With the proposed increased RRSP withdrawal limits and the new First-Time Home Buyer Savings Account, you'll get the complete scoop on every resource available to help you secure your first home. Plus, hear my personal journey navigating Whistler's real estate market for some hands-on insights.
Ever wondered what it really takes to own a condo in Vancouver? Let's break it down together as I walk you through the costs of a $500,000 condominium, including down payments, mortgage insurance, and monthly budgeting tips.
Learn how to navigate additional costs like strata fees and property taxes, and understand the significance of aiming for a 20% down payment with insights from the Canadian Mortgage Housing Corporation.
I even sprinkle in a story about a fun visit to the Capilano Suspension Bridge and my love for pickleball (check out The Pickleball Chronicles!) to keep things light and relatable.
Tune in and get ready to be well-prepared for your home-buying adventure!
With the proposed increased RRSP withdrawal limits and the new First-Time Home Buyer Savings Account, you'll get the complete scoop on every resource available to help you secure your first home. Plus, hear my personal journey navigating Whistler's real estate market for some hands-on insights.
Ever wondered what it really takes to own a condo in Vancouver? Let's break it down together as I walk you through the costs of a $500,000 condominium, including down payments, mortgage insurance, and monthly budgeting tips.
Learn how to navigate additional costs like strata fees and property taxes, and understand the significance of aiming for a 20% down payment with insights from the Canadian Mortgage Housing Corporation.
I even sprinkle in a story about a fun visit to the Capilano Suspension Bridge and my love for pickleball (check out The Pickleball Chronicles!) to keep things light and relatable.
Tune in and get ready to be well-prepared for your home-buying adventure!
Hey everybody, welcome back to Keeping it Real, the Vancouver and area residential real estate podcast that aims to cut through all the stuff that is fake news that you hear about real estate in and around the Lower Mainland. My name is Jacquie McCarnan and I am a North Vancouver residential realtor. I also work all over the Lower mainland and in Squamish and I can give you advice about Whistler, but I don't usually sell there. If you are one of my super loyal listeners who have been with me for the last 21 episodes, you'll know that I always throw in a disclaimer that keeps my managing broker happy. That disclaimer is everything you hear on this podcast is my opinion, coupled with my experience and my research. Happy to hear other opinions and I'm always happy to have a discussion about that.
Jacquie McCarnan:
On today's episode, I want to talk about something that I get asked about all the time. First of all, little context. I have daughters who are in their early 20s and so many of their friends want to know if and how they might get into the real estate market. So I thought I'd do a podcast on how to buy a house in BC for the very first time, if you know somebody who's looking at buying real estate in Vancouver for the first time or in British Columbia for the first time. Definitely get them to listen to this podcast because this is going to be filled with really helpful info. Some of it I didn't even know, but I do now. So don't tell my manager, so let's get into it. So don't tell my manager, so let's get into it.
Jacquie McCarnan:
I want to start with some of the ways that are available to help first-time homebuyers. So the federal government has a whole bunch of ways to make it just a little bit easier for first-time homebuyers to purchase something they have. There's something called the first time home buyers incentive which is available to first time home buyers and it's 5% of a resale home value or 10% of a new building home value, so pre-sales, that sort of thing and it acts a little bit like a second mortgage. And for those of you who are new to all of this, a second mortgage is you take out your first big mortgage and then, if you need help with some incidentals maybe property transfer tax and not in this particular we'll get into that in a minute. But if you need some extra money, you can take out what's called a second mortgage against the value of your home. But that second mortgage is usually at a higher interest rate. But this cool little first-time homebuyers incentive is an interest-free loan that can be repaid at any time.
Jacquie McCarnan:
Now let's say you buy a house, let's say you buy a condo for $500,000 and you get 5% of that which is what is that? $25,000 from the government when you sell the home let's say you sell it for $600,000, you have to pay them back 5% of that value, just so you know. But it's great, great free money to borrow, which is really. I think that's kind of a great incentive. And, like all government programs, there are some hoops to jump through and there are some restrictions and some exemptions. But, you know, worth looking into and I will put a link in the bio. I'm not sure how many of you know this, but it is currently recommended that housing costs recommended that housing costs are less than 39% of your monthly income before deductions. Now, if you live in Vancouver, toronto, that's probably not going to be the case in many instances, but that's kind of the recommendation and that's going to have a big effect on how much mortgage you can borrow.
Jacquie McCarnan:
But before we talk about that, we're going to talk about a few more of these government programs. So there's the homebuyer Amount, which is a non-refundable tax credit up to $1,500. There's GST Housing Rebate. So if you're buying a new home that has GST owing, you may be eligible for a rebate on all or part of that GST that you have to pay, for a rebate on all or part of that GST that you have to pay. You may have heard that there have been changes to the government initiative called the Home Buyers Plan. So it used to be that you could withdraw $35,000 from your RRSP to use as a down payment, and in the 2024 budget it's been proposed to increase that from $30,000 to $60,000. So if you are in a position where you're able to put money into an RRSP, you can later use that money to make up part of your down payment, which is pretty great because it's all tax-free. There's also a little thing called the First time home buyer savings account. You're able to add up to $8,000 a year to a total of $40,000 in a tax free savings account, specifically the first time home buyers account, and then that $40,000 can also be used as part of your down payment. So there are a bunch of different ways that you can save for your first home without having to pay tax on that, and that become income tax write-offs, I suspect Although don't ever quote me on tax stuff, because that is a question for an accountant and I could not be further from an accountant. That's all the federal stuff, uh. But there are some other initiatives that come to you from the province. So, um, a lot of people don't even know that there's a property transfer tax.
Jacquie McCarnan:
When I bought my first home, we were living in Whistler. We, uh, we had the down payment saved and we were trying to get in on the Whistler Valley Housing Association's lottery so you would be able to. They had a development and if your name got picked in the lottery, you were allowed to buy one of those homes that were designated affordable in Whistler in the late 90s. We didn't get picked, but we had the down payment. So we had about $30,000 saved up and our realtor amazing realtor. She helped us and we eventually we found a place we just loved. I was so new to buying real estate that when I walked in I went, oh my God, I love it so much, let's get it. And she quietly shushed me and told me not to do that, which is what I do to my clients now. But we went to, came to it, came time to complete the deal and we found out we owed something like $6,000 in property transfer tax. So those are the old days, the reason.
Jacquie McCarnan:
By the way, a little history about the property transfer tax. It was started in the late 80s and it was meant to be a wealth tax, so it was a tax on anything over $200,000. And in those days, in the late 80s, nothing really. A giant mansion cost $200,000. So it was considered to be a tax on the wealthiest homebuyers. But obviously now $200,000 is not going to buy you a parking spot in Vancouver. So they had to make some adjustments to that and those adjustments are really geared toward first-time homebuyers. In fact, on April 1st 2024, they even made some additional adaptations to the property transfer tax. So now if your new home costs less than $500,000, you would owe $14,860 in property transfer tax. So just so you know it's not nothing, it's a good savings for first-time home buyers who are buying properties that are under $500,000 or between $500,000 and $859,000.
Jacquie McCarnan:
I actually dug around on the internet for a little bit to try to find out what happens to that money, all that property transfer tax money, because there must be quite a lot of it floating around, but it's not specifically earmarked for anything. It goes to the province, obviously, and so, because the province is responsible for health care and education and social services, the money from property transfer taxes goes into those programs. So that's good. I mean, it stays in the province, which is great.
Jacquie McCarnan:
One thing I just wanted to throw in here something I didn't know until I started doing this research was and I believe this has changed but if you owned a home with your spouse and then you got divorced, there is a chance that you could qualify as a first-time home buyer when you go to enter the market again, which is great news for all kinds of people. I think that that is a fantastic policy by the provincial government, and so if you want to know if you qualify to be a first-time homebuyer, reach out to me or to your mortgage broker or to the mortgage brokers that I could suggest, and we can all find out together, can all find out together, all right. So now that you know what all of the incentives and bonuses and tax breaks and everything are with buying your first home in Canada, bc, specifically, let's talk about what the next steps are, and I think this is the part where a lot of people get really. They really don't know what they don't know. So it's important to understand some very important things about buying a home for the first time. For example. A lot of times I hear, well, I only need to put 5% down. Right, and that's true, you can put 5% down, but boy does it come with some caveats. For example, if you put 5% down on a new purchase and you're buying in Vancouver, you're going to have to be able to make whatever the monthly payment of that is. So, just for kicks and giggles and because you know how I like to tell a story, I decided to create a fake client and tell you the process that they would have to go through a client and tell you the process that they would have to go through. So I decided to name my fake client Scout, because that was one of the names I wanted to give one of my kids. And then my mom said you have to name your kid something that they will be comfortable with in their 80. And I changed the name and I really, really wish that I well, at least fought a little harder for Scout, although I do love the names of my children. Anyway, our client today her name is Scout.
Jacquie McCarnan:
Scout wants to buy a $500,000 condominium with 5% down in Vancouver. So that's $25,000 down on a 25-year mortgage. And we're going to just say a 5% interest rate because I just want to keep the numbers easy. You would never speak to me about mortgage and mortgages. I would absolutely send you to a mortgage broker, which, incidentally, is the very first thing that I tell all of my buyer clients. Go and talk to a mortgage broker. I can't help you on the money side. All I can do is find you the perfect home for you within your budget. All right, so Scout has now put $25,000 down, or she has $25,000 to put down. And just so you know, a mortgage anything under 20% down has to be insured by the CMHC, the Canadian Mortgage and Housing Corporation. So the condo costs $500,000. Scout puts $25,000 down, but she also has to pay an additional $19,000 for insurance. So the mortgage amount that she is going to get is $494,000,. Mortgage amount that she is going to get is $494,000, which is about $2,900 a month.
Jacquie McCarnan:
Going back to what we learned about housing costs, you're only supposed to use 39% of your monthly income before tax to pay for your housing costs. So that means that you need to be making about $7,435 a month to afford that $500,000 condo with only 5% down. So that's $90,000 a year. So I'm not sure how many people make $90,000 a year Some do, definitely but that's the kind of the bare minimum that you would have to make in order to buy that $500,000 condo.
Jacquie McCarnan:
What a lot of people don't understand when they hear that you only need to put 5% down is that, yes, you can do 5%, but you have to be able to make those monthly payments, and a monthly payment of $3,000 a month is not nothing Like. That's a pretty big nut to crack, unless you're sharing it, which is better, but then you know what size place do you have for $500,000? Anyway, lots of factors here. The other thing is that you need more than that $25,000 up front, because you also will have to pay property. Well, you don't have to pay property transfer tax on that one, but you are going to need to pay lawyer fees and title insurance and you'll have to have an inspection. Because if, certainly if you're buying something for 500,000, it's not going to be new Even if it was new an inspection should be done, but it definitely needs an inspection. So we're now looking at about $27,000 to $28,000 to close this deal. So even if you think you're putting 25% down, you're going to need another couple thousand dollars to complete the transaction.
Jacquie McCarnan:
All right, so here's where things get this. So I had to learn all this on the fly, and I really hope that you are either listening to this or you have sent it off to your adult children, who need to know this also have to. You have to pay the strata fee, you have to buy food, you have to pay for your cell phone, your internet, all that stuff and that stuff adds up. So we are well over $4,000 a month now, and that is before we talk about having a car, making car payments or insurance, car insurance payments or paying credit cards or going out to dinner or any of those other things, or even a bus pass. So you know, anyway, I think you're getting the picture. I know what you're thinking. You're thinking, but, Jac, I don't have more than $25,000 to put down, and that may be true, and if it is true, there are some other options. But also it looks like there are some options from the government that we talked about at the beginning of the podcast. That could be really helpful here too.
Jacquie McCarnan:
So don't discount the idea of borrowing money as part of your down payment idea of borrowing money as part of your down payment. But just know that anytime you borrow money, it has an effect on things like your credit rating. It has an effect on how much debt ratio, debt service ratio you have. So if you have all your money wrapped up in your mortgage and an extra second mortgage, then it's going to be difficult to do anything else on credit, which is fine, I mean, good Lord, you don't need to live your life on credit, that's for sure. But just know that there are things that, like you, won't be able to get a credit card at the bay. But this is why you need to talk to your mortgage broker and maybe even a financial planner when it comes to this stuff.
Jacquie McCarnan:
I'm just going to go back a little bit and reiterate the Canadian Mortgage Housing Corporation, cmhc. Everybody has heard about things like foreclosures in the United States and other countries, but mostly in the States where they have all these different kind of mortgages that get defaulted on. So what we have in Canada is CMHC and you pay mortgage insurance on a high ratio mortgage so that you don't end up in a precarious situation if the rates go up, which is what's happened in the last couple of years. So we don't see a lot of foreclosures in Canada because lenders work with you and with CMHC to make sure that you are not depressed and worried about money constantly. They see that there's value in the home that you live in. That said, you pay quite a premium for that mortgage insurance and the lower the down payment, the more mortgage insurance you have to get. So a 5% down payment has a lot of mortgage insurance requirement and if you're able to put 20% down so in this case that would be $100,000, then you don't have to pay that additional mortgage insurance and that doesn't get wiped out ever. It's rolled into your mortgage. You pay it right. So just remember that and talk to your mortgage broker about it. The moral of that story is, if you can borrow up to 20% of the down payment from friends and family, or family and inheritance, or cash in some crypto, I don't know whatever it's better for you in the long run. You borrow less money so you don't have to pay back as much money. Obviously.
Jacquie McCarnan:
I'm actually going to wrap this episode up here because I want people to listen to it a couple of times so they get a really good understanding of what it means to purchase a home, your first home. It's important to understand all of the things that I've talked about in this podcast, but in the next one I'm going to give you some solutions on how you can buy a house or a condo or whatever, in a bunch of different strategies, on how you can do that and start to build wealth through real estate without breaking the bank. On every episode of Keeping it Real, I really like to talk about some things around town, and this one is kind of fun. I, as you all know, I live in north vancouver and I have lived here for a really long time like 15 years I think now and I have never, ever, been to the capilano suspension bridge. I used to live in Lynn Valley, so we had our own suspension bridge. That was free, and so I just never got around to going to the Capilano Suspension Bridge. So the last year and a half I've been talking to my daughters about taking me there, and that was supposed to be my Christmas present, but then we never got around to it. Well, it happens that one of my daughters gets what's called the tourism passport, which is this great thing they do if you work at a tourist I don't know a tourist attraction in the Lower Mainland. So if you work at the Aquarium or if you work at the Capilano Suspension Bridge or the museums in North Vancouver or all over the Lower Mainland or Van Dusen Gardens, wherever, if you work at a tourist attraction, you can get the tourism passport and then you run around all over the Lower Mainland, squamish Whistler, and you get stamps in your passport and once you do, you can visit these places for free and bring a guest.
Jacquie McCarnan:
So last night I was treated to the Capitolano Suspension Bridge. Finally we went up there. It was a Finally we went up there. It was Thursday night. We went up there at about 630. It kind of no more entrance after six o'clock, so it was after seven o'clock. So it was amazing because there weren't very many people there and we got to do everything without a big crowd and it was absolutely beautiful. I even walked along that there's a glass bottom or glassed in walkway stuck into the side of a rock. That makes absolutely no sense. Although I'm not a structural engineer, I still didn't think it made any sense for how it was standing there. It was scary, but I mitigated my fear by videotaping the whole thing. But if you get the opportunity, the cap suspension bridge was awesome.
Jacquie McCarnan:
You know how I like to regale you with things that I'm reading or watching, and lately most of what I've been doing has been watching, because around four o'clock in the afternoon I'm wiped out and I just want to sit on the couch. But I don't do that at four o'clock in the afternoon. What I do instead is I go and play pickleball and I enjoy it so much that I sometimes play far too much pickleball and it ends up being, just you know, detrimental to my physical health later when I can't stand up. But so much fun. And I actually wrote an article on my North Van Keres blog this week called the Pickleball Chronicles, and if you are looking for something to read, I will put the link in the show notes.
Jacquie McCarnan:
Thanks very much for joining me this week on Keeping it Real. I hope that you learned something about buying a home for the first time. In British Columbia. There are some new rules too around buying homes for not the first time. If you haven't bought or sold in a really long time. You definitely could use a refresher course and I also have buyer and sellers guides on my website at northvanhomesalescom. Under the start here link menu item link. You know what I mean. You can get Keeping it Real anywhere. You get your podcasts and you can also get it at northvanhomesalescom slash podcasts. Thanks so much. We'll see you next week when I have some really cool strategies for how to use real estate to build wealth when you don't have a ton of money to put down.