Why now is the best time to think about buying and selling in 2010
Traditionally we see an upswing in real estate transactions in the “Spring Market” (March, April and May) here in Brampton and the surrounding GTA. This year we have a few extra reasons to buy and sell in the first half of the year that are beyond the traditional spring fling.
The first reason is an announcement made recently by Federal Finance Minister Jim Flaherty. Until July 2008, Canadians had the option to amortize their mortgage up to 40 years. This meant that you could choose to pay your home over 25, 30, 35, up to 40 years. We also had zero down payment loans available at that time. As a result of the housing crisis in the United States,our government changed this rule and adjusted the amortization to 35 years. They also reinstated the 5 per cent down payment as a minimum. Recently he hinted that he may change the options once again.
He has pondered about increasing down payments to an even higher level and reducing the amortization period further. This will definitely affect the real estate market. It will probably mean that less people will be able to buy. First time buyers will struggle to save the necessary down payment and with higher interest rates, mortgages will be less affordable not only for first time buyers but buy move up buyers as well. If you were planning on moving in the second half of the year you may save thousands buy purchasing your home that bit earlier.
Another way to get more for your money at this time of year is to use the Government Home Buyers Plan (HPB). The government allows you to withdraw up to $25,000 from your RRSP to use towards your down payment. The money not only becomes your down payment but can provide you with a tax break This is a fantastic way for first time buyers to get into the housing market and use money you would normally pay in taxes to help you buy a house.
Depending on your tax bracket, if you put your down payment into an RRSP you will get a refund. What better way to fund a down payment?
You must act on this now, though, as the money must be put into your RRSP prior to Feb. 28, 2010.
The third reason is the HST that will come into effect on July 1, 2010. The HST will combine the current GST (5%) and PST (8%) to create one tax, HST at (13%). This tax will apply to new homes over $400,000 and too many home closing costs, adding to the cost of a resale home and thousands to the cost of a brand new home. Under the current system many of the services associated with the purchase of a Resale home are only charged the 5 per cent GST. This means that mortgage insurance premiums, legal costs, real estate commissions, home inspections and title insurance will now all have an additional 8% tax. Put these three things together and you can see why buying a home in the first half of the year could save you money.
As published in the Brampton Guardian January 27, 2010