Are You a BC First Time Home Buyer? Here’s What You Need to Know.

British Columbia is a great place to live, but, unfortunately, for a first-time home buyer — often a younger person — the barriers to home ownership are quite prohibitive. The BC housing market is expensive and competitive. A first-time home buyer in BC will need to have their finances in tip top shape and will still most likely need to make use of a variety of Government and other resources, in order to make their dream of home ownership come true. In this challenging landscape, strategic planning goes a long way.

Preparing to Buy Your First Home

Preparation to buy your first home starts way before you have your eye on a specific home; it starts with the realization that you would like, someday, to own a home in British Columbia. You’ve got the dream, and now you’re taking steps to make that dream come true. Just be aware that it may be a long and frustrating road, but with careful planning you’ll get there.

The BC Housing Market — Fall 2023

The current BC housing market is challenging for everybody, but especially for first time home buyers. Supply is low, and costs are high. In September 2023, only 5,531 residential unit sales were recorded in BC’s Multiple Listing Service® (MLS®) and the average price was $966,530, according to the British Columbia Real Estate Association. Homeowners who bought when times were better, and are perhaps enjoying a low-interest mortgage, are hunkered down, staying put.

For the few available homes, first time home buyers will be facing stiff competition from experienced, well-capitalized buyers coming from anywhere in Canada. These are people who can quite often offer substantial down payments and potentially offer the seller above their asking price and/or other attractive conditions as well. But don’t despair, the first-time home buyer, you can also stack the odds in your favour, starting with making sure you’re in a good financial position.

Strengthen Your Finances

This may seem obvious — buying a house is expensive after all, but what we’re really talking about is educating yourself as to the actual costs, assessing your financial situation and creating and implementing a plan to make up for any deficiencies. 

Improve your credit score.

Commit to this right away, since it can take some time to move the score in the right direction. To improve your credit score, regularly take on some debt such as credit card or car loans, and then make the payments on time and in full. That’s all there is to it! The longer you’ve been doing this, the better your credit score.

Lower your debt to income ratio.

What percentage of your monthly income is used to pay off debts? This is your debt-to-income ratio. To lower it, you can either make more money, spend less, or both.

Start saving for a down payment.

The required down payment is a huge hurdle for first time home buyers. For properties under $500,000, you are required to put 5% down. If the home is between $500,000 and $1 million, the down payment is 5% on the first $500,000 and 10% on every dollar thereafter. If the house is $1 million or more, the required down payment is 20%. Of course, the larger the down payment you’re able to put towards your purchase the greater the odds of getting approved for a mortgage for the difference. Lenders will also consider you to be less of a risk, and you may be rewarded with more favourable mortgage terms. Not to mention, this provides additional comfort to sellers as well, which means they’re more likely to accept your offer.  
Set up a budget and stick to it. You might consider leveraging a First Home Savings Account (FHSA), which is a federal registered plan, launched April 1, 2023. It allows you to save for a first home tax-free, with maximum contributions up to $8,000 per year to a total maximum of $40,000. Like other tax free accounts, funds can be invested within the account, potentially increasing your savings more quickly. 

Calculate what you can afford to borrow.

Our Maximum Mortgage Calculator is a handy tool when you are starting your search, so you can set realistic expectations. Be sure to factor in extra expenses, such as closing costs, or insurance when you are assessing your borrowing capabilities. We also recommend you come talk to us early on as part of the education and strategic planning process.

Government First Time Home Buyer Incentives

Even if your finances are in good shape, as a first-time home buyer, you’re likely to need a little extra boost. Sometimes families will step up and offer to help, but if this isn’t an option, there’s always the Government. Both the BC and Federal Governments offer a few programs to help first time home buyers.

Take your time researching the various programs. Qualifying criteria are diverse. For example, the BC definition of a first time home buyer is very strict: a person who has never owned or had an interest in a home anywhere in the world. However, the federal definition is more lenient and includes people who haven’t owned a home in the past four years.

BC First-Time Home Buyers’ Program

The BC First-Time Home Buyers Program provides an exemption from the property transfer tax on the first $500,000 of a home that has a fair market value of $835,000 of less.

B.C. Newly Built Homes Exemption

The BC Newly Built Homes Exemption reduces or eliminates the property transfer tax reduces or eliminates the property transfer tax for a newly built or pre-construction home that has a fair market value of $1,100,000 or less. If the fair market value of the property is more than $1,100,000 and less than $1,150,000, the exemption amount is proportionally reduced.

Canadian Federal First-Time Home Buyer Incentive (discontinued as of March 31, 2024)

This federal program helped make buying a home more affordable for first-time buyers, however it was discontinued on March 31, 2024. The Federal First-Time Home Buyer Incentive (FTHBI) was a shared equity program meaning the government shared in the appreciation or depreciation of the home. The FTHBI allowed first time home buyers to borrow up to 10% of the home’s value towards a down payment for new homes and up to 5% for pre-owned homes. 

Canadian Federal Home Buyers’ Plan

The Home Buyers’ Plan allows you to withdraw up to $60,000 from your RRSP tax-free for the purpose of buying or building a home. To keep the withdrawal tax-free, you will need to pay the funds back within 15 years. 

New Build Federal Mortgage Rules

Starting August 1, 2024, the Canadian Federal Government’s rules surrounding mortgages will change to allow up to 30 year mortgages for first-time buyers purchasing a newly constructed home.

Starting December 15, 2024, 30 year mortgages will also be available to any first-time home buyers (not just those purchasing newly built homes), and any buyers of newly built homes (not just first-time home buyers).

To Sum Up

Research and a good plan will help make your dream of home ownership come true:

• • Educate yourself on the BC housing market, mortgage requirements and available Government incentives!

• • Assess your current financial status, create, and implement a plan to strengthen any weak areas!

• • Determine what you can realistically afford!

• • Seek help from real estate and mortgage experts!

We encourage you to check out our First Time Home Owner Handbook, where we go into great depth on everything you need to know about the home buying process. If you still have questions, feel free to contact us. We’re happy to help!