However, there are several ways to make the process easier and more accessible. In this article, we will explore three ways for first-time home buyers to get into the real estate market, including utilizing Canada's First Home Savings Account (FHSA).
1. Utilize Canada's First Home Savings Account (FHSA)
Canada's First Home Savings Account (FHSA) is a program designed to help first-time home buyers save for a down payment on their first house. Marci Ien, Minister for Women and Gender Equality and Youth recently announced the program, telling ByBlacks: “Let's be real: life is expensive, especially for young people. That's where the First Home Savings Account comes into play. It's our way of bringing homeownership closer, helping you make that dream a reality. With tens of thousands already on board, we're creating a way for people to put aside tax-free savings that can be put toward a place you can truly call your own.”
The program allows individuals to save up to $25,000 in an FHSA, which can be used towards the down payment on a home.
The best part? The money in an FHSA grows tax-free!
This means that first-time home buyers can keep a higher percentage of return on their FHSA savings than they would in a traditional savings account.
To be eligible for an FHSA, individuals must be first-time home buyers, which means they cannot have owned a home in the past four years. They must also meet certain income and purchase price limits, which vary depending on the region in which they are buying. To open an FHSA, individuals can visit their bank or credit union and ask about the program. They will need to provide proof of their identity and income, as well as any other documentation required by the financial institution. Once the account is open, individuals can begin saving for their down payment and earning interest on their savings.
2. Consider a Mortgage with a Lower Down Payment
Another way for first-time home buyers to enter the market is to consider a mortgage with a lower down payment. While a 20% down payment is typically recommended, there are mortgage options available that require a lower down payment, such as 10% or even 5%.
The best part? You can save for a down payment faster!
These mortgages, known as high-ratio mortgages, are designed for first-time home buyers who may not have enough savings for a larger down payment, but otherwise qualify to be able to purchase a home. However, they often come with higher interest rates and some additional fees, so it's important to weigh the pros and cons before choosing this option.
To qualify for a high-ratio mortgage, first-time home buyers will typically need to meet certain income and credit score requirements. They may also be required to purchase mortgage default insurance, which protects the lender in case the borrower defaults on the loan.
While this strategy may not be as inexpensive in the short term, many people find tremendous value in getting into a home quickly. In the long run, it is also possible to recoup the costs incurred if you are able to save money in rising rent costs and grow equity in the home.
3. Explore Alternative Housing Options
Finally, first-time home buyers may consider exploring Finally, first-time home buyers may consider exploring alternative housing options, such as co-op housing or private non-profit housing.
It's also worth considering townhouses or condominiums. These types of housing are often priced lower than detached homes, making it easier for first-time home buyers to get into the market.
Townhouses and condominiums also often have lower maintenance costs, which can be a relief for first-time home buyers who may not have a lot of experience with home maintenance. Additionally, these options can offer a sense of community and amenities, such as a pool or fitness center, that may not be available with detached homes. To find alternative housing options, first-time home buyers can work with a real estate agent who specializes in these types of properties. They can also search online or visit open houses to get a sense of what's available in their price range.
In conclusion, getting into the real estate market as a first-time home buyer in Canada can be challenging, especially in today’s market, but there are several strategies to make the process easier. By utilizing Canada's First Home Savings Account (FHSA), considering a mortgage with a lower down payment, and exploring alternative housing options, first-time home buyers can find a way to achieve their dream of homeownership.
At CleveDoesMore, the best part of our job is helping people make informed choices to minimize their risk while building equity and wealth for their future.