Talk about mixed messages. There’s concern that the new mortgage rules might push first-time homebuyers out of the market. But mortgages are still a pretty amazing bargain – historically speaking. In fact, some are calling it the great Canadian mortgage sale. So what’s a first-time homebuyer to do? Is buying a home right now a reckless risk… or a great, time-limited opportunity?
Over the next few paragraphs we offer tips for first-time homebuyers – to ensure that you get off on the right foot in your home buying journey!
RUN THE NUMBERS: First, determine what you can afford.
It happens: you fall in love with a home that seems perfect, but it is way outside your possible price range. Before you go looking at homes – and long before you consider putting an offer on one – you need to run the numbers. Get some professional guidance – there’s more to home ownership than a mortgage payment – and determine exactly what you can comfortably afford.
Meet with us first. Independent mortgage brokers are expert at providing the advice, education and resources that first-time buyers need. We can offer advice on boosting your credit rating, determining an affordable mortgage payment, and advising you on the extra costs that come with buying a home. Generally, you can expect to pay between 1.5% and 4% of the home’s selling price in total closing costs.
We can also make sure you have a pre-approval with an attractive rate – usually good for 90 to 120 days – so you’re house-shopping with a plan and a budget. Doing this work ahead of time will make you a confident and informed homebuyer. You’ll know exactly how much house you can afford – before you ever start dreaming of home!
GETTING THAT DOWNPAYMENT: It might be easier than you think!
For many first-time homebuyers, that downpayment is one of the big obstacles to home ownership. Saving up cash – especially if you’re paying rent, paying down student loans, and trying to live a life – can be slow and difficult work.
In most cases, you’ll need to save up at least 5% of the purchase price of your home. But there are some programs and tips we can offer to give your downpayment a boost – to get you into your home faster:
- Home Buyers’ Plan (HBP) lets first-time homebuyers withdraw up to $25,000 each (or $50,000 for a couple) tax-free from their RRSPs. You’ll need to pay those funds back, of course, on a repayment plan.
- A financial gift from a parent or blood relative can be used as a downpayment. This can not be a private debt; you’ll need to document in writing that the funds are a gift and you are not required to pay the money back at any time.
- Start small. If your dream home is out of reach, look for a starter home. Use today’s low interest rates to start hammering down your first mortgage, then watch for the opportunity to get the home of your dreams – using the equity and credit rating you’ve been building!
Talk to us today – to ensure that you get off on the right foot in your home buying journey!
BEYOND RATE: Get expert advice
There’s a tendency to go rate shopping when you’re looking for a mortgage. After all, a great rate can save you thousands and help you better manage your debt. And that’s one reason so many first-time homebuyers are working with independent mortgage brokers. Most brokers have access to a wide range of established lenders – up to 50 – including major banks. They can compare rates across the board and show you where the best bargains are for your situation.
Dreaming of home? Come see us. We’ll get you started!
CREATE AN EMERGENCY FUND: Someday, something will go wrong.
Somewhere in that first-time homebuyer’s budget you need a line item that says “Emergency Fund”. You may think that you don’t need it; if something happens, you could take out a Line of Credit, right?
Every homeowner should have an Emergency Fund set aside. That’s because someday, something will go wrong. Imagine the roof suddenly starts to leak. Or you discover mould in the basement. Or maybe you get hurt and need to take a month or two off work. What happens to your carefully designed budget then?
Having an emergency fund in place before you buy a home will give you peace of mind – knowing you have some financial buffer to tackle an unexpected financial obstacle.
So what about that Homeowner Line of Credit? Well your mortgage broker can provide some guidance; it’s often a good idea to have a low-interest financial safeguard – before you need it. Just keep in mind that it is also borrowed money. If you use your Line, you’ll need to budget carefully to pay it back.
BOOST YOUR PAYDOWN: Tips to save thousands
Early and often: that’s the best way to pay down your mortgage to save thousands and cut years off your debt. There are a few ways to boost your mortgage paydown:
Make your house pay. Put a dent in your debt by adding revenue. Consider renting out part of your home, or taking in a roommate to help off-set expenses. Rent out an extra parking space if you have one. Or talk to your accountant about whether you can write off a room in your home as an office for your home business – and throw your tax savings against your mortgage each year!