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How You can Afford Your First Home

With so many housing option, price ranges and neighborhoods to choose from in many communities these days, first-time buyers are in a prime position to enter the real estate market.

But buying a home in today’s market, especially in the higher priced areas, requires sacrifice and, often, a lowering of expectations.  As a first time buyer it’s important to keep in mind that double garages, fireplaces, family rooms, powder rooms, walk in closets etc, all add high dollars to the price of any home.  In the same way, prime neighborhoods – regardless of a home’s negative features – also command premium prices.

What all this means is that your fist home may not be that large, beautiful house in a park setting you dreamed of.  It may be significantly smaller, require a longer commute to work and some elbow grease on your part to clean and fix up.  But as your equity builds, you will be able to trade in this home for a better one.  It may take several trade-ins over a period of years, but eventually you can realize the home of your dreams.

Down Payment is the Key

The key to getting started for most first time buyers is the initial down payment.  This is the part of the purchase price you have to put down as cash (usually 25 per cent of the purchase price for a conventional mortgage) but can be as little as 5 percent.   Saving up for a down payment and keeping up with the monthly payments (mortgage, utilities and property taxes), may require you to make some significant changes in your spending and lifestyle habits.  One of the best ways to save for a down payment is by taking advantage of government programs available to first-time buyers.  Enlist the services of a real estate professional to help you understand how these programs work.   A Realtor will also help you understand and choose the housing options and neighborhoods that will best serve your pocketbook and desired lifestyles.

RRSP Home Buyers’ Plan (Canada)

If you have been contributing regularly to a registered retirement savings plan (RRSP), you may have to look no further for your down payment.  The federal government’s RRSP home buyers plan allows eligible taxpayers to withdraw up to $20,000 per person ($40,000 per couple) tax free from their plan to buy a qualifying home.  However, you have to pay back every year at least 1/15th of the amount taken out until it is all paid back, or there will be a tax penalty.

CMHC Five Percent Down (Canada)

The Canada Mortgage and Housing Corporations five per cent down mortgage program is available to both first time buyers and those who have already owned a home.  This benefits buyers who can afford the monthly payments but would have trouble saving for a larger down payment.

Under the program, CMHC may insure the mortgage on your home (against default in payments) for up to 95 per cent of the lending value of the home.  The cost of this mortgage insurance depends on the value of the house and the size of the loan -- rates run from 1.25 to 3.75 percent.  This amount can be added to the mortgage or paid on a monthly basis.  For more information on CMHC, visit




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