new-home-build-first-home-materials.pngDespite what you may have heard, building a home is not out of reach for a first-time homebuyer. There are many affordable choices when building a new home and several ways you can come up with the required down payment. Read on to discover just a few of the many reasons why a new home build is ideal for your first home.

1. There Are Down Payment Options to Help You

As a first-time homebuyer, remember down payments and home prices aren’t as daunting as they seem. In fact, there are many ways to make a home purchase affordable. Here is the general rule of thumb for down payments:

  • For homes with a purchase price under $500,000, it is recommended that you put 20% of the home’s purchase price down. Even though you are only required to put down a minimum of 5%, anything less than 20% will require you to pay mortgage insurance. This means you will have to pay an additional 1.80% – 3.60% of your mortgage amount with every payment. So, it’s best to put down as much as you can upfront to avoid additional costs down the road.
  • For homes with a purchase price of more than $500,000, you will need a down payment of 5% for the first $500,000 and then 10% for any amount over $500,000. The same down payment rules apply here.

Again, coming up with cash for a down payment is easier than you think. For starters, there is The Home Buyers’ Plan. This plan allows first time homebuyers to borrow funds saved in a Registered Retirement Savings Plan (RRSP) for a down payment on a new home. And best of all, when you repay the loan, you are repaying your own retirement account. To qualify:

  • You must purchase a home with the intent to occupy it.
  • You may withdraw up to $25,000 from your RRSP, or if you are part of a married couple, $50,000 combined maximum.
  • You must begin to repay your RRSP within two years of the withdrawal, and the RRSP must be repaid within fifteen years in increments of at least one-fifteenth each year or suffer tax consequences.
  • You may use RRSP funds for a down payment more than once, but only if the RRSP funds are fully repaid before submitting an additional application.

Alternatively or in addition to withdrawing funds from a RRSP, you can set up a tax-free savings account and automatically deposit funds in it every month. With a tax-free savings account, your savings are earmarked specifically for the purchase of a home. The benefit of a tax-free savings account is that you are not required to pay taxes on any investment income you earn on your principal deposits.

Additionally, unlike borrowing from your RRSP, you are not required to pay yourself back and can transfer funds in a tax-free savings account anytime you choose. However, right now you may only contribute $5,000 each year to your account, which limits your savings potential if you are looking to purchase a home in the near future.

new-home-build-first-home-kitchen.png2. You Get to Choose the Features You Want

Working with a builder, you often have opportunities to pick what goes in your home that you don’t have with an existing unit. For instance, home builders often allow buyers to choose cabinet finishes, countertop materials, paint colours and flooring types all based on your aesthetics and budget.

3. No Repairs, No Maintenance, No Problem

You’ll reap the benefits of new construction, including lower home maintenance costs and a home warranty. With a brand new build, you won’t have to worry about a water heater on the fritz or air conditioning that doesn’t cool for a number of years.

If something does happen during your home warranty period, the builder will assess the problem and make the necessary repairs. Home warranties on new home builds are mandatory in Alberta and some builders offer additional home warranty programs. This will give you peace of mind knowing that your home will look and feel new for many years to come.

4. It’s A Blank Canvas

If your social media pages are filled with do-it-yourself project ideas, owning a home is the best way to satisfy your creative itch. Imagine filling your space with the things and designs you love made by you. Building a new home gives you the opportunity to design it exactly how you want.

new-home-build-first-home-money.png5. You Can Get More Bang For Your Buck

Builders do not care to hold on to homes for very long after they are built because for each additional day a builder owns a home, interest is accruing. For this reason, builders often provide buyers with purchase incentives to sweeten the deal and move the home off of their books.

This benefit is something sellers of existing homes can’t provide.

6. Lower Utility Costs

A new home allows you to live more efficiently. They are built with the best materials to comply with the most recent building requirements, meaning every component, from your roof to insulation and appliances, will be more efficient than homes built even ten years ago. This often translates to reduced heating and cooling costs and overall reduced expenses.

7. You Are Investing In Your Future

Building equity and investing in your future. Homes are expensive, but historically, they continue to be great investments in your future, with the average home price rising year over year. Purchasing a home allows you to invest the money you typically give to your landlord for rent each month and build equity for your future, not someone else’s.

Don’t be afraid to check out the possibility of a new build. As a first-time homebuyer you have a wealth of resources available to help you come up with a down payment for the home of your dreams. These resources, along with the many other perks that come along with a new home build, guarantee you’ll be able to find an affordable new home that is sure to keep you happy for years to come.

Photo credit: building materials, money house