Looking to buy your first home? There are a few things you should prepare for financially. You'll need to apply for a mortgage, and your mortgage provider will check your credit when you apply. You'll also need to save up for a downpayment, which can be a considerable amount of money, depending on the price of your home.
Although a good credit score can help you qualify for a mortgage, buying a house can still be an expensive decision. But did you know that you can qualify for incentives and rebates if you are a first-time home buyer in Canada?
As a first-time home buyer you get access to down payment programs, great incentives and tax rebates all of which can help turn your homeownership dream into a reality. The purpose of these programs is to help buyers overcome some of the bigger hurdles when it comes to purchasing a home in Canada.
The key to getting help is to understand where to go and whether or not you qualify. Use this resource on first-time home buyer programs to help you prepare to buy your first home. For more information on the home buying process, check out the Zolo Homebase First-Time Home Buyer Resource Guide.
Are You a First-Time Home Buyer?
To get access to rebates and home buyer programs, you must first determine whether or not you qualify as a first-time home buyer. To qualify you must meet all eligibility requirements — but just to keep things confusing, these requirements tend to differ slightly between federal, provincial and municipal programs.
For instance, to qualify for the federal Home Buyers' Plan (HBP) you must be a Canadian citizen; yet to qualify for the federal First-Time Home Buyer Incentive you must be a Canadian citizen or a permanent resident or non-permanent resident authorized to work in Canada.
These differences in eligibility requirements can get confusing. To help, we've listed the main criteria used to determine first-time home buyer eligibility in Canada:
Residential Status: All first-time buyer programs and incentives will have a qualification about citizenship or residency. Some will require the home buyer to be a Canadian citizen, while others will also be open to permanent residents or non-permanent resident authorized to work in Canada.
Current Residence: To qualify as a first-time buyer, you can't currently be living in a home that is owned by you or a common-law partner or spouse. For instance, if your partner bought a townhouse five years before you met but only recently you decide to move into your partner's townhouse then you would no longer be considered a first-time buyer. However, if you and your partner didn't move in together but decided to sell her townhouse and buy a home together, you would qualify as a first-time home buyer, although your partner would not.
Future Residence: To qualify for rebates and incentives, the property you buy must be the home you intend to live-in full-time (making it your primary residence).
Length of Time Since You Last Owned Property: Under most federal programs you can re-qualify as a first-time home buyer if you have not owned or lived-in an owned home in the four-year period before you purchase a new or resale residential home.
Disability Status: You will qualify for first-time home buyer incentives if you are buying a home for a disabled family member or you qualify for the disability tax credit.
Marital Status: If you and your spouse or common-law partner separate or divorce for a period of at least 90 days, you can re-qualify as a first-time home buyer. Keep in mind there are additional requirements to re-qualify as a first-time buyer. For instance, you and your ex-spouse must dispose of your previous principal residence no later than two years after the end of the year in which you purchased your new home (as a re-qualified first-time buyer).
Income Threshold: Some programs have income thresholds, meaning that you cannot earn above a certain sum (or below a certain sum) in order to qualify for the rebate or incentive.
There are other steps you can take to increase your purchasing power when finding a home. If you're buying your first home, you'll have access to exclusive programs to help you increase your purchasing power. We've put together a list of programs and incentives you may qualify as a first-time home buyer.
What Incentives Do I Qualify For as a First-Time Home Buyer?
As a first-time home buyer in Canada, here are the incentives and rebates that can help you become a property owner. Home Buyers’ Plan (HBP)
The Home Buyers’ Plan (HBP) is a federal program that helps first-time home buyers to find or beef-up their down payment funds using money borrowed from their Registered Retirement Savings Plan (RRSP).
The HBP allows you to withdraw up to $35,000 (per person) tax-free from your RRSP savings. You have 15 years to repay this interest-free loan from your retirement savings and the money withdrawn must be used to build or buy a home you intend to live in (or your disabled relative intends to live in).
The drawback of the HBP is that you'll need to make annual repayments to your RRSP (it does not have to be the same account or at the same institution) for the duration of the interest-free loan until the total amount is repaid to your retirement savings. Also, the money removed from the RRSP will not grow and accumulate and you do not get the RRSP room back once funds are withdrawn.
For you to qualify for the HBP, you need to meet the following conditions:
Be a first-time home buyer;
Submit a written agreement to buy or build a qualifying home (a qualifying home is defined as a housing unit located in Canada, including existing homes and homes still under construction);
Be a resident of Canada during the time that you withdraw funds from your RRSPs and up to the time a qualifying home is built or bought; and
Show intent to occupy the qualifying home as your place of residence within one year of building or buying it.
Official program page on the Government of Canada website: Home Buyers' Plan Land Transfer Tax Rebate
Some provinces and territories charge a Land Transfer Tax on all property sale transactions. To help offset the cost, Ontario, British Columbia, Prince Edward Island, and the City of Toronto offer land transfer tax rebates to first-time home buyers.
In most circumstances, your lawyer will automatically register you for the refund, while filing other property purchase paperwork. For example, as a first-time buyer in Ontario, you are eligible for rebates up to $4,000 (this was doubled for all homes bought or built after Jan 1, 2017).
To qualify for this tax rebate, you need to meet the following requirements:
You are at least 18 years old and a first-time home buyer;
You must occupy the home as your principal residence within nine months of the date of the transfer;
If married or common-law, your spouse should not have owned an eligible home or had any ownership interest in any eligible home anywhere in the world;
In some provinces, you must prove you were a resident for a period of time. For example, first-time home buyers in BC must show income tax filings for the province for two of the last six years before the property purchase.
In Alberta, Saskatchewan, Manitoba and Quebec, all home buyers are required to pay land transfer title fees and there are no rebates on these fees even for first-time home buyers.
In the Maritimes provinces and territories, all buyers must pay a land transfer tax.New Home GST Rebate
If you buy a new-build home you will be required to pay for the Goods and Services Tax (GST). (Whether you’ll pay GST or HST when you buy a house for the first time depends on your province of residence.)
In most provinces and territories you can qualify for a new home GST rebate if you are a first-time home buyer. The full rebate — up to $6,300 — is only offered on new-build homes with a fair market value of $350,000 or less. You can still qualify for a partial rebate if the new home you purchase is priced under $450,000.
You’re eligible for the GST/HST rebate if you meet the following requirements:
You are a first-time home buyer;
Your home is declared as your primary place of residence; and
You bought a new or renovated single, townhouse, condo, mobile, or modular home from a builder, or you bought a share of interest in a cooperative home.
Official program page on the Government of Canada website: GST/HST New Housing RebateFirst-Time Home Buyer Incentive
First-time home buyers in Canada are eligible for a shared equity mortgage with the Government of Canada. With this incentive, the government will offer you interest-free financing options to help you buy a house. This will help reduce your monthly mortgage payment without paying a significant amount for a down payment.
Under the First-Time Home Buyer Incentive, the Government of Canada will finance 5% of the purchase price of an existing home and 10% of the purchase price of a newly constructed home.
To enjoy the perks of the First-Time Home Buyer Incentive, you need to meet the following criteria:
You should be a first-time home buyer;
Your total annual qualifying income shouldn’t exceed $120,000 or $150,000 if you’re buying a home in Toronto, Vancouver, or Victoria;
Your total borrowing is no more than four times your qualifying income or 4.5 if you’re buying a home in Toronto, Vancouver, or Victoria;
You are a Canadian citizen; and
You meet the minimum down payment requirement with traditional funds.
Official program page on the Government of Canada website: First-Time Home Buyer Incentive First-Time Home Buyers’ Tax Credit
This is a $5,000 non-refundable tax credit that is open to any first-time home buyer. The credit results in a total tax rebate of $750. To qualify:
You should be a first-time home buyer;
If married or common-law, your spouse should not have owned an eligible home or had any ownership interest in any eligible home anywhere in the world.
You apply for this tax credit when you file taxes for the year you purchased the home.
Official page to program on the Government of Canada website: First-Time Home Buyers’ Tax Credit
Maximize Incentives and Rebates Today!
The great news is that provinces and even municipalities are always launching or updating existing programs to help first-time buyers become homeowners. Always be sure to check your provincial and city government websites to learn about current programs and availability.