What is the First Time Homebuyer Incentive?

The first-time homebuyer incentive program is a shared-equity mortgage with the Canadian government. It helps qualified first-time buyers to reduce their monthly mortgage payments to better afford a home!

The Incentive: This program allows you to obtain an incentive from the government to assist with your down payment, thereby lowering your overall mortgage amount and, in turn, your monthly mortgage costs.

• 5% or 10% for a first-time buyer’s purchase of a newly constructed home
• 5% for a first-time buyer’s purchase of a resale (existing) home
• 5% for a first-time buyer’s purchase of a new or resale mobile/manufactured home

Qualifying for the Incentive: This program is designed to assist first-time homebuyers, therefore you must have:

• Never purchased a home before
• Not occupied a home that you, your current spouse, or your common-law partner owned in the last 4 years
• Recently experienced a breakdown of a marriage or common-law partnership

If you meet the above criteria, further qualifications are based on your income and status as follows:

• Your total qualifying income is no more than $120,000 ($150,000 for homes in Toronto, Vancouver, or Victoria)
• Your total borrowing is less than four times your qualifying income (four and a half times your income if you’re purchasing in Toronto, Vancouver, or Victoria)
• You are a Canadian citizen, permanent resident, or non-permanent resident authorized to work in Canada
• You meet the minimum down payment requirements

Additional Costs 

With the incentive, there are a few additional costs to be aware of such as additional legal fees (your lawyer is closing two mortgages, one on your behalf and that on the Government’s behalf), appraisal fees to determine the repayment value of your home when it comes due, plus other potential expenses such as refinancing or switching costs if you decide to move or update your mortgage.

Repayment Process

When it comes to repayment of the incentive, the homebuyer is required to pay back after 25 years or when the property is sold, whichever comes first. They are also able to repay anytime prior to this without penalty. The repayment is based on the fair market value at the time of repayment. If you received a 5% incentive, you would repay 5% of the current home value at the time of repayment.

Keep in mind, if you choose to port your mortgage or go through a separation during the term and want to buy out your co-borrower, you will have to repay the incentive sooner.

Learn more about the First Time Homebuyer Incentive and contact Vinil today to start on your home-buying journey.

Getting a Mortgage After Bankruptcy.

If you have had to declare bankruptcy, you may be wondering what is next.

Bankruptcy is not a financial death sentence. In fact, there are a few things you can do after declaring bankruptcy to help reset your financial status and get a mortgage in the future.

While there is no waiting requirement to apply for a mortgage after bankruptcy, it is essential to allow your credit time to heal in order to ensure approval.

The first step to rebuilding your credit is getting a secured credit card. If you are able to show that you are responsible with this credit card by paying your balance in full each month and not overspending, it will help to improve your credit score.

Once you’ve re-established your credit, you can apply for a mortgage. What type of mortgage you can apply for, and whether or not you qualify, will depend on a few factors, such as: how long ago you declared bankruptcy, the size of your down payment, your total debt-to-service ratio (how much debt you are taking on compared to your total income) and your loan-to-value ratio (loan value versus the property value).

Depending on this, you will have three options for your future mortgage loan:

Traditional or Prime-Insured Mortgage

This is a traditional mortgage, which will typically offer the best interest rates. To apply for this type of mortgage after bankruptcy the following requirements apply:

• Your bankruptcy was 2 years, 1 day previous
• One year of re-established credit on two credit items (credit card, car lease, loan).
• Minimum down payment of 5% for the first $500,000 and 10% for any additional amount over that
  • You have mortgage insurance – required for all down payments under 20%
• The total debt-to-service ratio of 44% maximum
• The loan-to-value ratio is 95% minimum

Subprime Mortgage

This type of mortgage falls between a traditional and private mortgage, meaning you qualify for more than private but not enough for a traditional loan. To apply for this type of mortgage:

• Your bankruptcy was 3 – 12 months prior
• You have a total debt-to-service ratio of 50% maximum
• Your loan-to-value ratio is 85% minimum

Private Mortgage

If you don’t qualify for a traditional or subprime mortgage, you can look into a private mortgage. Typically, your interest rate will be higher on a private mortgage but there is no waiting period after bankruptcy and the requirements are as follows:

• A down payment of 15% of the purchase price
• Obtained a full appraisal
• Paid a lender commitment fee – typically 1% of the mortgage value
• The loan-to-value ratio is 80% minimum

If you have previously declared bankruptcy and are now looking to start over and apply for a mortgage, don’t hesitate to reach out to Vinil for expert advice and to review your options today.

If you are a self-employed client who owns your own business, you may have chosen to set that business up as a corporation. This means the business operates as essentially its own person. They have income through business revenue and expenses from marketing costs, materials, office space, etc.

There are a few benefits to putting a mortgage under the corporation instead of your individual self:

1. Corporations tend to pay a lower tax rate than the personal income tax rate. Corporations only pay taxes on net business income.
2. Lenders can look at the business income or personal income.
3. Adding the net business income or the personal income from year 1 and year 2 and dividing it by two is the income a lender will associate with that borrower. Corporations with multiple shareholders will affect this process.

There are two ways one can go about this type of corporate mortgage. Is the corporation the operating company or acts as the holding company?

Mortgages and Operating Companies

As with any mortgage, there are considerations, and more so when looking to put your mortgage under your corporate umbrella. The lender will package your application differently, even though you essentially qualify as if you were buying a property in your name. You would be instead qualifying as a corporation with a personal guarantee from yourself.

It is also possible to do a mortgage deal under your personal name but utilize both personal and corporate income. Lenders can do this by looking at both personal T1 generals and respective NOA, plus you can qualify by looking at the Net Business Income before taxes as seen on company financials.

When it comes to getting a mortgage under an operating company (versus a holding company), you may encounter limitations with the lenders that provide this type of deal. You would be looking at an Alt-A (B Lender) to finance this particular mortgage, which may come with higher interest rates.

Mortgages and Holding Companies

When it comes to getting a mortgage under a holding company, you will find things are a bit easier. Having a mortgage under a holding company removes limitations or liability from the operating company with regard to the mortgage.

You must meet the definition of a Personal Holding Company (PHC) or Personal Investment Company (PIC) per the bank. This is typically considered “a Canadian incorporated entity established by an individual or individuals for the purpose of conducting investment activities, which can include holding real estate, and/or investments. Personal Holding or Investment Companies, and the owner of the PHC or PIC must qualify personally, and sign as covenantor”.

Some additional reasons to consider a mortgage under a corporation or holding company include:

1. To flip properties rather than hold them as rental revenue.
2. Retaining corporate profit that can be used to buy a property without withdrawing money personally and incurring personal tax.

For some individuals, the benefits might not be enough to convince them to put their property under the corporation. For others, it may be the perfect solution.

Contact Vinil to find out how lenders will view your income if you have your business set up as a corporation.

oration but for others, it may be the perfect solution.