By Laura Parsons, Vice President, BMO Mortgage Specialists
Entering the world of homeownership is a big process. Our friends at BMO have broken down a few of the most common questions people have about mortgages and buying their first home.
Thinking about buying a house with friends or family?
It is the simplest and most effective way to begin your home-buying journey. You must both qualify, and it is prudent to draft out an agreement outlining the parameters of your purchase and, if applicable, a future sale. If you are both first-time homebuyers, you can each use up to $35,000.00 from your RRSP. Remember that if you both have $35,000.00 in RRSPs, not all of it has to go towards the down payment; some can be used to pay fees, buy furniture, or pay off other debt. If you decide to go it alone, the insurers all have a program where you can refinance to buy out the additional owner. Given the rising cost of rent and interest rates, this tactic is very popular to achieve homeownership.
What should every first-time homebuyer need to know when buying a home?
If your purchasing your first home or if it has been 4 years since you last owned your primary residence, you are considered a first-time home buyer and can take advantage of the federal government’s incentive. You may take out up to $35,000 from your RRSP tax-free and interest-free in order to buy a house. There would be a two-year grace period before repayment, which would be made over 15 years with no interest or taxes due. You immediately requalify as a first-time homebuyer if you are going through a divorce or separation. There is also a Government Incentive Program, but you must meet the requirements. If you satisfy the criteria, you might qualify for a 5% down payment on a resale home and a 5% or 10% incentive on newly constructed homes. You could potentially save a lot of money on interest and other expenses.
Cash back mortgages: What they are and how do they work?
When purchasing a home, you may want to replenish your savings, pay off high interest debt or help family with a down payment for a home. You can opt to pay a higher interest rate and buy cash. It isn’t considered a loan and it doesn’t show up as a debt on your credit bureau. Ensure to talk to your financial representative regarding the terms and conditions.
Tips for finding the best mortgage provider?
The process of selecting a lender should be one you begin early in the process. This could be the biggest purchase you will ever make. BMO can help you with your journey and get you there faster. If you’re considering other mortgage providers, ensure you ask for advice on all available programs, how long your rate hold is good for, and more importantly, ensure you have a pre-approval or approval in place prior to your search. Be aware of all the charges and costs; read your agreement thoroughly, and ask questions. During your initial meeting with your builder, upgrades can be added upfront to your purchase contract. This can save you from having to re-apply and potentially lose your rate hold prior to possession. Ask your lender for more details.
More information on financing your new home can always be found under the Buyer Resources tab on the Sterling Homes website.