First-Time Homebuyer Programs
Friday Nov 04th, 2022
In Canada, various programs are available for first-time homebuyers, with the aim to help make buying your first home easier.
RRSP Home Buyers’ Plan
If you haven’t purchased a home within the last four years (or lived in a spouse’s home in the same timeframe), you may qualify for the RRSP Home Buyers’ Plan. With this plan, you may borrow up to $35,000 tax-free from your RRSP to fund your down payment. Just keep in mind that the money must be in your RRSP at least 90 days before the purchase of your house.
The RRSP Home Buyers’ Plan is advantageous for Canadians because, generally speaking, early withdrawals from RRSPs are considered taxable income. In this case, they’re exempt, but you must start repaying the amount borrowed from the RRSP two years after you buy. You will have a 15-year period to complete the repayment process.
Land Transfer Tax Rebate
Some Canadian provinces charge a land transfer tax when you buy a house. This is generally between 0.5% and 2.0% of the property’s purchase price and represents the largest closing cost you’ll have to pay. To help first-time homebuyers, several provinces rebate some or all of this tax if you’re eligible.
You can receive a rebate on some of the land transfer tax you pay if you live in British Columbia, Ontario or Prince Edward Island. Homebuyers in the City of Toronto are also eligible to receive a rebate on the city’s land transfer tax in addition to the provincial rebate.
First-Time Home Buyers’ Tax Credit
The First Time Home Buyers’ Tax Credit, introduced in the 2009 federal budget, allows first-time homebuyers in Canada the opportunity to recover some of the costs associated with their purchase. It helps offset legal fees, inspections, and other similar closing costs. The First Time Home Buyers’ Tax Credit is a non-refundable credit and is valued at $750.
GST/HST New Housing Rebate
The GST/HST New Housing Rebate offers money back to Canadians who buy a newly-built home, substantially renovate an existing home, or rebuild a house that was destroyed due to fire. In all three cases, an individual will incur GST/HST on their purchase. The GST portion of a new home purchase or renovation can be rebated to all Canadians who qualify.
First Home Savings Account
This new savings vehicle was announced in the 2022 federal budget and is expected to be available starting early 2023. It combines features from both TFSAs (Tax-Free Savings Accounts) and RRSPs (Registered Retirement Savings Plans) but has advantages over both. Your contributions to your First Home Savings Account (FHSA) are tax-free, and you don’t have to pay yourself back when you take out money from your FHSA to purchase your first home. You can learn more about the First Home Savings Account on our blog.
Provincial first-time homebuyer programs
Most first-time homebuyer programs are found at the federal level, but several provinces have their own programs as well (along with the land transfer tax rebates we mentioned earlier). Quebec, for example, offers an additional tax credit (max $750) to first-time homebuyers.
To properly understand what you’ll be eligible for in your province, it’s worth speaking to a mortgage broker near you - consultations are free.