Spring is in the air and “House For Sale” signs are popping up everywhere. You’ve been renting for years, and have finally decided that you’re ready for home ownership. Congratulations – in making this decision, you’ve taken the first step toward buying your first home! But there are many things to think about, especially with regards to financing.

Money is probably the most important deciding factor when making a home purchase. Many decisions like neighborhood, location and size will depend solely on what you can afford.

So where should you start? Assuming you will need a mortgage, it is recommended you get a mortgage pre-approval from your lender. This will give you an idea of your budget and the price range of the homes you should be considering.

Even though it is possible to arrange for a down payment as low as 5%, it is recommended that you have at least 25% of the purchase price of your new house as a deposit. However, with housing prices the way they are, 25% can be a daunting amount to save. The Canada Mortgage and Housing Corporation will provide Mortgage Loan Insurance (a requirement if your initial payment is less than 25%) to those who qualify, allowing a down payment as low as 5%. There is a fee for this service, so make sure you understand the consequences of this decision.

The Home Buyer’s Plan (HBP) is a Federal Government program that allows qualified first-time homebuyers to withdraw up to $20,000 from their RRSPs, tax-free, to use as a down payment to purchase a home. This withdrawal must be paid back into your RRSP over 15 years, beginning the second calendar year after the withdrawal is made. These payments are not tax deductible, as they are repayments, not contributions to your RRSP. If you do not pay the required amount, the unpaid portion is considered income and taxed accordingly on your income tax return.

Buying a home is a big step, but there is lots of help available to make things easier. For more information, contact your lender, financial planner and your real estate agent. With luck, you could be enjoying a barbeque while relaxing in the back yard of your new home before the end of summer.

This is a monthly article on financial planning. Call or write to Rick Sutherland CLU, CFP, FDS, R.F.P., of Fundex Investments with your topics of interest at 798-2421 or E-mail at rick@invested-interest.ca.