Archive for the ‘Buying Real Estate’ Category
First-Time Home Buyers Tax Credit
The First-Time Home Buyers Tax Credit (HBTC) is one of the measures provided by the federal government in 2009 to encourage investment in Canadian housing.
For 2009 and subsequent years, the HBTC is a new non-refundable tax credit, based on an amount of $5,000, for certain home buyers that acquire a qualifying home after January 27, 2009 (i.e., generally means that the closing is after this date).
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 was $750. Each year, the credit is recalculated, so it may be higher or lower than previous years.
How do you qualify for the tax credit?
You, and anyone you purchase the home with, must be considered a first time home buyer to be eligible for the tax credit. The home must be used as your principal residence, and if you purchase with your spouse, common-law partner, or even a friend, then either one of you can claim the credit (or share it). However, the combined total cannot exceed $750.
If you are a person with a disability or are buying a house for a related person with a disability, you do not have to be a first time home buyer. See the Government of Canada website for further details.
What is a qualifying home?
To qualify for the First-Time Home Buyers Tax Credit, a home must be a housing unit located in Canada, including mobile homes, condominiums and apartments. 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.
How to Claim the First-Time Home Buyers Tax Credit?
First-time homebuyers purchasing a home may claim the HBTC on their income tax returns. Starting with the 2009 taxation year, line 369 is incorporated into the Schedule 1, Federal Tax to allow you to claim the credit in the year in which you acquired the qualifying home.
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.
Claimants should ensure that documentation supporting the purchase transaction is available if requested by the Canada Revenue Agency. Claimants are also responsible for making sure that all applicable eligibility conditions are met.
Keep the HBTC in mind when you consider buying a Canadian home. It’s just another great reason to take the final step of real estate home ownership.
For more Information visit: http://www.cra-arc.gc.ca/gncy/bdgt/2009/fqhbtc-eng.html
————————————————————————————————————–
Contact the Jeffrey Team for more information - 416-388-1960
————————————————————————————————————–
Understanding Your Local Real Estate Market
Experts always say that real estate is a great investment because the value of homes is always going up. To some extent, there’s truth in that. But it’s also a fact that the real estate market fluctuates. Many people mistakenly rely on national trends when evaluating the real estate market, however, this could at times be misleading. The key is to focus on and understand your local market.
Focusing on your local real estate market is the key to evaluating real estate deals. This however could be difficult to evaluate since there is often less information on particular areas versus the national situation. To understand your real estate market, here are a few factors to focus on.
Understand the market trend. Sometimes it’s a buyer’s market and sometimes it’s a seller’s market. And there are actually other times when the real estate market is in transition. A transitional real estate market poses certain issues for people who are buying and selling homes and you should be aware of them. This is especially true for anyone involved in real estate right now because the real estate market in many areas is either in transition or could be in transition shortly.
Supply and demand. Real estate is governed by the law of supply and demand. This rule is absolute and without exception. The appreciation of a market, the expectations of buyers and sellers, and the velocity of market sales are all dictated by the supply of, and the demand for, real estate for sale.
New construction is another area to consider when evaluating your market. In this case, we are focusing on supply and demand. The more homes available to buyers, the harder it will be for sellers to move properties. Most communities have some new construction, but the key is to determine if it is outpacing the demand.
Increased job growth and in-migration. Where there is strong growth, there are new workers. New workers need some place to live. A vast percentage of these people will be moving in from other areas and often are bringing money from a previous home. If job growth is strong, your real estate market should be stable and showing appreciation.
Real estate doppler effect. Real estate is governed by the law of cause and effect. Positive situations cause positive outcomes, and vice versa. For example, a vibrant economic growth leads to a vibrant real estate market and strong appreciation of homes, while loss of jobs and a languishing economy produce exactly the opposite effect.
The conditions that make a good market can change literally overnight. All it takes is the entrance of a major employer or a little word of mouth and buyers looking for a bargain and seeing others take a chance, and before you know it, a neighbourhood has turned around. Homes that sat unsold are selling for high prices. Young people are moving in, making improvements, and making the area cool to live in.
A secret to evaluating your local real estate market is to look at people around you. One sign of a hot real estate market is the number of people who suddenly become real estate investors. These tend to be people using the equity in their primary home to make secondary purchases. There is no statistical analysis for this factor. Just keep an ear out for friends or neighbours who are suddenly investing in multiple properties.
Understanding the real estate market requires various skills such as knowledge of land price, an insight for land in the future, the risk factors for a property, laws that apply for property, etc. Moreover, the real estate market has changed tremendously over the year. It takes much time and effort for an individual to understand it completely. The real estate market is an adventurous place to get in to, with the prices of property increasing as the time passes.
If you are thinking of buying or selling a property, consult with your local real estate agent. He or she is equipped with the right tools and knowledge to insure your investment is a successful one.
————————————————————————————————————–
Contact the Jeffrey Team for more information - 416-388-1960
————————————————————————————————————–
To Rent or Buy? The Financial Issues
By James E. McWhinney – Investopedia.com
When making the decision either to rent or buy a place to live, there are two broad categories of factors that must be considered. The first and most obvious category represents the financial aspects of your decision. The second category is a set of personal and emotional factors, which are more intangible but play an important role in the decision to rent or buy. Here, we look at the financial factors, including the initial and ongoing costs as well as the long-term pros and cons of owning your home.
Examining Your Finances
The first step in the decision-making process is to determine whether or not you can afford to purchase a home. Issues to consider include your ability to make a down payment (generally between 5% and 20% of the home’s purchase price) and pay closing costs (which may be an additional 5%). These costs are likely to exceed substantially the initial payment and security deposit that would be required if you were renting instead of buying. Of course, having enough money to cover the initial purchase of a new home is only half of the battle.
Before moving into your new home, you’ll need to put some thought into how much it’s going to cost you to stay there after you take up residence. Many financial experts suggest that your monthly mortgage payment not exceed 28% of your gross monthly income and that your total monthly debt payments not exceed 36% of your gross monthly income. If you go beyond these limits, you may run into trouble because, in addition to paying the mortgage each month, you have to factor in home maintenance. From carpet to window coverings, new appliances to a new roof, everything costs money and nothing lasts forever.
Renting may be a little easier on the pocketbook because it provides a fixed-dollar cost for monthly expenditures, which are paid simply with the rent. Besides perhaps increasing from year to year, the rent remains steady. And, if maintenance issues arise, the landlord pays for the repairs. Instead of spending your money on a new roof, you can invest it or spend it as you like.
If you’ve done the math and can afford to make the initial purchase and service the ongoing debt, the next factor you have to decide is whether this purchase benefits you financially. A rent-controlled apartment in New York City, or a place in a suburban location outside of a major city, quite possibly charges a month’s rent that is significantly less than a monthly mortgage payment for properties within the city. Of course, even if the monthly cost of renting is less than the cost of buying, there are long-term financial considerations that must be taken into account.
Long-Term Cost/Benefit Analysis
Proponents of buying often cite the ability to build equity, the tax breaks and the investment value of a home as solid reasons to buy instead of rent. While these arguments have merit, there are downsides to all of them. This chart outlines the positive and negative long-term realities of the equity, tax breaks and investment value associated with buying a home.
Equity
Some of the money that you give to pay a mortgage goes directly toward building equity in your home. You will never again see any of the rent money that you pay. Home equity can serve as collateral for a loan, enabling you to convert the equity into cash.
Equity takes time to build, and payments made during the first few years of a mortgage go primarily toward interest on the loan. Should you move after living in a home for only a few years, you may have little or no equity in the property. And after the costs of selling the home, you could end up losing money.
Investment
Real estate in the form of your primary residence is likely the single largest asset in your portfolio. Over the long term, price appreciation can be significant. Many homeowners downsize their primary residence when they retire; they sell at profit, purchase a less expensive home and use the profits to supplement their income.
While history shows it is likely that your home will appreciate over time, there are no guarantees. There are always areas of the country where homes have lost value, and owners are unable to sell them at a price equal to or greater than the purchase price.
Do the Calculations
A variety of online calculators are available to help you evaluate the financial aspects of the rent versus buy decision, but keep in mind that you need to estimate a range of variables that includes the number of years you will stay in the home.
And to estimate the investment profit the home will provide for you, you must assume the yearly rate of appreciation on the home’s value. The results provided by a calculator and the investment evaluations you make are only as good as the assumptions used to calculate them, and don’t forget to consider the cost of ongoing maintenance. After you have carefully considered the financial issues, it’s time to explore the non-financial issues.
————————————————————————————————————–
Contact the Jeffrey Team for more information - 416-388-1960
————————————————————————————————————–