With interest rates still sitting near historically low levels – with nowhere to go but up – now is an ideal time for first-time homebuyers to embark upon homeownership.
But if low interest rates still don’t tip the scales on your decision to enter the property market, perhaps the information below will.
The main reason many renters feel they can’t afford to purchase a home has to do with saving for a down payment. But there are many solutions available today that can help first-time buyers with their down payments.
Many lenders will allow for a gifted or borrowed down payment. And of those lenders that will not provide this alternative, many offer cash-back options that can be used as a down payment.
Better yet, there are programs available from some financial institutions where they will offer a “free down payment” or a “flex down”. Of course, you will end up paying about 1% more in your interest rate, but the program will help you get in the homeownership door and start accumulating equity earlier. The only catch, however, is that you must remain with the original lender for the full initial five-year term or else you’ll have to pay the down payment back.
Under the RRSP Home Buyers’ Plan, first-time homebuyers can withdraw up to $25,000 from their RRSPs for a down payment – tax- and interest-free.
And if there’s a couple making a home purchase together, they can each withdraw up to $25,000 from their RRSPs.
Making an informed decision
There’s an endless amount of information available to prospective homeowners – through the Internet, friends, family members and anyone willing to voice their opinion on a given subject. What you need, therefore, is education and coaching as opposed to being bombarded with more information.
That’s why it’s important to speak to a real estate agent and a mortgage professional in order to get a pre-approval prior to setting out home shopping. This will help set your mind at ease, because many first-time buyers are overwhelmed by the financing and buying processes, and often don’t know what it truly costs to purchase a home. Real estate and mortgage professionals can provide you with real examples that can go a long way in showing you what it really costs to buy a home in your area versus what you’re currently paying in rent.
You may be pleasantly surprised by how manageable it is to start building equity in your own property as opposed to helping pay someone else’s mortgage each month!