First Time Home Buyers – Tips, Grants, Rebates and Government Programs

Knowing what you can afford is the absolute first step to buying a home in Collingwood or the Blue Mountains. You don’t want to go looking for homes and come up empty-handed because you thought you could afford more than you actually could!

When it comes to mortgages, a stress test is a way of determining exactly how much you can afford and under what circumstances. For example, if your income was reduced due to a job loss or unforeseen expense, could you still afford to make mortgage payments? What if interest rates spike or you need to refinance your home?

Knowing that you can still afford to pay your mortgage in the case of an interest rate increase can make the difference between the type of home you start shopping for or how you re-evaluate your budget if you’re already a homeowner.

Due to new mortgage rules that came into effect Jan. 1, 2018, all homebuyers getting either a high-ratio mortgage (those with a down payment of less than 20% on the purchase price on a home) or an uninsured mortgage (those with a down payment of at least 20%) are now subject to a mortgage stress test and have to qualify at a rate that’s higher than they actually pay. (Previously, only high-ratio mortgages were subject to this test).

Start with a Mortgage Affordability Calculator

Start with the mortgage affordability calculators on this website. Here you will enter in your household income, debt payments, down payment and amortization (how long you want to have the mortgage for). It will give you a rough idea of what you can afford in a monthly, weekly or bi-weekly payment.

Check Your Credit Score

A good credit rating is essential for getting approval for a mortgage loan. There are a few companies in Canada where you can check your credit score without affecting your rating. They also send monthly updates and recommendations to improve your score. Visit these websites for more information:  Borrowell.ca  | CreditKarma.ca

 

Get Pre-approved

Once you’ve done this step, get your finances in order and head to the bank to find out actually how much the bank will give you. All first-time homebuyers should have a pre-approval in hand before setting out to look at homes. This will give you a good range in which to conduct your search and give the sellers more confidence in your commitment to buy a home (you just need approval upon acceptance of an offer).

Most mortgage lenders consider five factors when determining whether you qualify for a mortgage loan: income, debts, employment history, credit history and value of the property you want to buy. They will also consider how much of your total income you’ll be spending on housing. This helps the lender decide whether you can comfortably afford to buy a home.

One of the first criteria a lender will consider is how much of your total income you’ll be spending on housing. This helps the lender decide whether you can comfortably afford to buy a home.

A lender will then look at your debts and monthly obligations — such as loan payments, credit cards, and child support.

A history of steady employment, usually within the same job for several years, helps you to qualify. But a short history in your current job shouldn’t prevent you from getting a loan, as long as there have been no significant gaps in income over the last two years.

First Time Home Buyers Grants, Tax Credits, Rebates and Loans

Speak with your local lending institution and your real estate professional about any special financing or tax breaks available. Many levels of government offer programs to help people get in the property ladder. Here are a few examples:

Simcoe County Homeownership Program

The County of Simcoe offers a down payment assistance program aimed at helping low- to moderate-income renters purchase a home of their own and get out of the rental market and free up rental units.

This program also offers a 20-year forgivable loan of 10% of the down payment needed on a qualifying home valued at less than $462,645. As with other programs, the loan is interest free and does not need to be paid back unless you move out of the home before the 20 years is up. Some of the funding is put aside for Aboriginal renters under a twin program, but you must choose one program or the other.
For more information: Simcoe.ca Home Ownership

Ontario Land Transfer Tax Rebate

When you buy land or an interest in land in Ontario, you pay land transfer tax. First-time homebuyers of an eligible home may be eligible for a refund of all or part of the tax. Up to $4,000.
For more information: Ontario Ministry of Finance Land Transfer Tax

First Time Buyers’ Tax Credit

The FTHB Tax Credit offers a $5,000 non-refundable income tax credit amount on a qualifying home acquired after January 27, 2009. For an eligible individual, the credit will provide up to $750 in federal tax relief.
For more information: First-Time Home Buyers’ (FTHB) Tax Credit

Home Buyers Plan (HBP)

The Home Buyers’ Plan (HBP) is a program that allows you to withdraw up to $25,000 in a calendar year from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability.
For more information: Home Buyers’ Plan (HBP)

GST/HST New Housing Rebate

You may qualify for a rebate of part of the GST or HST that you paid on the purchase price or cost of building your new house, on the cost of substantially renovating or building a major addition onto your existing house, or on converting a non-residential property into a house.
For more information: GST/HST New Housing Rebate

Resources:

Canadian Mortgage & House CMHC
Homebuying Step by Step: Your Guide to Buying a Home in Canada

Home Buying Step-by-Step Workbook & Checklists

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