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If you're a first-time home buyer, you're in for an exciting experience. You'll learn a lot from buying a home-and also from this Web site, which is packed with tips for first-time home buyers. When it's all over, you'll feel thrilled, independent and, we hope, confident that you chose the right home and financing.
Speaking of financing, it's most likely your biggest concern. But there's great news-several attractive financing options are available especially for first-time home buyers. Here are three of them:
Using Your RRSP Savings
Many first-time home buyers use their RRSP savings to help buy a home.
With the federal government's Home Buyers' Plan, you can use up to $20,000 of your RRSP savings ($40,000 for a couple) to help finance a down payment on your first home. You then have 15 years to repay the money you withdrew.
To qualify, the RRSP funds you're using must be on deposit for at least 90 days. You must also supply a signed agreement to buy or build a qualifying home.
Even if you already have enough money for your down payment, it may make sense to access your RRSP savings through the Home Buyers' Plan.
For example, if you have already saved $20,000 for a down payment-and assuming you still had enough "contribution room" in your RRSP for a contribution of that amount, you could move your savings into an RRSP at least 90 days before your closing date. Then, simply withdraw the money through the Home Buyers' Plan.
The advantage? Your $20,000 RRSP contribution will count as a tax deduction this year. Use any tax refund you receive to repay the RRSP or other expenses related to buying your home.
However, the money you borrow from your RRSP won't earn the tax-sheltered returns it would if left in your account. Ask your financial planner if this strategy makes sense for you.
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Learn more about RRSPs. |
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Learn more about the Home Buyer's Plan. |
Low Down Payment Insured Mortgage
With a down payment of as little as 5%, you can finance your home purchase with an insured mortgage (if you qualify).
Also known as National Housing Act (NHA) or High Ratio mortgages, low down payment mortgages carry the additional cost of mortgage default insurance to protect the lender against potential default of payment.
Mortgage default insurance is a one time premium paid when your purchase closes. You can pay the premium or add it to the principal amount of your mortgage. Talk to your mortgage specialist to find out which option is best for you; (You'll also pay appraisal and legal fees at closing.)
No Down Payment Mortgage
You want to buy a home. You can handle the monthly mortgage payments and the costs of owning. But you just can't pull together enough money for a down payment. There is a solution.
Check out the RBC No Down Payment Mortgage™. All you need up front is 1.5% of the purchase price to cover closing costs1.
Did you know? |
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RBC Royal Bank's Mortgage Centre contains a ton of information for first-time home buyers. You can even watch a video that guides you through the process and your financial options. |
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1 You can borrow 100% of the appraised property value or purchase price of your new home - whichever is less. Subject to Royal Bank of Canada lending criteria for residential mortgages. Guarantors not permitted for credit qualification purposes. Mortgage default insurance premiums apply. Some additional conditions apply.
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