We’ve dedicated an entire section to answer some common questions!
The Kore Team is well versed with First Time Home Buyers. We will hold your hand through the buying process, start to closing, allowing you time to consider the needs & wants of your new home purchase.
Let’s talk about a few noteworthy items, to prepare you upfront:
As first time home buyers, we often get asked how much ‘cash’ is required to buy a home?
It’s a great question. Lenders require a minimum of 5% of the purchase price down, due on closing, for homes up to 500,000. In other words, $5000 for every $100,000.
Explanations can often be better explained by example:
Lets say the purchase price is $460,000.
460,000 X .05 = $23,000
Therefore you need a minimum of $23,000 to satisfy the lender.
Now you may be wondering, what is a deposit, what’s a reasonable amount, when is it due, and where do the funds come from?
More good questions, as a deposit can often be confused with your down payment.
The Deposit is submitted on acceptance of your offer- via certified cheque from your bank account. It shows that a buyer is serious, and intends to proceed with the purchase. Typically, for a $400,000-500,000 home purchase, we expect to see a $10,000 deposit.
And yes, this forms part of your down payment.
Using the last example:
$23,000 Down Payment- 10,000 Deposit= $13,000 (Balance of Down Payment, due on closing)
CMHC or ‘Default’ insurance is essentially an insurance policy for the lender. A premium is applied to cases when less than 20% of the purchase price (Let’s face it, most of us) is available for a down payment.
It works like this, using our $460,000 home again as an example:
Taken from the CMHC Website, we find that a 4% premium applies to a $460,000 home, with a 5% Down Payment. This amount will be added on top of the amount to be mortgaged, and subject to the same interest rate. The premium as a percentage is reduced as the Down Payment Increases as a percentage of the purchase price. In other words, the ‘Risk’ decreases in the eyes of the lender.
For Clarity,
Purchase Price- 460,000
Less Down Payment (23,000)= 437,000
Premium @ 4% of 437,000= 17,480
Therefore, Your New Mortgage Becomes $437,000 + $17,480 = $454,480
Yes, the interest rate applies to the full amount.
HST is not applicable to most residential resale properties. But Land Transfer Tax typically is.
The good news is that, as First Time Home Buyers in Southern Georgian Bay, you may be eligible for a refund of all or part of the tax.
To claim a refund, you must be at least 18 years of age, you cannot have owned a home or an interest in a home anywhere in the world, and your spouse cannot have owned a home or interest in a home, anywhere in the world while he or she was your spouse. Previous ownership in a home means you do not qualify for the land transfer tax first-time homebuyers refund. The method of acquiring the home (e.g., purchase, gift or through an inheritance) is not relevant.
You cannot re‑qualify as a first‑time homebuyer.
How much will I save, you ask?
If you qualify, no land transfer tax would be payable on the first $368,000 of the value of the consideration for eligible homes- a Savings of $4000. First‑time purchasers of homes greater than $368,000 would receive a maximum refund of $4,000. Basically, you’d pay LTT on the balance.
Using our Example:
Purchase Price: 460,000
As a Non- Eligible Buyer, you’d Pay 5675.00 in LTT (using a Tiered Calculation, starting from .5% and climbing to 2%+) (See Buyer 101 Page for More Info)
As a Qualified First Time Buyer, you save $4000 on the first $368,000 of purchase price. But would pay the LTT on the amount beyond- in this case $1675.00.
For those that like math…
The balance of $92,000 (in our case, 460,000 – 368,000) is taxable as if you were a repeat home buyer. In this case 32,000 @ 1.5% & 60,000 @ 2.0%= ~$1675
