Published: September 30, 2020 • Last updated: October 24, 2020 at 22:09 pm
First Time Homebuyer Government Incentives Explained
Every smart college student knows there are lots of bursaries and scholarships out there – you just have to know where to look. It’s the same with home buyer incentives. There are many good government programs – especially for first time buyers.
The good news is governments want to help you buy a home! In addition to all sorts of federal and provincial tax credits, there are even municipal first-time homebuyer grants available in some cities. This is where your province or city simply gives you money in order to buy a home there — typically with a few conditions.
What Homebuyer Government Incentives Are Available?
Click on the link below to jump directly to the program of interest:
Municipal Government Assistance
Down payment assistance: Some municipalities provide down payment assistance to buyers with limited resources. For example, Simcoe County will provide a 10% down payment assistance in the form of a forgivable loan. And Dufferin County will provide you with an interest free down payment assistance loan/second mortgage to help purchase a home.
There are no monthly mortgage payments for the second mortgage. Repayment of the second mortgage is required when the property is sold. Make sure to check out the municipalities which interest you.
Land Transfer Tax rebate (Toronto): In the City of Toronto, if you are a first-time purchaser of a newly constructed or resale residential property, for conveyances and dispositions of an eligible home on or after March 1, 2017, there is an available rebate of up to $4,475.
Ontario Government Assistance
Land Transfer Tax rebate: When you buy land or an interest in land in Ontario, you pay land transfer tax. First-time homebuyers of an eligible home may be entitled to a refund of all or part of the tax. Beginning January 1, 2017, the maximum amount of the refund is $4,000. Check out our land transfer tax calculator (above).
Federal Government Assistance
Home Buyer’s Plan (HBP): With this program, for withdrawals made after March 19, 2019, you may withdraw up to $35,000 tax-free from your registered retirement savings plans (RRSP) to put towards the purchase of your home. It is intended for first-time home buyers, but you can also qualify if it has been at least four years since you last owned a home.
With this plan you are essentially lending yourself money from your RRSP. You must pay it back in installments over the next 15 years, or face the tax consequences. So, if both you and your partner are purchasing a home for the first time, you can each access $35,000, for a total of $70,000.
CMHC Shared Equity Program
The Canada Mortgage and Housing Corporation (CMHC) will provide 5% of the cost of an existing home, or 10% of a new home for first-time buyers with the minimum 5% down for an insured mortgage. With the maximum allowable household income of $120,000, the top purchase price would be approximately $505,000 with 5% down, and about $565,000 for a 15% down payment.
You are required to pay the incentive back after 25 years or when you sell the home based on the property’s fair market value, whether it has increased or decreased in value.
Energy Efficient Housing
These rebates are available to all home buyers and kick in when the mortgage you have is insured by any of CMHC, Genworth, or Canada Guaranty. High ratio mortgages are typically insured, as are some other types. This rebate provides a refund of up to 25% of the mortgage default insurance premium you paid. So if you bought a $400,000 home with only 5% down, you would have paid $16,000 in insurance premiums.
Under the Energy-Efficient refund program, you could save $2,400 or even $4,000 off the premium you paid. If the home’s energy rating is between 82 and 85, you will earn a 15% refund. If the rating is between 86 and 100 (or R2000), your refund will be 25% of the premium paid.
Kyle Prevost also points out there is also tons of eco-specific cash available if you purchase an energy-efficient home. A good place to start is at Natural Resources’ website.
First Time Home Buyer Tax Credit (HBTC)
A $5,000 non-refundable tax credit intended to support first-time buyers with the many additional costs associated with purchasing a home, including legal fees, HST on newly constructed homes, disbursements and land transfer taxes. In reality, this translates to about $750 in tax savings in your pocket. When you purchase a new home, be sure to claim this credit on your income tax returns that year.
To confirm whether or not you meet the criteria, be sure to research all the details on the Department of Finance Canada Website. Search under ‘First Time Home Buyers Tax Credit’.
GST/HST New Housing Rebate
First-time home buyers residing in provinces that have combined provincial and federal sales tax, which includes Nova Scotia, New Brunswick, Newfoundland, Ontario, and British Columbia, are eligible for an HST tax rebate through the federal government. Guidelines vary, so it’s best to check out Service Canada’s website. Buyers of investment properties in Ontario are eligible for the Residential Rental Rebate. We usually direct buyers to Mark Purdy’s Rental Rebate site.
Get what is coming (back) to you
The bottom line is there are a number of incentives available to first time buyers if you know where to look and spend a little time grabbing everything you are entitled to.
- Mortgages 101 — What You Need To Know Before Applying For A Mortgage
- Top Ten Things Your Home Buying Budget Needs To Include (In Addition To The Purchase Price)
- Why You Need A Down Payment Strategy
- Mortgage Pre-approval In Canada. What It Is & How To Get It
- As A First Time Buyer, How Can I Use My RRSP As Part Of My Down Payment?