Fact sheet

First-time home buyers’ tax credit

What is the first-time home buyers’ tax credit (HBTC)?

The HBTC is a non-refundable tax credit for certain homebuyers who acquire a qualifying home after January 27, 2009, that is – closing after this date.

How is the HBTC calculated?

The HBTC is calculated by multiplying the lowest personal income tax rate for the year (15% in 2009) by $5,000. For 2009, the credit will be $750. However, if the total of your non-refundable tax credits is more than your federal income tax, you will not receive a refund for the HBTC.

Who is eligible for the HBTC?

You will qualify for the HBTC if:

• you or your spouse or common-law partner acquired a qualifying home; and
• you did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years.

If you are a person with a disability or are buying a home for a related person with a disability, you do not have to be a first-time home buyer to get the HBTC. However, the home must be acquired to enable the person with a disability to live in a more accessible dwelling or in an environment better suited to the personal needs and care of that person.

For the purposes of the HBTC, a person with a disability is an individual who is eligible to claim a disability amount for the year in which the home is acquired, or would be eligible to claim a disability amount if we ignore that costs for attendant care or care in a nursing home were claimed as medical expenses on lines 330 or 331.

What is a qualifying home?

A qualifying home is a housing unit located in Canada. This includes existing homes and those being constructed. Single-family homes, semi-detached homes, townhouses, mobile homes, condominium units, as well as apartments in duplexes, triplexes, fourplexes, and apartment buildings all qualify. A share in a co-operative housing corporation that entitles you to possess, and gives you an equity interest in, a housing unit located in Canada also qualifies. However, a share that only provides you with a right to tenancy in the housing unit does not qualify.

Also, you must intend to occupy the home or you must intend that the related person with a disability occupy the home as a principal place of residence no later than one year after it is acquired.

Important things to remember

The home must be registered in your or your spouse’s or common-law partner’s name in accordance with the applicable land registration system.

You do not have to submit documents supporting your purchase transaction with your income tax and benefit return. However, you have to make sure that this information is available if the Canada Revenue Agency asks for it.

Where can I get more information?

For more information, go to www.cra.gc.ca/hbtc or call us at 1-800-959-8281.

This document is also available for download in PDF format.

What’s affecting your credit score?

Garry Marr, Financial Post · Tuesday, Jan. 18, 2011

I still have an Eaton’s department store credit card even though there is no where to shop with it.

That hasn’t stopped the long-forgotten card from making its way on to my credit report and ultimately affecting my credit score.

When contacted by a representative of TransUnion LLC — one of two companies providing credit ratings in Canada, the other being Equifax Inc. — for a story about how to improve credit ratings I decided it would be a good time to check my own score.

TransUnion gave me a code to download my score, something that normally costs $14.95 for a one-time credit profile and another $7.95 to get your credit score. The company also offers a program that allows you to monitor both whenever you want for $14.95 a month.

“One of the benefits of checking your credit report is to make sure information is accurate and up to date,” says Tom Reid, director of consumer solutions for TransUnion.ca, referring to opened accounts you may have forgotten about.

So how did I do? I scored 786 out of 900, considered “good” and better than 66.02% of the population. But I somehow feel like the kid who got a B on an assignment. I want that A.

According to my report, I have too many bank or national revolving accounts on my credit report. I have three major credit cards, American Express, Visa and MasterCard. I have a car loan and an unused line of credit with my bank.

That Eaton’s card probably didn’t help my score and then there’s the Hudson’s Bay card account that was still open that I haven’t used in a decade. Show me a Canadian who hasn’t opened up one of those to get the 10% discount. I just never closed mine.

There are five different categories that go into a credit score. The first is on-time record of payment — got that covered. Next up is the number of inquiries or applications for credit.

You remember getting that credit card for a free tee-shirt at a hockey game or signing up for the department store card to get the discount and then destroying it. You think that doesn’t matter? Think again.

“It could potentially have a negative impact on your score,” says Mr. Reid, about applications I’ve made to various department stores over the years. Fortunately, I haven’t made any in the last two years.

Your utilization of credit is also a major factor — that’s your balance divided by available credit. It’s not based on whether you have a balance at the end of the month but it’s the balance outstanding at a given moment divided by your available credit.

“If that number exceeds 40%, that is typically a warning sign,” says Mr. Reid, noting a higher credit limit will keep that percentage down.

The last factors are longer term credit history and the breadth of your credit, somebody who has just one credit card doesn’t look as strong as someone who also has a line of credit and say a mortgage.

“It’s a fantastic credit score,” says Mr. Reid, about my result, adding I shouldn’t have a problem getting credit. Yeah but my editor who took the same test scored 831.

All of this may just seem like a vanity project but there are real problems you can encounter with bad credit and a poor rating, says Vince Gaetano, a principal broker with Monster Mortgage.

“A number of things can happen if you don’t have a good score. Right now 680 seems to be the cut off for buying a home with mortgage [default] insurance,” says Mr. Gaetano. “If you are below 600, you are in real trouble, you are going to a B leader.”

Those lenders will just kill you on interest rates — 5% to 6% compared to 2.25% —not to mention the fact you’ll need to have at least a 20% deposit on your home.

Then there’s the fees for bad credit. Lenders charge 1% of the value of the mortgage for people with bad credit. Who wants to pay $3,000 extra on a $300,000 mortgage. The broker will also demand 1% because your bad credit means the bank is not compensating the broker for you, the questionable customer.

What’s the worst score Mr. Gaetano has seen. “Somebody had like 430-something. I mailed them a bullet. I wouldn’t lend a guy like that $5 for lunch. That’s happens when you stop paying everybody,” he says.

I’m starting to feel better about my score. But I still cancelled my open HBC card and started to investigate how one goes about cancelling a credit card for a store that no longer exists.  : http://www.financialpost.com/personal-finance/What+affecting+your+credit+score/4126038/story.html#ixzz1BTyII8NL

One of the most common questions is how someone can begin building financial security, especially when they’re still paying off loans or other types of debt. After interviewing dozens of successful savers over the years, …they tend to have the following five traits in common. With the exception of the last one, they are all strategies that anyone can begin implementing today.

Here are the five secrets of successful savers:

1) They started slowly. Overcoming the initial inertia that prevents many of us from saving is often the hardest step. That’s why starting by saving just a small amount can get you on the path towards bigger savings. Nicole Mladic, a 31-year-old communications director in Chicago, couldn’t afford to put away a big chunk of her salary when she was in her mid-20s, so she started saving 2 percent. A few months later, she raised it to 3 percent, then went to 4 percent, and eventually reached her goal of 10 percent. Today, her net worth is over $90,000.

2) They read about financial and economic news. A survey by HSBC Direct found that people they call “active savers,” tend to pay attention to financial news. That might help them maintain a general awareness and savviness about money, and also teach them about basic principles such the importance of not trying to time the market, and finding accounts that don’t charge hefty fees.

3) They save regularly, often through automated systems. Online banking makes this technique easy: Sign up for monthly transfers into a brokerage or savings account. You can also transfer funds directly from your pay so you never even see the money, which means you won’t miss it. Check in with your human resources department–you might be able to set up an automatic savings account through your pay in addition to your automatic retirement savings.

4) They find saving pleasurable. This trait might sound counter-intuitive: How can anyone enjoy saving money, since doing so essentially prevents the pleasure of a purchase today? But some people–especially successful savers–naturally feel more pleasure while socking money away rather than spending it, since they know they are building financial security, and they can spend it one day in the future. If you don’t naturally feel this way about saving, you can teach yourself to, by focusing on how much financial security means to you each time you add to your savings accounts.  

5) They first began saving as a child. The HSBC survey found that most active savers had been saving money since they were little and they learned the value of saving from their parents. While adults today who didn’t receive those lessons can’t change their past, they can help pass on better lessons to their own children by talking about finances and family budgeting often. Doing so would put them in the minority: A Charles Schwab survey found that only one in five parents frequently talk to their teens about family budgeting and spending decisions, and just over half of parents teach their teens how to save regularly.

One trick that combines these strategies is to encourage elaborate family discussions about what you will do with all the money you are saving. For example, if your savings goal is to take a family vacation to Belize, children can draw pictures of the rainforest, parents can crunch some numbers, and soon you’ll be snorkeling in the coral reefs.

NEWS RELEASE

VICTORIA – More than one million B.C. homeowners with homes valued up to $1.15 million may be eligible for the full homeowner grant amount as the Province raises the threshold by 10 per cent for the 2011 tax year.

“Raising the homeowner grant threshold ensures that 95 per cent of homeowners continue to benefit from a full grant, helping them with the cost of living,” Finance Minister Colin Hansen said. “While we’re starting to see mills and mines reopen in our smaller communities, we recognize the economic downturn hit some parts of rural B.C. harder, so we’ve kept our promise to provide a Northern and Rural Home Owner Benefit to ease the burden on rural families in the months ahead.”

BC Assessment estimates the value of most properties (homes) as of July 1 each year, based on market value. Assessment notices were mailed to all property owners Dec. 31, 2010.

The Province reviews B.C. Assessment’s property value information and adjusts the grant threshold so that at least 95.5 per cent of homeowners are eligible for the full grant. People with homes valued above the threshold may be eligible for a partial grant.

The home owner grant provides a maximum reduction in residential property taxes of $570. An additional grant of $275 — for a total of $845 — may be available if the homeowner is 65 or over, permanently disabled or eligible to receive certain war-veteran allowances. The assessment data reflects the market value of homes as of July 1, 2010. The grant threshold was $1,050,000 for both 2009 and 2010.

A further measure of relief from residential property taxes for northern and rural homeowners takes effect in 2011, with the start of the Northern and Rural Area Homeowner Benefit. This benefit provides up to $200 for homeowners living outside of the Capital, Greater Vancouver and Fraser Valley regional districts. To be eligible, homeowners must meet the requirements to receive the basic or additional homeowner grants. The new benefit will be included with property tax notices in the spring, and eligible homeowners will not need to apply separately.

Other changes taking effect this year to benefit property taxpayers include:

• Increasing the Industrial Property Tax Credit to 60 per cent of school property taxes payable by light and major industrial properties.
• Establishing a credit of 50 per cent of school property taxes for land classified as “farm”.

For more information on the Home Owner Grant program and the Northern and Rural Homeowner Benefit, please visit: www.sbr.gov.bc.ca/individuals/Property_Taxes/Home_Owner_Grant/hog.htm

The changes coming into place in March are:

1. Amortizations are reduced to 30 years instead of 35 years

2. Refinancing only up to 85% instead of 90%

3. No longer insuring lines of credit

The impact on a 350,000.00 mortgage

1. On amortizations approx $35 per month per 100k in mortgage in the example above $123 a month

2. Access to 5% less equity ($17,500) in the amount above

3. Harldey no impact, lenders didn’t offer insured lines of credit even though they were avaliable.

Summary

This does not impact your down payment, you can still purchase with a 5%  down payment and remember this is for insured mortgages only. If you have a 20% down payment for your purchase or have over 20% equity in your home, your options are still open.

 A refinance is when you are taking money out of your home. This will not impact a simple mortgage renewal unless you were making a change to the mortgage to take more money out.

Rates are still at record lows, and this is a great time to purchase real estate if the fundamentals work for you.

 Angela Calla, AMP

Mortgage Expert-Dominion Lending Centres-Angela Calla

Host of The Mortgage Show on CKNW AM980 Saturdays at 7pm

Bank of Canada maintains overnight rate target at 1 per cent

OTTAWA –The Bank of Canada today announced that it is maintaining its target for the overnight rate at 1 per cent. The Bank Rate is correspondingly 1 1/4 per cent and the deposit rate is 3/4 per cent.

The global economic recovery is proceeding at a somewhat faster pace than the Bank had anticipated, although risks remain elevated. Private domestic demand in the United States has picked up and will be reinforced by recently announced monetary and fiscal stimulus. European growth has also been slightly stronger than anticipated. Ongoing challenges associated with sovereign and bank balance sheets will limit the pace of the European recovery and are a significant source of uncertainty to the global outlook. In response to overheating, some emerging markets have begun to implement more restrictive policy measures. Their effectiveness will influence the path of commodity prices, which have increased significantly since the October Monetary Policy Report (MPR), largely reflecting stronger global growth.  

The recovery in Canada is proceeding broadly as anticipated, with a period of more modest growth and the beginning of the expected rebalancing of demand. The contribution of government spending is expected to wind down this year, consistent with announced fiscal plans. Stretched household balance sheets are expected to restrain the pace of consumption growth and residential investment. In contrast, business investment will likely continue to rebound strongly, owing to stimulative financial conditions and competitive imperatives. Net exports are projected to contribute more to growth going forward, supported by stronger U.S. activity and global demand for commodities. However, the cumulative effects of the persistent strength in the Canadian dollar and Canada’s poor relative productivity performance are restraining this recovery in net exports and contributing to a widening of Canada’s current account deficit to a 20-year high.  

Overall, the Bank projects the economy will expand by 2.4 per cent in 2011 and 2.8 per cent in 2012 – a slightly firmer profile than had been anticipated in the October MPR. With a little more excess supply in the near term, the Bank continues to expect that the economy will return to full capacity by the end of 2012.

Underlying pressures affecting prices remain subdued, reflecting the considerable slack in the Canadian economy. Core inflation is projected to edge gradually up to 2 per cent by the end of 2012, as excess supply in the economy is slowly absorbed. Inflation expectations remain well-anchored.  Total CPI inflation is being boosted temporarily by the effects of provincial indirect taxes, but is expected to converge to the 2 per cent target by the end of 2012.

Reflecting all of these factors, the Bank has decided to maintain the target for the overnight rate at 1 per cent. This leaves considerable monetary stimulus in place, consistent with achieving the 2 per cent inflation target in an environment of significant excess supply in Canada. Any further reduction in monetary policy stimulus would need to be carefully considered. 

Information note:

A full update of the Bank’s outlook for the economy and inflation, including risks to the projection, will be published in the MPR on 19 January 2011. The next scheduled date for announcing the overnight rate target is 1 March 2011

Flaherty tightens mortgage rules

Paul Vieira, Financial Post · Monday, Jan. 17, 2011

OTTAWA — Finance Minister Jim Flaherty unveiled changes Monday morning to mortgage lending rules that would see Ottawa stop backing home loans greater than 30 years and make it more difficult for households to use their property to access financing.

The changes, as reported by the National Post on Sunday, emerged as worries escalate among Bay Street leaders and the Bank of Canada about the record levels of household indebtedness, and how conditions could deteriorate unless pre-emptive action was taken.

The key change announced is that mortgages with amortization periods longer than 30 years will no longer qualify for government-backed mortgage insurance, which is required for buyers with less than a 20% down payment on a home. The previous limit was 35 years.

Also, Mr. Flaherty lowered the maximum amount Canadians can borrow against the value of their homes, to 85% from 90%, on a refinancing; and removed federal government backing for home equity lines of credit, or so-called HELOCs, whose popularity soared in the past decade with growth double that of mortgage debt.

“Canada’s well-regulated housing sector has been an important strength that allowed us to avoid the mistakes of other countries,” Mr. Flaherty said at a media conference. “The prudent measures announced [Monday] build on that advantage by encouraging hard-working Canadian families to save by investing in their homes and future.”

Executives at Bank of Montreal applauded the government’s move.

“The actions announced are prudent, measured, responsible and timely,” said Frank Techar, president of personal and commercial banking at Bank of Montreal.

The changes will be implemented in stages, with adjustments on amortization and refinancing limits coming into force on March 18. Government backing on HELOCs will be removed as of April 18.

The government said exceptions would be allowed after the new measures come into force when needed to satisfy a home purchase or sale and financing agreement struck before the March and April in-force dates.

The minimum down payment, at 5%, will remain as is. Further, there are no plans to target condominium purchases by requiring monthly condo fees be added to the list of expenses that is measured against income to decide whether a buyer can afford a mortgage.

Analysts at Scotia Capital said in a morning note the changes had been anticipated for some time. “We remain of our long-held belief that Canada is tapped out on housing and household finance variables that are all at cycle tops, in contrast to the U.S. that has already moved well off cycle tops and may be creating some pent-up demand,” said economists Derek Holt and Gorica Djeric.

The changes to the country’s mortgage rules — the second in as many years — emerge amid rising concern about the record levels of household debt, which measured as a ratio of money owed to disposable income nears a startling 150% as of the third quarter of last year. That surpasses the level of debt held by American households, whose appetite for borrowing helped stoke the financial crisis of a few years ago.

The Bank of Canada recently warned debt levels are growing faster than income, and the risk posed by consumer indebtedness to the domestic economy would continue to escalate without a “significant change” in how consumers borrow and banks lend.

Bank of Canada governor Mark Carney said policymakers have a “responsibility” to look at the benefits of pre-emptive action. Joining the chorus have been chief executives at the big banks, most notably Ed Clark at Toronto-Dominion Bank, in publicly advocating for tougher mortgage standards.

Last Friday, Prime Minister Stephen Harper acknowledged his government was considering changes to the rules governing mortgages.

 In February of 2010, Mr. Flaherty moved to toughen up the mortgage rules amid worries that Canada was in the midst of a housing market bubble. The reforms, since introduced, compelled borrowers to meet standards for a five-year fixed-rate mortgage, even if the buyer wanted a shorter-term, variable rate loan; reduced the amount Canadian can borrow against their home, to 90% of the property value from 95%; and require purchasers of rental properties to issue a 20% down payment as opposed to 5%. The moves played a role, observers say, in slowing down real estate activity.

The Scotia Capital analysts suggested government regulation was the way to go in terms of curbing household appetite for credit as opposed to the Bank of Canada raising interest rates, which they said would be “imprudent” at this time.

The central bank issues its latest rate statement on Tuesday and it is expected to hold its benchmark rate at its present 1% level as signs indicate the economy may be benefiting from renewed business and consumer confidence in the United States.

Stewart Hall, economist at HSBC Securities Canada, said the extraordinarily low-rate environment “provides all the incentive to consumers to borrow and spend and none of the incentive to save. You can try to [regulate] that away but that is apt to be fraught with significant frustration.”
Read more: http://www.financialpost.com/personal-finance/Flaherty+tightens+mortgage+rules/4119505/story.html#ixzz1BIhkDuhh

Sources say rules now being discussed would add 100% of condominium fees to the list of expenses that is measured against income to decide whether a buyer can afford a mortgage. – Brett Gundlock/National Post

Flaherty: loonie will stay at par with U.S. thanks to “sound” fiscal situation

By Lee-Anne Goodman, The Canadian Press

WASHINGTON – The Canadian loonie will hover at parity with the U.S. dollar for some time to come, and deservedly so thanks to Canada’s economic strength, Finance Minister Jim Flaherty said Wednesday.

“This is a new world,” Flaherty told reporters after speaking about controlling debt at a think-tank discussion at the Woodrow Wilson International Center for Scholars in the U.S. capital.

The high Canadian dollar reflects a “sound fiscal situation” in Canada, he added.

“It is unreasonable, given those fundamentals, for anyone in Canada to expect the Canadian dollar to go back to the days when it was significantly devalued vis-a-vis the U.S. dollar…. it makes sense for the Canadian dollar to be much closer to the U.S. dollar that it was for some years.”

The Canadian dollar hit a two-and-a-half year high earlier Wednesday of $0.9848, or US$1.0154. It closed the day at $0.9869 to the U.S. dollar, or US$1.0133. The loonie’s been at or near parity with the U.S. currency for weeks, a state of affairs that causes headaches for Canadian exporters who get paid in American dollars.

That’s why Ottawa is throwing a lifeline to exporters and manufacturers by lowering corporate taxes, reducing tariffs and extending an accelerated capital cost write-off, Flaherty said.

The capital cost measure allows companies to accelerate the rate at which they can write off investments. It was scheduled to expire in 2011.

The finance minister spoke to the media after an event that proved something of a Canadian love-in. Those in attendance included Gary Doer, the Canadian ambassador to the U.S., and astronaut Julie Payette, who recently signed on for an eight-month stint as a public policy scholar at the Woodrow Wilson Center.

“We look at Canada as a good example of what we ought to do on several different fronts,” David Biette, the director of the centre’s Canada Institute, told Flaherty.

The finance minister also said Canada would put global financial standards in place well before deadlines imposed by the Basel Committee of international bank regulators.

The new regulations, dubbed Basel Three, are supposed to be in place by 2019. But Flaherty said Canada will move much faster than that, adding the new rules aren’t onerous for Canadian financial institutions since they already practise so many of them.

The new standards would require banks to prepare for economic recessions by holding onto more cash and assets that can be easily sold off. They aim to ensure taxpayers aren’t on the hook when a financial institution fails amid a global financial meltdown.

“It’s an advantage for our financial system to move more quickly to the Basel III standards,” Flaherty said. “It creates more business confidence. It creates more confidence outside of Canada for direct investment in Canada.”

Home-equity loans surge twice as fast as mortgage growth: BoC

Paul Vieira, Financial Post · Monday, Jan. 10, 2011

OTTAWA — Home-equity lines of credit surged 170% over the past decade, or twice the rate of mortgage growth, a Bank of Canada deputy governor said Monday as she acknowledged keeping interest rates low “create their own risks” for the economy as they pertain to household debt levels.

Agathe Côté said home equity loans, whose popularity grew as housing prices climbed and interest rates remained low, helped Canadians buy goods, such as additional real estate, or pay off higher-interest consumer debt. So-called HELOCs — secured loans that carry lower rates of interest compared to unsecured financing — now account for 12% of all household debt, which as of the third quarter was at a record high, or the equivalent to 148% of disposable income.

“If there were a sudden weakening in the Canadian housing sector, it could have sizable spillover effects on other areas of the economy, such as consumption, given the high debt loads of some Canadian households,” she said in remarks delivered to the Canadian Club of Kingston, Ont.

Data collected on behalf of the central bank suggest roughly one-third of the financing made available via HELOCs are used to pay off other debt, while another 20% is used for stock-market investments. The roughly 50% of financing remaining, Ms. Côté said, is used on current consumption, and renovating or purchasing other properties.

This real estate-related spending has a domino effect, she added, as it can accelerate the increase in house prices, “reinforcing the growth in collateral values and access to additional borrowing, thus leading to a rise in household spending.”

Analysts say this type of cycle could spell trouble for Canada’s growth prospects in an environment of rising rates and softer housing prices. That’s why the Bank of Canada is pressing individuals and lenders to proceed with caution now in terms of taking on or issuing debt.

“The issue is not whether we are going to see a wave of defaults,” said Benjamin Tal, deputy chief economist at CIBC World Markets. “It is how higher interest rates will lead to a softening in credit demand, and then consumer spending.”

In a recent interview, Finance Minister Jim Flaherty singled out the rapid-fire growth in home-equity loans as a cause for concern and that was one area the federal government may target should it move to try to cap household debt levels.

Since the trough of the recession, household credit has grown about twice as fast as personal disposable income.

Meanwhile, Ms. Côté tried to address the dilemma the central bank faces as it continues to warn about record levels of household debt while keeping its benchmark policy rate at extraordinarily low levels in the face of a still-fragile recovery. Bank of Canada policy is to set interest rates in an effort to reach or maintain 2% inflation.

“Some have asked if increasing interest rates poses such a threat to households, why raise them? Yet others have asked if household debt is such a concern, why not raise rates and discourage borrowing?” she said, noting rates are set to achieve or maintain 2% inflation. Annual headline inflation was 2% in November, although the core rate, which strips out volatile-priced items, fell to 1.4% in the month.

“The bank recognizes that low interest rates, while necessary to achieve our inflation target, create their own risks,” said Ms. Côté, who was appointed deputy governor last June.
http://www.financialpost.com/news/economy/Home+equity+loans+surge+twice+fast+mortgage+growth/4087788/story.html#ixzz1AjKdc2Ri