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First Time Home Buyer Programs in Canada

Owning your own house is a dream most people have. However, with rising land and property prices, this dream ends up being unattained. Buying a home is a decision. A decision that you will have to take with full caution and conviction. The reason is that it involves a lot of pre-planning. For example, house-hunting, saving up for down payments, as well as having the financial stability to pay up the mortgage loan EMIs. All these can be a little complicated for you if you are a first time home buyer. 

If you are also caught up in the space of buying your first home, worry not as we are here to assist you. The Canadian government offers several programs to first time home buyers to help them purchase their first dream house. It not only reduces the cost of buying a new home but also encourages people to have their own safe space. 

Though there are some prerequisite questions that you must ask yourself before buying your first house in order to avoid financial stress later. 

Questions to Ask: 

  • How much you earn and how much you can save for the down payment of your house?
  • What is the budget for your new house purchase?
  • Are you willing to compromise on a few factors to save a little?
  • What would be the actual down payment?
  • Would you need any financial help in paying the down payment, if yes, from where you will get it?
  • Are there any other expenses associated with buying a home, apart from the down payment?
  • How much EMI in your new home can you afford?

The list of questions is long, but the bottom line is to prepare a list that you think would have a significant impact on your finances as a first time home buyer. 

First Time Home Buyer Programs in Canada

In Canada, first time home buyers are given some great privileges that makes their overall house purchasing experience smoother and easier. Though, it also requires a little bit of research to find the program for first time home buyers that you are eligible for. The following is a compiled list for you if you are also looking to make your first dream home a reality. 

1. Home Buyer’s Plan (HBP)

You may have Registered Retirement Savings Plans (RRSPs), so in the Home Buyer’s Plan, you can withdraw your money from this fund and can build your first dream house. Though, it has to be your first home in order to get eligible for withdrawing the funds. HBP helps greatly in paying the down payment amount.

If you have more than just one RRSP, you can use them if you are the owner of those accounts. Though there are a few RRSPs like Locked in or group RRSPs that would not let you encash the fund. If the amount of your withdrawal is $35,000 or less than that, you don’t need to pay the taxes amount. 

Important points to keep in mind:

  • To be called a first time home buyer, you must not have resided in a house owned by you, your spouse, or common-law partners during the preceding period of 4 years. Though, for individuals with disabilities, this term can be waived off depending upon the situation. 
  • The cash you are planning to withdraw needs to be in your RRSP account for at least 90 days. 
  • You need to repay the withdrawn amount within 15 years, or else you will have to pay taxes. 
  • If you have used HBP earlier, before using it again, your repayable HBP balance needs to be null on the first January of that particular year. 

2. First Time Home Buyer Incentives

To make it easier for you to buy a house in Canada, first time home buyer incentives are given which is a shared equity mortgage program that lowers your mortgage payments monthly. 

In this program, the government looks after the downside or the upside value of your house. You can borrow as much as 5 to 10 percent of your total house value. Though you need to repay the amount within 25 years or when you sell it. 

Important points to keep in mind:

  • You need to be the first time home purchaser for this program.
  • Your earnings are less than $1,20,000 annually. 
  • You already own the minimum qualifying amount for the down payment.
  • The sum of borrowing is not more than 4 times your qualifying income. 
  • If you are buying an existing home, you may get an incentive value of 5 percent. 
  • If you are buying a newly constructed home, you may get an incentive value of 5 percent or 10 percent. 

3. Home Buyer’s GST/HST Rebates

This tax rebate or credit is given to home buyers to help them with the expenses like legal fees, transfer fees, disbursements, etc. This was formerly named as the first time home buyer’s tax credit. 

Under this, home buyers are given an income tax credit of $5000 which is non-refundable. For this tax credit, the house needs to be bought after January 27, 2009. Also, keep all the tax credit-related documents, invoices, and forms as proof for at least a period of 6 years.  

Important points to keep in mind:

  • The maximum credit allowed is $750. 
  • The house needs to be new. If it is old, you must have renovated it significantly that the house has a fair market value of $4,50,000 after the completion of construction. 
  • You or your spouse or common-law partner haven’t owned a house in the preceding 4 years. 
  • The property you are seeking tax credit for has to be your sole residence premise. 
  • For mobile or floating home, and for leased land (for at least 20 years) as well, the tax credit is applicable. 

4. Rebate on Land Transfer Taxes

Land transfer is the tax that one has to pay while closing the final home buying transaction. The transfer fee depends on the purchase rate. These charges are common in all the Canadian provinces except Alberta and Saskatchewan.

Though, provinces like Ontario, Prince Edward Island, British Columbia, and the City Toronto facilitates a tax rebate for first time home buyers on land transfer taxes. 

Ontario: In Ontario, the maximum rebate amount on land transfer tax is up to $4000 if the house value is $3,68,333 or less. If the home value is more than that, the entire rebate can be available, subject to the rest of the amount needing to be paid. 

Prince Edward Island: Here, the rebate amount for the house value till $2,00,000 is $2000. But if the house valuation exceeds that, no rebate is provided.

British Columbia: In this province, on the house value amounting till $5,00,000, the rebate amount of $8000 can be availed. If the house values between $5,00,001 and $5,24,999, you can only have a partial rebate. If the house value exceeds $5,25,000, there is no rebate given to the home buyer. 

Toronto: In Toronto, for newly constructed properties or resale properties, $4475 is the rebate amount. If the value of the house exceeds $4,00,000, you can claim the entire rebate amount, though the rest of the balance has to be paid.

5. Mortgage Insurance by CMHC

You need to have mortgage loan insurance in Canada if you have paid 5 percent to 20 percent of the house rate in down payment.  Canada Mortgage and Housing Corporation (CMHC) provides such mortgage insurances to protect the lender against any kind of home repayment default. It also helps home buyers to pay less in down payments. 

Important points to keep in mind:

  • You need to pay 5 percent as a down payment if the house price is $5,00,000 or less. 
  • You need to pay a 10 percent amount as a down payment if the house price is more than $5,00,000.
  • If your house price is more than a million-dollar, mortgage loan insurance doesn’t apply as the down payment requirement reaches 20 percent here. 

 

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Devanshee Dave

Devanshee is a staff writer at YourFirst.ca. She is a finance enthusiast and has completed her Master’s degree in Mass Communication & Journalism. She is currently pursuing CFA (Chartered Financial Analyst) and has worked as a journalist in a local business newspaper, multiple start-ups as well as finance and economy-related online media houses.

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