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Navigating Homeownership: Key Incentives and Programs for First-Time Buyers
November 15, 2024 | Posted by: Jamie Small - Ottawa Mortgage Broker
Buying your first home can be both exciting, and daunting. With rising home prices and fluctuating interest rates, the path to homeownership can seem challenging. Fortunately, several valuable programs and incentives are available to help first-time homebuyers navigate these challenges and make the dream of homeownership more achievable.
If you’re planning to purchase your first home, knowing which programs could benefit you the most is essential. Here’s a look at five key incentives designed to make your first home purchase more affordable.
First Home Savings Account (FHSA)
Canada’s First Home Savings Account (FHSA) is a tax-free savings tool designed to help first-time homebuyers save for a down payment. Introduced in 2023, the FHSA combines elements of both the Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP).
Individuals can contribute up to $8,000 annually, with a lifetime maximum of $40,000. Contributions are tax-deductible, and investment growth and withdrawals are tax-free when used for purchasing a first home. This account offers significant tax advantages, making it easier for first-time buyers to accumulate funds for homeownership.
Example: If you contribute the maximum $8,000 annually, you could save up to $40,000 over five years—all of which can be used toward your first home.
Home Buyers Plan (HBP)
The Home Buyers’ Plan (HBP) allows first-time homebuyers to withdraw up to $60,000 from their Registered Retirement Savings Plan (RRSP) to use towards purchasing a home. For couples, this limit can double, allowing each partner to withdraw $60,000 for a total of $120,000. Withdrawals are tax-free, provided the funds are repaid into the RRSP within 15 years, beginning two years after withdrawal. This program gives first-time buyers access to additional tax-advantaged funds, helping cover upfront costs like down payments.
Example: If you made your first withdrawal in 2022, you could opt to start your repayment in 2027, taking advantage of temporary repayment relief that defers the start of the 15-year period by three years. This additional delay timeline is available until December 21, 2025.
Ontario Land Transfer Tax Rebate
The Ontario Land Transfer Tax Rebate offers first-time homebuyers a rebate of up to $4,000 on the land transfer tax owed when purchasing a home. In Toronto, where an additional municipal land transfer tax applies, first-time buyers can receive an additional rebate of up to $4,475. This rebate can be applied directly at closing, reducing the cash needed for upfront costs.
Eligibility Note: Ensure your property qualifies for this rebate by consulting with your real estate agent or legal advisor.
30-Year Amortizations for First Time Homebuyers
The Canada Mortgage and Housing Corporation (CMHC) recently announced that first-time homebuyers with less than a 20% down payment—and therefore requiring mortgage default insurance—can extend their mortgage amortization period to 30 years. Previously capped at 25 years, this change can significantly reduce monthly mortgage payments, making homeownership more affordable and accessible. The extended amortization period can also help buyers qualify for a larger mortgage, expanding their options when choosing a home.
Benefit: A 30-year amortization reduces monthly payments, allowing more flexibility in your budget.
GST/HST Housing Rebate
This federal rebate is available to buyers purchasing new or significantly renovated homes, providing a partial refund on the GST or HST paid. In Ontario, eligible buyers can receive up to 36% of the GST portion (up to $6,300) for homes priced below a certain threshold.
Tip: Check if your new home purchase qualifies for this rebate to save on taxes.
Making Homeownership a Reality: First Steps
These programs and incentives can make buying your first home more attainable than it might seem. By utilizing tools like the First Home Savings Account, the Home Buyers’ Plan, 30-year amortization, and available rebates, first-time homebuyers can alleviate some financial pressure and accelerate their path to homeownership.
For personalized guidance and help accessing these programs, reach out to our team who can walk you through each option and find the best solutions for your unique financial situation. Exploring these options might just be the key to unlocking the door to your first home.