February 18 2021
First-time Home Buyer Guide:
Are you a first-time home buyer? Purchasing a home is one of the largest commitments you’ll ever have to make. It is important you do your research and have a good understanding of the process so that you are prepared to make an informed decision.
Here are some things to consider before purchasing a home for the first-time:
1. Advantages that come with of owning a home:
– Instead of paying rent each month, you will be building up your equity as you pay down your mortgage.
– Owning a home is an investment, if you sell your home when the market is higher than when you purchased, you can make financial gains on the resale price.
– If your home has a secondary suite you have the opportunity to make extra income by renting it out to a tenant.
– When you own your own home, you have freedom: you can renovate it, modify it or sell it as you wish.
Once you have decided to make the leap to homeownership, it is important that you have a thorough understanding of all the expenses associated with buying and to figure out how much you can afford to spend.
Here is a breakdown of what to consider while budgeting:
– How much you make per month minus how much you spend per month. This will determine how much you have available after your expenses.
– According to CMHC your monthly housing costs should be no more than 32% of your average gross (before-tax) monthly income and your monthly total debt load should be no more than 40% of your average gross (before-tax) monthly income
Know all the costs:
– Monthly mortgage payments
– Condo fees
– Property taxes
– Utility bills
– Land registration fee
– Moving expenses
– Purchasing fees (inspection, appraisal, or legal fees)
– GST/HST/QST on the purchase price (for newly built homes)
3. Get Pre-Approved:
Once you have determined what you can afford, it is important to get pre-approved before you start looking at any homes. A pre-approval does not mean you will be guaranteed that mortgage, but it is a good way to narrow down your home search and to ensure that you only look at homes within your budget.
There are many options when it comes to selecting a mortgage. You will have to meet with a mortgage broker to determine what is the best option for you.
4. Purchasing Incentives:
- Canada’s First-Time Home Buyer Incentive:
- Canada offers a shared equity mortgage for first time buyers. The incentive helps make monthly mortgage payments more attainable without having to have a larger down payment. You can borrow 5% or 10% the purchasing price of your home and you must pay back the same percentage of the value when you sell your home or within 25 years. Having a shared equity mortgage means that the government will also share in any gains or losses you take on your home. Visit here to learn more about this incentive.
- Home Buyers’ Amount:
- A “$5,000 non-refundable income tax credit amount on a qualifying home acquired during the year. For an eligible individual, the credit will provide up to $750 in federal tax relief.” Visit here to see if you qualify.
- Home Buyers’ Plan:
- You can withdraw up to $35,000 for your down payment from your RRSP tax free. The amount repaid in instalments for up to 15 years. Visit here to learn more about this plan.
- GST/HST New Housing Rebate:
- If purchasing a new home in McConachie, you may qualify for a rebate for part of the GST you paid on the purchase price or cost of building your new home. Learn more about this rebate here.
Buying your first home should be an exciting time! Canada Mortgage and Housing Corporation (CMHC) offers many great resources for first time home buyers and can answer many of your questions.