The first time Home Buyer's Plan (HBP) enables RRSP withdrawals up to $25,000 ($50,000 for a couple) to help make the
down payment. Withdrawals must be repaid within 15 years. RRSP funds must be on deposit for at least 90 days. Other
Tip: If you have non-registered down payment savings of, say, $10,000 and have enough RRSP “contribution room”, transfer
the $10,000 into a RRSP at least 90 days before your closing date. Then withdraw the down payment money from your RRSP.
The advantage? Your $10,000 RRSP contribution is tax deductable and you can use any tax refund to repay the RRSP
withdrawal or cover other home expenses. Note that RRSP withdrawals may mean foregoing tax-sheltered investment
The best mortgage involves a competitive interest rate and ‘flexibility’ that saves you the most amount of money long-term.
Statistics show that over half of Canadians with a mortgage renegotiate before their term end due to a change in prime rate
or personal financial conditions. The average five-year borrower changes their mortgage every 3 1/2 years.
If you obtain a cheap rate and want/need to refinance before term end, you may be subject to severe financial penalties
due to mortgage restrictions. That’s why flexibility (e.g. pre-payment privileges, portability, hybrids, refinancing) easily
outweighs small (e.g. 0.10 to 0.25%) differences in interest rates. The lowest rate saves hundreds of dollars up front but
may cost thousands after closing.
Your OECU mortgage advisor will explain your flexibility options and help arrange the best deal to suit your short and
Closing costs are typically in the 2% range of the loan amount. They include property appraisal, home inspection, legal fees
and disbursements, land transfer tax, title insurance and any prepaid property tax and utility adjustments. So, if your new
home is $300,000, closing costs could be $6,000. Besides closing costs, other expenses typically include moving costs,
furniture, appliances, etc. Your OECU mortgage advisor will help you identify these costs.
Firstly, any capital prepayment privileges amortize a mortgage faster since all pre-payments are applied directly to capital.
Closed mortgages typically allow annual capital pre-payments up to 20% of the original mortgage or higher monthly
payments without penalty. Interest rates for closed term mortgages are generally lower than for open term mortgages
Open mortgages allow full capital pre-payments or a total discharge anytime without penalty. They may be appealing if
you are planning to pay off your mortgage in the near future via an inheritance, bonus, etc. Interest rates are generally
higher versus closed mortgages because of the pre-payment flexibility.
A shorter term is more viable if selling your home in the near future to pay off your mortgage, or in a declining rate scenario
by the time your term expires.
A longer-term mortgage of 3 to 5 years is more viable in a stable or rising rate scenario. It also provides easier budgeting
and peace of mind benefits.