Last week, I had the opportunity to chat with Mortgage Agent Carina DeMedeiros about some of the significant changes happening in the real estate industry. Here’s a breakdown of some key takeaways from our conversation:
First-Time Homebuyer Benefits
Several new initiatives put in place will help first-time homebuyers:
- Extended Amortization: The amortization period has been extended from 25 years to 30 years, providing more flexibility for buyers.
- First Home Savings Account: This new account allows Canadians to save for their first home with tax advantages.
- RRSP Withdrawals: First-time buyers can now withdraw up to $60,000 tax-free from their RRSP to help with their home purchase.
- Land Transfer Tax Credit: Homebuyers may also be eligible for a Land Transfer Tax Credit of up to $4,000, which can help offset some of the upfront costs.
Capital Gains
Capital gains have been a hot topic in the last year. In 2024, the federal government announced plans to increase the capital gains tax inclusion rate from 50% to 66.67%. However, this change has been delayed and is set to take effect in 2026. Only time will tell whether the government will follow through with this timeline.
CMHC Updates
Did you know that the Canada Mortgage and Housing Corporation (CMHC) has made adjustments to its minimum down payment requirements? CMHC, the primary mortgage insurer in Canada revised the criteria for insured mortgages:
- Mortgages under $500,000: A minimum 5% down payment is required.
- Mortgages between $500,000 and $1,500,000: A minimum 10% down payment is required. Note: This threshold has been raised from $1 million to $1.5 million.
- Mortgages over $1,500,000: A 20% down payment is required.
These changes may impact how homebuyers plan for their down payments.
Variable vs. Fixed Mortgages
The age-old question: Fixed or Variable mortgage? The choice depends on a variety of factors, and it’s important to work with your mortgage agent or bank to determine what’s best for your financial situation. Here are some important points to consider:
- Bank of Canada Prime Rate: The Bank of Canada announces changes to the Prime Rate every two months. The most recent announcement on January 29th revealed a decrease to 3% for the Prime Rate.
- Variable Mortgages: Variable mortgages are directly affected by changes in the Prime Rate. If the rate changes, so will your payments.
- Fixed Mortgages: Fixed mortgages, on the other hand, are not impacted by the Prime Rate changes and are tied to the bond market. Your payments will stay consistent over the term of your mortgage, but they may change when it’s time to renew.
The current market is constantly changing. Follow along on Facebook, Instagram or LinkedIn for all the most recent updates. If you’re looking for more advice on the London real estate market contact me today!