Taking your first step into the housing market as a first-time home buyer can feel overwhelming. After all, buying a home will probably be one of the largest financial decisions you will ever make.

But you won’t be alone! A recent Bank of Canada study found that first-time home buyers are the largest group of home buyers in Canada, making up half of all home purchases since 2014.

What is a first-time home buyer in Canada?

For the purposes of the government incentives, a first-time home buyer is a Canadian citizen, permanent resident, or non-permanent resident authorized to work in Canada who has not previously owned property and is looking to buy a primary residence for the first time.

If you fall under this group, there are several incentives and tax rebates that can help make your first home more affordable when you are ready to get onto the property ladder.

The First-Time Home Buyer Incentive

The First-Time Home Buyer Incentive is the federal government’s flagship housing initiative for first-time home buyers.

Through the program, the government offers an interest-free loan of 5% or 10% of a home’s purchase price that you can use as part of your down payment. You need to pay back the same percentage in full after a period of 25 years or when you sell your home.

Since the program is a “shared equity mortgage”, the government shares in any gains or losses on your home’s value.

Aside from being a first-time home buyer, borrowers must also have a qualifying household income of less than $120,000 (or $150,000 in Toronto, Vancouver, or Victoria). The total borrowing amount is also capped at four times (or 4.5 times in Toronto, Vancouver, or Victoria) the maximum qualifying income.

The Home Buyers’ Plan

Under the federal Home Buyers’ Plan, first-time home buyers can borrow up to $35,000 from their Registered Retirement Savings Plans (RRSPs) to put towards a home. The amount is tax free and can be repaid over a 15-year period starting two years after you withdraw your funds. 

The Home Buyers’ Tax Credit

The Home Buyers’ Tax Credit is a $5,000 non-refundable income tax credit for the purchase of a home that provides up to $750 in federal tax relief. This amount may not seem like a lot, but it can help you recover some of the closing costs associated with buying a home, such as pre-sale inspections or land transfer taxes.

GST/HST New Housing Rebate

If you are looking to buy a newly constructed home, this rebate can help recover part of the GST or HST on the property’s cost if you plan on using it as your primary residence. You can also avail of the rebate if you are planning to build a house on land that you already own.

Provincial land transfer tax rebates

If you live in a province that charges a land transfer tax on home purchases, you may be eligible for provincial rebate programs. In Ontario, for instance, first-time home buyers can be eligible for a refund of up to $4,000. And residents of British Columbia can qualify for a rebate of up to $8,000 on taxes on their first home.

All these programs can help ease anxieties around the costs of buying your first home. And to get you past the finishing line, Home Trust has a range of financing options for your needs. A mortgage broker can help you in this journey. To learn more about these options visit hometrust.ca/mortgages.

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