First-time homebuyers often feel like they are unequal players in the housing market, but there are many perks to being a first-time buyer. First-time buyers have more loan programs and financial assistance available to them than people who have already experienced homeownership.
Want to know how you can save money during the homebuying process? Here is what you need to know about the financial benefits of being a first-time homebuyer.
Use Your RRSP For Your Down Payment: The Home Buyers Plan
Purchase prices are rising in the current real estate market. As a result, so is the cost of down payments. Although both first-time and repeat buyers are required to have a minimum 5% down payment, this 5% can be significantly more money as housing prices rise. Thankfully, there is good news; the Home Buyer’s Plan can offer down payment assistance to make it easier for a first-time homebuyer to afford their down payment.
The Home Buyer’s Plan allows first-time homebuyers to use money from their RRSP for their down payments. Each buyer is allowed to withdraw up to $25,000 from their RRSP. This means, when buying with a partner, you can withdraw up to $50,000 together. The money that you withdraw from your RRSP is tax-free dollars that can help make affording your down payment easier.
While the Home Buyer’s Plan can make it easier to afford a down payment, it does have its drawbacks. The only catch with the Home Buyer’s Plan is that you need to pay back this money as an interest-free loan over the next 15 years.
Receive A Land Transfer Tax Refund
Among the closing costs of your home purchase is your land transfer tax (LLT) or property transfer tax. The land transfer tax is a one-time cost that is applied when the title or ownership of a property changes from one person to another. In Ontario, the cost of the land or property transfer tax is a portion of the property value.
The Ontario government offers a rebate on land transfer tax for people buying their first home. You could receive up to $4,000 to pay your land transfer taxes by simply applying for the Land Transfer Tax Refund.
Take Advantage Of The First-Time Home Buyer's Credit
Many first-time buyers feel the financial stress of buying their first home. That’s why the Canadian government offers a tax credit to help alleviate the burden of homeownership.
The First-Time Home Buyers Tax Credit is a $5,000 non-refundable tax credit. This tax credit can help offset the money you owe on your tax return, allowing you to put more towards your mortgage loan payments.
However, it’s important to note that the First-Time Home Buyers Tax Credit does not benefit everyone. Since the tax credit only offsets the balance owed on your income tax return, this tax credit is only helpful to people who have earned more than the low-income cutoff.
GST/HST Tax Rebates For First Time Home Buyers
All new homes in Ontario require the purchaser to pay HST as part of the overall price. The HST is typically built into the purchase price, but buyers need to be aware that that may not always be the case. Most larger builders will “net” the value of the New Housing Rebate from the purchase price making the overall cost of the house more affordable.
In some instances, the builder may not “net” the value of the New Housing Rebate from the purchase price. In these instances, the purchaser, assuming that they qualify for the rebate, will need to apply for the New Housing Rebate directly.
The New Residential Rental Property Rebate
If you are not looking to purchase a home for your principal residence but rather for an investment, you can apply for the GST/HST New Residential Rental Property Rebate (NRRP).
Investors could receive a maximum of $30,000 back from the Government of Canada. You could use this money to pay off your mortgage, build equity, and lower your debt-to-income ratio. Another great option is to utilize this money for later renovations; renovations can help increase the value of your property and make your rental property more appealing to future tenants.
The NRRP makes homeownership generally more affordable. Every home buyer interested in investing should look into the NRRP to help them save on tax and put more money towards their mortgage.
Other GST/HST Rebates
There are also GST/HST rebates available for first-time homeowners who have opted to build instead of buying their first homes. Much like the New Housing Rebate, You could receive up to a maximum of $30,000 back with the GST/HST Rebate for Owner-Built Homes. It can pay to build your dream home!
Financial & Lifestyle Benefits
While buying a home is one of the biggest commitments you will make in your whole life, it does come with many benefits. The main two benefits of being a first-time home buyer are the rebates and the lifestyle.
There are many financial products like tax rebates and credits that first-time home buyers can utilize to their advantage. You can start paying for your down payment with tax-free dollars that you’ve already saved up. You can also receive a tax credit from the government to pay your mortgage.
The most obvious benefit to being a first-time home buyer is having your own place. You can call the property your own, a place to host future family time, or tenants. No matter whether you take out a mortgage for your home or a rental, it is your place to call home.