Government to Introduce New Mortgage Terms for First-Time Home Buyers
Canada’s Finance Minister, Chrystia Freeland, recently announced proposed changes to mortgages for first-time home buyers as part of the upcoming federal budget. If these changes are approved, first-time buyers will be able to extend their mortgage terms to 30 years (instead of the standard 25 years) for newly built homes, starting on August 1, 2024. This policy aims to make homeownership more affordable by lowering monthly mortgage payments for buyers. It’s just one of several strategies designed to help first-time buyers save for a down payment or reduce the financial burden of owning a home.
At Gerardi Real Estate, we understand the challenges faced by first-time buyers, and we’re here to guide you through the various incentives and options available. Below, we’ve outlined some key programs that could make homeownership more accessible.
Who is Considered a First-Time Home Buyer?
A first-time home buyer is typically defined as someone who has never owned property that was their primary residence. However, there are exceptions to this rule, such as individuals who previously owned property with a spouse and are now separated or divorced.
Mortgage and Down Payment Requirements for First-Time Buyers
Before you make an offer on your first home, it’s essential to understand your mortgage options and down payment requirements.
In Canada, the amount of your down payment depends on the purchase price of the property:
- $500,000 or less: 5% of the purchase price
- $500,000 to $999,999: 5% on the first $500,000, and 10% on any amount above $500,000
- $1,000,000 or more: 20% of the purchase price
If your down payment is less than 20%, you may also need mortgage loan insurance, which can range from 0.5% to 4.5% of the mortgage amount.
First-Time Home Buyer Incentives and Programs
Saving for a down payment can be daunting, but there are several programs in Canada designed to ease the process for first-time buyers. Here are a few key incentives:
Home Buyers’ Plan (HBP)
The Home Buyers' Plan allows first-time buyers to withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSP) to use as a down payment. This amount must be repaid within 14 years.
First Home Savings Account (FHSA)
The FHSA is a new federal program that lets first-time buyers save up to $8,000 per year tax-free, with a lifetime limit of $40,000. This helps buyers save more efficiently for their future home.
First-Time Home Buyer Incentive (Discontinued)
The federal First-Time Home Buyer Incentive, which offered buyers 5% or 10% of the home’s purchase price toward the down payment, ended on March 31, 2024. However, other valuable programs remain available.
Tax Credits and Rebates for First-Time Buyers
In addition to mortgage programs, several tax credits can help reduce the financial strain of buying a home:
- Home Buyers’ Amount: First-time buyers can claim up to $10,000 of their home’s purchase price on their tax return.
- GST/HST New Housing Rebate: Buyers of new or substantially renovated homes may recover some of the GST or HST paid on their property.
- Land Transfer Tax Refund (Ontario): In Ontario, first-time buyers can qualify for a land transfer tax refund of up to $4,000 if the home is their principal residence.
Additional Tax Credits for Home Renovations
If you're planning home improvements, you may also be eligible for additional tax credits:
- Multigenerational Home Renovation Tax Credit: Claim up to $50,000 in eligible renovation costs for creating a secondary unit for an elderly or disabled relative.
- Home Accessibility Tax Credit: Qualifying renovations to improve accessibility or mobility within the home may also be tax-deductible.
Final Thoughts
At Gerardi Real Estate, we know that buying your first home can be both exciting and overwhelming. Understanding the incentives and programs available for first-time buyers can make a huge difference in managing the financial burden of homeownership. Be Sure to reach out to professional real estate lawyers for more information and planning. If you’re unsure which programs apply to you, we’re here to help. Contact our team today for expert guidance on your first home purchase.
Check out our other blogs on first-time homebuyers