Home buying, especially if you are a first-time buyer, is daunting. “It is going to be one of the most significant investments of your life,” says Shounak Mehta, Founder and Principal Lawyer at Juriscorp Law.
But becoming a first-time home buyer in Edmonton hasn’t been easy lately. House prices continue to hit record highs, with the average house price just hitting $441,350 (a 5% yearly increase). Add to that high mortgage interest rates.
Does that mean Edmonton’s first-time home buyers should simply pack up? Not in the slightest. We’ll tell you 6 things to consider if you are first-time home buyers in Edmonton, Alberta–from increasing mortgage pre-approval amounts to making sure you get your money’s worth.
6 Things to Know if You Are a First-Time Home Buyer in Edmonton, Alberta
Don’t Start Shopping Without a Mortgage Pre-Approval
A mortgage pre-approval is essential before you start house hunting. Lenders will assess your financial situation and determine the amount they’re willing to lend you for your home purchase.
Having a pre-approval in hand clarifies your budget, ensuring you don’t miss out on your dream home due to loan constraints. Additionally, a pre-approved mortgage signals to sellers that you’re a serious and committed buyer.
Work On Improving Your Credit Score
Lenders rely on your credit report to gauge your reliability in repaying a loan. A higher credit score translates to better interest rates and more favourable loan terms.
If your credit score isn’t where you’d like it to be, don’t worry. You can take immediate steps to improve it, such as paying your bills on time and keeping your credit card balances low.
These actions can significantly enhance your creditworthiness and improve your chances of securing a better mortgage deal.
Save Up for Your Down Payment
As a first-time home buyer in Edmonton, the down payment is going to be one of your primary financial challenges. The 2024 Mortgage Consumer Survey says first-time home buyers usually need over 6 years to save up for it, and put up less than 20% of the down payment.
The minimum down payment is 5% of the home’s purchase price. For homes priced up to $500,000, this means you’ll need at least $25,000.
However, for homes priced between $500,000 and $999,999, the minimum down payment is 5% on the first $500,000 and 10% on the portion of the price above $500,000.
For instance, if you’re buying a home for $600,000, you’ll need $25,000 for the first $500,000 and an additional $10,000 for the remaining $100,000, totaling $35,000.
Contributing more than the minimum can be beneficial, as it reduces the overall interest you’ll pay over the life of your mortgage.
As a first-time buyer, there are several programs that can help you source your down payment from retirement funds and other savings. We’ll delve into these options in below.
Account for Closing Costs
Closing costs, including legal fees and title insurance, can add up quickly, potentially reaching tens of thousands of dollars. Using closing cost calculators can help you estimate these one-time expenses and ensure they fit within your budget.
In Alberta, you’ll also need to budget for land transfer registration fees:
- $50, plus $2 for every $5,000 in property value.
- Mortgage registration fee of $50, plus $1.50 for every $5,000 of the mortgage amount.
For example, buying a $300,000 home with a $30,000 down payment will cost approximately $301 in registration fees.
Make Sure You Work With a Reputed Real Estate Lawyer
Closing a real estate transaction involves lawyers conducting title searches at a Land Registry Office (LRO). This process includes:
- Exchanging legal documents
- Turning over property keys
- Handing in the payment
- Registering the transfer
A real estate lawyer’s role also includes reviewing all transaction documents, such as the Agreement of Purchase or Sale. They ensure property taxes are current and that there are no claims or liens against the property. They also verify details with the relevant tax authorities and land registries.
Note that if you are getting financing for your home, the lender will almost definitely require the transaction be closed by your real estate lawyers.
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First-Time Home Buyers Incentives in Edmonton (As of July 2024)
The City of Edmonton, the province and the federal government provide a range of incentives to first-time home buyers. There are tax breaks, mortgage deferrals, tax-free RRSP withdrawals and others that make home buying that much more financially feasible.
That said, the programs tend to move around a lot. Sometimes the conditions for eligibility change, at other times the program may be suspended. Here’s the most up-to-date list of first-time buyers incentives in Edmonton at the time of writing.
Edmonton First-Time Home Buyers Program (Also Called the First Place Program)
The First Place Program collaborates with banks and builders to convert vacant school sites into market-priced townhomes, offering a 5-year deferral on the land portion of the mortgage to ease initial costs.
To qualify, buyers need pre-approved financing with a recommended 5% down payment and up to 25 years of mortgage amortization, with the option of a co-signer.
Eligible applicants must be first-time homebuyers in Alberta, full-time occupants for the first five years, and have a personal net worth of $25,000 or less (excluding primary vehicle, RRSPs, and down payment).
They must also be Canadian citizens or permanent residents with a combined household income below $130,000.
The Federal First-Time Home Buyer Incentive (Not Accepting Applications After March 31, 2024)
The Federal First-Time Home Buyer Incentive, which ceased accepting applications after March 31, 2024, was designed to help qualified first-time homebuyers reduce their monthly mortgage payments without adding financial strain. This program offered a shared-equity mortgage with the Government of Canada, providing 5% or 10% of the home’s purchase price for the down payment.
Under this incentive, the government shared in the property’s value changes, capping gains or losses at 8% per annum (not compounded) on the incentive amount. It meant that buyers needed less saved for a down payment, resulting in a smaller mortgage and lower monthly payments.
The incentive had to be repaid based on the home’s market value at repayment time, corresponding to the original incentive percentage (5% or 10%). Repayment was required after 25 years or when the property was sold, whichever came first, with the option to repay early without penalties.
The Home Buyers’ Plan
The Home Buyers’ Plan (HBP) allows you to withdraw funds from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or a specified disabled person. The HBP withdrawal limit is being hiked to $60,000 in 2024.
You can also combine withdrawals from your RRSP under the HBP with qualifying withdrawals from your first home savings account (see below) for the same home, provided all conditions are met at the time of each withdrawal.
First-Time Home Buyers’ Tax Credit (HBTC)
The First-Time Home Buyers’ Tax Credit (HBTC) offers up to $10,000 for purchasing a qualifying home. To be eligible, you or your spouse/common-law partner must have acquired a qualifying home and not owned another home in the year of acquisition or the previous four years, unless you have a disability.
A qualifying home must be registered in your name or your spouse’s/common-law partner’s name and be located in Canada. Eligible properties include houses, townhouses, mobile homes, condominiums, and certain apartments. Co-operative housing shares that provide an equity interest also qualify.
You must plan to occupy the home as your principal residence within one year of purchase. For persons with disabilities, the first-time buyer requirement is waived if you are eligible for the disability tax credit or if you bought the home for a related person who is eligible.
GST/HST New Housing Rebate
When buying a newly built home in Alberta, you’ll need to pay GST on top of the purchase price. The GST New Housing Rebate helps offset this cost and is available to all buyers.
The rebate covers 36% of the GST paid, up to $6,300, for homes valued at $350,000 or less. Homes priced between $350,000 and $450,000 qualify for a partial rebate.
To be eligible, the home must be your primary residence, and you must be an individual buyer, not a corporation or business partnership.
| House FMV | GST Rebate Amount | Notes |
| Up to $350,000 | 36% of GST paid, up to $6,300 | Full rebate |
| $350,001 – $449,999 | Partial rebate | Rebate reduces as FMV increases |
| $450,000 or more | Not eligible | No GST rebate available |
*FMV – Fair Market Value
The rebate applies to new or substantially renovated homes, including single, semi-detached, condos, townhouses, mobile, or modular homes, or a share in a co-operative housing unit.
This benefit can be combined with other incentives.
First Home Savings Account (FHSA)
A First Home Savings Account (FHSA) is a registered plan designed to help first-time home buyers save for a qualifying home without paying taxes on the contributions, up to specified limits.
For those who opened an FHSA in 2023, you can deduct up to $8,000 in contributions made by December 31, 2023, on your 2023 income tax return. This deduction reduces your taxable income, making it easier to save for your first home.
The Right Guidance Can Make Buying Your First Home So Much Easier
As a first-time home buyer in Edmonton, let’s be honest, you’re going to be overwhelmed by all that you have to take in. There’s the financial planning, purchase contract, home inspection, tax ramifications, and a lot more to take in.
However, with the right guidance you can ease some of your burden and protect your investment. For personalized guidance and experienced support, contact our team today.
We guide home buyers in the language they speak, helping them look past the complexities to clear outcomes — a smooth, stress-free real estate transaction closing. Book a consultation with our team to discuss your first home today.