Are you looking to buy your first home but struggling to come up with a down payment? These first-time buyer programs can help.
CMHC Mortgage Default Insurance
Admittedly, mortgage default insurance isn’t a “program” per se, but it is beneficial for helping first-time buyers realize their dream of home ownership. To purchase a home in Canada, you’ll require a minimum down payment of 5% on the home’s overall purchase price. Buyers with a down payment of 19.99% or less will be required to purchase mortgage default insurance, which protects the lender in the event you, the borrower, default on your mortgage loan.
In short, mortgage default insurance enables buyers to purchase a home with as little down payment as possible.
First-Time Home Buyer Incentive
The First-Time Buyer Incentive is a program that leverages your home equity for your down payment. Through the Incentive, qualifying home buyers who already have their minimum down payment saved may apply to finance part of their mortgage through the Government of Canada, in what is known as a “shared-equity mortgage”.
By making a larger down payment on your new home, you ultimately make your mortgage payments more affordable over the long term and reduce your monthly costs. Home buyers are eligible to receive:
- 5% or 10% for a new construction home
- 5% for a resale home
- 5% for a mobile home
When you’re ready to sell, you will then repay the 5% or 10% to the government based on the property’s fair market value at the time (otherwise the Incentive is to be repaid within 25 years).
Home Buyers’ Plan
The Home Buyer’s Plan allows first-time buyers (or a buyer that hasn’t purchased a home within the last four years) to borrow up to $35,000, tax-free, from their RRSPs to put towards their down payment. Additionally, your spouse or partner can also borrow the same amount for a shared total of $70,000.
A few things to keep in mind:
- The money must be in your RRSP at least 90 days prior to the purchase of your home
- You must repay the borrowed amount starting two years after purchase over a maximum 15-year period
Home Buyers’ Amount
Under the Home Buyer’s Amount, qualifying home buyers are eligible to receive a $5,000 (non-refundable) tax credit for a qualifying property they buy that year. This amounts to approximately $750 total in income tax relief and is extremely helpful for offsetting costs associated with the home’s purchase (i.e. closing costs).
Here too, you’re only eligible for the Home Buyers’ Amount if you (or your spouse) have not purchased a home within the last four years.
GST/HST New Housing Rebate
Should you opt to buy a newly built home, the GST/HST New Housing Rebate will offer money back for a portion of the GST/HST incurred on your purchase. The rebate also applies to homeowners choosing to build a large addition, substantially renovate their existing home or who convert a non-residential property into a home.
For more helpful home buying info, check out our top Home Buying Tips, or see our previous posts:
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