This Section is particularly valuable for 1st Time Buyer’s. Helping You understand whether you should purchase at all. Please scroll down to the section that interests you.

 

 

 

1)  Benefits Of Ownership

2)  Is Buying a Home a Good Idea 

3)  Advantages & Disadvantages to owning a home 

4)  Property Purchase Tax Exemption for 1st time Home Buyers 

5)  RRSP Home Buying Plan for 1st Time Home Buyers 

6)  Things NOT to Do before Purchasing a Home 

7)  How Much House Can You Afford?

8)  7 Steps To Buying A Home

 

 

1)  Benefits of Ownership

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2)     Why Buying a Home Is A Good Idea

The Best Investment- As a fairly general rule, homes appreciate about four or five percent a year. Some years will be more, some less. The figure will vary from neighbourhood to neighbourhood, and region to region. Five percent may not seem like that much at first. Stocks (at times) appreciate much more, and you could easily earn over the same return with a very safe investment in treasury bills or bonds

But take a second look- Presumably, if you bought a $200,000 house, you did not pay cash for the home. You also got a mortgage. Suppose you put as much as twenty percent down? That would be an investment of $40,000. At an appreciation rate of 5% annually, a $200,000 home would increase in value $10,000 during the first year. That means you earned $10,000 with an investment of $40,000. Your annual "return on investment" would be a whopping twenty-five percent. Of course, you are making mortgage payments and paying property taxes, along with a couple of other costs. But remember, you would be paying rent which is not benefiting you at all, as well as still having the standard costs of living, such as phone, cable etc. Your rate of return when buying a home is higher than most any other investment you could make. Plus you have the benefit of enjoying your investment every day, as well as having the option of cashing out if you choose not to own anymore, and any money you make is tax free!

Stable Monthly Housing Costs - When you rent a place to live, you can certainly expect your rent to increase each year, or even more often. If you get a fixed rate mortgage when you buy a home, you have the same monthly payment amount for thirty years. Even if you get an adjustable rate mortgage, your payment will stay within a certain range for the entire life of the mortgage and interest rates aren’t as volatile now as they were in the late seventies and early eighties. Imagine how much rent might be ten, fifteen, or even thirty years from now? Which makes more sense?

Forced Savings- Some people are just lousy at saving money, and a house is an automatic savings account. You accumulate savings in two ways. Every month, a portion of your payment goes toward the principal. Admittedly, in the early years of the mortgage, this is not much. Over time, however, it accelerates. Also, your home appreciates. Average appreciation on a home is approximately five percent, though it will vary from year to year, and in some years may even depreciate. Over time, history has shown that owning a home is one of the very best financial investments

Freedom & Individualism - When you rent, you are normally limited on what you can do to improve your home. You have to get permission to make certain types of improvements. Nor does it make sense to spend thousand of dollars painting, putting in carpet, tile or window coverings when the main person who benefits is the landlord and not you. Since your landlord wants to keep his expenses to a minimum, he or she will probably not be spending much to improve the place, either. When you own a home, however, you can do pretty much whatever you want. You get the benefits of any improvements you make, plus you get to live in an environment you have created, not some faceless landlord.

More Space - Both indoors and outdoors, you will probably have more space if you own your own home. Even moving to a condominium from an apartment, you are likely to find you have much more room available your own laundry and storage area, and bigger rooms. Apartment complexes are more interested in creating the maximum number of income-producing units than they are in creating space for each of the tenants.

If you are moving to a home for the first time, you are going to be very pleased with all the new space you have available. You may have to even buy more "stuff"!!

3)     Advantages and Disadvantages of Buying

• Ownership rewards you with tremendous control. Tear a wall or install a two door garage--it’s your home. 
• Owning your own home is a significant investment. The value of your home is likely to appreciate with time.
• Home ownership builds credit history, because lenders look favorably on people who make timely mortgage payments.

What Kind Of Tax Relief will I See In My Mortgage Payment? While some provinces, such as Ontario, offer tax incentives to people who own their own homes, mortgage payments in Canada are paid in after tax dollars. In the United States your mortgage payments can be deducted on your tax return, BUT are subject to Capital Gains which ours are not. Your Primary Residence is a tax free investment that can sell for as much as you can get with no tax consequences, and is one of our greatest wealth building tools available to Canadians.

What Forms Of Tax Relief Exist For Homeowners? In Canada, the Tax benefits of ownership include:

Capital gains exclusion: A gain on the sale of a primary residence is completely tax deductible. Even if you own your own business and run it from home, you can still qualify for this deduction, provided you reinvest your income from the sale of the business in another business.

Increased basis for improvements: Expenses for a home if it is an investment property, including home improvements are generally added to the cost basis of the home, reducing the amount of capital gain when you sell.

Mortgage costs: If payments are not made in time, the lender could foreclose on your home, meaning that it would be seized and then sold. This is the worst thing that can happen to one’s credit history.

Less flexibility: Owning a home necessitates stability.  

Home repair: In the absence of a landlord to care for your home, you will be responsible for repairing it, whether you find a handyperson and hire the work out or Do it yourself.  

Structural maintenance: Upkeep on your home’s structure is your responsibility. Without a builder’s warranty or some other purchased warranty, this could be costly.

4)     BC Property Purchase Tax Exemption

As a first time buyer, you enjoy two major benefits: (1) You could be exempt from the BC Property Purchase Tax and (2) Access to the Home Buyer’s-RRSP plan.

Some of the conditions for exemptions are as follows:

You must not have owned a principal residence anywhere in the world

You must have resided in BC for at least 1 year

The maximum purchase price to qualify for the exemption through out the province is $425,000 raised in 2008 from the old value of $375,000 (A partial exemption is available for homes between $425,000.00 and $450,000.00 - see formula below).

To calculate the amount of tax payable on homes between $425,000.00 and $450,000.00, use the following formula:

Amount of PTT X ($450,000.00 - Purchase Price)
$25,000.00

 The amount borrowed must be at least 70% of the fair market value of the property.

The BC Property Purchase Tax is 1% on the first $200,000 and 2% on the amount over $200,000.

5)     RRSP HOMEBUYERS PLAN FOR 1ST TIME BUYERS

No tax is owed on the monies withdrawn

No interest is paid on the monies while it is outside of your RRSP

There is no monitoring of the monies while outside your Plan

Subject to restrictions
Regardless of no penalties for withdrawing funds, there a re certain guidelines that must be followed in order to remain protected under the HBP’ umbrella:

• • There is a maximum of $20,000 that can be withdrawn from one individual’s RRSP.
  • There can be a maximum of two first-time buyers in the purchase of a new home, and each individual can withdraw up to $20,000 for a total of $40,000.
  • The purchased home must be owner occupied.
  • The RRSP must be repaid within 15 years with minimum annual payments of 1/15th of the withdrawn amount — failure to do so will result in 1/15th of the RRSP initially withdrawn having to be added back to taxable income in any year the minimum re-deposit is not made.

6) THINGS NOT TO DO BEFORE BUYING A HOME

Don’t make a major purchase-Making a major purchase before buying a home would seem to have little effect on your ability to buy a home, but unfortunately it has huge ramifications. Credit is an asset when you are trying to buy a home and making a major purchase can jeopardize your credit worthiness in a number of ways. Things like a new car, furniture on a store credit card can seriously affect your TDSR (Total Debt Service Ratio), which can have a major impact on what lender’s will consider as a maximum mortgage amount you can qualify for.

Don’t change jobs- Of course, this rule does not apply if you have lost a job or are in line for a promotion, which makes changing jobs necessary. However, it is advised that you don’t change your job if it is unnecessary, or at least wait until you have purchased your home, as it leaves an opening for your loan source to question your credit worthiness. Please contact your mortgage broker for more information on how this can impact your ability to get the best loans and rates available.

Don’t move money around-When you decide to move money around, you may be doing this for practical financial reasons. However, your loan source will not look at this action the same way as you do. By moving money around, you are jeopardizing your loan approval and leave yourself vulnerable from creditors who will insist on seeing the paper trail for your financial actions.

Don’t give an earnest money deposit directly to a For Sale By Owner Seller If you do enter into an agreement to purchase a home from a For Sale By Owner Seller, it is important that you take steps to protect your investment by not directly giving an earnest money deposit directly to the seller. This is because these home sellers have the opportunity to spend your deposit money prior to the closing stages of the real estate transaction. There have been many cases where the home purchase was voided for valid reasons and the prospective homebuyer had to go to great lengths in order to retrieve their deposit. Consequently, it is recommended that your deposit should go into a trust account that the home seller will be able to access once the home is sold.

Don’t let your emotions take over- Buying a home is a long process and there are many instances where emotionally you have the opportunity to become overly involved. During a home inspection, it is possible that you may become overly upset if a home seller refuses to do a small repair that was detected during the inspection. As the saying goes, the devil is in the details, and if you become overly emotional about one small detail in the overall context of the home, you can jeopardize the entire deal.  However, it is important also not to become too emotionally attached to a home. If the home requires a number of repairs and the home seller is completely inflexible about performing any of these repairs, do not be afraid of walking away from a bad deal. It is better to spend an extra month finding a great home for sale than it is to purchase a home that you fell in love with during the home looking phase but now are committed to for years.

Generally, there are two rules of thumb to follow to determine how much house you can afford:

You can buy a house that costs up to 3 times your annual gross income.

Housing should cost about 1/3 of your gross pay or 1/2 of your take-home pay.

While this can help provide a general idea of what houses to look at with your real estate agent, or give you an approximate amount you might be able to spend on monthly mortgage payments, they’re unlikely to satisfy your curiosity. And they shouldn’t.

When you buy a house, there will be up-front costs and mortgage payments. Your buying power will depend on how much money you have available now to put down on a house and on how much a creditor agrees to lend you.

The down payment how much is enough? Coming up with the cash for a down payment is usually the hardest part of buying a home, especially when it’s your first. Depending on your loan, you may be able to make a down payment of as little as 3-5 percent of the purchase price. The downside to this, however, is that you will end up paying much more in interest and will also have to purchase private mortgage insurance, which protects the lender’s investment in case you fail to make your payments.

Obviously, the larger your down payment, the lower the cost of your mortgage (and ultimately the house). The amount of your down payment will be determined by several factors:

Closing costs- These usually total between 3 and 6 percent of the amount of your loan, and include points, insurance, various fees and inspections.

Savings-Your lender may want to see that you have at least two months of mortgage payments in savings when you apply for your loan.

Miscellaneous Costs- Moving into your new home will bring other up-front costs, as well, such as the cost of moving, any repairs that the house might need, and any furnishing you plan to do.

The mortgage how much can you borrow?-The other factor will be how much you can afford in monthly payments on a mortgage, which will often depend on how much a bank will loan you. Your lender will consider both your income and your existing debt in determining how much mortgage debt you can afford.

Two ratios serve as guidelines for lenders in evaluating your mortgage application:

Housing expense ratio. Your monthly housing costs (including property taxes and insurance, as well as mortgage payments) should not exceed 30 percent of your monthly gross income.

Debt To Income Ratio- Your total long-term debt (including housing costs, car loans, student loans, alimony or child support, and balances on credit cards that will take longer than 10 months to pay off) should not exceed 40 percent of your monthly gross income.

Lenders feel that these guidelines will keep household debt manageable. However, they are somewhat flexible. If you make a large down payment, or if you have consistently made rental payments close to the amount of your proposed mortgage payments, you may be able to exceed these guidelines. And some lenders allow low- and moderate-income buyers to use 33 percent of their gross monthly income for housing and 38 percent for total debt.

Go to Buyers-How Much House Can You Afford to evaluate your situation and determine how much you can afford to pay for a house. Just remember that because some formula determines that you can afford a certain mortgage doesn’t mean you will necessarily feel comfortable making the payments. Keep track of what you spend for a few months in order to better understand what lifestyle you can comfortably afford.

Like any other event in life, owning a home has pros and cons. Consider the financial benefits, tax relief, and the financial setbacks, high maintenance costs in finding a solution that best reflects your desires and means.

If you are just starting out, and are a little overwhelmed by the whole process. Remember that you CAN’T MAKE AN INFORMED DECISION WITHOUT ALL OF THE INFORMATION!! Feel free to contact us with any questions you may have. Kim & Gord have years of experience dealing with 1st time Buyer’s, and have helped many families and singles accomplish their dream of home ownership. We have a team of dedicated professionals, to help take you through the whole home buying process from start to finish. Don’t try to figure everything out on your own. Take advantage of experience, knowledge and a wealth of information. 

 

      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 8- 7 Steps to Buying a Home

 

 

 

 

 1.      Decide What You Want
The first step to take when buying your first home is to decide what you want. The best way to do this is to create a prioritized list of features and amenities that are important to you. This list should serve as your guide to searching for a new home, keeping in mind that the home you eventually purchase might not include every feature on your list. Three important factors to consider in your search are location, personal tastes, and budget. Kim & Gord can provide a wealth of information on community characteristics including schools, shopping, dining and other neighborhood features that will play an important part in your final decision.

 2.      Determine What You Can Afford
Once you have made your prioritized list, it’s time to decide how much house you can afford. There are many things that factor into what you can afford: income, credit rating, current monthly expenses, down payment and interest rate. Dominion Lending  offers many different calculators to help you determine what price range will fit comfortably within your budget.

 3.      Apply for a Mortgage
There are literally hundreds of mortgage programs available to first time homebuyers, and it can seem like a daunting task to know which program will give you the most for your money. With expert experience, a wealth of options, contacting an Mortgage consultant is the easiest way to get a pre-approved home loan and learn about the many different mortgage options available to you.  This link gives you various options and is an excellent starting point!

 4.      Shop for a Home
Now that you have an idea of the area you would like to live in and how much you can afford, you can start your search for your new home. To help you simplify the process as much as possible, you can register with BCHomesAndRealEstate.com, and the system will automatically notify you when new listings are available that match your search criteria.

 Once you see a few homes that you like, you should begin to visit homes in person. Kim & Gord can arrange your personal tour of homes in your target area and price range.

 5.      Make an Offer
After you have found a home you like, you will need to make an offer. In most cases, it is beneficial to have a real estate professional negotiate the offer on your behalf. An important thing to remember is that if you have any personal interaction with the homeowner, be sure not to divulge any information about your move, current housing status, financial status or positive or negative feelings about the property. All of these factors will play an important role in future negotiations on the purchasing price

 6.      Inspection and Insurance
Once your offer is accepted, you will need to set up, coordinate an inspection on the property. It is important not to get discouraged if problems are discovered during this period. Kim & Gord are always there for you to make this process as easy and smooth as possible. In rare and more difficult situation consulting a real estate attorney can also help with interpreting and understanding the language involved in the contracts and paperwork that need to be completed.

 In addition to the previously mentioned inspection, you will also need to arrange for homeowners insurance and finalize your mortgage agreement, and hire a lawyer/notary to finalize the closing documents for you.  Again Kim & Gord will guide you through this process step by step!

 7.      The Final Closing
Before you arrive at the final closing, you should make sure that all the necessary paperwork and deposits have been completed and forwarded to the appropriate parties. Missing or incomplete information can delay the closing, so it is imperative that everything is done prior to your closing date.

 Once all the paperwork is completed and signed, you own the house.

 For detailed information about the home buying process,  continue reading through the information available on BCHomesandRealEstate.com or feel free to contact Kim & Gord anytime via email or phone 604-942-0606, toll free 1888-942-0606.

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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