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Using your RRSPs towards a downpayment
With the Home-Buyer’s Plan (HBP), first-time home buyers may use up to $60,000 of their RRSPs towards the downpayment of their home. This withdrawal limit was originally $35,000, however was increased to $60,000 on April 16, 2024. The HBP allows them to not pay taxes on the withdrawal, as long as they’re repaid within 15 years.
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First Home Savings Account (FHSA)
New as of April 2023, first-time home buyers may open an FHSA. This account allows them to save for a downpayment and write the contributions off their income. Once the qualified buyer is ready to close on a property (or within 30 days after), they may pull out the funds as a qualified withdrawal, completely tax-free.
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Land Transfer Tax Rebates
In the province of Ontario, a first-time home buyer can receive a land transfer tax rebate in the amount of up to $4000 towards the land transfer tax on a property purchase transaction. Note: first-time home buyers in this case are defined as someone who has never been on title on a property ever.
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First-Time Home Buyer Incentive
In Canada, there is a program where the government will match your downpayment of 5-10%. This can increase your borrowing power, as the downpayment that they contribute does not include monthly payments. It registers as a second mortgage, with the total due being the same percentage as the percentage contributed, but as the value at the date of the refinance or sale.
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First-Time Home Buyers’ Tax Credit (HBTC)
You can claim up to $10,000 on your taxes for the purchase of a qualifying home in 2022 or later.
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5% Down, the Common Myth
Many people are told that only first-time home buyers may use contribute as little as 5% down, but subsequent purchases require 20%. This is untrue! You’re allowed to still put less than 20% down when you sell and buy, or if you buy a second home such as a property for your family or a vacation home.
Becoming a first-time home buyer opens a world of opportunities that can make the path to homeownership more accessible and affordable. By utilizing resources like the Home-Buyer’s Plan (HBP) to withdraw funds from your RRSPs tax-free, or taking advantage of the newly introduced First Home Savings Account (FHSA), you can save more efficiently while enjoying tax advantages.
Take advantage of these opportunities, consult with a licensed mortgage professional, and embark on your homeownership journey with confidence. The rewards of owning a home are not only financial but also extend to the sense of stability, pride, and investment in your future.
