Owning a home is one of the biggest milestones for many Canadians, but it often feels like an unattainable dream. Rising property prices, strict mortgage rules, and down payment challenges can make home ownership seem far out of reach. But the truth is, with the right approach planning, your dream of owning a home is closer than you think. Here are 10 simple steps to help you achieve it.
Step 1: Where Do You Want To Own a Home And Live?
This may seem like a simple and obvious question to ask yourself, however, you don’t want to find yourself in a situation where you regret buying a home in a location which has challenges you did not consider. These include: schools, daycare, public transportation, time to
commute to work, distance from family members whose support you might need, and the type of community that you and your family want to live in.
Step 2: What Type Of Home Would You Like To Own?
This is very important because this is where you might end up calling home for a long time to come. Too many people end up buying a home and then realize that it does not meet their needs, such as a growing family, entertainment, detached vs semi-detached vs townhouse, etc.
Step 3: What Is The Price Range Of Your Potential Home?
Sounds simple, however, knowing the price of your home will make it possible to determine your down payment, guide your Real Estate Agent and build a budget.
Step 4: How Much Downpayment Will You Need?
You should plan to have a minimum of 10 -25% down payment to help you qualify for the most attractive mortgage and avoid unnecessary and costly fees.
Step 5: What Are The Best Strategies To Accumulate Funds For Your Down Payment?
There has never been a better time for Canadians to save towards making their home ownership dream a reality. Here are some some effective strategies that you can implement:
● Maximize your RRSP contributions, even if you have to borrow money to make this happen. You are allowed to withdraw up to $60,000 to use as a first time home buyer.
● Maximize your FHSA contributions. You can contribute up to $8,000 each year, up to $40,000 and use all the funds towards a down payment as a first time home buyer. Like an RRSP, your contributions are tax deductible which increases your down payment due to the tax savings that you benefit from.
● Maximize your TFSA contributions. Your investments will grow tax free, just like your RRSP and FHSA.0
● Eliminate debts as soon as possible, unless debts are incurred to make contributions to your RRSP and FHSA.
● Determine early if you will be able to get financial assistance from family members.
● Start a Home-Based Business to increase your income and save taxes.
Step 6. Make Wise Decisions When It Comes To The Investments That You Will Choose
For Your RRSP, FHSA and TFSA Funds.
The most thing to remember is the advice from Warren Buffet, the World’s Greatest Investor: Your Investments must meet the “3 Musts of a Good Investment”:
1. Safety of Capital.
2. High Rate of return ( Rule of 72)
3. Liquidity.
Step 7: Maintain A Good Credit Score.
A good credit score ( minimum 650) will help you to qualify for a lower mortgage rate and potentially save you tens-of-thousands of dollars over the amortized period of your mortgage. There are a lot of ways to improve and maintain a good credit score. Learn about them.
Step 8: In Addition To My Down Payment, What Additional Funds Will I Need?
Some of the additional funds that you might need to plan for are:
● Legal Fees
● Land Transfer Tax
● Home Insurance
● Mortgage Insurance
● Moving Expenses
● Utilities
● Furniture
● Appliances
● Miscellaneous
Step 9: What Type Of Mortgage Should I Get?
Most experts agree on these guidelines:
● When interest rates are expected to rise, you should choose a Fixed Rate mortgage.
● When interest rates are expected to fall you should choose a Variable Rate mortgage.
Step 10: How Can I Minimize My Stress After I Move Into My Home?
The best way is to prepare a budget and stick with it.