Fortunately, there are many financing options available to help you realize all your real estate projects. Here are a few:
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.
Mortgage payments are typically 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 made, and the borrower's repayment capacity.
La subvention de la SCHL
The Canada Mortgage and Housing Corporation (CMHC) can help buyers access homeownership more easily by contributing to the down payment. Through the Home Buyers' Amount (HBA), the Government of Canada provides:
- 5 or 10% to first-time homebuyers for the purchase of a new home;
- 5% to first-time homebuyers for the purchase of an existing home;
- 5% to first-time homebuyers for the purchase of a new or existing mobile or manufactured home.
These options can be particularly useful for low-income buyers or first-time buyers who are struggling to save enough money to complete their project.
Note that the incentive granted must be repaid in full, without partial payment, after 25 years or upon sale of the property, including the appreciation of the property.
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.
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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 tax on the funds withdrawn.
To qualify for 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 prescribed 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.
The Tax-Free Savings Account (TFSA)
Thanks to its great flexibility, the Tax-Free Savings Account (TFSA) is an excellent investment vehicle to finance the purchase of a home.
The TFSA is a tax-free source of funds. This means that the gains and withdrawals you make are not taxed. Unlike Registered Retirement Savings Plans (RRSPs), which impose penalties for early withdrawals, withdrawals from your TFSA are not penalized. You can therefore withdraw funds from your TFSA at any time and without penalty to finance the purchase of a home.
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
To encourage homeowners to buy houses in their territory, several municipalities have chosen to offer grants, down payment assistance programs, or property tax exemption programs to facilitate the financing of their project.
As municipal programs evolve over time and in response to new legislation, it's advisable to consult with your Proprio Direct real estate broker to explore all potential grants, rebates, credits, and financial assistance you may be eligible for.
Mortgage Home Equity Line of Credit (HELOC)
A HELOC is a type of loan that allows you to borrow against the equity in your home. As such, it is exclusively available to homeowners who already have a mortgage.
Among its advantages are often lower interest rates compared to personal loans or credit cards. HELOCs also offer greater flexibility as you can withdraw funds as needed and only pay interest on the amount borrowed.
Lease with Option to Purchase
A lease with an option to purchase is a contract that allows a tenant to occupy a property while having the option to buy the home at the end of the agreement.
This is a very attractive option for individuals who have difficulty obtaining financing or simply want to take their time to evaluate the home before becoming the official owner. The tenant has the freedom to decide later whether or not they want to purchase the property.
Caution! Leases with an option to purchase also present risks. If the tenant is unable to purchase the property at the end of the lease term, they may lose all the money they have already paid during the lease period. It's important to consider this carefully.
Personal Loan
A personal loan is an unsecured loan that can be used for various expenses, including the purchase of a home. The flexibility and speed of this financing option offer 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 be subject to stricter repayment terms.
Personal contribution
Have you been fortunate enough to receive financial support from your parents or perhaps a generous benefactor? Rejoice! Unlike other forms of financing, a financial contribution requires no repayment or interest. It's the best of both worlds. While this is perhaps the ideal way to finance a real estate project, it's unfortunately not accessible to everyone.
