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20 Nov

Benefits Available for First-Time Home Buyers in Canada

Home Purchase

Posted by: Jack Dawson

There are several benefits available in Canada for home buyers, given the home buyers and subject property meet the criteria required for each benefit. Below are the four means available to possibly help in the purchase of a first property.

 

Home Buyers’ Plan

Up to $35,000 can be borrowed tax-free from your RRSP to go toward the down payment. You have up to 15-years to repay, with minimum repayment periods starting the second year after the year when you first withdrew these funds, i.e., if you withdrew funds in 2021, your first year of repayment would be 2023. Any minimum amount not repaid during a repayment period will be considered taxable income. Further details here.

 

Home Buyers’ Amount

 A tax credit of $5000 can be claimed by a sole purchaser or between two co-purchasers. If eligible, this credit will provide up to $750 in federal tax relief. Further details here.

 

First-Time Home Buyers’ Incentive

The Government of Canada can loan 5% (or up to 10% if the property is new construction) of the value of your home and retain an interest in the same percentage of the value as it changes over time. The home must be owner-occupied, and after 25 years, or when you move or sell your home, the loan must be paid back in full in the same percentage of the current value of the home, i.e., if you received a $25,000 loan for a $500,000 home, $40,000 would have to be paid back if it sold for $800,000. The limiting factor for most people here is that the loan amount must be no more than four times your qualifying income, so a home buyer would need an income of $100,000 per year to take on a $400,000 loan. Further details here.

 

First Time Home Buyers’ Progam

If the property purchasing is valued at $500,000 or less, first-time home buyers can be completely exempt from paying property transfer tax. Partial exemptions can be in place for homes from $500,001-$525,000. Any home purchased above $525,000 is subject to full property transfer tax. Further details here.

 

As with any government program, it’s important to read each benefit’s specific criteria to ensure that you qualify beforehand.