Buying your first home can be a daunting process. However, the rewards are incredibly gratifying and can lead to lifelong investment benefits. The Government of Canada strives to make this process as easy as possible. Numerous homeownership plans and incentives are available to the benefit of buyers throughout the country.
Plans and Incentives
Under the federal government’s Home Buyer’s Plan (HBP), buyers will be able to withdraw up to $35,000 a year from their RRSP (registered retirement savings plan). They may use the money to buy or build a home for themselves or for a related person. Read more about the Home’ Buyer’s Plan here.
The Canadian government recognizes the financial burden that buying a new home can become. As a result, buyers who meet certain standards can apply to have the federal government fund a portion of their purchase. The main eligibility requirement is having the required down payment for a mortgage to be insured. This takes place via a shared equity mortgage. More info about this program can be found here.
In 2022, the federal government proposed the implementation of the First Home Savings Account (FHSA), a new tax-free registered plan. The FHSA would give homebuyers the ability to save up to $40,000 tax-free, and would be similar to a Registered Retirement Savings Plan (RRSP) in that contributions would be tax-deductible. Withdrawals would be non-taxable, and used to purchase a first home. Additionally, the tax-free nature and deductible contributions available through an FHSA gives it inherent advantages over the Home Buyer’s Plan. An HBP and an FHSA can be used together to purchase the same home. Learn more about the FHSA here.
Land Transfer Tax Refunds
Land transfer tax refunds are also available, at both the municipal and provincial level. In Ontario, provincial land transfer tax refunds are available for purchases above $368,000, with the maximum refundable amount being $4,000. Municipal land transfer taxes (such as those in effect in Toronto), have maximum refund amounts of $4,475. Thus, first-time buyers in Ontario can get up to $8,475 in land transfer tax refunds. More info on this topic is available here and here.
*Note: If one or more buyers is not a first-time buyer, the overall refund will be reduced. In this case, the final amount will be allocated according to the percentage of interest purchased by each first-time buyer.
To calculate your land transfer tax rates and potential refunds, use this handy calculator from RateHub.
5% Down Payment Program (For homes priced under $1,000,000)
As long as they are able to make a 5% down payment, all buyers can access mortgage insurance and begin the process of purchasing a home. Sources of the required amount can be either personal (e.g. savings) or via a variety of other programs, such as lender incentives or borrowed funds. Homes costing more than $500,000 require 5% down on the first $500k and 10% on the remainder. Mortgage loan insurance is not available for homes priced at more than $1,000,000. The maximum amortization period is 25 years.
CMHC Purchase Plus Improvements
Insured loans from Canada Mortgage & Housing Corporation can be used to cover not just the purchase of a new home, but also renovations and improvements that need to be made immediately. This allows homebuyers to cover all of their costs under one mortgage. The following criteria must be met:
- Cost estimates must be provided
- A minimum 5% down payment on the total cost (both purchasing price and renovations/improvements)
- Must be obtained via an approved lender.
Homes costing more than $500,000 require 5% down on the first $500k and 10% on the remainder. Mortgage loan insurance is not available for homes priced at more than $1,000,000
Tax Credits and Housing Rebates
In 2009, a new tax credit for first-time homebuyers was introduced. This new credit provides up to $5,000 in a nonrefundable credit, and can allow for up to $750 in federal tax relief to eligible participants. Read more about the Home Buyer’s amount here.
Qualification for a GST/HST rebate on new housing is based on several factors. You may qualify if:
- You purchased a new home or one that has undergone substantial renovations.
- Leased a unit in a cooperative housing complex (co-op) to use as your primary residence.
- Built your own home (or constructed a third party to do so), or conducted substantial renovations on your own home.
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