{"id":1226,"date":"2020-02-15T18:28:52","date_gmt":"2020-02-15T18:28:52","guid":{"rendered":"https:\/\/rankmyagent.com\/realestate\/?p=1226"},"modified":"2020-02-15T18:28:53","modified_gmt":"2020-02-15T18:28:53","slug":"the-tools-available-to-canadians-purchasing-their-first-home","status":"publish","type":"post","link":"https:\/\/rankmyagent.com\/realestate\/the-tools-available-to-canadians-purchasing-their-first-home\/","title":{"rendered":"The Tools Available to Canadians Purchasing Their First Home"},"content":{"rendered":"\n

A down payment is\ntypically (and ideally) at least 20% of the full price of a home. To most\nCanadians, this is a lot of money, especially with home prices sky-high.\nLuckily, the government, over the years, have developed tools to help\nfirst-time homebuyers make the largest purchase of their life. <\/p>\n\n\n\n

In this article,\nwe explain these tools and look at how they can help you buy a home. The tools\ninclude the Home Buyers\u2019 Plan, the new First-Time Homebuyers\u2019 Incentive, and\nthe various tax rebates and credits available to first-time homebuyers. <\/p>\n\n\n\n

Home\nBuyers\u2019 Plan: Borrowing from your RRSP <\/h2>\n\n\n\n

The Home Buyers\u2019\nPlan lets any first-time homebuyer buying or building a home to borrow up to\n$35,000 from their Registered Retirement Savings Plan (RRSP). This amount used\nto be $25,000 until March 19, 2019, when it was raised to $35,000. If you\u2019re\npurchasing your home with someone else, like a significant other, each person\ncan use the Home Buyers\u2019 Plan for a total of $70,000. <\/p>\n\n\n\n

Although it\nmentions \u201cfirst-time\u201d homebuyers, if you\u2019ve previously participated in the\nplan, you may be able to do it again if your borrowing balance is 0 as of\nJanuary 1st of the year. Just remember that every year that the money isn\u2019t in\nyour RRSP is another year that it\u2019s not growing. Without the help of this\nappreciation, it could impact what you have ready for retirement.<\/p>\n\n\n\n

Although\nwithdrawing this money is tax-free, it has to be repaid within 15 years to\nremain so. The repayment period starts the second year after the year that the\nmoney is withdrawn. So funds withdrawn in 2019 have 2021 as the first year of\nrepayment. The tax consequences of not paying back the loan within the allotted\ntime could result in a hefty income tax.<\/p>\n\n\n\n

Unlike mortgages\nand other loans, there are no consequences for paying back the money early. <\/p>\n\n\n\n

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First-Time Homebuyer Incentive: Sharing Equity with the Government <\/h2>\n\n\n\n

The First-Time\nHomebuyer Incentive (FTHBI) started on September 2nd, 2019 as part of the\ngovernment\u2019s national housing strategy. It\u2019s expected to help Canadians fitting\ninto a specific criterion reduce monthly mortgage payments by $286. <\/p>\n\n\n\n

The government\ndoes this through a shared-equity mortgage program, where they provide a\nfirst-time homebuyer with 10% of the purchase price of a new home, or 5% of a\nresale home. This capital comes interest-free because it is not a loan. The\ngovernment is actually purchasing part of the equity. <\/p>\n\n\n\n

When the property\nis sold or after 25 years, the homebuyer must pay back either 10% or 5% of the\nhome\u2019s current market value. Thus, if the home declined in value, the homeowner\npays back less than what they got. If the home\u2019s value appreciated, they must\npay back more. <\/p>\n\n\n\n

For example, a\nhomebuyer purchases a $100,000 new home and receives $10,000 (10%) from the\nFTHBI. If the home appreciates to $400,000 after 25 years or when they sell,\nthey\u2019ll have to pay back $40,000\u201410% of the market value after 25 years or at\nthe time of the sale. One big benefit is that this amount can be paid back at\nany time, meaning you could pay it back when the property market is weaker to\nmaximize the benefit. <\/p>\n\n\n\n

As great as it\nsounds, there are severe limitations to this tool. To qualify for FTHBI,\nhomebuyers must have a combined household income of $120,000 or less. The price\nof the mortgage plus the incentive amount also cannot exceed more than four\ntimes the buyers\u2019 household income. This effectively limits the maximum\npurchase price of a qualified home to around $500,000. This likely rules out\nVancouver or Toronto purchases, as even most condos in these cities have\nsurpassed this maximum purchase price. <\/p>\n\n\n\n

Another drawback\nof the program is that homebuyers using the plan with less than a 20%\ndownpayment still need mortgage default insurance. If you have 10% of the\npurchase price ready and hope to get another 10% from FTHBI, this won\u2019t help\nyou wiggle your way out of default insurance. The FTHBI is almost like a second\nmortgage on your home\u2014not part of your down payment. <\/p>\n\n\n\n

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Tax Rebates and Credits<\/h2>\n\n\n\n

In addition to\ntools that can help you get the money you need for a down payment or to reduce\nmonthly mortgage payments, multiple tax rebates and credits can help avoid some\nof the costs of purchasing your first home. <\/p>\n\n\n\n

First-Time\nHome Buyers\u2019 Tax Credit<\/h3>\n\n\n\n

The First-Time\nHome Buyers\u2019 Tax Credit came into effect in 2009. It provides a $5,000\nnon-refundable tax credit if you and the home you\u2019re buying fit a certain criterion.\nThe credit works out to a maximum of $750 back in your pocket. <\/p>\n\n\n\n

To qualify, you\nand your spouse\/common-law partner need to buy a qualifying home and must also\nhave not lived in another home owned by you or your partner in the past four\nyears. You and your partner also get a combined total of $5,000 tax credits.\nThis means that regardless of whether it\u2019s a solo or joint purchase, the\nmaximum tax credit is $5,000. <\/p>\n\n\n\n

HST\/GST\nRebate<\/h3>\n\n\n\n

The HST\/GST\nhousing rebate allows a homeowner to recover the GST or federal portion of HST\nfrom the purchase of their home or from any renovations that they made to it.\nTo qualify, this home must be your primary place of residence, among other conditions<\/a>. Depending on your\nprovince, the PST or provincial portion of the HST may also be recoverable. <\/p>\n\n\n\n

Land\nTransfer Tax Rebate <\/h3>\n\n\n\n

If you\u2019re a first-time homebuyer purchasing a home in British Columbia, Ontario, or Prince Edward Island, you could also recover some or all of the land transfer tax paid on your purchase. The recoverable amount depends on the specific province. The City of Toronto also provides a rebate on the city\u2019s land transfer tax, in addition to the provincial one. The qualifications for each rebate differ depending on the province and whether you\u2019re purchasing in the City of Toronto. <\/p>\n\n\n\n

As a first-time\nhomebuyer, many tools can help you purchase your first home. You can borrow\nfrom your RRSP through the Home Buyers\u2019 Plan, split the equity of your home\nwith the government via First-Time Homebuyer Incentive, or recover some money\nthrough various tax credits and rebates. Make sure to speak to an accountant\nand your realtor to make the best use of these tools.
<\/p>\n\n\n\n

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A down payment is typically (and ideally) at least 20% of the full price of a home. To most Canadians, this is a lot of money, especially with home prices sky-high. Luckily, the government, over the years, have developed tools to help first-time homebuyers make the largest purchase of their life. In this article, we […]<\/p>\n","protected":false},"author":1,"featured_media":1230,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"footnotes":""},"categories":[39,35,49],"tags":[329,330,120,274,396,408,145,251,86,50,85,220,323,401,70,407],"class_list":["post-1226","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-buying","category-first-time-home-buyer","category-first-time-home-buyers","tag-buying-a-home","tag-buying-a-home-as-a-couple","tag-buying-a-new-home","tag-canada","tag-canada-real-estate","tag-canadian-government","tag-first-home","tag-first-time-buying","tag-first-time-home-buyers-canada","tag-first-time-home-buyers","tag-first-time-home-buyers-tax-credit","tag-homeowners","tag-moving-in-together","tag-purchasing","tag-real-estate","tag-young-family"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/rankmyagent.com\/realestate\/wp-json\/wp\/v2\/posts\/1226","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/rankmyagent.com\/realestate\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/rankmyagent.com\/realestate\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/rankmyagent.com\/realestate\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/rankmyagent.com\/realestate\/wp-json\/wp\/v2\/comments?post=1226"}],"version-history":[{"count":4,"href":"https:\/\/rankmyagent.com\/realestate\/wp-json\/wp\/v2\/posts\/1226\/revisions"}],"predecessor-version":[{"id":1237,"href":"https:\/\/rankmyagent.com\/realestate\/wp-json\/wp\/v2\/posts\/1226\/revisions\/1237"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/rankmyagent.com\/realestate\/wp-json\/wp\/v2\/media\/1230"}],"wp:attachment":[{"href":"https:\/\/rankmyagent.com\/realestate\/wp-json\/wp\/v2\/media?parent=1226"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/rankmyagent.com\/realestate\/wp-json\/wp\/v2\/categories?post=1226"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/rankmyagent.com\/realestate\/wp-json\/wp\/v2\/tags?post=1226"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}