The decision to buy your first home is easily the most stressful and equally the most exciting financial decision you’ll make in your life. From semi-detached to row houses, bungalow to condo, the possibilities are endless and can keep you up at night.
What shouldn’t worry you? How you’re going to pay for it. Many young, first-time home buyers put off buying their first home because they are afraid of the financial commitment, but you shouldn’t let money get in the way of your family dreams.
Today, from comprehensive savings plans to flexible mortgages and more, there are many financial options available to would-be homeowners, and lenders are more than willing to help adapt their plans to fit the individual needs of a home buyer’s lifestyle and priorities.
Get Pre-approval For Your Mortgage Loan
Getting pre-approved for a loan means the bank or lender has investigated your credit history and determined that you are a suitable candidate for a mortgage. Mortgage specialists and lenders encourage pre-approval since it gives you an idea of the amount you are qualified to borrow, the interest rate you will be charged, and the payment amounts you will make. You benefit by knowing exactly what you can afford and being able to negotiate arrangements with the homeowner or builders with confidence.
Choose A Mortgage Plan
There are a few different options in terms of how you borrow money from your lending institution.
Fixed-rate mortgages: These offer the security of a locked-in interest rate for the duration of your term, typically one to five years.
Variable-rate mortgages: They may offer a lower interest rate than a fixed-rate mortgage, but the interest rate is linked to the prime rate and fluctuates with it. This could mean decreases or increases in the rate you pay over the term you select.
Blended-rate mortgages: These offer a combination of both fixed- and variable-rate financing, combining the benefits and risks of each type of mortgage.
The flexibility of today’s mortgage rates is important, as if interest rates go down, it might be possible to renegotiate your existing mortgage at a lower rate. Or if your financial situation changes and you are able to pay your mortgage off faster, there are prepayment options such as increased regular payments and lump sum prepayments.
Prepare Your Down payment
Your mortgage down payment is the amount of money you put upfront in order to get a loan. In Canada, you can borrow with as little as 5 per cent down, but when you provide a down payment of less than 20 per cent, the mortgage must be insured against default, however, the insurance premium can be added to the mortgage.
If you have been putting money into a Registered Retirement Savings Plan (RRSP), first time home buyers can take advantage of the Home Buyers Plan, which allows you to withdraw up to $25, 000 from your RRSP, tax free, for use as your down payment, or to cover other purchase related costs. Your partner can do the same for a combined total of $80, 000. These funds have to be paid back to your RRSP account within 15 years, though you don’t have to begin repayment for two years. For more information, visit the Canada Revenue Agency online, or contact your local agency office.
Once your financing is in place The Right Wans are here to execute the home-finding plan and begin showing you carefully-selected homes from our neighborhood and market analysis, that match your unique needs. Contact us today!