First-time home buyer programs in Canada: what you need to know

• Important information about the different programs available to you
• How to use the Home Buyers’ Plan to borrow from your RRSP
• How to make homeownership more attainable

After years of saving, monitoring the real estate market, and weighing your options with family – you’ve decided to take the leap into homeownership. Congratulations! This is one of the most exciting and most important purchases you will make in your life.

Luckily, the different levels of government in Canada offer a variety of programs to help make homeownership more attainable. Depending on where you live, there may be programs available to you – such as the First-Time Home Buyers’ Plan – that can help lessen the financial burden of buying a home and can help make your dreams of homeownership a reality.

Let’s take a look at some of these programs.

First Home Savings Account (FHSA)

The First Home Savings Account (FHSA) is a new registered account that can help Canadians save for a down payment for their first home. It allows you to contribute an annual tax-deductible amount of up to $8,000 with a lifetime contribution maximum of $40,000 per person. The great advantage of an FHSA is that it's like an RRSP and a TFSA, where your contributions to the account are tax deductible and any qualifying withdrawals from the account are tax free. Just like any registered accounts, you can invest and hold multiple investments inside an FHSA which can potentially help in growing your money for a future home purchase.

Some other key information to know about the FHSA:

• You must be a first-time homebuyer at the time you make the withdrawal. This means that you cannot have lived in a home you owned, in any part of the calendar year before the withdrawal or in the past four calendar years.
• You can carry forward any unused contribution in the following year up to a maximum of $8,000 per year (up to the $40,000 lifetime contribution maximum). The carry-forward amounts begin to accumulate only after you open your FHSA.
• You can transfer funds from an FHSA to another FHSA account, RRSP or a RRIF tax free. When you transfer from an FHSA to an RRSP or RRIF, the transfer will not reduce, or be limited by, your available RRSP contribution. It also will not restore any of your FHSA annual contribution limit.
• You don’t need to repay back the withdrawn money from an FHSA, unlike the RRSP Home Buyers’ Plan.

The Home Buyers’ Plan

The Home Buyers' Plan allows you to withdraw up to $60,000 tax-free from your RRSP (Registered Retirement Savings Plan) for a down payment, which is the upfront cost of your home.

Here are some facts about the plan:

• If you are borrowing with a partner, they can also withdraw $60,000 from their RRSP
• All withdrawals from an RRSP for the HBP must be made within 30 days of purchasing the home.
• The government gives you 15 years to re-deposit the money back into your RRSP
• Your repayment period starts the fifth year after the year when you first withdrew funds from your RRSP for the Home Buyers’ Plan. Please note: The extended grace period currently applies to HBP withdrawals made between January 1, 2022, and December 31, 2025.

If you have a Questrade RRSP and are looking to make a withdrawal under the Home Buyers’ Plan or to determine your eligibility to the Home Buyers’ Plan conditions, you can learn more about it in this Home Buyers’ Plan Help and How-to article.

GST/HST New Housing Rebate

The GST/HST New Housing Rebate offers money back to Canadians who buy a newly built home, significantly renovate an existing home, or rebuild a home that was destroyed. The rebate allows you to recover some of the goods and services tax (GST) or the federal part of the harmonized sales tax (HST) you pay towards these purchases. Learn more.

Land Transfer Tax Rebate

Some Canadian provinces charge a Land Transfer Tax when you buy a house. It’s typically between 0.5% and 2.0% of the purchase price. Luckily, several provinces will rebate a portion or all of the tax if you’re an eligible first-time home buyer. 

You can receive a rebate on some of the land transfer tax if you live in Prince Edward Island, British Columbia, and Ontario.

Also, if you’re buying a home in the city of Toronto, there is also Municipal Land Transfer Tax (MLTT). As of March 1, 2017, you can also receive a rebate of up to $4,475 for this municipal tax. Learn more.

Home Buyers’ Amount

The Home Buyers’ Amount was introduced as part of “Canada’s Economic Action Plan” to help Canadians buy their first home. It’s used to assist in covering closing costs, such as inspections and legal expenses, and land transfer taxes. The Home Buyers’ Amount offers a $5,000 non-refundable income tax credit for the purchase of a qualifying home for you or your spouse or common-law partner. You also must be a first-time home buyer to be eligible for the credit. Learn more.

As you can see there are quite a few programs and incentives available in Canada that can help you purchase your first home. But one of the most important factors when it comes to your mortgage is the rate you receive. With a BetterRate ^® mortgage from QuestMortgage, you can feel confident knowing  that you’ll receive a great rate on your mortgage application right from the start. And, with our expert mortgage advisors, you’ll get someone who can help walk you through every aspect of your journey to homeownership.

See how you can get a mortgage with a BetterRate ^® right from the start. GET MY RATE.

Get started today to see what rate you can qualify for. Start now.

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Please note: The information provided in this article is based on CRA guidelines and may be subject to change.

The information in this blog is for information purposes only and should not be used or construed as financial or investment advice by any individual. Information obtained from third parties is believed to be reliable, but no representations or warranty, expressed or implied is made by Questrade Group of Companies, its affiliates or any other person to its accuracy.