New Year - Does that mean new home?

New home can mean many things to different people. It can be your first home, or maybe a retirement home or it can even be a revenue property. But whatever it is, there is a different way of approaching the mortgage process.

Let’s start with a First Home

This is going to be one of the biggest decisions and purchases you ever make. The reason this type of home purchase looks a little different than some others, besides how monumental it is. Is because there are some programs you may have access to that can help make the purchase process a little easier.

The First-Time Home Buyer Incentive is where the Government of Canada provides an incentive towards the purchase of a new home. Either 5% or 10% for a first-time buyer's purchase of a newly constructed home. Or 5% for a first-time buyer's purchase of a resale (existing) home or mobile/manufactured home. This addition to your down payment lowers your mortgage carrying costs, making homeownership more affordable.

The Home Buyers Plan (HBP) is a program that allows you to make a one-time withdrawal from your RRSP’s to buy or build a home. The HBP allows you to pay back the amounts withdrawn within a 15-year period.

Time to Buy That Second (or maybe it’s your third) Home

This will be a different experience than the first time you purchased a home. Yes, you will still need to get a pre-approval and you will still have to find a lawyer, but this time you will be able to use the proceeds from the sale of your existing home towards your new place.

How this works is the equity from the sale of your home will be applied towards the purchase of the new home, which will help with lowering the overall amount you are wanting to borrow. Equity is calculated by subtracting what you owe on your existing mortgage, from what you sell the home for. Chances are if you have owned your home for a longer, you have accumulated more equity in your home.

Revenue Properties or Second Homes

When purchasing a home that isn’t intended to be used as your primary residence, things can work a little differently when it comes to applying for a mortgage. If you buy a second property, you'll have to apply for a new mortgage — one that only applies to the new property.

However, you can buy a second home with as little as 5% down. This can be done as a second home for yourself or a family member with 5% down, but only if the intention is not to generate revenue for it. In these circumstances, the interest rate is the same as if you were purchasing a home to reside in full time.

If you purchase a revenue property there is a minimum 20% down rule (unless of course you are purchasing a duplex, living in one side then the minimum down payment is 5% even though the one side was going to be a rental. If you were buying a triplex or flex plex and living in one of the units then the minimum down payment is 10%).

If 2024 is the year that you are planning on purchasing a new home, there are different things to think about to help make the process as smooth as possible. The easiest thing to do is to call a mortgage professional who can help answer any of your questions pertaining to the purchase of a new home.