Are you considering purchasing a home? It’s an exciting decision, but it’s crucial to evaluate if it aligns with your current circumstances. Here are four steps to help you decide if homeownership is suitable for you:
Assess Affordability
It’s essential to analyze what you can afford. According to the Canada Mortgage and Housing Corporation, your monthly housing expenses, including mortgage payments, property taxes, and utility costs like heating and cooling, should ideally not exceed 39 percent of your gross monthly income. Take a close look at your budget to ascertain if you can comfortably manage these additional expenses.
Obtain Mortgage Preapproval
Getting pre-approved for a mortgage with your bank will provide you with an understanding of the amount you qualify for. This serves as a useful benchmark to compare with your budget. Keep in mind that the approved amount may not perfectly align with your financial plans. You can also utilize the Financial Consumer Agency of Canada’s complimentary mortgage qualifier tool to assess your eligibility for a mortgage based on your income and expenses.
Consider Additional Costs
Beyond the mortgage, there are additional upfront expenses known as closing costs. These one-time fees, such as home inspection fees, legal fees, property tax adjustments, and title insurance, typically range from one and a half to four percent of the home’s purchase price at the time of closing. Additionally, remember to account for ongoing expenses like maintenance costs and insurance.
Explore Government Programs and Incentives
The Canadian government offers various home-buying programs and incentives that may assist you in purchasing your home if you’re eligible.
- Home Buyers’ Plan: Allows you to withdraw up to $35,000 from your registered retirement savings plan tax-free for your first home.
- First-Time Home Buyer Incentive: Offers five or ten percent of your home’s purchase price as a down payment assistance.
- Home buyers’ amount: Eligible for a non-refundable tax credit of up to $1,500.GST/HST
- New Housing Rebates: Potentially eligible for a rebate on some of the taxes paid when buying your home.
For more information to help you make an informed decision about buying a home, visit canada.ca/money.
Sources:
- CMHC – https://itools-ioutils.fcac-acfc.gc.ca/MQ-HQ/MQ-EAPH-eng.aspx
- Canada.ca – http://canada.ca/money
