Buying your first home can be an intimidating experience. There are numerous things to take into consideration, from finding the right house to financing. But, being a first time homebuyer does come with some advantages.
First time homebuyers often have access to special loan programs, government grants or certain tax incentives that can assist them in getting into a home more quickly and less expensively than those who have purchased homes previously. These programs offer first time buyers benefits such as low down payments, subsidized interest, and a limit to the fees that a lender may charge them.
For example, as part of the Provincial governments' commitment to help Ontarians who are starting out, there has been a Land Transfer Tax Refund Program for First-time Home buyers. It has recently been proposed that this program be expanded to include purchases of resale homes. Check with your real estate agent for current government incentives or financial assitance programs like the Land Transfer Refund Program to help reduce your cost of home ownership.
Using Your RRSP for First Time Homebuyers
If you have any saving in an RRSP then you may also be eligible to access these registered savings as part of the federal governments "Home Buyers Plan" (HBP). The Home Buyers Plan is a program that allows you to withdraw from your registered retirement savings plan (RRSP) to buy or build a qualifying home for yourself or for a related person with a disability. For 2009 and subsequent years, withdrawals can be as large as $25,000.
And both you and your partner are eligible to withdraw up to the maximum from your own individual plans including spousal RRSPs. This means together, you and your partner may be able to access up to $50,000 towards a downpayment - if you have enough saved in your respective RRSPs. For certainty, you'll want to check with your financial advisor or mortgage broker for the most current Canada Revenue Agency eligibility requirements.
Conventional vs. High Ratio Downpayments
Lenders usually expect homebuyers to pay a down payment of at least 25% of the homes selling price which may qualify you for a conventional mortgage. This can be prohibitive for those who are trying to purchase their first home. But first time homebuyer loans often offer reduced down payment options of as little as 5% - %10. A down payment that low helps make buying a first home much more accessible by facilitating what is referred to as a high ration mortgage.
First time homebuyer loans may also feature a limit on the fees that the lender may charge. Like the reduced down payments, this is made possible by government mortgage insurance available to new homeowners. For an annual premium, Canada Mortgage and Housing Corporation (CMHC) insures your mortgage, reducing the risk to the lender. This results in the ability to charge lower fees and down payments while remaining profitable.
Low-income first time homebuyers may qualify for subsidized interest programs. This means that a third party pays the interest on your loan. These programs can make your mortgage payments more affordable and enable you to pay off the mortgage more quickly. While the government is one of the most frequent subsidizers of loans, they can also be subsidized by charities, organizations, or even individuals.
First time homebuyer programs are generally available only to people who are going to live in the home they purchase as their primary residence. The home will also have to be in good condition with no safety hazards present. And due to the fact that these programs are designed for those in need, there is a limit on the value of the homes you can purchase through these programs.
First time homebuyers can take advantage of numerous programs to assist them in owning their first home. From lowered down payments to subsidized interest, first time homeownership has become much more affordable. There is no time like the present to make your dream of owning your own home a reality.
These programs may or may not be available in your region so you'll need to investigate. An experienced mortgage broker will have answers to these sorts of questions. In fact, that may be one of the best places to start. Find a qualified mortgage agent in your local area and ask for an appointment. You may discover that home ownership is within your grasp.