Are you a first-time home buyer in Canada?
Buying your first home in Canada can be an exciting and overwhelming experience, especially if you’re unfamiliar with the legal aspects of the transactions. As a first-time home buyer in Canada, there are several things you need to keep in mind to ensure a smooth and stress-free transaction. In this blog post, we’ll cover key considerations and legal requirements to remember when buying your first home in Canada.
What should you know about the home-buying process in Canada?
The home-buying process can vary depending on where you live in Canada, but there are some general steps you’ll need to follow. These include:
- Saving for a down payment: In Canada, you will need to have a minimum 5% of the home’s purchase price as a down payment.
- Getting pre-approved for a mortgage: Before you start house hunting, it’s a good idea to get pre-approved, so you know what you can afford. Reach out to banks directly or engage with a mortgage broker, who will be able to help you make the best lender choice for your circumstances. At Shory Law, we are happy to recommend brokers and specialists who can help meet your needs and wants.
- House hunting: This is the fun part! It is best to work with a real estate agent to find homes that meet your needs and budget. Shory Law works with a variety of real estate agents across the country and would be happy to help you find the one that fits your needs.
- Making an offer: Once you find a home you like, you will make an offer to the seller. If they accept, you’ll move on to the next step.
- Closing the deal: This is where the legal work comes in. You will need a real estate lawyer to help you with the closing process. A real estate lawyer is mandatory in Alberta and we welcome you to contact our seasoned team of real estate lawyers today to help you close your first-home deal in Canada.
Are there any legal considerations for a first-time home buyer in Canada?
As a first-time home buyer, there are several legal considerations you’ll need to keep in mind. These include:
- Property title: Before you purchase a home, you’ll want to ensure the seller has the legal right to sell it. Your real estate agent and or lawyer will conduct a title search to ensure the seller owns the property and that there are no liens or issues with the property.
- Understanding your mortgage contract: A mortgage contract is a legally binding agreement between you and your mortgage lender, the financial institution or the bank that provided you with the funds to purchase your home. As a first-time home buyer in Canada, it’s essential to fully understand the terms of your mortgage contract before signing one. Real estate lawyers at Shory Law can help review your mortgage contract and explain legal implications, if any.
- Home insurance: Another essential aspect of the home-buying process in Canada involves securing home insurance. Your lawyer can explain the different types of coverage, help you understand your policy, and ensure that you have the right level of protection in place for your specific situation. Some properties do not require home insurance but our lawyers at Shory Law can help explain the differences.
- Understanding mortgage default insurance: As a first-time home buyer in Canada with a down payment of less than 20%, you’ll need to obtain mortgage default insurance. Lenders require this insurance policy to protect them in case of a payment default. This is offered through the mortgage company directly and is NOT included in the amount they are going to advance to the lawyers. Default insurance is a protection mechanism for the lender.
- Closing costs: In addition to the purchase price of the home, you’ll also need to pay closing costs, which can include items such as land transfer taxes, legal fees, and home inspection fees. Your real estate lawyer can provide a closing day checklist to help ensure everything goes smoothly and offer an accurate amount of closing costs.
How does the government help a first-time home buyer in Canada?
One of the most popular governmental programs is the First-Time Home Buyer Incentive, which provides shared equity loans to eligible first-time home buyers. Under this program, the government will contribute up to 10% of the purchase price of a new home (or 5% for existing homes) in exchange for an equity stake in the property. This program is beneficial to reduce your mortgage payments and makes homeownership more affordable, especially for new couples, families and immigrants.
In addition to the First-Time Home Buyer Incentive, the Home Buyers’ Plan (HBP) could be a valuable resource for first-time home buyers in Canada. If eligible, it allows you to withdraw up to $35,000 or $70,000 if you are a couple. This amount is tax-free from your registered retirement savings account (RRSP) when purchasing or constructing a home. Following your withdrawal, you’ll have 15 years to reimburse the funds which start two years after the withdrawal without incurring interest.
If you’re a first-time home buyer and purchase a qualifying home, you may be eligible to claim a non-refundable tax credit of up to $750. This credit is non-refundable, meaning that it can only be applied to offset taxes owing, and any unused portion cannot be carried forward or refunded. The First-Time Home Buyers Tax Credit (HBTC) is a potential benefit for first-time home buyers looking to maximize their financial resources.
To be eligible for these programs, you must be a Canadian citizen or permanent resident, a first-time home buyer in Canada, and have a minimum down payment. If you are interested in knowing whether you are eligible, please contact us. If you’re not a non-Canadian individual or a corporation planning to buy a residential property in Canada, learn more here.
How can Shory Law help you buy your first home?
If you’re a first-time home buyer in Canada, we do not recommend trying to navigate the legal process on your own. Our real estate lawyers at Shory Law have established the trust of the real estate community by continuously providing our clients with a stress-free and comfortable approach to their real estate transactions.
If you are thinking of purchasing a property, contact our office for a consultation and take the first step towards becoming a first-time homeowner in Canada.