For most people, buying a home is the biggest transaction they will ever make. Preparing financially to purchase your first home requires solid discipline and exemplary rigour. Adopting certain behaviours will help you reach first-time home ownership faster. Here is a series of tips to help you make your dream of buying your first home a reality.
A budget is a must
There is no way around it: keeping a budget and sticking to it is the foundation of the work to be done when planning to buy your first home. Once the timing of the purchase is set (in 6 months, 1 year, 5 years), it is imperative to have a good idea of the purchase amount you can afford and to know your borrowing capacity.
Draw up a current picture of your financial situation, including all of your income, expenses and debts. Then run a few mortgage scenarios that are realistic for your situation. You will already have a good first idea of the price range you can consider.
Meet with a financial advisor who can arrange a mortgage pre-approval. You will then know exactly how much you can borrow for the purchase of your home. You can review repayment options with them so you can choose, when the time comes, the one you feel most comfortable with.
Do not forget that your credit score will be taken into account by the lender in determining how much they are willing to grant you. The better it is, the better your credit file, and the more you will be able to borrow, which is why it is important to pay down your debts and stay current on your payments.
Saving is not rocket science
Putting money aside can seem quite difficult at first, since it also means giving up a certain amount for other expenses. On a weekly or monthly basis, deposit into a savings account an amount that will serve as your down payment when you are ready to buy.
To be valid, the down payment must be at least 5% of the property’s purchase price. The higher it is, the more it reduces the total loan amount. A smaller mortgage to repay also means less interest to pay your mortgage lender, and more money in your pocket.
A few tricks can help you save toward buying your first home.
- Use cash for your expenses. You will be better able to see how much you have left for the week.
- Go easy on credit. Pay with cash or a debit card as often as possible and avoid your credit card, which will only increase your debt.
- Limit restaurant outings. Instead, invite friends over to share a good meal, or watch a movie on TV rather than at the theatre. Together, these small habits will quickly add up to savings.
- Contribute to your RRSP. The Government of Canada’s Home Buyers’ Plan (HBP) will allow you to withdraw a substantial amount that can serve as your down payment.
A new home as a first purchase?
People tend to wrongly believe that first-time buyers should only consider a used home. In fact, a new home is not necessarily more expensive to buy, and it offers many advantages. First, it can be tailored to the buyers’ taste, since the homes can be customized through the choice of different materials, colours and finishes. You take possession of a property that reflects your tastes and, what’s more, will not need renovations for many years.
It is true that federal and provincial taxes must be paid on a new home, which increases the purchase price. However, you should know that it is possible to be reimbursed up to 36% of the GST and 50% of the QST, up to a maximum of $6,300. This Quebec government measure encourages the purchase of new homes.
Finally, a new home will allow you to save a good amount of money by taking advantage of the promotions offered by the builder. The market is currently favourable to buyers, who benefit from many included extras. Groupe PM is proud to offer its clients standout offers that will make taking possession of a first home even more enjoyable and memorable.
