Buying a First Home – Questions to ask yourself before buying

Before buying your first home in Quebec, make sure you ask yourself the right questions!

Debt capacity

Your monthly debt level must not exceed the authorized ratios.

This calculation is based on your gross annual income, taking into account your debts and financial obligations.

Determine your needs

Buying a property, especially for the first time, can be very exciting. However, it is important to study your needs before you start looking. These needs must be proportional to your purchasing capacity.

Where to buy ?

We advise you to use a real estate broker who will take care of the search for houses, the negotiation of the purchase price and the verification of titles and other documents.

Buying a first home in Quebec: moving in or making a rental investment?

What is the purpose of buying your first property in Quebec? It is important for the rest of the process that you determine whether you intend to move into this home or whether you prefer to invest in a rental property.

In some cases, in addition to your financing, you may be able to get a renovation loan to do work on your new home.

Getting a mortgage for a first time home buyer in Quebec

Credit file

Check your credit report before applying for a mortgage. Any potential lender will review your credit history to determine whether or not they will approve your mortgage application.

Therefore, our mortgage brokers advise you to

• request a copy of your credit report
• make sure that there are no errors by validating it with you.

Mortgage Pre-Approval

To obtain your mortgage, you must be pre-qualified, our teams can accompany you.

Determining your down payment for your first home

Our mortgage brokers offer you several solutions to finance your down payment for your first home.

TFSA

Starting in 2023, TFSAPP will be the new way to buy your first home by allowing you to save for your down payment.

RSP

Another option would be to buy your home with the savings you have accumulated in your RSP. This is called a HBP (Home Ownership Plan)
The RSP is an account that allows you to save for your retirement or for a first time purchase of a home, condo or qualifying real estate.
The money deposited in your RSP is deductible from your income and generates tax refunds.

HBP

For all first time home buyers in Quebec, you can HBP to access home ownership by withdrawing up to $35,000 from your RSP without paying taxes.

First-Time Homebuyer Grant in Quebec

There are many programs to help you buy your first property in Quebec.

– CMHC Grant

For all first time home buyers in Quebec, the Canadian Mortgage Corporation offers you a grant of 5 to 10% of the value of your home. Do not hesitate to contact us, we will be able to give you the details.

To qualify, you must meet several conditions:

• your income must not exceed $120,000 and the amount of the mortgage must be limited to 4 times the eligible income
• Your down payment must come from traditional funds (Savings, RSP, Donation).

– Municipal Programs

Many cities have municipal programs to facilitate home ownership.

For example, the City of Montreal offers a homebuyer support program that allows you to obtain, under certain conditions, financing and a refund of the welcome tax, depending on your financial situation.

First-time homebuyer incentive

The first-time homebuyer incentive allows you to obtain 5 to 10% of the purchase price of your property for the down payment.

Personal savings

If you are planning to buy a property in the near future, start saving now. There are different savings and investment options available. We recommend that you talk to your financial advisor.

Family donation

It is possible to fund your down payment with a gift from a family member. Make sure it is a free gift, commonly called a “donation”.

Rent with an option to buy

Lease purchase is a method that allows you to purchase a home over a period of 2 to 3 years. In this case, a portion of the rent will be used as a down payment. However, be careful, not all banks accept this method, the rules are strict so that a portion of the rent can be deducted and considered as a down payment at the time of purchase.

Determining your down payment for your first home

Banks

Banks offer their mortgage products. The disadvantage is that they offer you mortgage products with rates and conditions that you cannot compare.
In case of early repayment, the penalties can be very high.

By consulting only your bank, you are depriving yourself of the big picture that a mortgage broker offers, by comparing all the options on the market

Mortgage brokers

The best way is to go through a mortgage broker, who will research the best conditions for you and find you a mortgage loan at a rate that is most advantageous for you. In addition, you don’t have to pay any fees!

Mortgage Loan Insurance

If your down payment for your first home is less than 20%, your loan must be insured (CMHC, Canada Guaranty, Sagen)

This insurance protects your mortgage lender from any default on your part and allows you to obtain lower interest rates than uninsured loans (with more than 20% down payment).

Tax credits for homeowners in Quebec

Canada offers 2 types of tax credits to all first time home buyers.

Amount for the purchase of a home

You are eligible for this type of credit when you have purchased your first property and filed your tax return. The amount can be up to $750 and will allow you to pay for incidental expenses such as legal fees, conveyancing fees etc.

GST/HST Housing Rebates

Generally, the purchase of new construction is subject to GST and HST, which are taxes that you may be partially reimbursed for depending on the amount of the Purchase.

Cost of first home purchase Quebec

In addition to the purchase price, there are several other costs associated with the purchase of a home.

Legal costs

You must pay legal costs for the closing of your purchase which are approximately $ 1200.00 to $ 2000.00 depending on the notary you choose.

Adjustment costs

You may have to pay adjustment costs to the seller of your home on the day of closing. Sometimes the seller has paid property taxes for a period beyond the closing date. So, on the day of closing, they receive a credit from you that will cover the costs paid by the seller.

Evaluation of the house

Banks may require you to do a home condition assessment as part of your mortgage purchase or refinance, this assessment is usually free but with some banks there may be a fee, in any case no fee can be incurred without you confirming it.

Home inspection

By hiring a professional inspector, you will receive a detailed report( visual inspection ) of your home, not having the home inspected is risky, and may limit your recourse.

Welcome tax

The welcome tax is an amount that you must pay to your municipality when you purchase your property.

It is calculated according to the higher of

• the purchase price of your home
• the amount of the consideration recorded in the deed of transfer
• and the amount of the municipal assessment

You must pay it within 30 days of receiving the invoice.

You may be exempt if:

• your taxable base is less than $5,000
• The transfer of ownership is done between members of the same family or by a majority shareholder with respect to his company.

Other closing costs

• interest readjustment (based on the date the loan was disbursed)
• cost of certificate of location, title insurance
• municipal or township levies
• estoppel certificate
• mortgage loan insurance premium
• provincial sales tax for mortgage insurance premium

Annual fees for first-time homeowners in Quebec

In addition to the costs of buying a property, you must consider the annual fees when owning a home in Quebec.

Home insurance

You must have home insurance to protect your home and belongings.

Our mortgage brokers offer you solutions to pay less for your home insurance.

Municipal Tax

The municipal tax helps finance your municipality. Your municipality will send you a request for payment of the tax every March 1st of each year, which you will pay in a single payment.

School tax

Please note that every homeowner in Quebec must pay a tax to the school service center that serves the territory where your property is located.

If you do not have children admitted to the school service center, then you may choose to pay this fee to the institution (English or French of your choice).

Maintenance costs

The maintenance of a house necessarily requires expenses (gutters, chimney, snow removal from the parking lot and roof, etc.). So take into account the costs for regular or occasional maintenance of the property but also of the land.

Advantages of having a real estate agent accompany you when you buy your first home

Using a real estate broker to buy your first property in Quebec has several advantages.

Get advice from an expert

The real estate broker is a real estate expert. He knows the different districts, the value of the buildings and will be able to advise you more easily for your real estate investment.

Let a professional handle the negotiation

The real estate broker in Quebec also has a role of negotiator. Thus, he represents you with the buyers.

Insurance in case of post-purchase problems in the house

For any difficulties encountered after your purchase, the real estate broker continues to accompany you in order to solve any problem for you.