First Mortgage rates

Qualifying for the Home Buyers' Plan (HBP)

If you're buying your first home you're likely eligible to take advantage of the Home Buyers' Plan. This home buyers program is specifically designed for first-time home buyers. The HBP allows you to withdraw up to $25,000 from your Registered Retirement Savings Plan (RRSP), tax-free, to be used for the purchase of your home. The key conditions of the program that first-time home buyers should be aware of are listed below:

• In a calendar year, a maximum withdrawal of $25,000 is allowed - can withdraw from multiple accounts if you're the plan holder of as long as the total withdrawals do not exceed $25,000
• The amount you decide to withdraw must be fully paid off within 15 years given that it's a loan
• You must have a written agreement confirming the purchase or the construction of the home
• Once the home is bought or built, you must occupy it within 1 year
• You cannot have owned a home in the 4 years prior to the purchase or construction of the new home; otherwise, you will not be considered a first-time home buyer and would not qualify for the HBP
• You must make the withdrawal no later than 30 days after taking possession of your first home
• RRSP contributions must remain in your RRSP for at least 90 days prior to the withdrawal in order to be eligible to be deducted against income for the year
• You have to be a resident of Canada and must complete Form T1036 in your income tax return upon withdrawing the money

What is the First-Time Home Buyers' Tax Credit

The First-Time Home Buyers' Tax Credit is a tax credit of $750 for first-time homeowners. It is meant to refund home buyers a portion of the money associated with the purchase of their home.

In order to receive this tax credit, the following conditions must be met:

• The home must be owned by either you, your spouse/common-law partner, or both
• You must not have owned any other home, or lived in a home owned by your spouse or common-law partner, over the last four years
• You must occupy the home no later than one year after purchasing/constructing it
• If you have a disability, you do not need to be considered a First-Time Home Buyer to qualify. However, the home must be specially equipped to meet the needs of a disabled person and must be occupied within one year of the purchase/construction

For more information, please see our First Time Home Buyers' Guide.

Searching 'best first mortgage rates'?

There's more to getting a mortgage than finding the lowest mortgage rate. In fact, the best mortgage is the mortgage that offers you the options, flexibility and mortgage interest rate that you can live with and this is precisely where Kanetix.ca can help you. Through Kanetix you can compare the mortgage rates for a variety of mortgage products and terms. Rates are updated as they change and are displayed in an easy-to-compare format to help you in your search for the best available mortgage rate.

1st mortgage options: Fixed rate mortgage loan or variable rate mortgage loan?

There are two types of mortgage interest rates and for your first mortgage you may be asking yourself: Should I select a fixed mortgage rate or an adjustable mortgage rate? Both options have their pros and cons:

Fixed rate first mortgage

Fixed rate mortgages have interest rates that are set and will remain the same for the entire term of the mortgage. With a fixed rate mortgage, your mortgage payments remain constant so you know exactly how much you will pay every month.

With a fixed rate mortgage, you are protected from interest rate increases and can better control your budget. You will know exactly how much of your income will go towards your mortgage.

Your mortgage payments are broken down into "Principal" (amount of the loan owed at any specified time, not including interest) and "Interest" (the fee you pay for having borrowed money from a lender).

Since your monthly mortgage payments do not change with a fixed rate mortgage, more of your mortgage payment will go towards the principal with each payment that you make. This is because as your principal gets reduced with each payment, the total interest charged on the principal shrinks as well. This trend continues regardless of whether interest rates in the economy start increasing.

Variable rate first mortgage

Variable rates could change many times over the course of the term of your mortgage. The effect of changing rates will depend on the lender or the mortgage you obtained.

For example, if your lender's interest rates change (let's say they increase), then the amount of your mortgage payment that goes against your principal will decrease. If rates decrease then more will be applied to your principal because you will be paying less in interest. If your payments are not fixed, as rates rise and fall so too will your payments.

1st mortgage options: Open mortgage or closed mortgage?

As a first time home buyer in search of your first mortgage, you will also need to decide if the mortgage you choose will be an:

Open first mortgage

With an open mortgage you can pay off the balance at any time, or apply extra cash to the outstanding loan, without incurring any penalties or extra charges. A fully open mortgage loan typically has a higher interest rate than a closed mortgage home loan, because you can pay it off or reduce the balance by any amount at any time.

Closed first mortgage

A closed mortgage loan typically has a lower interest rate than an open mortgage although it too may allow the occasional additional payment, as per your lender's discretion. Basically a closed mortgage cannot be renegotiated, or refinanced before the mortgage term reaches full maturity without some sort of additional charge.

Great first mortgage resources

The following are great resources for first time home buyers looking to get their first mortgage:

• Deciphering mortgage language; what's it all mean?
• Tips to pay off your mortgage sooner
• Looking to buy a house to make your home? A primer on mortgage loans
• Canada Mortgage and Housing Corporation
• Home Buyers' Plan
• Financial Consumer Agency of Canada
• First-Time Home Buyers' Guide
• Mortgage Calculator
• View today's best mortgage rates

This summary is for informational purposes only and should not be relied upon without verification by contacting a mortgage professional.

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