Are you a first time home buyer? Don’t be stressed! Alex Lavender is a Halifax local and author of the best selling book Mortgages For Millennials. He’s a mortgage broker that has helped thousands of Nova Scotians buy their first home.
This first home buyers guide will break down exactly what the home buying process is, and show you how to take advantage of Nova Scotia’s first time home buyer’s HST rebate, and how to get up to $25,000 from government down payment programs.
The First Time Home Buyer’s Guide For Nova Scotians:
#1 What you need before shopping for your dream home
- Down payment and closing costs. As a first time buyer you have the opportunity to use your RRSP as a free loan for your down payment. When you meet with your mortgage broker you will be guided through how much money you will need for closing costs. These are the expenses that you’ll incur during the transaction.
- Pre-approval for a mortgage. Before you shop you should get a pre approval from a licensed mortgage broker. This allows you to lock in your interest rate for up to 120 days. This will also let you know exactly how much you can afford, to ensure that you’re looking at homes that are within your approval limit.
- List your nice to haves and need to haves. When determining what you want in a property you will quickly find that you can’t have it all. That’s why you should determine what areas you can be flexible with.
- Pick your realtor. Realtors can be a great resource to help you research and inspect properties. Choose someone that you trust and enjoy working with.
#2 Use tax-advantage programs
Tax rebate program
Canada’s first home buyers tax credit program allows you to claim a one time $10,000 non-refundable tax credit that could let you get $1,500 off your taxes. You’ll have to claim this within a year of purchase.
The new First Home Savings Account is a new tax-free registered savings account. This allows you to save with contribution tax credits (like an RSP). Plus you get to withdraw your investments tax-free (like the TFSA).
The RRSP has a first time home buyer plan that allows you to withdraw up to $35,000 from your investments. The only catch is that you have to put that money back into your RRSP within the next 15 years.
Nova Scotia Down Payment Assistance Program
Also known as DPAP this provides an interest-free loan to Nova Scotians who pre-qualify for an insured mortgage. You can get up to $25,000 that you have to repay over 10 years. As long as your total household income is less than $145,000, you are a first time home buyer, and must be in Nova Scotia for at least 12 months.
There are a few other eligibility requirements that you must meet when you apply for this program through the Government of Nova Scotia’s website.
#3 Get to know the real estate lingo
Once you get talking with a mortgage broker and real estate agent there are a few terms that you should understand.
Financing – ensuring that you have your down payment ready and a mortgage pre-approval.
Closing date – this is the date that you’ll get the keys for your first home purchase and pay for the property.
Purchase and sales agreement – this is usually called the offer and is your formal agreement made to the seller. This is where you include detailed information and conditions like inspections, tax adjustments, fuel adjustments etc.
Closing costs – these are the additional costs on top of your down payment that you will pay when buying a home. These are paid on the closing date at your lawyers office, or paid ahead of time.
#4 Common first home buyer misconceptions
- The down payment is the only cash you need. Unfortunately there are many closing costs which include your property inspection, deed transfer tax, property tax adjustment, fuel adjustments, and legal fees. The average closing cost is between 2-3% of the price of your new home.
- Credit scores can not be improved. Buying a home is sometimes the first time someone will find out what their credit score is. These scores do impact what sort of mortgage products are available to you. However you can improve your credit score over time and a mortgage broker can help you identify what to do.
- There is no easy way to learn about buying a home. Do a couple Google searches and you’ll very quickly find a lot of confusing information or sites that apply to the USA but not to Canada. That’s why Alex Lavender wrote the best selling Canadian book “Mortgages for Millennials” which is your quick and easy guide book to learning everything you need to know about getting a home loan in Canada.
First Time Home Buyer Nova Scotia FAQs
Should you use a mortgage broker or a big bank?
Using a mortgage broker allows you to get access to loans from a variety of lenders, all with one easy and free application. Where banks only provide you with their products and can not shop around with other lenders to show you all the options you have available.
How long does it take to purchase a home?
Once you have your pre-approval, down payment, and have chosen a home to buy. The process can take a few weeks depending on the conditions of your offer (e.g. inspection, deposit, and conditions) and the close date. When the seller signs you have a legal agreement to buy and the process is underway.
What tax advantages can you take advantage of?
There are 3 main ways to get tax advantages on your first home purchase. The first home buyers tax credit program can allow you to claim a $10,000 non-refundable tax credit. The RRSP allows you to borrow your own investments tax-free for the down payment. Then the new FHSA account allows you to save, invest, and withdraw your money tax-free to buy your first home.