First Time Home Buyer Incentives

First Time Buyer Definition

The criteria could be different depending on the program, the general rule of thumb will be having never owned a home anywherebut in some cases it may be just in the past 4 years but you must check with your mortgage broker or bank for each program individually.

FTHBI - First-Time Home Buyer Incentive

The First-Time Home Buyer Incentive could be a great way to enter the market provided you qualify. In this case the government participates in your purchase by contributing an additianal 5% or 10% of the homes price on top of yor down payment  to reduce your mortgage costs. It’s a unique arrangement, so you’ll want to know as much as you can about it before applying for an FTHBI loan

Here’s a nifty little calculator to help determine if you qualify and what the amounts would be - FTHBI Calculator

• Maximum salary of $150,000 in Toronto ($120,000 elsewhere)
• The value of your mortgage must be greater than 80% of the value of your property.
• You can borrow up to 4.5 times your household income
• The total value of the mortgage plus the CMHC portion is limited, which effectively means that it’s only available for properties worth a maximum of $722,000
• Resale homes: the government will contribute up to an additional 5%;
• Newly built homes: The government will contribute up to 10%

More Details

• The money from CMHC is provided interest-free, and because it’s an equity share and not a loan, there aren’t any traditional repayments required.
• Under this program, your monthly mortgage payments are reduced (because your downpayment is higher with the government contribution), thus making it more affordable to own your first home.
• When it comes time to sell your home, CMHC is repaid via a proportionate % of the price of the home – if they gave you 5% to buy it, they get 5% of the sale price when you sell it (whether prices go up or down).
• If you want out of the program you can do it at any time but will have to have your house appraised to determine the fair market value at the time and your payback will be based on that value. So if the house value goes up you will pay 5% of the new value, if the value has fallen you still only pay 5% of the current value. Ultimately the government particpates in the risk and reward. of yoiur purchase

What is the First Time Buyer Incentive?  Video

How Does The First Time Home Buyer Incentive Work?  Video

HBP - The Home Buyers’ Plan (can be used in conjunction with the FHSA below)

The federal government’s Home Buyers’ Plan (HBP) is a program that allows first time home buyers to withdraw money from their registered retirement savings plan (RRSPs) to buy or build a qualifying home. This money is not taxed as income as it would normally be when you withdraw for an RRSP…but you do have to pay it back. You have 15 years to repay the money into your RRSP, starting two years after the initial withdrawal. The maximum you can withdraw from your RRSP to help fund your home purchase is $35,000.

Some things to know about the first-time buyer RRSP Plan in Ontario:

• The home must be a principal residence (meaning you are living there vs. renting it out)
• You can take the cash out of your RRSP up to 30 days after buying the home
• If you withdraw from your RRSP before closing on your new home, you must own or build the home by October 1st of the following year.

Qualifying as a first-time home buyer for the RRSP Plan:

Unless you are a person with a disability or you are helping a related person with a disability to buy or build a qualifying home, you have to be a first-time home buyer to withdraw funds from your RRSP(s) to buy or build a qualifying home.

You are considered a first-time home buyer if, in the four year period, you did not occupy a home that you or your current spouse or common-law partner owned.

FHSA - First Home Savings Account (can be used in conjunction with the HBP above)

The FHSA is a new program, similiar to an RSP,  that allows you to save for your first home. It allows you to make tax-deductible contributions of up to $8,000 per year, up to a lifetime maximum of $40,000. Your contribution room starts to accumulate as soon as you open your first account. You can carry forward your unused FHSA contribution room, up to a maximum of $8,000, to use in the following year.

To open a tax-free First Home Savings Account (FHSA), you must meet the following eligibility criteria: 

• You must be a resident of Canada. 
• You must be between 18 and 71 years old*
• You and your spouse must not own a home in Canada. This means you must be a first time buyer.

HBTC - First Time Home Buyer Tax Credit

The government created the First-Time Home Buyers Tax Credit, a $10,000 non-refundable income tax credit that results in up to $1500 in federal tax relief to help first-time home buyers, cover some of the added costs of buying a home such as lawyer fees, HST (on newly constructed homes), and adjustments (e.g. taxes or utilities prepaid by the seller) that allow you to complete the house purchase.

The government recently doubled this benefit which previously amounted to a maximum of  $750.

Who Qualifies as a First Time Home Buyer for Ontario’s Tax Credit?

• The home must be used as your principal residence.
• You did not live in a home owned by you or your spouse in the previous four years
• If you buy with a spouse/friend/family member, they must be a first-time home buyer too
• You OR your spouse/friend/family member can claim the credit, or you can share it – the maximum credit between you and any other owners is $1500

Tax credits can also reduce some of the costs of buying your first home at both the provincial and federal levels. There are two credits for buyers who meet certain criteria.

Land Transfer Tax Rebate Program

Ontario offers a land transfer tax refund of up to $4,000 for first-time home buyers. Remember that if you buy in Toronto there is an additional Land Transfer Tax charged by the city of Toronto but the city of Toronto also offers a land transfer tax rebate of up to $4,475 for first-time home buyers.

To calculate the cost for land transfer tax click here  try my calculator  but as an example, if you buy a $700k home/condo etc. in Oakville or anywhere outside of Toronto the total land transfer tax would be $10,475 less the $4000 rebate = $6,475. If you buy in Toronto the Land Transfer Cost would be $10,475 + $10,475 less the two rebates of $8,475 = $12,475

Do you or someone you know qualify, or could benefit, from one or all of these programs?  Maybe it's time to think about buying your first home!  Give me a call! 

Please verify all of the above information with the government, bank, mortgage broker or real estate lawyer.