Buying your first home is one of the most exciting and possibly the biggest financial decisions you’ll ever make – and you want to do it right. Nearly half of first-time homebuyers in Canada are young professionals who simply want to “become a homeowner.”
But, many aspiring homeowners quickly realize how challenging it is to fulfil their dream of homeownership. Purchasing a home is a big financial commitment involving many tasks, steps and requirements. Challenges may pop-up along the way making the process difficult, confusing and complicated, leaving many aspiring homeowners feeling anxious about making an expensive mistake.
So, where do you go? Or, more importantly, who do you trust with such a significant financial decision?
With a deep understanding of your long-term financial goals and current financial status, your Everything Mortgages Broker will guide you through the homebuying journey, answering your most daunting questions and mitigating any challenges along the way.
Frequently asked questions
The best place to start is to determine how much you can afford to borrow. The mortgage amount you qualify for will depend on how much you earn, have saved for a down payment and your outgoing expenses. It's best practice to know how much money you have in your wallet before you start shopping around for properties. You can do this by getting a mortgage pre-approval with us.
Can I really only afford how much online calculators and banks are telling me?
Recent changes to mortgage lending (i.e. the stress test) have made it more difficult to qualify in recent years. But, there’s still hope yet. We use a creative approach to find the solution that’s best for you. As your broker, we have access to a portfolio of over 35 lenders including banks, alternative and private lenders.
Why should I work with a broker vs. a bank?
As your mortgage broker, we represent your interests and take the time to understand your entire story. We’re not tied to one specific lender nor do we have a hidden agenda. We’ll guide you through the homebuying process and give you the advice, strategy and tools you need to succeed as a first time homebuyer. Plus, it’s a service that’s at no cost to you.
What is the minimum down payment?
Minimum down payment for your first home purchase is 5% of the first $500,000 and 10% on anything above that.
Down payments can consist of your savings, RRSP's of up to $35,000 per applicant (first-time homebuyers only or if you've recently separated), gifted down payment, inheritance, and to clarify, can still even be borrowed (i.e from a line of credit or loan).
What is the difference between a deposit and a down payment?
A deposit is a sum of money you pay up front to secure, or commitment to move forward with your accepted purchase and sale agreement. The deposit is typically held in trust by the Buyer's Agent’s real estate office. The down payment is the money that you pay to the seller to be eligible for financing.
The deposit is generally part of the down payment. If the down payment is $40,000 and you give a $20,000 deposit, that $20,000 would count towards the total down payment.
Once you find the house that you want to make home, you’ll work with your realtor to submit your offer to the sellers. With your pre-approval and qualification information you’ll show sellers that you’re serious and confident about your home purchase.
What is a fixed rate mortgage?
A fixed rate mortgage is when the interest rate is set for a predetermined term - usually between 6 months to 25 years. This offers the security of knowing what you will be paying for the term selected.
What is a variable rate mortgage?
A variable rate mortgage is when payments are fixed for a period of one to two years although interest rates may fluctuate from month to month depending on market conditions. If interest rates go down, more of the payment goes towards reducing the principal; if rates go up, a larger portion of the monthly payment goes towards covering the interest.
What is a pre-approved mortgage?
A pre-approved mortgage is an interest rate guarantee from a lender for a specified period of time (usually up to 120 days) and for a set amount of money. The pre-approval is calculated based on information provided by you and is generally subject to certain conditions being met before the mortgage is finalized.
The pre-approval amount is the maximum you may get. It does not guarantee a mortgage for that amount. The approved mortgage amount will depend on the value of the home, your down payment and income information.
Most real estate professionals will want to ensure you have a pre-approved mortgage in place before they take you out looking for a home. This is to ensure that they are showing you property within your affordable price range.
What is the process to get approved?
It’s easy to get started! The first step will be information gathering which will take merely minutes to complete. From there, our team will work hard to underwrite a mortgage pre-approval for you.
We’ll also provide you with an in-depth lender comparison report and discuss every option available to you. You'll also learn about the resources provided and your next steps up to and after your first home purchase.
With our digital mortgage management portal, you can sign-in to your unique profile where you can update your profile, verify information, upload documents, track your loan status and communicate with your advisor, anywhere, anytime.
What are the closing costs?
We will ensure to outline your unique closing costs based on your situation. Some of the associated closing costs may include:
Land Transfer Tax
You will be required to pay a one-time tax based on a percentage of the purchase price of the property and/or mortgage amount. As a first-time homebuyer, you'll enjoy up to a $4,000 land transfer tax credit applied against the total on closing.
If your down payment is less than 20%, then you will need to pay PST on the mortgage default insurance (known as CMHC).
Real Estate Legal Fees, plus Lawyer’s disbursements
These fees will vary from lawyer to lawyer, budget for $2,000 to be conservative.
$500 to $800. Optional costs but strongly recommended to have it done. It is usually placed as a condition to the Offer to purchase. The inspection may bring to light areas where repairs or maintenance are required. Usually the inspector will provide you with a written report. If they don't, then ask for one.
$300 to $500. An optional cost however some lenders would prefer to appraise the home before granting the loan.
What is mortgage insurance?
Mortgage loan insurance is a type of insurance provided by Canada Mortgage and Housing Corporation (CMHC), a crown corporation, and GE Capital Mortgage Insurance Company, an approved private corporation. This insurance is required by law to insure lenders against default on mortgages with a loan to value ratio greater than 80%. The insurance premiums, ranging from .50% to 3.75%, are paid by the borrower and can be added directly onto the mortgage amount.
How can I get the land transfer tax credit?
First-time homebuyers in Ontario can qualify for a rebate equal to the full amount of their land transfer tax, up to a maximum of $4,000.
Based on the Ontario land transfer tax rates, the rebate will cover the full tax amount up to a maximum home purchase price of $368,333. For homes with purchase prices over $368,333, homebuyers will qualify for the maximum rebate, but will still owe the remainder of their land transfer tax. If you are buying your home with your spouse, but only one of you qualifies for this rebate, you can still receive 50% of the rebate.
What are the qualifications for being considered as a first time home buyer and can I use my RRSPs?
You are considered a first-time homebuyer if you or your spouse or common-law partner have not owned a home in the last for years.
Each applicant can withdraw up to $35,000 from their RRSPs, tax free, to put towards a down payment on your first home. These funds can be used for any homebuying costs including land transfer tax, legal fees, home furnishing, etc.
Your RRSP contributions must stay in the RRSP for at least 90 days before you can withdraw them under the HBP. If this is not the case, the contributions may not be deductible for any year.
You can also withdraw from your RRSP up to 30 days after your home purchase (closing). However, there can only be one withdrawal, whether before or after.