Benefits of being a first-time home buyer

As a first time home buyer, a little help can go a long way. This is why the Government of Canada offers three programs to help first-time homebuyers: First Time Home Buyer Incentive, First-Time Home Buyer's Plan and the First-Time Home Buyers' Tax Credit.

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What is the First-Time Home Buyer Incentive?

In 2019, the Government of Canada launched a new program to help Canadians purchase their first home called the First-Time Home Buyer Incentive.

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This program lends 5% of the value of the home you are purchasing (10% if you're building a home) towards your down payment.

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So if you put 5% down on your new home plus the First Time Home Buyer Incentive of 5%, your total down payment would be 10%. With a higher down payment, your mortgage payments will be lower, making homeownership more affordable.

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When you sell your home, or after 25 years, whichever comes first, you pay back that same percentage of your home's selling price.

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Do You Qualify for the First-Time Home Buyer Incentive?

You qualify as a first-time home buyer if you meet any of the following conditions:

• You have never owned a home
• You did not live in a home owned by your spouse or partner in the last four years
• Your marriage or common-law relationship has ended (which allows you to qualify even if you don't meet the previous two qualifications)

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Here is the criteria to determine if you're eligible to participate in the program:

• Your annual household income is not higher than $120,000
• You are borrowing no more than four times your annual income
• Either you or your partner must be a first-time home buyer
• You are a Canadian citizen, permanent resident, or authorized to work in Canada
• You must have at least 5% of the home's purchase price as a down payment, but with the incentive, your down payment cannot exceed 19% of the home's purchase pric

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Is it Right for Me?

The decision to take advantage of the First-Time Home Buyer Incentive is personal. This program can help you buy your first home sooner and lower your mortgage payments, allowing you to put more money into your savings or pay other debt.

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However, it is important to keep in mind that when you sell your home, you will be required to pay a percentage of your home's value back to the government.

• If your home has increased in value, you will be paying more than you received initially through the program.
• If you opt not to sell your home, be aware that in 25 years, you will be required to pay a percentage of your home's current value.

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A Cambrian Personal Banking Advisor can help you decide whether taking advantage of this program is right for you. Contact your local branch to make an appointment with an advisor.

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Learn more about the First-Time Home Buyer Incentive.

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What is the First-Time Home Buyers' Plan?

The Home Buyers' Plan is a federal program allowing first-time home buyers to withdraw up to $35,000 from their RRSP to use as part of their down payment. Saving for a down payment can be an overwhelming prospect; this is why the federal government created this program to improve home affordability.

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Do you qualify as a first-time home buyer?

Even if you or your spouse owned a home previously, it is possible you may still qualify as a first-time home buyer under this program. To qualify, you cannot have occupied a home you or your spouse owned in the previous four years.

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You must be a resident of Canada, you must have a written agreement to buy or build a qualifying home, and you must intend to occupy the qualifying home as your principal place of residence within one year after buying or building it.

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Repaying your RRSP Withdrawal

You are required to pay back the funds you withdraw from your RRSP. You have up to 15 years to do so, and the period begins the second year after you withdraw the funds. For example, if you purchase a house in 2022, you will begin paying it back in 2024. Every year, you will have an annual amount that must be repaid, though you can pay more if you prefer, which will lower the amount owed in subsequent years.

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To return the Home Buyers' Plan withdrawal, simply contribute to your RRSP and designate the appropriate amount as payment on your tax return.

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If you don't repay some or all of the balance due in a calendar year, it must be included as income on your tax return, and you lose that RRSP contribution room, which can hurt you in retirement. Before taking advantage of this program, ensure you are prepared to repay the funds you take out annually.

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Tips for Saving

If you are saving up your down payment, living as though you already have a mortgage is a good idea. Meet with a Cambrian Advisor to add up the monthly cost of your mortgage, utilities and property taxes and compare it to your current rent payment. Then, put the difference in a savings account. Not only will this get you used to living with increased payments, but it will also force you to put money away for your down payment.

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You should also set up an automatic savings program that matches your pay dates. Automatic savings means you will save every month without thinking about it. You can set up a regular automatic transfer to your savings account using Cambrian Online Banking, or you can meet with a Cambrian Advisor to set up a savings program that aligns with your goals.

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What is the First-Time Homebuyer Tax Credit?

The First-Time Homebuyer Tax Credit allows you to claim up to $5,000 on your taxes for the purchase of a qualifying home if the following conditions apply:

• You (or your spouse or common-law partner) acquired a qualifying home
• You did not live in a home owned by your spouse or partner in the last four years

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If you qualify, you can claim a non-refundable tax credit of up to $750.

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Starting from 2022, the Budget proposed to increase the amount to $10,000, which would provide a tax credit of up to $1,500 for qualifying first-time home buyers.