FIRST TIME HOME BUYER GUIDE
Buying your first home can be both exhilarating and intimidating. There are many items you should know and this guide should shed some light on the subject. The following guidelines have been assembled to help you feel more comfortable with this new chapter in your life. We at the Today Team are very experienced with property virgins and look forward to making the course of action less daunting.
Government Programs
There are two government programs available for the first time home buyer and were created as incentives to make the process more affordable.
Property Transfer Tax Exemption
Upon purchase of your first home you may qualify for an exemption from property transfer tax if certain requirements are met. In B.C. we pay this tax when we register a property at the Land Titles Office.
The B.C. property tax is calculated at 1% on the first $200,000 and 2% on the remaining balance.
What are the requirements?
Purchasers qualify if:
- You are a Canadian citizen, or a permanent resident as determined by Immigration Canada.
- You have lived in British Columbia for 12 consecutive months immediately before the date you register the property, or you have filed 2 income tax returns as a British Columbia resident during the 6 years before the date of registry.
- You have never owned an interest in a principle residence anywhere in the world at anytime, and
- You have never received a first time home buyers exemption or refund.
Properties qualify if:
- The fair market value of the property is not more than $425,000.
- The land is .5 hectares (1.24 acres) or smaller and,
- The property will only be used as your principle residence.
How do I apply for the exemption?
Generally, a lawyer or notary public registers for the exemption on your behalf when he/she registers the property at the Land Title office.
If you do not apply for the exemption when the property is registered you have an 18 month grace period from the date of registry.
RRSP Withdrawal
The Home Buyers Plan allows eligible individuals to withdraw up to $25,000 tax free from their RRSP to purchase or build a qualifying home. Under this Plan you must begin repayment within 2 years of the withdrawal and full payment is required within 15 years or the balance is subject to tax. Please seek advice from a tax consultant or the financial expert that is managing your RRSP.
The Canada Revenue Agency considers the following persons first time home buyers:
- Persons, including former homeowners, who have not owned a home they occupied as a principle place of residence at any time during the four year period before the date of withdrawal of funds.
- Disabled persons acquiring a more accessible home.
- Persons acquiring a more accessible home for a disabled person related to them by blood, marriage, common-law partnership or adoption.
- Persons providing funds to a disabled person related to them by blood, marriage, common-law partnership or adoption, to build or purchase a more accessible home.
- Other criteria may apply. For more information please visit the following website:
www.cra-arc.gc.ca/E/pub/tg/rc4135/README.html
Down Payment
In order to qualify for a mortgage, down payments generally range from 5% to 20% of the purchase price or appraised value (whichever is less).
If you have 20% or more for a down payment you can qualify for a “conventional mortgage”. There are many types and terms available with an array of different rates.
If you have less than 20% for a down payment then you must qualify for a “high ratio mortgage”. You will need to purchase loan insurance through CMHC or a private company. This insurance can be blended in with your monthly payment and ranges from 1% – 3.5% or it can be paid up front.
We recommend that you consult a mortgage specialist or bank so they can meet your requirements, needs, expectations and provide the many options available. It is also recommended that you get pre approved for a mortgage and most lenders will guarantee that rate for 90 days. This will usually give us time to find your new home and provides us at the Today Team leverage when negotiating your purchase.
10 Tips for First Time Home Buyers
1. Start by finding a good realtor and if you are reading this you have already found some of the best in the business
2. Apply for a pre approved mortgage, which is good for at least 90 days, not a pre qualifier which isn’t. This will help us keep you on budget and let the seller know that you are a serious buyer. This equates to leverage and ultimately saving you money.
3. Budget for extra expenses, like moving, utility hook ups and if required new appliances.
4. Closing costs need to be part of your budget. See our section on Closing Costs on our website.
5. Consider using the government programs previously explained in this section.
6. Buy a home you can afford. You can’t enjoy your life when every cent goes towards your payments. This is where our expertise is advisable. We can help you with determining a realistic budget.
7. Get a home inspection by a licensed inspection company. The cost runs around 350.00 and with this type of investment that is money well spent. We at The Today Team will ensure that this clause is entered as part of the contract and a summary is conducted on your behalf.
8. Make an offer only if you are serious and until you have seen other homes for comparison. We will ensure that it meets the current market conditions and other factors such as the sellers needs.
9. Keep your emotions in check when negotiating. Impulse buying can have many negative affects. Let the Today Teams experience guide you through the bidding war and prepare to walk away if the house is out of your price range.
10. Trust and rely on your agent. We pride ourself on our integrity and experience to guide you through the properties that fit your budget, your lifestyle and personal taste.