Many Canadians are eager to take advantage of the first-time home buyers incentive offered by the federal government. This tax credit allows eligible individuals to deduct a portion of their initial purchase costs, enabling more people to enter into property ownership and reducing the financial burden that makes the process so onerous.
In many situations, these individuals employ the services of qualified mortgage brokers like those found at Mortgages by Brandi. Mortgage brokers are real estate professionals who work with both private and public lenders, like banks and investment companies, to provide aggregate mortgage products to their clients. They help them find the right mortgage for their needs and offer estimates of their expected loan amounts, referred to as pre-approval. First-time home buyers find this service exceedingly helpful and often develop lasting relationships with brokers they trust.
Still, many first-time home buyers need additional help understanding the large, confusing and oft-contradictory world of real estate. One of the most common questions to arise is whether they can rent the homes they purchase. Why does this question get asked so often, and what is its answer? Today, we provide the information needed to lay these questions to rest.
Why Is There So Much Confusion About First-Time Home Buying & Renting?
The short answer? Large financial contracts are complex and designed to cover many different contingencies. The long answer is, well, longer anyway. One of the main reasons for the confusion is that just qualifying for the incentive is complex. You can’t own any other property (unless you have a partner who can assume ownership of it), borrow more than four times your “qualifying income” (unless you’re in one of the three urban centres where that amount is actually four and a half times), have an annual qualifying income exceeding $120,000 (again, in Toronto, Vancouver and Victoria that amount is raised to $150,000) and you must also be a Canadian citizen, permanent resident or non-permanent resident authorized to work in Canada. Lots of caveats to consider, eh?
That isn’t even the whole list! And, keep in mind, these are just the personal requirements. The property requirements only further complicate matters. The property must be a residential property not exceeding four individual units. Different property types are only eligible for certain loan amounts (5 or 10%). Did we mention that the incentive requires a majority repayment or that using it may incur additional fees, insurance premiums and other charges?
As is plain to see, the complicated nature of the credit makes it hard to grasp, and even those with experience in using it may not fully comprehend the agreement they’ve entered into. So, what does all this mean for our title question, and is there a clear-cut answer to follow?
Can First-Time Home Buyers Rent Out Their Homes?
Yes, first-time home buyers can rent out their homes in some circumstances. That’s the clearest answer you’re likely to get on the subject, and we’ve already provided you with the rationale for the answer. Indeed, the proof is in the pudding, as the idiom goes. The key factor is the type of property you can own, which, as we’ve discussed, is a residential one with up to four units. This includes apartments, duplexes and other buildings where multiple dwelling units exist.
These units do not need to stand empty until you’ve repaid the first-time home buyers incentive, meaning that you can rent them out and begin to recoup your initial investment. Of course, the best way to take advantage of this information is to work with qualified and experienced real estate and loan professionals to ensure you are taking full advantage of the program as it is written.