Tips for First Time Home Buyers
Much like owning your first car, buying your first home brings you a whole lot of freedom, but it can also bring you a whole lot of emotional stress.
Many first-time home buyers quickly tire of the home buying grind and they end up settling too quickly before they find out what is possible. It gets really difficult to be patient when the search stretches into weeks or even months – especially after your bank or mortgage broker has given you the green light – but patience and diligence will reward you in the end.
If you see what you like right away, don’t immediately succumb to that “it’s meant to be” feeling. Even in current market conditions of high demand and low inventory, it’s almost always better to take your time for a thorough look rather than make an impulsive purchase only to find your property’s downsides later on. Finding a place to live isn’t hard; finding a home requires patience, diligence, research, and, yes, a bit of frustration along the way.
Run a personal credit check. You can request a free report by mail from Equifax Canada and TransUnion – the two consumer credit reporting agencies. Here’s how to go about it.
Be sure you really know your budget, what you have for your down payment and where it’s coming from. Rising real estate prices are making it difficult to scrape together a down payment.
Canada Home Buyer’s Plan:
Did you know Canada’s Home Buyer’s Plan allows a first-time purchaser a one-time chance to withdraw up to $25,000 from their RRSPs? If you are a couple, that gives you access to $50,000 with the condition that you repay it within 15 years’ time.
Make your registered retirement savings plan contribution more than 90 days before the withdrawal, or it may affect your down payment. Make sure you also fill out for T1036, Home Buyers Plan Request to withdraw from your RRSP account.
Repayments are due in the second year following the year you made the withdrawal. If you make a withdrawal this year, your first payment of generally one-fifteenth of the loan will be due in 2019 and then every year following until it has been repaid. If you don’t make a repayment in any given year, that amount is deemed income and you pay additional taxes.
An interesting fact that many homebuyers may not realize is if it has been more than four years since you or your spouse sold your first house, you can still qualify as a first-time home buyer, and capitalize on all the benefits. Find out more about the Home Buyer’s Plan.
You can pay as little as 5 percent down if you pay for mortgage insurance through CMHC, however, that will add another 4 percent to your mortgage if your down payment is under 10 percent or 3.1 percent if your down payment is between 10 and 15 percent.
If you want to avoid CMHC mortgage insurance all together, you will need 20 percent down. If you buy a Triple Crown condominium at the current starting price of $324,000, a 20 percent down payment would be $64,800 (minus the $10,000 purchase option you would already have paid which gets converted into part of your down payment). More information about Mortgage Insurance.
G.S.T. New Housing Rebate
When you buy a new home from a builder, you might be eligible for a rebate. The full rebate is available for new homes priced up to $350,000, then on a sliding scale until the rebate diminishes to zero at $450,000.
Let’s run some hypothetical numbers: Assuming the purchase price of you new home is $350,000 (excluding G.S.T.) The gross G.S.T. would be 5 percent of $350,000, which is $17,500. The G.S.T. New Housing Rebate is 36% of $17,500, which is $6,300. Thus, the applicable G.S.T. is $17,500 less $6,300, which equals $11,200.
If you’re buying a condominium here at Triple Crown, give Justine Connor or Todd Mahovlich a call. They will be happy to help guide you through the process of purchasing your first home. Test.