Exploring funding sources for down payments

It’s the end of tax season in Canada and you either loathe this time of year or love it.

For most Canadians, this isn’t a stressful time of year, especially if they’ve taken advantage of tax saving strategies that will reap them a cheque back from the government.

The calls started coming in earlier than usual this year, as a few of my clients already had their tax refund amounts calculated and started shopping for a home.

Springtime is typically a busy time of year for those looking for their first home or upgrading their home and the tax refund is many people’s top-ups to their down payment or closing costs enticing them even further to get out and buy.

Here in Alberta, we’ve been fortunate to be coupled with a busy economy and super low interest rates and the first time buyers have been coming out in droves. Over the past few years, the first time buyer has accounted for just under 40% of the market and many are using their tax saving strategies to purchase the home.

It usually starts a few years prior to the year that they buy, as they invest in their first RRSP. That first large refund cheque rolls in and they become excited that their strategy is working, propelling them forward to continue their savings.

Most first-time buyers do actually take advantage of the first-time home buyers’ program that the government provides. The program is designed for those that have saved up RRSP funds and to withdraw them to buy a home without paying tax on the withdrawal. I find that a few years of RRSP savings, coupled with the buyers’ same year tax refund is how many are coming up with their down payment; some even have mom and dad kick in a little bit extra.

Home prices are expecting to rise 2 to 4% this year, and we are seeing large increases in certain home value ranges, especially in the $250,000 – $350,000 market. There weren’t many listed in that value range to begin with, but if you have a home in that price range and want to sell it, it’s certain to move very quickly.

The news around the globe is seemingly more positive as the U.S. and Europe turn themselves around. But maybe that’s only because we aren’t hearing of the head jerking headlines of some country falling into oblivion.

If you are one of the those that love this time of year, not only because leaves are coming back and it’s golf season (soon golfer soon!), but the government is sending you some of your own money back, then why not get out there and do some home shopping while prices and interest rates are still low as there is only one certainty here – your taxes will still be due or refunded next year.

Jean-Guy Turcotte is an Accredited Mortgage Professional with Dominion Lending Centres- Regional Mortgage Group.

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