5 Money Saving Programs For First-Time Home Buyers In Ontario
After tightening up the rules about mortgage lending requirements (the mortgage stress test) in 2017, the federal government has been gradually improving incentives to give first-time buyers more help in buying a home. Here are five programs to look into if you’re thinking of buying your first home. Some of these programs are new, some have been updated and some have been around for a while.
First-Time Home Buyer Incentive
Launched in September 2019, this is the newest program. It offers eligible buyers up to 10% of a home’s purchase price to be used towards the down payment, thereby lowering your monthly mortgage payment and helping affordability.There are no loan payments to be made on the borrowed amount and interest is not charged. However, this is essentially a shared equity mortgage between the buyer and the government. The loan must be paid back in 25 years or when the property is sold, and the repayment amount is a proportional share of the fair market value of the property at that time. You could end up paying more than you borrowed if the property value has increased, or less than you borrowed if the property value has decreased.
Some of the eligibility requirements are that buyer’s qualifying income is less than $120,000, that they already have the minimum down payment, and that the buyer is borrowing less than 4x their qualifying income.
In reality, the cap on borrowed amount makes this an impractical incentive in Canada’s priciest markets, Toronto included.
Home Buyers' Amount
The HBTC (Home Buyers' Tax Credit), also known as the Home Buyers' Amount, was first introduced in 2009. Essentially, this is a $5,000 income tax credit for qualifying buyers that adds up to $750 to their tax refund.To qualify, buyers can’t have lived in a home owned by themselves or their spouse in the four years prior to buying the home.
HST/GST New Housing Rebate
HST/GST rebates on new housing have been around since 2006 and apply to new builds or substantial renovations or additions to existing housing structures.For first-time home buyers purchasing a new build, the rebate amounts to up to $6,300 (or 36% of the HST/GST paid) on homes under $350,000 and a lesser amount for homes between $351,000 and $450,000. The rebate is claimed on the tax return.
Home Buyers' Plan
The Home Buyers' Plan has existed for a very long time, however the Plan was amended in 2019 to increase the amount available for withdrawal. Eligible first-time home buyers are able to withdraw up to $35,000 from their RRSPs without the issuer withholding tax. Borrowed amounts are to be repaid into the RRSP within 15 years to avoid the tax charge.Ontario Land Transfer Tax Rebate
In 2017 Ontario doubled the Land Transfer Tax Rebate for qualifying first-time home buyers to $4,000. Upon signing the required affidavit, this amount can be deducted right at the time of purchase.In order to qualify, buyers and their spouses cannot have owned property anywhere in the world. Where certain municipalities also charge Land Transfer Tax, such as in Toronto, rebates are also available for qualifying first time home buyers.
For more information on land transfer tax, please visit my blog here.
I hope you’ve found this information about 5 Money Saving Programs For First-Time Home Buyers In Ontario useful. For more information for buyers, please visit my website and my blog here.
Caution: The information around these programs - who qualifies, what the amounts are, and even if they exist - changes all the time. Please do your own homework by checking the government websites to make sure nothing has been changed rather than taking my word for it. I've done my best to reflect the programs accurately but I can't held responsible for any errors or changes to the information.
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