This influx represents one of the highest rates per population of any country in the world.

These newcomers will be looking to navigate the dream of owning a home in Canada. According to REALTOR.ca insights, approximately 40% of individuals currently searching for homes are first-time buyers.

This article lays out the three significant steps to help you become prepared about the purchasing a home in 2024, including:

• Planning out your needs and what you can afford;
• Arranging your finances and mortgage; and
• Selecting a real estate agent

Plan the Requirements of Your First Home and What You Can Afford in 2024

What do you need in a first home?

Homes come in all shapes and sizes, in different neighbourhoods, and with various amenities. Before you even look at potential homes, you need to decide what’s important to you. This is especially true if you’re buying a home with a partner. It’s better to understand each other’s needs and wants now rather than later on in the process. For example, the neighbourhood and school district may be vital if you want or already have children and want to live in a neighbourhood with great schools.

What kind of first home can you reasonably afford?

You should also consider what you can afford when contemplating your needs and wants. You may want 3,000 square feet of space. But such a large home is out of reach for most first-time homebuyers. Areas with high-ranking school districts are also expensive.

Even if you can get an enormous mortgage to purchase the most expensive house available to you, it doesn’t mean you should. A sizeable monthly mortgage payment can hurt your financial and mental well-being in the long term. The Canada Mortgage and Housing Corporation recommends keeping your total housing payment (this includes taxes, maintenance, and mortgage) under 35% of your gross household income.

Arrange Your Finances and Mortgage for Your First Home

Are you financially ready to purchase your first home in 2024?

Buying your first home requires financial readiness. At this point, you’ve likely saved for a downpayment. But are you ready for closing costs such as legal fees and home inspection costs? These costs can amount to 2 – 4% of your purchase price. Further, once you purchase the home, are you ready for property taxes and maintenance expenses on top of your monthly mortgage payments?

It’s also important to understand what tools the Canadian government provides to first-time homebuyers. These tools generally make it easier for first-time homebuyers to make their purchase.

What is your credit score?

The next step is to review your credit score, which determines whether you’re qualified mortgage. It’s handy to find services that can help track your credit score. Many banks offer free credit score estimates without impacting it.

If your credit is on the low side, it’s essential to bring it up. This isn’t something you can do overnight. Raising your score may even delay your first home purchase. But a better credit score can provide you with better mortgage rates and more financial flexibility. If you’re purchasing your first home with a partner, note that lenders consider both of your scores.

How to find a mortgage for your first home

Your mortgage is commonly the largest loan you’ll take out in your lifetime. Therefore, it’s essential to shop for the best one. You’ll likely speak with two types of people in this process: a mortgage lender and/or a mortgage broker.

• Mortgage lenders are most commonly your large banks or credit unions. They lend money directly to you.
• Mortgage brokers don’t directly lend to you but arrange a transaction to help you find a lender. Brokers have access to many lenders beyond the big banks and credit unions — generally referred to as “A Lenders”. They can introduce you to B and C lenders who may be more lenient if you have a less-than-pristine credit score.

Previously this process involved visiting numerous banks and mortgage broker offices. But post COVID-19, this process is more commonly done over video conferencing. When the deal is settled, some lenders or brokers may still require you to visit in person to sign the paperwork.

The interest rate on your mortgage is the most crucial characteristic, but also consider aspects such as:

• Do I need to purchase mortgage insurance?
• What fees do I need to pay if I break the mortgage?
• Are there any penalties if I refinance my home?

Getting your mortgage pre-approved before you begin to look at properties is essential but optional. A pre-approved mortgage can provide certainty in how much you can bid on a house when you find the one.

Find a Real Estate Agent

Buying a home isn’t easy. It’s a lengthy process with complicated steps and procedures. Luckily, real estate agents are here to help. A realtor can match your needs and wants with what you can afford. They can also advise what to look out for in a first home — things you’ve never anticipated. They can address your concerns about the current market conditions, how certain neighbourhoods are, and what red flags to look out for and provide referrals to real estate lawyers, home inspectors, and other professionals part of the home buying process.

A REALTOR® can also do a lot of the in-person work for you during this COVID-era. Suppose you’re afraid of attending a home showing. In that case, many agents may be happy to visit the property on your behalf and show it to you via ZOOM, Facetime, or similar applications.

Once you’re ready to close on your deal, a real estate advisor can help prepare your offer package. This includes your offer price, pre-approval letter, proof of funds for the down payment, and terms and conditions.

It’s also important that you meet with several real estate agents before selecting the one you want to work with. Hiring an agent is similar to hiring an employee. You’ll want to meet with multiple agents and ask questions to understand their credentials. Online reviews are also a great way to differentiate between agents as reviews are written by real clients that have had a full experience working with the prospective agent you are interviewing.

Buying your first home is a complicated and exciting process — especially in 2024. It’s important to plan out what you can afford and what amenities and features that you and your partner need in a home. Arranging your finances and mortgage and finding an excellent real estate agent are also critical to making this process as smooth as possible and turning your homeownership dream into reality.

The post Three Steps to Purchasing Your First Home in 2024 first appeared on RankMyAgent - Trusted resource about Buying, Selling and Renting.

In this article, we explain these tools and look at how they can help you buy a home. The tools include the Home Buyers’ Plan, the new First-Time Homebuyers’ Incentive, and the various tax rebates and credits available to first-time homebuyers.

Home Buyers’ Plan: Borrowing from your RRSP

The Home Buyers’ Plan lets any first-time homebuyer buying or building a home to borrow up to $35,000 from their Registered Retirement Savings Plan (RRSP). This amount used to be $25,000 until March 19, 2019, when it was raised to $35,000. If you’re purchasing your home with someone else, like a significant other, each person can use the Home Buyers’ Plan for a total of $70,000.

Although it mentions “first-time” homebuyers, if you’ve previously participated in the plan, you may be able to do it again if your borrowing balance is 0 as of January 1st of the year. Just remember that every year that the money isn’t in your RRSP is another year that it’s not growing. Without the help of this appreciation, it could impact what you have ready for retirement.

Although withdrawing this money is tax-free, it has to be repaid within 15 years to remain so. The repayment period starts the second year after the year that the money is withdrawn. So funds withdrawn in 2019 have 2021 as the first year of repayment. The tax consequences of not paying back the loan within the allotted time could result in a hefty income tax.

Unlike mortgages and other loans, there are no consequences for paying back the money early.

First-Time Homebuyer Incentive: Sharing Equity with the Government

The First-Time Homebuyer Incentive (FTHBI) started on September 2nd, 2019 as part of the government’s national housing strategy. It’s expected to help Canadians fitting into a specific criterion reduce monthly mortgage payments by $286.

The government does this through a shared-equity mortgage program, where they provide a first-time homebuyer with 10% of the purchase price of a new home, or 5% of a resale home. This capital comes interest-free because it is not a loan. The government is actually purchasing part of the equity.

When the property is sold or after 25 years, the homebuyer must pay back either 10% or 5% of the home’s current market value. Thus, if the home declined in value, the homeowner pays back less than what they got. If the home’s value appreciated, they must pay back more.

For example, a homebuyer purchases a $100,000 new home and receives $10,000 (10%) from the FTHBI. If the home appreciates to $400,000 after 25 years or when they sell, they’ll have to pay back $40,000—10% of the market value after 25 years or at the time of the sale. One big benefit is that this amount can be paid back at any time, meaning you could pay it back when the property market is weaker to maximize the benefit.

As great as it sounds, there are severe limitations to this tool. To qualify for FTHBI, homebuyers must have a combined household income of $120,000 or less. The price of the mortgage plus the incentive amount also cannot exceed more than four times the buyers’ household income. This effectively limits the maximum purchase price of a qualified home to around $500,000. This likely rules out Vancouver or Toronto purchases, as even most condos in these cities have surpassed this maximum purchase price.

Another drawback of the program is that homebuyers using the plan with less than a 20% downpayment still need mortgage default insurance. If you have 10% of the purchase price ready and hope to get another 10% from FTHBI, this won’t help you wiggle your way out of default insurance. The FTHBI is almost like a second mortgage on your home—not part of your down payment.

Tax Rebates and Credits

In addition to tools that can help you get the money you need for a down payment or to reduce monthly mortgage payments, multiple tax rebates and credits can help avoid some of the costs of purchasing your first home.

First-Time Home Buyers’ Tax Credit

The First-Time Home Buyers’ Tax Credit came into effect in 2009. It provides a $5,000 non-refundable tax credit if you and the home you’re buying fit a certain criterion. The credit works out to a maximum of $750 back in your pocket.

To qualify, you and your spouse/common-law partner need to buy a qualifying home and must also have not lived in another home owned by you or your partner in the past four years. You and your partner also get a combined total of $5,000 tax credits. This means that regardless of whether it’s a solo or joint purchase, the maximum tax credit is $5,000.

HST/GST Rebate

The HST/GST housing rebate allows a homeowner to recover the GST or federal portion of HST from the purchase of their home or from any renovations that they made to it. To qualify, this home must be your primary place of residence, among other conditions. Depending on your province, the PST or provincial portion of the HST may also be recoverable.

Land Transfer Tax Rebate

If you’re a first-time homebuyer purchasing a home in British Columbia, Ontario, or Prince Edward Island, you could also recover some or all of the land transfer tax paid on your purchase. The recoverable amount depends on the specific province. The City of Toronto also provides a rebate on the city’s land transfer tax, in addition to the provincial one. The qualifications for each rebate differ depending on the province and whether you’re purchasing in the City of Toronto.

As a first-time homebuyer, many tools can help you purchase your first home. You can borrow from your RRSP through the Home Buyers’ Plan, split the equity of your home with the government via First-Time Homebuyer Incentive, or recover some money through various tax credits and rebates. Make sure to speak to an accountant and your realtor to make the best use of these tools.

The post The Tools Available to Canadians Purchasing Their First Home first appeared on RankMyAgent - Trusted resource about Buying, Selling and Renting.

Ah, love is in the air. Little pink, red and white Valentine’s Day decorations adorn every window of every store and heart-shaped candy is aplenty — and tempting. Couples are oversharing their affection in public and bombarding you with cutesy images on Instagram and Facebook.
Yes, Valentine’s Day is a macro lens on all romantic cliches, but what about when you zoom out? Enter today’s topic: Couples living.

Whether renting or purchasing a home, moving in with a partner is a significant moment in any relationship and there are a lot of moving parts we have to consider in this decision-making process: What happens if we break up? Are we ready yet? Is it better to move into a rental unit or buy our own place? Our incomes are very different, how do we strike a balance? Do we need to be married first? Our styles are very different, how do we decide how to decorate?

There is a seemingly endless stream of questions that you and your partner should discuss. And yes, unfortunately, some of these questions are going to bring about tough and uncomfortable conversations about finances and debt, future financial and life goals and more. But, it has got to be done if you are to gain a realistic picture of what your future with your partner entails.

Buying with your boo:

Buying a home with your partner is pretty scary — especially when you’re not married. It’s still less common to purchase a home with your boyfriend or girlfriend, so you may experience some stigma and backlash from friends and family. They may tell you that buying a home with someone you’re not married to is a deathwish. This is simply not true.

Although divorce rates have dropped slightly from their peak of 41% during the mid-’80s, CBC reported that four in 10 first marriages end in divorce — of course, this information was based on a 2006 census, but StatsCan has since stopped collecting divorce data. With that — somewhat tragic — info being said, it’s important to realize that these couples will also have to go through the break-up processes that unmarried common-law couples will endure. So, really, it’s essentially the same product with different labels.

Buying a lovenest with your honey is a great idea, especially if the market is leaning in your favour. Take advantage of that. Again, be sure to discuss debt and finances as your partner’s debt could influence the outcome of your mortgage approval.

The debt talk matters, Realtor.com says, because it will uncover your debt-to-income ratio, the “number your lender will look at to decide if you can pay back a loan.” This number can’t be higher than 43% and lenders will figure it out by adding up all monthly debts and dividing it by monthly income.

The down payment is another big-ticket item you’ll have to discuss with your partner. How will you afford this, plus closing costs? Realtor.com says this can be acquired through savings, a gift from a family member, or it can come from an RRSP. 

But who will pay for what? And how will the costs be divided? Realtor.com says this discussion is necessary before any paperwork is finalized. Some couples are fine merging all of their funds together in one giant pot and tackling everything together, but some find this can lead to a “yours and mine” mentality that can be detrimental to a relationship.

One way to conquer this is to keep things separate — to an extent — and based on income. It’s rare that couples earn the same amount of money so it doesn’t make a whole whack of sense to split the costs of a new home down the middle, 50-50. Instead, break it down.

One technique to do this involves opening a joint “house account” that both you and your partner will contribute to while keeping your other finances separate. Together, you can decide what you will pay together and what you will keep separate, such as student loans, or that travel debt you acquired in your gap year.

“Make a list of all your combined expenses: housing, taxes, insurance, utilities. Then talk salary,” Cynthia Ramnarace from HerMoney says. “If you make $60,000 and your partner makes $40,000, then you should pay 60 per cent of that total toward shared expenses and your partner 40 per cent.”

To make this fair and equal, set up a direct deposit from individual accounts to a shared-joint account. Be honest and keep that line of communication open. But, Ramnarace says, keep some emergency funds tucked aside in your personal account in case of unexpected changes in the bills department.

But what if we break up?

Breakups can happen whether your married or not, so Realtor.com suggests establishing a contract that defines what happens to the equity in such a case. This contract could give partners a limited time-frame of 30-60 days to buy the other out, or you can agree to sell the home and split the proceeds.

Having this contract in place, although bleak, can save you a lot of hardship if this situation ever arises. It’s best to think ahead and protect yourself.

Even if you’re renting, a contract like this isn’t a terrible idea. It could protect both of you and the financial contributions you invested in the relationship, like furniture and expensive housewares. Perhaps a deal can be made to buy out the other instead of feeling ripped off — on top of having a broken heart.

On a lighter note…

Now that all the serious talk is winding down, let’s discuss something a little more fun. DECORATING! You two have moved into your new home — rented or purchased, either way, congratulations! And it’s time to start decorating!

First things first, you’re going to have a lot of duplicates of things so it’s best to purge the doubles. This will save you space in your new home. No one needs four spatulas — you’re not running a Wendy’s out of your home.

Next, keep your all your sentimental things and mix your styles. The home should represent both of you and your individual styles, interests and flair.

Compromise, compromise, compromise. You will not be on the same page about every little detail, so really try to emphasize what is really important to you and what you are OK on budging on a bit. Again, you want the space to reflect both of your personalities while highlighting what makes you two work well together.

My only real big suggestion on this topic is to avoid conflict be sure to check in with each other a lot. Be sure to check in before making any crucial purchases and be sure to check in before you start randomly tossing things that may contain your partner’s personal belongings.

Enjoy this time. It can be really fun and you can really get to know each other on a whole new level.

To all you lovebirds out there, cohabitating or thinking about it, we at RMA wish you good luck and a very happy Valentine’s Day.

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