Ugh, taxes again!

I'm just in the process of finalizing my income taxes for last year, so taxes are top-of-mind for me. I've seen a lot of clients recently who are behind in their income taxes and/or property taxes. Are there any quick fixes to bringing your income or property taxes up-to-date if you're refinancing your mortgage or moving.

You may wonder why this is relevant. Most mortgage companies (bank or wholesale bank) will require confirmation that your income and property taxes are up-to-day, if you’re selling a house or renegotiating your mortgage.
I recommend paying your property taxes directly to the City of Guelph (or any other city/town you live in). I like being in control of that. Most municipalities allow pre-authorized debt and you can even pull the forms off the web site.

Here's the link for the City of Guelph's pre-authorized debit for property taxes http://guelph.ca/living.cfm?subCatID=2035&smocid=2608

If you’re behind in your property taxes, look for ways to pay them off by borrowing from a family member or putting them on credit. If you renegotiate your mortgage you can then use the extra money through the refinance to pay back the money. Then make a promise to yourself to do pre-authorized debit either through your mortgage holder or directly through the city.

You can employ this strategy with your income taxes as well.

Is this the year to buy your first home?

With low interest rates and home prices in Guelph remaining stable, 2012 will be a good year to buy a home if you don’t already own one!  

Canada Housing and Mortgage Corporation (CMHC) states that many of the potential first-time buyers of 2011 didn’t buy a house when they could qualify for one because of the unpredictable job market.  However, Guelph’s employment rate has always been strong boasting an unemployment rate of just over 4% - one of the lowest in the country.

Here are a few tips if you’re considering buying your first home in 2012…

How do I know I can qualify for a mortgage?

There are several  “on-line” mortgage calculators that will give you a rough idea of a mortgage amount that you can qualify for based on your income and your debts.  But don’t use this as a true mortgage pre-approval.  Why? There are many factors that can influence your ability to really qualify for a mortgage loan, such as credit history and income stability.  For example, if you work at a job that pays an hourly rate and your are entitled to overtime, overtime income can only be used to help you qualify for a mortgage, based on a two year average.

A good credit is also essential to qualify for a mortgage loan.  If you’re interest in obtaining your own credit history you can purchase it at www.equifax.ca.  Otherwise if you consult your mortgage broker they will review your credit history with you.

How to come up with a down payment?

The minimum down payment required to buy a home is 5% of the purchase price.  You can get a loan from the bank for the down payment, from savings, or through a family gift.  If you have great credit history and good job stability you may also be able to qualify for a mortgage – even if you don’t have the full 5% saved.

How much can I buy?                                      

There are two ratios that are used to help determine how much you can qualify for in a mortgage.  They are the Total Debt Service Ratio (TDSR) and the Gross Debt Service Ratio (GDSR). Essentially, these ratios compare the carrying costs of the house (mortgage payment, property taxes heat and debt) to your gross income.  These ratios should be between 32 and 44 per cent.  What I’ve found is that most home buyers can qualify for more of a mortgage, than they feel they need.  Have your mortgage broker work with you to help you develop a budget and determine what the ideal monthly mortgage amount should be based on your budget.  We can then help you work back to determine the purchase price.