April 23, 2018

RRSP First-time Buyer Program & Exceptions

Generally, you can withdraw funds from your RRSP’s to buy or build a qualifying home however you have to meet the first-time buyer’s conditions.  You can withdraw up to $25,000 of your RRSP savings ($50,000 for a couple) to help finance your down payment.  The withdrawal is not taxed as long as you make an annual repayment of at least one-fifteenth of the amount you withdrew.  The funds you use for the Home Buyers Plan (HBP) must be in your RRSP for at least 90 days before withdrawal.

You are not considered a first-time home buyer if you or your spouse or common-law partner owned a home that you occupied as your principal place of residence during the period beginning January 1 of the fourth year before the year of withdrawal and ending 31 days before your withdrawal.

If at the time of the withdrawal you have a spouse/partner, it is possible that only one of you will be considered a first-time buyer.

Example:  In 2007, Paul sold the home that he had occupied as his principal residence for 5 years.  He will be able to participate in the HBP in January 2012 as he will not have owned/occupied a principle residence since January 1, 2008.

The exception to the first-time buyer’s condition is: 
  1. If you did not own a house that you occupied as your primary residence and did not make a spouse’s or partner’s owner-occupied home your principal residence.  As this suggests, you can rent your primary residence while owning one or more rental properties and still be considered a first-time buyer under the RRSP HBP
  2. If you are a person with a disability and you withdraw funds under the HBP to acquire a home that is more accessible or better suited to your needs
  3. You withdraw funds under the HBP to acquire a home for a person with a disability related to you by blood, marriage, common-law partnership or adoption and the home is more accessible or better suited to the needs of that person
  4. You withdraw funds under the HBP and give those funds to a person with a disability related to you by blood, marriage, common-law partnership or adoption to acquire a home that is more accessible or better suited to the needs of that person.
Should you need any further clarification, you can go to the Canada Revenue Agency website

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on our site or call 416-459-2406


Did You Pay The CMHC or Genworth Premium Twice And Not Know It?

A CMHC or Genworth insured mortgage can be refinanced with REDUCED insurance premiums charged only on the new funds.  It is up to the submitting Lender or Banker to inform the insurer that the current mortgage is already insured.  

There have been cases where the Banker did not inquire if the current mortgage was already insured and the mortgage application was processed as an entirely new mortgage and the borrower was again charged the full insurance premium!

CMHC insurance premiums are portable, meaning the policy can be transferred from one house to another.  The borrower is given credit for premiums already paid.  Providing the amortization and the amount borrowed remains the same, then the insurance is portable.   Again, it is up to the lender submitting the application to request the CMHC or Genworth premium be ported to the new property otherwise the borrower will again pay the full insurance premium costing them thousands of dollars.

It should be noted that there are occasions when you may need to pay the full premium ie if you change the amortization, if the loan to value increases and warrants a higher insurance premium.

If you think that you may have been overcharged on a previous mortgage, contact your lending institution to get the full details and if you do not get any satisfaction from them, you can contact the Ombudsman for Bank Services and Investments.

I would be very interested in hearing from you if this situation has happened to you or anyone you may know.  If I can help you in any way, please call me anytime.

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on our site or call 416-459-2406


Mortgage Penalties Exposed….. An In-Depth Study reveals Unjust Penalties

In February 2010, the Federal government announced many changes to tighten mortgage lending policies to ensure Canadians don’t get in over their head when it comes to mortgages…they also promised to standardize Mortgage Penalties.  So far, we have not seen or heard anything about it.


A report came out from the Ombudsman for Banking Services and Investments in June/July 2010 that shows complaints were up 21% and many of the complaints had to do with Mortgage Prepayment Penalties and rates on Lines of Credit.  

Last year was the start of record low interest rates, rates were down below 4% for a 5 year fixed and variable rates were below 2%.  If you bought a new house or renewed your mortgage, it was great…you couldn’t have timed it better.  But what if you wanted to refinance your existing mortgage?  If you were in a Variable rate mortgage, your penalty was probably 3 months interest but if you were in a Fixed Rate Mortgage, then you were in for a big surprise.  Enormous prepayment penalties.

What happened was the Banks changed how they calculate prepayment penalties about 10 years ago and to sum it up, you have to pay for any ‘discount’ off the posted rate and you have to pay for that discount in full for the entire duration of the mortgage.  Banks have shrunk or reduced the spreads between their Posted and Discounted rates over the past few years and this has had a huge impact on the  Interest Rate Differential (IRD) penalty calculations.  Here is a direct quote from the TD Canada Trust website:  “The IRD amount is calculated on the amount being prepaid using an interest rate equal to the difference between your existing mortgage interest rate and the interest rate that we can now charge when re-lending the funds for the remaining term of the mortgage.”  Therefore, the IRD penalty is there to compensate the Bank for any loss due to a mortgage being paid out and then to have to lend funds out again for the remaining term at a rate that is less than what they had in the contract. 

Most mortgages fell into the IRD category.  Apparently only 1 Bank, TD Canada Trust actually post the formula online.  Here is an example:  $250,000 with 3 years remaining at 5.50% and the client received a 1.25% discount when the mortgage was first arranged…equals a penalty of $14,250 which is equal to 12 months interest.  The good news is that as interest rates climb, it now becomes worth looking at getting out of the higher fixed rate mortgage products (possibly look at a variable rate mortgage with rates as low as 2.30%).

One other fact to be aware of should you want to pay out your mortgage, you are entitled to prepay 10/15/20% (depending on your lender) of the original mortgage amount before the prepayment penalty is calculated.  There have been lawsuits in the past against some Banks for not taking this into consideration as this practice inflated the penalty interest charges.

If you have paid out or refinanced your mortgage within the last 7 years, take a look at your calculations or speak with your Bank to ensure you weren’t overcharged.  I would be very interested in your feedback. 

If I can assist you in any way or you need any further info, call me anytime.

(The above info was obtained through The Star and Canada Mortgage News)

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on our site or call 416-459-2406

Tax Free Savings Account

When the Tax Free Savings Account (TFSA) was introduced in 2008, I looked at the product with an annual contribution limit  of $5,000 and wondered what advantage an account with such a small contribution limit could possibly offer. 


The TFSA was introduced as an incentive to save for retirement, college or your first home. 

Flexibility is the biggest advantage of the TFSA and was designed to encourage those with lower incomes to set aside money for retirement and major purchases.  

It is tax free.  Earnings in the account grow tax free and can be withdrawn tax free as well.  You can contribute up to $5,000 in after-tax funds into the TFSA each year, regardless of income.  Any unused contribution allowance will carry over to subsequent years, where it gradually accumulates.  Also, withdrawals can be replaced the following year.

Saving For University:  Many parents withdraw money from an RRSP or RESP to help their children continue their education.  With the TFSA when you withdraw funds, you will not be taxed on the withdrawal nor the investment return.

Saving For Your First Home:  Most people have to raid their RRSP accounts for a down payment on their first home, forcing you to pay taxes and penalties for withdrawing the funds.  You can withdraw up to $25,000 from your plan but these monies also have to be replaced within the RRSP over a 15 year time span otherwise you will be taxed on the portion that is not repaid. 

With a TFSA, there are no home buyer restrictions.  You can withdraw your deposits without having to repay the funds or incur penalties.  Should you choose to replenish the money in the TFSA, you can do so the following year.

When I look at the taxes we pay, the cost of gas, etc. I now feel differently about this account and have every intention of opening up a TFSA!  

Check it out and see if it works for you.  I would love your feedback.

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on our site or call 416-459-2406

Do You Need or Should You Get Title Insurance?

In order to make an informed decision, here is some background information about title insurance.


‘Title’ is the legal term for ownership of property.  Buyers want “good and marketable” title to a property.  Marketable title means title the buyer can convey to someone else.  Prior to closing, public records are searched to determine the previous ownership and dealings of the property.  The search might reveal:  existing mortgages, liens for outstanding taxes, utility charges, etc., registered against the property.  At closing the buyer expects property that is free of such claims and should be cleared up before closing.

Sometimes problems (or defects) regarding title are not discovered before closing or are not remedied before closing.  Such defects can make the property less marketable when the buyer subsequently sells and depending on the nature of the problem, can also cost money to remedy.  For example, the survey might have failed to show that a dock and boathouse built on a river adjoining a vacation property was built without permission.  The buyer of the property could be out of pocket if he is later forced to remove the dock or boathouse.  Or the property might have been conveyed to a previous owner fraudulently, in which case there is the risk that the real owner may come forward at some point and demand their rights with respect to the property.

Title insurance policies can be issued in favour of a purchaser, a lender or both.  Title insurance protects purchasers and/or lenders against loss or damage sustained if a claim that is covered under the terms of the policy is made.

Types of risks that are covered include:  survey irregularities; forced removal of existing structures; claims due to fraud, forgery or duress; unregistered easements and rights of way; lack of pedestrian or vehicular access to the property; work orders; zoning and set back non-compliance or deficiencies; etc.

Title insurance remains in effect as long as the insured purchaser has title to the land.  Some policies also protect those received title as a result of the purchaser’s death (eg a spouse or children).  In the case of the lender’s coverage, the policy remains in effect as long as the mortgage remains on title.

The premium for title insurance is paid once at the time of purchase.  The cost for a typical residential home of less than $500,000 in Ontario is approx. $200 + taxes.

Colleen Saunders is a 20 year veteran in the mortgage industry, serving Mississauga, Burlington, Oakville and Toronto and offering all mortgage related services such as 2nd mortgages, private mortgages and more.

To contact Colleen, please fill out the form on our site or call 416-459-2406