Do you qualify for the First-Time Home Buyer Incentive program?

September 23, 2019 | Published by

At Morris Law, we offer real estate legal services for a variety of clients, from first-time home buyers to investors and business owners. Even in Vancouver’s competitive real estate market, we’ve taken note of some enticing reasons why more and more potential homeowners are starting to enter the market, including the newly enacted First-Time Home Buyer Incentive program.

Not to be confused with the First-Time Home Buyers’ Tax Credit enacted in 2009 across Canada, the First-Time Home Buyer Incentive is a new benefit that launched this month (September 2019). 

What is the First-Time Home Buyer Incentive?

The Canadian Government will match the down payment of eligible first-time home buyers by 5% of the purchase price of a resale home, or 10% of the price of a new build. This is registered as a mortgage for a term of 25 years.

How Does This Help First-Time Home Buyers?

Let’s take a look at a scenario where you are considering the purchase of a new home in the amount of $400,000 and have $20,000 prepared for the down payment.

With the First-Time Home Buyer Incentive, Anita can receive $40,000 in a shared equity mortgage (which is 10% of the cost of the new home), reducing the amount that Anita needs to borrow.

This directly decreases Anita’s monthly expenses by $228 a month, or $2,736 a year. Later, when Anita decides to sell her home for $420,000, she repays the First-Time Home Buyer Incentive to the amount of $42,000 at the time of selling her house (which is 10% of the value of her property).

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

The First-Time Home Buyer Incentive is a wonderful program that will help reduce costs by over $280 per month in mortgage payments for a new-build home worth $500,000 in fair value.

This incentive is limited to first-time homebuyers with a maximum pre-tax household income of $120,000. Obviously, you must be a first-time homebuyer and a Canadian citizen or permanent Canadian resident.

Why Buy Now?

There are an assortment of incentives for potential first-time home buyers which include:

  1. The new First-Time Home Buyer Incentive described above, where the government will match the down payment of eligible buyers for 5% of the purchase price on a resale home, or 10% of the price on a presale (or new-build) home.
  2. The Home Buyers’ Program (HBP) which helps alleviate property tax by providing a tax break of up to $8,000 on a home sold with fair market value of $500,000 or less. You can apply for this program directly by entering the exemption code “FTH” on your tax return.
  3. The Government of Canada offers a First-Time Home Buyers’ Tax Credit (FTHB or HBTC) noted as “Line 369 – Home buyers’ amount” which allows you to claim $5,000 in tax exemptions under certain conditions. This usually results in a $750 tax credit and is available across Canada.

There are also an assortment of potential tax exemptions for potential homeowners, even if this is not their first purchase, such as the Newly Built Home Exemption or the GST/HST new housing rebate.

Outside of direct tax exemptions and benefits, there are some benefits to being a first-time home buyer such as access to the Home Buyers’ Plan (HBP) which allows individuals to withdraw up to $25,000 from their RRSPs to help with their down payment.

Always conduct research to see where you can save costs on potentially the biggest purchase of your life! If you have any questions or concerns, please feel free to contact the lawyers at Morris Law, who will provide real estate legal services to help you realize the benefits of purchasing your first home.