Financial Planning Tips for First-Time Homebuyers

It’s important to explore all your options when looking to buy your first home. Here are some financial planning tips to consider before making your first move:

RRSP Tactics

  • Home Buyers’ Plan (HBP): Borrow up to $35,000 from your Registered Retirement Savings Plan (RRSP) for a down payment without tax penalties. Couples can combine withdrawals for a total of $70,000, to be repaid within 15 years.
  • Tax Breaks: Deposit your down payment into your RRSP for at least 90 days to qualify for a tax deduction.
  • Multiple RRSPs: Withdraw from multiple RRSP accounts, ensuring the total doesn’t exceed the maximum withdrawal limit, and report the amount on your tax return.

First Home Savings Account (FHSA): Introduced in 2022, the FHSA offers tax-deductible contributions and withdrawals, a $40,000 lifetime contribution limit, and allows carrying forward unused contribution room.

Home Buyer’s Amount (HBA): This non-refundable income tax credit is available for first-time homebuyers or those buying for someone eligible for the disability tax credit. Eligible homes include single-family houses, townhouses, mobile homes, condos, and apartments in multi-unit buildings.

Mortgage Affordability Calculators: Use tools from CMHC and other lenders to determine your mortgage eligibility based on your financial situation. Understand the down payment requirements:

  • $500,000 or less: 5% of the purchase price.
  • $500,000 to $999,999: 5% of the first $500,000 and 10% of the remainder.
  • $1 million or more: 20% of the purchase price.

Budget Accordingly: Factor in additional costs such as closing fees, home inspections, utility connections, condo fees, property taxes, and potential renovations. Budget for about 4% on top of your down payment.

Save Whatever You Can: Maximize your savings by utilizing all available financial tools and cutting unnecessary expenses. Allocate any extra income, like raises or tax refunds, into a high-interest savings account to build a financial cushion for your homebuying journey.