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Tag: First Time Home Buyer

A Complete Guide to Buying Your First Home
Buying your first home is an exciting and a significant milestone in your life. If you’re considering purchasing a home, you’re in for a unique and rewarding experience. Ontario offers a diverse range of housing options, from bustling city condos to peaceful suburban homes, making it an attractive destination for first-time homebuyers. However, the process of buying a home can be complex and overwhelming, especially if you’re new to the real estate market. In this comprehensive guide, we will walk you through the complete process of buying your first home, from setting your budget to closing the deal.

STEP 1: Assess Your Finances
Before you start looking at properties, it’s crucial to evaluate your financial health. Review your income, savings, debts, and credit score. Your credit score is particularly important because it will affect the mortgage terms a lender will offer you. It’s also the right time to start saving for a down payment if you haven’t already.

STEP 2: Establish Your Budget
Next, you’ll want to establish a realistic budget. Before you start looking at homes, you need to determine how much you can afford. To do this, consider the following factors:
- Down Payment: In Ontario, a minimum down payment is required, which varies based on the purchase price of the home. For homes priced up to $500,000, the minimum down payment is 5% of the purchase price. For homes priced between $500,000 and $1 million, you need to put down 5% on the first $500,000 and 10% on the remaining amount. Homes priced over $1 million require a 20% down payment.
- Additional Costs: In addition to the down payment, you’ll need to budget for closing costs, which can include legal fees, land transfer tax (unless you’re a first time homebuyer), home inspection fees, and more. These costs can add up, so it’s essential to factor them into your budget.
- Monthly Expenses: Consider your current monthly expenses, such as rent, utilities, and insurance. Your new home may have different monthly costs, such as mortgage payments, property taxes, and maintenance. Ensure that you can comfortably manage these new expenses within your budget.
STEP 3: Obtain Mortgage Pre-Approval
Once you have a clear budget in mind, it’s time to obtain mortgage pre-approval. This step involves working with an experienced Mortgage Broker, to determine how much you can borrow and at what interest rate. A mortgage pre-approval provides you with a clear understanding of your purchasing power and can help streamline the home-buying process. To get pre-approved for a mortgage:
- Gather Financial Documentation: Be prepared to provide your financial information, including proof of income, employment history, and details about your assets and liabilities.
- Complete an Application: Make sure the information you give is accurate and complete, this will ensure a smooth application process.
- Choose a Mortgage Type: There are various mortgage types available, including fixed-rate mortgages, variable-rate mortgages, and hybrid mortgages. Consult with your Mortgage Broker to determine which type is best for your financial situation.
STEP 4: Start Your Home Search
With your budget and pre-approval in hand, it’s time to begin your home search. Ontario offers a wide range of housing options, from single-family homes to condos and townhouses. Consider your lifestyle, preferences, and future needs when searching for the right property. Here are some tips for finding your ideal home:
- Hire a Realtor: Working with a qualified real estate agent can make the home-buying process more manageable. Realtors have local knowledge, access to property listings, and negotiation skills that can be invaluable.
- Create a Wish List: Make a list of must-have features and preferences for your future home, such as the number of bedrooms, location, proximity to schools or public transportation, and any specific amenities you desire.
- Research the Neighborhood: Explore the neighborhoods you’re interested in to ensure they meet your needs. Consider factors like safety, local amenities, schools, and commute times to work.
- Attend Open Houses: Visit open houses and schedule private viewings to get a feel for different properties. Pay attention to the condition of the home, the neighborhood, and any potential issues.
STEP 5: Make an Offer
Once you’ve found the perfect home, it’s time to make an offer. Your real estate agent will help you prepare a written offer that outlines the purchase price, any conditions, and the closing date. In Ontario, it’s common to include conditions such as a home inspection and financing approval. The seller can either accept, reject, or counter your offer. Here are some key points to keep in mind during this process:
- Negotiate Wisely: Be prepared to negotiate with the seller to reach a mutually agreeable price. Your real estate agent can provide guidance on the negotiation process.
- Include Contingencies: Including contingencies in your offer, such as a financing condition, can protect you in case unexpected issues arise.
- Deposit: When your offer is accepted, you will need to provide a deposit, typically held in trust by the seller’s brokerage. This shows your commitment to the purchase.
- Home Inspection: Consider arranging a professional home inspection to identify any potential issues with the property. You can use the inspection report to negotiate repairs or a reduction in the purchase price if needed.
STEP 6: Secure Financing
With an accepted offer in hand, it’s time to finalize your financing. This involves working closely with your Mortgage Broker to complete the application process. Be prepared to provide updated financial documents, and ensure that all conditions in your offer, such as financing approval, are met. Your Mortgage Broker will then arrange for a property appraisal to determine the home’s value.

STEP 7: The Legal Process
The legal process of buying a home involves several important steps:
- Hire a Real Estate Lawyer: You’ll need to hire a real estate lawyer to handle the legal aspects of your home purchase. They will review the purchase agreement, conduct a title search, and ensure that the property has no outstanding liens or issues.
- Land Transfer Tax: In Ontario, you’ll need to pay a land transfer tax when you buy a property. The amount depends on the purchase price and other factors. First-time homebuyers may be eligible for a rebate.
- Closing Costs: Your lawyer will provide you with a statement of adjustments that outlines the closing costs you need to cover. These costs may include property taxes, utility bills, and legal fees.
- Property Insurance: You will need to arrange for property insurance to be in place at the time of closing.
STEP 8: Finalize the Deal
As the closing date approaches, you and your lawyer will work together to ensure all necessary paperwork is in order. This includes signing the final documents, transferring funds to cover the purchase price, and closing costs, and conducting a final walkthrough of the property to ensure it’s in the agreed-upon condition.

STEP 9: Closing Day
Closing day is the culmination of the home-buying process. On this day:
- The seller’s lawyer transfers the property’s title to your name, and your lender provides the funds for the purchase.
- You’ll receive the keys to your new home, and the property officially becomes yours.
- Your lawyer will register the transfer of the property and pay any outstanding fees, including land transfer tax, if applicable.
- Your lender will set up your mortgage payments as per your agreement.
STEP 10: Move In & Settle In
Congratulations, you’re now a homeowner! After closing day, it’s time to move into your new home and settle in. Here are some essential steps to consider:
- Utilities: Ensure that you transfer or set up utilities such as electricity, water, gas, and internet in your name.
- Change of Address: Update your address with important institutions such as your bank, employer, and any government agencies.
- Home Maintenance: Begin regular maintenance tasks to keep your home in good condition.
- Enjoy Your New Home: Take the time to explore your neighborhood and make your new house feel like home.
Buying your first home is an exciting and rewarding journey. By following the steps outlined in this comprehensive guide, you can navigate the process with confidence. Remember to establish a realistic budget, obtain mortgage pre-approval, work with a real estate agent, and conduct thorough research to find the right property for you. With careful planning and the support of professionals, you’ll soon be enjoying the benefits of homeownership in this beautiful province.
November 8, 2023
Planning & Establishing a First Home Savings Account

Saving up for your first home can be stressful and challenging in this ever-changing market. Recently the federal government of Canada has created a way to help make the process a little easier, so you can begin saving sooner.

In the 2023-2023 budget, they announced several measures to help Canadians who are trying to save money for a down payment on the purchase of their first home, by creating a First Home Savings Account (FHSA). This new savings account is open to eligible taxpayers starting in April 2023.

Contributions to the Plan

This new benefit is open to any resident of Canada who is at least 18 years of age and has not lived in a home which they own in any of the current or previous four years. If criteria are met, you are able to open the plan, contributing up to $8,000 annually. Contributions can be made annually, ending at the end of the calendar year. Unused portions of contributions can be rolled over into the following year. Regardless of the timeline, the maximum you can contribute to this plan is $40,000. Contributions under this plan are similar to contributions made to RRSP accounts.

Withdrawing from the Plan

On a qualifying purchase (when money from the fund is used to make a purchase of a qualifying home) the money contributed, as well as any investment income, are able to be withdrawn tax free. The plan holder must have a written agreement to buy or build a home located in Canada before October 1 of the following year. The plan holder also must intend to occupy that home within one year of buying or building it.

Other Information

Individuals who open a FHSA have 15 years from the opening date to use funds in the account on a qualifying purchase. If the money is unused in the account after 15 years, or at the end of the year when they turn 71), the account must be closed with funds either being transferred to a RRSP or RRIF (Registered Retirement Income Fund) on a tax-free basis.

This plan is an addition to the existing Home Buyer’s Plan (HBP), which allows an individual to withdraw up to $35,000 from their RRSP and use those funds to purchase a first home. Any funds withdrawn through the HBP however must be repaid over the next 15 years. Both plans are options for buying your first home, however an individual is not permitted to withdraw from both FHSA and a HBP withdrawal in respect to the same qualifying home purchase.

April 5, 2023
The Ultimate Guide to the Tax-Free First Home Savings Account

As house prices continue to rise, many Canadians find it more challenging to save for a mortgage down payment. As reported in the 2022 federal budget, the Canadian government has proposed initiatives to make homeownership more affordable. One way the government aims to tackle the housing crisis is through the First Home Savings Account (FHSA).

The FHSA has many similarities to two existing registered accounts, the tax-free savings account (TFSA) and the registered retirement savings plan (RRSP). Here is updated information about the First Home Savings Account (FHSA) and what you should know about it.

What is the First Home Savings Account (FHSA)?
The first home savings account is a tax-free savings account for the sole purpose of buying a home. The FHSA is expected to become operational in 2023 and is targeted at Canadian residents who plan to purchase their first home. There are conditions on who can use it and how.

When you contribute to your FHSA, you can invest your money in allowable investment assets like stocks, bonds, mutual funds, exchange-traded funds (ETF’s), and guaranteed investment certificates (GIC’s). You can get these through online brokers. The CRA would not tax investment income from your FHSA when you make withdrawals. It is a tax-free account.

Suppose you contribute $5,000 to your FHSA and invest in stocks. If the value of your stocks increases to $10,000, you will make a capital gain of $5,000. This extra income is not subject to tax. The income is safe from the CRA. In addition to having a tax-free savings account, if you contribute to the FHSA, you can claim tax deductions when you file your income tax return, thereby reducing your taxes.

What is the FHSA contribution limit?
Through the FHSA, you can save $8,000 annually beginning in 2023. Why only $8,000? The FHSA comes with an annual limit of $8,000 and a lifetime limit of $40,000.

There is a significant difference in how the tax-free savings account (TFSA) works. Your unused contribution room accumulates and can be carried forward. This is not the case for the first home savings account (FHSA). You cannot carry your FHSA unused contribution room forward to future years.

For example, if you contribute only $6,000 to your FHSA in 2023, by 2024, you will forfeit the $2,000 unused contribution room and only have the $8,000 annual contribution room for 2024. Typically, if you contribute your annual contribution limit of $8,000 every year starting from the year you are eligible to open and contribute to an FHSA, you will reach your lifetime limit of $40,000 within five years.

Who can open a FHSA?
If you are planning to buy your first home, you may be able to use the first home savings account. However, you need to check that you are eligible to open and use the FHSA for your home buying goal. There are eligibility requirements.

First, you must be a resident of Canada between the ages of 18 and 40 years old. Also, you must not have resided in a home you own at any time in the year you open your FHSA or during the past four calendar years. Essentially, the Canadian government wants the proposed FHSA to benefit only first-time primary homeowners.

Can you open more than one FHSA?
Yes, you can open more than one first home savings account, but you cannot exceed the annual and lifetime contribution limits across all your accounts.

Withdrawing from the First Home Savings Account (FHSA).
If you withdraw money from your FHSA to purchase your first home, you will not pay taxes on your withdrawals. However, if you use money from your FHSA for other purposes other than a first-home purchase, the CRA will recognize your withdrawal amount as income and tax it.

The lifespan of the FHSA is limited. The first home savings account can only be open for 15 years. If you open and contribute to your FHSA but do not use it to purchase a qualifying first home after 15 years from when you opened it, you will need to close your account.

You have three withdrawal options for the money in your FHSA.
You can withdraw a lump sum amount from your first home savings account and pay taxes on the withdrawal. Another option to avoid any immediate taxation. To do this, you convert your FHSA to a registered retirement savings plan (RRSP) before the end of the year you turn 71. Alternatively, you can transfer the funds in your FHSA through your FHSA provider to a registered retirement income fund (RRIF). It is important to note that the RRIF is intended to provide periodic income in retirement. If you convert your FHSA to a RRIF, you will need to start withdrawing the minimum amount in the following year.

Direct transfers from your FHSA to your RRSP or RRIF are qualifying transfers. The transfer is not taxable when you initiate this transfer. However, withdrawals from your RRSP and income received from your RRIF are subject to tax at your marginal tax rate.

Contribution Room Consequences
Also, when you make transfers from your FHSA to an RRSP, this transfer does not reduce your RRSP contribution room! Even if you do not have available RRSP contribution room, you can still do a qualifying direct transfer from your FHSA to your RRSP. It is a very strategic move.

However, when you withdraw from your first home savings account or make a transfer to your RRSP or RRIF, this does not increase your FHSA contribution limits. For example, if you contribute up to the $8,000 annual limit to your FHSA in 2023 but decide to transfer $5,000 to your RRSP, this does not free up additional room for you to contribute to your FHSA in 2023. You would need to wait until 2024 for your total annual contribution limit of $8,000. Likewise, you can transfer money from your RRSP to your FHSA without paying taxes if you have available FHSA contribution room, but your transfer would not restore your RRSP contribution room.

The FHSA vs The Home Buyer’s Plan (HBP)
The FHSA is different from the home buyer’s plan. With the home buyer’s plan, you can borrow up to $35,000 from your RRSP tax-free to buy your first home. When you withdraw from the RRSP through the home buyer’s plan, you need to pay back the amount you borrow within 15 years. Whereas when you withdraw from the FHSA, you do not have to repay the withdrawn amount.

Does the First Home Savings Account replace the Home Buyer’s Plan (HBP)?
No, the FHSA does not replace the home buyer’s plan. The HBP will still be available to Canadians looking to purchase their first home. However, you cannot withdraw from the first home savings account and the home buyer’s plan at the same time to buy the same home. You have to use one at a time when you qualify for a first-home purchase.

Conclusion
The first home savings account is good for Canadians looking to purchase their first home. You can use the FHSA to save up for your down payment. With the FHSA, you get tax benefits available to the TFSA and the RRSP in one account. You can claim tax deductions for your contributions, and your withdrawals for a home purchase are tax-free. The FHSA does not replace the existing home buyer’s plan (HBP). Instead, it provides another tax-advantaged home-savings opportunity for Canadians.

May 1, 2022