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Table of Contents
Buying your first home is a big milestone and getting there can be a long journey. You need to save for a minimum 5% down payment, qualify for a mortgage and have sufficient money left over for both closing costs (minimum 1.5% of the purchase price) as well as furnishing your place. And of course, you’ll need to be able to afford the mortgage payment and new costs associated with home ownership (property taxes, home insurance, maintenance, and more).
Owning a home is a rewarding experience and can teach you a lot about financial discipline. Home ownership can also be a lucrative long-term investment as you begin to build equity by paying off your mortgage.
With home prices increasing, buying your first home can be a challenge. Luckily, government incentives can make entering the market more affordable. Learn more about incentives available to first-time home buyers in Canada on this page and find your best mortgage rates using our online free quote tool.
To qualify for the First-Time Home Buyer Incentive, the Home Buyers’ Amount tax credit or the RRSP Home Buyer's plan, you must meet the following criteria:
The government offers the Home Buyers’ Tax Credit and the Home Buyers’ Plan to people with disabilities or those helping disabled family members with a home purchase as well, even if they are not first-time home buyers. The other conditions apply, and the home purchase must help better meet the needs of the person with a disability.
The conditions to qualify for the land transfer tax rebate are slightly different and vary across the provinces that offer the rebate.
Questions about your eligibility? A licensed mortgage broker can answer them and help determine what programs you qualify for. Just use our free online quote tool above. A licensed mortgage broker will be in touch to assist you.
To make it easier for first-time home buyers to purchase a property, the government offers several different kinds of financial incentives. Here are the main ones:
This guide will give you a high-level overview of each of them as you prepare for this exciting next step in your journey towards home ownership.
The First-Time Home Buyer Incentive is like a second mortgage that you enter into with the federal government of Canada. You can borrow 5% of your home’s purchase price through this program – or 10% if your home is new construction. This can help you to make a larger down payment and lower your monthly mortgage payments.
With the First-Time Home Buyer Incentive, you don’t repay the government the specific dollar figure you borrowed, as with a standard mortgage. Instead, you repay the same percentage of your home’s value, either when you sell the property, or within 25 years. This means that the government shares both the potential risk and reward of homeownership with you.
To qualify you need to save a large enough down payment to qualify for an insured mortgage. This amount can vary with the purchase price, but is at least 5% of the home’s value. You must meet income guidelines, and there are rules about how much the home can cost as well. For most home buyers in Canada, your income can’t exceed $120,000 per year (this includes your partner’s income, if you are buying a home together) and the purchase price of the home can’t be more than four times your income. In the Toronto, Vancouver and Victoria metro areas, your income can be up to $150,000 per year and the home value can be up to 4.5 times your income.
The Home Buyers’ Amount is a $5,000 tax credit to help reduce the financial burden of purchasing a first home. It can be claimed against personal income and provides a rebate of $750 (multiplying $5,000 by the lowest personal tax bracket of 15%). This first-time homebuyer tax credit can be claimed on line 369 of your personal income tax return in the year you buy a home.
The Home Buyers’ Amount may be split between the buyer and their spouse or common-law partner so long as the total tax credit does not exceed $5,000. It can also be split between any people who decide to jointly purchase a property.
The Home Buyers’ Plan (HBP) allows you to borrow up to $35,000 from your RRSP to be used as a down payment for your home purchase with no tax consequences. It is a great way to access savings that would otherwise be taxed if withdrawn prior to retirement.
To withdraw funds from your RRSP for a home purchase, you must present an agreement to buy or build a qualifying home for yourself or a relative with a disability.
To avoid being taxed on the money you’ve withdrawn, you will need to repay it into your RRSP within 15 years, 1/15 of the total each year. Repayment starts the second year after the year you withdraw the money. Any portion you haven’t repaid in time will be taxed like regular income.
If you have multiple RRSPs, you can withdraw money from each of them, but you are limited to a maximum withdrawal amount of $35,000 in total.
There are a few other rules you will need to follow if you take advantage of the RRSP Home Buyers’ Plan. Here are the requirements:
To participate in the HBP you must take the following steps:
There are many costs related to a home purchase, but one that’s often forgotten is the land transfer tax. This makes up a significant share of closing costs for many home buyers. Provincial governments typically charge land transfer tax, except for Alberta and Saskatchewan. You have to pay this tax up front when you buy your home.
The amount of tax is based on the price of the property, and it can add up, especially if your home’s purchase price is high.
Fortunately, many first-time home buyers can take advantage of special rebates of the land transfer tax offered by provincial governments. This first-time home buyer incentive helps ease your way into the market. British Columbia, Ontario and P.E.I. offer a land transfer tax rebate to first-time home buyers.
Toronto home buyers should be aware that the city government charges a land transfer tax, separate from Ontario’s provincial land transfer tax. Fortunately, like the province, the city offers a rebate of this tax to eligible Toronto first-time home buyers, of up to $4,475.00.
Here is what you need to know about how the land transfer tax rebate for first-time homebuyers works in each province that offers one.
British Columbia offers a full land transfer tax rebate to first-time home buyers who meet these conditions:
*If the three last conditions are not met the buyer can still qualify for a partial rebate.
The B.C. land transfer tax rebate is calculated based on the purchase price of the home.
Purchase price to rebate:
Ontario offers a full rebate of its land transfer tax to first-time home buyers who meet these eligibility criteria:
The refund for properties in Toronto can be up to a maximum of $3,725. For properties outside Toronto, the maximum refund is $2,000.
The Ontario land transfer tax rebate is calculated differently depending on whether your home is in Toronto or anywhere else in the province.
Purchase price to rebate:
Purchase price to rebate:
Prince Edward Island provides a full rebate of the land transfer tax to first-time home buyers who meet these conditions:
Preparing to buy a home can be exciting and overwhelming at the same time. This is especially true of your first home purchase. Here are some tips to make the process a little smoother.
Read up on how the mortgage and home buying process works and talk to people you know who have been through it. This can help you set realistic expectations. Doing a little research in advance will also familiarize you with the language of home buying and help you to ask useful questions as you get closer to making a purchase.
You will need to save at least 5% of your home’s purchase price for the down payment, and you’ll need to be able to afford the monthly payments on your mortgage. But there are other costs linked to home ownership. These include closing costs – one-time expenses related to sealing the deal on the purchase, such as fees for a home inspection, title insurance, provincial sales tax on mortgage default insurance and other items. You will also need to consider ongoing expenses of home ownership, such as repairs and maintenance, property taxes, utility bills and home insurance. If your down payment amount is less than 20% of your home’s cost, you’ll need to budget for mortgage default insurance, which is typically combined with your monthly mortgage payments.
Mortgage pre-approval is a quick way to check with a lender about the likelihood that they will approve you for a home loan, how much they would be willing to lend you, and your mortgage interest rate. You don’t have to provide much documentation at this stage. Getting pre-approval helps you to know what you can afford and makes you more credible with sellers.
Before you start touring homes, it’s smart to think about your requirements and preferences. Which details are essential, and which are items that you can be flexible about? How long a commute is too long? How much space do you need now, and in the future? How long do you think you will live in this home? You may revise your thinking as you get better acquainted with the market, but it’s smart to start thinking about your needs earlier in the process to make it more efficient.
Most people have a lot of feelings wrapped up in a first home purchase, so it’s natural to sometimes let emotions get in the way of financial and practical aspects of home buying. However, a home is a major financial move, so it’s important think clearly about your budget and make choices informed by reason more than symbolic or emotional factors.
There are a variety of mortgage products available. You’ll need to choose between an open vs. closed mortgage, and a fixed-rate vs. variable rate mortgage. You’ll need to consider what mortgage term works best for you, too. There are options ranging from as short as six months to as long as 10 years, with five years being most common. These options can help you tailor your mortgage to best fit your needs.
A good real estate agent and licensed mortgage broker can help ease the home buying process, answer all your questions along the way and help resolve any challenges as they arise. Home buying can feel complicated but having qualified, trustworthy and professional guidance can take a lot of the stress out of buying your first home. (When you get a free quote using RATESDOTCA, a licensed broker will follow up with you. Just scroll to the top of the page and enter a few details about your mortgage needs to get started).
If you’re on this page, you are already on your way to finding savings on your first home purchase through the government’s first-time home buyer incentive programs. Your licensed mortgage broker can assist you in determining your eligibility and applying for incentives.
Your mortgage rate is one factor that will determine the total cost of your mortgage. Comparing the market will ensure you get the most competitive rates available. RATESDOTCA lets you shop all the best mortgage lenders quickly and conveniently. Just go to the top of the page and enter a few details about your mortgage needs. Our online quote tool is fast and free.
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