Buying Your First Home
Looking for your first home can be exciting as well as confusing. You can find yourself plagued by such questions as; How much do you need for a down payment? What extra costs will there be? And what is a 'chattel'? If these sound like some of your questions then I can help. I have the information, experience and the products you need to tackle these tough questions and many more.
And as always, if you don't find the answer you need here then proceed to my contact page and I will be more than happy to personally assist you.
Can You Afford to Buy a Home?
For most first time buyers, the answer is usually, "I don't know!". You can find an easy formula here that will give you the straightforward answers you need. If you need further assistance, contact me and I will work through the calculations with you. Tip: Typically when determining how much you can afford, your household expenses should not exceed 32% of your gross income (this is called Gross Debt Service Ratio).
How Much Do You Need?
A down payment is that amount of money needed upfront in order to buy a home. You can buy a home for as little as 5% down but remember, the larger the down payment, the easier the other expenses will be to manage. An ideal down payment is 25% of the purchase price. Part of your down payment will be used as a deposit once you're ready to put an offer on a property, so remember to keep some of it available in easily accessible funds.
If you can provide a 25% down payment, you may qualify for what's called a Conventional Mortgage. If you have less than 25% to put down, you must apply for a High Ratio Mortgage. This type of mortgage must be insured by the Canada Mortgage and Housing Corporation (CMHC) or by GE Capitol Mortgage Insurance Company Canada (GEMI).
When insured by CMHC, the insurance premium for a high ratio mortgage is 1.25% to 3.75% of the total mortgage amount, depending on the size of your down payment. This premium may be paid in cash or your bank can add it to your mortgage. The PST on the insurance must be paid upfront.
A Faster Down Payment
For many first time home buyers, saving such a substantial amount of money can seem overwhelming. Here are some ways you and I can get your down payment together faster.
Invest In Yourself First
You think of rent, utilities, credit card payments, etc. as financial commitments, so you always find a way to make those payments. On the other hand, you probably consider "savings" or "investments" to be optional. The truth is, if you can make the commitment to pay everybody else, you can make the commitment to pay yourself, too! Start thinking of a savings or investment plan as one of your financial commitments and make your payments as regularly and routinely as you do all others.
Re-organize Your Finances
Can't figure out where the money for savings or investments will come from? Sometimes it's simply a matter of managing your budget differently, perhaps by consolidating your debts, so that money can be freed up for savings.
Using RRSPs Towards Down Payment
Registered Retirement Savings Plans are a good way to secure your financial future while enjoying tax benefits today. You may also be able to use your RRSP savings toward the purchase of a home. If you are a first time home buyer, or haven't owned a home in the previous five calendar years, you may be eligible for the government-approved RRSP Home Buyers Plan.
You and your eligible spouse may withdraw up to $20,000 each from your RRSPs using funds which have been in your RRSPs for at least 90 days. You don't have to pay income tax on the funds, as long as you repay the total amount to your RRSP over the next 15 years. Your payments don't have to start until the second year after withdrawal.
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