First Time Home Buyer
You’ve decided to dive into the world of home ownership. For most Canadians buying a home and acquiring a mortgage will be one of the biggest and most important milestones in your life. As a mortgage broker, part of my job is to help make sure that you understand the process and to make it as easy as possible. It’s important that you get a pre approval before you start to look for a property. Your pre approval will allow you to see how much of a mortgage you will be approved for. During the pre approval process we will discuss your down payment options, credit score, current debt as well as your long term and short term goals.
Down Payment Options
| Purchase price of the home | The minimum down payment required for first time home buyers |
| $500,000 or less | 5% of the purchase price |
| $500,001 to $999,999 | 5% of the purchase price up to $500,000 and 10% of the purchase price above $500,000 |
| $1 million or more | 20% of the purchase price |
Before you buy a home, consider the programs, plans and incentives available to you.
The First-Time Home Buyer Incentive
This incentive helps qualified first-time home buyers reduce their monthly mortgage payments without adding to their financial burdens.
The program offers 5 or 10% of the home’s purchase price to put toward a down payment. This is a loan the government offers but the benefit is you do not pay interest on the loan. The First-Time Home Buyer Incentive is a shared-equity mortgage with the Canadian government.
The shared equity component of the incentive means that the government shares in both the upside and downside of the property value, The Government of Canada will limit its share in the appreciation and depreciation of a home up to a maximum gain or loss equal to 8% per annum (not compounded) on the Incentive amount from the date of advance to the time of repayment.
The Home Buyers’ Plan or HBP is a Canadian government program that aims to make it a little easier for first-time home buyers to make their dreams of property ownership a reality.
This program gives you an additional way to increase your down payment. Normally, funds withdrawn from a Registered Retirement Savings Plan (RRSP) are included in your overall income and are subject to tax. However, withdrawals from an RRSP that meet all applicable HBP conditions are not considered income and are not taxed at the time of HBP withdrawal. The plan gives you the ability to withdraw existing funds from your RRSP, up to $35,000 or a couple can withdraw up to $70,000 to buy or build a home, either for yourself or for a family member with a disability.
In Ontario when purchasing a newly built home, condo from a builder, if you hire a builder to construct a new house or purchase a heavily renovated house, it is subjected to HST.
Harmonized Sales Tax (HST) was implemented in Ontario on July 1, 2010, which raised the tax on new homes in the province from 5% (GST) to 13% (HST). In an effort to help homeowners deal with the increased cost of buying a new home, the Government introduced a rebate program to reimburse buyers for a portion of the additional new home tax. The property’s purchase price should be less than $450,000 for you to be eligible to claim the GST or the federal portion of the HST rebate. If the purchase price is more than $450,000, you will only be eligible to claim the provincial part of the Ontario new-build HST rebate.
Home Buyer’s Tax Credit (HBTC)
The First-Time Home Buyer’s Tax Credit (HBTC), is a small rebate that can help recover some of the costs associated with buying your first home. If you, your spouse or common-law partner haven’t owned a home that you’ve lived in, in the past 4 years, or haven’t ever owned one, you may qualify for the First-Time Home Buyers’ Tax Credit (HBTC).
When it comes time to do your taxes, you put the Home Buyer’s amount of $10,000 on Line 31270 of your income tax return. You do not need to apply for this tax credit, you can add it to your taxes or let your accountant know.
The government allows you to split the amount with your spouse or common-law partner, but your combined total claims must not exceed $10,000. The credit results in a $1500 rebate on the taxes you owe for the year. (The amount is calculated at the lowest personal tax rate, which is presently 15%.)
In 2022 legislation was passed to increase the tax credit to $10,000 for 2022 and all subsequent tax years.
While $1,500 isn’t a life-changing amount of money, it can make buying your first home a little bit easier.
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