How To Leverage Your Savings Accounts As A First-Time Homebuyer

How To Leverage Your Savings Accounts As A First-Time Homebuyer

First-time homebuyers often encounter issues when purchasing a property, battling against high prices and plenty of competition. However, Canada’s 2024 Federal Budget announced numerous changes and incentives to simplify the journey. 

If you’re dreaming of ending the constant cycle of renting and purchasing a property, know it is possible. But, to make it happen, you’ll need to leverage your savings account and utilize the incentives for first-time buyers. 

In this guide, we’ll reveal how you can make your savings count and finally get onto the property ladder. 

How The Key Interest Rate Affects Canadians Savings Accounts

The Bank of Canada determines key interest rates, which have a direct impact on savings accounts. As we revealed in our 2024 Federal Budget Update, the BoC decided to hold rates at 5%, although this could change in June. 

When interest rates increase, they can raise mortgage costs, but it also means your savings will generate more interest. However, if these rates decrease, you might need to search for accounts that offer better rates. 

Many people take advantage of higher rates by saving more money and avoiding borrowing it instead. So, a 5% hold is still beneficial for first-time homebuyers because you can generate consistent interest on your savings and save for a downpayment. 

How To Determine and Maximize Savings

Buying a property requires a downpayment, and many people turn to their savings accounts when it’s time to leave the stresses of renting behind. So, the first thing to do is assess your current financial situation and determine where to save money. 

1: Define a clear budget of earnings and expenses

Saving for a downpayment is great, but it’s important to assess your earnings and average expenses. Remember, you’ll probably need a mortgage, and many people jump into purchasing a property without realizing how much it will cost them. 

Creating a clear list of your earnings and factoring in potential mortgage expenses can help you determine whether you’re in an excellent position to buy a home. 

2: Avoid carrying a balance on high-interest lending products such as credit cards

According to Fairstone, the average Canadian has $4,265 in credit card debt and 31 million people in Canada own credit cards. While they can be lifelines in emergencies, spending carelessly could impact your financial situation. 

Avoiding high-interest credit cards can help you leverage your income and save more money over time—the same goes for loads and other financial products. Additionally, having access to too much open credit can hinder your chances of mortgage approval. When it comes to closing lines of credit, we recommend never severing your oldest products. 

Always consider the long-term implications of any financial decision instead of focusing on the immediate benefits. 

3: Explore high-interest savings products and account promotions

Canadians have access to plenty of savings accounts – but are you getting the best deals? Shopping around means you could find high-interest accounts that let you earn more money on what you save and build a larger down payment. 

Many companies also offer incentives for new customers, including higher introductory interest rates and money for switching to them. Remember to research different accounts and find the best promotions for your needs. 

4: Look into employer-matching benefits

Many employers in Canada offer matching benefits, which serve as incentives to save for retirement. If you put some of your salary into accounts such as the RRSP, your employer will match a percentage of your contributions. 

The most popular structure matches 50% of your contributions and up to 4% of your salary. While this might not seem like a lot, it’s free money. 

Different Savings Accounts Explained

So, now you know more about how first-time homebuyers can leverage their savings, it’s time to explore the different accounts available. 

Each of the following has unique benefits; the one you choose ultimately depends on your savings goals and which incentives are most beneficial.

RRSP

The Registered Retirement Savings Plan (RRSP) is one of Canada’s most popular accounts, as it enables you to plan for retirement while also accessing a range of benefits. These plans are tax-free unless you receive a payment from them – which is possible. 

Canada’s new Home Buyer’s Plan lets RRSP holders withdraw money from their accounts to purchase a home. You can withdraw between $35,000 and $60,000 to buy an existing property or build a new one, significantly boosting your down payment. 

Pros: 

  • RRSPs are flexible regarding investment opportunities, including bonds, stocks and GICs. 
  • You can withdraw money under the Home Buyer’s Plan and avoid paying taxes for a set timeframe. 
  • In most cases, RRSP funds are protected from creditors. 

Cons: 

  • There are limits to the yearly contributions you’ll make. 
  • People on lower salaries often prefer tax-free savings accounts as they offer more benefits. 

TFSA

Many first-time buyers leverage tax-free savings accounts as they offer a range of benefits and are easy to manage. These registered accounts are highly flexible and enable you to save for anything without worrying about taxation. 

Whether you want to use them to fulfill short-term goals or save up for a down payment, TFSAs are available for anyone over 18 with a Canadian social security number. 

Pros: 

  • Withdrawals are tax-free, making TFSAs ideal for first-time buyers. 
  • These accounts are highly accessible, and you don’t need to be in employment to open one. 
  • Withdraw and re-contribute money as and when you need it, ensuring you meet your savings goals. 

Cons: 

  • TFSAs have limited contribution amounts, so you might need to explore other options when building a down payment. 
  • The accounts aren’t income-based and won’t reduce your yearly tax. 

FHSA

The First Home Savings Account is ideal for people who want to climb the property ladder. As the savings plan is intended for first-time buyers, you can take advantage of various incentives, including tax-deductible contributions and higher contribution limits. 

Anyone over 18 can open an account, begin making contributions immediately, and take advantage of investment options that diversify their savings. 

Pros: 

  • With an annual contribution limit of $8,000 and a lifetime limit of $40,000, saving for a home is easier. 
  • Many people combine their FHSA and RRSP to generate a higher down payment. 
  • All contributions are tax-deductible, as is the withdrawal you make for the down payment. 

Cons: 

  • BC is notoriously expensive, and using just an FHSA gives you a maximum down payment of $40,000 – which probably isn’t enough. 
  • There aren’t as many investment options, as the plans are newer than RRSPs and TFSAs. 

HISA

Many Canadians opt for a High-Interest Savings Account, which allows them to earn more money on contributions and save for the future. One reason these accounts are so popular is their flexibility. 

You can make regular withdrawals or contributions while also taking advantage of security through the CDIC. While interest rates might vary, most accounts offer better terms than traditional savings and can help you reach your down payment goals quickly. 

Pros: 

  • Interest rates on these accounts are higher than traditional accounts, with some options offering 4%. 
  • Due to CDIC protection, the risks associated with HISAs are low. Even if the rates fluctuate, most people still make a return on their investments. 
  • These accounts allow you to save for the future but make emergency withdrawals as and when needed. 

Cons: 

  • While high-interest accounts are beneficial, many companies charge maintenance fees. 
  • You’ll also have to maintain a minimum balance in most cases, but as it’s a savings account, you’ll probably have enough money there anyway. 

GIC

Guaranteed Investment Certificates are popular solutions for people who want a clear roadmap to generating a down payment. With a GIC, you’ll enter into an agreement with a bank or credit union, contributing a set amount of money for the set term. 

Some people choose a short-term savings account, while others opt for longer-term investments, which allow them to save for a down payment. 

The company agrees to pay a set interest rate throughout your GIC agreement, making it easier to afford your first home. 

Pros: 

  • Regardless of what happens to the economy, your pre-agreed GIC rate will remain the same. 
  • These accounts are highly secure as the CDIC insures them. 
  • Some longer-term accounts offer higher interest rates. 

Cons: 

  • GICs don’t offer the same returns as bonds or stocks but are less risky. 
  • While your rate will remain stable, economic downturns mean you might miss out on high rates initially. 
  • When you agree to a GIC, it’s in place for a set term, so you can’t withdraw any money. 

Book A Consultation With A Victoria Mortgage Broker

Saving for your first home can be daunting, but choosing the right accounts and focusing on reaching your goals means you can begin to prepare for a new property. Once you have savings in place, it’s time to look for the best mortgage deals and turn your dreams into a reality. 

Prime Mortgage Works has years of experience working with first-time buyers, and our dedicated brokers can help you find mortgages that meet your needs. Please feel free to contact us with any questions or apply for a mortgage today. 

 

What Is The Home Flipper Tax In BC?

The Canadian government’s 2024 Federal Budget announced more accessibility for people who want to purchase a property by building more properties, extending mortgage amortization periods and increasing RRSP withdrawal limits—welcome changes for many. 

However, other announcements, including the increase in capital gains tax and the new home flipping tax, were met with less enthusiasm. 

In this guide, we’ll explore the home flipping tax, whether it will impact you, and analyze whether it’s a good or bad thing for residents. 

Let’s dive straight in. 

What is the Home Flipping Tax?

The home flipping tax is a new measure that requires homeowners to pay tax if they sell a property within two years of purchasing it. If the property is sold in year one of ownership, the tax rate will be 20%, while 18 months of ownership decreases to 10%. 

Selling the home after two years of ownership has no tax implications. The new legislation will take effect in January 2025, and the government believes it will generate around $40 million in revenue. 

How does it work?

When you sell your home, you’ll pay tax based on your profits. For example, if you purchase a property for $600,000 and sell it for $700,000, you’ll pay $20,000, but selling the property 18 months after you buy it reduces the tax charges to $10,000. 

Who is Subject to the Home Flipping Tax?

Property flippers often purchase a property and sell it shortly after completing renovations or noticing changes in the market, allowing them to make a profit. 

The new flipping tax law now means that anyone who sells a property within two years of purchasing it will be subject to taxation. 

Property developers, those who bought the home for a personal project, and residents who used the home as a second or temporary residence are all subject to home flipping taxes. 

It’s important to remember that the new laws apply to anyone who owns and sells property in the province, not just BC residents. This means international buyers will also pay home flipping tax if they sell a home within two years of purchasing it. 

Who is Exempt From the Tax?

While the new tax laws will impact many BC residents, there are exemptions that can protect you. If you fall into any of the following categories, you might not need to pay any tax—even if you sell the home soon after buying it. 

Individuals who have owned their property for more than two years

The legislation was enacted to prevent home flippers from profiting from the housing market while first-time and low-budget buyers struggle to climb the property ladder. 

Many people buy a home and have to move shortly after due to expanding families or other reasons. If you’ve owned your property for over two years, you can sell it and avoid the home flippers tax. 

You have a relevant presale contract that takes effect prior to 2027

Presale contracts are agreements between buyers and developers where the buyer agrees to purchase a property, even if it’s still in the planning or construction stages. 

These contracts can last for years, but you might be exempt if you entered into the agreement before the tax laws came into effect. 

You’re eligible for the primary residence deduction

If the home you’re selling is your primary residence, you can apply for a reduction, allowing you to deduct the capital gains. If you bought a property and lived in it the entire time, you might not have to pay any house flipping tax—but there are restrictions. 

Residents need to own the property for at least one year, so even if someone lived in a property continuously for eight months, they’d still need to pay tax on the sale profit. 

You’ve had a change of circumstances

There are also exemptions for individuals who sell a property due to changing circumstances. If you change jobs, relocate for other valid reasons, or your marriage breaks down, you might be able to sell the property and avoid paying taxes. 

However, there are restrictions. For example, if you relocate to another area, your current property must be at least 40 kilometres away from your place of work or study. 

You fall under another exemption category

Other exemptions include buying properties in protected locations, inheriting a home and working in specific sectors. The Government of British Columbia website has helpful information on all possible exemptions. 

Understanding how much you might pay can help you decide whether it’s best to sell the property or wait until two years pass.

Benefits of The Home Flipping Tax

While the home flipping tax might be unpopular with some, others will regard it as a positive move that will make housing more available and level the playing field for first-time buyers. 

Let’s take a look at the benefits that might result from the home flipping tax. 

Decreases Home Flipping As A Practice

Home flipping benefits property developers but also creates problems for first-time buyers, making it harder for them to purchase a home. 

According to CTV News, many renters feel like purchasing a property isn’t possible in this lifetime, highlighting an ongoing problem with affordability and accessibility. 

Many buyers rely on properties that require renovations, as they’re easier to purchase—but flippers provide more competition, which often increases property prices. 

The new laws mean many flippers will avoid selling their homes too early, stabilizing the housing market and making ownership a possibility for prospective buyers. 

Discourages Speculation and Investment Properties

Many investors purchase properties as short-term investments, aiming to sell them quickly and make a profit. Unfortunately, this leads to shortages in rental homes and causes supply issues. 

Families looking for properties to buy and rent are often pushed out of the market if they’re on a budget, but the new laws discourage speculation and investment properties. 

Potential long-term effects include stable property prices and accessibility for renters. 

Generates Additional Revenue From Taxes

The 2024 Federal Budget also promised millions of newly built properties by 2031, and the revenue from BC’s home flipping tax will raise funds to facilitate construction across the province.

The government could use the funds to make properties more affordable, provide rental assistance to low-income households, and support first-time buyers. 

Downsides of The Home Flipping Tax

While the home flippers tax has numerous benefits, it will also result in some disadvantages. The government will naturally try to strike the right balance between offering first-time buyers support and ensuring the market remains attractive. 

Impedes Regretful Home Purchases

Buyers in BC can purchase and sell a home with no implications right now, but this will change when the new laws come into effect. Some people might approach the situation warily and be less likely to purchase a new home unless they know they’ll keep it for two years. 

However, investors or buyers with high incomes might not be put off by the home flippers tax, which could still maintain high levels of activity within the market. 

Doesn’t Stimulate Additional Housing Builds

While the tax will make purchasing a property more attractive for first-time buyers, it won’t stimulate additional housing construction. The tax only targets existing homes that people sell quickly, so it won’t encourage developers to build new homes. 

Many could focus on renovating existing properties instead of building new homes – meaning there’s less supply.

May Affect Development Presales

Investors often buy presale apartments and condos to sell quickly, and the new tax laws might reduce the number of investors interested in them. It could also lead to people seeking out other opportunities that don’t carry the same tax risks. 

The number of development properties might drop due to investors delaying projects, meaning there’s a lower supply of affordable housing. 

Learn About The Home Flipping Tax With Your Victoria Mortgage Broker

The home flipping tax will change the BC housing market in many ways, but only time will tell if it has the desired impact. If you’re considering buying a new home, the laws don’t come into place until January 2025, giving you plenty of time to find a property that grows with your family. 

At Prime Mortgage Works, we help clients find the right mortgage deal for their needs. Whether you’re a first-time homebuyer, investor, or want to upsize, our dedicated mortgage brokers can help. 

Please contact us today and discover our vast network of specialist lenders. 

 

2024 Federal Budget Analysis for Canadian Mortgages

2024 Federal Budget Analysis for Canadian Mortgages

Every year, the Canadian government releases its Federal budget, and residents wait to see how the changes will impact them. While the 2023 budget focused on improving the economy and making daily life affordable, the 2024 budget heavily targets the housing market. 

A study from Abacus Data highlights that 68% of Canadians in March 2024 were worried about the housing crisis, stating they believe accessibility and affordability will continue to worsen. 

While the housing market is still experiencing issues, the budget clearly outlines a targeted approach to creating more housing options and making ownership accessible for first-time buyers. 

Discover how these changes might impact your mortgage options with our complete analysis of the 2024 Federal budget. 

2024 Budget Key Points

  1. Capital gains rates will increase from 50% to 66.67% for individuals with gains that exceed $250,000. These rates will impact those with investments or second properties, but they level the playing field for families on a lower income. 
  2. The government will build 3.87 million homes by 2031, addressing the shortage and making ownership more affordable for first-time buyers. 
  3. New RRSP withdrawal limits and longer mortgage amortization periods reduce property ownership costs and give first-time buyers more opportunities. These rates don’t extend to current homeowners, but mortgage specialists advocate for changing the rules. 
  4. In the coming years, getting a mortgage will be easier, and capitalizing on the new rates can help young people transition from renting to ownership. 

Let’s break these changes down one by one:

1:  Increased capital gains rate

Canada’s current capital gains tax inclusion rate is 50%, but it will increase to 66.67% on June 25, 2024. The increased rate is intended to ensure that individuals with high-value assets, such as investments or second properties, pay their fair share. 

Individuals with capital gains that exceed $250,000 will be subject to the 66.67% increase, leading many to explore ways to reduce the financial implications of the upcoming changes. 

Accelerating transactions and utilizing carrybacks of capital losses can save money, but the government hopes to generate a higher income through these increases.

This may open up new properties on the market, giving first-time homebuyers an opportunity to secure their mortgage.

2: Increasing home density and propelling new home builds in Canada

The 2024 budget also revealed the government’s aims to build 3.87 million homes by 2031, making ownership more accessible for residents. Government entities will have new roles that support the drive to create affordable housing. 

For example, Canada Lands Company will oversee 29,000 new constructions between 2024 and 2025, and 20% of those properties will be affordable units. 

With an influx of homes coming to the market, buyers can look forward to affordable homes in tandem with the new budget announcements focused on helping you save for your mortgage.

3: Help for first-time homebuyers with increased RRSP withdrawal limit

Canada’s Home Buyers Plan lets first-time buyers withdraw a tax-free amount from their RRSP (Registered Retirement Savings Plan) to make a downpayment on property. 

The tax-free amount you could previously withdraw was capped at $35,000, but the 2024 budget announced an increase to $60,000, with repayment grace periods increasing to five years from two. 

4: Announcement of 30-year mortgage amortizations

We all know the struggles young Canadians face when trying to climb the first step of the property ladder, but the 2024 budget recently announced 30-year amortizations for first-time buyers in an attempt to help younger people purchase homes. 

While it’s only a five-year increase from the current amortization period of 25 years, these changes will make monthly repayments more affordable. 

How Do Federal Budget Changes Affect Canadian Mortgages?

While there are many positive changes coming in 2024, it’s important to remember that building new homes will take time, as the government utilizes public lands. However, this gives the opportunity to continue saving and building up the downpayment for a home in the meantime – leveraging high-interest savings accounts, TFAS, FTHB accounts, and GICs to maximize your savings over the next 7 years. 

The plan to tax vacant lands could also lead to more construction, but availability will gradually increase from 2024 to 2031. 

With changes to amortization periods and increased RRSP withdrawals, homeownership is set to become more affordable. 

Increased Mortgage Amortization Periods

Longer amortization periods will help first-time buyers enjoy the benefits of property ownership while improving the Canadian market. 

However, mortgage specialists feel that other people are being overlooked and would like the 30-year rule to extend to current homeowners. 

First-time buyers can reduce their monthly payments, making homeownership a real possibility instead of a distant dream. 

More Home Builds Create More Affordability

The housing market is always subject to availability, and Canada’s housing shortage means those on lower incomes often miss out on ownership and fall into the continuous renter’s trap. 

The 2024 budget clearly states that building new homes is a priority, making properties more affordable in the future. 

When supply is low, but demand is high, property prices increase, but less competition means more affordable housing. As the government fulfills its commitment to construct more properties, first-time buyers can compete in a previously impenetrable market. 

Increased RRSP Withdrawals Benefit FTHB

The RRSP increases will significantly benefit first-time homebuyers, enabling them to withdraw higher amounts from their retirement savings and purchase a property.

By almost doubling the eligible withdrawal amount from $35,000 to $60,000, buyers can make regular contributions to their RRSPs, preparing for the future. 

It’s also important to mention that increased amounts mean Canadians might control their finances more and make regular contributions to their retirement savings plans. 

Can We Look Forward To Interest Rate Cuts?

With so many positives to take from the 2024 Federal budget announcement, it’s easy to see why Canadians are hoping for interest rate cuts. Unfortunately, the rates will stay the same at this time, with the Bank of Canada announcing a 5% hold this spring. 

However, our 2024 interest rate predictions reveal potential cuts in June if the economy continues to recover. 

If the rates do decrease, prospective buyers can expect lower mortgage rates while also taking advantage of higher RRSP withdrawals and longer amortization periods. 

Contact A Victoria BC Mortgage Broker To Learn More

Purchasing a property might seem like a distant dream, but the future looks bright for first-time buyers. By regularly contributing to your RRSP and leveraging the new incentives, you can move away from renting and enjoy the convenience of homeownership. 

If you’d like to discuss your options or are ready to purchase a property, our dedicated mortgage brokers can help you find the best deal for your needs. 

With a vast network of lenders, we work with people from all backgrounds, including first-time buyers, individuals with bad credit scores and those looking to save money. 

Please feel free to contact us with any questions or begin the application process today. 

Book an Appointment

    • May 2024

      SunMonTueWedThuFriSat
      1234
      567891011
      12131415161718
      19202122232425
      262728293031

      May 29, 2024

      May 30, 2024

      May 31, 2024

    • Hidden
      Service
    • Hidden

The Homebuyers Guide to Assessments and Appraisals

Buying a home is an exciting process as it symbolizes a new beginning. From viewing different properties to waiting in nervous anticipation for your offer to be accepted, the process can also be draining. 

Many people forget the importance of appraisals and assessments—two integral factors when moving home and securing a mortgage. While property assessments define the taxes you’ll pay, appraisals ensure you’re getting a fair deal and can simplify the mortgage application process. 

In our homebuyers guide to assessments and appraisals, we’ll cover everything you need to know about the two, including: 

  1. The key differences between property assessments and appraisals
  2. How house appraisals work and the different types available. 
  3. How home assessments work and key home assessment dates.
  4. The benefits of home assessments. 

What’s The Difference Between an Assessment and Appraisal?

Property appraisals and assessments are essential for prospective homebuyers, ensuring you know how much you’ll spend. Let’s explore the key characteristics of both: 

Home Assessments 

The Provincial government performs property assessments to assess how much tax homeowners need to pay. These taxes fund vital services, including public schools, police, maintenance of public roads, and other expenses that local authorities have to pay. 

A professional will assess your property’s size, condition, location and how it compares to other properties in the area. Homeowners with large properties in affluent areas often pay higher taxes than those in low-income areas. 

Home Appraisals 

Appraisals also examine a property’s value, but they are not for tax purposes. Prospective buyers might hire a professional appraiser to determine the real market value of a property, ensuring complete clarity. 

If you’re applying for a mortgage, the provider might also want you to get an appraisal to determine whether the property is worth the price. The professional appraiser will evaluate the property’s condition and location and compare their findings against those of other properties in the area. 

How Does A House Appraisal Work?

According to Canada Newswire, over 30% of property owners in Canada regret agreeing to their mortgages due to high rates and financial difficulties. House appraisals can ensure you get a better mortgage deal and don’t overpay for a property, making them a wise investment. Remember – mortgage brokers have access to a wide variety of lending products, and can get you the best mortgage rates available.

Here’s what you can expect during the house appraisal. 

1: The appraiser first visits the property

When you book an appraisal, the professional will visit the property and assess it. They’ll examine the exterior and interior, looking at the location, curb appeal, whether it has a parking space and other vital factors outside, then look at the interior. 

Your appraiser will consider the number of rooms, decor, and unique features. Structural integrity and the property’s condition are also important, as even minor issues can decrease its value. 

2: The appraiser will research the competition

After assessing the property, the appraiser will look at comparable properties (comps) to get an idea of how much they sold for. They’ll also consider the condition of each property, its advertised market value, and other information to form a basis for your valuation. 

However, the value generated from these appraisals is an estimate only, as your property’s condition is a defining factor. 

3: The appraiser provides a full appraisal report of the house and property

Once the appraiser has all the information they need, they’ll create a report that details the property’s market value based on the above factors. The information from these reports can help prospective buyers secure better mortgage rates or make a lower offer. 

Appraisals can also help sellers and real estate agencies price the property, increasing enquiries and offers. 

Different Types of Home Appraisals

With a full appraisal, the professional personally visits the property and performs a full inspection. However, if the seller doesn’t agree to a visit or you’d prefer a more affordable option, alternatives are available, including drive-by, hybrid and desktop appraisals. 

Each has its benefits, and the best solution for your needs depends on your reasons for the appraisal. 

Drive-By Appraisal

Drive-by appraisals are visual assessments of a property without the professional going inside the home. They’re beneficial when your lender knows the home is  in a low-crime area and is confident about its value. 

For example, newly constructed homes are less likely to have structural issues or other damage that might impact their value. Ordering a drive-by appraisal is often more cost-effective but less thorough than a full appraisal. 

Desktop Appraisal

Technology makes it easier to source details on a property, including its previous value, past selling prices, and other important information. You can often ask for a desktop appraisal, which uses available information to generate a valuation. 

The specialist will look at other properties in the area and compare them with the home you’re buying, ensuring a realistic market value. 

Hybrid Appraisal

Hybrid appraisals typically combine elements of desktop and drive-by appraisals, giving you and the mortgage lender more clarity about the property’s value. 

For example, they might drive to the property for a visual inspection but also perform research to understand how comps are selling in the area. These appraisals are ideal if you want to save money but would prefer a thorough inspection that offers a realistic valuation. 

What is a Home Assessment in BC?

Unlike home appraisals, assessments are primarily used by local authorities to determine the tax you’ll pay. As confirmed by BC Assessment, properties within the British Columbia province are assessed based on their market value and the likely price they’d sell for. 

The assessment calculates a tax amount based on the age of your home, its condition, and its location. 

Information is collected

An accurate home assessment relies on in-depth information about the property, area and other key factors. People with properties in more affluent areas often pay higher taxes – as do those living in period homes. 

The assessor will collect information on the home, enabling them to assess what it could be worth. 

Information is analyzed

The BCAA then performs an in-depth analysis of the information they gather, evaluating the property market for changes and looking at trends. The process ensures they’ll provide an accurate valuation, which makes it easier to manage taxes. 

Assessment notices are delivered

Once the valuation is complete, homeowners receive an assessment notice detailing how much tax they’ll pay over the year. If you’re unhappy with the decision or feel the tax amounts are too high, you can appeal and ask the BCAA to reconsider its position. 

Home Assessment Key Dates

If you’re new to home assessments in British Columbia, getting to grips with the key dates can be challenging. Whether you want to ask for a review or stay up to date with the assessment process, these are the dates you should be aware of. 

January 31: Property Assessment Review Panel Deadline

Property owners can submit a review request to the BC Assessment panel if they believe their assessment is inaccurate. Failing to submit your request by January 31 will likely result in the case not being heard. 

July 1 – Valuation Date

July 1 is BC’s tax-roll date and is the reference point for assessing properties each year. If your property’s value decreases or other significant changes occur after this date, they won’t be factored in until the following year. 

October 31 – Physical Condition and Permitted Use

The BCAA also requests that property owners update them on any changes to the property’s condition or usage by October 31. If the condition deteriorates or the property is not in use, its value can decrease. 

December 31 – Assessment Notices

The BCAA sends assessment notices to homeowners and realtors, letting them know the tax breakdown for the next year. Once you receive your notice, you’ll have one month to request a review. 

How a Home Appraisal Helps With Buying Your Home

Home appraisals are an investment, but they also offer clarity and can help you decide whether to buy a home. Here’s how a home appraisal can support you during the decision-making process: 

  • Fair Market Value: Nobody wants to overpay for a home, and appraisals tell you what the property is worth. 
  • Negotiations: Appraisals prove a home’s value, making it easier for prospective buyers to negotiate the right price. 
  • Mortgage Opportunities: Lenders want security and peace of mind that the property is a wise investment. Providing an appraisal could help you access better rates.
  • Warning Signs: An in-depth appraisal can also flag issues related to the property, including whether it has any structural damage and if other homes in the area sell well.  
  • Confidence: Buying a home is a huge decision; jumping into it could mean spending more money. The appraisal will give you peace of mind that you’re making the right choice. 

The Benefits of Home Assessments For Homebuyers: 

  • Clarity: Knowing how much a property is worth can help you decide whether to buy it or look for something with a higher market value. 
  • Understanding: Home assessments will also look at the surrounding properties in a neighbourhood, enabling prospective buyers to see if the area suits their needs. 
  • Budgeting: All homeowners must pay taxes to their local authorities, and understanding how much you’ll spend will help you budget for ongoing expenses. 
  • Decision-Making: Many people buy properties as investments, and an assessment can help you decide whether the property you’re looking at is a good investment. 

Book A Consultation With A Top Victoria BC Mortgage Broker

Going into the home buying process with complete clarity means you’ll know what you’ll spend and whether your property has the potential to increase in value. 

However, before considering assessments and appraisals, it’s important to know whether you’re eligible for a mortgage. 

If you’d like to discover your eligibility and get access to the best mortgage deals, working with a top Victoria, BC, mortgage broker is a wise decision. Prime Mortgage Works has access to a network of specialist lenders, and we help people from all backgrounds diversify their mortgage options. 

Please feel free to get started with your application today or contact us with any questions. 

 

4 Questions To Ask Before You Buy A Home in Canada

4 Questions To Ask Before You Buy A Home in Canada

So, you’re thinking about buying a home in Canada. Whether it’s your first home or you’re upgrading to a larger space, there are many things to consider. 

The right property will last for years and prove a wise investment, but buying a home that doesn’t suit your long-term needs could mean expensive repairs and financial losses. 

Despite increasing interest rates and the aftermath of COVID-19, Global News reports that the Canadian housing market is turning a corner, making 2024 a good time to fulfil your property goals. 

In this guide, we’ll explore four important questions to ask before buying a home so you can go into the process with confidence. 

Let’s dive straight in. 

Question 1: Which mortgage rates are available—and which will I likely get?

Unless you’re lucky enough to buy a property outright, you’ll probably need a mortgage. The good news is that there are plenty of mortgage types available, but eligibility depends on multiple factors. 

The most popular mortgages in Canada are high-ratio, fixed-rate, and variable mortgages. However, some lenders offer a wider range of deals based on your circumstances. We work with a variety of lenders which traditional banks may not have access to, and at Prime Mortgage Works we’re able to secure the best rate for your mortgage. Learn more about the benefits of using a mortgage broker vs. a bank. 

High Ratio Mortgages 

High-ratio mortgages are ideal for people who don’t have a large down payment. Most mortgage providers in Canada ask for at least 20% of the property’s market value, but high-ratio mortgages—also known as insured mortgages—let you contribute a lower down payment. 

Pros: 

  • Individuals living in high-cost areas can buy a home without saving large amounts for a down payment. 
  • Buying your first property is more accessible with high-ratio mortgages. 
  • Property owners can still build equity in their property over time. 

Cons: 

  • While you can save money on your down payment, you’ll still need to contribute higher monthly repayments. 
  • Providers insist on mortgage insurance, which means paying premiums. 
  • Some lenders aren’t willing to offer high-ratio mortgages, so you might find them difficult to access. 

Fixed-Rate Mortgages 

Many buyers apply for a fixed-rate mortgage because the lender agrees to a set mortgage rate that remains the same throughout the loan’s duration. For example, if your initial agreement lasts for four years, you’ll make the same monthly payment. 

Pros: 

  • You don’t need to worry about surprise interest rate increases. 
  • Fixed-rate mortgages are easy to budget as you know what you’ll pay monthly. 
  • Many people save money and can switch to different mortgages when the initial term ends. 

Cons: 

  • Some fixed mortgages have higher interest rates because you’re paying for stability. 
  • If the Bank of Canada’s base interest rates decrease, you could miss out on savings. 
  • People with fixed-rate mortgages often find they come with stricter terms, making it challenging to repay them early. 

Variable rate mortgages 

These mortgages are dependent on the Bank of Canada’s interest rates. As they increase and decrease, your monthly payments will do the same. While variable-rate mortgages are easy to secure, they’re also notoriously volatile, and some prefer to avoid them. 

Pros: 

  • Decreasing interest rates could lower your monthly payments. 
  • Variable mortgages are easier to secure than fixed-rate deals. 
  • Most also come with shorter terms. 

Cons: 

  • If the base interest rates increase, your mortgage payments will do the same. 
  • The instability of fixed-rate mortgages can restrict your purchasing power. 
  • Some people find variable rate deals cause a lot of stress and uncertainty. 

Which mortgage am I likely to get?

While there are many mortgages available, the type you’re likely to be accepted for depends on numerous factors, including: 

  • Credit History: Lenders want to make sure you’re a safe prospect, so they’ll perform a credit check to assess whether you have a history of responsible borrowing. 
  • Income: Applicants with stable incomes are more likely to receive a range of mortgage offers. 
  • Buying Status: Some providers favour current homeowners because they’ve already proven they’re reliable and can handle the monthly repayments. 
  • Your Preferences: Remember that your preferences also factor into the decision. Some people prefer fixed rates, while others might seek a less popular mortgage deal based on their current and future needs. 

Want to quickly assess how much of a mortgage you’re likely to be approved for?

Use our online mortgage calculator for a quick financial snapshot.

Question 2: What can I afford to spend on a new home, and how will the long-term costs impact me?

Buying a property is a huge decision that will impact your finances in the long run. However, many buyers focus on the outright costs and forget ongoing expenses. Determining how much you can afford will help you save money and prevent going into debt. 

What’s your property budget?

Your property budget depends on the size of your down payment and whether you have a stable income. Most lenders ask for a down payment of 20% of the property’s value, but contributing a larger amount means you could buy a more expensive home. 

If you already have equity in a current property, this could contribute to your down payment, opening up more options. 

Mortgage affordability 

You might be able to secure a high mortgage, but is it a good idea? Lenders will review numerous factors before deciding whether to approve your mortgage application, including your monthly income, financial commitments, and stability. 

Using a mortgage calculator can give you an idea of the amount you might be able to borrow and how much your monthly repayments will be. 

Additional costs

Focusing solely on the cost of your property and mortgage payments can render you unprepared for any additional expenses. These fees include: 

  • Home Inspections: Up to $1000 
  • Deposits: Usually 5% of the property’s price 
  • Appraisals: Up to $500
  • Legal Fees: Up to $2000 
  • Surveys: $1000 to $2000 
  • Land Transfer Tax 
  • Mortgage Insurance 
  • New Home Warranty 

As you can see, the accumulated costs of the above can make a big dent in your budget, and failing to factor them in might lead to debt. 

Ongoing expenses 

Most mortgage providers ask applicants to secure home insurance, which protects them from damage. You’ll need to budget for your monthly premiums and make regular mortgage repayments. 

Failing to meet your obligations could result in the mortgage company repossessing your property. 

Question 3: Is the property a wise investment?

So, you saw a property, fell in love with it and made an offer—now it’s yours. Stepping into the front door should be a thrilling experience – but what if you’re met with mold, structural damage and faulty electrics? 

Failing to perform due diligence before buying a new home could result in significant expenses and turn your new haven into an ongoing project. Sure, renovations can be fun—but only if you approach them with open eyes. 

Here’s how to avoid any unexpected surprises. 

Book a property inspection 

Professional property inspectors will visit the property and assess it for minor and major issues. Whether it’s mold, roof leaks, or compromised structural integrity, you’ll receive a full report to help you decide whether the property is worth your investment. 

It’s also beneficial to look at the property’s history and assess whether it experienced severe damage in the past. The current owners should be able to provide reports of previous inspections to help you make an informed decision. 

Don’t jump straight in 

When viewing a property, make sure you check it thoroughly. Noticing any odours or cracks might be a warning sign. You should also ask if you can review the electrics and assess for temperature alterations in each room. 

Even minor problems could become significant expenses, so it’s good to know how much you’re willing to spend. 

Assess the extent of renovations 

If you will need to perform any repairs or renovations, it’s a good idea to call a professional for an evaluation. They can tell you how much various work will cost, giving you clarity on whether you can afford to purchase the property.

We recently dove into all of the considerations when buying a home in Victoria. Read our Ultimate Buyers First-Time Homebuyers Guide if you’re looking for a wealth of advice and knowledge.

Question 4: Are you ready for the property-buying process?

Unless you’re a first-time buyer and purchase a vacant property, the time between your offer being accepted and moving into the home can be weeks or months. On average, it takes 91 days – or 13 weeks – but this depends on the seller’s circumstances and your own. 

Your mortgage broker will give you an idea of how long it will take, but buying a home can be stressful. Make sure you do the following things to make it a smooth process: 

  • Deal with the mortgage stuff first: Contact a specialist mortgage broker and get pre-approved. Doing this means you know how much you can afford and protect yourself from disappointment. 
  • Stay organized: Keep your paperwork in order and plan ahead of time to ensure a smooth process. 
  • Be realistic: Understand that the process can take time, and the seller also has to handle their move. Be prepared to wait and stay in touch with your realtor for updates. 
  • Reduce stress: Take steps to reduce stress, including enjoying your hobbies, packing things in advance, and avoiding constantly worrying about the move. 

The bottom line 

Buying a property should be an exciting process, and asking yourself the questions we listed ensures you go into it with your eyes open. Once you find your dream home and complete the moving process, you can settle in and turn it into a haven. 

Prime Mortgage Works is fully committed to finding you the best deals. No matter what your personal circumstances are, we’ll work with you to secure a mortgage that aligns with your needs. 

Please feel free to get started with your application today. 

 

Bank of Canada April Interest Rate Announcement

Bank of Canada April Interest Rate Announcement

Homeowners and property hunters across Canada waited to see whether the Bank of Canada would shake up its interest rates. However, the April 10, 2024 announcement confirmed what most experts already knew—the overnight lending rate will stay at 5%. 

Our recent 2024 interest rate predictions post highlighted the likelihood of this happening despite many hoping the rates would fall. 

What does this mean for people in Canada? More importantly, how will the rate announcement impact your mortgage options? 

Find out here as we dive into the implications of a 5% interest rate hold. 

April 10, 2024 – Bank of Canada Announces Steady Hold at 5%

The Bank of Canada announced its interest rate hold in a statement, emphasizing its policy of quantitative tightening. Many hoped things would be different due to the February inflation report, which revealed a Consumer Price Index of 2.8%. 

The Bank of Canada’s target is 2%, signalling an apparent reduction in inflation rates. However, mortgage interest costs and shelter are the most significant contributors to CPI rates, and the bank wants to see more improvements before officially cutting interest rates. 

Will the Interest Rates Fall?

Despite this being the sixth consecutive hold in interest rates, there’s still hope they’ll decrease in June. Some positive changes show that the Canadian economy is stabilizing, but unemployment rates remain high (Bloomberg). 

Tim Macklem, the BOC’s governor, stated that the inflation rates are promising, but lowering the bank’s rates is a significant decision that could impact the economy. If these rates continue to fall, there’s a good chance the Bank of Canada will reduce its interest rates by June 2024. 

Macklem previously stated that 2024 would be a transitional year for interest rates – but for now, the rate hold will inevitably frustrate some people (CBC). 

Benefits of An Increase in Interest Rates

While many people want to see interest rates decrease, others focus on the benefits higher rates offer. They include: 

  1. Growing Savings Accounts: People with access to low-interest loans and credit cards are less likely to save money, as it’s easy to borrow. However, high interest rates require a more conservative approach to saving money, resulting in a better return on tax-free and high-interest savings accounts. 
  2. More Real Estate: Canada is one of the most competitive places to buy a home, with many people trying to secure a property. When the interest rates are higher, fewer people will search for property, making it easier to move into densely populated cities. 
  3. Tamed Inflation: Inflation rates are a balance of supply and demand. When the rates are higher, consumers are more likely to cut back on non-essentials, decreasing the rates and possibly returning to their previous levels. 

Benefits of a Decrease in Interest Rates

A decrease in the Bank of Canada’s interest rates would offer many benefits for consumers and homeowners. They include: 

  1. More Spending: Low interest rates enhance loan, mortgage and credit card accessibility. When people can afford a home, construction and other industries are strengthened as they receive more investment. 
  2. Less Debt: Homeowners with variable interest rates can save money by paying off other debts and focusing on their savings accounts. Over time, this will result in less spending and boost investments. 
  3. Stronger Economy: When people can access loans and other financial products to enhance their futures, the economy strengthens. 

Bank of Canada Interest Rate Implications on Victoria Mortgages

Our 2024 mortgage interest rate predictions explore what might happen over the course of this year—but how will the 5% interest rate hold impact Victoria mortgages? 

It depends on whether you have a fixed or variable-rate mortgage, as the latter is fully dependent on the Bank of Canada’s interest rates. However, people on fixed rates are protected for the duration of their initial mortgage agreement. 

Whether you’re a first-time buyer, preparing to renew your mortgage, or selling your home, the rates might impact your options.

For First Time Homebuyers

There are many things for first-time homebuyers to consider, including whether the 5% interest rate hold will benefit them. Lower rates make the housing market more accessible for first-time buyers and mean they’ll often make lower monthly payments, which is a huge benefit. 

In contrast, lower interest rates also mean there’s more competition, which might impact first-time buyers. With fewer options for a suitable mortgage, some people will have to turn to rental properties, compromising the freedom homeownership offers. 

However, a hold in interest rates means many people might delay looking for a property, and first-time buyers could have a competitive edge. 

For Mortgage Renewals and Transfers

People on fixed-rate mortgages might also experience issues associated with the 5% interest rate hold. If you’re at the renewal stage or want to transfer your mortgage, it could impact your options. 

  • Renewals: The hold in interest rates means homeowners might not find a great deal when they need to renew the mortgage.
  • Transfers: If you want to transfer your mortgage to a new property, you might find the interest rates limit the terms.

The best way to avoid issues is to research your options in advance and negotiate with different lenders. Your current mortgage will have portability terms, which can help you make the best decision for your needs. 

For Those Selling Their Homes

While higher interest rates limit housing market activity and low rates create a surge, the 5% hold will likely mean there are few changes in housing demand. If you plan on selling your home, the hold could result in less buyer interest. 

However, some buyers want to take advantage of less competition, and selling a property is still possible. A dynamic pricing strategy can help you attract prospective buyers and generate offers. 

Book A Consultation With A Top Victoria BC Mortgage Broker

We hope to see the economy stabilize and Bank of Canada interest rates decrease in the future. However, the rate hold doesn’t mean you need to put your plans on hold; a top Victoria, BC, mortgage broker can help you find a mortgage deal that aligns with your needs. 

Prime Mortgage Works has access to a range of specialist lenders. Working with us gives you access to better interest rates and terms. Please get started today and discover our extensive network of lenders. 

Book an Appointment

    • May 2024

      SunMonTueWedThuFriSat
      1234
      567891011
      12131415161718
      19202122232425
      262728293031

      May 29, 2024

      May 30, 2024

      May 31, 2024

    • Hidden
      Service
    • Hidden

When Should You Start Thinking About Refinancing Your Mortgage?

Owning a home gives you more freedom and flexibility—but it also comes with additional responsibilities and big decisions. One such decision is whether to refinance your mortgage.

Refinancing could save money and give you more flexibility if you own at least 20% equity in your property. However, jumping into a decision might mean you don’t fully understand the financial implications of your new deal. 

In this guide, we’ll reveal everything you need to know about refinancing your mortgage, including when it makes sense and how to find the best deal for your needs. 

Let’s jump straight in. 

How Does Mortgage Refinancing in Canada Work?

Refinancing a mortgage means switching from your current deal to a new one. You’ll use the new mortgage to repay your old loan and continue making property repayments. While some people refinance with their existing mortgage company, others might find a new provider. Working with an independent Victoria mortgage broker is one of the best ways to refinance your mortgage and ensure you’re getting the best rate possible. 

Mortgage refinancing is a popular way to access better deals, with many people searching for alternatives due to the Bank of Canada’s increasing interest rates (The Globe and Mail). 

The 2023 CMHC Consumer Mortgage Survey revealed that 24% of respondents refinanced their mortgage to consolidate debts, while 19% focused on home improvements. 

So, how does mortgage refinancing work? 

Assessing Your Eligibility

To refinance your mortgage, you must have at least 20% equity in your property. For example, if your home is worth $700,000, your equity should be at least $210,000. The provider will also check your home’s value and decide whether you can handle the repayments. 

We’ll cover the factors that might impact your application later, but understanding the basic criteria will help you decide whether it’s the right time to refinance. 

Evaluating Available Options 

Refinancing gives you more options, including the type of mortgage you choose and applicable terms. Should you go with a variable rate, or fixed rate? Fixed-rate mortgages offer more stability, while variable mortgages could offer lower rates when the Bank of Canada’s rates decrease. 

Some providers also offer flexible repayment terms, which typically range between 2 and 10 years, depending on your financial status. 

Wondering where mortgage rates in Canada are heading for the rest of 2024? We’ve provided an update on the 2024 mortgage rate forecast in Canada.

The Application Process

Once you decide on a lender, they’ll assess your eligibility and conduct a property valuation. Applications with a good credit score and a history of responsible borrowing might find the process less stressful as lenders view them as a safer choice. 

If everything goes to plan, you’ll receive a pre-approval agreement. When the paperwork is complete, the provider will release funds, and you’ll begin repaying your new mortgage. 

The Pros of Refinancing Your Mortgage

Refinancing is a big decision, but many find it offers them more flexibility and stabilizes their finances. There are numerous benefits associated with switching to a new deal, including: 

  1. Saving Money: If you find a mortgage provider offering lower rates, you can save a lot on your monthly repayments. First-time buyers can benefit from lower rates, as they’ve proven responsible during the initial mortgage agreement. 
  2. Income Boost: Securing lower repayments can free up cash and boost your monthly income. The extra cash can enhance your quality of life, from paying bills to having more money for day trips. 
  3. Debt Consolidation: If you take out a larger mortgage, you can use some of that money for debt consolidation. Clearing all outstanding credit and loan repayments will offer more financial freedom and increase your credit score. 
  4. Home Improvements: Lastly, refinancing your current mortgage can fund major renovations, including conversions and adding extra space to your property. These can increase your property’s value, providing a positive return on investment. 

Potential Drawbacks

As with anything, refinancing a mortgage also comes with some drawbacks. While they’re not necessarily deal breakers, understanding the negative side of switching mortgages can help you make the best decision for your needs. 

The potential drawbacks include: 

  1. Longer Repayments: A new mortgage could lock you into longer repayments. However, the mortgage duration might not be an issue if you have a stable income. 
  2. Associated Fees: If you switch to a new company, your existing mortgage provider might charge mortgage discharge fees. You should also consider legal and appraisal fees. 
  3. Higher Interest: Jumping into a decision might mean you miss out on savings. For example, your current deal could offer lower interest rates when you renew, but checking the terms of your mortgage can avoid this. 

Current Interest Rates in Canada

Mortgage interest rates depend on each provider and whether you choose a fixed rate or variable agreement. As of 2024, the average rates are as follows: 

  • Fixed Mortgages: Five-year fixed rates generally range between 5.25% and 5.60%, but they’re often lower if you have a larger down payment. It also depends on the company you choose and whether they feel you’re a responsible borrower. 
  • Variable Rates: These rates depend on the Bank of Canada’s base rate, which changes frequently. At present, variable interest falls between 5.95% and 6.95%. However, these rates aren’t guaranteed. 

The rates often change with the economy, leaving many wondering whether they could save or lose money on a variable mortgage. Our 2024 Canadian mortgage rate predictions guide can give you an idea of what might happen in the coming months. 

What Factors Impact Your Mortgage Refinancing Eligibility?

Aside from the equity in your property, there are other factors that might impact your eligibility to refinance a mortgage in Canada. Lenders take a risk when offering a mortgage, so they perform due diligence to ensure you’re a stable prospect. 

Here are the main factors to consider before applying for a new mortgage. 

Credit Score

Your credit score gives lenders a clear view of how you manage loans and credit cards. Canadian credit scores are measured on a points scale, with 300 being the lowest and 900 representing an excellent history (Government of Canada). 

Anything above 660 is considered good, meaning lenders are more likely to offer you a better deal. Individuals with a low credit score might find they’re offered shorter repayment terms and higher interest rates. 

If you can take steps to improve your score before refinancing, it will help you access better deals. 

Home Value

Lenders will also perform a home appraisal to assess the property’s current market value. Naturally, they prefer properties with a higher value because it might mean more equity – but this isn’t always the case. 

As your lender will repossess the home should you default on the loan, they’ll want to ensure it’s in good condition and in an area that doesn’t have excessive crime rates. Some lenders are more lenient than others. 

Income to Debt Ratio

Lenders also perform a comparison based on your current income and how many outgoings you have. For example, if someone brings in $6,000 monthly but has $4,000 worth of loan, mortgage and credit card repayments, they might struggle to find a lender. 

Having a high income with low debt obligations gives you access to better rates and repayment terms. 

Savings and Investments/Cash On Hand

While having savings and investments isn’t a defining factor of the application process, it can make a difference. If you have savings, it proves you’re responsible with money, leading lenders to look more favourably on your application. 

A savings account also means you can fund emergency home repairs and expenses, giving lenders peace of mind about your property’s ongoing value. 

Looking For The Best Mortgage Interest Rates in Victoria? Book Your Appointment

Refinancing your mortgage can improve your financial future and provide more stability. Whether you want to approach your current lender or find a new deal, lower rates and better repayment terms will make a significant difference in your life. 

Prime Mortgage Works is Victoria, BC’s top mortgage broker, providing clients with a streamlined application from the initial consultation to closing your deal. We’d love to help you access better interest rates through our network of mortgage providers. 

No matter your financial circumstances, our expert brokers can help, so please feel free to contact us today. 

Book an Appointment

    • May 2024

      SunMonTueWedThuFriSat
      1234
      567891011
      12131415161718
      19202122232425
      262728293031

      May 29, 2024

      May 30, 2024

      May 31, 2024

    • Hidden
      Service
    • Hidden

FAQs

What are the alternatives to refinancing my mortgage?

Your lender might offer a blend and extend the agreement on your existing mortgage, enabling you to access different terms. Some people opt for a HELOC (Home Equity Line of Credit), typically up to 65% of the property’s value. 

These products offer a pre-agreed loan amount, and you can withdraw what you need throughout the duration. However, most HELOC interest rates cost more than refinancing the mortgage. 

How many times can I refinance? 

There’s no limit to mortgage refinancing, but the costs associated with moving to new deals repeatedly will add up. Remember, you’ll have to pay the appraisal, legal fees, and applicable charges to your current provider. 

Can I get a new mortgage with a bad credit score?

A low credit score doesn’t necessarily rule you out of refinancing but can impact your options. Some lenders will turn away anyone who doesn’t have a good score, while specialist mortgage companies might specifically cater to clients with poor credit histories. 

However, lenders typically introduce higher interest rates due to the additional risk they’re taking. 

The Ultimate First-Time Homebuyers Guide in Victoria

So, you’re ready to buy your first home. Congratulations! There’s nothing quite like homeownership, which gives you more flexibility and provides an escape from the volatile rental market. 

Unfortunately, Canada recently decided to end its Incentive Program for first-time buyers, leaving many unsure of their home-buying eligibility. While the incentive was a great way to leave the rental market, options are still available – if you know where to look. The first step is working with a trusted Victoria mortgage broker.

We’ll explore them in this guide and reveal everything you need to know about buying your first home in Victoria. Let’s dive straight in. 

Can I Buy a Home in Victoria?

It’s no secret that getting on the property ladder is challenging in Canada. With lots of buyers competing with each other and a limited supply of properties, purchasing your first home can seem like an uphill struggle. 

According to Houseful, the average cost of a property in Victoria was just over $700,000 in February 2024, a significant decrease from $755,000 in September 2023. This is great news for those looking to enter Victoria’s competitive real estate market.

The Times Colonist also reports that property prices and mortgage rates have stabilized, making ownership more accessible. Between January 2023 and January 2024, real estate sales increased by 22%, highlighting growth within the market. 

So, while purchasing your first home still requires a lot of planning and saving, 2024 is a great year to get on the ladder. 

Next, we’ll reveal the steps you should take when buying a home. 

Determine Your First-Time Homebuyer Budget

In an ideal world, you’d be able to buy a property outright, but that’s unlikely. Instead, you’ll have to evaluate your income and save money to afford a new home. Joint buyers usually have more wiggle room with their budgets because they’re contributing two incomes. 

In Canada, properties under $500,000 require a minimum downpayment of 5%, while anything over $500,000 requires the initial 5% downpayment and a further 10% for the rest of the property price. 

Self-employed borrowers and individuals with poor credit histories may need to contribute a larger downpayment. 

How Much Can I Borrow?

When determining whether you’re eligible for a mortgage and how much you can borrow, lenders will assess numerous factors, including: 

  • Your income 
  • Monthly commitments 
  • Your employment status 
  • Whether there’s a history of responsible borrowing 

Before looking at properties and applying for a mortgage, it’s a good idea to check your eligibility and use a mortgage calculator to get an idea of how much you can borrow. 

Upfront Costs

Mortgage costs are typically split into upfront expenses and ongoing first-time homebuyer costs. The upfront costs ensure you can purchase a home and secure a mortgage. Many people save for years to secure enough money, but it’s also possible to use inheritance money. 

Down Payment 

As mentioned, most first-time buyers must contribute at least 5% of the property’s purchase price—unless it’s over $500,000. However, some mortgage providers are stricter than others and might ask for a higher down payment. 

The more you can offer upfront, the lower your mortgage will be. A higher down payment also secures better interest rates and gives you a broader selection of lenders. 

It’s a good idea to save early and put a percentage of your monthly income in a separate account. 

Opening a FHSA (First Home Savings Account) or a TFSA (Tax-Free Savings Account) can help you save money quicker and avoid paying tax on any of your savings. 

Closing Costs 

Many new buyers forget that closing costs are necessary to purchase their first home. These expenses include legal fees, appraisals, valuations, and land transfer tax. The amount each buyer pays varies, but it typically falls between 3% and 5% of the property’s value. 

Putting money aside to cover closing costs can help you stay on track and ensure there are no barriers to buying the property. 

Unsure of what your closing costs as a FTHB are? Our free closing costs calculator lets you plan for the future.

Realtor Fees

Generally, the property seller pays a commission to realtors in British Columbia, cutting your potential expenses down a lot. Once the property sells, the current owner will give their – and your – realtor commission. 

However, the realtor might have administrative fees covering the paperwork they handle during the process. 

Ongoing FTHB Costs

Many new homeowners forget the ongoing costs of paying for and maintaining a property. While you might be able to afford the outright costs, what about mortgage payments, maintenance, and applicable taxes? 

Let’s look at the ongoing expenses for first-time buyers. 

Mortgage 

Most mortgages in Canada last up to five years, after which you’ll either find a new deal with your current provider (also known as mortgage renewal) or move to a different one. The amount you’ll pay each month depends on the lender’s interest rates, so shopping around and finding the best deal for your needs is essential. 

While heading to your bank might seem like a good idea, there are many benefits to using a mortgage broker, including saving money. 

Brokers often work with first-time buyers who might not have great credit scores or a history of defaulting on loans. Many also partner with specialist lenders who are unavailable through mainstream mortgage applications. 

Most importantly, a mortgage broker can find a deal that aligns with your current financial circumstances and future goals, making them a valuable tool for first-time buyers. 

Renovations and Home Improvement

If the initial appraisal shows minor issues with the property, you might be able to secure it for a lower price. However, it will also become your responsibility to address any faults and ensure the property is safe. 

Home improvements, whether knocking through walls or redecorating, can be expensive—even if you choose the DIY route. If you seek professional help, you’ll need to pay for materials and labour. 

Renovating and improving your property is beneficial because it increases its value and allows you to personalize the interior.

Property Taxes 

Canada has different property taxes for each province. British Columbia defines the amount you’ll pay based on the home’s value and your status. Municipal tax is calculated by location, and you can find out your rates on the BC Assessment website. 

Buyers in the following categories might have to pay additional taxes: 

Foreign Buyers

Individuals purchasing properties with a foreign trust or corporation will need to pay the municipal tax rate and a further 20%. However, there are some exemptions for BC Provincial Nominees or emigrants who become Canadian residents. 

GST Properties 

New constructions are subject to the British Columbia Goods and Services Tax, which means you’ll pay 5% of the property’s sale price. However, rebates are available for people who build their own homes (valued under $450,000) or buy shares in a cooperative complex. 

Insurance 

Many mortgage providers in BC also require buyers to secure home insurance. The provider can repossess the property should the buyer default on the mortgage payments, and insurance protects it against severe damage. 

Your home insurance payments differ depending on the provider and your amount of coverage. Choosing the cheapest plan might seem like a good idea, but these policies often have strict clauses. 

Learn More About First-Time Homebuyer Benefits in Victoria

From never having to worry about jumping through hoops when applying for a rental property to having control over your property, homeownership is a mark of freedom. Buying today means more financial freedom in the future. 

If you’d like to learn more about FTHB benefits, our extensive guide has everything you need to know. 

To summarize: 

  • FTHB can take advantage of tax relief initiatives to make ownership more affordable.
  • Tax-free savings accounts help you build a downpayment quickly. 
  • When you own a property, you can do what you want with it. 
  • Performing improvements and renovations can increase the value of your home. 
  • Once you prove you’re a responsible borrower, you can access better mortgage rates. 

Need Help With Your First-Time Homebuyers Mortgage in Victoria?

Navigating the property market as a first-time buyer can be overwhelming, but understanding where to save money will make the process much easier. Prime Mortgage Works is a specialist broker working with clients in Victoria, BC. 

Our professional team of brokers have access to a diverse network of lenders and go out of their way to find each client the best deal for their needs. Whether you’re on a limited income, have a low credit score or don’t know where to start, we’d love to hear from you. 

APPLY NOW 

Book an Appointment

    • May 2024

      SunMonTueWedThuFriSat
      1234
      567891011
      12131415161718
      19202122232425
      262728293031

      May 29, 2024

      May 30, 2024

      May 31, 2024

    • Hidden
      Service
    • Hidden

March Interest Rate Announcement: What This Means for Mortgage Rates 2024

On March 6th the Bank of Canada announced that they would hold their policy interest rate at 5%, with the bank rate at 5.25%, and deposit rate of 5%. With this announcement, the Bank of Canada is continuing on with their policy of quantitative tightening. The Canadian economy grew in the fourth quarter of 2023, however the growth remained at a slow pace.

In this blog post we’ll delve into the Canadian interest rate announcement, and what this means for Canadian mortgage rates in 2024.

Bank of Canada Announces Interest Rate Remains Unchanged

This morning, the Bank of Canada made a significant announcement by opting to maintain its benchmark interest rate at 5%. This decision, arrived at after careful consideration, reflects the central bank’s commitment to balancing economic growth with inflationary pressures. By keeping the interest rate unchanged, the Bank aims to provide stability to the financial system while supporting continued economic recovery post-pandemic. This decision is likely to impact various sectors of the economy, from lending rates to consumer spending and investment decisions. This affects the landscape for mortgage rates in Canada for 2024, and beyond.

Understanding The Policy Interest Rate

The policy interest rate set by the Bank of Canada serves as a crucial tool in influencing economic conditions within the country, and its relation to the global economy. When the Bank adjusts this rate, it directly impacts borrowing costs for consumers, lenders, and borrowers, consequently affecting spending and investment decisions. A higher interest rate tends to discourage borrowing and spending, leading to slower economic growth and potentially curbing inflation. 

Conversely, a lower interest rate stimulates borrowing and spending, promoting economic activity and potentially increasing inflation. Therefore, the Bank’s decision regarding the policy interest rate has profound implications for the Canadian economy, particularly its Gross Domestic Product (GDP). Changes in the interest rate can influence GDP growth by affecting consumption, investment, and net exports, ultimately shaping the overall economic performance of the nation. 

  • For Mortgage Borrowers: The Bank of Canada’s decision to hold the policy interest rate at 5% means stability for mortgage borrowers. Those with variable-rate mortgages can expect their interest payments to remain steady, providing a sense of financial predictability in the short term.
  • For Investors: With the interest rate unchanged, investors may see reduced costs associated with borrowing for investment purposes. This could potentially encourage investment in various sectors of the economy, stimulating growth and market activity.
  • For Consumers: The decision to maintain the interest rate at 5% may lead to steady borrowing costs for consumers, impacting credit card rates, personal loans, and lines of credit. This stability could bolster consumer confidence and encourage spending, contributing to overall economic resilience. 

2024 Mortgage Interest Rates in Canada

There’s no crystal ball when it comes to 2024 mortgage interest rates in Canada, but mortgage brokers, lenders, realtors, and real estate professionals are seasoned in the ebbs and flows of lending policies and trends. We will discuss the impact of the Bank of Canada interest rate hold announcement for first time homebuyers, mortgage renewals, self-employed borrowers, and those new to Canada.

For First-Time Homebuyers

The Bank of Canada’s interest rate announcement carries significant implications for first-time homebuyer mortgages. With the interest rate unchanged, prospective homebuyers can expect mortgage rates to remain stable in the near term. This stability offers a window of opportunity for those entering the housing market, providing them with a predictable borrowing environment. 

However, while steady interest rates may offer relief from immediate financial uncertainty, aspiring homeowners should remain vigilant. While interest rates may remain stable for now, there is always the possibility of future adjustments, making it essential for first-time homebuyers to carefully evaluate their financial situation and long-term goals before making a significant investment in real estate.

To discuss the benefits of a fixed vs. variable mortgage rate, contact a Victoria mortgage broker today.

For Mortgage Renewals and Transfers

For those looking at renewing their mortgage in Victoria, the interest rate hold implies that they can potentially lock in their interest rates at current levels, providing financial predictability. This stability could be particularly advantageous for homeowners looking to secure favorable terms for their mortgage renewal or transfer, particularly with 

For New To Canada Mortgages

For newcomers to Canada seeking a mortgage, the Bank of Canada’s decision to maintain its interest rate at 5% in its recent announcement carries both opportunities and considerations. On the positive side, stable interest rates provide a sense of certainty and affordability for those looking to enter the housing market. This consistency in borrowing costs can be particularly beneficial for newcomers who may still be adjusting to the financial landscape of their new country. 

However, while steady interest rates offer a favorable environment for securing a new to Canada mortgage, borrowers should always be aware of other factors that can influence their ability to secure financing, such as credit history, employment stability, and documentation requirements. Additionally, given the diverse range of mortgage products and lenders available in the Canadian market, newcomers should take the time to research and compare options to find the best fit for their individual needs and circumstances.

If you’re looking for a quick snapshot of your financial health, use our online mortgage calculator

For Self-Employed Borrowers

While stable interest rates can offer a degree of certainty in borrowing costs, self-employed mortgage applicants may face unique challenges when applying for a mortgage. Traditional lenders often scrutinize self-employed applicants more rigorously, requiring extensive documentation to verify income and financial stability. Despite stable interest rates, self-employed borrowers may encounter stricter lending criteria or higher down payment requirements compared to salaried individuals. 

Here at Prime Mortgage Works we’re seasoned in working with lending professionals who offer a wide variety of mortgage products for self-employed borrowers. Contact your Victoria mortgage broker if you’re a self-employed borrower seeking guidance from mortgage brokers specializing in self-employed applicants may help navigate the complexities of securing financing in the current lending environment.

Book Your Consultation With A Victoria Mortgage Broker

Did you know there are significant benefits to using a mortgage broker vs. a bank? With the Bank of Canada holding the interest rate at 5%, a Victoria mortgage broker can secure you the best rates available with a plethora of lenders. 

Contact Prime Mortgage Works today to learn about your lending options.

Send us a message

Securing Your Mortgage As A Self-Employed Borrower

Securing Your Mortgage As A Self-Employed Borrower

If you’re an entrepreneur looking to buy a home, you may need to meet additional requirements to qualify for a self employment mortgage. However, here at Prime Mortgage works we specialize in mortgage lending for self-employed borrowers. We’re going to discuss everything you need to know for a self employment mortgage and the benefits of working with your Victoria mortgage broker.

Here’s what you need to know to improve your chances of a successful self-employed mortgage application. 

Is it Difficult To Get A Mortgage When Self-Employed?

Getting a mortgage when you are self-employed can be challenging but it certainly isn’t impossible. It can be more challenging to get a mortgage because you need to prove you have reliable income. There isn’t a specific product called a self employed mortgage, you will be applying for the same mortgage as everyone else. The difference is that you’ll have to provide more evidence of your income when you are self-employed. This can include a T2125 as well as the TD1 General Sample

Self-Employed Borrower Definitions

Mortgage lenders have different rules to determine if a borrower is employed or self-employed.  When determining the appropriate qualifying income for a self employed borrower,  it is important to note that the structure of a business depends on the type of business. Lenders will view you as self-employed if you have an ownership interest of more than 25% of a business from which you earn your income as an Individual, partnership (general or limited) and/or a corporation.  Let’s take a look at the borrower definitions below in more detail.  

  • Running a business as a sole proprietorship, with a partner, or corporation.

A sole proprietorship is a business that is run by one person and is not registered or incorporated. For tax purposes, the owner and the business are the same, so the owner reports their business earnings on their personal tax return.  

Partnerships are formed when two or more individuals or corporations come together to run a business. 

Corporations require more than just fulfilling the day to day of business responsibilities. Corporations must also hold shareholder and director meetings, keep records, minutes, and document major decisions. 

  • Receiving 25% or more income from your business.

Most lenders require applicants to have less than 25% ownership in a company to use their basic income and be treated as employed. When a borrower has ownership interest equal or greater to 25% in their company they are treated as self-employed. 

  • Your income is commission-based.

You can get a mortgage if your income is commission based. However, lenders may have different ways of looking at your commission based income. Some lenders may use all of your commission income for affordability, while others may only use 50%.  Some lenders may also cap the acceptable income if it is higher than your basic salary.  

  • You work short contracts for multiple employers.

If your business or employment is based on fixed-term work contracts, this will not prevent you from getting a mortgage. A fixed term contract work mortgage is a type of loan designed to accommodate individuals whose work is derived from employment contracts vs traditional permanent business employment.  

Documents You’ll Need As A Self-Employed Borrower

Self-employed people often worry about applying for a mortgage because they’re unsure what documents mortgage lenders will accept. What exactly do you need to prove your business is viable and your income will cover your mortgage repayments?  

Self-employed applicants need to verify and document their income to apply for a mortgage. You will need to provide documents such as tax returns, bank statements, proof of income, balance sheets and more depending on the lender. Let’s go over some of those in more detail:  

Monthly Bank Statements

Each lender will have their own requirements but, typically a lender will ask for the last 3-6 months bank statements to evaluate your financial habits, average salary, and any major expenses you may have.  Mortgage lenders will want to see the bank statements of both the business and your personal accounts. 

Tax Returns and TD1 Forms

We all know what a tax return is but what is a TD1 form? Simply put a TD1, personal tax credits return, is a form that is necessary for calculating how much tax should be withheld from payments, giving the best estimate of your personal tax situation. 

Business Balance Sheet

To get a self-employed mortgage, you must be able to prove both your business profits and your individual income. Most lenders want to see 2 years worth of accounts, though some may work with only 1 years documentation for new businesses. 

Business Credit Card Statements

If there’s evidence of heavy credit card usage, the lender may also want to check your credit card statements, it is always a good idea to reduce or clear your credit card balances before applying for a mortgage if you can. 

Reference Letters from Financial Institutions

Basically this is a financial letter of reference. It’s a document from your bank, or other financial institution, that explains your financial history.  Lenders may ask for a mortgage reference letter to prove your income.  Additionally a credit reference letter can help you get approved for services based on your history with other service providers. The reference provider basically is vouching for you, which makes other lenders more comfortable extending credit to you.  

Not sure how much you’re eligible to borrow? Use our easy online mortgage calculator as a general guide. 

Benefits of a Self-Employed Mortgage

If you’re self-employed, the journey to home ownership may seem daunting due to your unique financial circumstance. The good news though is that self employed mortgages provide tailored solutions to accommodate entrepreneurs. Unlike traditional mortgages that focus on steady employment income, self-employed mortgages take into account your unique income streams, offering more flexible criteria to suit your financial reality.

There are lending institutions and incentives designed just for the self-employed. Lenders understand that self employment comes with its challenges and rewards. As a result, self-employed mortgages feature more flexible underwriting criteria that align with your entrepreneurial journey. Let’s discuss a few of the benefits further. 

Your net worth holds a great value to a lender

Net worth can actually matter more than an income statement. Self-employed people can often face difficulties obtaining a conventional mortgage. Instead of relying on traditional income, borrowers can demonstrate that they possess adequate assets to support the mortgage. 

Assets that commonly meet mortgage requirements include checking and savings accounts, stock and bonds, mutual and money market funds, income from investments and vested retirement funds. Annuities can qualify as well as some pensions. For borrowers who possess substantial qualifying assets, asset utilization can be an excellent financing option for self-employed mortgages. 

There’s more flexibility in how your income is calculated and reported

The advantages of self-employed mortgages go beyond flexibility: self-employed mortgages acknowledge the fluctuating nature of your income, allowing for a broader range of income sources to be considered. If you’re a newcomer to the world of self-employment, don’t worry, self-employed mortgage solutions consider projected earnings, business potential, and industry expertise to make home ownership achievable for newer ventures.  With lenders considering various income sources, self-employed mortgages can potentially allow you to borrow more than a traditional mortgage would, giving you more flexibility in your property choices.  

Secure Your Victoria Mortgage As A Self-Employed Borrower

Each mortgage provider has their own lending criteria when it comes to assessing self-employed borrowers. Partnering with a mortgage broker in Victoria who specializes in self-employed mortgages can help you find not only the best deal on the market and minimize the complexities and hassle involved in the process. A mortgage broker helps you manage the expectations from the start, helps to determine what you will be able to borrow, and helps you prepare your application so that you have the best chance of being accepted. Mortgage brokers also have connections to far more lenders than you can on your own as well as have access to better rates with their bulk mortgages with lenders. 

Contact Prime Mortgage Works today to learn about securing your self-employed mortgage in Victoria. Book a free consultation online today.

Book an Appointment

    • May 2024

      SunMonTueWedThuFriSat
      1234
      567891011
      12131415161718
      19202122232425
      262728293031

      May 29, 2024

      May 30, 2024

      May 31, 2024

    • Hidden
      Service
    • Hidden