Buying a home can be challenging for a first-time buyer. After all, there are so many steps, tasks, and requirements, and you may be anxious about making an expensive mistake. Although homeownership can be thrilling, it is not always the best option for everyone. But first-time homebuyers enjoy some special advantages created to encourage new entrants into the real estate market.
If you decide to buy a house, make sure you factor in all of the costs. Housing costs should not exceed 35 percent of your gross monthly income, according to the Canada Mortgage and Housing Corporation (CMHC). In addition, expenses such as mortgage payments and utility bills are always there.
Your total monthly debt should not exceed 42% of your gross monthly income. This includes your mortgage payments as well as any other debts you may have. Here's a home buyer guide about what you should think about before you buy, what to expect during the buying process, and how to make life easier after buying your first home to help you get the most out of your purchase.
Minimum Down Payment
Did you know that the purchase price of your home determines your minimum down payment? For homes costing less than $500,000, the total minimum down payment in Canada is 5%. Saving for a down payment is the most challenging obstacle for first-time homebuyers. This is why having a savings strategy is crucial. A savings plan can assist you in determining a target down payment amount. It's significant because a larger down payment reduces the amount of money you'll need to borrow to buy a house. Once you've figured out the down payment amount you can afford, calculate your mortgage payment to estimate what your monthly payment will be.
So, who are you going to call while you're looking at real estate listings and attending open houses? I'm not talking about your real estate agent. Most Canadians believe that the first step in the home-buying process is to contact a realtor and begin looking at houses. Once you've saved enough for your desired down payment, the first thing you should do is get a mortgage pre-approval. Contact your mortgage broker or your bank's mortgage specialist before calling your realtor.
Many of us wish to purchase a home, but we must be realistic about the properties we can afford. The total amount you can borrow is determined by your household income, personal monthly expenses, and home costs such as property taxes, condo fees, and heating and electricity bills.
You shop around when you look for a home, so make sure you do the same when it comes to getting a mortgage. Don't expect to get the best rate by going to your local bank branch (because you won't!). Instead, investigate and compare mortgage rates. It would be best if you also considered hiring a mortgage broker to help you negotiate rates.
Remember that even a half-percentage-point reduction in your mortgage rate can make a significant difference in your monthly payments and the total amount of interest you pay over time.
Did you know that mortgage brokers can get you a mortgage with a Big Bank at a lower rate than you could get on your own ? Mortgage brokers compare mortgages from many banks and financial institutions to find the best deal for their clients. Mortgage brokers have access to mortgage products and special rates from trust companies and credit unions in addition to the Big Banks. They also collaborate with smaller lenders who do not have the same overhead as the Big Banks (often have lower rates and fewer fees). So what's the best part ? The majority of mortgage brokers do not charge a fee for their services. Instead, the lender pays the broker's commission. The broker handles all of the negotiating and paperwork, and they'll walk you through the entire application process, from pre-approval to home appraisal.
First-Time Home Buyer Programs
For specific types of homebuyers, the government of Canada offers two tax credits. As well, other home-buying incentives may be available from your provincial or territorial government. First, you'll want to be familiar with the various programs that apply to your situation as a first-time homebuyer. There are many government programs listed below that can help you potentially save money when buying your first home, whether it's a rebate you may qualify for or a tax-efficient way of funding your down payment:
The Home Buyers' Tax Credit currently equates to a $750 rebate for all first-time home buyers.
The Canadian government's Home Buyers' Plan (HBP) allows first-time homebuyers to borrow up to $35,000 tax-free from their RRSP for a down payment.
First-time homebuyers in Ontario, British Columbia, and Prince Edward Island may be eligible for land transfer tax rebates if they meet specific criteria. In the city of Toronto, there is also a land transfer tax rebate available for first-time homebuyers.
You may be eligible for a sales tax rebate if you buy your home before it is built or if you substantially renovate an existing home. The amount of the GST/HST new housing rebate you are eligible for is determined by the home's purchase price, and it can only be claimed if the net purchase price is less than $450,000. Additionally, You might relocate to a new home to work or run a business. You can deduct eligible moving expenses from your new location's employment or self-employment income.
Your down payment and monthly mortgage payments are only the start of your home-buying journey. Closing costs, land transfer tax, and CMHC insurance are just a few of the extra costs that come with buying your first home. That's why, even after you've saved enough for your down payment, you'll need to stick to a savings plan. A good rule of thumb is to set aside 3-5 percent of the purchase price of your home to cover the closing costs.
Are you a First-time Homebuyer ?
Purchasing a home for the first time does not have to be a stressful experience. It is you and your loved ones who bring a home to life wherever you land. Maintain your financial health to get there, so your quality of life improves with purchase instead of decreasing. If you're a first-time homebuyer or planning to buy a home in Canada, you should consult a home buyers guide or talk to the experts at Guglu Homes about your options. Every step of the way, we're here to assist you!
This website may only be used by consumers that have a bona fide interest in the purchase, sale or lease of the type of realestate being offered via this website. REALTOR®, REALTORS® and the REALTOR® logo are certification marks owned by REALTOR® Canada Inc., a corporation jointly owned by the National Association of REALTORS® and CREA. MLS®, Multiple Listing Service®, and the associated logos are all registered certification marks owned by CREA and are used to identify real estate services provided by brokers and salespersons who are members of CREA.