First-Time Homebuyer

January 06, 2021

Being a first-time homebuyer is exciting and stressful at the same time. It can also be expensive if you do not have any pre-existing assets to help you get a mortgage; you would have to rely heavily on your savings to pay for a down payment and closing costs.

Canadian government offers incentives to make your lives easier. For example, the City of Toronto can qualify for land-transfer tax rebates.

  1. First-time home buyer tax credit – claimed on your annual tax return in the year that you buy a property. This rebate will result in $750 assuming you meet the conditions.
  2. First-time homebuyer land transfer tax rebate – charged by every province except for Saskatchewan and Alberta. There is an additional land transfer that is charged by the City of Toronto. In BC, ON, PEI, and the City of Toronto, first-time homebuyers are eligible for a rebate of these land transfer taxes subject to the maximums and conditions.
  3. The homebuyers plan (HBP) – allows first-time homebuyers to use their tax-sheltered savings in a Registered Retirement Savings Plan (RRSP) for a down payment. The RRSP will let you take out $35,000 for a down payment which MUST be repaid to the RRSP within 15 years. Some additional conditions may apply so make sure to do your research before.
  4. GST/HST new housing rebate – rebates a portion of the federal component. Some provinces have their own versions that reimburse buyers a portion of the provincial component. This rebate can only be used on newly built houses, new constructions of a home on land that you own, or for significant renovations to an already existing home. This rebate is not only for first-time homebuyers, but is used more by them if they are buying a newly built home.
  5. CMHC Insurance for first-time homebuyers – mortgage default insurance (AKA CMHC Insurance) allows homebuyers to buy a home with as little as a 5% down payment. It is important for first-timers who may not have enough time to save a 20% down payment especially if it is in a hot real estate market like Vancouver and Toronto. A high-ratio mortgage is a mortgage default insurance for any mortgage that has a down payment of less than 20%. This type of insurance is offered by CMHC (Canadian Mortgage and Housing Corporation) and other private insurers. This insurance is not cheap, and it would be advised to try and avoid paying for it by saving a larger down payment.
  6. Mortgage rates for first-time homebuyers – if you have good credit and the necessary down payment, you are more likely to qualify for the best rates on the market. Be sure to shop around and many first-time mortgage brokers are used in order to help through the application process.