Mortgages

From the desk of Peter Majthenyi and Andre Semeniuk of My Mortgage Planner...






A Harsh But Short Recession

It appears our recession has come to an end and Canada is leading other nations on a slow climb to prosperity. After shedding more than 400,000 jobs, there will still be significant challenges to get many Canadians back to work in the years to come.

As a result, our Government has committed to keeping interest rates low until at least 2011 in order to maintain our economic momentum. Real estate appears to be one of the first sectors to be rebounding by posting an 18% jump in July 2009 alone, fueled primarily by record low mortgage rates.

Considering the Bank of Canada is in no position to increase interest rates anytime soon, the majority of borrowers are opting to tie their mortgage to the benchmark over night rate of .25%. This means taking a 5 year variable mortgage, which is currently as low as 2.4%.

Even if we factor in gradual rate increases in the future, this interest rate will still out perform the alternatives. Also keep in mind that a variable mortgage allows you to “abort” at any point for free, so you are more nimble to react to a changing interest rate market.

In most cases, we will all pay 5-6% for our mortgages over time regardless if we choose a variable or fixed right now, yet our goal is not to pay it any sooner than we have to!

The mortgage product that will dominate the 2010 landscape will be the “Mortgage & Line of Credit Combo”. This type of mortgage allows borrowers to pay their mortgage off much quicker as well as to engage in tax efficient investing.

The line of credit availability grows with every dollar paid down on the mortgage principal, with the line of credit hopefully leveraged only to invest in appreciating assets. This growing line of credit allows all of one's income to be used to pay down mortgage principal while never leaving one short of cash.

In the past, we'd often have thousands of dollars sitting in our chequing account earning very little interest and not working for us, while with this growing line of credit at 3.25% we will always be prepared for unexpected situations.

In order to secure this type of financing package, the borrower must have good income and credit, as well as at least 20% equity … eventually every homeowner will end up in a mortgage of this nature because there is absolutely no down side, and it is a key tool to create personal net worth much quicker.

Financial literacy includes understanding your “Mortgage Plan”. We welcome you to call us soon for a complimentary assessment of maneuvers you can implement now to ultimately build your personal wealth sooner … the cost of procrastination can be significant.

Here's to a healthy fall market.


Anytime,
Peter & Andre

Home Renovation Tax Credit

You've likely heard of the Home Renovation Tax Credit (HRTC). Here are the details you need to know if you're going to take advantage of this great incentive...

For renovations done between January 28, 2009 and February 1, 2010, you can claim a 15% credit against renovation expenses after the first $1,000. The maximum tax credit is $1350 which represents $9000 worth of renovations.

Renovations must be to any dwelling that you own and use personally, or is used by a spouse or child. Eligible dwellings include a cottage, provided it is for personal use.

Rental properties are not eligible, but you may qualify for the credit if, for example, you renovated the personal use areas on a house that is your principal residence but which contains a rental unit.

For expenditures made for common areas or that benefit the housing unit as a whole (such as re-shingling a roof), you must divide the expense between personal use and income-earning use.
Here are the renovation expenses that qualify:

- renovating a kitchen, bathroom or basement,
- building an addition, deck, shed, or fence,
- new carpet or hardwood floors,
- installing a new furnace, fireplace or water heater,
- re-shingling a roof, a new driveway or resurfacing,
- painting (interior or exterior)
- permanent swimming pools, sodding or some landscaping.

The renovation must be of an enduring nature and integral to the dwelling, and can include the cost of labour and professional services, building materials, fixtures, rentals, and permits.

Furniture, appliances, electronics, or tools, are not eligible for the tax credit. Routine repairs, maintenance and cleaning normally performed on an annual or more frequent basis are also not eligible.

The tax credit is family-based; one tax credit is available per household. If two families share the same home (as co-owners, not renters), then both are eligible for separate tax credits. The tax credit can be applied to the tax return of either spouse.

Most home have received a green envelope on their door to keep all required documentation which includes agreements, invoices, receipts, and cancelled cheques.

You should also check out the ecoENERGY retrofit program if you plan to do any renovations that will save energy.

For more details on the government websites, click below...

HOME RENOVATION TAX CREDIT 2009

ecoENERGY PROGRAM