First-Time Home Buyer? Here Are the Ways to Save and Get Ahead

Rebates and programs designed for a first-time home buyer are helping to make housing more affordable and accessible for Canadians. Here are 3 ways you can stretch your dollar and help you move from buying your first home to owning your first home.

Back to Basics

Before we jump into the rebates and programs, let’s cover some of the basics like how much you’ll need for a down payment and who exactly qualifies as a first-time home buyer.

Am I a First-Time Home Buyer?

You might think the answer to that question is rhetorical, but there are actually a few extra circumstances that might qualify you. Satisfy at least one of the following:

  • You have never purchased a home
  • You have gone through a breakdown of Marriage or common-law partnership
  • In the last four years, you have not occupied a home owned by you or your partner

Also, only one spouse or common-law partner needs to meet the above requirements to qualify.

How Much is My Minimum Down Payment?

Minimum down payments are dependent on the purchase price of the home. It breaks down like this:

  • $500,000 or less = 5 percent of the purchase price
  • $500,000 to $999,999 = 5 to 10 percent of the purchase price, bracketed.
  • $1 million or more = 20% of the purchase price

With an average sold price of around $748,000 in Canada, most will fall in that second category. The bracketed system works the same as your income tax does. So, for a home that costs $650,000 you’ll need:

5% of the first $500,000 = $25,000

10% of the final $150,000 = $15,000

Making your total down payment $40,000.

First-Time Home Buyer Land Transfer Tax Rebate

Across Canada, a land transfer tax is levied and applied to your property’s purchase price in a bracketed system. Depending on where you live, different tax rates will apply. In Ontario, for example, you a required to pay an additional $6,475 on a $500,000 property.

The First-Time Home Buyer Land Transfer Tax Rebate gives you a refund of up to $4000 on that tax. Every little bit helps.

If you’re buying in Ontario, you can use this simple land transfer tax calculator.

RRSP Home Buyer’s Plan

Having an RRSP is already a smart move, but with the RRSP Home Buyer’s Plan, it’s even smarter.

There are three compelling reasons why you should invest in an RRSP:

  • Grow your retirement savings, tax free.
  • Any money contributed to your RRSP will lower your bill come tax season
  • The Home Buyer’s Plan allows you to withdraw before-tax contributions to your RRSP for your down payment.

The Home Buyer’s Plan allows you to withdraw up to $35,000 ($70,000 for married or common law couples) to put towards buying or building a home. Remember, this money is tax-free, meaning you can contribute the full before-tax income amount to your down payment.

You have up to 15 years to repay this withdrawal to your RRSP and payments start the following calendar year. You will receive a statement from the CRA each year listing your balance and minimum payment and you may also repay the full loan amount at any time, without penalty.

First-Time Home Buyers Incentive Program

The First-Time Home Buyers Incentive Program allows you to share part of the ownership and cost of buying a home with the Government of Canada. This program can significantly reduce interest payments and mortgage insurance premiums. Under this incentive program, the government will contribute 5 to 10 percent of a home’s price toward your down payment.

The government receives a share of the equity of your home, and that amount is to be repaid within 25 years or when you sell your home. Gains and losses in market value will be shared with the government, and no interest will be charged.

This program expires on September 2, 2022 or once $1.25 billion in incentives have been granted. This funding is expected to go quickly, so if you’re in a position to take advantage of it, act soon.

When it comes to buying your first home, no one expects you to be an expert. That’s why having an expert on your side makes all the difference. Solid Ground Mortgage Solutions gives the best advice with no catch, no fluff, and no sugar coating. Let us tell you if you’re ready for your first home and how to get started if you are.

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