Programs for First-Time Home Buyers: What You Need to Know
t-TiFortunately, there are various programs and incentives available to first-time home buyers in Canada, designed to make homeownership more accessible and affordable. This blog will delve into these programs, including the latest initiative rolling out on August 1, 2024, and provide an overview of what it means to be a first-time home buyer (FTHB).
What is a First-Time Home Buyer?
A first-time home buyer is typically defined as someone who has never owned a home before. However, the definition can vary slightly depending on the specific program or incentive. In general, a first-time home buyer is someone who meets one of the following criteria:
- Never Purchased a Home: The borrower has never purchased a home before.
- Recent Home Ownership History: In the last four years, the borrower has not occupied a home as a principal place of residence that either they themselves or their current spouse or common-law partner owned.
- Marriage or Common-Law Partnership Breakdown: The borrower recently experienced the breakdown of a marriage or common-law partnership.
New 30-Year Amortization Option for First-Time Home Buyers
Effective August 1, 2024, the Department of Finance will allow first-time home buyers purchasing a newly built property to opt for a 30-year amortization for insured mortgages. This is a significant change aimed at easing the financial burden on new homeowners by lowering monthly mortgage payments, thus making homeownership more attainable.
Key Details of the Program:
- Insured Loans Only: The program is available for loans with 80.01-95% loan-to-value (LTV) ratios.
- Borrower Criteria: At least one borrower must meet the FTHB criteria and occupy the property.
- Eligible Properties: The program is available for 1-4 unit properties, owner-occupied or partially owner-occupied, and newly built homes and condos only.
- Insurer Premium: A surcharge of 0.20% will be applicable to loans where amortization is greater than 25 years.
- At least one of the borrowers must be a FTHB
- Eligible Loan Types: Includes purchase, purchase plus improvement, and port/replacement loans.
- Ineligible Loan Types: Rental and secondary home programs are not eligible.
Other Programs for First-Time Home Buyers
- Property Transfer Tax Exemption: The first-time home buyers’ program in British Columbia reduces or eliminates the amount of property transfer tax you pay when you purchase your first home. If you qualify for the program, you may be eligible for either a full or partial exemption from the tax.
Key Details:- Full Exemption: Available for homes valued up to $835,000 (effective April 1, 2024). Previously, homes valued up to $500,000 qualified for the full exemption.
- Partial Exemption: Available for homes valued between $835,000 and $860,000. If one or more purchasers do not qualify, only the percentage of interest that the first-time home buyer(s) have in the property is eligible.
- Newly Built Home Exemption:
- Full Exemption: The fair market value threshold for full exemption for newly build homes is increased from $750,000.00 to $1,100,000.00
- Partial Exemption: A partial exemption is also available for properties with fair market values just above the threshold. The phase out range is $50,000.00 above the threshold, with the complete elimination of the exemption at $1,150,000.00 for qualifying purchasers
Example: If you acquired 60% interest in the property and another person acquired 40% interest but only you meet the qualifications, only your 60% would receive the exemption.
Qualification Criteria:
- Canadian Citizenship or Permanent Residency: Must be a Canadian citizen or permanent resident.
- Residency in B.C.: Must have lived in B.C. for at least a year immediately before the date you register the property or filed at least two income tax returns as a B.C. resident in the last six taxation years immediately before the registration date.
- Principal Residence: Must be used only as your principal residence.
- Fair Market Value: Must have a fair market value of $835,000 or less (effective April 1, 2024).
- Property Size: Must be 0.5 hectares (1.24 acres) or smaller and contain only residential improvements.
- First-Time Buyer Status: Must have never owned a registered interest in a property that was your principal residence anywhere in the world at any time and have never received a first-time home buyers’ exemption or refund.
Exemption Amount:
- If all requirements are met, the purchaser will be exempt from property transfer tax on the first $500,000 of the purchase price of the property.
- RRSP | Home Buyers’ Plan (HBP): The HBP allows first-time home buyers to withdraw up to $60,000.00 from their Registered Retirement Savings Plan (RRSP) to use as a down payment. The withdrawn amount must be repaid within 15 years to avoid taxes.
Key Features:- Withdrawal Limit (as of April 16, 2024): Up to $60,000.00 per individual (or $120,000.00 per couple).
- Repayment Period: 15 years, starting the second year after the withdrawal.
- Eligibility: Must be a first-time home buyer and enter into a written agreement to buy or build a qualifying home.
- First-Time Home Buyer Savings Plan : Introduced in April 2023 to encourage savings for a first home, this plan allows contributions to be made to a tax-advantaged savings account specifically for first-time home buyers. Contributions and growth within the plan are tax-free, similar to an RRSP.
Key Features:- Make tax-deductible contributions of up to $8,000.00 annually to a lifetime maximum of $40,000.00
- Tax-Free Contributions and Growth: Contributions are made with after-tax dollars, but growth within the account is tax-free.
- Withdrawal: Funds can be withdrawn tax-free for the purchase of a first home.
- Eligibility: Must be a first-time home buyer and meet specific income and contribution limits.
- Do not have to pay it back after withdrawal for a home purchase
- Tax Credits: First-time home buyers can also benefit from various tax credits, which can provide significant savings.
First-Time Home Buyers’ Tax Credit (HBTC):
- As of December 2022 – This is a non-refundable tax credit based on an amount of $10,000. It can provide up to $1,500 in tax relief for eligible first-time home buyers to help with closing costs such as legal fees, disbursements, and land transfer taxes.
GST/HST New Housing Rebate:
- If you buy a newly built home, you may be eligible for a rebate of the federal part of the GST/HST that you paid on the purchase price or cost of building your home. Provincial rebates may also be available.
- The new housing rebate is worth 36% of the GST or federal portion of the HST paid on a newly constructed home, up to a maximum of $6,300. The rebate is valid on homes that are considered fair to the market with a value of $350,000 or less.
Conclusion
As a first-time home buyer, there are numerous programs and incentives designed to make your journey to homeownership more manageable and affordable. Understanding these options and leveraging them effectively can significantly reduce the financial strain and make owning your first home a reality.
Why Choose GLM Mortgage Group?
Navigating the various programs and incentives available to first-time home buyers can be complex. Working with an experienced mortgage group like GLM Mortgage Group can help streamline the process and ensure you take full advantage of all available benefits. With a deep understanding of the latest programs and a commitment to personalized service, GLM Mortgage Group is the best partner to help you achieve your dream of homeownership.
As a first-time home buyer, there are numerous programs and incentives designed to make your journey to homeownership more manageable and affordable. Understanding these options and leveraging them effectively can significantly reduce the financial strain and make owning your first home a reality.
If you have any further questions or need personalized advice, feel free to reach out to GLM Mortgage Group, where our team of experts is ready to assist you every step of the way.
