Solutions for first time home buyer mortgages in Ontario
If you’re a first-time home buyer, navigating your first mortgage can seem like a monumental challenge. You’re treading new water and there are tons of financial decisions – big and small – to consider and plan for. Not to mention, sometimes it’s tough to find a mortgage lender to help you finance the largest purchase you’ve ever committed to. Maybe your credit score isn’t perfect, or banks feel you are a risk without equity or credit history. First time home buyers often don’t know that they have options when it comes to mortgage lenders. At Canadian Mortgage Services, we can help you find reputable mortgage providers that will give you the best options for first-time home buyer mortgages in Ontario.
First-time home buyers: Mortgage 101
Let’s go back to the basics. Here are some terms and FAQs all first-time home buyers should consider before looking at their mortgage options.
First, what is a mortgage? In short, a mortgage is a loan used to purchase property in Canada. To pay it off, you’ll make regular payments to a lender (a bank, trust, or private lender) that consists of two parts: principal loan amount and interest. Your mortgage loan will start off as a very large number (the difference between your down payment and the cost of the property), but as you make payments, it will decrease over the length of the mortgage term.
Now that that’s out of the way, let’s talk about the difference between a mortgage and a down payment. Quite simply, if a mortgage is borrowed financing, your down payment is lump sum that goes towards the principle cost of the purchase. Down payments are important because they serve dual purposes for home buyers. First, down payments will be deducted from the purchase price, thus lowering the loan size needed be borrowed from your mortgage lender. Second, down payments can often be used as a way to strengthen your application. The larger the down payment, the less “risk” your lender feels they will take on, and the more likely they are to finance your purchase.
The next decision you’ll have to make is between a fixed term vs. a variable term mortgage. The difference is, a fixed rate mortgage will keep your rate consistent throughout the term (i.e. 2.99% over a 5-year term), and a variable rate will fluctuate (up or down) according to prime lending rates set monthly by the bank or lender. In some cases, you could be paying less, but in others, you could be paying more than a fixed term rate.
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Where to get your first mortgage
If you’re in the position to purchase property, where can you get a mortgage? First-time home buyers looking for a mortgage can turn to three different lending options: Banks, Alternative lenders (B banks, Trusts or credit unions), or private lenders, although private lenders can get expensive and is best used as a last resort. Banks and Alternative lenders will approve you based on your credit score and income. We can help you tap into a network of all types of lenders who will help you get a first-time mortgage approved.
WE CAN BE YOUR MORTGAGE GUIDE
At Canadian Mortgage Services, we are committed to treating you with respect and integrity. We recognize that getting a mortgage can be complicated and confusing, not to mention intimidating. We are glad to be your guide through the process. Besides finding you the right mortgage, we also provide thorough information and offer resources to help you make the right decision. When you contact us, there’s no high-pressure sales pitch or demand for a quick decision. Even if you don’t know what you need, we’ll help you figure it out. We’re your mortgage helper and we’ll assist you in finding the best solution, every time.
Let’s talk about your options.
Q: Where do I begin as a first time home buyer?
A: Best thing to start the process is to speak with one of our mortgage specialists. Our job is to help guide you from start to finish. This includes prequalifying your application to ensure you are ready to take the necessary steps towards homeownership. We will be able to help narrow your focus for home prospects by helping you understand your purchasing power based on the information we gather through our collaborative efforts. Although many applications share similarities, no two applications are exactly the same.
Q: What if there are 2 applicants, and one of them owned a home previously?
A: Depending on the program that you are looking at, there may be varying definitions of what qualifies as a first-time home buyer. For example, under the first-time home buyers incentive, only one of the applicants needs to be a first-time homebuyer. Under the home buyers plan, you are considered a first-time home buyer if you haven’t owned a home in that previous four-year period. The land transfer tax rebate considers a first-time home buyer as one who has never owned a home anywhere in the world.
Q: What programs are available to first time home buyers?
- The home buyers plan, which allows you to use up to $35,000 of your RRSP without penalty or any withholding taxes. To learn more, visit CRA’s HBP
- Firs time home buyer’s incentive, which grants the borrowers up to 10% in the form of a down payment, in exchange for an equal shared equity. To learn more visit CMHC’s First-time home buyer incentive
- Land transfer tax rebate, which provides you a max rebate of $4000.00 (Ontario) against any applicable Land transfer taxes that are incurred. Also, if you are purchasing a home in the city of Toronto, then an additional rebate of up to $4475.00 is available to offset any applicable land transfer taxes which are typical in Toronto. It is important to note that any unused amount of the rebate is forfeited
- Minimum down payment of 5% is available to first-time home buyers. Although this is not specific to first-time home buyers specifically, the lowest down payment requirement of 5% is certainly something that makes it easier to enter the homeownership market.