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What can you afford?
Here's a great Toronto Star column about making financial decisions:
Always ask: What would You Inc. do? by Ellen Roseman
Excerpt:
Financial literacy means understanding the economic trends that affect your future welfare.
Here's an example: You buy a house and get pre-approved for a mortgage.
Since you can handle the payments at today's low interest rates, you willingly sign the deal.
But what if interest rates rise sharply and your income doesn't go up at the same rate?
What if your property's value stays the same or even (gasp) drops? Unlikely, you say?
Well, it happened in the United States. Many people took on huge debts based on their current circumstances and failed
to look ahead. You could be in for a shock when borrowing money at the lowest rates in 50 years and expecting no changes
in the future.
Ignorance of the big-picture economic context behind today's rates could lead to financial disaster.
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FIRST-TIME HOME BUYERS:
Government programs make your purchase more affordable
Other
government programs for Buyers
» Government of Canada First-Time Home Buyers'
Tax Credit:
First-time home buyers may be eligible for a 15 per-cent income
tax credit for up to $750 on the closing costs of your first
home.
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To assist first-time home buyers with the costs related
to the purchase of a home.
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The First-Time Home Buyers' Credit (FTHBC) provides a
15 percent credit on a maximum of $5,000 of home purchase
costs (e.g. legal fees, land transfer taxes, etc.), meaning
maximum tax relief of $750.
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Applicable to first-time buyers purchasing a home closing
after January 27, 2009.
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The FTHBC is claimable for the taxation year in which
the home is acquired.
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An individual will be considered a first-time home buyer
if neither the individual nor the individual's spouse
or common-law partner owned and lived in another home
in the calendar year of the home purchase or in any of
the four preceding calendar years.
For more information: Revenue
Canada website.
» City of Toronto Municipal Land Transfer Tax:
Rebate for First-Time Home Buyers
A rebate of up to $3,725 will apply to first-time purchasers
of both new and existing homes. This means a full rebate for
first-time buyers of homes valued at $400,000 or less. You
are responsible for paying this tax on the balance of the
purchase price above $400,000.
City of Toronto definition of a FIRST TIME PURCHASER:
With respect to an eligible home, an individual who is at
least 18 years of age and who has never owned an eligible
home anywhere in the world and whose spouse has not owned
an eligible home anywhere in the world while he or she was
a spouse of the individual.
For more information on the Toronto rebate: City
of Toronto website
Tax Calculator
» Province of Ontario Land Transfer
Tax Refund Program for First-Time Buyers
First-time buyers of new and resale homes are eligible for
a refund from the provincial government of up to $2,000 of
the Land Transfer Tax paid. A $2,000 rebate is equivalent
to the Provincial Land Transfer Tax payable on a purchase
price of $227,500 (net of GST). You are responsible for paying
this tax on the balance of the purchase price above $227,500.
For more information on the Ontario rebate: Province
of Ontario website
Tax
Calculator
Warning: Some financial institutions are
now offering to pay some/all of the Land Transfer Taxes or
rebate it to you as a cash-back option — usually
tied to locking you in to a 5+ year mortgage. Sounds good,
but be very careful to note the mortgage rate, terms and conditions,
and do lots of comparison shopping. If you get back a few
thousand from your lender up front but agree to a higher rate
of interest, you will end up paying many more thousands in
interest over the term of your mortgage. Better just to shop
for the best possible interest rate.
A
$4,000 gift for home-buyers? Don't bank
on it by Garry Marr, Financial
Post (Dec. 4, 2007)
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