Before you can start shopping for that first dream home, you need to have a realistic picture of your ability to carry a mortgage and at what size. The information below can help you do just that.

When you are ready to buy a home, you can save money on your closing costs when you partner with a real estate lawyer at Axess Law. They’re an online real estate law firm, meaning that you can access them at your convenience and because they don’t have the overhead of a physical location, they pass the savings on to their clients.

Preparing to buy a home means knowing all the financial variables, so before you apply for a mortgage, you might want to know how available incentives can change the picture for you.

Carefully Research Available Government Incentives For First-Time Home Buyers

The Home Buyers’ Plan (HBP) and the First-Time Home Buyer Incentive (HBI) are available for first-time home buyers who have never owned their own homes or lived in a home owned by their current spouses or common-law partners in the last four years. Some of the incentives they provide include:

• The ability to transfer money from your RRSP to use towards a down payment on your first home.
• A First-Time Home Buyers Tax Credit of $5,000 can be used on your tax return and approximately equals out to a $750 federal tax credit.
• An Ontario Land Transfer Tax Rebate of a $4,000 refund of the LTT.
• A reduction of your monthly mortgage payments.

Many of the incentive programs require you to repay them at a later date. Make sure that you fully understand the terms and conditions, and feel free to reach out to a real estate professional you trust to have them explain how the repayments can affect you down the road.

Get Pre-Approved On The Right Mortgage Amount For You

Completing a thorough budget that accounts for all of your closing costs, property taxes, maintenance, utility bills, emergency fund, etc., is the first step to potential homeownership. It’s the only way to know exactly how much you have available to pay for a mortgage every month and, after factoring in interest, how much you need to have saved to apply for a mortgage. Be sure to consult the Bank of Canada website to know when they plan to raise interest rates and include future rate hikes in your considerations.

The minimum down payment on a home in Canada is 5% for a home up to $500,000;however,when the purchase price is over $500,000, the minimum down payment is 5% on the first $500,000 and 10% for the remainder of the purchase price. If you’re putting down less than 20% of the purchase price, you may have to apply for a high-ratio mortgage. These mortgages may have a higher interest rate and/or require you to buy mortgage insurance.

Getting pre-approved for a mortgage lets you know a realistic price range of property immediately and saves you time and possible aggravation later on.

When you apply for a mortgage, the lender will put you through a “stress test” to see if you would still qualify for a mortgage if it was at a higher rate. This is done to prevent people from buying homes they could not afford if interest rates rose and increased their mortgage payments.

This higher interest rate is called a “mortgage qualifying rate” and is currently the higher of either the rate offered to you by the lender plus 2% or 5.25%.

Your credit and finances must show that you can afford mortgage payments at the higher rate to qualify for a mortgage at a lower, offered rate.