First Time Buyers

 

Why Rent When you Can Own!

 

Two out of three Canadian families own a house – that's one of the highest rates of home ownership in the world. And for good reason!

 

Real Estate is a great investment.  And with increasing housing prices, it's all the more important for first-time buyers to get a foot on the first rung of the property ladder.

 

Why Rent when you can own?  If you're like most renters, you feel trapped within the walls of a house or condo that doesn't feel like yours ...and in fact it isn’t!  The real fact is every month you lose 100% of your rent, to pay off your Landlord’s mortgage!  

 

When you do improvements to your rental home, it may help your living situation, but it is the Landlord who benefits from your hard work!  Not only that, but you have to get permission every time you want to change a wall from pink to white, or bang a nail. You feel like you're stuck in the renter's rut with no way of rising up out of it and owning your own home. 

 

With Interest rates at all time lows, you may be surprised what your rent could be doing if it was paying off a mortgage!  Sometimes for the same dollars, or slightly more and some smart budgeting, you can begin paying off your own mortgage.  Unfortunately many Renters get caught in the hand to mouth of renting, ... soon 10,15 and 20 years have passed, and al the money paid into rent is 100% gone!   Even if home prices did not increase, the amount of mortgage that could have been paid of with the equivalent of your rent money may shock you!  This is real money in your jeans and for your future!

 

Advantages of homeownership:

  • PRIDE OF OWNERSHIP: When you own, you have the freedom to renovate and decorate as you please.  Your home is a place where you can be uniquely YOU!  Your style, your personality, your priorities can all be expressed to the fullest!
  • YOUR OWN SENSE OF HOME, HAVEN, IDENTITY AND FAMILY:  Family and community. Homes can strengthen ties to your family and members of your community. More than basic shelter, your home is the place where you connect with those you love and where you provide a haven from the stresses and busyness of everyday life. 
  • NEST EGG: Homeownership is the single largest source of savings for Canadian households.
  • EQUITY BUILDER: Your mortgage payments will build equity as you pay down your principal amount owing (as opposed to renting, where your money goes to the building owner’s equity).  Every month a little more is paid down, and with today’s interest rates, it doesn’t take long. 
  • APPRECIATION OVER TIME: Unlike other investments that can be volatile, when you buy a home the increase in its value is relatively steady. When you look at the 10 year average of home prices, the average home value increase has been consistent and positive for the past 50 years!
  • INVESTMENT:  The return on investment for a house can be substantial. In 2004, the average house price in Canada rose by 9% in just one year. It also experienced a 27% increase over four years.
  • CREDIT:  Homeowners can use the equity in their homes as security for other loans.
  • FIRST STEP TO MORE!:  Buying a home and building equity is the first step on the property ladder. It gets you into the housing market, keeps you in touch with increasing house prices, and puts you in a good position to trade up to bigger and better homes as your circumstances allow.

 

How much can I afford?

 

So how do you get from here to there? Bridging the gap between dreaming and owning can be costly, BUT WORTH EVERY PENNY!

 

Most lenders say that your monthly housing expenses (principal, interest and taxes) should not exceed 30% of your family income (before personal income tax). This is called your gross debt service ratio (GDS).

 

Lenders may also look at your total debt service ratio (TDS). Your TDS takes into account monthly housing expenses, plus other debts and loans you may have.

  1. Multiply your monthly gross (before tax) income by the maximum TDS ratio of 40%.
  2. Subtract your regular monthly costs (e.g. credit cards, car payments, personal loans).

The figure you are left with represents the maximum amount available for your mortgage payment, property taxes and 50% of condo fees (if applicable).

 

The first step to home owning is to connect with a local REALTOR you can trust!  Shawn has many years in the business, and his heart is for you to see your dreams of home ownership become a reality for you...whatever those dreams are.

 

Secondly would be for your to visit a local mortgage broker, so he can go through the initial qualifying stages with you, in order to ascertain what type of financing you can qualify for.  You may be interested in CURRENT MORTGAGE RATES, and a MORTGAGE CALCULATOR.  There is no commitment at this point, and all information is confidential.  This is something between you, your broker and your REALTOR to know, so you they can help you set realistic goals, timeline, and plan for property ownership. 

 

 

PROPERTY PURCHASE TRANSFER TAX FIRsT TIME BUYER EXEMPTIONS

 

Normally on a property purchase, there is a BC Property Purchase Transfer Tax which amounts to:

1% of the 1st $100,000; and 2% on the balance. 

 

For first time Buyers, there is a one time exemption or partial exemption that is possible to apply for.   In general:

  • This applies to a property purchase of a maximum $425,000;
  • Purchaser must a first time owner/buyer of property, any where in the world;
  • Purchaser must be a Canadian Citizen, and a BC resident for at least 12 months;
  • Property must be a primary place of residence and be under 1.25 Acres.

 

FIRST TIME BUYERS AND USING RRSP’S AS DOWNPAYMENT

 

Since 2009, first-time homebuyers have been allowed to withdraw up to $25,000 from their Registered Retirement Savings Plan (RRSP) for a deposit on a home purchase.

 

The First-Time Home Buyers' Tax Credit (HBTC), is a non-refundable tax credit, and has  been available to first time home buyers who acquire a qualifying home after January 27, 2009. Based on an amount of $5,000, the HBTC will provide up to $750 in federal tax relief.

 

The HBP is a program that allows you to withdraw funds from your RRSPs to buy or build a qualifying home.  You can withdraw up to $25,000 in a calendar year. The home can be for you, or it can be for a related person with a disability. If the home is acquired by a person with a disability or for a related person with a disability, one of the following should apply:

  • it is more accessible to that person than his or her current home; or
  • it is better suited to that person's needs.

As an HBP participant, you can acquire the home for the related person with a disability, or you can provide the withdrawn funds to the related person with a disability to acquire the home.

 

There are a number of other qualifications and requirements under this program, both in use and payback, but we suggest you talk to your accountant for more current details. 

SHAWNWORSFOLD

REECEWORSFOLD


shawn@swproperties.ca

250.870.7771

 

Hon B. Sc, Realtor ®

Unlicensed Assistant


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