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Tips for First-Time Home Buyers

Aug. 10, 2011
4 mins
A woman takes notes as a man types on his laptop

Buying your first home is a big step. There’s so much to consider and many resources to consult. Don’t worry - we’re here to help!

Check out our top seven tips to give you a boost onto the property ladder and help you save money on your first home.

Tip #1: Take advantage of government contributions and tax credits

Home Buyer’s Plan (HBP)

The Home Buyer’s Plan (HBP)allows first-time buyers to withdraw up to $25,000 from RRSPs to buy or build a home. If you want to increase your down payment, and have been investing in RRSPs, the HBP is a useful tool to consider. The amount you withdraw must be repaid within 15 years, with a set amount required for each year. If the determined amount is not fully paid, it must be added to the buyer’s personal income for that year.

To qualify for HBP, you must be a first-time home buyer and a resident of Canada at the withdrawal time. You can only be considered as a first-time home buyer if you (and your spouse) haven’t owned and lived in a primary residence for at least four years before the date of the RRSP withdrawal.

Home Buyer’s Tax Credit (HBTC)

The Home Buyer’s Tax Credit (HBTC) is a newer, non-refundable tax credit for qualifying home buyers.

Based on the amount of $5,000, the HBTC is calculated by multiplying the lowest personal income tax rate for the year. For example, in 2009 the lowest rate was 15%: $5,000 x 0.15 = $750 so the 2009 HBTC was $750. To qualify for the HBTC, you need to meet the following criteria: you or your spouse have already bought the home, and haven’t owned or lived in a primary residence for at least four years before the date of purchase.

Tip #2: Save, save, save

Continue saving until you have a large enough down payment to avoid CMHC insurance (which is 20% of the value of the property). Saving a little extra for a down payment also means you can live more comfortably and pay a lot less interest in the long run - so it pays to sit on that nest egg.

You will thank yourself when it comes time to making your mortgage payments, when you have an unexpected large cellphone bill come in the mail, or when you want to plan a vacation.

Tip #3: Get professional advice

You’re bound to have a few questions as you go through the home buying process. Which areas are best to buy in? How much can I afford to borrow? What mortgage product is right for my personal situation? You get the idea.

Find a good real estate agent, and mortgage broker and we promise they’ll be your new best friends. These trained professionals are excellent resources to have in your back pocket.

Tip #4: Shop around

Like buying a new car, or even a new pair of shoes, you don’t usually make a purchase without trying out a few options. If you have your heart set on one home but it’s slightly out of reach financially, go see something else. You may find your dream home with a slightly less expensive price tag.

Tip #5: Don’t over extend yourself

Just because you qualify for a certain amount, doesn’t mean you shouldn’t look for a home for less. The maximum limit is a maximum for a reason.

If you won’t be able to live comfortably, look for a house with a slightly cheaper price tag or re-considering the idea of buying until you’ve saved up a bit more. And if you’re a variable rate customer, don’t forget to plan for increased mortgage rates. You may be able to afford the mortgage right now, but what if rates go up by 2% or even 3%? Could you still afford your payments?

Tip #6: Get the best mortgage rate

It might be easy to take out a mortgage with your current bank, but it doesn’t mean you’ll wind up with the best rate. Make sure you compare mortgage rates before you choose a lender or broker. This will give you more power to negotiate a better rate, and you may even find a different broker or lender offering a much lower rate. Remember, even a few basis points can make a big difference when it comes paying off a mortgage.

Tip #7: Use the buddy system

Consider buying with a friend. Buying with a friend or co-worker is becoming an increasingly popular trend, especially in the more expensive markets. Look at houses that have full suites on both floors or older multiplex homes.

However, if you choose this route, make sure you have a plan in place if one of you wants to move out or can no longer afford the mortgage payments.


The RATESDOTCA editorial team are experienced writers focused on sharing stories and bringing you the latest news in insurance and personal finance. Our goal is to provide Canadians with the information and resources they need to make better insurance and financial decisions.

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