First Time Home Buyers In Canada.
Tags: Credit Score, Mortgage, Down Payment, Closing Costs, First Time Buyers, Lawyers Fee, RRSP, Home Buyers Plan, First Time Home Buyers Rebate and Incentive. CMHC Insurance.
Buying a Home First Time – Down Payment Resources
Credit History and Credit Score.
When was the last time you checked your credit history. TransUnion and Equifax are the two popular and widely accepted platforms used by the financial institutions. Apart from down payment, your monthly mortgage relies on this. Its therefore recommended to know your credit info.
Here is quick reference guide to the resources available. This guideline is in brief but explains everything.
For more details and updates, it’s a good idea to consult your accountant and lawyer.
From the three options as you see below, first two are very popular, third one (Incentive) has its pros and cons, but may be good for someone needy.
1. Home Buyers Plan*
Under this HBP, an eligible individual can withdraw $35000 from their RRSP account. This money can be paid back in 15 years.
It’s important to know, your RRSP account shouldn’t be in locked in type.
Your repayment period starts the second year after the year when you first withdrew funds .
2. First Time Home Buyers Rebate*
Beginning January 1, 2017, no land transfer tax would be payable by qualifying first‑time purchasers on the first $368,000 of the value of the consideration for eligible homes. First‑time purchasers of homes greater than $368,000 would receive a maximum refund of $4,000.
Land Transfer Tax Calculator:
A quick calculation formula is as under.
For more details, one can also visit MOF website.
Please note that if you are buying a property in Toronto Municipality, you will be paying Toronto Land Transfer Tax as well.
3. First Time Home Buyers Incentive in 2020*
Under this scheme of this, Government of Canada provides incentives as under:
- 5% or 10% for a first-time buyer’s purchase of a newly constructed home. Please note this once again.
- 5% for a first-time buyer’s purchase of a resale (existing) home. Most of the first time buyers buy resale homes.
- 5% for a first-time buyer’s purchase of a new or resale mobile/manufactured home. There are fewer first time buyers in this category.
The incentive is available to first-time home buyers with qualified annual incomes of $120,000 and less. A participant’s insured mortgage and the incentive amount cannot be greater than four times the participant’s qualified annual income.
If you want to buy a new home for $400,000.
Under the First-Time Home Buyer Incentive, you can apply to receive $40,000 in a shared equity mortgage (10% of the cost of a new home) from the Government of Canada. This lowers the amount she needs to borrow and reduces her monthly expenses.
Ten years later, Anita sells the home for $420,000. The Incentive will need to be repaid as a percentage of the home’s current value.
This would result in Anita repaying 10%, or $42,000 at the time of selling the house.
* Always check with your Accountant and Lawyers for the latest governments policies announced from time to time.
If you still need help and have more questions, please feel free to call me at 416.562.8417.