First Time Home Buyer Programs

Government Programs for First Time Home Buyers

There are essentially four different government initiatives:

1. First Home Savings Account (FHSA)
2. Home Buyer Plan (HBP)
3. First Time Home Buyer Initiative (FTHBI)
4. Reduction to Land Transfer Tax

Canadian residents have the opportunity to combine all government programs provided they meet each program criteria.

 First Home Savings Account (FHSA)

The First Home Savings Account is the most recent federal program implemented effective April 1, 2023. It is available for Canadian residents age 18 to 70 to save in a FHS bank account up to $8,000 a year or up to $40,000 over 15 years tax- free towards the purchase of a home. The funds must be used within 15 years of opening an account and or before age 71 which ever is earlier.

A separate home buying account will help first time home buyers to stay focused on their goal of buying a new home and allow them to use up to $8,000 a year of this savings to reduce their income tax. FHB account owners will not pay income tax on their investment gains either! For example, if you save $8,000 in a year an earn $400 interest on those funds, you will not pay tax on the $400. Multiply and accumulate that over 5 years or more and you could gain thousands of dollars tax free. Your savings and gains are not taxed as they grow and you are able to put the full amount of your savings and investment earnings that remain in the account towards the purchase of your first home.

Residents must meet the following criteria to be eligible...

• A Canadian Resident age 18 to age 71 inclusive
• You or your spouse do not own a home in which you live currently or in the 4 years prior to opening the account
• If you separate from your spouse and do not live in that residence or another residence that you own for 4 years

The account may remain open until December 31st in the year…

• after your first qualifying withdrawal,
• of the 15th anniversary of your account, or
• that the account owner turns 70          

If there is unused money in the FHB account after the aforementioned conditions are met, then the following options apply.

1. Direct transfer tax-free to a RRSP or RRIF if the CRA indicate RRSP room
2. Reinvest the funds in a TFSA;
3. Withdraw the money subject to tax withholding.

Home Buyers Plan (HBP)

The federal government’s Home Buyer Plan is also designed to help Canadians enter the housing market by providing them with tax-free funds to put towards the purchase of their first home. The HBP allows each first-time home buyer to withdraw up to $35,000 from their registered retirement savings plan (RRSP) to use as a down payment on their first home. These funds must be replenished in 15 years. 

First Time Home Buyers Initiative (FTHBI)

Please refer to www.Canada.ca for details and a calculator to determine your eligibility of this plan. This plan offers to assist borrowers with up to 5% of their down payment on the purchase of an existing home or 10% down payment of a new build provided the total down payment is less than 20%. The government will register 5% or 10% respectively ownership in the home and the borrowers would then need to repay 5% or 10% respectively within 25 years. Initially the criteria included the property value being less than 4 times the annual income on the application with a maximum income of $120,000 combined for all applicants. Subsequent changes were made to the qualifying details in Toronto and Vancouver from the rest of Canada (see Canada.ca). The plan is widely considered to be inaccessible based on the qualifying criteria. 

Reduction in Land Transfer Taxes

Municipalities charge land transfer tax (LTT) on the purchase of a property which must be paid at the time of closing. Many municipalities will reduce or waive LTT for first time home buyers. If there is more than one buyer, in most cases I believe the LTT will be reduced proportionately. Buyers are encouraged to speak to their lawyer to learn how much the LTT is in the municipality that they are purchasing and if they qualify for a rebate.

 Summary of FHSA and HBP

First Home Savings Account (FHSA)

• No repayment required
• No withdrawal limit
• Maximum annual contribution $8,000
• Previous unused contributions accumulate
• Maximum lifetime contribution $40,000
• No minimum holding period before withdrawal
• The deadline to contribute is December 31 each year
• Minimum age 18
• Maximum age 70
• May be transferred to a RRSP (if room) or RRIF
• Maximum 15 years before funds are used

Home Buyers Plan (HBP)

• Repayment required in 15 years
• Withdrawal limit of $35,000 per person
• Maximum Contribution is 18% of prior years income
• Previous unused contributions accumulate
• No maximum RRSP contribution
• Minimum holding period 90 days before withdrawal
• The deadline to contribute is 60 days after end of year
• No minimum age
• Maximum age 70
• Must be transferred to a RRIF in 70th year
• No maximum holding period before funds are used

To learn more or pre-qualify for a mortgage, contact Nancy Blakely 905.269.3721 or Apply Now at www.NancyBlakely.ca