Entering the real estate market for the first time is exciting, and in truth, it can be a little bit daunting.
REALTOR® Peggy Hill understands how challenging it can be for first-time buyers to be able to save enough money to put together a down payment on their first homes. These are her top 3 tips.
1. Establish your goal
If you’re hoping to buy a home, it’s important to determine what is within your reach. Speak to a real estate and mortgage professional about what your goals and timeline look like.
There are many ways to get into the housing market now, and there are some really great strategies to make it affordable for buyers. A popular approach over the last few years has been something called ‘house hacking’. Typically, this is when someone buys a home and rents out the basement or some of the rooms to generate income on the property.
Determining your goal will help you create a better picture for step 2, which is making a plan for how you’re going to afford this property.
2. Create a plan to reach your goals
Determining what needs to be done to help you reach your goal is an essential step to buying your first home. Often, this will look like making a savings plan.
Probably the least fun, yet essential, part of any savings plan is cutting out unnecessary expenses. This could mean trimming back the amount you spend on entertainment and subscriptions, dining out, clothing, gifts and travel. Look at the discretionary categories you tend to spend the most in and target those first; then work your way down the list, looking for more opportunities where you can cut back. It’s also important to get an understanding of exactly what you need to save each month.
How much are you able to put away monthly in order to meet this goal? Can you save $1,000 a month? $1,500? $2,000? Many are already paying rent, so they’ll have to fit this new savings goal into an already tight budget; others might temporarily move back home with their parents or other family member to accelerate their ability to save—no two situations are alike, and there is no right or wrong.
Determine what a realistic savings plan is for you, draw up a schedule and check off each achievement as you go along. Better yet? Automate it, so the amount is deducted from your account on the same day every month. If you ever find yourself with extra funds to put aside, add them in.
3. Take advantage of government incentives
You can’t afford to turn down the helpful government incentives that are available, such as the Home Buyers’ Plan, that lets you borrow up to $35,000, tax-free, from your Registered Retirement Savings Plan. To qualify, you need to be a first-time homebuyer and a resident of Canada.
Those who are part of a couple can each do this, resulting in $70,000 that can be used towards a down payment; just keep in mind that you have 15 years to pay that money back into your RRSP accounts in full.
The First Home Savings Account is a new incentive introduced in 2023 that allows buyers to save money for their first home tax-free. Details on this incentive can be found here.
Another great option? The First-Time Homebuyer Incentive. If you can save at least 5% of the purchase price as a down payment, the government will give you an additional 5%-10%. Important to note: to qualify, you must be a Canadian citizen or a permanent resident and a first-time homebuyer. There are also income caps in place: $150,000 if you live in Toronto, Vancouver or Victoria, and $120,000 elsewhere throughout the country.
For more advice for first-time home buyers, visit the Peggy Hill team, call 705-739-4455 or follow them on Facebook.