Getting financing can be an obstacle you will need to face if you wish to buy property. However, you must be aware that there are many resources available to help you overcome this obstacle. Do you know about these resources?
1- Borrowing capacity and mortgage loan
When looking for property to buy, it’s a good idea to know what your borrowing capacity is. This information will give you useful insight on what types of property are accessible to you during your research. A good strategy is to get a pre-approved mortgage even before you have found the property that interests you. A pre-approved mortgage will allow you to know how much you can borrow, what your interest rate will be and the amount of each payment. Your research will be focused on properties that are within your means.
2- Mortgage loan insurance
Are you dreaming of buying a property but have less than 20% of the down payment saved up? Mortgage loan insurance can help you make this dream become a reality. Mortgage loan insurance applies to various types of new or formerly owned properties and is offered in Canada by the Canada Mortgage and Housing Corporation (CMHC) and Genworth Financial Canada.
You must keep in mind that a smaller down payment will increase mortgage payments and the total cost of purchase. In addition, to qualify for this type of loan, your financial obligations (mortgage, taxes, heating and electricity billing and other debts) must not surpass 44% of your income.
3- The Home Buyer’s Plan
The Home Buyer’s Plan (HBP) is a government program that allows buyers to use the funds they put in an RRSP to finance the purchase of a property without having to pay taxes on the withdrawal. The funds withdrawn from the RRSP must be repaid within a fixed period.
To qualify for this program, the buyer or their spouse must not have owned a residence that has served as a principal residence in the past 5 years prior to the withdrawal request. In addition, the buyer must have concluded an agreement for the purchase or construction of the property (promise to purchase or preliminary contract) before withdrawing from the RRSP. Contact Revenue Canada or your financial institution for more details