Purchasing a first home is a challenging feat these days. Home prices are high and inflation has raised interest rates significantly in the last year. Due to this, many young people are priced out of owning a home and forgo the whole experience of buying a first home. While many millennials are focusing on renting a home at this time, long-term renting can be more expensive. 

The good news is that government programs are available to assist first-time home buyers on their first home purchase. Below, we will discuss the available incentives and what you need to know to break into the housing market.

Who Qualifies

A first-time home buyer has never purchased a property before or has not lived in a home that you or your partner owned. This also includes common-law partners. Who is a first-time home buyer does vary depending on the program as some aren’t as strict with eligibility? Working with a mortgage broker can help determine which incentives you are eligible for.

Now, to look at the incentives.

The First-Time Homebuyer Incentive

This shared-equity mortgage program helps lower first-time homebuyers’ monthly mortgage payments. With this program, the government enables you to borrow 5% of the purchase price of an existing home or 10% of a new build. You pay back the loan after 25 years, or if you sell your home, and what you pay on maturity depends on the same percentage of the current value of your home. Thus, what you pay back will likely be more as your home is more likely to appreciate in value over time.

To qualify for this incentive, you must of course be a first-time homebuyer, be a legal Canadian citizen or permanent resident, or be allowed to work in Canada. Your total yearly income (combined with any spouse/partner) cannot exceed $120,000, meet minimum downpayment thresholds and borrow no more than four times your income.

Land Transfer Tax Rebate

As most homeowners know, the purchase of a new property usually involves a land transfer tax in Ontario. This is the largest closing cost you pay on closing. In Ontario, the government has a rebate for first-time homebuyers, which can also be supplemented by a land transfer tax rebate if you are in the city of Toronto. 

To qualify, you must have never owned a home, anywhere in the world. The rebate maxes out at $4,000. If your partner is not a first-time home buyer, but you are, you may be entitled to a $2,000 rebate. Working with a real estate lawyer can help sort through any stipulations.

First-Time Home Owner Tax Credit

This is a non-refundable credit amount of $750 meant to help with closing costs. To qualify, you must claim the credit within a year of the home purchase under line 369. The home must be in your, or your spouse’s name to receive.

HST New Housing Rebate

For any new build homes, Canadians can receive a rebate towards the HST of any new home purchase. The total rebate is 36% of the total tax paid, up to $6,300. It is only valid on homes with a market value below $350,000.

RRSP Home Buyer’s Plan

If you have not purchased a home within the last four years or lived in a spouse-owned home in the same time period, you may be eligible for the RRSP Home Buyer’s plan. With this incentive, you can borrow up to $35,000 tax-free from your RRSP to help towards a down payment that has been in your RRSP for at least 90 days before purchase. 

This plan allows you to circumvent early withdrawal taxable income fees, however, you will need to repay what you borrowed after two years, over a 15-year term.

Similar to the above, you can also use your RRSP funds to help buy a first home. If you already contribute to a RRSP, you may qualify for a program that lets you take out funds without penalty to use towards real estate purchases. This is the Home Buyer’s Plan and also has a max withdrawal of $35,000. Understanding the eligibility requirements, terms and conditions is important before taking out any funds from your RRSP.

Now that you are aware of some of the programs available to help first-time homebuyers, you are better equipped to start looking for your first home. Start with getting pre-approved and work with your mortgage broker to determine what programs you are eligible for. They can help you submit your applications and ensure you take advantage of any first-time homebuyer programs you can.
The various supports make it much easier for first-time homebuyers in Ottawa to enter the housing market. Work with a trusted mortgage broker to make sure you take advantage of them and get the financial support you need on your first home purchase.