Thinking about buying your first home but have no idea where to start?
Before you even think about submitting an offer you need to take a look at your finances first.
Think about your monthly and yearly expenses. Be realistic.
Download my free Excel Budget Spreadsheet and enter your information.
If you are comfortable with that number we can get started.
Need to prepare a bit more?
Here are some Money Saving Tips!
Cut cable and save $730 a year by streaming instead.
Brew your coffee or tea at home and save $946 a year.
Carpool and save $998 a year.
Wash you laundry in cold water and save $87 per year.
Quit smoking and save $708 per year.
Drink tap water and save $205 per year instead of bottled water.
Avoid takeout and eating out and save $1,144 a year.
Skip the gym and exercise at home and save $520 a year.
Total Potential Savings… $5,338!
Now that is a step in the right direction to save up for a down payment!
Understanding Legal Fees and Disbursements
Purchasing a home does not stop at paying a monthly mortgage, there are also other legal fees and disbursements you need to be aware of.
Request a First Time Home Buyer’s (FTHB) Package (at the bottom)
Understanding Land Transfer Tax
When you acquire land or a beneficial interest in land, you pay land transfer tax to the province when the transaction closes. Land transfer tax is normally based on the amount paid for the land, in addition to the amount remaining on any mortgage or debt assumed as part of the arrangement to buy the land.
Buyers of houses and condos in Ontario pay land transfer tax when they purchase a property – Sellers never pay. Your lawyer will arrange for land transfer taxes to be paid when the deed to the new home is transferred in your name (on closing day).
Source: Ontario Ministry of Finance
Government Provided Incentives
First-Time Home Buyers’ (FTHB) Tax Credit
Assist first-time homebuyers with costs that come with purchasing your first home such as legal fees (preparation and recording of official documents) , land transfer taxes (transferring property to your name) and disbursements (out-of-pocket expenses: registrations, searches, supplies). The Government of Canada offers a $5,000 non-refundable income tax credit for eligible individuals providing up to $750 in federal tax relief as well as a $4,000 rebate on the land-transfer tax for first-time homebuyers.
For more information regarding FTHB Tax Credits visit: http://www.cra-arc.gc.ca/gncy/bdgt/2009/fqhbtc-eng.html
Expansion of the Home Buyers’ Plan (HBP)
Provides increased access to your RRSP savings to purchase or build a home. The limit has increased to a withdrawal of $25,000.
For more information regarding the HBP visit: http://www.cra-arc.gc.ca/hbp/
The Basics of a Canadian Mortgage
A mortgage is a type of loan often used to buy a home or other property. A mortgage allows the lender to take possession of the property if you don’t repay the loan on time. The property is the security for the loan. Normally, a mortgage is a large loan and is paid off over many years.
When you get a mortgage loan, you are called the mortgagor. The lender is called the mortgagee.
Under a mortgage, you are responsible for making regular payments to the lender. The payments cover the interest on the loan plus part of the principal (the amount of the loan). Payments may also include property taxes, insurance and similar charges.
When you make a mortgage payment, the lender uses it first to cover the interest. Then anything left goes to the principal and in some cases to taxes and insurance. At the beginning, only a small amount goes to the principal, but gradually more of the payment goes to the principal until it is fully paid off. The part of the property that is paid for—both through the down payment and through your mortgage payments—is called your equity in the property.
- When you look for a mortgage, you have to choose:
- The amount of the down payment you can pay
- The amortization period that will best fit your monthly budget
- An open or closed term mortgage
- A fixed or variable interest rate
- Fixed or variable payments
- A monthly, weekly, biweekly or accelerated payment schedule.
- The key factor in choosing a mortgage is what you can afford in your monthly budget.
- A mortgage calculator will help you compare the costs of different mortgage options.
For more information contact me or visit the Government of Canada’s website.
Source: The Government of Canada
The Cost of Owning a Home
Consider your monthly fees:
Mortgage Payment, Property Tax, Home Insurance, Utilities