TORONTO – Buying your first home can be complicated, but it doesn’t have to be. In this episode of Building Better with Brandon, he sat down with Latanya Monteith Housen from TD Bank to dig into everything you need to know about mortgages.
With home ownership comes many questions, starting with down payments.
How much do you actually need for a downpayment on a home?
“A down payment is always essential. The difference though is how much someone can afford. With the prices of houses, you might find that the down payment may be hard to come by, but the minimum that you need to have is five per cent of the purchase price,” said Monteith Housen.
Things to Consider While Purchasing Your First Home
So if you’re purchasing a home for $500,000, what would a potential down payment look like?
“In that instance, just for the down payment, the borrower would need at least $25,000. But that’s on top of other costs that a lot of people aren’t aware of,” explained Monteith Housen.
“There are closing costs, there are transfer fees, lawyer fees, all of that. So it’s very important for you to get in touch with a specialist around mortgages. At TD we have mobile mortgage specialists that are able to give you that kind of advice and help you do the math to make sure you understand the expenses.”
If speaking to an expert is the first step when considering buying a home, what else should potential buyers be thinking about? Monteith Housen says that timelines are a big factor.
“Personally, I’ve had closings happen within weeks, and then I’ve had closings happen over a duration of months. So it’s always important to pay attention to the closing, always ensure you have your closing cost, and also ensure that you can meet the closing date. Because there are penalties for not meeting your closing date,” Monteith Housen explained.
Saving enough money for a down payment can be tricky, especially with the rising cost of necessities like groceries and rent. But there is a new government program for first-time home buyers.
The First Home Savings Account allows Canadian residents aged 18 or older to save $8,000 yearly and $40,000 over their lifetime to be used tax-free when purchasing their first home. Monteith Housen explained why this is a game-changer for many Canadians.
“It has a dual benefit. The money that you put into it is tax-deductible like a contribution to an RSP, and the withdrawal from it when it’s for the purpose of purchasing a house, it’s not taxable, like a TFSA.”
But she shared that there are other ways to come up with a down payment, and your RRSP may be a place to look.
“Another option too is that you can borrow from your RRSP, Registered Retirement Savings Plan, up to $35,000 per applicant. So if two people are joining on [buying] a home, and it’s their first home, they are able to get $70,000 back from their RRSP as a loan, and once they recontribute that money over 15 years, there is no tax involved,” Monteith Housen explained.
Monteith Housen explained how your credit score can affect your ability to be approved for a mortgage, some of the different support programs offered by TD to help you through this process, and more on this episode of Building Better with Brandon. We also hit the streets to see what people already know about mortgages. Let us know in the comments, do you have any other questions about mortgages?