First time homebuyers lack essential knowledge.

You’re the parent of a millennial and your son or daughter is considering becoming a first time home buyer — but they may lack essential knowledge that will help ensure they get the best property at the best mortgage rate and with closing and on-going costs they can afford.

A recent survey by the Financial Services Commission of Ontario (FSCO) found that only 12% of Ontario millennials likely to get a mortgage feel very confident they know everything they need to know to make the best decisions and 47% say they aren’t very or at all confident.

It’s safe to assume that the Ontario results are similar across Canada — so here are a few first time home buying tips to pass along to your millennial:

 Know the real costs including mortgage principal payments plus interest, taxes, heating expenses and condominium fees (if applicable).

 Know the monthly debt load including monthly housing costs plus all other loans or monthly payments for car, credit cards and so on.

 Know all the extra expenses like applicable provincial taxes, appraisal fees, property tax, survey fees, land transfer tax, legal fees, service charges, inspection fees, mortgage loan insurance premium, property insurance, moving costs and any other immediate costs for renovations or repairs.

 Know about mortgages — generally there are two types of mortgages: fixed rate and variable rate. With either, the term of the mortgage, the interest rate, the amortization period and payment frequency all have a direct impact on the amount of the monthly payment and the overall cost of the mortgage. The larger the down payment, the lower the monthly mortgage payment can be.

 Know about financing options — first time homebuyers can take advantage of the Home Buyers Plan (HBP) that allows the withdrawal of up to $25,000 from a RRSP without immediate withholding tax to use as a down payment or other home expenses. Joint applicants can withdraw $25,000 each. Alternatively, fund the purchase with a Tax-Free Savings Account (TFSA) withdrawal without any dollar limits or tax issues and keeping the RRSP intact.

 Know about tax credits — the Home Buyers’ Tax Credit is available to first time home buyers of a qualifying home and doesn’t affect eligibility for an existing RRSP Home Buyers’ Plan.

With your help, your millennial first time home buyer can make well-informed decisions that won’t risk other financial priorities like building retirement savings and maintaining their financial stability. Your professional advisor can provide any additional information you need.

If you’d like more information contact me at blake.linklater@investorsgroup.com or www.spend10kyourway.com/blake.linklater

This column, written and published by Investors Group Financial Services Inc. (in Québec — a Financial Services Firm), and Investors Group Securities Inc. (in Québec, a firm in Financial Planning) presents general information only and is not a solicitation to buy or sell any investments. Contact your own advisor for specific advice about your circumstances. For more information on this topic please contact your Investors Group Consultant.