This week’s blog is the second of two by guest contributor Mandy Szucs, AMP. Mandy is a mortgage expert and the Principal Broker at Signature Mortgage Group in Oakville. This week, Mandy shares advice for first time home buyers.

At some point in their lives, most Canadians have probably asked themselves whether it is better to buy or rent a home.

Owning a home is generally considered to be a sound, long-term investment that can provide satisfaction and security for you and your family. That same amount of money you are paying in rent could be a mortgage payment and instead of building equity for your landlord you will be doing that for yourself.

If you do decide that home ownership is right for you, it is important to choose a home you can afford. Interest rates are still at historical lows and now may be an ideal time to enter into home ownership for the first time.

To start you will want to seek assistance in getting a pre-approval. Throughout the pre-approval process a Mortgage Professional will put together a mortgage plan for you; confirming how much you would qualify for in relation to your income and available down payment you will have for your purchase.

While these numbers will show the maximum purchase price you could afford it is important to also take into consideration what your comfort level is and not exceed that.

First Time Home Buyer Program

As a first-time home buyer you can put as little as 5% of the first $500,000 of the purchase price plus 10% for the portion of the purchase price above $500,000 up until $999,999. The down payment can be sourced from your own saving or gifted funds from an immediate family member.

There are also special products available for borrowed funds however, this type of mortgage will come with higher interest rates. We’ll explore these in more detail later on.

First Time Home Buyer Expenses

There are a few other expenses to consider when starting the home buying journey; closing costs and land transfer tax. Legal expenses, title insurance, appraisal costs will vary depending on your purchase however, land transfer tax will be your largest expense. As a first-time home buyer you will get a first-time rebate of up to $4,000 for the land transfer tax and will be responsible for payment of any amount over and above this.

If you are thinking of buying your first home, Signature Mortgage Group’s mortgage professionals can answer all your mortgage-related questions and help you put the dream of home ownership in sight.

Transitioning from Renter to Homeowner

Transitioning from renter to homeowner is one of the biggest decisions you’ll make throughout your lifetime. That’s why it’s essential to surround yourself with a team of experts – including both a mortgage and real estate professional – to walk you through the steps as a first-time home buyer, answer all of your questions and concerns, help you decide what kind of home you can afford, and get you pre-approved for a mortgage.

With interest rates still hovering around “emergency” levels – low rates never before seen by your parents and even your grandparents – now is an ideal time for first time home buyers to embark upon homeownership.

Down payment

The main reason many renters feel they cannot 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. You must, however, stay with the original lender for the full initial five-year term or else you’ll have to pay the down payment back.

Last year, a $5,000 increase was made to the RRSP Home Buyers’ Plan, meaning first time home buyers can now withdraw up to $25,000 from their RRSPs for a down payment – tax- and interest-free.

And if you’re part of a couple making a home purchase together, you can each withdraw up to $25,000 from your RRSPs.

Educating and coaching

There is 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 really need, therefore, is education and coaching as opposed to being bombarded with more information.

Speaking to a mortgage professional to obtain a pre-approval prior to setting out home shopping can 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 examples can go a long way in showing you what it costs to buy a home versus what you are paying in rent.