Being a first-time home buyer can be both exhilarating and overwhelming – particularly when faced with the substantial costs involved, especially if you lack existing assets to aid in securing a mortgage. This is especially true since most first-time home buyers in Canada do not have proceeds from a property sale to finance their initial purchase. However, the Canadian government has implemented numerous programs to alleviate the financial strain of entering the housing market.
How Much Mortgage Can You Afford in 2023?
For many, this question looms large. Watch our video for insights into determining your affordability.
First-time Home Buyers: Frequently Asked Questions
How Do I Qualify as a First-time Home Buyer in Canada?
To qualify under the Income Tax Act as a first-time home buyer in Canada:
- You must be a Canadian resident when withdrawing funds from a registered government plan for a first-home purchase.
- You must not have lived in a home you owned, jointly owned, or that your spouse or common-law partner owned or jointly owned in the current calendar year or the preceding four calendar years.
- Exceptions apply in case of marital breakdown, where a 90-day separation from your former partner grants you first-time home buyer status again.
How Much Do I Need for a Down Payment as a First-time Home Buyer?
The required down payment does not vary based on first-time home buyer status. However, in Canada, homebuyers must have a minimum percentage of the home’s purchase price available:
- For homes under $500,000, the minimum down payment is 5%.
- For homes between $500,000 and $999,999, it’s 5% of the first $500,000 plus 10% of any amount over $500,000.
- For homes at $1,000,000 or more, a 20% down payment is required.
What Was the Canadian Government Incentive for First-time Home Buyers?
The First Time Home Buyer Incentive (FTHBI) formerly offered an interest-free loan of 5% – 10% of the home’s cost, which had to be repaid within 25 years or upon sale, with the government sharing equity gains or losses. However, this program ceased on March 31, 2024.
The article provides a comprehensive guide for first-time home buyers in Canada, covering various programs and incentives offered by the Canadian government. It discusses qualification criteria, down payment requirements, and key programs like the RRSP Home Buyers’ Plan and the First Home Savings Account (FHSA). Additionally, it touches on tax credits, rebates, and other financial considerations for Canadian homeowners. The article emphasizes recent updates, such as the discontinuation of the First Time Home Buyer Incentive and the expansion of withdrawal limits for the RRSP Home Buyers’ Plan. It also highlights provincial programs and tax incentives, offering a wealth of information for individuals navigating the complexities of buying their first home in Canada.
What Is the Maximum RRSP Contribution Amount for a First-time Home Buyer?
Under the RRSP Home Buyers’ Plan (HBP), potential home buyers can deposit up to 18% of their previous year’s income or the year’s maximum RRSP contribution limit, whichever is higher. However, the maximum withdrawal for a home purchase is capped at $60,000.
What Is the FHSA Limit in Canada?
The First Home Savings Account (FHSA), introduced in 2023, allows annual deposits of up to $8,000, accumulating to a lifetime maximum of $40,000 per individual. Withdrawals are tax-free, encouraging savings for a home purchase.
What Bank Offers FHSA in Canada?
Financial institutions like Questrade, Royal Bank of Canada, and National Bank of Canada currently provide the FHSA, aiding first-time home buyers in saving for their dream homes.
Programs for First-time Home Buyers in Canada
As of March 31, 2024, the First-Time Home Buyer Incentive is no longer available. Explore our blog post “Federal government cancels the First Time Home Buyer Incentive” for detailed information.
First Home Savings Account
The FHSA, combining features from TFSA and RRSP, offers tax-free contributions and flexibility in accessing funds for a first home purchase.
RRSP Home Buyers’ Plan
This plan allows first-time home buyers to withdraw up to $60,000 from their RRSP for a down payment, repayable over 15 years, with recent expansions in withdrawal limits and repayment timelines.
Land Transfer Tax Rebate
Provinces like British Columbia, Ontario, and Prince Edward Island offer rebates on land transfer taxes, easing financial burdens for first-time home buyers.
First Time Home Buyers’ Tax Credit
Introduced in 2009, this non-refundable credit assists in covering purchase-related costs, with recent increases in credit amounts.
GST/HST New Housing Rebate
This rebate refunds GST/HST on newly-built homes, benefiting first-time home buyers investing in new properties.
Other Tax Incentives and Obligations
Canadian homeowners enjoy various tax incentives, including the Multigenerational Home Renovation Tax Credit, Home Accessibility Tax Credit, and principal residence tax exemptions. However, they must also navigate tax obligations like the underused housing tax and accommodation sharing rules.
For detailed eligibility criteria and information on provincial programs, consult our provincial first-time home buyer pages. For personalized guidance, consider consulting a mortgage broker.