First-Time Home Buyer Programs in Canada

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Every homeowner was once a first-time homebuyer. Unfortunately, with housing markets getting heated, it is never been so tougher to get the property as it has become now. However, there is a range of first-time home buyer programs in Canada that make it easier to buy your first home.

If you are a first-time homebuyer, it is wise to be familiar with all these programs that can provide assistance in any way whether it is rebates, tax benefits, programs to fund your down payment, or even the minimum you must put down for your home purchase. If you are interested in these programs, as well as some other general information about the home buying process, then continue reading.

Programs For First Time Home Buyers in Canada

Below are some of the best programs to help you purchase your first home and that too without any hassle.

RRSP Home Buyer’s Plan

If you have not purchased a home within the last four years and also have not lived in your spouse’s home for the same timeframe, you can qualify for this. With Registered Retirement Savings Plan (RRSP) Home Buyer’s Plan, you can borrow up to $35,000 to fund your down payment. This money will not be liable to any tax. Just make sure that the money stays in your RRSP account for at least 90 days before the purchase of your house.

This program is advantageous for Canadians as it gives them tax exemption. However, keep in mind that you will have you start repaying the amount borrowed two years after if you buy over a 15-year period.

Land Transfer Tax Rebate

When you buy a house, you will be charged a land transfer tax. Although this tax is not charged in all provinces, a few provinces still impose it on home buyers. This tax is generally between 0.5 percent to 2.0 percent of the purchase price of the property. This amount represents the largest closing cost you will have to pay. In an attempt to help first-time home buyers, several provinces rebate some or even all of this tax if you are eligible.

If you are a resident of Ontario, Prince Edward Island, or British Columbia, you can receive a rebate on some of the land transfer tax you pay. 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 Buyer’s Tax Credit

First introduced in the 2009 federal budget, it allows first-time buyers in Canada the opportunity to recover some of the costs associated with their purchase. It was introduced as part of Canada’s economic action plan to help Canadians purchase their first home.

This first-time home buyer’s tax credit program offsets legal fees, inspections, and other similar closing costs. So, the main advantage of this is that it helps recover closing costs such as legal expenses, inspections, and land transfer taxes.

First-time home buyer’s tax credit is a non-refundable credit and is valued at $750. To receive your $750 claim, you must include it with your personal tax return underline 369.

Provincial First-time Home Buyer Programs

Although most of the first-time homebuyer programs are found at the federal level, there are a number of programs that come from provinces as well. The provinces along with their homebuyer programs, also come with land transfer tax rebates. Take for instance Quebec which offers an additional tax credit of $750 to first-time home buyers.

To know about these programs and your eligibility, it is advised to speak to a mortgage broker near you. They may charge for consultations but you will get helpful information in return.

GST/HST New Housing Rebate

Lastly, we have GST/HST New Housing Rebate which offers a money-back to Canadians who buy a newly built home, renovate an existing home, or rebuild a home 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.

For this, you will have to fill a single form. In return, you will save thousands of dollars in taxes if you are buying a newly constructed home.

General Tips For First-time Homebuyers in Canada

Down Payment

For first-time home buyers, the down payment is the most concerning thing when they think about the first purchase. In Canada, you usually have to pay 5% as a down payment for homes that are less than $500,000. If the purchase price is exceeding $500,000 and less than $1 million, the down payment increases to 10%. Similarly, for houses over $1 million, the minimum down payment is 20%.

CMHC Insurance

Mortgage default insurance or CMHC insurance may seem like a strange concept but it is simpler. If you have a down payment of less than 20%, you must purchase mortgage default insurance. However, know that it is not your insurance. Rather, it is insurance to protect your lender in case you do not make your mortgage payments.
Basically, CMHC insurance is designed to make financial institutions comfortable with lending to individuals who do not have a large down payment.

Mortgage insurance is calculated as a percentage of the value of the mortgage amount. For simple understanding, if your down payment is between 5% to 9.99%, the mortgage insurance will represent 3.6% of the mortgage amount. Similarly, for a down payment of 10% to 14.99%, the mortgage insurance will cost 2.40% and for a down payment of 15% to 19.99% mortgage insurance costs 1.80%.

It is important to mention here that CMHC insurance is not available for homes with the purchase price of more than $1 million. So, if you are buying a house in excess of this amount, you must have at least 20% as a down payment.

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The Bottom Line

At Lionsgate, we specialize in helping people obtain funding private mortgages for land purchases as well as for other real estate transactions. If you are looking to buy land in Canada, get a mortgage or apply for a loan, leave us a message and we will try to connect you with local realtors and sourcing for financing.