Buying a home in the Edmonton area is a significant milestone, and saving for a down payment is a critical step. Canadians/Edmontonians have several saving options, each with its benefits and considerations. Here’s a breakdown of three popular choices: the First Home Savings Account (FHSA), Home Buyers’ Plan (HBP aka RRSP), and a Tax-Free Savings Account (TFSA).

First Home Savings Account (FHSA)

The First Home Savings Account (FHSA) in Canada is a tax-advantaged savings account designed to help individuals save for their first home. This account aims to make homeownership more accessible by providing significant tax benefits for first-time homebuyers.

Pros:

• Contributions are tax-deductible, and withdrawals (including investment income) for qualifying first home purchases are tax-free.
• Offers flexibility and significant tax advantages for first-time homebuyers.

Cons:

• The annual contribution limit is capped. The annual contribution limit for the First Home Savings Account (FHSA) has been $8,000 in recent years, and there is a lifetime contribution limit of $40,000.
• Specifically designed for first-time homebuyers, limiting its use for others.

Home Buyers’ Plan (HBP)

The Home Buyers’ Plan (HBP) is a program in Canada that allows individuals to withdraw from their Registered Retirement Savings Plans (RRSPs) to buy or build a first home, without immediate tax penalties.

Pros:

• Allows you to borrow up to $35,000 from your RRSPs to buy or build a first home, interest-free.
• A repayment period of 15 years gives ample time to return the funds.

Cons:

• Requires repayment, otherwise, it is added to your taxable income.
• Using RRSP funds can interrupt the growth of your retirement savings.

Tax-Free Savings Account (TFSA)

A Tax-Free Savings Account (TFSA) is a flexible investment account in Canada that allows contributions to grow tax-free. Withdrawals can be made at any time for any purpose, also tax-free. It’s available to individuals 18 and older with a valid Social Insurance Number. While contributions are not tax-deductible, the account offers significant tax advantages, especially for long-term savings and investment growth.

Pros:

• Contributions aren’t tax-deductible, but investment growth and withdrawals are tax-free.
• Offers flexibility; funds can be withdrawn anytime for any purpose, including a home purchase.

Cons:

• Annual contribution limits may restrict how much you can save over time.
• Doesn’t offer the same direct home-buying incentives as FHSA or HBP.

When considering these options, think about your timeline for buying an Edmonton home, your current and future tax situation, and how much you can save. Consulting with a financial advisor and an Edmonton mortgage broker can also provide personalized advice tailored to your specific circumstances. Whichever path you choose, start early and review your strategy regularly to keep your home-buying dream on track.

Did you know we offer complimentary Home Buyer consultations to talk about your unique goals and desires? Based on where you are at in the process, we can also connect you to top-tier professionals who can further guide you in getting ready to become a homeowner.

The purchase of your first Edmonton home is an exhilarating and monumental event. However, many homebuyers are unaware of the “hidden”, one-time expenses that come with buying a home. When you budget for a real estate purchase, you should have a good understanding of what investments will have to be made alongside your down payment. Doing so will allow you to prepare properly, save accordingly, and make the acquisition of your new Edmonton home much less stressful.

Edmonton Home Inspection

While not mandatory, it is often recommended to have a home inspection done prior to closing the deal on your new home. An Edmonton home inspection allows the buyer to better understand the condition of the house, including its structural integrity and mechanics. Doing an inspection before closing a sale means that potential issues can be brought to the seller’s attention before it becomes the buyer’s responsibility. Additionally, knowing that there are no major defects to surprise you in the future may provide more security for your lender.  

Legal Representation

You will require legal assistance to facilitate the transaction between yourself, the bank, and the seller. Only a portion of this cost will pay the lawyer’s fee, while the remainder will be used to execute the title transfer and all other details regarding the purchase (disbursements). Legal feels will vary depending on the complexity of the transaction. 

Adjustment Costs

Adjustment costs refer to the costs that the previous owner prepaid (property taxes, utility bills, maintenance services, etc.). You as the buyer may be required to reimburse the seller for expenses they may have already been paid in a prorated fashion. This cost is dependent upon the possession date. 

Property Appraisal Fee

In order to determine the value of the property you’re purchasing, and whether or not it meets its lending criteria, your bank may hire an independent appraiser to assess the property. This, of course, depends on the type of property being purchased.

Estoppel Certificate Fee

If the property you’re purchasing is a condominium or strata unit, an estoppel certificate allows you as the buyer to know if the previous owner has any unpaid condominium contributions. Outstanding payments and associated interest owing on unpaid condominium fees are carried with the unity and not the owner.

Land Registration

Before the sale closes, you have to register the property’s title under your name. This is also referred to as a land transfer tax, deed registration fee, or property transfer tax. 

If You’re Buying a Brand-New Home

Often only associated with the purchase of a brand-new home (not just new to you), you will likely have to pay goods and services tax (GST) on your home purchase. 

Home Insurance

As a condition of getting a mortgage, oftentimes the lender will require proof of home insurance before approving a loan. The cost of your home insurance policy will vary depending on your personal assets, the features of your new home, and the type of policy chosen. 

A general guide is to have an additional 3%-4% of the purchase price as cash-on-hand. Keep in mind, the estimates of these costs will differ based on the type of property you are buying and what kind of services are available to support your purchase. If you’re unsure of what fees will be associated with your first home purchase, consult your real estate agent. They are on your side and are eager to ensure you are making a quality investment. 

Our TruHome real estate agents take great pride in facilitating your purchase by making sure you’re well-informed before any documents are signed. We are always happy to aide our clients – especially if you’ve chosen us to help you find your first TruHome! 

Step 1:

Know Where Your Money Is Going

Step 2:

Figure Out Where You Can Cut Back On Your Expenses

Step 3:

Step 4:

Step 5:

This week we heard the news that CMHC was changing some of their requirements for obtaining an insured mortgage. What CMHC highlighted is that starting July 1st, 2020:

• Limiting the Gross/Total Debt Servicing (GDS/TDS) ratios to our standard requirements of 35/42;
• Establish minimum credit score of 680 for at least one borrower; and
• Non-traditional sources of down payment that increase indebtedness will no longer be treated as equity for insurance purposes.

We get it, your probably wondering, what exactly does this mean to me? Simply speaking, obtaining your next Edmonton home may become more challenging after July 1st if (like many) you are looking to secure an insured mortgage.

To put even more simply, in speaking to Edmonton Mortgage Broker Dallas Sleeman, “this move will effectively reduce the purchasing capacity of buyers by about 10%”.  Meaning if you were approved for $500,000 – after July 1st, you may only qualify for $450,000. She also went on to mention that those who have been struggling with managing their credit will also have a tougher time getting a mortgage as at least one borrower will need to show minimum credit score of 680. She has shared some additional information that highlights the differences at On The Mark Mortgages website.

While there are other insurance options out there for Edmonton Home Buyers including Genworth and Canada Guarantee, it is difficult to determine if they will implement similar rules as well.

So… I’m sure your wondering, is there any GOOD NEWS? Absolutely there is! What this change means is now, even more so could be the ideal time to buy. Buyers that remove the conditions on a purchase prior to July 1st will not have to meet these new criteria. As Dallas put it, “The one bright side of the equation is that we have 3-ish weeks to get active files approved under the old rules to the finish line. So if you have any clients that are actively shopping, I would get live offers in ASAP. As long as the file is approved with conditions removed prior to July 1, the deal can still close after July 1.”

The real question is: What are you waiting for? Our Edmonton real estate team and our amazing mortgage broker partners are ready to help you realize your life goals one house at a time. Simply send us a quick message and lets chat about how we can secure your next home before July 1st.

• Book An Edmonton Buyers Consult
• Book An Edmonton Home Evaluation To Find Out If It Is A Good Time To Sell

More info from CMHC.

TruHome always wants to give our clients the best information possible when it comes to buying and selling in Edmonton.  We are sure you know that finding the right mortgage is often the first major step when it comes to purchasing a new home.

One of our team members was recently on the hunt for mortgage information and found that going directly to their bank was less than ideal. They felt the person they spoke to “lacked the human touch” – they wanted to develop a connection and feel that their banker would guide them through the process: stress free and easy.  To get them back on track – we wanted to connect with a likeminded person who would provide the guidance they were seeking. Step 1 was introducing them to some of the amazing Edmonton mortgage brokers we have worked with over the years. This made a huge difference with the service they experienced.

We wanted to share with you some of the outstanding insights to common questions that many first time home buyers have when it comes to obtaining an Edmonton mortgage.

What advice would you give to a first time home buyer when it comes to getting a mortgage?

” Really really understand your living budget. Know what it takes to run your home and make sure those numbers actually work for you. It is so important that you understand more than just qualifying for your mortgage. Owning a home can be affordable if you plan well. Think about how long you want to own that home and what you want to accomplish financially in 5 to 10 year increments.  Talk to someone who understands the upfront costs, and the back end costs. Treat this purchase as an investment in our overall portfolio of investments. You have to live somewhere so learn how to make money on your purchase.” ~ Yvonne Wilchewski, River City Financial

” My advice when getting a mortgage is call and let’s get you pre approved.  We can sit down and find out exactly what your price range is,  that way when you go to the Realtor you are ready.  There is nothing worse than going out and looking for a home and finding the home of your dreams, make an offer on it and find out it is way above your price range. It is what disappoints all  buyers.” – Suzette Hawkes from RBC Mortgages

“Buyers sometimes jump in too quickly before getting their ducks in a row.  Preparation beforehand is ALWAYS a good idea. Income, credit, down payment and stability needs to be addressed before the actual buying process begins.  Sit down with an experienced mortgage broker to discuss your personal situation and steps to getting pre-approved! ~ Julian Izquiredo, CIBC Mortgage

What advice would you give a person if they are worried about their credit?

“Bad credit? No problem!If you are worried about your credit then come in and let’s see just how bad it is.  Bad credit is never going to go away, so let’s sit down pull a credit bureau and see what we need to do to get you back on track and ready to go. Also you may be surprised that it isn’t as bad as you thought. ~ Suzette Hawkes from RBC

“I would say let’s talk about why you are worried and explore where that fear is derived from. Let’s investigate and educate how purchases affect your credit, how payments affect your credit, and how balances affect your credit. Utilize Equifax a free service to view your credit. Lenders look at your history and your habits on your credit report. They look to see how you have managed and paid little bills and this is used as an indicator of how you will pay your big bills ( i.e., your mortgage payments)”. ~ Yvonne Wilchewski, River City Financial

“The rules of lending have changed it’s a different market now, and banks are more cautious, and more risk assessment is being done. More insurers like CMHC and Genworth are more sticky when there are blemishes on a credit bureau. Be transparent with the mortgage broker so they can understand the full story rather than experience financial surprises somewhere down the road. Also keep in mind that having poor credit or lack of credit is quite normal for many people and that it can and will get better by us providing our professional guidance to help point you in the right direction.” ~ Julian Izquiredo, CIBC

Have additional mortgage questions or want to get pre-approved for a mortgage – be sure to connect with our team today.  We can also get you set up looking for your TruHome and advice on the steps you need to take to get there.

Over the last week, we have spoken with a few of our mortgage specialists to gain a better understanding of how the mortgage changes may affect you.   Due to the updates, a homebuyer may not qualify for as high of a mortgage as they previously could.

Now “the average home buyer will have to pass a financial stress test and qualify for the 4.64% interest rate which is about 2% over the rate they are qualifying for right now.” Suzette Hawkes from RBC explains that “this test measures whether the buyer can still afford to make payments if the mortgage rates rose to the Bank of Canada’s posted five-year fixed mortgage rate. In some cases, this means homebuyers will be able to spend $20,000.00 less on a home that they were originally pre-approved for on a prior date.”

Homebuyers that are applying for a conventional mortgage with 20% or more down will not be affected by this change.  For the home buyers that require an insured mortgage (less than 20% down) will have to go through this process.

Our recommendation: be sure to talk to a mortgage specialist to learn more about your current buying power.