Mortgages for first-time homebuyers

If you’re thinking about purchasing your first home one of the first steps should be to take advantage of the wealth of experience a seasoned mortgage agent provides.

Unlike the limited options at traditional banks, a mortgage agent has relationships with many different lenders. This means they can find you the mortgage plan best suited to your needs by negotiating on your behalf with more lenders… including multiple banks.

The best part about working with a mortgage agent is that since their fees are paid by the lender, there is no cost to you.

Your mortgage agent can also guide you step-by-step through the home buying process, and provide access to rates you might not find at a bank, starting with some key considerations to help you qualify for your mortgage loan.

Understanding how much mortgage you can qualify for

Buying your own home is a dream most of us have. One thing that is important to keep in mind is not to “overbuy” on your first property. If you can comfortably afford a condo, try to avoid stretching yourself too thin buying a detached home if it will cause undue financial hardship or stress. You want to find a comfortable mortgage amount, which might mean starting small and working your way up.

Remember, some lenders will approve you for more than you need…  so we recommend crunching the numbers yourself. Add up everything, childcare, meals, entertainment expenses, estimated bills, retirement savings, etc. If you feel confident that you can comfortably afford the payments on your dream home, that’s the sweet spot you are looking for.

Getting pre-approved for your mortgage

Getting pre-approved can take a lot of the guesswork out of shopping for a home. Your mortgage agent will assess your current financial picture including income, debts, credit scores, etc., and determine the maximum amount lenders will offer you.

Getting pre-approved also means you’ll get a locked-in mortgage rate. This will usually be held for between 60 and 120 days.

The final advantage? Being pre-approved lets sellers know that you’re serious and that your offer won’t fall through due to insufficient financing. Which will make your offer much more attractive to sellers, and likely put you ahead of other offers that are conditional on financing.

Start saving for that down payment

Saving up for a down payment is the first step to moving into the house of your dreams. Thankfully, in Ontario, first-time homebuyers can buy with only 5% down (as opposed to the usual 20%).  Sure, with 20% down you will qualify for a conventional mortgage, but for many first-timers, saving up that much money for their first home just isn’t possible.

If you are planning on making a 5% down payment, it’s important to keep in mind that you will need to pay mortgage default insurance, which may cost roughly 1-3% of your total mortgage loan amount.

A mortgage agent can help you understand all of the potential costs and all of the ways first-time homebuyers can accumulate their down payment:

• RRSP withdrawal: First-time purchasers in Ontario can borrow up to $25,000 from their RRSP to use as a down payment. Funds must be repaid within 15 years. Learn more at the Canada Revenue Agency site.
• Family gift: Gifted down payments are permitted, so long as they come from immediate family.
• Borrowed funds: If you have a good income, and money available on a line of credit, borrowed funds may be used as a down payment.

Government programs for first-time homebuyers

The government of Canada also has a number of programs in place to help Canadians purchase their first home. Your mortgage agent can help you understand your options, and how to apply for them.

First-time homebuyer’s credit

The first-time homebuyer’s credit provides a 15% income tax credit on closing costs for eligible applicants – up to a maximum of $5000. (The maximum will result in a closing credit of $750.)

To be eligible, both the claimant and their partner (if applicable) must not have owned or lived in a home during the purchase year, and the four previous years.

Learn more about refunds from the Government of Canada.

CMHC first-time homebuyer program

The CMHC (Canada Mortgage and Housing Corporation) offers a number of incentives for first-time homebuyers. Visit the CMHC website to learn more.

Buy with 5% down

Not technically a deduction or rebate, the 5% down payment option lets first-time homebuyers access mortgage insurance other homebuyers are not entitled to. To qualify, you will need to satisfy the requirements of a 5-year, fixed mortgage. You will also be asked to prove that you can cover closing costs, approximately 1.5 % of your purchase price.

Keep in mind that properties purchased in this way must meet the following criteria:

•  Owner-occupied
• Amortization can be no longer than 25 years
• The home cannot exceed $1 million
• Proof of down payment must be provided

To find out if you quality, speak to your mortgage broker.

Land Transfer Tax Rebates

Land transfer taxes can add considerable cost to the purchase of a home. Thankfully, there are programs in place to ease some of the burden for first-time homebuyers.

In the Province of Ontario, qualified purchasers may be eligible for a rebate of up to $2,000. In the city of Toronto, they may also qualify for an additional Municipal Land Transfer Tax rebate of up to $3,725.

Your mortgage agent can help determine whether you are eligible for either of these rebates, and your real estate lawyer can claim them for you when they transfer your deed.

Learn more about these refunds from the Ontario Ministry of Finance.

HST New Housing Rebate

Finally, as a first-time homebuyer you may also qualify for a partial rebate of the HST you will pay when you make your purchase. You can apply for a refund of up to $6,300 on a home that costs less than $350,000. Homes between $350,000 and $450,000 qualify for less, while homes over $450,000 are not eligible.

Qualifying homes include:

• Renovated or new home from a builder
• New mobile
• Shares in a co-op
• Your own home, if substantial renovations have been made (even after a fire)

New homebuyers can also qualify for a rebate of up to 75% on your provincial HST – up to a maximum of $24,000.

Read more about the federal HST rebate.

Read more about the provincial HST rebate.

Let an InTrend Mortgage agent help you become a first-time home buyer

Getting pre-approved for your first home can feel overwhelming. There’s a lot to learn and a thousand questions that go through the minds of first-time home buyers.

Thankfully, we’re here to help you qualify for your first mortgage. Call us today at 905-415-8488, and let us help you get the keys to your first home.