Tuesday, 25 October 2016

First Time Home Buyers

As a follow-up to my previous posting on home ownership, There are several benefits available for first-time home buyers.

Government Support programmes include:

·        -  Home Buyers Plan, which allows a $25,000 withdrawal from RRSP towards purchase of a home. This translates to $50,000 for a couple, and you have up 15 years to repay.

·         - First Time Home Buyers credit, which offers a $5,000 non-refundable income tax credit, which translates to a $750 reduction in income taxes paid.

·         - GST/HST rebate, which pays back the taxes paid on the purchase of a new home.

Lastly, there is a programme called Fast Track Home Ownership Plan sponsored by the City of Toronto, the Province of Ontario and the Government of Canada. Under this plan, a first time home buyer whose income is between $40,000 to $88,900 one can qualify for a $55,000 interest free and payment free loan.  However, the programme was only available for the purchase of a Rocket condo unit located at the Wilson subway station in Toronto. If you had read the previous posting, you would not have to come up with the additional 10% required in order to bump up the down payment to 20% to avoid having to pay mortgage insurance as the initial 10% plus the 15% that the government provides constitute 25% down payment on the condo unit. 

You can probably tell that I have been condo shopping for the kids. This past weekend, the missus and I saw a new development that starts at $180,000s for a bachelor suite (which I think with some creativity, can be turned into a one-bedroom unit with sliding doors). All one has to do is put $5,000 down, continue to pay $1,000 each month until the amount reaches 10% or $18,000 in this case. What a novel idea!

Is there a fear that Toronto is overbuilt with condos? Yes, there could be a possibility. Is there a fear of an imminent housing correction? Yes, that is an even higher odds of happening. Experts have been calling a global housing correction for an eternity. My belief, however, and it may be biased, is that it is better to invest in bricks and mortars than a worthless piece of paper! In these days of low interest rates and low returns from equity markets, more and more investors are considering alternative class of investments such as real estate. 

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