Buying a first home

Do you dream of becoming an owner? Between down payment, purchase fees, monthly fees and unexpected expenses, buying a first home is a major financial challenge for young families and early-career professionals. The Canadian government has therefore put in place several measures to support new buyers in their efforts.

New measure to reduce mortgage costs

You have been saving for several years to buy your first home and are ready to take the plunge? Good news: as of November 1, the federal government could, if you qualify, help you lower your mortgage bill.

With the ” First Ownership Incentive “, you could receive a loan of 5% or 10% from Canada Mortgage and Housing Corporation (CMHC), depending on the type of housing, the value of the property you want to complete your down payment.

Why? Simply because the higher it is, the less money you have to borrow.

CMHC’s participation reduces the cost of buying a property and decreases the amount of your mortgage, and therefore your monthly payments, and the mortgage loan insurance premium. resulting will be lower. This will give you more flexibility and you can decide, for example, to repay your mortgage faster or invest your money in other projects that are important to you.

Eligibility criteria

This measure is for first-time homebuyers, divorced or separated owners, or any other person who has not lived in a dwelling they or their current spouse has owned in the last four years. In all cases, the down payment must be less than 20% of the price of the property. The mortgage can not be more than four times your eligible annual income, which must not exceed $ 120,000.

Reimbursement

If no monthly payments or interest are required immediately, however, you will have to pay the amount borrowed when reselling your property or, at the latest, 25 years after the purchase. The amount to be refunded will be based on the percentage of the fair market value of the house at the time of payment, ie 5% or 10% depending on the type of dwelling. You can, however, choose to repay the incentive amount at any time without penalty.

Additional fees

It should be noted, however, that additional expenses may add to the bill at the time of purchase and refund.

First, during the acquisition, the notary, who will accompany you throughout this important stage of your life, will publish two mortgages in the land register instead of one, as is usually the case . CMHC’s interest is considered a second mortgage.

In addition, when selling your property, you may need to do business with a chartered appraiser to determine the fair market value of your property. The same is true if you have owned your home for at least 25 years.

For example, if you want to buy an existing home at $ 400,000 with a down payment of 5% ($ 20,000) and an incentive to purchase a first CMHC property of 5% ($ 20,000) you will have to borrow $ 360,000 for the mortgage instead of $ 380,000.

With a mortgage rate of 3.5% amortized over 25 years, your monthly payments will be $ 1,853, instead of $ 1,973 without the incentive. You save $ 120 a month, or $ 1,440 each year for a total of $ 36,000 on the entire mortgage.

Now imagine that you resell your home after a few years and that it is valued at $ 460,000 at the time of the sale. You will then have to make a refund equal to 5% (the percentage of the incentive allocated at the time of purchase) of its fair market value of $ 23,000.

The HBP increases from $ 25,000 to $ 35,000

The Home Buyers’ Plan (HBP) is also modernizing. New buyers will now be able to withdraw up to $ 35,000 from their Registered Retirement Savings Plan (RRSP), $ 10,000 more than before, to make a down payment or pay some purchase-related expenses. of a first dwelling by the occupying owner. A couple can “rapper” up to $ 70,000, a maximum of $ 35,000 per person.

Like the incentive to buy a first property, this increase in the HBP will allow you to reduce the amount of your mortgage loan, and therefore easier access to the property.

This measure is for first-time home buyers, as well as anyone who has not lived in a dwelling they or their current spouse owned in the last four full calendar years.

Reimbursement of HBP

The repayment terms remain unchanged, which means that new buyers will always have 15 years to return the money withdrawn to their RRSP without penalty, and this, within the first year after the withdrawal.

The incentive to buy a first property and the bonuses made to the RAP could give you a big boost if you plan to become a homeowner soon.

Doing business with a Multi-PrĂȘts broker has many advantages when it comes to buying your first home. This one will find in particular the rate of interest which corresponds best to your situation, in addition to accompany you throughout the mortgage process while preserving your peace and saving you time.

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