First Time Home Buyers

Five-year Fixed Rate Mortgages

When you apply for a mortgage, you have the choice of getting either a fixed or variable interest rate. The most popular kind of mortgage is a five-year fixed rate mortgage, which means your rate is set for the first five years of your loan.

As the name implies, fixed-rate mortgages are constant for the duration of the term. There are also variable-rate mortgages, which fluctuate with the bank’s prime rate. The advantage of a fixed-rate mortgage is that your mortgage payments won’t change your rate won’t increase even if the prime rate increases. Because of this, the interest rate on fixed-rate mortgages tend to be higher than variable-rate mortgages. With a variable-rate mortgage, your interest rate will decline if the bank’s prime rate falls. However, if the prime rate increases, so will the interest rate on your mortgage.

Down Payment Rules

A down payment refers to the money a purchaser must pay upfront when buying a home. Typically, the down payment is a much smaller amount compared to the size of the mortgage. Together, the down payment plus the mortgage represent the total value of the home being acquired. Down payments are usually expressed as a percentage of the property value.

For example, a 15% down payment on a home selling for $500,000 would be $75,000. The mortgage, comprising the balance, would be 85% or $425,000.

In Canada there are rules about how much someone much have as a down payment. The percentage you must put down depends on the purchase price of the home:

  • For homes less than $500,000, the minimum down payment is 5%​

  • For homes selling for between $500,000 and $1 million, the minimum down payment is 5% of the first $500,000 of the purchase price and then 10% of the purchase price between $500,000 and $1 million​

  • For homes with a purchase price of greater than $1 million, the minimum down payment is 20%

The size of your down payment affects the size of your mortgage and whether or not you need CMHC insurance.

First-Time Home Buyers' Tax Credit

The First-time Home Buyers' Tax Credit was introduced as part of 'Canada's Economic Action Plan' to assist Canadians in purchasing their first home. It is designed to help recover closing costs such as legal expenses, inspections, and land transfer taxes.

To help Ontarians buy their first home, the Province is proposing to double the maximum refund for first-time homebuyers from $2,000 to $4,000, effective January 1, 2017.

The Province is proposing to restrict eligibility of the first-time homebuyers refund program to Canadian citizens and permanent residents, effective January 1, 2017.

How do you qualify for the First-time Home Buyers' Tax Credit?

In order to be eligible for the First-time Home Buyers' Tax Credit, your home must meet the following requirements:

  • Be within Canada

  • Be an existing or new home

  • Be a single, semi, townhouse, mobile home, condo, or apartment

  • You must intend to occupy the home within one year of purchase

  • You or your spouse must purchase a qualifying home

  • The home must be registered in either your name or your spouse's name

  • You cannot have owned a home in the previous four years

  • You cannot have lived in a home owned by your spouse in the previous four years

Land Transfer Tax Rebate for First Time Home Buyers

Another tax credit available to first time home buyers in Ontario, British Columbia, and Prince Edward Island is the land transfer tax rebate. Each province has its own rules about who is eligible to claim the land transfer tax rebate. The amount of the rebate depends on which province you live in, the value of the home, and whether one or both buyers has owned a home before. First-time home buyers in the city of Toronto can also get a rebate of up to $3,725 on the municipal land transfer tax as long as they meet the necessary criteria.

Are you looking to purchase your new home? Contact us, we will walk you through the entire process.

Call us at 416 830 1510 or request a call back

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