4 tools to help you purchase your first home

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Many Canadians set the goal of buying a home. However, the process isn’t always easy to do on your own, especially the first time around. From making a down payment and getting approved for a mortgage to keeping up with rising prices, it’s common for first-time buyers to get discouraged. Fortunately, there are a number of tools available to help you reach the goal of homeownership.

Determine affordability with pre-approval

I can’t tell you how many potential homebuyers come to us at Homewise and discover they can afford a lot more than they expected. Getting pre-approved helps you gain a broader view of your current financial situation and affordability, as well as the potential monthly fees that come with a mortgage.

Help from a co-signer

Sometimes, first-time buyers are unable to make a home purchase because their credit score needs improving or their monthly income isn’t sufficient. Applying with a co-signer is a great solution to these common roadblocks. A co-signer is someone who applies for a mortgage with you, legally agrees to take liability on the loan and is responsible to pay off the debt if you’re unable to make payments. If you currently have too much debt or not enough income to afford a particular home, having a co-signer could increase your home affordability and chances of mortgage approval.

Gifted down payment

Roughly 30 per cent of Canadian homebuyers get help from a parent or family member when making a down payment – most commonly in the form of a gift. This is considered to be a portion of money that is given to the buyer by a parent or family member to use toward their down payment. You are then required to provide your lender a gift letter that explains who your family member is, the amount they are giving you and an explanation that the money is being used for your home purchase and doesn’t need to be repaid.

Government incentives

Over the years, the Canadian government has introduced many great programs and incentives for first-time buyers. These include:

1. The Home Buyers’ Plan (HBP)

The HBP allows first-time homebuyers to withdraw up to $35,000 tax-free from their Registered Retirement Savings Plans (RRSPs) to buy or build a qualifying home. It gives you the chance to tap into additional funds to pay your required down payment and re-contribute this money back into your RRSP within a 15-year period. If you’re buying a home with someone who also qualifies for the HBP, the two of you will be eligible to double the maximum amount to $70,000 when you apply together.

2. Land Transfer Tax Rebate

As a homebuyer, you’ll need to pay for land transfer taxes when you buy a home along with other essential closing costs. Fortunately, for first-time buyers, there’s a Land-Transfer Tax Rebate to offset this additional cost.

3. First-Time Home Buyer Incentive

This incentive serves as a great tool for first-time buyers to reach their homeownership goals. It is a shared equity program that offers first-time buyers five per cent on the purchase price of resale properties and 10 per cent on the purchase price of new builds to put toward a down payment. Essentially, the government makes a shared investment in your home and participates in the transaction with you, which is why the amount is registered as a second mortgage on the property. Buyers are then required to pay the money back interest-free to Canada Mortgage and Housing Corp. within 25 years of purchase or once the property is sold.

Buying a home can be a simple and stress-free process. There are plenty of tools available that you can use to make the process easier and more affordable. As well, it’s always a good idea to seek help from an expert mortgage advisor, such as our team at Homewise, so you can receive the guidance needed to find the best mortgage and make the right home purchase.