First Time Buyers

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Joan Hing King
Sales Representative

eXp Realty Brokerage

(416) 891-4705

Buying a house for the first time is a big and important decision in your life. As someone who represents you and looks out for your best interest, I would like to introduce you to the First-Time Home Buyers’ Tax Credit, the First-Time Home Buyer Incentive and the RRSP Home Buyer's Plan.

First-Time Home Buyer’s Credit (FTHBC)

The First-Time Home Buyer's Tax Credit is a government program geared towards buyers like you. The objective is to reduce costs associated with purchasing a home. As a first time buyer, you are eligible for a 15% income tax credit on a maximum of $5,000 of home purchase costs such as legal fees and land transfer taxes. It can be claimed for the taxation year that you acquired the house.

You are considered to be a first time buyer if neither you and your spouse or common-law partner has owned and lived in another home in the year of the purchase or in any of the four previous years.

First-Time Home Buyer Incentive

1.The First-Time Home Buyer Incentive is a shared equity mortgage. It aims to help first-time homebuyers without adding to their financial burdens. There are no additional monthly payments.

You are considered a first-time homebuyer if:

You have never purchased a home before or
You have recently experienced a breakdown of a marriage or common-law partnership or
You did not occupy a home that you or your current spouse or common-law partner owned in the last 4 years or
One individual in the couple has never owned a home

How to qualify for the incentive:

Be a first-time homebuyer
The participants have a combined qualified annual household income of $120,000 or less.
The participant's insured mortgage and incentive amount cannot be greater than four times their qualified annual household income.
Participants must meet minimum insured mortgage down payment requirements.

With this incentive, the Government of Canada provides:

5% or 10% for a first-time buyer’s purchase of a newly constructed home
5% for a first-time buyer’s purchase of a resale (existing) home
5% for a first-time buyer’s purchase of a new or resale mobile/manufactured home

How much can you save?

How is repayment calculated?

Using the incentive means that the government will share in both upside and downside changes in the property’s value.

If a homebuyer receives a 5% Incentive, the homebuyer will repay 5% of the home’s value at repayment.
If a homebuyer receives a 10% Incentive, the homebuyer will repay 10% of the home’s value at repayment.

The first-time homebuyer will be required to repay the Incentive amount after 25 years or when the property is sold, whichever comes first. The homebuyer can also repay the Incentive in full at any time, without a pre-payment penalty.

Ex: Anita and John bought their first home (new construction) for $400,000.

They saved $20,000 for a down payment (5%)

They received $40,000 from the First-Time Home Buyer Incentive in a shared equity mortgage (10% of the cost of a new home)

As a result, Anita and John saved $216 per month which equates to $2,592 per year

10 year later they sell their home for $420,000

The incentive needs to be repaid as a percentage of the home’s current value:

10% of $420,000

Anita and John need to repay $42,000 or ($2,000 more than originally received)

They saved $2,592 x 10 years = $25,920

Extra fees:

There may be additional legal fees when selling your home since 2 mortgages are being closed.

The home may need to be assessed to determine the fair market value of your home.

When refinancing your first mortgage or switching your mortgage to a new lender.

RRSP Home Buyer's Plan

Home Buyers’ Plan (HBP) is a program that allows you to withdraw up to $35,000 (recently changed from $25,000) in a calendar year from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability. Therefore, the total amount that can be withdrawn is $70,000 in the case of a couple, including common-law.

To qualify you must be considered:

A first-time homebuyer
You must have a written agreement to buy or build a qualifying home for yourself

Qualifying home – a qualifying home is a housing unit located in Canada. This includes existing homes and those being constructed. Single-family homes, semi-detached homes, townhouses, mobile homes, condominium units, and apartments in duplexes, triplexes, fourplexes, or apartment buildings all qualify. A share in a co-operative housing corporation that entitles you to possess, and gives you an equity interest in a housing unit located in Canada, also qualifies. However, a share that only provides you with a right to tenancy in the housing unit does not qualify.

Repayment: