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If you’re an aspiring first-time home buyer and live in one of Canada’s three most expensive cities, a new government incentive may be the way forward for you. If you live in Toronto, Vancouver, or Victoria, then the First-Time Home Buyer Incentive (FTHBI) helps ease mortgage rates to make home-owning more accessible to all.

The government’s Fall Economic Statement included changes that will come into effect in the Spring of 2021, helping qualified buyers to reduce their monthly mortgage payments, without adding to their financial burdens. The incentive will be helpful to a lot of people in the right situation, but qualifying for it has a few caveats. 

Here is everything you need to know about the FTHBI and how to use it for your benefit in your home-owning journey.

What does the incentive offer?

The FTHBI is essentially a shared equity mortgage with the Government of Canada. In order to reduce mortgage rates, it offers three main benefits:

1. 5% or 10% for a first-time buyer’s ownership of a newly constructed home.

2. 5% for a first-time buyer’s ownership for a resale or existing home.

3. 5% for a first-time buyer’s ownership or a new or resale of a mobile/manufactured home.

As the incentive offers a shared mortgage rate benefit, the Canada Mortgage and Housing Corporation (CMHC) partners in sharing the investment of the home with you, the homeowner. As the property appreciates and depreciates in value according to the fluctuation of the market, the CMHC will share in the upside and downside of the property value with you.

The scheme is most valuable to those with outstanding financial payments, as it will help reduce the regular mortgage payments for the new home. You’ll need to pay back the amount within 25 years, during which home-buyers will be able to save up a significant chunk of money due to the reduced mortgage rates. The incentive also stipulates that in the case the property is sold before the 25 year period, the amount must be paid back. The home-buyer may also pay back the amount in full before the payment deadline without facing a prepayment penalty.

Qualifying for the FTHBI

While the incentive is of great value for many home-buyers, unfortunately it does come with some caveats. The CMHC has placed some restrictions on qualifying based on who can use it and what kind of homes can be purchased with it. Here are the four main requirements to qualify for the FTHBI:

1. First-Time Home Buyers. The name of the incentive says it all: you have to be a first-time home buyer in order to qualify! The incentive defines a first-time home buyer as someone who’s never owned a home (anywhere in the world, not just Canada), nor lived in a house owned by a spouse of a common law partner in the last four years.

2. Household Income. Another stipulation the CMHC has put in place is that the household income of the interested party must be less than $120,000 to qualify. This includes the income of you and anyone else who chooses to co-own the home with you. The annual average Canadian income is reported to be around $52,000, which means that a lot of Canadians will be able to qualify for the FTHBI in the Household Income clause.

3. Minimum Down Payment. The down payment must be paid fully in cash, after which the reduced mortgage rates start applying, meaning that the incentive doesn’t kick in until after the down payment is paid off. For properties worth $500,000 or less, the minimum down payment will be 5% of the total amount. For homes costing between $500,000 and $1 million, the down payment is 5% of the first $500,000 and then 10% of the remaining amount.

4. Maximum Borrowed. The incentive also stipulates that the maximum amount to be borrowed is four times your qualifying income. If you earn exactly $120,000 a year (which is the qualifying maximum), that means the maximum amount you can borrow to be eligible for the incentive is $480,000. This is a pretty restrictive requirement, as it significantly limits the range of properties available for reduced mortgage rates. As the FTHBI is available only in Canada’s three most expensive cities, finding an eligible mortgage within this amount can be tricky for some. This is because the first-time buyer will likely earn close to the national average and then have to buy a moderately priced home compared to their earnings as well.

Is the FTHBI right for you?

This is a tricky question because it depends on so many factors such as where you live, how much you earn, and how much financial burden you wish to undertake. There will be no one-size-fits-all answer, but checking if you’re eligible is a good place to start. Crunching some numbers to check your mortgage affordability is helpful too, so be sure to check mortgage rates with the incentive as well as without. However, it’s always best to speak to a mortgage broker in your area who can help evaluate the right move for you.

For example, if you’re looking to buy a home that’s more expensive than the maximum allowed in the incentive, then it may not be right for you. At the same time, remember that the housing market is constantly fluctuating, and it is impossible to determine future property values.

Also, researching other options for someone in your situation is great to understand the housing market where you live. A joint mortgage may be a solution for some, while a refinancing may be the right move for others.

To book an appointment or for more mortgage advice, call Canadalend at 1-866-422-6536 or contact us here.

If you’re reading this, chances are that you’re looking to save up for a big life purchase - your first home. Congratulations! Buying a home is a great investment that will only appreciate over time.

Home ownership is a growing trend in Canada, as young homebuyers are realizing the problems associated with renting homes instead of buying. Policies at the governmental level make renting unfavourable in Canada because rents are too high in big cities for many to live affordably, and renters also lack control over their homes. This has led the country’s home ownership rate to rocket, with over two-thirds of Canadians choosing to buy their own home.

While home ownership can seem daunting upon first consideration, remember that planning, hard work and savings go a long way. Here are 5 tips to get you started on your home ownership journey.

1. Buy within your means

Owning a home is more expensive than renting, with maintenance and mortgage payments quickly stacking up. There will always be unforeseen costs that come up when you own a home, and these are generally more expensive than outsourcing the problem to your landlord or condo manager. Keeping this in mind, our first tip is to start humbly and consider homes within your means. Factor in all the variants such as your income, the purchase price of the home, mortgage payments and the down payment. The main options our advisors suggest is to either buy a less expensive home or keep saving to make a bigger down payment.

From there, double down on a home that is in line with your long-term financial goals. Getting professional advice on mortgage plans is important, and can be the deciding factor in keeping your home ownership process stress-free and financially manageable. Another helpful tip is to use a mortgage affordability calculator to determine the mortgage you can afford.

2. Closing costs add up

Once you’ve figured out the average down payment and mortgage you can afford, start factoring in the closing costs. For example, what you get approved for may be a lot higher than what you’ll want to spend, both long term and each month.

For a good approval rating, most lenders will want to see that you’ve saved up about 1.5% of the purchase price to cover additional costs other than just your home. This might include expenses such as lawyer fees, taxes etc.

These closing costs can add up but depending on where you live, some of these expenses could be eliminated. There are many programs and rebates to incentivize first time homebuyers, so that is a good resource to investigate.

Some lenders will also provide a lower interest rate, provide quick funding or help you lock in a fixed rate. Often first-time home buyers do not have the kind of credit rating and financial background or history that lenders are looking for. So referring to a private lender who can work with your unique situation can be a solution.

3. Check out home buying incentives

If your city has a first-time home buyers program, definitely look into it as it can help make home owning more affordable in many of Canada’s larger cities. If you can get part of the down payment covered with an interest free loan, it can help you save up to $20,000.

The Home Buyers Plan (HBP), on the other hand, allows you to save using your registered retirement savings plan (RRSP). Essentially, you can withdraw up to $35,000 without penalty, which can reduce your tax burden as well as use your tax refunds to bump up your savings.

Both the first-time home buyers program and the HBP come with their own stipulations such as the payback period and penalty clauses.

4. Saving is everything

All financial experts say that home owning is simply about saving up enough - and it's true. People often underestimate the power of a savings account and how far it can help you when you’re looking to make a big purchase. Opt for a high interest savings account, which will pay you a lot more interest than most typical savings accounts, where the interest rate is usually extremely negligible. This will allow your savings to appreciate without you doing anything. An automated savings plan is also beneficial.

If you’ve done your research on the starting rate for down payments, you’ll know that most Canadians spend between 5 -10% of the purchase price on a down payment. If you’ve started saving early, you’ll be able to pay a larger down payment upfront.

This is always more beneficial as the Canada Mortgage and Housing Corporation (CMHC) can charge a hefty mortgage default insurance. This expense can be avoided with a down payment of 20% or more.

5. Consider a home equity mortgage

Your future home accrues interest over time, so looking into a home equity mortgage could be a great solution if you don’t currently qualify for a loan. A home equity loan, as opposed to other loans, will allow you to draw money from the equity built up in your home. The amount you can take out depends on the value of your home.

If you’re interested in home equity loans, our financial advisors suggest a fixed-term loan for first time home buyers. This loan is a one-time lump sum loan that you can pay back on a monthly basis. The monthly payments don’t fluctuate by month, which provides a great alternative for risk averse buyers who are looking for flexibility to budget according to their varying lifestyle needs.

There you have it: 5 tips to save up for your first home. While home ownership can be expensive, with the right advisors and resources it is becoming increasingly easier to own a home in Canada.

Just make sure to budget for a high down payment and start saving early. If you’re looking for more information on home equity mortgages or to get you started on your home ownership journey, you can always reach out to our licensed team of financial experts.

For more information on home equity mortgages, call Canadalend at 1-866-422-6536 or contact us here.

Credit scores are essential in today’s world. Not only do you need them to qualify for most mortgages and loans, but a decent credit score can take you a long way even when renting or applying for a high-end credit card.

Often, rates are lowered for those with a higher score, as it demonstrates to lenders that you’re likely to pay back your debts in a timely manner. A good or excellent credit score is essential to not only qualify for perks and rewards, but also grant you access to more favourable terms on loans.

Life throws all of us unexpected curveballs, and maybe your credit score is lower than you would like. Or, perhaps you want to raise your already good credit score even higher. There are many simple steps you can take to maintain or improve your credit score as quickly as possible.

Here are 5 of the best ways to keep your credit score high:

1. Pay your bills on time

Making on-time payments is the key to maintaining and increasing your credit score. This is because payment history makes up around 35% of your total credit score, which means that paying bills on time is one of the easiest ways to jack up your score. Paying bills consistently on time, over time, will indicate to your existing and potential creditors that you are financially responsible and trustworthy.

Some lenders or mortgage broker services will offer longer grace periods to pay off your bills, but it is important to make sure you never pass the due date. This will avoid potentially being reported to the credit bureau.

If you have an overdue bill, contact your provider as soon as possible to arrange a payment plan, as overdue utility bills in particular can hurt your credit score. Also, remember to always pay off the oldest dues first before moving on to more recent ones.

2. Keep your credit utilization low

Another factor that affects your credit rating greatly is credit utilization, which comprises about 30% of your credit score. This term refers to how much credit you’ve used previously compared to the net amount of credit available for you to draw on.

The most important tip we have is to always keep your credit utilization below 30%. Therefore, if you’re looking to buy a house or take out a loan, be sure to find out how much of your available credit you’ve already used up to keep the amount low. Here are two tips our team has to keep your credit utilization rates low:

1. Pay more than the minimum payment on your credit card. This will also save you money that would otherwise go towards interest.

2. Under use your credit card or use it up to 30%. For example, if your credit limit is $1000, then use up less than $300 a month.

3. Use all existing lines of credit

Most people often have a couple of different credit facilities in addition to their primary credit card that they never end up using. Avoid neglecting these other dormant credit cards when trying to maintain and maximize your credit score. Instead, try using all available credit fairly regularly, even if it’s for extremely small amounts. This is because older credit facilities contribute “score juice” to your history, which takes up about 15% of your total credit score.

Often, these credit streams can become stale and end up not contributing to your history. To combat this, just refresh the facility by making a modest payment and paying it back with a bit of an increase immediately.

4. Be careful when applying for additional credit

The type of credit inquiry you apply for can impact your credit in different ways. A hard credit inquiry (also known as a hard pull or hard check) is when a potential lender or mortgage broker service checks your credit report before approving your application. As this involves full access to your entire credit history, it can have a negative impact by staying on your credit report for up to 3 years.

Soft credit inquiries (also referred to as a soft pull or soft check), on the other hand, take place when you check your own credit score before applying for a mortgage or loan. This does not affect your overall credit score.

5. Pay off disputes while handling them

At Canadalend, we recommend that you regularly check your credit report. Not only will it ensure that the accounts listed are accurate, but it will also make certain that the credit inquiries conducted are done with your permission.

If you do spot an error on your credit report, it is important to take action as soon as possible and dispute any inaccuracies on your report to avoid further issues. To do this, contact the financial institution or collection agency reporting this information to you. If they verify that their information is correct, then your next step is to file a dispute with the credit bureau. Equifax will then review the details and change the information accordingly.

If you run into such a situation, it is extremely important that you pay off the disputed amount first and continue the process. If you choose to wait out the investigation process and it takes a while, you run the risk of interest fees and getting charged on late payments. If the charge is indeed fraudulent or mistaken, you will get the amount back to your account anyway.

There you have it: 5 tips to keep your credit score high. We have seen that, in general, consumers with lower credit scores can see their scores improve in as little as 30 days. This can be extremely beneficial, whether you are waiting to refer to a mortgage broker service for a home loan or wanting to get approval from a landlord you wish to rent from.

These actions, when worked on consistently, may increase your credit score by up to 100 points! If you’re still struggling with low credit, reach out to our team for advice and more expertise. For more information on credit scores, call Canadalend at 1-866-422-6536 or contact us here.

We all know that missing payments and carrying a significant balance on our credit cards are a big no-no. These kinds of actions can negatively impact our credit score and make future financial decisions more challenging.

However, did you know that many other factors can potentially damage your rating? Since our credit rating impacts almost all big purchases—from a car to a house—knowledge about factors that hamper your progress is essential. Mortgage broker services can also turn you away from financing and lending if your credit score is poor.

This article looks at some of the main things that are impacting your credit score (and what to do about it).

1. Not paying your bills on time

Let’s start with the basics. Even one late or missed payment has the potential to reduce your credit score drastically. It can dip 100 points lower if the bill is left unpaid for an extended period. Many people are aware of this impact, but where they trip up is they fail to consider that a bill includes your water bill, phone bill, and even services or employers you’ve hired.

How this essentially works is that missed payments are sent to third-party collection agencies. They then report them to a credit bureau like TransUnion or Equifax. It is essential to avoid reaching that stage because the longer the payment is put off, the more your credit score suffers.

How can I avoid this? Ensure that you set up automated bill payments. This way, you don’t need to worry about due dates and amounts for any recurring bills that you may have.

2. Overusing credit checks

Each individual is entitled to one free credit report a year from a credit bureau. However, if you surpass that limit and get it checked more than once, then you open yourself up to a drop in your rating. Many people sign up for multiple credit cards and financing options, thus leading to their credit being checked many times over. This makes it appear as if you are trying to accumulate a great deal of credit in one go. Financial institutions and mortgage broker services take this as a sign of riskiness.

How can I avoid this? Try to apply for only one line of credit a year. Whether that’s a credit card, mortgage, or home loan, try not to exceed the amount, and your credit score will not dip.

3. Extreme usage

The amount of credit that you utilize will also impact your credit score significantly. Lenders look at this through percentages. Someone with a high usage percentage is at risk of a dip in their score.

For example, if you have two lines of credit at a $10,000 limit for each, then you have a total usable credit limit of $20,000. If you find yourself spending $15,000 during a particular month, then your usage percentage shoots up to 75%. This is a sure-shot way to get your credit rating to drop.

How can I avoid this? Try to get your monthly percentage down to 30% at the minimum. The less you utilize your lines of credit and keep your rates low, the better it is.

4. You have a lack of credit history

Mortgage service lenders are more likely to provide financing to those who have an excellent financial history. They will look at your debt resolution strategies and assess your risk level. This then determines how much they will lend to you. Thus, it is essential to have a traceable history of purchases and paying bills. This represents a total of 15% of your score. The longer you have an account and statements to your name, the better. A lot of people take out new reports if they have a poor financial history. Even closing old credit cards can damage your credit! That is because your overall credit history gets cut short, which in turn affects your score.

How can I avoid this? If you’re looking for financing, then go with the credit card that you’ve kept the longest. Look for one with the most transactions on it, even if it is something as small as a recurring subscription purchase.

5. You have existing liens on your assets

Liens on any of your assets, such as your car or home, have the potential to impact your credit score poorly. Liens can be placed on an asset if you failed to make a payment to a service provider or lost legal proceedings. Those who’ve been sued may also find liens placed on their investments. A lien is one of the worst ways to impact your credit score. It can bring your score down significantly, thus affecting it as much as bankruptcy!

How can I avoid this? The best way to combat this is to make an immediate rectification. Be sure to pay off outstanding bills, service providers, and more. The longer you put off making the payments, the more your credit score suffers.

There you have it: 5 things that are majorly impacting your credit score! Many Canadians do not realize that small actions are reducing their rating. The good news is that there are ways to divert these mistakes. If you’re worried about your credit score and are struggling with getting approved for financing, then be sure to check out Canadalend.com. Our team offers a variety of lending options to increase cash flow that you can free up for renovation, investments, and more.

For more information on mortgage broker services, call Canadalend at 1-866-422-6536 or contact us here.