Fortunately, there are many financing options available to help you realize all your real estate projects.
Here are a few examples:
The mortgage
A mortgage is one of the most common financing options for buying a home. It's essentially a long-term loan, with a fixed or variable interest rate, secured by your property.
Repayment of the mortgage is usually made over a period of 25 to 30 years. The amount of the mortgage depends on the purchase price of the property, the down payment and the borrower's ability to repay.
The CMHC subsidy
The Canada Mortgage and Housing Corporation (CMHC) can help make it easier for first-time buyers to become homeowners by contributing to the down payment. Through the First-Time Homebuyer Incentive (FHBI), the Government of Canada provides first-time homebuyers with :
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5% or 10% to first-time homebuyers for the purchase of a new home;
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5% to first-time buyers of existing homes;
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5% to first-time buyers for the purchase of a new or existing mobile or manufactured home.
These options can be particularly useful for low-income buyers, or for first-time buyers struggling to save enough money to bring their project to fruition.
Note that the incentive must be repaid in full, with no partial payments, after 25 years or when the property is sold, including any increase in value.
First Home Savings Account (FHSA)
The First Home Savings Account (FHSA) is a tax-free savings account created by the federal government to encourage and facilitate first-time home buyers.
Good to know:
- Maximum annual contributions of $8,000 and a total of $40,000 over a lifetime
- No repayment required
- No withdrawal limit
- No minimum holding period to withdraw funds
- Contribution deadline: December 31 of each year
- 15-year lifespan from the date it is opened.
Benefits of the First Home Savings Account (FHSA)
- Your contributions qualify for a tax deduction on your income tax and benefit return.
- Your savings grow tax-free.
- Withdrawals for the purchase of your first home are not taxable.
- If you want to use the funds for something other than buying a property, you can transfer them to an RRSP, RRIF, or TFSA without affecting your contribution limit or incurring penalties.
- Unused contribution room from one year can be carried forward to the following year up to a maximum of $8,000.
Pour en savoir plus, consultez notre article de blogue sur le sujet juste ici.
The Home Buyers' Plan (HBP)
The Home Buyers' Plan (HBP) is a federal program designed to help Canadians purchase their first home. This program allows eligible individuals to use their Registered Retirement Savings Plan (RRSP) to finance the purchase of a property, without having to pay income tax on the funds withdrawn.
To benefit from the HBP, you must be a Canadian resident and not have owned a home in the last four years.
The maximum amount you can withdraw from your RRSP to purchase a home is $35,000, which you must repay within 15 years of your withdrawal.
The HBP is an excellent way to obtain additional funds for the purchase of a home, but it's important to note that it reduces your retirement savings. It is therefore essential to plan your use of the program carefully, and to ensure that you can repay the borrowed funds within the timeframe.
Tax Credits
Since January 2009, the Government of Canada has offered a First-Time Home Buyers' Tax Credit (HBTC). This credit allows buyers of a qualifying home to claim a non-refundable tax credit of up to $5,000.
In Quebec, the provincial government may also grant you a tax credit, this time up to $750 if you meet the eligibility criteria.
Tax-Free Savings Account (TFSA)
Thanks to its great flexibility, the Tax-Free Savings Account (TFSA) is an excellent investment vehicle for financing the purchase of a home.
The TFSA is a tax-free source of financing. This means your earnings and withdrawals are not taxed. Unlike Registered Retirement Savings Plans (RRSPs), which impose penalties for early withdrawals, withdrawals from your TFSA are not. Meaning you can withdraw funds from your TFSA at any time, without penalty, to finance the purchase of a home.
The Novoclimat program
Novoclimat is an energy certification program for new residential construction offered by Transition Énergie Québec (TEQ). It is designed to encourage the construction of energy-efficient and environmentally friendly homes, and to reduce the energy consumption of residential buildings.
The Novoclimat program offers a financial incentive of $2,000, and up to $4,000 for first-time homeowners, to help them build or buy homes that meet energy certification standards.
Municipal Programs
In an effort to convince homeowners to buy on their territory, many municipalities have chosen to offer subsidies, down payment assistance programs or tax exemption programs to help finance their projects.
In line with new legislation and since municipal programs evolve over time, ask your Proprio Direct real estate broker about all the subsidies, rebates, credits and financial assistance available to you.
Home equity line of credit
A home equity line of credit is a type of loan that allows you to borrow money using the equity in your home as collateral. It is intended only for homeowners who already have a mortgage.
Among its advantages, mortgage lines of credit usually offer lower interest rates than personal loans or credit cards. They also offer greater flexibility, as you can withdraw money when you need it and pay interest only on the amount borrowed.
Rent to own
Rent-to-own is a contract that allows a tenant to occupy a property while having the option of buying the house at the end of the agreement.
This is a very attractive option for people who have difficulty obtaining financing, or simply for those who want to take their time to better evaluate the house before officially becoming its owner. The tenant is then free to decide whether or not to purchase the property at a later date.
Please note! Rent-to-own situations also present risks. If the tenant fails to purchase the property at the end of the rental period, he or she could lose all the money already paid during the rental period. Think carefully!
The personal loan
A personal loan is an unsecured loan that can be used for a variety of expenses, including the purchase of a home. The flexibility and speed of this financing option are advantages for many buyers, but it's important to note that personal loans can also have much higher interest rates than traditional mortgages. They may also come with stricter repayment conditions.
Personal donations
Are you lucky enough to be able to count on the financial support of your parents or the contribution of a wealthy Austrian heir? You're in luck! Unlike other forms of financing, a personal donation means no repayment and no interest to pay. It's the best of both worlds.
It may be the best way to finance your real estate project... but it's not for everyone.
