How To Become A Homeowner – A Step By Step Guide
Becoming a homeowner can be very exciting, but it’s not always the best decision for everyone. Before buying a home, such as a house or a condo, make sure you consider all costs.
According to Canada Mortgage and Housing Corporation (CMHC), your monthly housing costs should not be more than about 39% of your gross (before deductions) monthly income. These costs include your mortgage payments, property taxes and heat costs.
Your entire monthly debt load should not be more than 44% of your gross monthly income. This includes your mortgage payments and all your other debts, such as loan or credit card payments.
Saving for your home
To buy your home, you’ll need a down payment. To accumulate the amount you need, make saving part of your budget. Most employers deposit your pay directly into your bank account. Set up automatic transfers to a savings account for each pay period.
You’ll want to keep the money you save protected and easily accessible. Short-term savings and investment options can include savings accounts, guaranteed investment certificates (GIC) and low-risk mutual funds. Ask your financial institution about the short-term investments they offer and how your money is protected.
Tax-Free Savings Account
A Tax-Free Savings Account (TFSA) lets you save or invest your money tax-free. You won’t pay tax on money you withdraw from your TFSA. You can also use your TFSA to help you buy a home.
Registered Retirement Savings Plan
A Registered Retirement Savings Plan (RRSP) allows you to save money for your retirement. You don’t pay taxes on your savings until you withdraw money from the RRSP. You can also use your RRSP to help you buy a home.
Deposit insurance
Deposit insurance protects your savings if your financial institution fails. The Canada Deposit Insurance Corporation (CDIC) automatically insures your eligible deposits. This applies to deposits held at CDIC member institutions in Canada.
Home buying programs and incentives
The Government of Canada offers home buying programs and incentives for homebuyers. These can help you purchase your home. The programs and incentives include the following:
The Home buyers’ amount
You may be eligible to receive a non refundable tax credit of up to $1,500.
GST/HST new housing rebates
You may be eligible for a rebate for some of the tax you pay when buying your home.
The Home Buyers’ Plan (HBP)
You may withdraw up to $35,000 from your registered retirement savings plan (RRSP) tax-free to buy your first home.
Budget 2024 increased the HBP withdrawal limit from $35,000 to $60,000. This limit applies to withdrawals made after April 16, 2024.
The First Home Savings Account (FHSA)
You may be eligible to save up to $40,000 tax-free to buy a home with an annual contribution limit of $8,000. Your provincial or territorial government may also offer other home buying programs and incentives.
Getting preapproved for your home
Before you start looking for the home you’d like to purchase, get preapproved for a mortgage. Once you know what amount you qualify for, you can start looking for the home that is right for you and your budget.
Finding your home
To find the home you want to buy, do your research. There are many websites, online resources and mobile applications (apps) to help you find the right home for you. Realtors can also help you with your research.
Using a realtor is optional. A realtor usually searches for homes, negotiates a purchase price, fills out and files paperwork and more. The seller pays the realtor’s fees when you buy a home.
Paying for your home
A mortgage is probably the biggest loan you’ll get in your lifetime. It’s important that you understand the process.
Shop around to get the mortgage that is right for you. Mortgages have different features to meet different needs. It’s important that you understand them before you decide.
Home buying costs
When you buy a home, you have to pay for upfront costs in addition to your mortgage. Upfront or closing costs are one-time fees that you have to pay when you buy a home. You usually pay these costs by the time the sale is completed.
Examples: include home inspection fees, legal fees, property tax adjustments and title insurance. Be prepared to spend between 1.5% and 4% of the home’s purchase price on these costs. Always use news9ja tools to research your best targeting.
Leave a Reply