This may be your first time buying a home in Hamilton, but I’ve done hundreds of mortgages. With my expertise and your excitement, amazing things can happen.
If you are thinking about buying your first home in Hamilton, ON, you need to make sure you’re financially ready for it. Before you even meet with a broker or lender, you need to know how much can you afford to spend on housing each month without stressing yourself out or endangering your financial health.
You should also consider how much you have saved or invested compared to how much you spend on living expenses and paying off other debt.
When deciding how much you can comfortably spend on housing, there are two general rules you should follow.
- Your monthly housing costs should be no more than 32% of your gross monthly income.
- Your monthly debt load should be less than 40% of your gross monthly income.
If you can follow these two rules, then you can most likely afford a mortgage.
First-Time Home Buyer Programs in Hamilton
There are some great programs, tax credits, and rebates available to first-time homebuyers through the Government of Canada. Depending on your situation, you can potentially save a significant amount of money in the long term by taking advantage of these incentives on a first-time home buyer mortgage.
First-Time Home Buyer Incentive (FTHBI)
FTHBI was launched this past September by the federal government. It offers eligible homebuyers nationwide up to 10% of a home’s sale price to put towards the down payment of their home to help lower the interest rates on a first-time home buyer mortgage.
Who Is Eligible for FTHBI?
- Those whose qualifying income is less than $120,000
- Those who can afford a minimum down payment of 5% for the first $500,000 of the home’s purchase price, and 10% for any amount above that, but are still putting down less than 20% of the home’s purchase price.
- Those who are borrowing less than four times their qualifying income
How It Works
If you are eligible for the program, you can apply for what is a shared equity mortgage with the Government of Canada. The government will loan you 10% of the purchase price for a new home or 5% of the purchase price for a resale home.
The incentive can save you roughly between $100 and $300 per month on your mortgage payment and monthly insurance premium. You are also not required to make ongoing payments, and there is no interest on the loan.
There is also no fee if you pay the loan back early. However, you have to repay the incentive either after 25 years or if you sell the house before the 25 years is up.
While this sounds like a terrific deal, there is one catch. The repayment is for the percentage of the share rather than the original dollar amount borrowed. That means if the house appreciates during your ownership, you will end up paying back more than you borrowed depending on the appraised sales value of the home after the 25 years are up or when you sell the house.
Getting an Insured Mortgage/CMHC Mortgage
The Canada Mortgage and Housing Corporation (CMHC) offers Insured mortgages that can help you purchase a new home. If you want to buy a home, but can only afford a down payment of 20% or less, mortgage loan insurance is mandatory.
An insured first-time home buyer mortgage protects a lender if a borrower defaults on their mortgage. It also lets you get a more reasonable interest rate, despite a smaller down payment because it lowers the lender’s level of risk.
Contact McKay Wood: First Time Home Buyer Mortgage Broker in Hamilton
If you’re ready to purchase a home in Hamilton, a mortgage professional can help you find the best mortgage option for you and what incentives you may be eligible for that will save you money.
Contact McKay Wood today here.