What Programs Are Available to First-Time Home Buyers in Canada?
- October 6, 2023
- By Ben Pinckney
Four Canadian Programs that Help First-Time Home Buyers
Buying your first home in Canada can seem challenging, especially with current market conditions and interest rates. However, a few programs available to first-time home buyers can offer a helping hand.
If you have any questions about these Canadian first-time buyer programs below, don't hesitate to contact us anytime and we will be happy to help you! Also see:
- What is the "First Home Savings Account" in Canada?
- What is the "Five-Year Rule" for Homebuyers?
- Buying Your First Home in Calgary? Hire a REALTOR®!
First Home Savings Account (FHSA)
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First-time home buyers in Canada can open a “First Home Savings Account” with their financial institution of choice. The program is helpful for those looking to buy their first home because any contributions have the benefits of both an RRSP and TFSA.
- You can contribute up to $8,000 a year annually for up to a maximum of $40,000
- Just like an RRSP or TFSA, you can invest in stocks, bonds, GICs, mutual funds, etc. and have your money grow tax-free
- Any contributions reduce your year-end taxable income; for example, contributing $8,000 in 2023 will be a write-off on your taxes of an equal amount
Overall, the FHSA plan is an excellent choice for first-time home buyers looking to buy within the next five years, as you can contribute $8,000 annually.
Home Buyers Plan
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If you’re a first-time real estate buyer in Canada, the Home Buyers Plan program allows an individual buyer to withdraw up to $35,000 tax-free from your Registered Retirement Savings Plan (RRSP). Hence, if a couple was purchasing their first property together, they could withdraw up to $35,000 each for a total of $70,000!
The only catch with this program is that you need to repay what you borrowed within 15 years. Don’t worry; the borrowed amount is interest-free, and you don’t have to start making payments back into your RRSP until two years after your initial withdrawal.
Although the Home Buyers Plan is aimed at first-time home buyers, the program is also open to people who have not occupied a home that they or their spouse owned during the past four years.
As of January 2020, eligible people who are divorced or separated can also take advantage of the program, even if they don’t meet the first-time home buyer requirement. This means they can use the Home Buyers Plan a second time to buy a new property or buy out their ex’s share of their home, provided that their first Home Buyers Plan withdrawal has been repaid in full.
Home Buyers Tax Credit
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First-time buyers in Canada are offered a $10,000 tax credit to help cover the costs associated with buying a home. It can land you with a total tax rebate of up to $1,500 for the year you purchased your home!
To be eligible for the Home Buyers Tax Credit, you, your spouse or common-law partner must:
- Buy a qualifying home (see "types" below) registered in you, your spouse’s, or common-law partner’s name. It can be a property under construction or an existing resale home. Qualifying homes include detached homes, townhomes, condominiums, etc.
- Be a first-time homeowner, meaning you did not reside in a property that you or your partner owned within the past four years.
- The qualifying home must be your principal place of residence within one year after it is built and/or constructed
Also, did you know that people with a disability can also apply for the tax credit without being a first-time buyer? Yes, that's right, if you are an eligible person with some sort of disability, this tax credit applies to you!
Properties that would qualify for the First-Time Home Buyers’ Tax Credit include:
- Single-family houses
- Semi-detached houses
- Townhomes
- Apartments
- Mobile homes
First Time Home Buyer Incentive
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The Canada Mortgage and Housing Corporation (CMHC) created a shared equity mortgage program to help first-time home buyers increase their down payment and reduce their monthly mortgage costs. This program helps make homeownership more affordable and attainable.
Through the First-Time Home Buyer Incentive, you can take advantage of the following rules for down payments:
- 5% or 10% when buying a newly constructed home
- 5% for buying a resale (existing) home
- 5% for buying a new or resale mobile home
The catch is that the Canadian government now has an interest in your property for helping you with the down payment. The government will now share your property's value up to a maximum gain or loss equal to 8% per annum on the incentive amount from the date of advance to the time you repay.
The positive here is that you won't have to save as much for a down payment to qualify for mortgage payments, but for helping with the initial down payment, the government now has a stake in your home.
You will have to repay the incentive based on the market value of your home at the time of repayment equal to the percentage (for example, 5% or 10%) of the original home value used to determine the incentive.
You must repay the incentive within 25 years or whenever the property is sold, whichever comes first. You can repay the incentive in full anytime before that without any prepayment penalty!
Are You a Calgary First-Time Home Buyer? Contact Us!
Each of these programs offers an excellent opportunity to help first-time home buyers get their foot into owning real estate. I’d highly encourage anyone eligible to consider taking advantage of them!
Don’t hesitate to contact us anytime you have questions about the program or want to discuss your options as a first-time home buyer. I’m here to help you achieve your real estate goals on your timeline and at your pace!