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Buying your first home is a major life milestone, but with rising real estate prices, it can also feel like a daunting financial commitment. The good news is that the Canadian government, both at the federal and provincial levels, offers several programs to help first-time home buyers ease into homeownership. 

From tax credits to savings programs, these initiatives can significantly reduce your financial burden and help you navigate your purchase more smoothly. In this guide, we'll cover the key first-time home buyer programs available in 2024, ensuring you're well-informed and ready to make the most of these opportunities.

First Home Savings Account (FHSA)

The First Home Savings Account (FHSA) is a game-changer for Canadians looking to save for their first home. Launched in 2023, it’s designed to offer the best of both worlds by combining the tax advantages of a TFSA (Tax-Free Savings Account) and an RRSP (Registered Retirement Savings Plan). Contributions to an FHSA are tax-deductible, meaning they can reduce your taxable income for the year, just like an RRSP. Meanwhile, withdrawals made to purchase your first home are entirely tax-free, similar to a TFSA.

Key details of the FHSA include:

• Annual contribution limit: $8,000

• Lifetime contribution limit: $40,000

• Tax-free withdrawals: You won’t pay taxes on the money you withdraw for your home purchase, including any investment gains made within the account.

For couples, the FHSA becomes even more powerful. Both partners can open their own FHSAs, giving them the potential to contribute up to $80,000 toward their home purchase. It's important to note that while the contribution limits are capped, the withdrawals are not, meaning any growth within the account (interest, dividends, or capital gains) is also tax-free when used for a first home.

Additionally, you have 15 years from the time you open the account to use the funds for a home purchase. If you don’t end up buying a home within that period, the money can be transferred into your RRSP or RRIF without affecting your contribution limits.

Home Buyers’ Plan (HBP)

The Home Buyers’ Plan (HBP) has long been a popular option for Canadians to tap into their retirement savings to help fund their first home purchase. Under this plan, you can withdraw up to $60,000 from your RRSP, tax-free, as long as it is repaid over a period of 15 years. One recent update in 2024 increased the withdrawal limit from $35,000 to $60,000, giving first-time buyers even more flexibility to cover their down payment and closing costs.

Key aspects of the HBP:

• Eligibility: You must be a first-time home buyer, or purchasing for a related person with a disability.

• Repayment terms: Repayments start in the fifth year after you make the withdrawal, giving you a five-year grace period. After that, you have 15 years to fully repay the amount.

• No interest: This is not a loan in the traditional sense, as there’s no interest on the withdrawn amount.

The HBP can be a great resource if you've been diligent about contributing to your RRSP but need additional funds for your home purchase. Just keep in mind that failing to repay the amount within the allotted time frame will result in the remaining balance being taxed as income.

Home Buyers' Amount (First-Time Home Buyers' Tax Credit)

When tax season rolls around, first-time home buyers can benefit from the Home Buyers' Amount. This program allows you to claim a $10,000 tax credit when purchasing a qualifying home. The resulting non-refundable tax rebate of up to $1,500 can help offset some of your initial expenses after closing on your home.

To qualify:

• You (and your partner, if applicable) must not have owned a home in the four years preceding the purchase.

• The home must be intended to be your principal residence.

• The home must be located in Canada.

This credit is simple to claim—just fill out line 31270 on your tax return the year you purchase your home. Although it’s not a huge sum, every bit helps when it comes to managing the costs associated with homeownership.

GST/HST New Housing Rebate

If you’re buying a newly built home, or one that has been substantially renovated, you may be eligible for the GST/HST New Housing Rebate. This rebate covers a portion of the federal portion of the GST or HST you paid on the purchase of your home.

The specifics of the rebate depend on the price of your home and the province in which you live. In Ontario, for instance, the rebate applies to homes costing up to $450,000. In some provinces, the rebate can also apply to the provincial portion of HST.

This program is especially beneficial for those purchasing new homes, as GST or HST can add a significant amount to the purchase price. By applying for this rebate, you can reduce your costs by several thousand dollars, making it easier to manage the financial burden of buying a new property.

Regional and Provincial Programs

In addition to the federal programs, many provinces and municipalities offer their own incentives for first-time home buyers. For example, in Ontario, the Land Transfer Tax Rebate allows first-time buyers to receive a rebate of up to $4,000 on the provincial land transfer tax. If you’re buying a home in Toronto, you can also qualify for a rebate on the city’s land transfer tax, offering an additional $4,475.

Other regions have similar programs:

• Prince Edward Island: Offers a conditionally interest-free loan of up to 5% of the home’s purchase price.

• Manitoba: The Rural Homeownership Program offers pathways to help buyers purchase homes in rural areas.

These regional programs can provide much-needed financial relief, especially for buyers in high-demand markets where the cost of homeownership can be prohibitive.

CMHC Eco Plus Program

If you’re environmentally conscious and interested in an energy-efficient home, the CMHC Eco Plus Program may be a great fit. This program offers a rebate of up to 25% on your CMHC mortgage loan insurance premium for homes that meet certain energy efficiency standards, such as LEED or Energy Star certification.

To qualify, you’ll need an EnerGuide rating for your home, which assesses its energy efficiency. The rebate is available within 24 months of closing, making it a great option for those looking to reduce both their environmental footprint and their mortgage costs.

Final Thoughts

Buying your first home is a monumental step, but it doesn’t have to be financially overwhelming. Canada offers a wide array of programs designed to help first-time buyers, from the tax-efficient FHSA and HBP to regional land transfer tax rebates and eco-friendly mortgage incentives. By taking advantage of these programs, you can lower your upfront costs and make homeownership more attainable.

If you’re ready to start your home-buying journey, partnering with an experienced real estate team is crucial. The Johnson Team is here to help you every step of the way. With decades of experience in the Greater Toronto Area market, we’ll help you find the perfect home, secure financing, and guide you through the entire process. Contact The Johnson Team today to get started!