Purchasing your first home is an exciting life milestone but saving for it can be daunting.
Preparing to make any large purchase starts with a plan. Part of that plan involves choosing the right vehicle to hold and accumulate your savings.
There are a number of ways to save for your first home, including the Canadian government’s Home Buyers’ Plan (HBP), which allows first-time homebuyers to withdraw up to $25,000 from their Registered Retirement Savings Plan (RRSP) to buy or build a home. The withdrawn amount must be paid back within 15 years through an annual repayment plan.
You may choose to invest in a Tax-Free Savings Account (TFSA) instead of or in addition to the HBP. By investing in a TFSA, you can reap the benefits of tax-free interest income and capital gains on your investments.
Other considerations when purchasing your first home include:
- Maintaining good credit to qualify for a mortgage;
- Aiming for a 20 per cent down-payment to avoid paying mortgage insurance, and
- Researching available tax credits for first-time homebuyers.
Visit the Canada Mortgage and Housing Corporation (CMHC) for a step-by-step guide to buying a home in Canada.