Getting the best mortgage rate for your first own home is a challenge for many people in Canada. It requires a complex process of budget evaluation and finding the best mortgage option, pre-approval, hunting home, and preparing the required documents. Professionals like mortgage agents and brokers perform all these tasks on your behalf. In this blog, you will learn tips that help you get the best rates and difference between a mortgage agent and a broker, and how they can help you get the best rates.
What is meant by First-Time Home Buyers in Canada
First-time home buyers are people who have not owned any home or not lived in their own home for the current year or for the last four years. Homes owned by a spouse are also included in this category. You must live in a new home for one year as your primary residence. To qualify as a first-time home buyer in Canada, your age must be 18 or older. Also, you must have Canadian residency. There are also some relaxations in the rules for couples having a breakup. Overseas people who want their own home in Canada are also considered as first time home buyers under certain conditions.
Top Mortgage Tips for First-Time Home Buyers
Understand the Down Payments and Government Incentives
If you want to buy a new home, you should know how much money you actually need to start this process. This is called the down payment. In Canada, if the worth of a new home is below or $500,000, then you need 5% of its purchase price. For a more expensive home, the down payment will be high.
The Canadian Government also provides incentive programs to first-time home buyers, such as:
- First-Time Home Buyer Tax Credit (FHSA)
- First Home Savings Account (FHSA)
- Home Buyers’ Plan (HBP)
- First-Time Home Buyer Incentive (FTHBI)
You can borrow money from these incentives to buy your new home for the first time.
Choosing the Right Mortgage for Your Situation
Choose the right mortgage type based on your financial condition to get better rates. You must understand the difference between types of mortgages, such as fixed, variable, short-term, and long-term rates. The following table helps you understand each type with side by side comparison of all.
| Feature | Fixed Rate | Variable Rate | Short-Term Rate | Long-Term Rate |
|---|---|---|---|---|
| Monthly Payment | Predictable, stays the same | Can go up or down with the market | Usually, higher payments, less interest overall | Lower monthly payments, pay more interest over time |
| Flexibility | Harder to change terms without penalty | Easier to switch lenders or refinance | Easier to refinance after the term ends | Locked for a longer period, harder to switch |
| Pros | Peace of mind, easy to plan | Can save if rates drop, potentially lower total interest | Pay off faster, lower total interest | Lower monthly payment, more cash flow |
|
Cons |
Might pay more if rates drop |
Payment can increase unexpectedly |
Higher monthly payments may strain the budget |
Pay more interest over time |
Hidden Costs
Always consider hidden costs before finalizing a new home and mortgages for a new home. There may exist some hidden charges, such as Legal fees, land transfer taxes, insurance, upfront fees, and other possible related charges. This may burden your budget in the end.
Work With Professionals
You can get help from mortgage agents and brokers. These are the licensed professionals in the mortgage field. They guide you about each type of mortgage and provide you with a wide range of lenders that can offer you the best rates based on your financial conditions. The following table helps you understand the difference between a mortgage agent and a broker. Both are helpful depending on the seriousness of your case.
| Feature | Mortgage Agent | Mortgage Broker |
| Lenders | Works with a few lenders | Works with many lenders |
| Options | Limited products | More choices, can compare deals |
| Flexibility | Less flexible | More flexible |
| Commission | Paid by the lender | Paid by the lender, sometimes better deals |
| Best For | Simple, direct approach | Exploring multiple options, saving money |
Get Mortgage Pre‑Approved
After completing all the required documents, you can get pre-approval for your mortgage. A mortgage agent helps you in this process. He will prepare all necessary documents and negotiate with the lender for the best rates based on your goals and financial challenges. Pre-approval is important for buying a new home. Most home sellers trust pre-approval, as it gives them a surety that you will pay the full purchase amount.
Pre-approval contains all the information regarding your mortgage, such as its amount, time period, interest rates, and other conditions for the mortgage. It gives you a loan estimate so that you can look for a new home in that range.
Bonus Tools and Tips
There are a few things that make life easier. Mortgage calculators let you calculate numbers and see what your monthly payment could be. Check your credit score, because even a few points can change the lender’s offer. A simple checklist helps too. Even just writing down what documents you need and what deadlines are coming up makes everything feel simple.
Conclusion
First-time home buyers need careful planning and a clear understanding of the available financial loans and resources. Mortgage agents and brokers help you get the best rates based on your financial conditions. They guide you about all the possible mortgage options. In Canada, Mortgage Squad Advisors has a team of mortgage professionals who guide you to the best lenders and help you get the best rates despite your financial challenges.
FAQs
Who is eligible for first time home buyer in Canada?
You may qualify if you haven’t owned or lived in a home in the current year or the past four years and plan to live in the home as your main residence. You must also be a Canadian resident and at least 18 years old.
What is the first-time home buyer tax credit in Canada?
It is a federal tax credit that helps reduce the taxes after buying your first home. It helps cover some early costs like legal fees and moving expenses.
How much do first-time home buyers have to put down in Canada?
If the home costs $500,000 or less, the minimum down payment is usually 5%. For higher-priced homes, the required down payment increases.