With interest rates at their lowest in decades, a great variety of housing options and some help from government incentives, buying your first home may be more affordable than ever before.
If you are thinking of buying your first home in the near future, the Ontario Real Estate Association and your local realtor offer the following advice to help make your dreams of home ownership come true.
WHAT CAN YOU AFFORD?
Along with the excitement of buying a home comes many challenges and questions. It's a complicated process and you'll need to ask yourself if home ownership is right for you - and - if you are financially ready for it.
Start by determining exactly what you can afford and how much you can put as a down payment on a home. This will require a thorough assessment of your finances to figure out your net worth. Your net worth is the amount left over once you subtract your liabilities from your assets.
For help figuring out your net worth and what you can realistically afford as a first time buyer, enlist the services of a realtor. A realtor will help you identify what type of home you want and take you to homes and neighbourhoods that fit within your lifestyle, needs and price range. This individual will also help you understand property financing, taxes, insurance and the steps you will have to take as a first-time buyer to complete a real estate transaction.
SAVING THAT DOWN PAYMENT
For most people, saving the necessary down payment is the hardest part of buying a home - especially the first one. A conventional mortgage requires a down payment of 20 per cent which can be a real challenge. Fortunately there are mortgage insurance products available that allow you to put as little as five per cent down as long as the money comes from your own savings. However, even if you don't have that much to put down, but you have a good credit history and the income to support your mortgage payments, you could benefit from a product like CMHC's Flex Down. This product allows you to obtain the minimum five per cent down payment from virtually any source including lender incentives and borrowed funds, provided that the source is at arm's length to the purchase or sale of the property.
Once you decide what you can afford and find the home you want in the right neighbourhood at the right price, here are some of the sources you can tap into for a down payment:
- savings and investments,
- registered Retirement Savings Plan (RRSP),
- loans, lines of credit, or gifts from your family or relatives.
The Government of Canada's Home Buyers' Plan allows qualified buyers to withdraw a maximum of $25,000 from their RRSPs to purchase or build a house. If your spouse is also eligible, you can each withdraw up to $25,000 towards the down payment, for a total of $50,000. No income tax is deducted from these funds, as long as they are repaid to the RRSP according to the government's repayment schedule. You may participate in the plan if you (or your spouse) have not owned a home which you occupied as your principal residence in the last five years.
LAND TRANSFER TAX (LTT) REBATE
First-time buyers of newly constructed homes may receive a refund of land transfer tax up to a maximum of $2,000. Only individuals who are at least 18 years of age, have not owned an interest in a home anywhere in the world and whose spouse has not owned an interest in a home anywhere in the world while he or she was a spouse of the individual, qualify as first time buyers. The first-time buyer must be buying a newly constructed home or an interest in a newly constructed home that has never been occupied. The purchaser must occupy the home as his or her principal residence no later than nine months after the date the property is transferred to his or her possession.
For information visit: www.mortgageandhome.ca
TALK TO A REALTOR
A realtor can help you understand how these programs work and ensure that you get the maximum benefit possible. Buying a home just may be the best investment you will ever make.
Contact a realtor to help you through the home buying process every step of the way.