Tips for first-time homebuyers

For many, buying a home is one of the first – and biggest – goals in life. But the process of finding that first house and arranging to pay for it can also be one of the most complicated tasks in life. Especially when finances are limited, the market is pricey and there’s so much choice.

By Institute of Chartered Accountants of Ontario – 

Tips for first-time homebuyers

For many, buying a home is one of the first – and biggest – goals in life. But the process of finding that first house and arranging to pay for it can also be one of the most complicated tasks in life. Especially when finances are limited, the market is pricey and there’s so much choice.

Chartered Accountant Suzanne Schultz is a financial planner with RBC Dominion Securities and host of HGTV’s House Poor, a show that gives advice to people who find they’ve bitten off more house than they can really chew…financially. Here are her top 10 tips for first-time home buyers who don’t want to be the next guests on her show!

1. Crunch the numbers yourself before shopping for financing – Banks and other lenders have formulas to determine how much you can afford to borrow. But they don’t tell the whole story. Things like child care, which can be a huge expense for young parents, are not always factored into the budget unless you specifically mention them.

2. Find financing, then a house – In other words, don’t fall in love before knowing what you can realistically, all-costs-in, afford. Know, too, about the cost of money, and how much that mortgage is really going to add to your bottom line each month.

3. Read up on interest rates – They’ve begun to rise, but how far they’ll go and by when is anybody’s guess. Imagine the worst cast scenario for the next five years and build your financial plan around that number. If things turn out better, you’ll be ahead of the game.

4. Reconcile your dreams with your bank account – Be realistic. Start with a small mortgage at an amount that lets you sleep at night. Your first house probably won’t be your dream house, but it can be a good place to start working towards it.

5. Find out what that “great deal” really buys you – Financing homes is a competitive industry, and there are lots of incentives. Make sure you understand the full cost of any discounts, cash-back offers or insurance associated with the property and its purchase.

6. Add in upkeep – Home ownership comes with a whole new category of expenses. Whether it’s a new roof and shrubbery, or a few flowers in a planter on the balcony, you’ll be wise to put aside another two per cent or so each year for upkeep.

7. Start saving before you start shopping – The greater the down payment, the cheaper the financing. Mortgages with less than 20-per-cent down must be insured with the Canada Mortgage and Housing Corporation or Genworth Financial Canada – another expense to factor in.

8. Get government help – Under the Home Buyers’ Plan, you can withdraw up to $25,000 from your RRSP to buy your first home. But the money must have been in your RRSP for at least 90 days before the withdrawal. So, be sure to make any additional contributions to your RRSP before activating the Home Buyers’ Plan.

9. Know what constitutes a good real estate investment – Location, location, location…and value, value, value. Don’t be tempted by things like swimming pools or other amenities that can have limited appeal on resale.

10. Speed up your repayment plan – No better way to get your money working for you than by paying down your mortgage ahead of schedule. Make sure your mortgage agreement allows this, and make it a priority to increase or even double-up on payments as often as you can. Also, consider a shorter amortization period or increase the payment frequency to shave years off your mortgage, and even thousands off your interest costs.