The home insurance discount we offer to first time home buyers is not the only way new home buyers can save money.
As a first-time homebuyer in Canada, you also have access to several programs which are designed to make purchasing your first home more affordable.
Let’s discuss…
1\ Home Buyers’ Plan (HBP)
The HBP enables you to withdraw up to $60,000 from your Registered Retirement Savings Plan (RRSP) to buy or build a qualifying home without immediate tax implications. (1)
The catch? Withdrawn amounts must be repaid to your RRSP over a 15-year period.
The issue? How many people buying their first home already have a significant amount saved for retirement to draw from? Feels like a cart before the horse situation and an option that may not apply for many new home buyers.
So what other options may be more helpful?
2\ First Home Savings Account (FHSA)
Introduced in 2023, the FHSA allows eligible Canadians to save up to $40,000 tax-free toward their first home, with an annual contribution limit of $8,000.
The best part? Contributions are tax-deductible, and withdrawals for purchasing a home are tax-free. (2)
Why it makes sense? Saving money to buy your first home is not only wise, it’s a crucial part of the home buying process.
So if you’re going to be saving anyway, you may as well do it in a way that helps lower what you pay in income tax and not have to worry about paying taxes on withdrawals when you’re ready.
What other programs are there for first time home buyers?
3\ Land Transfer Tax Rebates
Some provinces, including here in Ontario, offer first time home buyers a rebate on the land transfer taxes they’ve paid as part of the home buying process. This rebate is not offered to other non-first time home purchases.
What is a land transfer tax?
Calculated as a percentage of the property’s value, a land transfer tax is collected by the provincial government when a property is sold.
How much is the land transfer tax for first time home buyers?
Land transfer taxes are calculated by varying rates depending on property types and values (3), however, for first time home buyers, the first $368,000 of their home purchase would be rebated (up to $4,000 total).
Does this help?
While the rebate may not be enough to cover the entire land transfer tax amount paid (many first time home purchases these days exceed the $368,000 threshold), and while yes receiving the rebate requires an application to be filled out, getting up to $4,000 back into your pocket as a first time home buyer would be wonderful!
FIRST TIME HOME BUYER TAX CREDIT (HBTC)
This only applies to those who owe income taxes in the year they’re buying their first home, but for those that do, why not save an additional $750 when you can right?
The HBTC is a federal non-refundable tax credit meant to help more Canadians enter the real estate market by making home buying a little more affordable. We stress the words “a little”.
Both you and your spouse (or common-law partner) can each claim a combined total of $10,000.
At the 15% tax rate (which is the lowest income tax rate) the $10,000 combined claim comes out to a $1,500 tax reduction.
You can choose to apply the entire $10,000 credit on your tax return or share it by splitting it between your spouse (or common-law partner).
This non-refundable tax credit would reduce the amount of taxes you owe by $750. (4)
RELATED ARTICLE: First Time Home Buyer Tax Credit
OTHER FIRST TIME HOME BUYER INCENTIVES IN CANADA
Outside of Ontario, other provinces and territories offer additional incentives and grants for first-time homebuyers.
For instance, British Columbia has the First Time Home Buyers’ Program, which reduces or eliminates property transfer tax for qualifying buyers. (5)
How do we bring that to Ontario?
Additionally, local municipalities sometimes offer their own programs to assist first-time buyers.
HEALTH AND SOCIAL SERVICES OF HALDIMAND AND NORFOLK HOME OWNERSHIP PROGRAM
Talk about local! Their Dunnville office is a 3-minute drive from Erie Mutual Insurance.
To sum it up:
This programs offers down payment assistance to qualified first time home buyers. (6)
To break it down:
- Funding is provided as a 20-year interest-free loan registered on the title of the property.
- The total value is up to 10% of the purchase price of the home.
- Applicants must be first-time homeowners and currently renting, be a minimum of 18 years old and earn a combined gross household income of $115,800 or less.
- The applicant’s household must be eligible to receive a mortgage and the purchase price of the home cannot be more than $618,000.
- A home inspection is required (unless it’s a brand new home).
- The home must be the sole and principal residence of the approved buyer(s) for the entire duration of the loan period.
- And of course, the home must be located within Haldimand or Norfolk.
NIAGARA REGIONAL HOUSING HOMEOWNERSHIP PROGRAM
Similar to the above, offered in the Niagara Region.
This Niagara-based program has the same goal of helping make homeownership for low to moderate-income households a reality.
In this case, they can offer a 10% interest-free loan up to $66,774.80 to eligible home buyers in Niagara. (7)
We know what many of you are probably thinking. This is a lot of information that might be hard to put the right comprehensive plan around.
We recommend you show this article to a trusted professional (an accountant, finance advisor etc,.) and discuss how you can make the most out of all these options based on your particular situation.
While you’re in money-saving mode, get a free home insurance estimate here and ask us about our first time home buyer insurance discount and other home insurance discounts that could also apply to you.
Erie Mutual Insurance proudly serves the commercial insurance, farm insurance, home insurance and auto insurance needs of members throughout Southern Ontario including Haldimand, Niagara and Hamilton.
Please don’t hesitate to contact us with any questions you may have about this or any other topic related to your insurance.
SOURCES:
1. canada.ca
2. canada.ca
3. ontario.ca
4. cibc.com
5. gov.bc.ca
