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Buying your first home is an exciting milestone, but it can also feel overwhelming with all the decisions and financial planning involved. Thankfully, Canada offers several programs designed to help first-time homebuyers ease into the process. Here’s a breakdown of the key programs that can help you get into your first home faster and more affordably.
The Home Buyers’ Plan allows you to withdraw up to $60,000 from your Registered Retirement Savings Plan (RRSP) to purchase or build a home. This withdrawal limit was increased on April 16, 2024. You won’t be taxed on the withdrawal as long as you repay the amount within 15 years.
Who can apply? First-time homebuyers, or those who haven’t owned a home in the last four years.
Pros: Provides access to your RRSP funds without immediate tax consequences.
Cons: The amount must be repaid to avoid taxation, reducing retirement savings in the short term.
The First Home Savings Account (FHSA), launched in 2023, is a tax-advantaged savings plan designed to help first-time homebuyers save for their down payment. You can contribute up to $8,000 per year, to a lifetime maximum of $40,000. Contributions are tax-deductible, similar to an RRSP, and withdrawals are tax-free, similar to a Tax-Free Savings Account (TFSA), as long as the funds are used to purchase a home.
Who can apply? First-time homebuyers who are Canadian residents and aged 18 or older.
Pros: Combines tax-deductible contributions with tax-free withdrawals for home purchases.
Cons: Annual contribution limit is capped at $8,000, so it may take several years to reach the maximum benefit.
This non-refundable tax credit is available to help with closing costs such as legal fees, inspections, and other expenses related to buying your first home. For the 2023 tax year, the credit provides up to $1,500 in savings.
Who can apply? First-time homebuyers or those who haven’t purchased a home in the last four years.
Pros: Helps reduce the financial burden of closing costs.
Cons: Non-refundable, so it only offsets taxes you owe.
If you’re purchasing a new or substantially renovated home, you may be eligible for a rebate on the GST or HST you paid as part of the purchase price.
Who can apply? Buyers of new homes or homes that have undergone major renovations.
Pros: Reduces the amount of taxes paid on new properties.
Cons: Eligibility is based on factors like the home’s value and the province you’re buying in.
One of the more recent initiatives introduced for first-time homebuyers is the option for a 30-year amortization period on insured mortgages for newly built homes. This extended amortization period allows buyers to spread their mortgage payments over a longer time frame, reducing monthly payments and making homeownership more affordable in the short term.
Who can apply? First-time homebuyers purchasing a newly built home who meet the criteria for a government-backed insured mortgage.
Pros: The longer amortization period results in lower monthly mortgage payments, easing the financial burden for first-time buyers.
Cons: Extending the mortgage term will mean paying more interest over the life of the loan.
Provincial and Municipal Programs
In addition to national programs, many provinces and cities offer additional programs. For example:
Ontario: The Land Transfer Tax Rebate offers up to $4,000 in rebates on land transfer taxes.
British Columbia: First-time buyers can qualify for exemptions or partial exemptions on property transfer taxes.
Toronto: An additional municipal Land Transfer Tax rebate is available on top of Ontario’s rebate.
With these programs, first-time homebuyers in Canada have various resources to make the process more affordable. These initiatives help reduce upfront costs, lower monthly payments, and make saving for a down payment easier. If you’re ready to start your journey toward homeownership or want more guidance, don’t hesitate to reach out.
Disclaimer: Not all programs may apply to your situation. Please confirm your eligibility for the above programs before proceeding.
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