.

Experience has shown that the “Big Banks” send their mortgage renewals out at a posted rate.

Lenders are counting on the fact that most home-owners are too busy to ask questions or to inquire about getting a better rate, but don’t let this happen to you. Posted rates are way too high of a rate to lock into, which can cost you thousands over the term of the mortgage.

You should recognize that you are now negotiating from a position of strength as your mortgage principal has dropped and in most cases your home value has increased.

Lenders see you as a lower risk borrower and consequently you should be getting the best rates available. That may not happen if you simply sign the renewal document provided by your existing lender.

Rather, let the lenders compete for your business to be sure you do in fact get the best mortgage possible.

A mortgage broker can do this for you. He or she can review your current situation and ensure you get the best rate and terms available. In most cases there is no fee.

Bank of Canada increases overnight rate target to 3/4 per cent

OTTAWA – The Bank of Canada today announced that it is raising its target for the overnight rate by one-quarter of one percentage point to 3/4 per cent. The Bank Rate is correspondingly 1 per cent and the deposit rate is 1/2 per cent.

The global economic recovery is proceeding but is not yet self-sustaining. Greater emphasis on balance sheet repair by households, banks, and governments in a number of advanced economies is expected to temper the pace of global growth relative to the Bank's outlook in its April Monetary Policy Report (MPR). While the policy response to the European sovereign debt crisis has reduced the risk of an adverse outcome and increased the prospect of sustainable long term growth, it is expected to slow the global recovery over the projection horizon. In the United States, private demand is picking up but remains uneven.

Economic activity in Canada is unfolding largely as expected, led by government and consumer spending. Housing activity is declining markedly from high levels, consistent with the Bank's view that policy stimulus resulted in household expenditures being brought forward into late 2009 and early 2010. While employment growth has resumed, business investment appears to be held back by global uncertainties and has yet to recover from its sharp contraction during the recession.

The Bank expects the economic recovery in Canada to be more gradual than it had projected in its April MPR, with growth of 3.5 per cent in 2010, 2.9 per cent in 2011, and 2.2 per cent in 2012. This revision reflects a slightly weaker profile for global economic growth and more modest consumption growth in Canada. The Bank anticipates that business investment and net exports will make a relatively larger contribution to growth.

Inflation in Canada has been broadly in line with the Bank's April projection. While the Bank now expects the economy to return to full capacity at the end of 2011, two quarters later than had been anticipated in April, the underlying dynamics for inflation are little changed. Both total CPI and core inflation are expected to remain near 2 per cent throughout the projection period. The Bank will look through the transitory effects on inflation of changes to provincial indirect taxes.

Reflecting all of these factors, the Bank has decided to raise the target for the overnight rate to 3/4 per cent. This decision leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in light of the significant excess supply in Canada, the strength of domestic spending, and the uneven global recovery.

Given the considerable uncertainty surrounding the outlook, any further reduction of monetary stimulus would have to be weighed carefully against domestic and global economic developments.

Information note:
A full update of the Bank's outlook for the economy and inflation, including risks to the projection, will be published in the MPR on 22 July 2010. The next scheduled date for announcing the overnight rate target is 8 September 2010.

Watch bond market for rate hike clues

Anyone caught off-guard by mortgage rate hikes by five of Canada’s banks during the last week of March probably wasn’t paying attention to the bond market – and, let’s face it, that means most people.

A common misperception is that mortgage rates follow the Bank of Canada’s overnight lending rate. While it’s certainly true that we’ve seen historical lows in both over the last few months, the central bank only affects variable mortgage rates. Fixed-rate mortgages are affected by government bond yields, which have been trending upward for the past six weeks.

The reason? Bond traders are expecting the Bank of Canada to either raise rates sooner than the planned date of July 20 or be more aggressive in raising them than previously anticipated. Typically, the bond market moves two to four months before the Bank of Canada does.

“The bond market is a live market that can change and fluctuate constantly, but they typically move in anticipation of events, not the events themselves,” says Peter Kinch, a Vancouver-based broker. “It’s almost like a speculative market.”

Another reason behind the increase, says Benjamin Tal, senior economist at CIBC World Markets, is that U.S. government bond yields are rising and that often impacts Canada’s bond yields. “Long-term rates in the U.S. are going up primarily because of the fact that people are becoming concerned about the ability of Obama to fund the debt,” says Mr. Tal. “Unfortunately, you and I are paying for Obama’s healthcare program in a way.”

That won’t make anyone looking for a mortgage feel better. Almost all the major banks boosted their five-year mortgage rates by 60 basis points to 5.85%. Mortgage rates generally rise at a one-to-one ratio with bond yields, says Tal, and the benchmark five-year government bond yield on March 29 was 2.9%, up about 50 points since Feb. 8 and a 17-month high.

Banks like the difference between the five-year bond yield and their best — not the posted — five-year mortgage rate to be between 90 and 110, says Mr. Kinch (although others suggest the spread is 125 to above 135. That spread is the profit between what banks can secure money at and what they can sell it at in the form of mortgages.

Mr. Kinch says it’s not necessary to understand the intricacies of how bond markets work to figure out where mortgage rates are heading, just pay attention to patterns in yield changes, which are readily available online. When the spread between bond and mortgage rates goes too high, banks bring their rates down, and when the spread dips, they increase them. Since 1980 there has been a 97% correlation between the two rates on a monthly basis.

“The spread was either getting too close to 90 or may have slipped below 90, and since they were anticipating a further increase in bond yields, they priced in a 60-basis point increase to give them a buffer and create a bigger spread,” says Mr. Kinch. “If they were wrong in their predictions, they will adjust them next week.”

Mr. Kinch believes a 25-point rise in the overnight lending rate, maybe as soon as April 20, is more likely than something dramatic. That would give Bank of Canada governor Mark Carney a chance to assess any fallout before raising the rate again. However, if it looks like he’ll stand pat, bond yields will likely come down, followed by mortgage rates.

Even though bond yields change almost every day, mortgage rates don’t because that would cause consumer confusion. “Banks will move when they feel the increase is not a one-off thing,” says Mr. Tal. “They don’t want to drive everyone crazy with changing mortgage rates.”

Banks are also more likely to respond quickly to rising bond yields than they are to dropping yields, according to a Bank of Canada study in 2009 called Price Movements in the Canadian Residential Mortgage Market. That’s partly because banks generally offer 60 to 120-day rate guarantees and early payment options, both of which cost the lender if rates rise.

There are exceptions, especially if banks sweeten the pot to buy customers with lower rates. For example, bond yields on March 9 went up, but mortgage rates at RBC and BMO actually fell.

Those days would seem to be over for now, but there could be 20- to 30-point dips in mortgage rates even as they generally rise, says Mr. Kinch. “You’d be foolish to expect rates to go back down again,” he says. “The rates we saw last week, I’d be surprised if we see those again maybe in our lifetime.”

Mr. Kinch was advising people to lock into low five-year rates earlier in March after noticing the steady rise in bond yields, but notes that rates are still near historic lows. Jittery first-time homebuyers looking for security should take a fixed five-year mortgage, but consumers comfortable with a variable mortgage can find rates at less than 2%. However, Mr. Kinch recommends boosting the monthly payment to a level that would be similar to a 5% fixed rate. That accelerates debt repayment and helps adjust for higher rates down the road.