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Guide to Every First Time Homebuyer Program in Canada

First Time Home Buyer Programs

First-Time Home Buyers Tax Credit

The First-Time Home Buyers Tax Credit (FTHC) is a non-refundable tax credit worth $750.

A tax credit reduces the amount of tax you owe by a set amount after you calculate your taxable income. In this case, if you owed $3,000 in federal tax at the end of the year, you would only have to pay $2,250. If you owed $10,000, you would only have to pay $9,250.

There are a few eligibility requirements in order to get this tax credit:

  • The property is located within Canada
  • It’s a condo, town house, semi-detached house, detached house, duplex-fourplex, or even a mobile home
  • You (the owner) occupy the property within one year of the purchase
  • You and your common-law partner or spouse have not lived in a home owned by either of you in the purchase year or the previous 4 years (works out to a bit less than 5 years, usually)

The most obvious rules are that it must be a property in Canada that is intended for a person to live in. You can’t use your FTHC to save money on buying a business property. You can’t use it towards the purchase of an empty plot of land, but you could use it to build a house on that land.

The definition for a first-time home buyer under this program is fairly lenient. You only must not have lived in a home owned by either your or your partner for the last 4 years before the purchase year of your new home (this works out to 5 years).

That means you can qualify for the FTHC even if you currently own a property, so long as that property isn’t your primary residence. You can also requalify for the program if you bought a house that was your primary residence, so long as you haven’t lived in it for more than 4 years.

Can both my partner and I get this credit?

Technically, yes. However, the max combined credit is still on $750. If you choose to split it with a partner, you can both only get a credit of $375.

How do I claim the First-Time Home Buyers Tax Credit?

Getting the tax credit is easy. Just fill out line 369 on your Schedule 1 form at tax time.

You don’t need to provide any proof when you claim the FTHC, but you may be audited by the CRA in the future, who would request proof.

 

Home Buyers Plan

The Home Buyers Plan (HBP) is one of the most well-recognized first-time home buyer programs in Canada. Nearly every first-time home buyer will have heard of it and wonder if it’s a good idea.

The HBP allows you to take $25,000 from your RRSP to use towards the down payment for a home purchase. The kicker? You have to pay it back over 15 years.

If you are buying a home with a spouse or partner that also qualifies for the HBP, you can both take out $25,000 from your respective RRSPs for a total of $50,000.

 

Qualifying for the HBP

There are a few rules for qualifying for the HBP:

  • You can’t have lived in a home owned by you or your spouse in the past 5 years
  • You can’t have an outstanding balance from a previous HBP
  • You must make the withdrawal within 30 days of taking the title of the new home
  • Any money used for the HBP must have been in your RRSP for more than 90 days prior to withdrawal
  • You must sign an agreement and state that you intend to live in the home within the first year after purchase

Let’s break those rules down.

You can’t have lived in a home owned by you or your spouse in the past 5 years

This isn’t strictly true.

In order to be considered a first time buyer for both the HBP and FTHC, the wording says you can’t have owned a home in the last 4 years. So why do I say 5?

Because the way that the "four-year period" is calculated isn't exactly four years. From the government of Canada website, you can see that the four-year period:

Begins on January 1st of the fourth year before the year you withdraw funds. Ends 31 days before the date you withdraw the funds.

To make it a bit simpler to understand, think of it this way. The four-year period always begins on January 1st of the year you bought your house MINUS 4 years. If you bought a house in 2018, the period goes back to January 1st 2014. If you buy a house in 2020, the period goes back to January 1st 2016. The date you buy doesn't affect the start of the period.

The end of the period is determined by when you bought your house because the period ends 31 days before the  purchase date.  In most cases, that will be the previous month, except when you purchase on the 30th or the 1st day of a 31-day month.  In that case, it'd be at the end of the month previous. Here are some examples marked out on a  calendar:

Since most home purchases happen in the spring and summer, it’s most likely that the length of time will be around 4 and a half years. After 4 years and 11 months, everyone will have waited long enough to be considered a first-time homebuyer.

 

You can’t have an outstanding balance from a previous HBP

You can requalify for the HBP roughly every 6 years, if you wanted. It’s not recommended, and almost guaranteed to lose you money, but possible. Since you can requalify faster than 15 years, it’s possible that you may have an outstanding HBP balance when buying another home.

In that case, you wouldn’t qualify for the HBP. You would have to pay back the HBP loan entirely, even if you don’t plan on using those funds for the latest HBP.

 

You must make the withdrawal within 30 days of taking the title of the new home

It may seem a little counter-intuitive, but you don’t have to actually take the money out of your RRSP immediately when making your down payment.

If you have enough money for a down payment without withdrawing from the HBP, you can still use the HBP. If you decide to, you can wait until up to 30 days after getting the title to withdraw the funds.

 

Any money used for the HBP must have been in your RRSP for more than 90 days prior to withdrawal

You can’t deposit money immediately before a home purchase for a huge tax refund then withdraw it for a down payment. You have to put the money in at least 90 days before you use it for the HBP.

If you know you’re going to buy a house more than 90 days in the future, you can make a large deposit in one year for a large tax deduction, then use that money for a down payment.

That may not be likely, since you would have to have both a large amount of money and a lot of contribution room, but is possible.

 

You must sign an agreement and state that you intend to live in the home within the first year after purchase

You can’t use the HBP if you’re buying an investment property.

This is both a positive and a negative. You’ll have to pay out of your normal accounts or TFSA for any investment property, but it allows you to still be considered a first-time home buyer if you buy a home to live in later.

 

GST/HST New Housing Rebate

The GST/HST New Housing Rebate (NHR) isn’t strictly a first-time home buyer’s program, but can benefit them if they’re buying a pre-construction house.

The NHR only applies to newly built or substantially renovated houses. It works by refunding a portion of the GST or HST paid on the purchase of a newly built home. Purchasing an existing home doesn’t require you to pay GST/HST, so you can’t get a rebate.

What’s the max rebate?

When you claim the NHR, you aren’t getting back 100% of the tax paid. The rebate is capped at 36% of the GST (or the GST portion of the HST) paid on houses valued up to $350,000. That works out to $6,300.

For houses worth between $350,000 and $450,000, you will get a progressively smaller rebate. After $450,000, there’s no rebate available.

For some provinces (Ontario, British Columbia and Nova Scotia) there’s an additional rebate on the provincial portion of the HST as well. This is calculated separately from the GST portion and is added on to your rebate.

Yes, that means home buyers in HST provinces get more money back than GST provinces.

In Ontario, for example, you can get an additional 75% of the PST portion of the HST rebated, up to a cap of $24,000).

Let’s take a look at a few examples:

 

Location

Price

GST/HST Paid

GST/HST Rebate

Percentage Rebated

Home 1

Saskatchewan

$380,000

$19,000

$4,410

23%

Home 2

Ontario

$320,000

$41,600

$24,960

60%

Home 3

Newfoundland and Labrador

$350,000

$17,500

$6,300

36%

 

Rebate for Renovations

You can still be eligible to receive this rebate if you already own your home and just made substantial renovations to it.

Be warned: the bar for “substantial” is quite high. You have to be able to prove that 90% of the interior of the home was removed or replaced.

In order for additions to be eligible for the rebate the additions have to increase the living space of your home by a factor of 2.

 

How do I claim the rebate?

If you are buying a construction unit from a developer, they may factor the rebate amount into the price of the unit, then apply for it on your behalf.

If you are building, or hired a company or contractor to build, your home, then you have to fill out a few tax forms at tax time. You can view the full list of necessary tax forms here.

 

Land Transfer Tax Rebate/Refund

The Home Buyers’ Plan (HBP) is one of the most well-known home buying programs in Canada for first-time buyers, but the Land Transfer Tax Rebate is the best one – if you’re in a province that has it.

There are only three provinces that offer land transfer tax rebates: Ontario, British Columbia, and Prince Edward Island.

No other provinces or territories have land transfer tax refunds or rebates.

 

Ontario Land Transfer Tax Refund

A first-time homebuyer, for the purposes of the Ontario Land Transfer Tax Refund, is defined as someone who:

  1. Is at least 18 years old
  2. Has never owned a home or an interest anywhere in the world
  3. Has a spouse that has never owned a home while they were their spouse

You are not eligible for this refund even if the house you owned was a gift or inheritance. There is also no way for you to ever qualify as a “first-time” homebuyer again.
This rule is a lot more stringent than the First-Time Home Buyers’ Tax Credit or Home Buyers’ Plan, which only require you to not have owned a house in the past four years.
The refund is the exact amount of the land transfer tax owed, up to a maximum of $4,000.

Municipal Land Transfer Tax Rebate (Toronto)

A first-time homebuyer, for the purposes of the Municipal Land Transfer Tax Rebate, is defined as someone who:

  1. Is at least 18 years old
  2. Occupies the house as their principal residence no later than nine months after they claim ownership
  3. Has never owned a home or an interest anywhere in the world
  4. Has a spouse that has never owned a home while they were their spouse
  5. Is a Canadian citizen or permanent resident. If they become a resident or citizen within 18 months, they may apply for the rebate.

The rebate is the exact amount of the municipal land transfer tax paid, up to a max of $4,475.
Purchasing a property in Toronto as a first-time homebuyer can mean a rebate of up to $8,475.

 

British Columbia First Time Home Buyers’ Program

The B.C. First Time Home Buyers’ Program isn’t as comprehensive as Ontario’s. 
The max rebate value is $8,000, but only applies to properties that are:

  1. Located in B.C.
  2. Used only as a principal residence
  3. Have a value of less than $500,000
  4. Are smaller than 0.5 hectares

There is the possibility of a partial rebate if the home is valued between $500,000 and $525,000, but it is cut off completely after $525,000.

Fair Market Value

Exemption Amount

Tax Payable

Under $500,000.00

Full amount

$0

$500,000.00

$8,000.00

$0.00

$501,000.00

$7,699.20

$320.80

$502,000.00

$7,396.80

$643.20

$503,000.00

$7,092.80

$967.20

$504,000.00

$6,787.20

$1,292.80

$505,000.00

$6,480.00

$1,620.00

$506,000.00

$6,171.20

$1,948.80

$507,000.00

$5,860.80

$2,279.20

$508,000.00

$5,548.80

$2,611.20

$509,000.00

$5,235.20

$2,944.80

$510,000.00

$4,920.00

$3,280.00

$511,000.00

$4,603.20

$3,616.80

$512,000.00

$4,284.80

$3,955.20

$513,000.00

$3,964.80

$4,295.20

$514,000.00

$3,643.20

$4,636.80

$515,000.00

$3,320.00

$4,980.00

$516,000.00

$2,995.20

$5,324.80

$517,000.00

$2,668.80

$5,671.20

$518,000.00

$2,340.80

$6,019.20

$519,000.00

$2,011.20

$6,368.80

$520,000.00

$1,680.00

$6,720.00

$521,000.00

$1,347.20

$7,072.80

$522,000.00

$1,012.80

$7,427.20

$523,000.00

$676.80

$7,783.20

$524,000.00

$339.20

$8,140.80

$525,000.00

$0

$8,500.00

If one of the purchasers doesn’t qualify for the First Time Home Buyers’ Program (for example, if they had owned a home before), you are still eligible to receive 50% of the rebate.
In order to qualify for the program, on the date the property is registered you must:

  1. Be a Canadian citizen or permanent resident
  2. Have lived in B.C. for 12 consecutive months, or have filed two income tax returns as a B.C. resident in the past 6 years
  3. Have never owned a home or an interest anywhere in the world
  4. Have never received a first time homebuyers’ exemption or refund

 

Prince Edward Island Real Property Transfer Tax First-Time Home Buyers Exemption

The P.E.I exemption covers 100% of the cost of the land transfer tax.
In order to qualify for the P.E.I exemption, you must:

  1. Be a Canadian citizen or permanent resident
  2. Have kept your principal residence in P.E.I for the previous six consecutive months
  3. Have never owned a home that was your principal residence anywhere in the world
  4. Have never obtained a first time homebuyers’ exemption in any jurisdiction
  5. Occupy, or intend to occupy, the property as their principal residence

If you haven’t lived in P.E.I for six months before purchasing a home, you can still qualify after having lived in the property for six consecutive months after purchase. 
If you don’t immediately occupy the property for six consecutive months following the purchase, you must forfeit the exemption.

 


Chris Chris 01/22/2019
Canadian personal finance buff and all-around writing enthusiast, Chris loves breaking down complicated money ideas to show that they're really not so complex. 
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