Buying your first home is a big milestone in life. It takes careful consideration of the first time home buyers program, which can differ from province to province. Buying your first home also means that you are taking on some major financial responsibility- one that will last for many years into the future. There are many things to consider before buying your first house, but here are six tips for Canadian first time home buyers to help make this task easier!

first time homebuyers program canada

The first time home buyer program can also apply to first time buyer’s plans. The Canadian HBP is a government grant that helps first-time homebuyers withdraw up to $25,000 from their RRSPs to put towards the purchase of their first homes. With this money you are able to withdraw any funds already in your registered retirement savings plan.

another great thing about the home buyers plan is the tax exemption on the property transfer tax. Meaning you would pay $0 for the property tax transfer.

How do I apply for the incentive?

The first time home buyers program can be applied for through your financial institution. You may need to provide some identification and contact information when you apply for the first time buyer’s plan, so make sure that you have all of this ready before you start filling out any forms!

Once an application is submitted, the first time home buyer’s program will provide you with a letter of confirmation. This first time buyer’s plan is also able to be used towards the purchase of an existing home, provided that it does not already have any resident owners and has been occupied for at least 90 days before your offer was accepted by the seller.

Am I eligible for the incentive?

The first time home buyers program can be available to you, provided that you are a Canadian citizen or permanent resident. You must also have not lived in another residence within the last four years before your purchase of the first house.

You cannot currently own any real estate anywhere across Canada and should not expect ownership for at least 30 days after submitting an application for the first time home buyers plan. The funds from this government incentive cannot be used to pay back any outstanding debts, such as a line of credit or open mortgage.

The Canadian HBP has numerous conditions that must be met in order to qualify for the program.

Do I have to pay the First-Time Home Buyer Incentive back?

No, you do not have to pay the first time home buyers plan back. This incentive is a non-refundable tax credit that can be claimed on your annual taxes provided that all of the necessary requirements are met.

In order to claim the tax credit from your first time home buyer plan, you must fill out a Schedule-H and attach it to your annual income taxes.

This can be filed with your tax return for the year that you purchased your home.

What is a Registered Home Ownership Savings Plan (RHOSP)

A registered plan is an investment savings account, similar to a regular RRSP . The first time home buyer incentive works on the same principle as the HBP , but through these accounts instead of your personal RRSP .

First time home buyer incentive can also withdraw funds from their registered plans for the purchase of a first house, with some limitations. The funds must be repaid within 15 years and cannot exceed $25,000 per year over this period.

Withdrawals can only be made once every calendar year- if you make another withdrawal before the next calendar year begins, you will have to include the amount from your second withdrawal on that years’ income tax return.

When a minimum of $1000 has been saved in an account for at least 90 days and is withdrawn within 12 months after these conditions are met, there is no penalty or repayment required. This first time home incentive plan can also be withdrawn for a home that is not an existing house.

What are the limitations of this incentive?

The first time home buyer plan can have multiple restrictions and conditions to qualify for, including:

You cannot withdraw funds from your registered savings plans within 30 days before you purchase or build your new home. You must also live in it as your primary residence for four years after the purchase. You cannot own any other real estate within 30 days before or after you buy your new home.

You must be a Canadian citizen, permanent resident of Canada, or have landed immigrant status during this period in order to apply for the incentive and receive it.

How does the Home Buyers’ Tax Credit Work?

The first time home buyers program can be a tax credit that is worth 15% of the purchase price of your house, as long as you meet all conditions. This means that if the cost of your new home was $200,000 and you claimed this amount on your taxes for the last year, then you would receive an income tax refund in the amount of $30,000.

The first time home buyer’s plan can be claimed on your taxes for the current year as well as back-to-back years following this one. If you do not claim it in the initial tax return that you submit after purchasing your new house, then you are able to carry forward this deduction until any point in the future when you do.

Mortgage Loan Insurance

The first time home buyers program can also be available to you if you are applying for mortgage loan insurance. This form of government assistance is only open to those who do not own any other real estate and will act as a type of second-chance financing option when buying your new house.

You must apply through the Canada Mortgage Housing Corporation (CMHC) to receive this type of first time home buyer’s plan. Mortgage loan insurance is available through your financial institution, with the necessary documentation only needing to be provided for underwriting purposes.

First-time home buyers can also apply for a down payment that will allow you access to CMHC insured financing on homes that are worth less than $500,000. This amount is a non-refundable tax credit that can be claimed on your annual taxes for the current year, as well as back to back years following this one. If you do not apply at first and carry forward into future tax returns then you are able to submit the necessary documentation until any point in the future when you decide to do.

The funds from this government incentive cannot be used to pay back any outstanding debts, such as a line of credit or open mortgage. The first time home buyer’s plan can also be available if you are applying for mortgage loan insurance and will act as a type of second-chance financing option when buying your new house.

Mortgage loan insurance is a must have when your down payment is less then 20% of your total mortgage loan.

Saving For Your Home

Saving for your new house can be a great way to make sure you have the necessary down payment, but it is not required in order to qualify for the first time home buyers program.

The funds from this government incentive cannot be used to pay back any outstanding debts, such as a line of credit or open mortgage.

First-time home buyers can also apply for a down payment that will allow them access to CMHC insured financing on homes that are worth less than $500,000.

Save money for a down payment. This amount can be anywhere from five percent of your new house’s purchase price or $25,000, whichever is greater.

Those who are looking into applying for this type of assistance may want to start making plans on how they will save up enough money to make this possible. Saving up for a down payment is important as it can have a big or small affect on your monthly mortgage payments.

Newly built home exemption

In some cases, those who have purchased a newly built home can be exempt from the first time home buyer’s plan. This is conditional on having a pre-approval letter for financing and building your house within 18 months of receiving this exemption.

The funds from this government incentive cannot be used to pay back any outstanding debts, such as a line of credit or open mortgage.

This new home exemption is only applicable for those who have not owned a property anywhere in the world during this time period as well, including an apartment building such as condos and co-ops. If you are looking to buy your first house then applying for the first time home buyers program can be a great way to make this happen.

Published On: October 7th, 2021 / Categories: Mortgage / Tags: , , , /

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