Are you looking to buy your first home? If so, the news about the current market may have you feeling discouraged. The words “record-high prices,” “bidding wars,” and “unprecedented sellers’ market” can strike fear into the heart of anyone, especially a first-time buyer. Sometimes, it may feel like your dream of owning a home will never happen.
However, there is some good news: The provincial and federal governments have passed legislation to make it easier for first-time buyers to get into the market.
Here are some of those programs:
The First Time Home Buyer Incentive:
This new program is worth getting excited about. Have you struggled to come up with the down payment on a new home? The federal government is now offering to help, by fronting you 5-10% toward your purchase.
With more to put down, your monthly payments will be lower, making it more affordable to buy, even in this market.
Of course, this gift comes with strings attached. When you sell your home, you’ll have to repay the loan, plus interest.
For example, you’ve purchased a house for $500,000. The government has given you 5%, or $25,000 for your down payment. Five years later, you sell for $600,000. You’ll have to pay back $30.000, which is 5% of the new price.
This new program puts homeownership in the grasp of many who couldn’t afford it otherwise.
Who qualifies for the First Time Home Buyer Incentive?
You must be a Canadian citizen, a first-time buyer, or recently divorced from a marriage or common-law partner, with an annual income of $150,000 or less. And the home must be for you to live in. Investment properties do not qualify.
Do you want more tips on buying your first home? These other posts will help:
First Home Savings Account
This federal program allows all Canadians under 40 to take advantage of tax-free savings for a down payment. You can withdraw up to $40,000 anytime for your purchase with no tax penalties. The program is simple, but you can only use the money to purchase a residential property.
What happens after age 40? All funds in a First Home Savings Account revert to an RRSP, in which case you can take advantage of the Home Buyers Plan below.
Home Buyers Plan
With the Home Buyers Plan, first-time buyers can pull up to $35,000 out of their RRSP to put towards the cost of a new home without paying tax on the amount.
Only first-time buyers or those helping a relative with a disability can use this plan. (To qualify as a first-time buyer, you must not have lived in a home that you, a spouse or common-law partner owned within four years.)
First Time Home Buyer’s Tax Credit
Just like it sounds, this is a tax credit extended to all first-time buyers. The total amount of the credit is $5,000, which results in a reduction of $750 off your taxes for the year.
Claiming the credit is simple. There is no need to apply and no approval process, but you should keep all documentation in case of an audit.
You can split the tax credit with a spouse or common-law partner, but the total amount can’t exceed $5,000.
First Time Homebuyer Land Transfer rebate
This plan by the Ontario Provincial Government allows you to qualify for a rebate of up to $4,000 off of the land transfer tax on your first home purchase. If the price is less than $368,000, there is no transfer tax. However, if you’re buying in Toronto, that is unlikely to be the case.
The plan is straightforward. However, the rebate amount can be reduced if buying as a couple where one partner has owned before.
GST/HST New Housing Rebate
This rebate allows you to recover some of the GST of the federal taxes on a newly built or substantially renovated home. Though not specific to first-time buyers, it can help make your purchase more affordable.
In Ontario, you can claim up to $24,000 off the GST. The property must be your primary residence, not an investment property or second home.
Buying your first home, while nerve-wracking, should be one of the most exciting moments of your life. With these programs in place, your dream of homeownership is one step closer to reality.
Ready to start searching for your first home in Toronto and want to know more about the city? Check out our comprehensive guides to all of the neighbourhoods in downtown, midtown, East end and West end:
Working with an experienced agent can take much of the stress away from buying your first home. If you have questions or want to know more about the process, we are happy to help. Book a free meeting with us today.
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