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First Time Home Buyer Questions.

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Deal Fanatic
Aug 9, 2009
6245 posts
1779 upvotes

First Time Home Buyer Questions.

Planning to buy first home. Planning to put own name only on house to benefit from the first time home buyer benefits. However, I might not be able to get enough mortgage lone by myself.

My options:

A)Put house under both myself and my brother and use two people for mortgage.

B) Have parents get a line of credit and pay a large down payment towards the house with only my name.

If i go with plan B, then in the future when my brother gets another house, it will still be considered first time home buyer for him. So my question is... which would be more beneficial? How much does one actually save by being a first time home buyer?

Also I heard something about the money used for down payment has to be in the persons' bank account for 60 days? Is this true? does that mean if my parent's want to help with down payment, they have to put that money in my account for at least 60 days before i purchase the house? If that isn't required, then could my parents just get a certified cheque and write that to the real estate company for the down payment even though the house does not have their name?
17 replies
Banned
Jul 3, 2013
1508 posts
300 upvotes
How about waiting until you save up a down payment and can afford a house?

Is this not an option?
Deal Addict
Aug 19, 2013
2397 posts
1091 upvotes
FutureCEO wrote: How about waiting until you save up a down payment and can afford a house?

Is this not an option?
Agreed. Banks usually qualify most people for way more then they should be spending on a house. If you can't afforded the house yourself then it's too much house.
Deal Expert
Aug 22, 2011
41788 posts
30051 upvotes
Center of Universe
Do not go in with your brother as it can ruin your relationship!
He will also lose the HBP privilege along with the land transfer tax credit reserved for first time buyers.
Deal Fanatic
Aug 9, 2009
6245 posts
1779 upvotes
FutureCEO wrote: How about waiting until you save up a down payment and can afford a house?

Is this not an option?
Momof3cuties wrote: Agreed. Banks usually qualify most people for way more then they should be spending on a house. If you can't afforded the house yourself then it's too much house.
With prices going up the way it is, I'd just be ending up paying more in the long run if waiting. There are not going to be any relationship issues with the family as we are extremely close.

Is the benefits of being a first time home buyer just the land transfer tax credit and HBP? Is that not only $2000 and $750? That's really nothing compared to price of a house. Don't mind losing that amount in the future when another house needs to be purchased. or is there more than that for a first time home buyer?
Deal Expert
Aug 22, 2011
41788 posts
30051 upvotes
Center of Universe
azncapcom wrote: With prices going up the way it is, I'd just be ending up paying more in the long run if waiting. There are not going to be any relationship issues with the family as we are extremely close.

Is the benefits of being a first time home buyer just the land transfer tax credit and HBP? Is that not only $2000 and $750? That's really nothing compared to price of a house. Don't mind losing that amount in the future when another house needs to be purchased. or is there more than that for a first time home buyer?
HBP is up to 25K of money that will be tax free (for 15yrs) provided it gets paid back; starting on the 2nd year.
Penalty Box
Apr 16, 2012
3565 posts
688 upvotes
Greely
If you are close enough with your family and you absolutely want to buy the house immediately:

-Borrow money from your family and pay them back in time

-If you have 0% credit card, use that towards your downpayment (make sure to live frugally so you can pay the lump sum when it is due in a year)

-Sell whatever possessions you don't need to pay for the downpayment

-Work overtime or second job


Do I recommend the above? No. But given your parameters those are the solutions.
Deal Addict
User avatar
Jan 2, 2012
4596 posts
3098 upvotes
Toronto
azncapcom wrote: A)Put house under both myself and my brother and use two people for mortgage.
Is your brother intending to live there with you? Does he already own a home?

If he is thinking about buying anytime in the near future, he could find it's impossible for him to get his own mortgage if he's co-signed yours already.

Also I'm not sure the tax implications here as if your brother is not living in the home with you to him it will be an investment property, and possible capital gains could come into play when the home is eventually sold.
B) Have parents get a line of credit and pay a large down payment towards the house with only my name.
That is fine, as gifted downpayment from family members is acceptable. Your parents may need to sign a declaration that the funds are indeed a gift, and they don't expect you to pay them back like a loan.
Deal Fanatic
Nov 9, 2013
5877 posts
7458 upvotes
Edmonton, AB
If you have to stretch yourself financially to buy a house, then clearly you shouldn't buy a house (as others have said). Your counter argument was "if I can barely afford to get in now, it's only going to get worse!". You do have a good point; are you worried your income growth will outpace the growth of the real estate market?

If that's the case, what's going to happen in 3-5 years when you have to re-mortgage? Rates may be the same, but what if they are not? If you're already financially stretched getting into a house, how are you going to afford remortgaging at a higher rate? Lets say you mortgage 350,000 at 2.89% over 25 years. The monthly payment is $1636.67. Lets say you re-mortgage at 3.39% (only 0.5% higher, not impossible) your payment jumps to $2005.90. Can you afford an extra $369.23?

What about your parents? Is it fair making them the pancake generation where they have to support their aging parents and their boomerang children?
Deal Fanatic
Aug 9, 2009
6245 posts
1779 upvotes
rob444 wrote: Is your brother intending to live there with you? Does he already own a home?

If he is thinking about buying anytime in the near future, he could find it's impossible for him to get his own mortgage if he's co-signed yours already.

Also I'm not sure the tax implications here as if your brother is not living in the home with you to him it will be an investment property, and possible capital gains could come into play when the home is eventually sold.



That is fine, as gifted downpayment from family members is acceptable. Your parents may need to sign a declaration that the funds are indeed a gift, and they don't expect you to pay them back like a loan.
treva84 wrote: If you have to stretch yourself financially to buy a house, then clearly you shouldn't buy a house (as others have said). Your counter argument was "if I can barely afford to get in now, it's only going to get worse!". You do have a good point; are you worried your income growth will outpace the growth of the real estate market?

If that's the case, what's going to happen in 3-5 years when you have to re-mortgage? Rates may be the same, but what if they are not? If you're already financially stretched getting into a house, how are you going to afford remortgaging at a higher rate? Lets say you mortgage 350,000 at 2.89% over 25 years. The monthly payment is $1636.67. Lets say you re-mortgage at 3.39% (only 0.5% higher, not impossible) your payment jumps to $2005.90. Can you afford an extra $369.23?

What about your parents? Is it fair making them the pancake generation where they have to support their aging parents and their boomerang children?
Will be moving into the home with both brother AND parents. moving into a larger house. Planning to rent out parents old house (which is mortgage free), which at this point you can look at this new house purchase as part of an investment as well, until either me or my brother gets married, then parents can move back to other home. There will be no issue's with being able to make the mortgage payments WITHOUT considering the rental income from the other house, as both myself and my brother will be contributing to the mortgage. That is not the concern right now.

What I want to know is it worth the benefits of the house title being just under 1 persons name (either myself or brother), so in the future, the other person is still qualified as a first time home buyer. or is the savings insignificant to be bothered with and should just use both of our names and get a larger mortgage vs having parents take out a LOC.
Deal Expert
Aug 22, 2011
41788 posts
30051 upvotes
Center of Universe
azncapcom wrote: Will be moving into the home with both brother AND parents. moving into a larger house. Planning to rent out parents old house (which is mortgage free), which at this point you can look at this new house purchase as part of an investment as well, until either me or my brother gets married, then parents can move back to other home. There will be no issue's with being able to make the mortgage payments WITHOUT considering the rental income from the other house, as both myself and my brother will be contributing to the mortgage. That is not the concern right now.

What I want to know is it worth the benefits of the house title being just under 1 persons name (either myself or brother), so in the future, the other person is still qualified as a first time home buyer. or is the savings insignificant to be bothered with and should just use both of our names and get a larger mortgage vs having parents take out a LOC.
If your brother has to withdraw money from his RRSP to loan you (even if he's not on the title); it's either as income of HBP!
If he decides as HBP; he will no longer qualify in the future for another withdraw as such!
Deal Fanatic
Aug 9, 2009
6245 posts
1779 upvotes
vkizzle wrote: If your brother has to withdraw money from his RRSP to loan you (even if he's not on the title); it's either as income of HBP!
If he decides as HBP; he will no longer qualify in the future for another withdraw as such!
thanks.

I was also told that when you sell your first house, you don't have to pay interest on the appreciation. This would be a huge factor. Say house right now is 600k, in 10 years if its 1 mil. thats 400k that would be taxed if the property is being sold? Is this correct? Interest on 400k is quite a bit of money....
Deal Expert
Aug 22, 2011
41788 posts
30051 upvotes
Center of Universe
azncapcom wrote: thanks.

I was also told that when you sell your first house, you don't have to pay interest on the appreciation. This would be a huge factor. Say house right now is 600k, in 10 years if its 1 mil. thats 400k that would be taxed if the property is being sold? Is this correct? Interest on 400k is quite a bit of money....
From CRA's website:
"When you sell your home, you may realize a capital gain. If the property was your principal residence for every year you owned it, you do not have to report the sale on your income tax and benefit return."
Deal Guru
User avatar
Feb 2, 2014
11231 posts
3350 upvotes
Toronto
Try Option B.

Being a first timer, you get rebates on the land transfer taxes and can take money out from your RRSP for the down payment (up to $25k).

Money does not have to be there for 60 days. Just get a gift letter signed by them and have them transfer the money to you.


azncapcom wrote: Planning to buy first home. Planning to put own name only on house to benefit from the first time home buyer benefits. However, I might not be able to get enough mortgage lone by myself.

My options:

A)Put house under both myself and my brother and use two people for mortgage.

B) Have parents get a line of credit and pay a large down payment towards the house with only my name.

If i go with plan B, then in the future when my brother gets another house, it will still be considered first time home buyer for him. So my question is... which would be more beneficial? How much does one actually save by being a first time home buyer?

Also I heard something about the money used for down payment has to be in the persons' bank account for 60 days? Is this true? does that mean if my parent's want to help with down payment, they have to put that money in my account for at least 60 days before i purchase the house? If that isn't required, then could my parents just get a certified cheque and write that to the real estate company for the down payment even though the house does not have their name?
Kevin Somnauth, CFA
Principal Broker/Owner - First Toronto Mortgage - MA (Ontario #13176, BC #X301007)
Real Estate Salesperson - Century 21 Innovative
Deal Addict
Aug 12, 2004
4511 posts
2168 upvotes
Calgary
azncapcom wrote: Will be moving into the home with both brother AND parents. moving into a larger house. Planning to rent out parents old house (which is mortgage free), which at this point you can look at this new house purchase as part of an investment as well, until either me or my brother gets married, then parents can move back to other home. There will be no issue's with being able to make the mortgage payments WITHOUT considering the rental income from the other house, as both myself and my brother will be contributing to the mortgage. That is not the concern right now.

What I want to know is it worth the benefits of the house title being just under 1 persons name (either myself or brother), so in the future, the other person is still qualified as a first time home buyer. or is the savings insignificant to be bothered with and should just use both of our names and get a larger mortgage vs having parents take out a LOC.
Be careful, the CRA loves situations like yours, where it seems like you are potentially circumventing rules through loops. Deciding where the money comes from where (i.e. the rental property) can have significant tax impacts.

Any money 'borrowed' from your parents, when they will end up living in the same house as you, while owning a rental property, while you try to get the benefits of the first time home buyer's plan, is opening up a large can of worms for the CRA to audit you and your parents. There are no true loopholes available here, be sure you setup your situation properly.
Sr. Member
Sep 25, 2006
598 posts
58 upvotes
Ottawa
If you buy it and use the hbp and live in it (minimum 1yr), then there's no tax implications. I don't think you can use the hbp if you don't intend to occupy it. It is fine if you plan to rent out your parents place, youll just lose out on being able to write off borrowing interest as the home has no mortgage. You'll have to claim the rental income and will only be able to deduct insurance and property taxes.
Deal Fanatic
Aug 9, 2009
6245 posts
1779 upvotes
Quanger wrote: If you buy it and use the hbp and live in it (minimum 1yr), then there's no tax implications. I don't think you can use the hbp if you don't intend to occupy it. It is fine if you plan to rent out your parents place, youll just lose out on being able to write off borrowing interest as the home has no mortgage. You'll have to claim the rental income and will only be able to deduct insurance and property taxes.
I didn't even know you could write off borrowing interest. I think the past years my parents have been paying an accountant like 300-500$ per year to do taxes and nothing out of the basic were claimed. regular T4 and rental income, i don't even recall if there were anything claimed or written off from renting but the rent was included as an income. Time to find a new accountant. I usually just file my own with Ufile because I don't really have anything to claim. Should really get a real accountant and see what I am actually able to claim/not claim.
Sr. Member
Mar 6, 2010
757 posts
124 upvotes
azncapcom wrote: I didn't even know you could write off borrowing interest. I think the past years my parents have been paying an accountant like 300-500$ per year to do taxes and nothing out of the basic were claimed. regular T4 and rental income, i don't even recall if there were anything claimed or written off from renting but the rent was included as an income. Time to find a new accountant. I usually just file my own with Ufile because I don't really have anything to claim. Should really get a real accountant and see what I am actually able to claim/not claim.
If you rent out your parents place, then mortgage interest of your parent's house is a write off against their rental income.

For the 60 days bank confirmation, your parents can transfer the money to you at any time. You just have to prove to your mortgage bank the down payment money source. They will give you a gift letter, fill and sign by your parents then give back to the bank. The down payment is given to the lawyer and have nothing to do with the real estate company.

New home credits is only $750 cash in hand and HBP plan need back contribution anyway.

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