Despite recent federal legislation there are still two ways in which you are able to purchase a home even if you do not have a down payment.

The first is called a “Flex Down” plan, which recognizes that you have actually borrowed the required 5% down payment from a source other than the lender making the first mortgage (i.e. the remaining 95% of the purchase price) available to you. In this case the loan (now called a “Non-Traditional Source”) must be disclosed up front and the payments on the loan will be included when calculating the corresponding debt service ratios.

The second is to take advantage of a “Cash-Back” plan offered by a very small number of lenders who will allow the 5% cash back element of the mortgage to be used as the down payment. In this case the mortgage insurer only covers the first 95% of the purchase price in the event of default, and the lender is on the hook for the remaining 5%, or the “Cash-Back” portion.

If you have never owned a home before you are eligible for two special programs:

Borrow from Your RRSP

The first allows you to borrow/withdraw up to $20,000 from your RRSP ($40,000 for a couple) in the tax year in which you buy or build a qualifying home. Provided you comply with the conditions governing the plan the withdrawal is not taxable. The loan must be repaid within a 15 year period commencing in the second year after your original withdrawal. You will usually be expected to repay (re-contribute) a minimum of 1/15th of your original withdrawal in each succeeding year until repayment is made.

Land Transfer Tax Rebate Program

In Ontario first time home buyers are eligible for a refund of the Land Transfer Tax they paid on closing, which would normally be administered by the lawyer who handled the purchase transaction. There is a maximum rebate of $2,000 available under the plan,which represents the equivalent of the land transfer tax payable on a home valued at $227,500.

Changes Proposed in the January 2009 Federal Budget

These changes will apply to income tax filings beginning with the 2009 tax year.

Under the “Home Buyers’ Plan”, the maximum amount you may now withdraw from your RSP has been increased to $25,000 from $20,000. Each buyer may withdraw a maximum of $25,000, provided the funds are applied to the acquisition of the home, without incurring a tax liability on the withdrawal - provided such persons qualify as “first time home buyers”. A person is considered to be a first time home buyer if that person has not owned a home in the calendar year of the purchase or any of the four preceding calendar years. Contributions must have been made at least 90 days prior to their withdrawal to qualify.

First time home buyers, as described above, who purchase a home after January 27, 2009 may now also claim a $5000 non-refundable tax credit. Unlike the Home Buyers Plan, if each spouse or partner uses his or her own funds to jointly purchase a new home this First Time Home Buyers’ Tax Credit is limited to one credit of $5000, not $5000 for each spouse or partner. In this case it would make sense for the higher income earner to claim the credit.

This plan allows you to either purchase or refinance a property and in addition to borrow up to a maximum of 10% of the estimated improved value of the home in order to complete improvements to that same property.

This would also be a good time to check out the $10,000 in federal and provincial grants available under the NRCan ecoENERGY Retrofit-Homes program. In such a case you may also be eligible for a 10% refund of the CMHC mortgage default insurance premium. 

The 2009 Federal Budget proposed the introduction of a temporary (after January 27, 2009 but before February 1, 2010) Home Renovation Tax Credit. For the 2009 tax year only, individuals will be able to claim a 15% non-refundable tax credit for eligible expenditures made in respect to their homes. The credit applies to expenditures in excess of $1000 and up to $10,000, therefore providing a maximum credit of $1350 i.e. $10,000 - $1000 = $9000 x 15% = $1,350. Similar to the First Time Home Buyers’ Credit this credit is family based, meaning that the maximum credit may be split between spouse or common-law partners. In this case it would also make sense for the higher income earner to claim the credit.

As far as mortgage lenders are concerned there are only two types of self employed (or commissioned) individuals - those who are able to prove their income and who consequently qualify for the loan based upon the same debt service ratio calculations applied to an employed person’s income - and those who don’t. And it’s the latter category who often have the most difficulty in obtaining a mortgage.
But don’t despair, there are insured programs available which take into account the nature of this type of income. Up to 95% of the purchase price, or as-improved value, is available determined by a graduated scale tied to your beacon score. The better your credit rating, the higher the amount you may borrow. Slightly higher mortgage default insurance premiums are applied (but capitalized into the mortgage balance) to offset the perceived higher risk.

Both permanent and non-permanent newcomers to this country are not completely forgotten by the mortgage market either. Plans are available to facilitate both situations, regardless of the fact that newcomers are obviously devoid of any credit history in this country whatsoever. No additional fees or premiums are imposed and standard interest rates apply.

We all know life can throw curves at us from time to time. My doctor once told me that life is what happens between crises. So you will be pleased to know that, in spite of the mortgage debacle in the US in recent years, there is still a way for someone with a hiccup or two (such as a discharged bankruptcy or a consumer proposal) on their record to obtain a mortgage. Once again, interest rates and mortgage default insurance premiums may be a little higher under the “Credit Assist” program but not so onerous that you won’t be able to realize your dream of home ownership.

This is a special arrangement whereby an investor purchases the property of your choice and leases it back to you for a predetermined period. Your 5% down payment plus 20% of the monthly rental amount is accumulated as a credit toward the eventual, predetermined, purchase price at the conclusion of the agreed term. This program is predominantly designed for those with credit or employment issues which are blocking an immediate purchase from happening. I will work with you during the rental period to repair your credit and to ensure that you will be in a position to satisfactorily conclude the arrangement when the time comes.

The basic principle is simple, but the annual return on investment is phenomenal, in most cases exceeding 25% or even 30% or more - and a large portion of that income is tax deductible! Furthermore, if the investment is held as part of a balanced portfolio inside a “Tax Deductible Mortgage Plan” or a “Reverse Mortgage” then there are even more benefits to the investor.

Up until the onset of the toxic mortgage debacle in the US, which began in 2008 and has created global financial meltdown, as a mortgage broker I could arrange a mortgage for almost anyone. It didn’t really matter how bad their credit was, there was always a lender somewhere who would find a home for what are now being called “orphan mortgages”. Times have changed however and the government, through their crown owned mortgage default insurer Canada Mortgage and Housing Corp., has considerably tightened the guidelines relating to mortgage approval, so that today it is as difficult to obtain a mortgage as it has ever been.

Life is hard, and sometimes bad things happen to good people. Unforseen occurrences like divorce, business failure, lay-offs, motor accidents and ill health, can all contribute to a poor credit rating, meaning that people with good moral character no longer qualify for a mortgage in today’s restrictive mortgage market. In order to bridge this gap, and never being one to shirk a challenge, I have embraced the age-old concept of Rent To Own, expanding it to provide a means for a renter to obtain the home of their choice today, and for an investor to place their hard-earned savings into a rewarding investment which is solidly protected by bricks and mortar.

Here’s how it works: A renter wishing to obtain his/her own home applies to me and is interviewed as to suitability for the program. If so I approach my investor who, having first exercised the opportunity to meet the tenant and inspect the house, purchases the home of the renter’s choice, agreeing to sell it back to the renter at the end of the contract for a pre-determined price acceptable to both. Investment amounts range from $20,000 to $50,000.

The renter provides the investor with a down payment (usually 5% of the purchase price or more) as if they were obtaining their own mortgage. In addition to an acceptable monthly market rent, the renter also pays an additional amount (usually 20% of the monthly rent amount) which is accumulated and held as security by the investor over the term of the contract and which, combined with the renter’s original down payment, forms a substantial credit towards the final purchase price when the tenant buys the home back form the investor. The home is owned 100% by the investor at all times until transfer of title back to the renter at the end of the term, usually three years. Should the tenant default under the terms of the contract and/or not exercise his/her option to buy the home at contracted price at the end of the term, all additional monies in excess of market rent are defaulted to the investor, who is now free to sell the home, rent it to another tenant or enter into a new Rent To Own arrangement with a different tenant.

Conversely if the tenant performs improvements to the home (with the investor’s permission) the sale price from investor to tenant at the end of the contract will not change from that in the original agreement, whatever prevailing market conditions are at the time. The intervening three years is utilized by the tenant, coached by myself, to correct and repair their credit situation, so that now they will qualify for a mortgage and will be able to buy back the home at the end of the contract. Safeguards are built into the agreements to protect both tenant and investor in a number of eventualities and great care is taken to ensure the arrangement is a win-win proposition for all concerned. 

So, is your mortgage tax-deductible? Odds are I know the answer to that question before you make it, and that would be a resounding NO!

Unlike our counterparts in the US, and indeed the UK, Canadians’ mortgage interest on their principal residence or vacation home is NOT tax deductible. Unless, that is, the property was free and clear and you borrowed against it in order to specifically invest in something which would in turn generate taxable income.

This Revenue Canada (now reverently referred to as the Canada Revenue Agency) basic principle was first challenged a number of years ago by a lawyer by the name of Singleton. Mr Singleton owned a home, for which the interest was not deductible, a mortgage and some investments. In his wisdom he decided to sell the investments, pay off the mortgage, wait a few days for the dust to settle, then re-mortgage the home so that he could buy back the investments he had just sold. And what do you know? Voila!, hey presto!, immediately the mortgage interest became deductible on his very next income tax return. Furthermore Mr Singleton entered mortgage folklore having invented what became known as the “Singleton Shuffle”.

At the end of the millennium a gentleman from British Columbia by the name of Fraser Smith further developed the concept and wrote a book entitled “The Smith Manouevre”, encouraging Canadians to follow the same principle in order to convert their mortgages to CRA sanctioned tax-deductible debt. At that time we did not have a mortgage product which was tax-deductible friendly, so to speak, and the monthly administrative bookkeeping gyrations necessary to keep CRA happy and protect one’s tax status were somewhat cumbersome, so the manouevre did not become as universally popular as Mr Smith would have liked.

Over the course of the last few years several things have changed however. Firstly a number of mortgage companies have developed mortgage products that are friendly to the concept, and were indeed designed with this concept in mind, and which allow easy access to and transfers between the various required components of the mortgage plan, thereby facilitating the process. Secondly a company entitled “TDMP.com” (i.e. Tax Deductible Mortgage Plan.com) evolved, which has concerned itself with the finer points of the plan, such as the monthly administration required, liaison with CRA over any disputed tax claims, and believe it or not, an insurance element whereby, provided you use a TDMP sanctioned individual to file your tax return, TDMP will even pay any disallowed tax claim for you should you run into difficulties. Thirdly there is an investment component to this plan which can considerably enhance one’s retirement planning, especially when a diversified portfolio of investments includes investment in my lucrative Rent To Own program..

And this is where I come in. I have been appointed as one of the first TDMP certified mortgage agents in Ontario who is authorized to offer the plan. Since the internal workings of the manouevre are both highly sophisticated and very specific to each individual, I will not attempt to go into great detail here, but I would recommend that you first visit my TDMP.com web site at
http://www.tdmp.com/index.php/MB2055.

Here you will learn much more about the plan, how it works, and you will have access to third party, non-biased articles and related information, including CRA Bulletin IT-533, published on October 31, 2003 as well as details on the Supreme Court of Canada’s January 2009 ruling on the Lipson case. You will also be able to take a simple on-line test to determine whether you qualify as a suitable candidate for the plan.

Unlock the value in your home

Would you like to gain access to the equity in your home? You could:

• Perform much needed home improvements
• Pay off expensive, high cost debt
• Take that once in a lifetime vacation
• Supplement your income
• Invest wisely to improve your monthly cash flow
• Combine with a Rent To Own investment to supplement income while protecting capital and making the interest tax deductible.

Seniors today are living longer, saving less, spending more and carrying more debt. Unlocking home equity is likely the most viable solution for a significant number of people in this position.

Did you know:

• Seniors are the fastest growing segment of our population?
• 77% of senior homeowners’ net worth is represented by their home equity
• 84% don’t want to move?

The plan:

• Is available to homeowners 60 years and older
• Makes up to 40% of the home's value available
• Means there is no need to leave the home
• Requires no medical, income or credit qualification
• Requires NO MONTHLY REPAYMENTS unless you move or sell the home

The lender:

CHIP Home Income Plan is provided by HomeEquity Bank, a Schedule 1 Canadian Bank, which is a wholly owned subsidiary of HOMEQ Corporation, a TSX listed company which has been in existence since 1986.

My role:

• As a qualified CHIP advisor is to explain the program, its interest rates and fees, and discuss with you your options, then;
• Introduce you to the area CHIP representative so you may move your application forward

You can get started right now with our Quick Start Mortgage Application or the full online application available at the Mortgage Intelligence site.