Buying a property is one of the biggest commitments you’ll ever make, but financial and lifestyle benefits are well worth the cost and effort. If you’ve been renting for a while or are living at home, buying your own place and getting a mortgage is probably on your mind. You’ve heard your whole life that buying a home is a step in the right direction in terms of financial freedom.
So, you’ve decided that home ownership is right for you. You’ve saved up your down payment, checked your credit, have a mortgage pre-approval and a real estate agent that you love working with. The process sounds straightforward, but it's complicated. It takes a lot of effort and dedication to save for your down payment, especially in the current real estate market. Figuring out your affordability can be stressful and finding the place you want to call home is far from easy. Once you get into the process you might feel like even though all your ducks are in a row and you’re prepared to sign the dotted line, you are still asking a lot of questions and start to wonder if being a homeowner is right for you.
The good news is, there are lots of reasons to own a home, including that you’ll build equity in the property over time, and the Canadian government provides incentives to make the process much more manageable. Here are two benefits of being a first-time buyer you should consider before you purchase your first home:
The Home Buyers’ Plan (HBP)
This plan allows Canadians who are first-time buyers to lend themselves tax-free dollars from their Registered Retirement Savings Plan (RRSP). You can withdraw up to $35,000 from your RRSP, you don’t have to start paying it back for two years and then you have a 15-year repayment period. If you are looking into a joint mortgage with a partner and both parties are first-time buyers, you can put $70,000 tax-free dollars against your home purchase.
The First-Time Home Buyer Incentive (FTHBI)
This incentive is available to first-time home buyers that have qualified incomes. The Government of Canada will provide 5% to 10% (for new builds) of the purchase price to help with the down payment. It helps lower down payment, carrying costs and makes home ownership generally more affordable. This incentive is a shared equity mortgage. The dollars received are interest-free, but the government will participate in the upside and downside of the property value. You have up to 25-years to payback the loan or when you go to sell the home, you will have to pay back the original percentage you received to the government.
To break it down: if you received 5% incentive to put against a home that cost $400,000 or $20,000, if your home sells for $600,000 in five years, you will have to pay back $30,000.
For more information on the program, visit The Government of Canada website.
There are many perks for first-time homebuyers. Be sure you are maximizing all your options to get the most out of your home. If you have questions about your financial plan or if buying a home is the right decision for you, talk to a financial planner today.