Federal Govt’s rrsp Home Buyer’s plan nets this couple a $15,000 tax refund.

RRSP home buyers planAround 20 years ago, the Federal govt introduced the RRSP Home Buyer’s Plan.   The goal was to stimulate a depressed housing market in the early ’90s.   The plan is really quite simple.   First time homebuyers could borrow up to $20,000 from their RRSP to be used towards the purchase of a home.   Buy with a spouse or your common-law spouse and you’ve doubled the amount to $40,000.

There really is no catch.  You simply have to pay it back to your RRSP plan over a 15 year period.   The minimum payment is 1/15th of the amount that you withdrew payable each year.  That’s it.

Today, the plan still exists with a slightly higher limit and more flexibility.   You can now withdraw up to $25,000 per person… still capped at 2 people max per purchase (married or common-law spouse).   You can also participate in the Home Buyer’s plan if you haven’t owned a home in the last 5 years.  This can work to your advantage if you previously owned but sold.  click here for the full guidelines and qualifications. Read the rest of this entry »

Long term is almost always more expensive.

long term contractsEver wanted to change cell phone providers?  How about internet providers?  Move your investments or rrsps?  Cancel that hydro or gas contract because you moved?

And how about mortgages?  When interest rates started heading down about 4 years ago, thousand of borrowers in fixed rate mortgages wanted to get out of their higher rates and start benefiting from the record low interest rates.

But borrowers were shocked to hear of unbelievably high early prepayment penalties…   Penalties of $15,000, $20,000, $30,000.    One recent situation had CIBC charging a $33,000 penalty on a $500,000 mortgage.  I’ve seen dozens and dozens of situations like this.   Almost all of these high penalties were from one of the BIG SIX BANKS…    Read the rest of this entry »

Tips on how to reduce your mortgage penalty

break your mortgage

Interest rates are still near record low levels. You’ve heard your co-workers,  friends or family brag how lucky they were to renew into these once in a lifetime rates.

But how you do you take advantage?  If you break your fixed rate mortgage then you face an enormous prepayment penalty…we’ve seen reports of $10k, $15k, $20k and even $30k in penalties….Wow!

Well, here’s a few tips…

-first, if you are in a 10 year fixed rate mortgage, and your are at least 5 years into the term, then the maximum penalty is 3 months interest  (this is a little known fact… Section 10 of the Interest Act of Canada).

-One more way to reduce the penalty is to utilize the annual prepayment privilege that’s within the mortgage.  Most mortgages have between 15% and 25% prepayment privileges which equates to a 15% to 25% reduction in the penalty…. Read the rest of this entry »

%d bloggers like this: