Financing is often the most
stressful part of buying a home, especially for first-time buyers. Here are
some valuable hints to help educate and ease the worry for first-time
You may want to enlist the services of a financial planner to help you determine this because it’s more complicated than you might think at first glance. It’s not just about pulling together a down payment and then estimating what you think you can afford monthly. There are many new costs that you’ll have to consider as a homeowner: repairs, renovations, taxes, utilities, insurance, inspections, maintenance fees (for some communities), closing costs, legal costs and even furniture.
One sure way to know that a home is within your means is to ask your mortgage specialist to pre-approve your mortgage. Getting pre-approved helps establish the price range you should be looking for to find a home within your means. You don’t want to start house hunting and fall in love with a home you can’t afford. Plus, there may be problems with your credit — perhaps even problems that you don’t know about. Finally, getting pre-approved shows the seller that you’re a serious buyer.
Even just saving up for your down payment requires tremendous restraint. Beefing up your bank account is vital because besides closing, legal and moving costs, there are always unexpected expenses when you purchase a home. Having a healthy savings account can also help you become a better mortgage candidate. Tighten your belt and look for additional ways to earn additional cash.
Your lender should be versed on tax breaks that you can take advantage of to help make your purchase more affordable. Also, consider borrowing from your RRSP: it’s a great way to help increase your down payment. For first-time homebuyers, $25,000 can be taken tax-free from your RRSP and you have 15 years to pay it back without penalty. If you buy with a spouse or partner who has also not purchased a home before, you each get $25,000 you can take from your RRSP for a total of $50,000.
What if home ownership seems unaffordable? Purchase with another family member or friend, look for a fixer upper or a property with potential for a rental unit to help defer costs.
It’s not called a starter home for nothing. Most times, your first home is not necessarily your dream home. Consider this a stepping stone to that forever family home. And bear in mind that if you’re not planning to stay in this house long-term, choose an amortization and mortgage rate that suits your plans. Also, talk to your mortgage specialist about whether a fixed or variable-rate mortgage best suits your long-term goals.