First Time Home Buyers

The minimum down payment in Canada depends on the purchase price of the home. For a home priced at $500,000 or less, the minimum is generally 5% of the purchase price. For homes priced above $500,000 but below $1.5 million, the minimum is 5% of the first $500,000 plus 10% of the portion above $500,000. Homes priced at $1.5 million or more generally require at least 20% down.

If your down payment is less than 20%, mortgage loan insurance will normally be required. Your lender may also require a larger down payment depending on your credit, income, property and overall application.

There are several programs that may help eligible first time buyers in Nanaimo and across Vancouver Island.

The First Home Savings Account, or FHSA, allows eligible buyers to save for a qualifying first home. The annual participation room starts at $8,000 in the first year the account is opened, with a lifetime contribution limit of $40,000.

The federal Home Buyers' Plan may allow an eligible first time buyer to withdraw up to $60,000 from an RRSP to buy or build a qualifying home. Eligible buyers can use the Home Buyers' Plan and an FHSA for the same qualifying home if the requirements for both programs are met.

BC also has a First Time Home Buyers' Program that may reduce or eliminate property transfer tax for qualifying buyers. Eligibility rules differ between programs, so it is worth reviewing them before you purchase.

Not always. BC's First Time Home Buyers' Program can reduce or eliminate property transfer tax for eligible buyers and properties.

Under the current program, a qualifying property with a fair market value of $835,000 or less may receive an exemption from property transfer tax on the first $500,000 of the purchase price. A partial exemption may be available for qualifying properties valued at more than $835,000 but less than $860,000.

There are additional requirements involving residency, previous home ownership, property size, use of the home and other factors. Because these rules can change, confirm the current requirements before relying on an exemption as part of your purchase budget.

Getting pre-approved before seriously shopping for a home can give you a much clearer idea of the mortgage amount you may qualify for and the price range that fits your finances.

A pre-approval can also identify potential issues with income, credit, debt or documentation before you make an offer. This can be especially useful in Nanaimo, Parksville, Nanoose, Ladysmith and other Vancouver Island communities where the homes you are considering may vary considerably in price and property type.

A pre-approval is not the same as final mortgage approval. The lender will still need to approve the actual property and confirm that your financial situation and documentation continue to meet its requirements.

Your down payment is only one part of the cash you may need to purchase a home. First time buyers should also plan for closing and ownership costs that can include legal or notary fees, a home inspection, property appraisal if required, home insurance, property tax adjustments and moving expenses.

Property transfer tax may also apply if you do not qualify for an exemption. Depending on the property, there may be other expenses to consider, such as strata fees, utility adjustments, repairs or immediate maintenance after possession.

Before making an offer, I recommend looking at the full amount of cash you will need to complete the purchase rather than using all of your available savings for the down payment alone.