Are you a first-time homebuyer?

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While purchasing a home is a popular option or goal, with close to two-thirds of Canadians households owning their home1 it’s not a decision to be taken lightly. Beyond the purchase price, there are a number of costs associated with buying and owning a home. A first-time homebuyer who’s considering the downpayment and regular mortgage payments would also want to plan for the following costs of home ownership:

legal fees;
land transfer tax (where applicable);
annual property tax;
strata fees (where applicable);
home insurance;
disability and life insurance;
repair and maintenance costs;
utilities; and
mortgage default insurance (required when the downpayment is less than 20 percent of the purchase price).

Note: This list is non-exhaustive and includes a selection of additional or common costs associated with home ownership.

A home purchase with a downpayment of less than 20 percent of the purchase price is called a high-ratio mortgage. High-ratio mortgages are at an increased risk of default, which is a situation where the buyer is unable to make their mortgage payments. Mortgage default insurance covers this risk. The premium for mortgage default insurance is often added into the mortgage payment.

You can save the money you need to buy a house, but most first-time homebuyers will make a downpayment and take out a mortgage. A downpayment is a lump sum of money you put towards the purchase of a home, at the time of the purchase. A mortgage is a loan to cover the remainder of the purchase price. A mortgage is also classified as a secured loan because the property provides collateral, or security, for the loan.

At minimum, a homebuyer needs a downpayment of at least 5 percent of the purchase price, when the home is priced under $500,000. For homes priced over $500,000, the downpayment required is 5 percent of the first $500,000 and 10 percent for the portion above $500,000. When the home has a purchase price over $1,000,000, the downpayment must be at least 20 percent. There are several government programs and incentives to help first-time homebuyers achieve the goal of purchasing their own home.

For more information on your first home purchase, savings programs and planning options, contact us today.

Interested in learning more? Check out these related resources:

Reference:

Statistics Canada Census of Population. The Daily. “To buy or rent: The housing market continues to be reshaped by several factors as Canadians search for an affordable place to call home.” (Released September 21, 2022) https://www150.statcan.gc.ca/n1/daily-quotidien/220921/dq220921b-eng.html

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