Are you buying your first home? Then you’re in luck because there are plenty of government assistance programs to help you do just that. After all, buying real estate doesn’t come cheap. Even if you’ve spent years saving, we could all use a little help, and that’s exactly what first time home buyer incentives offer. Keep reading to learn all there is to know about first time home buyer incentives, as well as other ways you can save money on your home purchase.
Incentives for first time home buyers
The following is a list of some of the most popular first time home buyer incentive programs in Canada. From the federal Home Buyers’ Plan to provincial offers like the Ontario First-Time Home Buyer Incentive, check out this list if you want to save on your first-ever home purchase:
Home Buyers’ Plan
The Home Buyers’ Plan, often referred to as the HBP, is a first time home buyer incentive offered by the federal government. Through this financial assistance program, eligible home buyers can use funds from their Registered Retirement Savings Plans (RRSPs) to purchase or build a qualifying home*. The maximum amount eligible home buyers can withdraw from their RRSPs is $35,000. The best part is that this money can be withdrawn tax-free, just as long as it is going toward the purchase of a home. The catch with the Home Buyers’ Plan is that anyone who uses it must pay back the withdrawn RRSP funds within 15 years. To be eligible for the Canadian Home Buyers’ Plan, you must meet the following criteria:
- The RRSP funds you withdraw must have been in your account for no less than 90 days before the withdrawal date.
- You cannot have purchased a home in the four years prior to claiming this incentive.
- If you are purchasing or building a home with a spouse or common-law partner who is not a first time home buyer, you cannot have resided in the home they owned for more than four years.
- At the time the funds are withdrawn, you must have already entered into a written agreement to purchase or build a qualifying home.
- You must intend to reside in the home you buy within one year of buying it and it must be your primary residence.
- If you have used the Home Buyers' Plan in the past, there cannot be any remaining or outstanding balance.
- The select amount (no more than $35,000) must have been withdrawn from your RRSP within 30 days of taking ownership of the property.
- You must be a Canadian resident.
Please note that “qualifying home” is a term defined by the Government of Canada as follows: a home that is registered in your or your spouse's or common-law partner's name in accordance with the applicable land registration system in your province or municipality, and a home that is located in Canada. Both resale and homes under construction may be considered qualifying homes, as well as a wide range of property types, including but not limited to townhouses, condominium units, apartments, mobile homes, semi-detached homes, single-family homes, and more.
Home Buyers’ tax credit
The Home Buyers’ tax credit is another first time home buyer incentive offered by the Federal Government of Canada. It works similarly to a tax rebate, allowing eligible home buyers to claim an income tax credit of up to $5,000 on a qualifying home. The result? A tax rebate of up to a maximum of $750. Claiming the Home Buyers’ tax credit is easier than you might think, as you do not need to apply for or be approved in advance. Instead, you simply enter it on Line 31270 of your income tax return for the corresponding year. Once your return has been submitted, you will simply wait for the Canada Revenue Agency to issue your rebate. If you’re wondering whether you are eligible for the Home Buyers’ tax credit, the following is the list of criteria that must be met:
- The home you bought is a qualifying home that is registered in your or your spouse’s or common-law partner’s name. As mentioned above, qualifying homes can be resale homes or pre-construction homes and can be a wide variety of properties, including condos, apartments, townhouses, single-family homes, etc.
- You are a first time home buyer, meaning that you have never lived in a home you owned or in a home that was owned by your spouse or common-law partner in the last four years.
- The home you bought is your principal place of residence or will become your principal place of residence within one year of buying it.
Ontario First-Time Home Buyer Incentive
Many provinces offer their own incentives to first time home buyers, and Ontario is one of them. Known as the Ontario First-Time Home Buyer Incentive, this assistance program is exclusively available to first time home buyers in Ontario. This incentive works as follows: Eligible home buyers can receive a land transfer tax refund up to a maximum of $4,000. This would mean that, if the home you purchase in Ontario costs $368,000 or less, you would not have to pay any land transfer tax whatsoever. Conversely, if the home you purchase costs more than $368,000, you could receive a major discount on your land transfer tax, up to a maximum refund of $4,000. It is worth noting that land transfer tax in Ontario is calculated according to a multi-tiered system, which is based on the price you paid for your home. Eligibility requirements for the Ontario First-Time Home Buyer Incentive are as follows:
- You are a first time home buyer, meaning you have not previously owned a home in Canada or any other country.
- Your spouse or common-law partner is also a first time home buyer who has never owned a home (note that if you or your spouse/partner has owned a home in the past, you may still be eligible for a land transfer tax refund at a discounted rate, e.g. 50%).
- You are 18 years of age.
- You are a Canadian citizen or a permanent resident.
Toronto First-Time Home Buyer Incentive
If you are in the process of buying a house in Toronto, then the Toronto First-Time Home Buyer Incentive might be for you. Unlike the incentive programs listed above, the Toronto First-Time Home Buyer Incentive is offered by the municipality and is only available to buyers who purchase homes in the City of Toronto. The Toronto First-Time Home Buyer Incentive functions much like the Ontario First-Time Home Buyer Incentive in that it serves as a land transfer tax rebate. First time buyers eligible for this assistance program can receive a rebate of up to $4,475 on the municipal land transfer tax they owe (note that the City of Toronto has its own land transfer tax, in addition to the province of Ontario’s land transfer tax). The eligibility requirements for the Toronto First-Time Home Buyer Incentive are the same as the Ontario First-Time Home Buyer Incentive program.
Tips for first time home buyers
Buying a home for the first time is both exciting and overwhelming. To keep stress levels down, we recommend following the tips below. The following tips will ensure you are financially prepared for the realities of home ownership:
1. Assess your current financial situation
The very first step that anyone thinking about buying a home should take is to assess their financial situation. This means calculating your gross household income and reviewing any existing debt. Doing so can give you a better idea of how much you can afford to spend on a home, or if you can currently afford to buy a home at all. If you’re buying a home with a spouse or common-law partner, make sure to review both of your financial portfolios, taking into account any existing student loans, auto loans, credit card payments, etc.
2. Contact a mortgage lender for pre-approval
Tip number two is to contact a mortgage lender or other financial institution and obtain a mortgage pre-approval. Assuming you plan to buy your home with a mortgage, as most first time home buyers do, mortgage pre-approval can give you an idea of how much a lender will approve you for (i.e. how much you can afford to pay for a home). Please note that mortgage pre-approvals are free of charge. However, they aren’t binding. In other words, the mortgage loan you are pre-approved for isn’t guaranteed, but it can give you a rough estimate of how much you will be approved for when it comes time to formally submit a loan application. The mortgage pre-approval process is as follows: A mortgage lender will review your information, which typically includes information on your assets, income/employment, and current debt levels or financial obligations, and from there, they will let you know whether you would be approved if you were to submit a formal application with the same information. Further, the mortgage lender will specify the amount of money you would likely be approved for the principal amount, along with the term length and interest rate.
3. Budget for moving costs
There is so much that goes into buying a new home. Beyond finding your dream home, planning a move is also important. To ensure you budget correctly, you must account for moving costs. Moving costs include everything from the boxes needed to pack up your items to the costs of hiring a professional moving company. You may also need to allocate funds for coverage when using a moving company, as the worst thing that could happen is your belongings being damaged or lost in transit. To ensure you don’t overpay for movers, reach out to multiple moving companies in your area and obtain quotes to determine which one is right for you.
4. Read up on first time home buyer incentives you may be eligible for
Our last tip for first time home buyers is to do some research into the incentive programs that might be available to you. Even if you have lots of money in savings and your debt is low or non-existent, it’s always wise to take advantage of assistance programs, especially when they are specially designed for first time home buyers. Plus, if you know that you will qualify for a certain incentive, it can help you determine your budget and avoid overspending on a home. If you have questions about the Home Buyers’ Plan, Home Buyers’ tax credit, or any provincial or municipally-run first time home buyer incentives, contact BrokerLink.
5. Research home insurance options
Last but not least, we urge all first time home buyers to research home insurance options. Whether your mortgage lender requires you to purchase home insurance or not , property insurance for first time buyers is crucial. As a first time homeowner, you want peace of mind knowing that your property is protected should something go wrong. That is exactly what home insurance offers. BrokerLink is a full-service brokerage specializing in home insurance solutions. One of our experts will ensure your home has adequate protection and can offer all kinds of tips to help you save money on your first time home insurance plan. In fact, keep reading to discover a few of these tips now.
Lower your home insurance rates to save even more money as a first-time homebuyer
There are many ways that you can save money as a first time home buyer. Above, we described some of the incentives you might qualify for. However, another way to save money is by qualifying for a home insurance discount. BrokerLink’s team of home insurance specialists have put together a list of tips for any homeowner looking to cut costs on their property insurance policy:
Install an alarm system on your property
Have you heard about the insurance discount for alarm system? Some insurance providers offer home insurance discounts to policyholders that have installed qualifying security systems in their homes. An insurance broker can confirm which systems qualify, but if you want to keep your home safe while cutting home insurance costs, this can be a fantastic option.
Consider many factors before buying your first home
Many factors will influence the cost of home insurance, some of which are within your control. Knowing which factors matter can help you decide which home you want to buy. For instance, homes with pools often have higher insurance rates. Oppositely, homes located near fire stations or fire hydrants may benefit from cheaper insurance rates. Further, homes with older or risk-prone electric, heating, or plumbing systems may result in higher premiums. Contact BrokerLink to speak with an insurance advisor about other factors that influence house insurance premiums.
Ask an insurance broker about property insurance discounts
No matter where you live in Canada, there is bound to be at least one house insurance discount you qualify for. There are tons of discounts out there, though they may not all be offered by every insurance company. A broker can inform you of any insurance discounts you may be eligible for and confirm which insurance companies offer them. For instance, if you don’t smoke, you could qualify for a non-smoker house insurance discount. Did you attend a certain university, work at a certain employer, or volunteer with a certain charity? You might be eligible for major home insurance savings! Ultimately, you won’t know unless you ask, so be sure to contact a licenced insurance broker to find out.
Outfit your home with a sewer backup loss prevention device
As you learned from the alarm system tip, safety pays in the world of home insurance. Another way that you can keep your home safe and thus qualify for a property insurance discount is by outfitting your home with a sewer backup loss prevention device. These devices are able to detect sewer backups before they happen, which in turn, can help minimize any water damage. In addition to your sewer backup device, a sump pump or battery operated sump pump can give you an additional discount on your policy.
Connect with a home insurance expert from BrokerLink
Lastly, working with a broker for home insurance is one of the best ways to save money. What are you waiting for? Connect with a BrokerLink insurance advisor today and learn even more ways you can save. Our expert brokers have tons of money-saving tips and they love to share them!
Get in touch with BrokerLink to learn more about first time home buyer incentives
Want to learn more about first time home buyer incentives and other ways that you can save money? Get in touch with BrokerLink today. There are so many benefits of insurance broker, from having an expert to help you navigate the process of buying your first-ever home insurance policy to having someone do all the work of researching and comparing policies on your behalf. The BrokerLink team has worked with many first time home buyers, and we would be honoured to help you take this big step.
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First time home buyer FAQs
What should my credit score be if I want to buy a home as a first time buyer?
The goal is to have the highest possible credit score when buying a home. That said, it’s still possible to buy a home with a lower credit score, it just might be harder to obtain a mortgage and/or the terms of your mortgage loan might be less advantageous. Generally speaking, you will need a credit score of between 620 and 680 to qualify for a mortgage, but the higher your credit score (e.g. if it’s in the 700s or 800s), the more options you will have and the better your interest rates will be.
How much are monthly mortgage payments for first time home buyers?
Monthly mortgage payments depend on a variety of factors. Such factors include the purchase price of your home, the down payment you made when you bought your home, your mortgage interest rate, your mortgage amortization period, and the principal amount of your mortgage loan.
Where can I buy home insurance as a first time home buyer?
As a first time home buyer, we recommend buying insurance from an insurance broker. An insurance broker can walk you through the process and ensure you have adequate coverage for your new home. An insurance broker can also review the terms of your mortgage agreement to make sure your policy complies with any contractual obligations. Further, since brokers are home insurance experts, they can offer tips to save money on home insurance and an expert opinion on whether to purchase any extra coverage, such as sewer backup coverage, equipment breakdown coverage, overland water coverage, etc.
What is the difference between home insurance and homeowner’s insurance?
There is none! Many people wonder about the difference between home insurance vs. homeowner’s insurance
, but the truth is that they are the same. They are both names for the same type of insurance. Property insurance and house insurance are two other names for home insurance, and they all refer to the same thing.
If you have any questions, contact one of our local branches.