Buying your first home is an exciting time in anyone’s life. However, in my experience, most people have a ton of questions about what is required and, quite often, they are surprised by how complex the process is. No need to worry, however. I am here to answer some of those questions for you.
How much money do I need?
This is the BIG question. It is no secret that Vancouver Real Estate isn’t exactly the most affordable. For first time buyers, the first step I recommend is speaking to your bank or mortgage broker and getting pre-approved. What does that mean? Basically, pre-approval means your bank tells you how much you can afford based on factors like your down payment, debt, income, job status etc. Once they give you this approval, it is valid for 3 months after which point you will need to reapply.
How much is a down payment?
This is the question I hear in almost every conversation with my first-time buyers. Let’s break it down. A down payment is the amount of money you have in your personal possession to put towards a home. The rest of the money comes from the bank in the form of a mortgage. So how much do you need?
The minimum down payment in Canada depends on the purchase price of the home:
If the purchase price is less than $500,000, the minimum down payment is 5%.
If the purchase price is between $500,000 and $999,999, the minimum down payment is
5% of the first $500,000, and 10% of any amount over $500,000.
If the purchase price is $1,000,000 or more, the minimum down payment is 20%.
I have a ton more info on this topic. Please reach out to me and I can break it down further.
How much do I pay you?
I like this question because my clients always like my answer. NOTHING! As a buyer, you are responsible for the down payment, legal fees associated with closing the deal, property transfer tax, movers, move-in fees etc. so I always recommend putting a little bit extra aside for that (3-5% of the purchase price will definitely cover it), but when it comes to my commission, that is taken care of by the seller who pays both the seller’s agent and the buyer’s agent.
What is the First Time Homebuyer’s Program
The First Time Home Buyers’ Program reduces or eliminates the amount of property transfer tax you pay when you purchase your first home. If you qualify for the program, you may be eligible for either a full or partial exemption from the tax.
If one or more of the purchasers don’t qualify, only the percentage of interest that the first time home buyer(s) have in the property is eligible.
For example, if you qualify and purchase a property with a fair market value of $400,000 with a person who doesn’t qualify you would still qualify. If you owned a 60% interest in the property, 60% of the tax amount would be eligible for the exemption.
Do I Qualify?
To qualify for a full exemption, at the time the property is registered you must:
1. be a Canadian citizen or permanent resident
2. have lived in B.C. for 12 consecutive months immediately before the date you register
the property or filed at least 2 income tax returns as a B.C. resident in the last 6 years
have never owned an interest in a principal residence anywhere in the world at any
3. have never received a first time home buyers’ exemption or refund
and the property must:
1. be located in B.C.
2. only be used as your principal residence
have a fair market value of:
$475,000 or less if registered on or before February 21, 2017, or
$500,000 or less if registered on or after February 22, 2017
be 0.5 hectares (1.24 acres) or smaller
You may qualify for a partial exemption from the tax if the property:
has a fair market value less than:
$500,000 if registered on or before February 21, 2017, or
$525,000 if registered on or after February 22, 2017
is larger than 0.5 hectares
has another building on the property other than the principal residence
Foreign entities and taxable trustees are not eligible for the exemption. If you are an individual who doesn’t qualify because you are not a Canadian citizen or permanent resident, but you become one within 12 months of when the property is registered, you may apply for a refund of the property transfer tax. To apply for a property transfer tax refund in this case, call 250 387-0555.
These are just some of the many questions I receive. If you have any of your own, please do not hesitate to reach out!
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