If you are a First Time Home Buyer, congratulations!
You are embarking on one of the most satisfying experiences of your lifetime. There is nothing like walking through the doors of your own home and knowing that it is yours.
The first question you need to ask is what can I afford to buy?
Before it’s time to go looking for a home be sure to get a pre-approval. This will allow you to secure a great rate as well as establish the confidence that when you do find your home, you will have financing in place. Our mortgage calculator can also help.
What can I use for a down payment?
For many first-time homebuyers, the down payment is one of the big obstacles to home ownership.
In most cases, you’ll need to save up at least 5% of the purchase price of your home. But there are some programs and tips we can offer to give your down payment a boost – to get you into your home faster:
- No or low down payment. Depending on the location of the property you are purchasing and if you have an excellent credit rating and stable income, you may qualify to purchase a property with no down payment using a “cash back” mortgage. All you need to provide is enough money to cover your closing costs and moving expenses (about 1.5% of the purchase price).
- Borrowed Down Payment. This is slightly different to a cash back in that you can borrow your down payment from a line of credit, credit card or personal loan. With good credit and stable income, your interest rate will be fully discounted, unlike the cash back mortgage.
- Home Buyers’ Plan (HBP). The HBP allows first-time home buyers, if you or your spouse have not owned and occupied a home as your principal residence in the preceding 4 years, or if you are buying or building a home for a disabled person who is related to you to withdraw up to $25,000 PER BUYER, from an RRSP. This is used to purchase a home without having to pay tax on the withdrawal but you’ll have up to 15 years to pay it back to your RSP interest free. Remember, the $25,000 per buyer does not HAVE to be used solely for down payment – it can be used for closing costs, paying off some debt, moving expenses, furniture or even a vacation or honeymoon!
- Gifted Down Payment: A financial gift from a parent or close relative can be used as a down payment. Your relative(s) will need to confirm, in writing, that the funds are a gift and you are not required to pay the money back at any time.
- Government Grants: Some municipalities provide down payment assistance grants – a forgivable interest free lump sum amount to be used for the sole purpose of down payment to purchase a home. If a municipality decides to offer this program, it is built into their budget, and they allocate a certain dollar amount – once the total budgeted grant amount is used, the program ceases. These programs are typically for people with low or moderate income and must go thru rigorous qualifying. These vary in guidelines based on the municipality that is offering; call me to find out if there is one available to you in the area you are considering purchasing in.
- Start Small: Of course the other option is to start small. If your dream home is out of reach, look for a starter home. Use today’s low interest rates to start hammering down your first mortgage, then watch for the opportunity to move up to the home of your dreams – using the equity and credit rating you’ve been building. Many people figure out ways to even keep the first home as a rental property, and leverage that first purchase into a nest egg for the future.
In Ontario, First Time Home Buyer incentives and programs may be available for you such as
Ontario Land Transfer Tax Rebate -You and/or your significant other can claim a refund of up to $2,000 of your land transfer tax payable at the time of purchase of your property. To qualify as a first-time home buyer under this program, you or your spouse must not ever have owned a home, anywhere in the world.
Toronto Municipal Land Transfer Tax Rebate – If you are buying in the City of Toronto, you are also entitled to a refund of the municipal land transfer tax payable at the time you buy your first home on the first $400,000 of purchase price. Again, you are only considered a first-time home buyer if you’ve never owned a home, anywhere in the world, ever.
The First-time Home Buyer’s Tax Credit (HBTC) – You and/or your significant other are also entitled to claim up to $5,000 in total as a tax credit when you purchase your first home. This entitles you to up to $750 in federal tax relief on your next tax return which could result in an income tax refund!
Let’s face it, buying a home is a big decision. It’s probably the biggest purchase you’ve made in your life so far. And you “don’t know what you don’t know”. The person who helps you put your mortgage together should be educating you on your options. You should feel equipped to make the choices that are best for your financial situation. Let me be that person to walk you thru the purchase of your first home, step by step, at a pace that is comfortable for you.
Don’t hesitate to get in touch. I’ll help you get started!FIRST STEP TO YOUR MORTGAGE