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Qualifications for First Time Home Buyers in Canada

Are you dreaming of owning your first home in Canada? Buying property is proven to be one of the most stressful things a person can do in life – but it doesn’t have to be. Becoming first time home buyers comes with criteria, and it’s important to know what qualifies you for this exciting opportunity. 

Let’s explore the requirements and exceptions that define a first-time homebuyer in Canada, regardles if it’s a house or a condo (or something else), and the various programs and incentives available to make your homeownership dreams a reality.

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Meeting the First-Time Homebuyer Criteria

To be considered a first-time homebuyer in Canada, you must meet a primary criterion: you cannot have previously owned a property in Canada or abroad. If you have owned a home before, whether in Canada or elsewhere, you may not qualify as a first-time homebuyer. However, exceptions to this rule can give you another chance at being classified as a first-time homebuyer.

Did you know?
You must come up with a minimum of 5% of the down payment from traditional sources. This might be from your own resources, your Registered Retirement Plan (RRSP), or a gift from a member of your immediate family.

Exceptions and Second-Time Opportunities

Under certain circumstances, you may still be eligible as a first-time homebuyer, even if you have previously owned a property. Here are two common scenarios in which you could qualify for first-time homebuyer status again:

  1. Separation from a Spouse or Partner: If you have separated from your spouse or partner and no longer live together, you may qualify as a first-time homebuyer once again.
  1. Time since First Home Purchase: If you purchased your first home more than four years ago, you might be eligible to participate in government programs that allow second-time buyers to buy a home. These programs provide additional opportunities to enter the housing market and achieve homeownership.

It’s worth noting that the criteria mentioned above may vary depending on the specific program or incentive you wish to access as a first-time homebuyer. Different programs may have additional eligibility requirements or alternative definitions of what qualifies as a first-time homebuyer.

Defining a First-Time Homebuyer in Different Programs

Let’s take a closer look at two prominent programs in Canada and their respective definitions of a first-time homebuyer:

Home Buyers’ Plan (HBP)

The HBP allows you to make a down payment using funds from your Registered Retirement Savings Plan (RRSP). A first-time homebuyer, according to the HBP, is someone who has not occupied a house owned by themselves or their current spouse or common-law partner in the four years before the withdrawal.

First Home Savings Account (FHSA)

With the FHSA program, eligible individuals can save up to $5,000 tax-free annually towards purchasing their first home. Suppose you have not resided in a qualified house that you or your spouse/common-law partner owned within the current calendar year or the previous four calendar years; you are considered a first-time homeowner by the FHSA.

These are just a couple of examples, and different programs may have specific definitions of first-time homebuyers. Make sure to familiarize yourself with the criteria associated with the program you’re interested in.

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Additional Incentives for First-Time Homebuyers in Canada

To further support first-time homebuyers, there are various incentives available throughout Canada. These incentives aim to alleviate financial burdens and assist with the home-buying process. Let’s explore some of these incentives:

  1. First Home Savings Account (FHSA): This program allows you to save up to $5,000 annually, tax-free, toward your first home purchase. Although the contributions to the account are not tax-deductible, the interest earned on the account remains tax-free.
  1. Home Buyers’ Plan (HBP): First-time homebuyers can use the HBP to withdraw up to $35,000 from their RRSP to use as a down payment. The withdrawn amount must be returned to the RRSP within 15 years.
  1. First-Time Home Buyer Incentive (FTHBI): This federal program offers shared-equity mortgages, allowing first-time homebuyers to borrow five or ten percent of the home’s purchase price from the government. This can result in lower monthly payments by increasing the down payment.
  1. Land Transfer Tax Rebate: Many provinces in Canada provide rebates on land transfer taxes paid when purchasing a home. The specific rebate amount varies by province, ranging from partial refunds to total reimbursements.
  1. First-Time Home Buyers’ Tax Credit (HBTC): HBTC is a tax credit available to eligible homebuyers. For the 2022 and subsequent taxation years, the CRA aims to raise the calculation amount for the HBTC to $10,000, resulting in a maximum tax credit of $1,500 for eligible homebuyers.
  1. GST/HST Housing Rebates: When purchasing a new home, you are generally subject to GST/HST. However, tax rebates are available to help offset some of the taxes paid on your home. It’s important to note that this particular rebate is not limited to first-time homebuyers.

Remember that each program or incentive has eligibility criteria, maximum purchase rates, and specific details that may vary by region or territory. It is highly recommended that you thoroughly explore the programs accessible in your location to determine your eligibility and the potential benefits you can gain from them.

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RE/MAX Agents: Guiding First-Time Homebuyers

It may be difficult to navigate the intricate world of real estate, especially for first-time homebuyers. This is where licensed professionals like RE/MAX agents in Canada come in. With their expertise and experience, RE/MAX agents can provide valuable guidance throughout your home-buying journey. Here’s how they can assist you:

  1. Initial Consultation: In an initial meeting, your RE/MAX agent will sit down with you to understand your needs, preferences, budget, timeline, and financing options. This consultation helps them get a clear picture of what you’re looking for in a home.
  1. Home Search: Leveraging resources such as the Multiple Listing Service (MLS), your RE/MAX agent will assist you in searching for properties that align with your criteria. Based on your buying profile, they can also suggest suitable neighbourhoods, schools, and other essential amenities.
  1. Property Viewing: Once potential properties are identified, your RE/MAX agent will arrange property viewings and accompany you to each one. During these visits, they will point out favourable features and potential issues, providing you with valuable insights to make an informed decision.
  1. Offer Preparation: If you decide to make an offer on a property, your RE/MAX agent will guide you through preparing and submitting the proposal. They will also negotiate on your behalf to ensure the best possible outcome.
  1. Closing: The closing process involves finalizing financing, arranging a home inspection, and completing all necessary legal paperwork. Throughout this phase, your RE/MAX agent will provide support, answering any questions and ensuring you understand each step clearly.

During every stage of the buying process, your RE/MAX agent will be there to offer guidance and support. They aim to help you find a home that suits your needs and budget while ensuring a smooth and stress-free experience.

FAQ

How do I qualify as a first-time home buyer in Canada? 

To qualify as a first-time home buyer in Canada, you must be buying a property for the first time and have not previously owned a home. You may also be eligible if you haven’t owned a home in the last four years.

Does Canada have a first-time home buyer program? 

Yes, Canada has a First-Time Home Buyer Incentive program that offers 5% or 10% of the home’s purchase price to put towards a down payment. This is a shared-equity mortgage with the Government of Canada.

How much do first-time home buyers have to put down in Canada? 

The minimum down payment for first-time home buyers in Canada is 5% for homes with a purchase price of less than $500,000. For homes that cost more than $500,000, the minimum down payment is 5% of the first $500,000 and 10% of the remaining amount.

Can you buy a house in Canada as an American? 

Yes, Americans can buy property in Canada. However, the rules and regulations for obtaining a mortgage may be different, and it’s recommended to consult with a real estate professional or legal advisor.

What is the First-Time Home Buyer Incentive? 

The First-Time Home Buyer Incentive is a program in which the Government of Canada provides 5% or 10% of the down payment of your home as a shared-equity mortgage. This means you will repay the incentive amount when you sell the house or after 25 years, whichever comes first.

Are there any income restrictions for the First-Time Home Buyer Incentive? 

Yes, to be eligible for the First-Time Home Buyer Incentive, your qualifying annual income must be $120,000 or less.

Are there any grants available for first-time home buyers in Canada? 

Yes, there are grants available for first-time home buyers in Canada to make their homes more energy efficient. These grants can be up to $5,000.

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First Time Home Buyers – Final Words

If you aspire to be a first-time homebuyer in Canada – by buying a house or a condominium, or aspire for an elite neighbourhood or an urban area – understanding the qualification criteria and available incentives is crucial. By meeting the requirements, exploring the various programs, and seeking the guidance of experienced professionals like RE/MAX agents, you can confidently navigate the path to homeownership.

If you recognize yourself as a first-time home buyer in the Toronto GTA area and require assistance, you can rely on us, the Kim and Howard Team, to help you with your exciting journey!

So, take that first step towards your dream home; soon enough, you’ll be unlocking the door to a new chapter in your life.

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