How does this works out - House + Investment Property


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kabutar12   
Member since: Nov 08
Posts: 130
Location: Brampton

Post ID: #PID Posted on: 14-04-09 10:09:40

Hi fellow CD's.

I am in market to buy a house and most probably i would go for a resale house.
Though i am waiting till September before making any offer.
So in other words after September 2009, i am planning to buy a house.

Over the weekend i saw a new project which will be ready by Spring of 2011 but you can buy it by giving deposite of $30k and no other payments till first quarter of 2011.

Now i have couple of questions.

Q1. If i buy this investment property by giving $30K deposite right now and later on when i buy my actual house in late 2009, will my mortgage company look at my investment house and could refuse mortgage on my actual house. (They might say that you already have a house and will have mortgage on that too, so we cant approve another mortgage).

Q2. Considering that closing on Investment property will be somewhere in 2011, which house will be considered my first house, Investment property or the actual house. Because what ever is considered my first house will be eligible for all first time home buyer benefits. Does signing a contract with builder means that i have bought a house or is it closing which indicates the sale...i am confused on timing.

Thanks in advance.



Pramod Chopra   
Member since: Sep 03
Posts: 1284
Location: Pickering, ON

Post ID: #PID Posted on: 14-04-09 16:00:13

Quote:
Originally posted by kabutar12

Hi fellow CD's.

I am in market to buy a house and most probably i would go for a resale house.
Though i am waiting till September before making any offer.
So in other words after September 2009, i am planning to buy a house.

Over the weekend i saw a new project which will be ready by Spring of 2011 but you can buy it by giving deposit of $30k and no other payments till first quarter of 2011.

Now i have couple of questions.

Q1. If i buy this investment property by giving $30K deposit right now and later on when i buy my actual house in late 2009, will my mortgage company look at my investment house and could refuse mortgage on my actual house. (They might say that you already have a house and will have mortgage on that too, so we cant approve another mortgage).

Q2. Considering that closing on Investment property will be somewhere in 2011, which house will be considered my first house, Investment property or the actual house. Because what ever is considered my first house will be eligible for all first time home buyer benefits. Does signing a contract with builder means that i have bought a house or is it closing which indicates the sale...i am confused on timing.

Thanks in advance.



A 1. No. The mortgage company would have no problem in approving you for mortgage for your principal house as at that time you would not have taken possession of the investment property. Moreover, you have to qualify based on your income and credit and the mortgage company would look at your GDS and TDS ratio at present time and not what liability you may have in future.

This question will come when you try to get the mortgage for the investment property and at that time the mortgage payment liabilities of your principal home would be taken in to consideration and if your GDS and TDS are in order at that time, you again would have no problem in getting the mortgage for the investment property as well.

A 2. Its up to you to which house you claim as your principal residence and only on that house you would qualify for HBP and other principal home benefits. For more information please follow this http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/cndtns/menu-eng.html

Good Luck.


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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada



yanksingh   
Member since: Jun 04
Posts: 355
Location: Ottawa, On.

Post ID: #PID Posted on: 15-04-09 07:14:43

Sorry for hijacking this thread but what is "Investment property"???


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Inderpal Singh
Sorry - yesterday was the deadline for all complaints
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kabutar12   
Member since: Nov 08
Posts: 130
Location: Brampton

Post ID: #PID Posted on: 15-04-09 07:20:15

Thanks Pramod ji, appreciate your response.



Pramod Chopra   
Member since: Sep 03
Posts: 1284
Location: Pickering, ON

Post ID: #PID Posted on: 15-04-09 10:00:24

Quote:
Originally posted by yanksingh

Sorry for hijacking this thread but what is "Investment property"???



Google is your friend for most of the answers.

Please follow this http://www.google.com/search?hl=en&rlz=1T4GGLG_enCA312CA312&defl=en&q=define:investment+property&ei=9eflSefeO4vuMrXe-YwJ&sa=X&oi=glossary_definition&ct=title


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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada



Fido   
Member since: Aug 06
Posts: 5286
Location: Canada

Post ID: #PID Posted on: 15-04-09 10:42:39

If in the above case of investment home, the majority of payment is due in 2011 and only 30K is needed up front ..... Considering that a person does not have 50K in RRSP right now but expects to have it by 2011 , can he take the benefit of taking out from his RRSP in 2011 under the first home buyer plan ?

I assume yes but can someone confirm .

Kabutar12 ~ would the final price of these investment homes be fixed now or in 2011 ?


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Fido.


Pramod Chopra   
Member since: Sep 03
Posts: 1284
Location: Pickering, ON

Post ID: #PID Posted on: 15-04-09 11:12:32

Quote:
Originally posted by Fido

If in the above case of investment home, the majority of payment is due in 2011 and only 30K is needed up front ..... Considering that a person does not have 50K in RRSP right now but expects to have it by 2011 , can he take the benefit of taking out from his RRSP in 2011 under the first home buyer plan ?

I assume yes but can someone confirm .

Kabutar12 ~ would the final price of these investment homes be fixed now or in 2011 ?



You can not use HOME BUYER PLAN for investment property. You can only use it for a home you intend to purchase for your own personal use.

However, if you are buying a principal home which would be completed in 2011 and you have to put $30,000 as a deposit now, I would ask you not to use HBP now but take the money out from RRSP under HBP at the time of making final payments as generally they want all the withdrawals from the RRSP under HBP should be in the same year. Though there is some exception to this in case of principal home being bought from a builder wherein you have a confirmed purchase agreement. I would ask you to follow the link I provided earlier and read about the HBP in detail.

Also, the $50,000 limit is for both spouses. One person (spouse) can only use up to $25,000 for HBP.


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Pramod Chopra
Senior Mortgage Consultant
Mortgage Alliance Company of Canada





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