Buying your first home has never been so intimidating or expensive. The market is at an all time high, many homes are entertaining multiple offers, selling well over their asking price, and now, interest rates are beginning to rise.
If you’re looking to enter the market for the first time, you’re going to want to use every resource at your disposal, whether that’s government programs or professional guidance, or preferably both. Knowledge is power, so let’s discuss several incentives and programs available to help you reach your goals.
*Tax-Free First-Time Home Savings Account will be implemented in 2023, as per the 2022 Federal Budget.
First, you need to clarify if you are, in fact, a First Time Home Buyer. In Canada, a First Time Home Buyer is someone who has not owned a home in the previous 4 years and has not occupied a home owned by their current spouse or common law partner. The only time this does not ring true is for the Land Transfer Tax Refund, but that will be explained further on in the article.
The First Time Home Buyer Incentive is a Shared Equity Program through the government.
Quick Facts:
Eligibility:
Property Type | Incentive |
---|---|
New Construction | 5% or 10% |
Existing Home | 5% |
Mobile Home (New or Resale) | 5% |
Example
In this example, you can see how the incentive lowered the monthly mortgage payments.
Instead of paying interest on the borrowed amount like a normal loan, the government shares in the increased value of Anita’s home.
You can apply for the Home Buyer Incentive online once you’ve found the home you want to buy and ensured that you meet eligibility requirements.
Example | $ |
---|---|
Anita wants to buy a newly constructed home | 400,000 |
Anita can apply for the incentive of 10% shared equity mortgage | 40,000 |
Anita’s Original Down Payment (5%) | 20,000 |
Anita’s Mortgage Value | 340,000 |
Anita sells for | 480,000 |
Anita repays through the incentive program | 48,000 |
The Home Buyer’s Plan (HBP) allows people buying or building a home for the first time to borrow from their RRSP tax-free.
Eligibility:
Quick Facts:
The Home Buyer’s Amount allows people to claim up to $5000 for the purchasing a qualifying home.
Quick Facts:
Eligibility:
A Land Transfer Tax is payment for registering your property’s title under your name. You may be eligible for a refund on this payment.
Quick Facts:
Eligibility:
The Tax-Free First Home Savings Account (FHSA) is a proposed savings account that acts like an RRSP, specifically for those savings to purchase their first home. Should the FHSA go ahead, you’ll be able to start saving in 2023.
Eligibility:
Quick Facts:
There are a lot of questions remaining about this brand new account.
As you can see, there are several programs and incentives that offer help to a First Time Home Buyer. While the overall objective is to decrease the burden of upfront cost associated with buying a home, they all work differently and have varying eligibility requirements. In addition to doing your own research, you may want to consider working with a qualified professional.
If you are feeling a bit overwhelmed by all of the programs, check out the table on the next page for a brief summary.
Benefit | Eligibility | The Catch | |
---|---|---|---|
First Time Home Buyer Incentive | Interest free loan from the government to boost down payment. 5% of purchase price, 10% on new construction. | Additional requirements regarding: Income total & borrowing down payment | Must repay upon selling or within 25 years. The repayment equals 5% (or 10%) of house value at the time of repayment. |
Home Buyer’s Plan | Withdraw from RRSP tax-free to boost down payment, up to $35,000 per person. | Cannot use with FHSA. Must occupy within 1 year | Must repay over 15 years, or pay tax on withdrawals. Repayments are not tax deductible. |
Home Buyer’s Amount | Tax credit after purchasing first home, up to $1,500. | Must be principal residence. Must occupy within 1 year | Make sure to claim it on your tax return. |
Land Transfer Tax | Refund on Land Transfer for first time buyers, up to $4,000. | Must occupy in 9 months. Never owned a home | May only be used once, ever. |
First Home Savings Account | New tax-free, tax deductible savings account, deposit $8,000 annually, lifetime max $40,000. | Cannot use with HBP | Does not exist, yet. Contribute up to $8,000 annually. Cannot accrue contribution room. |
Have Questions?
Contact a Ward & Uptigrove Wealth Management representative
at 519-291-3040 or email info@w-u.on.ca.
Ward & Uptigrove