Every homeowner has bought their first home at some point. Unfortunately, it's never been more difficult to start out on the housing ladder because of today's high prices and rising rates. Fortunately, there are several first-time homebuyer programs in Canada that are designed to make the process simpler.
As a first-time home buyer, it's a good idea to be aware of any programs that might be relevant to your circumstances, including rebates, tax advantages, methods of funding your down payment, and the minimum deposit requirements. Continue reading for more on these initiatives as well as some additional basic information on the house-buying procedure.
Programs for Canadian First-Time Homebuyers
The key incentives and rebates for first-time homebuyers are listed below.
RRSP Home Buyers' Plan
You might be eligible for the RRSP Home Buyers' Plan if you haven't bought a house in the previous four years (or lived in your spouse's house during that time). With this strategy, you can borrow up to $35,000 tax-free from your RRSP to pay for your down payment. Remember that the funds must be in your RRSP at least 90 days prior to buying your home.
The RRSP Home Buyers' Plan helps Canadians because, in general, early withdrawals from RRSPs are taxed as income. In this situation, they are excluded, but you must begin paying back the RRSP loan amount two years after the purchase. The payback process must be completed within 15 years.
Land Transfer Tax Rebate
When you purchase a home, certain Canadian provinces impose a land transfer tax. The most expensive closing costs are typically between .5% and 2% of the purchase price of the property. If you qualify for a Land Transfer Tax Rebate, the province will refund some or all of this tax to you as a way of supporting first-time homebuyers.
If you live in Ontario, British Columbia, or Prince Edward Island, you may be able to get a refund on some of the land transfer tax you pay. Homebuyers in the City of Toronto can also get a refund on the city's land transfer tax on top of the provincial refund.
First-Time Home Buyers' Tax Credit
First-time homeowners in Canada now have the chance to recoup some of the costs connected with their purchase thanks to the First-Time Home Buyers' Tax Credit, which was included in the federal budget for 2009. It helps reduce the cost of closing-related expenses, including inspections and legal fees. Prior to the passage of the 2022 budget, which raised the credit amount to $1,500, the First-Time Home Buyers' Tax Credit was a non-refundable credit with a value of $750.
GST/HST New Housing Rebate
The GST/HST New Housing Rebate gives Canadians money back if they buy a newly built home, make major changes to an existing home, or build a new home after a fire destroys the old one. In each of the three scenarios, an individual will pay GST or HST on their purchase. For the GST part of a new home purchase or renovation, all Canadians who are eligible can get a rebate.
First-Time Homebuyer Incentive
The First-Time Homebuyer Incentive was put in place by the Canada Mortgage and Housing Corporation (CMHC) in September 2019. It is a loan with no interest for people who are buying their first home. It can cover up to 10% of the total cost of your home (5% for an existing home and 10% for a newly built home), which makes your monthly mortgage payments much lower over time. Regardless of when you sell your house, you must pay back the loan within 25 years. Because of how hard it is to qualify for this incentive, many first-time homebuyers can't take advantage of it. This is one of its biggest drawbacks. Click here to read all about the First-Time Homebuyer Incentive, including an analysis of the requirements.
First Home Savings Account
It was put in the government budget for 2022, and people should be able to use it by the beginning of 2023. It has benefits over both TFSAs and RRSPs while combining elements of each. When you withdraw money from your First House Savings Account (FHSA) to buy your first home, you don't have to pay yourself back; instead, your contributions to the account are tax-free. You can find out more information on the First Home Savings Account here.
Provincial programs for first-time homebuyers
Most programs for first-time homebuyers are run by the federal government. However, many provinces also have their own programs, in addition to the land transfer tax rebates we talked about earlier.
Consultations with mortgage brokers are free, so it's worthwhile to do so to fully grasp what you'll be qualified for in your region.
Want to learn more about these programs and find out if you qualify for any of the above? Contact your Realtor; they can provide you more information and advise you if you want to take advantage of these fantastic first-time homebuyer perks.