5 things first-time homebuyers may not know
A home is the largest purchase most of us make, and arguably one of the most important. In the 2016 Census, Statistics Canada found that 67.8% of Canadian households own their home, meaning that ownership of where we live is a key element of most of our lives.
A lifetime of property ownership begins with buying your first house or condo. First-time homebuyers go on a journey where they save up for a down payment, read real estate listings, go to showings with their agent, and learn about the home buying process.
Going to open houses can be exciting as you picture living your life in different spaces. In the whirlwind of buying a place to live, sometimes you might not get all the information you’ll need. Here are five things all first-time homebuyers should know:
1. Don’t be alarmed by short-term movements in mortgage rates
Generally speaking, we typically hear about rate adjustments in the news, and the focus of those stories is the short-term. If you’re paying for your house or condo over a 25-year period, your timeline is very different. Looking at a historical graph of 5-year fixed mortgage rates, you can see that while mortgage rates have gone up recently, 5-year fixed rates have still been relatively low compared to rates in the last few decades. As long as you stay within your budget, mortgage rates today can still be quite affordable.
2. Don’t forget about your Registered Retirement Savings Plan
While one of the primary purposes of your Registered Retirement Savings Plan (RRSP) is to help you save for your retirement, there’s also a helping hand built-in for people looking to purchase a place to live as well. The program is called the Home Buyers’ Plan (HBP) and it was launched by the Government of Canada to help give first-time buyers a leg-up when it comes to getting into the housing market.
The plan allows you to withdraw up to $25,000 from your RRSP savings to purchase or build a new home. If you’re purchasing with a spouse or common-law partner who’s also a first-time home buyer, both of you can access $25,000 each from your own individual RRSPs for a combined total of $50,000. This can be a nice boost when it comes to saving for your down payment, as you essentially give yourself an interest-free loan (but it will need to be paid back).
3. The Government of Canada offers other programs to support first-time homebuyers
In addition to the HBP, the Government of Canada also offers other programs for first-time buyers. These programs include the First-Time Home Buyers’ (FTHB) Tax Credit, which offers a $5,000 non-refundable income tax credit on qualifying homes, and the GST/HST New Housing Rebate. These programs can add up to a very nice boost for your wallet, so be sure to check them out.
4. You might not need to pay all the land transfer tax
Many provinces and territories (and even some cities) charge a land transfer tax when you buy a new home. Typically charged as a percentage of your home’s value, this can add thousands of dollars to your costs – but you might not need to pay all of it. Some locations (such as Ontario and British Columbia) offer a rebate on a portion of the land transfer tax if you’re a first-time homebuyer. If you’re charged a land transfer tax when you purchase, be sure to do some research on your location. You might have a pleasant surprise ahead.
5. Track all of your moving expenses
The process of moving can be an exciting one, and there might be a bit more good news as well. If you’ll be moving at least 40 kilometers closer to your work or school, your moving expenses may be tax deductible. This might not apply to everyone, but if you happen to qualify for this tax deduction you’ll see a pleasant surprise when it comes time to fill out your taxes. Just be sure to save all of your receipts from the move and check with your accountant or a tax specialist for more details.
They say knowledge is power. When it comes to first-time home buyers, knowledge can also mean more money in your pocket.
Article submitted by Ratehub.ca
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