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What Every First-Time Home Buyer In Ontario Needs To Know

What Every First-Time Home Buyer In Ontario Needs To Know

Happy First Home Buyers

For first-time home buyers, entering the Ontario housing market can feel like diving into deep uncharted waters not meant to be explored with soaring average prices topping $800,000. But, with the right approach, you can land your dream home. Buying your first home is not out of reach. It’s all about being mentally prepared, financially savvy, and tapping into expert advice to avoid pitfalls while making a strategic plan to snag the home you fall in love with. Plus, there are incentive programs that can give you a leg up as well.

This comprehensive guide will give you all the advice you need so that you’re fully prepared for your housing market debut and if you have questions, I’m only a phone call away. Let’s dive in…

What Does It Mean To Be A First-Time Home Buyer?

Understanding what it means to be a “first-time home buyer” in Ontario is important, especially if you’re planning to use government assistance programs. Generally, being a first-time buyer means you’ve never owned a home before, though there are exceptions. For instance, if you’ve gone through a separation or divorce, or if you’ve owned property that you didn’t technically purchase, you might still be considered a first-time buyer. However, if you’ve received a home as a gift or inheritance, Ontario’s government won’t count you as a first-time buyer. Additionally, to qualify for financial assistance as a first-time buyer, your income usually needs to be below a certain threshold, which varies depending on where you live and the specific program you’re applying for.

First, Let’s Do A Reality Check For First Home Buyers

If you’re a first-time home buyer in Ontario, get ready for a slightly rough ride. Understanding the tough housing market here is key—it’ll keep you motivated and prepared, even if your offers to purchase a home don’t get accepted. You need to be patient while hunting for a home to buy and you need to set realistic expectations as well.

So what do you need to understand as a newbie home buyer?

Housing supply and prices in Ontario

In March 2024, Ontario had around 30,000 homes for sale, according to the Ontario Real Estate Association. With so few homes in a province of almost 15 million people, prices don’t drop fast. The average price for a home in Ontario in the first three months of 2024 was $865,788 – which is out of reach for most first-time buyers.

Prices that high can be even more scary because they require massive mortgages to finance them and larger minimum down payments too.

Your down payment and financial planning

In Canada, if you’re buying a home under $500,000 (which you’re lucky to find), you need to at least 5% of the purchase price as your down payment. But if it’s more expensive, you’ll need an even bigger down payment

It’s smart to start saving early and talk to a mortgage broker or a mortgage advisor when you first start thinking about buying a home. They can figure out how much you can afford and give you a pre-approval for a mortgage or at the very least they can give you an idea of what you might be approved for. Plus, they can give you tips as to how to strengthen your finances and credit score before you apply for a mortgage loan which will help improve your chances of getting approved for the amount you need. You can use my mortgage calculator to estimate your budget for buying a home as a general rough idea but, when the time comes we will get a little more specific when it comes to that pre-approval number.

Get familiar with local real estate activity

Another key person to connect with is a seasoned, full-time real estate agent who specializes in the area where you want to buy your first home. Once they understand your goals and budget, reliable local agents will analyze recent sales and give you a clear picture of the market. They’ll explain how competitive it is, its potential for growth, and whether you might need to offer more than the asking price. Good agents won’t hide the reality or push you to bid on a home you’re unlikely to get. Their job is to help you feel ready, both emotionally and strategically, for your first home purchase, and honesty is their best tool.

There Are First-Time Home Buyer Programs Available Locally

In Ontario, there are various programs offering financial aid to first-time homebuyers. While these programs might not completely solve affordability issues for most buyers, they can still make a dent in the overall cost of homeownership. You’ll want to look at…

The Ontario Land Transfer Tax Refund

If you’re a first-time homebuyer, you could get money back on the provincial land transfer tax, which is a cost you typically pay when closing on a home. If your home is valued under $368,000, you won’t have to pay any tax. If it’s worth more, you could still get up to $4,000 back. To qualify, you must be at least 18 years old, a Canadian citizen or permanent resident, and live in the home as your main residence within nine months of buying it. If you’re married, your spouse’s property history could affect the refund amount and you need to apply for the refund within 18 months of buying the home to be eligible.

The Simcoe County’s Homeownership Program

The Simcoe County Homeownership Program provides a loan worth up to 10% of the home’s purchase price for your down payment. If you live in the home for 20 years, the loan is forgiven completely. But if you sell before that, you’ll need to repay the loan in full along with a percentage of any capital gains. To be eligible, the property must be valued at $593,879 or less, and participants must be renters with a gross household income of no more than $103,200.

And, There Are Federal Programs For First-Time Home Buyers in Canada Too

The Home Buyers’ Plan

Starting April 16, 2024, the Home Buyers’ Plan lets you take out up to $60,000 from your registered retirement savings plan (RRSP) without paying taxes. You can use this money for the down payment on your main home. To qualify, you need to be a first-time buyer, live in Canada when you take out the money until you buy or build your home, and plan to use the home as your main residence within a year. You don’t pay taxes on the money from your RRSP, but you have to pay it back within 15 years so you’ll want to keep that in mind.

The First-Home Savings Account

The First-Home Savings Account (FHSA) is a special savings account that combines the tax benefits of both an RRSP and a TFSA. When you deposit money, you can deduct it from your taxes, and any profits you make from investments in the account are tax-free. You can put up to $8,000 a year into the FHSA, up to a total of $40,000. While this may not seem like much compared to Canadian home prices, you can use the FHSA along with the Home Buyers’ Plan (HBP) to boost your down payment savings.

The First-Time Home Buyers’ Tax Credit

The First-Time Home Buyer Tax Credit gives first-timers a $10,000 non-refundable credit. This means you could get up to $1,500 back on your taxes after purchasing your home. While it won’t directly help you buy a house or get a mortgage, it does make the first year of owning a home a bit cheaper.

The GST/HST New Housing Rebate

If you buy or build a new home, or make big renovations to your main home, you might get back some of the Goods and Services Tax (GST) or the federal part of the Harmonized Sales Tax (HST) you paid. The rules vary based on the type of property and where it is, so double-check that the new home you want qualifies for in terms of a rebate. Or make sure your renovations qualify before getting started. 

Important Tips for First-Time Home Buyers

Many first-time home buyers in Ontario are feeling frustrated and even angry because they think owning a home in the province is getting too expensive. It’s tough, no doubt, but don’t be discouraged. You won’t know what’s possible until you try. To give it your best effort you’ll want to make sure you…

  1. Make a budget and stick to it to save for your down payment.
  2. Try to increase your income by finding a better-paying job, a second job, or getting a roommate to help cover rent so you can save more.
  3. Keep an eye on the housing market to know if it’s getting more competitive or easing up.
  4. Get advice from professionals who know about real estate and mortgages, like a mortgage broker or realtor.

If things don’t go as planned, don’t take it personally. It’s okay to wait until buying a home fits better into your budget. There is lots of time to buy a home, and waiting for a better deal to come along, and for interest rates to dip, could be worth the wait.

I Can Offer The Guidance You Need And The Best Mortgage Options 

When you’re buying your first home in Ontario, it’s important to take advantage of all the resources you can. Working with an accredited mortgage broker, like me, is the smart way to approach the tough real estate market. With my help, you can be sure that you will get the best mortgage rates and options, as well as advice on how to save for your down payment, take advantage of as many credits and programs as possible, along with credit score advice. Reach out to me today at 705-315-0516, or book a consultation with me online to get started.

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