You just sold your condo, you made a hefty profit and know you have to pay your taxes.

The bill might be more than you think.

If it’s your principal residence, there’s no tax, as long as you have the paperwork to prove it. The Canada Revenue Agency is taking a closer look at the condominium sector in what some in the industry have dubbed the “Condo Project.”

Even if you own up to it being an investment property, you may not be allowed the capital gains tax break and that means a bigger hunk of your profit going to Ottawa.

Let’s say your gain is $100,000 and your tax bracket is 46%. Capital gains are taxed at 50% so you would only owe $23,000 on that profit.

Not so fast! If the CRA says you are in the business of flipping condominiums, get ready to pay based on the gain being counted as income for a tax bill of twice the amount at $46,000. And, it gets worse. You could also face a fine of up to 50% of the tax owed for making a false disclosure.

With the deadline for filing taxes coming up April 30, you might want to think very carefully about how you record that housing sale you made in 2012.

Sam Papadopoulous, senior public affairs advisor-manager with CRA’s Ontario region, acknowledges that the strength of the condo sector has attracted the attention of the taxman.

“We do from time to time target some sectors more closely than others,” he said. “We look at the real estate market in general. Of course, [there is more focus], it’s a hot market.”

People in the industry have a different view.

Some suggest it fits in with the recent budget when Jim Flaherty, the finance minister, announced his government was taking a closer look at loopholes and tax cheats — hoping to shrink its deficit in the process.

One of the issues attracting the attention of the CRA is assignment clauses, where one person agrees to purchase a condo before it is built but ultimately sells his or her right to buy that condo before the building is even registered.

Builders usually collect a fee for that privilege but ultimately when title is registered at the land registry office the original purchaser’s name is nowhere to be found.

While most builders are unlikely to voluntarily supply a list of properties in their building that were assigned, they could be forced to cough it up if they are audited by the CRA.

Those people who have assigned their units to another buyer are going to be hard pressed to prove they planned to use the unit as an investment property rather just flipping — meaning the CRA is highly unlikely to allow them to count money made at the lower capital gains rate.

“If you keep [assigning property] then it is not capital gains, that’s trade and that’s income,” said Mr. Papadopoulous, adding you do it a “couple of times” and it’s income. “Of course, that’s part of [what they are investigating].”

The warning to people flipping property and thinking they can get away without reporting the gain is pretty clear.

“We live in the information technology age,” said Mr. Papadopoulous, who wouldn’t get into how CRA is tracking down the tax evaders. “We are putting our resources to work and following the trail where we can.”

Robert Kepes, a Toronto tax lawyer at Morris Kepes Winters, said he’s seen the CRA go after people who have been living in a property and still question it as a principal residence.

CRA starts with a letter to a taxpayer asking them for details about when and why they sold their property and people often fill out the questionnaire without legal advice.

The issue goes all the way back to 1971 when there was no tax at all on capital gains so everybody tried to avoid counting gains as income.

Mr. Kepes says the distinction between income and capital is as simple as the difference between a tree and the fruit that it bears.

“The tree is capital and it produces a fruit and the income is the profit that is derived when that fruit is sold,” he says.

If your condo is that tree and your rental income is the fruit and you make a profit from that rental income, that’s taxed as full income. You eventually sell the tree for more money and that’s just a capital gain, taxed at the 50% rate.

If your entire businesses is just trading trees and not producing fruit, that’s business income.

“The Income Tax Act asks what was your intention when you bought that condo,” said Mr. Kepes. “These principles are easy to describe but harder to prove in fact.”

The law is like a civil case, a judge doesn’t have to believe you beyond a reasonable doubt, but a judge does have to conclude you are more believable than the CRA.

“We have to bring all kinds of intrinsic evidence,” says Mr. Kepes, noting some clients will produce something as simple as a change in address on their driver’s licence to show they were using their condo as a principal residence.

If you never actually moved into the condo, it’s going to be tough to prove that it was principal residence.

You may never have produced income from the profit but that’s not to say you didn’t plan to, so perhaps you could get the capital gains exemption.

“The question can be ‘how did they come to sell the property,’” said Mr. Kepes, adding the CRA might look at whether you were advertising the property for sale.

Brian Johnston, chief operating officer of Mattamy Corp., says the CRA has ways to get information on sales.

“They audit real estate companies, look at the name on the contract and look at the final deed and see a difference,” said Mr. Johnston. “They see Bill Smith bought it and Joe Blow is on the deed. They want to know how this happened and follow the paper trail.”

He has some sympathy for consumers confused about the whole process.

“I think the government should make it a little simpler in terms of filing for principle residence exemption,” said Mr. Johnston. “It’s a real gray area of the law. The government has not done a good job for Canadians trying to specifically identify all the rules around [selling homes and paying taxes]. People might have inadvertently made mistakes.”

Condominium developer Brad Lamb, who has been audited several times, said ultimately it’s better to be more conservative when you’re filing — meaning just count the gain as income if you are in doubt.

“If you are prolific buyer or seller of properties, whether it’s condos or not, you have to govern yourself accordingly. If you don’t, you’ll get caught and be fined,” said Mr. Lamb. “I decided many years ago when I started buying condominiums, after talking with my accountant, you can pay [lower tax] or you can fight 50 years with Revenue Canada.”

Source: Garry Marr, Financial Post

New home prices in Canada rose by 0.2% in February, the 23rd consecutive month-on-month increase, pushed up by a buoyant market in Calgary, Statistics Canada said on today.

The advance matched analysts’ expectations. Calgary prices rose 1.0% from January — the largest month-over-month increase since May 2007 — on higher material and labour costs. Calgary is the center of Canada’s booming energy industry.

Overall, prices rose in 10 cities, stayed unchanged in nine and fell in two. On a year-over-year basis new housing prices in Canada rose by 2.1% in February, down from 2.2% in January.

The Canadian government, which imposed tighter mortgage rules last July, and the Bank of Canada have long expressed concerns the housing market might overheat.

The new housing price index excludes condominiums, which the government says are a particular cause for concern.

The largest monthly price advances in February came in Regina, where prices were up 1.4%, and in Halifax, where prices were up 0.9% from January.

The Regina increase was largely the result of higher operating costs for builders and a shortage of developed land, while builders cited higher costs for materials, labour and developed land as the primary reasons for the Halifax increase.

Monthly prices declined 0.2% in Ottawa—Gatineau for the second month in a row, while prices fell 0.1% in St. John’s.

Prices remained unchanged in the combined metropolitan region of Toronto and Oshawa following six consecutive months of increases.

Prices were also unchanged in eight other metropolitan regions surveyed.

Source: National Post Wire Services

The average first-time homebuyer in Canada is 29 years old and expects to be able to put down a down payment of $48,000 on $300,000 home, according to a recent poll by the Bank of Montreal.

But the study, released Tuesday, also found that price expectations vary widely, depending on where the homebuyer lives in.

Those in Atlantic Canada say they expect to spend an average of $224,000 on a first home, while those in British Columbia anticipate to pay an average of $454,000.

Vancouver topped the survey as the most expensive city, with buyers there saying they’re going to shell out an average of $539,000 for a home, followed by Calgary at $474,000 and Toronto at $446,000.

BMO mortgage expert Laura Parsons says like with any major purchase, it’s important for people be realistic and prepared.

“What we tend to do is jump in the market when we’re ready, instead of starting a plan now,” she said from Calgary.

“Let’s start getting ready for it so we can start giving you good advice all along the way. Don’t be afraid to get things going.”

And while a large down payment is impressive, it does not necessarily mean that young people are diligently saving for their first home. Instead, many may be getting help from their Baby Boomer parents or friends, said Parsons.

Forty-six per cent of those surveyed also they’ll choose a fixed mortgage rate when they buy, versus 20% who will choose a variable rate.

The study also found that the average first-time homebuyer plans on paying off the mortgage on their home within two decades, with 20% anticipating they’ll be mortgage-free even earlier than that.

Twenty-three per cent of those surveyed say they will still have a mortgage within 25 years; 16% say within 20 to 24 years and 20% say within 10 to 19 years.

On the opposite end of the spectrum, seven per cent say it’ll take them more than 25 years to fully own their home, while 3% say it’ll take them between 1 year to 9 years to pay it off.

The survey also found that 31% admit they really don’t know when they’ll be able to stop making mortgage payments.

Source: Linda Nguyen, Canadian Press

Nearly a quarter of condos in Vancouver are empty or occupied by non-residents in some dense areas of downtown, a signal that investors play a significant role in the city’s housing market.

And the city overall has a much higher rate of empty apartments and houses than other Canadian cities, with a rate closer to places like New York and San Francisco at the height of their mortgage crisis in 2010.

Downtown, the rate is so high that it’s as though there were 35 towers at 20 storeys apiece – empty.

That’s the latest discovery that adjunct UBC planning professor Andrew Yan made when he analyzed 2011 census numbers to try to add more information to the contentious debate over whether Vancouver is turning into a high-end resort or offshore investors’ holding tank.

He revealed those numbers Wednesday night, as a capacity crowd turned out to listen to speakers on a panel at SFU Woodward’s talk about “foreign investment in Vancouver real estate.”

In all, the city of Vancouver appears to have about 7,500 more vacant housing units than what would be expected in most other Canadian cities. For Metro Vancouver, there are around 15,000 to 20,000 more.

That sign of high vacancies and non-resident-owned units, which contradict some other studies and assurances that Vancouver is not being flooded with investors, should give the city pause, analysts say.

“What kind of community are you living in if there are that many empty? For a city to have that kind of vacancy, it’s like cancer,” said Richard Wozny, a real estate consultant, during an interview Wednesday. “It distorts density and it’s delaying the impact. It raises the question ‘Are we over-building?’”

Mr. Yan, who specified that it’s not possible to know exactly why so many apartments were empty, said data indicates Vancouver is creating neighbourhoods that appear to be very dense, but actually don’t have an active full-time population.

That gives a skewed picture of, for example, the amount of commercial activity they can support.

In Coal Harbour, where up to one in four condos is empty in the tower-dominated waterfront neighbourhood between Stanley Park and the downtown convention centre, the scattered shops in the area often struggle to stay in business. By contrast, the West End, which has a low rate of empty residential units, is bounded by three streets – Davie, Denman, and Robson – that are packed with busy small shops and restaurants.

Mr. Yan said that the high numbers of empty apartments don’t prove there’s a problem with foreign investors, but they do indicate that Vancouver has a large proportion of general investor buyers, be they offshore or Canadian.

Housing analyst Tsur Somerville, director of UBC’s Centre for Urban Economics and Real Estate, said the data he has seen also indicates that Vancouver built more housing in the 2006-2011 period than the number of new households that were added to the city’s ranks.

That means investors. There’s nothing wrong with that, as long as those units are occupied, said Mr. Somerville, also on the panel.

“The problem is vacant units since that’s demand for real estate without housing people.”

Mr. Yan’s analysis entailed isolating the census data on dwellings that showed up as either “unoccupied” or occupied “by a foreign resident and/or by temporarily present persons” on Census Day 2011, which was May 10.

“These units could be non-resident occupied because their occupants were just away for the Census Day, between rental tenants, or moving in a just-opened building, but there is also a chance that they are someone’s pied-à-terre, vacation home or empty investment holding,” observed Mr. Yan.

In the city of Vancouver, the rate of those kinds of dwellings stood at 7.7 per cent overall, with some parts of the downtown as high as 23 per cent. In the city of Toronto, the rate was 5.4 per cent; in Calgary, 5 per cent.

If Vancouver’s “non-resident” category had the same rate as Calgary’s, it would have had only about 16,500 empty units on Census Day – the level to be expected in a regular city, where some part of the housing stock is always going to be empty for one reason or another. Instead, more than 22,000 units showed up in that category. An analysis for the whole Lower Mainland shows that it has between 15,000 and 20,000 more empty units, proportionally, than the Calgary or Toronto metropolitan regions.

Source: Frances Bula, Globe and Mail

A slowdown in Canada’s housing market will continue through 2013 and years of stagnation may follow, but no crash is likely because demographic trends will support demand in the medium term, a report by Scotiabank said on Monday.

The report by Canada’s third-largest bank said that home sales have already dropped more than 10% from spring 2012, with prices leveling off but not yet falling except in particularly hard-hit markets.

Housing, which slowed but did not crash as a result of the global financial crisis, helped sustain Canada’s economy through much of 2010 to 2012 but is now starting to slide just as the U.S. housing sector has begun a clear recovery.

Scotiabank said the housing slowdown will trim a quarter of a percentage point from Canada’s economic growth in 2013 and 2014, while the U.S. housing recovery is adding half a percentage point to annual growth rates there.

While Canadian home sales may continue to slump, the report said, prices will likely remain above year-ago levels until at least the second half of 2013, and will not drop as dramatically as they did in the United States.

Scotiabank senior economist Adrienne Warren said she expects a decline in prices of around 5% but that the drop will likely play out over the next couple of years rather than happen quickly.

She also said demographics, including steady immigration and the preference of baby boomers to remain in their homes, will support housing demand.

“Contrary to some dire predictions, population aging will not fuel a demographically induced sell-off in Canadian real estate. However, an aging population does point to a lower level of housing turnover, sales and listings,” Warren said in the report, the bank’s annual real estate outlook.

The report said today’s seniors are healthier, wealthier and living longer than previous generations, and attached to their homes, making them less likely to sell in a down market since many will not need to tap into their principal residence to finance retirement.

Warren said immigration, which adds some 250,000-300,000 people to Canada’s population every year, will increasingly be the dominant source of new household formation. And while immigrants typically rent on arrival in Canada, they seek home ownership after about five years and their rates of homeownership approach the 70% rate of native-born Canadians after 10 years.

Immigration is most likely to support house prices in big cities, Warren said. That should help put a floor under the market in Toronto and Vancouver, which had the hottest markets prior to the slowdown.

“Relative to their Canadian-born counterparts, immigrant households are more likely to reside in large and mid-sized urban centers, which could fuel relatively stronger housing demand and prices in those areas,” Warren said.

Source: Andrea Hopkins, Reuters

The bad news for China’s real estate market could be good news for Canada’s condominium market.

A crackdown on real estate ownership in the world’s most populous county might translate into Chinese citizens looking to move more of their money abroad, with Canada a leading destination.

“Absolutely it will have a positive impact [on the condo sector],” said Benjamin Tal, deputy chief economist with CIBC World Markets. “If it’s softening now, it will soften less rapidly than otherwise. This is a positive move because some of the money will find its way to Canada.”

The Shanghai Stock Exchange Property Index was off as much as 9.3% following news of the crackdown Monday, which will include increasing down payment requirements on second-home mortgages and tougher implementation of a 20% capital gains tax on property sales.

Cabada’s two largest condo markets — Vancouver and Toronto — can probably use a boost. RealNet Canada Inc. reported last month that new home high-rise sales across the Greater Toronto Area dropped to 686 in January from 744 a year earlier and 1099 in 2011. There has been less pressure on values with the group’s index showing only a 2% increases in condo prices from a year ago on a square foot basis.

In Vancouver, the real estate board for the metro area said last week that sales for existing apartment properties were down 25.5% in February from a year earlier. Prices were also down 3% in that asset class from a year ago.

Ben Myers, vice-president of Urbanation Inc., which does research on the condo sector in Toronto, said the impact of foreign investors remains unclear.

“A lot of foreign investment comes through a subsidiary so there is no way to figure it exactly out,” said Mr. Myers.

By his firm’s estimates, only about 10% to 15% of investors come from abroad and only about 5% of those people have their name on the direct purchase of sale.

“It’s a small amount,” said Mr. Myers about the number of people who might come from China to invest.

Even at a small amount, those people would be welcome in the condo sector, given sales are not quite as robust as past years.

Realtor and developer Brad Lamb says every time there is a crackdown abroad, it’s good for the Canadian market.

“Foreign buyers are trying to move their money to a safer spot for capital preservation. We see that a lot from more politically risky countries,” said Mr. Lamb. “They are looking for hard assets and the condo sector has a track record of increasing prices.”

While Mr. Myers speculated that tighter rules out of China could be bad for the Canadian real estate market if the Chinese government restricts money leaving the country, Mr. Lamb said that might mean foreign buyers are unlikely to sell here.

“There is no way in the world they are going to bring the money back,” said Mr. Lamb. “They’ve done that as a safe haven. You have money in Toronto, you leave it here.”

He said one of the methods of bringing cash into Canada via real estate is to have a student going to school here. Other times, the money is transferred to relatives.

“What makes it attractive is the scale here. We are talking $300,000 to $400,000 condos. There are few places in world you can buy that in that price range and have someone run it,” said Mr. Lamb. “It’s much harder to bring money into other countries. We have a very easy and open pipeline of Chinese money.”

Source: Garry Marr, Financial Post

Canada Mortgage and Housing Corp. has been asking realtors for months to keep consumers in the dark about whether the properties it (CMHC) sells are part of a foreclosure, according to a document obtained by The Financial Post.

The move, said to be part of CMHC national policy, upset Quebec realtors who refused to play ball, worried about an ethical breach.

The Quebec Federation of Real Estate Boards, which oversees the 12 real estate boards in the province, says it challenged CMHC about the change requiring them not to report on a detail sheet that properties for sale were part of a foreclosure, despite the fact that information is considered mandatory when loaded by brokers onto the selling system of local boards.

“Because the repossession field is currently a mandatory field in the brokerage system you have no choice but to indicate ‘no’, which goes against ethical rules stipulating that real estate brokers are obliged to publish information that is truthful and verified,” the group said in a statement to members.

The two sides resolved the issue by making it no longer mandatory to reflect the foreclosure status of a home, based on the seller’s instructions.

The issue raises a larger concern about why CMHC is acting now to tighten up its practices for foreclosures.

Some real estate industry insiders wonder whether the Crown corporation is simply being prudent, not letting potential buyers know a property is part of a distressed sell so they can put in a low-ball bid.

Others question whether the Crown corporation is just getting things in order in case home prices collapse and they are forced to sell properties that are backed by government insurance.

In Canada, anyone buying a home with less than 80% down and borrowing money from financial institution covered by the Bank Act must get mortgage default insurance. CMHC, which controls about 75% of the insurance market, is ultimately backed 100% by the federal government.

“Look at what is going on right now in financial institutions and everybody is ratcheting up their loan-loss provisions,” said Ben Rabidoux, a Canadian analyst for California-based Hanson Advisors, a market research firm whose clients are institutional investors. “Everybody expects loan losses to rise. I can’t imagine CMHC is in the dark on that. My suspicion is they want to limit any loss that hits their books.”

By limiting the information on whether a property is part of a foreclosure, the Crown corporation would potentially avoid a situation in which a buyer knows it has to sell. In the United States, foreclosed properties have sold at huge discounts.

“CMHC is trying to get the better price,” said Don Lawby, chief executive of Century 21 Canada, who had not heard of the new policy. “You know something is repossessed, you low-ball the offer. You know you are not dealing with a homeowner but an investor.”

Based on current market conditions, CMHC doesn’t appear to be looking at a huge uptick in foreclosures. The latest data from the Canadian Bankers Association shows only .32% of mortgage holders are in arrears and the number is actually on the decline.

Some also question whether the strategy would amount to much because although brokers may not load the foreclosure information onto a public site, it would become readily apparent to any buyer it was a repossession when CMHC is revealed to be the seller.

The Quebec Federation of Real Estate Boards, while leaving brokers the option about publishing the information, indicated brokers will ultimately tell people CMHC is behind the sale when asked.

“The broker has to give the information once anyone is interested in that property,” said Chantal de Repentigny, assistant director of media relations with the federation. “The only thing that has changed is they have the choice to do it on the listing.”

Source: Garry Marr, Financial Post

A new report says the cost of home ownership in most major Canadian markets was down slightly in the last three months of 2012 but notes that pressure on household budgets remains somewhat above the historical average.

“Home ownership costs came down for a second consecutive quarter as a share of household income thanks primarily to small declines in mortgage rates and home prices in several markets across the country,” the RBC report says.

But it notes that there were also back-to-back back cost increases in the first two quarters of 2012, extending a pattern of alternating decreasing and increasing affordability that has been going on since 2010.

The absence of clear direction in the trend in the past three years, in turn, means that affordability pressures continue to be somewhat greater than they have been on average historically.

“RBC’s measures still modestly exceed their averages since the mid-1980s, with the imbalance being more pronounced in the two-storey home segment.”

Vancouver showed the biggest improvement from the third quarter, but remained the least affordable home property market tracked by RBC Economics Research.

In that city, the cost of mortgage payments, utilities and property taxes for a benchmark detached bungalow would eat up 82.2% of a typical household’s pre-tax income.

That’s down 2.6 percentage points from the previous quarter but still indicates the cost of basic home expenses in Vancouver is beyond the reach of many people.

The RBC Housing Trends and Affordability report, compiled four times a year by the group that owns RBC Royal Bank, estimates it would take $147,700 of annual income to qualify for a benchmark mortgage on a Vancouver detached bungalow.

In Toronto, the second-most expensive market tracked, the qualifying income in the fourth quarter was $111,400, resulting in an affordability measure of 52.8% — down four-tenths of a point from the third quarter.

As is often the case in national real estate statistics, Vancouver and Toronto tend to have a disproportionate impact on the overall numbers.

On a national basis, the bank estimates the cost of owning a detached bungalow eased by two-tenths of a point to 42.1% of household pre-tax income. The qualifying annual income in this case is $77,200 — roughly half Vancouver’s rate.

RBC estimates it took 28% of pre-tax income to cover a condo’s basic costs and 47.8% of a typical family paycheque to pay for a two-storey home — down two-tenths of a point and three-tenths of a point respectively.

Source: Canadian Press

I get asked this a lot, especially around this time of year when RRSP deadlines are looming. If you’re a first-time homebuyer, then yes, RRSPs and pension savings can be put towards a down payment. This article written by Jim Yih, a financial expert, appeared in Postmedia News.

Twenty years ago, I borrowed $10,000 from my RRSPs, under the federal government’s Home Buyers’ Plan, to help me purchase my first home.

Since then, I have always been an advocate of the Home Buyers’ Plan.

It’s a great deal for those looking to purchase their first home because they can borrow up to $25,000 from their RRSPs.

Under the plan, you do not pay tax on the withdrawal because it’s like a loan that has to be paid back into the RRSP over a 15-year period.

Each year, you have to pay back one-fifteenth of the borrowed amount. If you don’t, then the required payment becomes taxable that year.

I recently talked to two young people who are planning to buy their first house this year. Their stories each illustrate how they are able to use their RRSPs and the Home Buyers Plan to their advantage.

But what happens when you have no RRSPS?

Mark has been working for three years, since graduating from university. He has saved $10,000 toward the purchase of his first home. His parents are going to match his savings and give him another $10,000 toward the down payment.

Because he has focused his savings on purchasing a home, he has not put any money away in RRSPs and therefore has considerable unused RRSP contribution room available to him.

Since Mark has no RRSPs, he is not able to take advantage of the Home Buyers’ Plan.

I suggested that Mark take both his $10,000 and his parents’ matching contribution and put it into to his RRSPs right away. After 90 days, he can get the money out through the Home Buyers’ Plan. This is advantageous because his $20,000 contribution creates a significant tax savings.

Let’s assume Mark is in a 32-percent marginal tax bracket. That means that a $20,000 RRSP contribution will give him a tax refund of $6,400. That $6,400 can be used toward the down payment of the home, or it can be used to deal with all the other costs like legal fees, moving costs, utility hook ups, etc. By contributing the money to the RRSPs first, Mark is creating $26,500 for his home purchase, instead of just $20,000, because of the tax deduction.

In another case, I met Stan, who is also looking to buy his first home this year. He has only saved $6,500. He has an RRSP at the bank worth about $3,500 and he has $8,000 in a defined contribution pension plan from one of his previous employers. Stan was thinking about cashing in this pension and using it toward the purchase of his home.

Normally, pension money cannot be cashed out. But because the balance of the pension is less than 20 per cent of the current Yearly Maximum Pensionable Earnings, he is able to do so. The problem with cashing out the pension is that Stan will have to pay tax on the withdrawal. Instead of getting $8,000, after paying tax he would only have $5,450. However, instead of cashing out the pension, Stan is able to transfer the pension to his RRSP. He won’t get a tax deduction, but he can use the entire $8,000 toward the down payment of the home through the Home Buyers’ Plan.

After transferring the $8,000 pension into the RRSP, he should also contribute his cash savings of $6,500 to it, as well. With the $3,500 already in his existing RRSP, he would then have $18,000 in the RRSP that can be pulled out through the Home Buyers’ Plan. In addition, his $6,500 contribution would result in a tax refund of approximately $2,000. This scenario will give Stan $20,000, compared to only $15,450 if he cashes out the pension and does not put the $6,500 into the RRSP.

Since we are in the heart of RRSP season, first-time home buyers should consider making a contribution to their RRSP, to get an immediate tax deduction and a corresponding refund in April or May of this year.

Any contributions to the RRSP can be withdrawn through the Home Buyers’ Plan 90 days after deposit. Any contributions will result in a tax deduction, which will give the homebuyer a little extra cash. Basically, first-time homebuyers with cash should contribute to their RRSPs, if they have the contribution room.

For more info, visit Jim’s blog, RetireHappyBlog.ca.

Renovating a home to make it more energy efficient can be expensive, but Canada Mortgage and Housing Corp. (CMHC) offers a program that could reduce the sticker shock.

CMHC Green Home offers a refund “equivalent to” 10% of CHMC mortgage loan premiums for those who use CMHC-insured financing to pay for a renovation that increases the energy-efficiency of a home.

Legalese aside, the program, which dates back to 2004, offers an incentive for homeowners looking to either renovate their homes to be more energy-efficient, buy a home undergoing improvements, or build or buy a new green home, says CMHC business development representative Nicole Lilge.

“Our Green Home product is great for people looking for high-ratio financing and who have plans for [an energy-efficient] home renovation or new home,” she says. “And you can go online and fill out the form.”

There are several steps to take in applying for the CMHC Green Home program.

First, and before any renovation work begins, says Lilge, you need to have your home inspected by an energy advisor qualified by the Office of Energy Efficiency (part of National Resources Canada) to determine the home’s EnerGuide (energy efficiency) rating at the outset. According to the CMHC, after taking this baseline reading of the home, the advisor will then provide suggestions for improving that rating as part of your upcoming renovation work.

For the second step, “the main thing is to talk to your lender or your broker to say we’re purchasing a home that we know is green, or we will be renovating a home,” Lilge says. At that point, the homeowner can find out what CMHC insurance-related refinancing options might be available.

After that, the saws and hammers come out and work begins on your renovation, addition, teardown and rebuild, or whatever vision you have for your home.

Once the dust settles, and within 24 months of completion, a second inspection by an energy advisor must be conducted to determine whether efficiency has actually been improved.

CMHC’s website says the threshold of improvement for a home reno has to be at least five points and a minimum overall EnerGuide rating of 40. For new homes, the EnerGuide rating minimum ranges from 77 and 82 — the number varies depending on the purchase-closing date and was recently increased to 82 for purchases closing on Jan. 1, 2013, or later. Hit the magic number, and you may be eligible for the premium refund. You can apply via an online form or download the application and mail it in.

Although the program has been in place for nine years, homeowners are often not aware that it’s available as a potential option when they finance a major renovation, says Ryan Scott, president of Avalon Master Builder.

“Quite a few of our customers have taken advantage of it — but almost none of them were aware of it prior to purchasing a home from us,” he says. “It is a perk of buying from a green builder.

“The biggest challenge is awareness of the program, and what it means to [customers] and how much money it can save them. The paperwork is pretty simple.”

Scott says that whether building new or renovating, clients often misunderstand some of the terminology used in building. “A lot of people think ‘building to code’ builds you an [energy-efficient] house,” he says. “It builds you a house that is safe — ‘code’ is all about safety, it’s not about energy-efficiency. Building a house ‘to code’ isn’t good enough.”

Although an exact breakdown of how many home renovations have taken advantage of CMHC Green Home isn’t available, Lilge says, “since 2004, Green Home has provided more than $6-million in premium refunds.”

Green Home is one of a number of CMHC resources, including information resources, available to homeowners and renovators, says Lilge. There are brochures available on a variety of topics via links on the CMHC Green Home website cmhc-schl.gc.ca/greenhome.

“[Homeowners] can also take advantage of our Purchase Plus Improvements Program, where you would include the cost of your renovation in your mortgage at the outset,” Lilge says.

The program allows those buying homes that need to undergo major renovations to roll the cost of that work into a single monthly mortgage payment rather than having to create separate financing, if the cost of the renovation work is known.

Source: Alex Frazer-Harrison, Postmedia News