Tips for First Time Home Buyers
For many, home ownership will be the biggest investment you make in a lifetime. It is important to do your due diligence and understand all the costs associated with buying your first home, as well as some of the incentives and rebates that are available to you. With the help of a Real Estate professional, the entire process will be much less complicated and overwhelming. There are many things to keep in mind during the home buying process, below outlines some of the financial aspects to prepare yourself properly for your first home purchase.
- Mortgage pre-approval: Know what you can afford – One of the most important questions to ask is how much home can I afford? Many things affect the amount your bank or mortgage broker will be willing to lend you and at what rate. Employment history, spouses’ income, amount of down payment all affect how much you will be approved for your mortgage. Speak to a specialist to find out what is available to you
- First Time Home Buyer’ Tax Credit – An individual is considered a first-time home buyer if neither they nor their spouse has lived in another home in the year of home purchase or in the past four calendar years. There are Government tax incentives available to help offset some of the costs associated with first time home ownership. Speak to your accountant regarding how this affects you at tax time.
- CMHC- Canada Mortgage and Housing Corporation allows you to put a lower down payment at time of purchase. A conventional Mortgage requires a minimum of 20% down on purchase price. This can be a substantial amount for first time buyers and you may require a high-ratio mortgage (5%, 10% or 15% down payment) for this, you will be required to pay a loan insurance premium, spread over the term of your loan, or spread out over the term of your loan.
- Costs associated with the deal- There are a number of additional costs associated with the transaction and it’s important to plan for these costs. While amounts vary, you should be prepared for the following additional costs:
- Lawyer fees
- Home Inspection
- Title Insurance
- Land Transfer Tax: exempt up to $2000 for first time buyers.
Further costs to keep in mind would be the cost of moving (if you need a moving company), furnishing your new home, any upfront / future renovations or upgrades (shingles, furnace, electrical, plumbing).