One of the most important and major financial undertaking that an immigrant will face is buying their first home. It was nine years ago when our family bought our first home or what we consider our starter home. I once shared that experience in this blog. I will not lie, finding and buying our first house was an anxiety-inducing experience. The time and effort that you need to put in looking for a house and the amount of paperwork needed to complete the process is overwhelming. And for some (just like us) coming up with the money to put for the down payment can seem to be impossible because of the increasing house prices plus other costs that involved in purchasing a house.
In the past five years, entering the housing market has gotten more difficult for novice home purchasers. The price of a house continues to climb up and the implementation of the mortgage rate stress test rules in 2018 added more pressure to aspiring home owners.
The government of Canada has variety of grants and special programs to encourage Canadians to take the leap into becoming home owners. Not all Canadians are aware that there are grants and programs available for them to ease the financial strain in taking this big step of owning a house.
To help you know the basics of these grants and programs, I have listed an overview of some of them on this article.
FIRST-TIME HOME BUYERS’ TAX CREDIT (FTHB) A non-refundable tax credit of $5,000 maybe claimed for purchase of the qualifying home acquired after January 27, 2009. The FTHB allows first-time home purchasers (as well as purchasers with disabilities) to claim a tax refund of up to $750 in the year when they purchase a home if both qualifications are met:
- you or your spouse or common-law partner acquired a qualifying home.
- you did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years (first-time home buyer)
GST/HST NEW HOUSING REBATE The GST/HST new housing rebate allows an individual to recover some of the goods and services tax (GST) or the federal part of the harmonized sales tax (HST) paid for a new or substantially renovated house that is for use as the individual’s, or their relation’s, primary place of residence, when all of the other conditions are met. A new homeowner may be eligible for some of the GST/HST he/she paid if he/she meets any of the following:
- purchased new housing or constructed or substantially renovated housing, which could include housing on leased land (if the lease is for at least 20 years or gives you the option to buy the land), for use as your (or your relation’s) primary place of residence
- purchased shares in a co-operative housing (co-op) complex for the purpose of using a unit in the co-op for use as your (or your relation’s) primary place of residence
- constructed or substantially renovated your own home, or hired someone else to construct or substantially renovate your home for use as your (or your relation’s) primary place of residence and the fair market value of the house when the construction is substantially completed is less than $450,000
HOME BUYERS’ PLAN (HBP) One of the reasons why you should consider investing in RRSPs even at young age is because it could be your source of money when you decide to buy your first house. Prior to March 20, 2019, Home Buyer’s Plan is a program that allows the account holder to withdraw up to $25,000 of their RRSP account to buy or build a qualifying home without having to pay any. For 2019 and subsequent years, the government proposed an increase for the Federal Budget so that first-time home buyers can use up to a maximum amount of $35,000 of their RRSP, tax free. To be eligible to this program, the individual must:
- Be considered a first-time homebuyer
- Have a written agreement to buy or build a qualifying home for himself.
- Have a written agreement to buy or build a qualifying home for a related person with a disability, or to help a related person with a disability buy or build a qualifying home.
- Intend to occupy the qualifying home as his/her principal place of residence within one year after buying or building it. For people with disabilities, he/she must intend to use the qualifying home as principal residence.
FIRST-TIME HOME BUYERS’ INCENTIVE (FTHBI) As announced during the March 2019 federal budget, the First-Time Home Buyer Incentive Program to be administered by the Canada Mortgage and Housing Corporation (CMHC), is a shared equity mortgage program to assist qualified Canadians with a household income under $120,000 per year to be able to afford to buy their first home. The program which will start on September 2, 2019 will offer first-time Canadian home buyers an interest-free, payment-free loan. The CMHC will provide up to 5% of the purchase price of a resale home or 10% of the purchase price of a newly-built home. The homebuyer who wish to apply for this program is still required to have the minimum 5% down payment.
Buying your first home is really challenging, especially if you are unsure how and where to start. That is why it is important that you involve the right people when you plan of buying your house – make sure that your real estate agent, your lawyer and your financial advisor and/or mortgage specialist recognize your needs, wants and your purchasing power. The success of this “endeavor” also depends on how reliable these people are. Whether you are a first-time homebuyer or not, make sure that the people around you are working with you and for you, to help you get your “dream home” and achieve your long-term plan. To be eligible, applicants for this program should meet the following qualifications:
- Must be a Canadian citizen or a permanent resident or a non-permanent resident who is legally authorized to work in Canada;
- Must have a maximum qualifying income of $120,000;
- At least one borrower must be a first-time homebuyer.
Homebuying Step by Step: Everything you need to buy a home in Canada. Retrieved July 16, 2019
Government of Canada Programs to Support Homebuyers. Retrieved July 20, 2019
GST/HST new housing rebate. Retrieved July 20, 2019
We welcome you to reach out to us, and we can help you make sense of the resources available to first-time home buyers.