7 Things To Know If You’re A First-Time Home Buyer

Purchasing your first home in Etobicoke or Toronto can be a rewarding, exhilarating, and intimidating endeavour.

As you make what may be the most significant financial decision of your life, it takes careful planning, research, and support to become a homeowner. Fortunately, there is a lot of support out there for people looking to save and buy a home. To make homeownership more accessible, federally and provincially, there are several ways to seek out financial support to make it happen.

Here are 7 things to know if you’re a first-time home buyer or are saving to eventually become one.

How A First-Time Home Buyer Is Classified

A first-time home buyer in Canada is someone who has not owned a home in the past 4 years and has not lived in a home owned by their spouse during the same period.

Down-Payment Amounts

The minimum down payment in Ontario stands at 5% for the first $500,000 of your purchase price, increased to 10% for the portion of the purchase price above $500,000 and under $1 million, and then 20% of the purchase price for homes valued at $1 million or more.

Even once you reach your minimum down payment amount, it makes sense to continue saving.

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Understand Your Closing Costs

Prepare for closing costs which will typically range between 2-4% of the home’s purchase price. It’s a decent amount of money that you will want to be ready for. Closing costs include legal fees, land transfer taxes, title insurance, and similar expenses.

Note that closing costs are separate from any down payment and are always covered out-of-pocket. They cannot be taken from any mortgage.

First Home Savings Account

The FHSA in Canada is a registered savings account that aims to assist prospective first-time home buyers save for their first home tax-free. A FHSA functions similarly to an RRSP. Contribute up to $8,000 annually up to a maximum lifetime amount of $40,000. This can be combined with a Tax Free Savings Account, aka a TFSA, to further top up what you can save with minimal taxes.

First-Time Home Buyer Incentive

The First-Time Home Buyer Incentive is a federal program that reduces monthly mortgage payments without increasing your down payment.

This is done by providing a shared equity mortgage with the Government of Canada, allowing the government to participate in the home’s appreciation. In exchange, you’re provided 5% or 10% of a home’s purchase price to be used towards a down payment.

Mortgage Pre-Approval

Have mortgage pre-approval in place before you make an offer on your dream home. Mortgage pre-approval means you know your budget and won’t need to pull an offer because financing was rejected.

Always Arrange A Home Inspection

Do not skip the very necessary step of a home inspection. There are many horror stories of first-time home buyers discovering all sorts of problems after the fact because they didn’t inspect their home purchase before making an offer. A home inspection will clearly indicate to you the status of a property and if there are concerns.