There are three main incentive programs for first-time home buyers. Each program has different requirements to qualify as a first-time buyer. See the FAQ below for details.
- Land transfer tax rebates, which refund some or all of the land transfer tax levied as part of your closing costs.
- The Government of Canada First-Time Home Buyer Incentive, which allows 5% or 10% of your home to be purchased (shared equity) by the government. This amount must be repaid, interest-free, within 25 years or if the house is sold. The program launches September 2, 2019 and is available for any purchase closed after November 1, 2019.
- The Home Buyers’ Plan, which allows you to withdraw up to $35,000 (since March 19, 2019) from your registered retirement savings plan (RRSP) tax-free. The amount must be repaid over a 15-year period.
- Canada’s most comprehensive calculator for first-time buyers
Government Shared-Equity Incentive
The government of Canada offers a First-Time Home Buyer Incentive program starting September 2, 2019. Under the program, you can apply for a 5% or 10% shared-equity mortgage with the Government of Canada, reducing your mortgage payments. Essentially, the government will help you purchase 5% or 10% of your home, to be paid back at a later date.
In order to be eligible for the government incentive program, your total borrowing amount (mortgage loan + shared-equity incentive) must be less than four times your annual income. Unfortunately, your total borrowing amount exceeds this limit, so you are not eligible for this program.
Frequently Asked Questions
Am I eligible for the program?
The program is only available for CMHC-insured mortgages. Therefore, you are automatically ineligible if
- your purchase price is $600,000 or above, or
- your down payment is at least 20% of your purchase price.
To qualify for a government shared-equity incentive,
- you must be a citizen or permanent resident of Canada,
- you or your partner must be a first-time homebuyer (see ‘Am I a first-time home-buyer?’ below), and
- your annual household income cannot exceed $120,000.
Even if you satisfy these criteria, there are limits on how much you can borrow depending on your annual household income. See ‘What is the borrowing limit, and how does it work?’ below. Other criteria may apply in special situations.
Am I a first-time home-buyer?
You qualify as a first-time home-buyer if
- you have never purchased a home,
- you have gone through a breakdown of marriage or common-law partnership, or
- in the last four years, you have not occupied a home owned by you or your partner.
You only need to satisfy at least one of the above criteria to qualify. Only one spouse/common-law partner needs to meet the above requirements to qualify.
How long does the program last?
The program launches September 2, 2019, and is available for any purchase closed after November 1, 2019.
The program will end either:
- after three years (September 2, 2022), or
- when a total of $1.25 billion of incentives have been granted,
whichever occurs sooner. Many experts expect the funding to go quickly, so it may be prudent to act as soon as possible.
How much do I qualify for?
- For existing, resale, or mobile/manufactured homes, you can apply for a 5% shared-equity incentive.
- For newly constructed homes, you have the option of applying for a 5% or a 10% shared-equity incentive.
Borrowing limits may apply in both of these cases. See ‘What is the borrowing limit, and how does it work?’ below.
What is the borrowing limit, and how does it work?
Your borrowing limit is four times your annual household income. Your total borrowing amount (mortgage principal + shared-equity incentive) cannot exceed this limit. The CMHC mortgage insurance premium does not count towards the limit.
No partial incentives are given. The only options are 5% and 10% shared-equity.
How much do I need to pay back?
The amount you owe depends on the future fair-market value of your property at the time of repayment. You will need pay 5% or 10% of the future property value, depending on which incentive program you applied for. No interest is charged in either case.
When do I need to pay back the incentive?
You must pay back the incentive within 25 years or if the property is sold, whichever occurs first. You must pay the amount in full.
There are no prepayment fees or penalties for an early payment. If you believe your property value will rise in the future, paying early may lower your payment amount.
I am buying a mobile or manufactured home. Am I eligible?
Yes. However, you can only apply for the 5% shared-equity incentive option, even if the home is new.
Example 1: $400,000 home
John and his wife want to buy a newly constructed home for $400,000. They would qualify for 10% of the purchase price, or $40,000, under the shared-equity incentive program.
At a 3% interest rate, this would lower their monthly payment from $1,870 to $1,673, saving them nearly $200 per month, or $60,000, over the lifetime of the mortgage.*
Assuming they make the minimum 5% ($20,000) down payment, John and his wife would need to make between $95,000 and $120,000 in total to qualify.
*Assuming a 5-year fixed term with 25-year amortization and 5% down payment.
Marissa makes $80,000 a year, and has $60,000 saved up for a down payment.. To qualify for the shared-equity incentive, she can purchase a home worth up to $380,000.
She buys a resale condo for $360,000. Marissa is eligible for $18,000 from the Government of Canada First-Time Home Buyer Incentive, allowing her to take out a mortgage of only $282,000 plus insurance.
Ontario Land Transfer Tax
Ontario levies a land transfer tax by applying a tax-bracket system to your property’s purchase price. The full breakdown of your provincial land transfer tax is shown below.
Starting January 1, 2017, Ontario offers a land transfer tax refund of up to $4,000 for first-time home buyers. Since your provincial tax exceeds the rebate limit, your provincial rebate is capped at $4,000.
Municipal Land Transfer Tax
Toronto is the only city in Ontario that levies a municipal land transfer tax. According to your selections, municipal land transfer tax does not apply to you.
Taken from WOWA