First Time Home Buyers

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Buying a home is an exciting time! It’s also a daunting time so start the process by having a conversation with me.  I’ll give you the facts and step by step processes you’ll need to know about financing your first home.

Fixed or Variable Rate Mortgage

When you apply for a mortgage, you have the choice of getting either a fixed or variable interest rate. 


A fixed-rate mortgages are constant for the duration of the term whereas variable-rate mortgages fluctuate with the bank’s prime rate. 


The advantage of a fixed-rate mortgage is that your mortgage payments won’t change your rate won’t increase even if the prime rate increases. Because of this, the interest rate on fixed-rate mortgages tend to be higher than variable-rate mortgages. 


With a variable-rate mortgage, your interest rate will decline if the bank’s prime rate falls. However, if the prime rate increases, so will the interest rate on your mortgage.

Down Payment Rules

A down payment refers to the money a purchaser must pay upfront when buying a home. The percentage you must put down depends on the purchase price of the home:

  • For homes less than $500,000, the minimum down payment is 5%
  • For homes selling for between $500,000 and $1 million, the minimum down payment is 5% of the first $500,000 of the purchase price and then 10% of the purchase price between $500,000 and $1 million
  • For homes with a purchase price of greater than $1 million, the minimum down payment is 20%

Mortgage Default Insurance

In Canada, any purchaser who has a down payment of less than 20% is required to purchase mortgage default insurance. This protects your lender in the event that you end up defaulting on your mortgage.  The amount you pay declines as your down payment increases. Mortgage default insurance isn’t needed if your down payment is 20% or greater. And it’s not available on homes that cost more than $1 million.

First Time Home Buyer's Tax Credit

The Home Buyers’ Tax Credit, at current taxation rates, works out to a rebate of $750 for all first-time buyers. After you buy your first home, the credit must be claimed within the year of purchase and it is non-refundable.  Click here for more information http://www.cra-arc.gc.ca/gncy/bdgt/2009/fqhbtc-eng.html

RRSP's Home Buyer's Plan

The Canadian government’s Home Buyers’ Plan (HBP) allows first time home buyers to borrow up to $25,000 from your RRSP for a down payment, tax-free.  However, since the HBP is considered a loan, it must be repaid within 15 years.