Financial Planning for Your First Home
By Dr. Roxanne Arnal, CFP®
Buying your first home is an exciting milestone, but it can feel overwhelming, especially with rising real estate prices and extra costs like taxes and closing fees. Smart planning can make the process easier. Here are key strategies to help you prepare financially:
- Work Backwards: Define Your End Goal
Start by researching the housing market in your target area. Make a list of your must-haves and nice-to-haves, then shop real estate listings to find options that match. Narrow down a few homes, note their average listing price, and don’t forget to check property taxes.
- Understand Down Payment Requirements
In Canada, the minimum down payment depends on your home’s price:
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$500,000 or less |
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$500,000 to $1.5 million |
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$1.5 million or more |
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If your down payment is less than 20%, you’ll need mortgage default insurance, which can add 2.8% to 4.0% to your loan. This gets added to the mortgage and accrues interest over time.
- Calculate Your Future Mortgage Payment
Use a mortgage calculator to estimate your monthly payment based on your target home price. Consider using a fixed rate 0.5% above your bank’s prime lending rate to get a sense of your future costs. The Mortgage Calculator | C3 Wealth Advisors Inc.
- Create a Realistic Budget
Start by evaluating your income, expenses, and how much you can save monthly. Aim to save at least the amount of your future mortgage payment, including a portion of the property tax, each month. Don’t forget about one-time costs like furniture, renovations, landscaping, and higher utility bills once you’re in your new home.
- Maximize Tax-Advantaged Savings Accounts
First Home Savings Account (FHSA): Contribute up to $8,000 annually (lifetime max $40,000) and enjoy tax-deductible contributions and tax-free withdrawals for home purchases.
Registered Retirement Savings Plan (RRSP) Home Buyers’ Plan (HBP): Withdraw up to $60,000 from your RRSP to use as a down payment, while maintaining its tax-deferred status until you start repaying.
Tax-Free Savings Account (TFSA): While not home-specific, the TFSA offers flexible saving and investing for your down payment, with tax-free withdrawals.
Each account has specific rules, so consult with a financial advisor to understand your eligibility and any withdrawal restrictions.
Saving for your first home involves planning and using the right financial tools. By following these strategies, you can make homeownership a reality. Stay patient, stay consistent, and remember that every step you take brings you closer to your dream home.
Advisory
As your Chief Financial Officer, I’m here to help you understand the various tools available to help you build your wealth. There are many factors to consider and understanding your goals is key to building a plan that serves you today and well into the future – as your life changes.
Have more questions than answers? Educating you is just one piece of being your personal CFO that I offer. Call (780-261-3098) or email (roxanne@c3wealthadvisors.ca) today to discuss your home aspirations.
Roxanne Arnal is a former Optometrist, Professional Corporation President, and practice owner. Today she is on a mission to Empower You & Your Wealth with Clarity, Confidence, & Control.
These articles are for information purposes only and are not a replacement for personal financial planning. Everyone’s circumstances and needs are different. Errors and Omissions exempt.
