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Ghummaz Bhatti

Understanding the Programs of First-Time Home Buyers in Canada

Owning a home is a major milestone for many Canadians. However, for first-time homebuyers, the process can be overwhelming. Financial constraints, the lack of knowledge about the buying process, and the high cost of homeownership are some of the challenges that first-time homebuyers face. Fortunately, first-time home buyer programs are available to help alleviate some of these challenges. This article will explore first-time home buyer programs available in Canada.

What are First-time Home Buyer Programs? 

First-time home buyer programs are initiatives by the government or private organizations to help first-time homebuyers purchase a home. These programs provide financial assistance, education, and other resources to help first-time homebuyers navigate the complex home-buying process.

Types of First-time Home Buyer Programs 

There are different types of first-time home buyer programs available in Canada. Here are some of the most common programs:

1. Home Buyers’ Plan (HBP) 

The Home Buyer’s Plan is a program initiated by the government to help those buying a home for the first time. It enables them to withdraw a maximum of $35,000 from their RRSP without any tax deduction, which they can use to procure or construct a house. The HBP allows first-time homebuyers to use this as a down payment without tax penalties. The amount withdrawn must be repaid within 15 years.

2. First-time Home Buyer Incentive (FTHBI)

The First-time Home Buyer Incentive is a government program that provides a shared equity mortgage with the federal government. The program provides 5% of the buying cost for a previously owned home or 10% for a newly built property. The incentive helps first-time homebuyers reduce their monthly mortgage payments without increasing their down payment.

3. First-Time Home Buyers’ Tax Credit (HBTC)

The HBTC is a tax credit that gives first-time homebuyers up to $5,000 in tax relief but cannot be refunded. The credit can be claimed on the homebuyer’s tax return and can help offset some of the costs associated with purchasing a home, such as legal fees and land transfer taxes. To qualify for the HBTC, the homebuyer must be a Canadian resident, have not owned a home in the previous four years, and must have purchased a qualifying home. The credit can be claimed in the purchase year or carried forward to future years.

4. Mortgage Loan Insurance 

Mortgage loan insurance is a program offered by the Canada Mortgage and Housing Corporation (CMHC) that helps first-time homebuyers purchase a home with a down payment of less than 20%. The insurance protects the lender in case the borrower defaults on the loan. This program helps first-time homebuyers access homeownership without saving a large down payment.

5. New Tax-Free First Home Savings Account (FHSA)

The new Tax-Free First Home Savings Account (FHSA) is a savings account created to help first-time homebuyers save for a down payment. This account allows individuals to deposit up to $8,000 annually, with a lifetime maximum of $40,000. The savings grow tax-free, and there are no taxes on withdrawing funds to buy a first home. The FHSA is available to Canadian residents who are 18 years or older and have never owned a home. This program incentivizes first-time homebuyers to save for their down payment and helps make homeownership more accessible.

Conclusion 

First-time home buyer programs are an excellent resource for Canadians looking to purchase their first home. These programs offer financial assistance and other resources to help first-time homebuyers navigate the complex home-buying process. By taking advantage of these programs, first-time homebuyers can achieve their dream of homeownership and build a better future for themselves and their families.

Need help navigating the complex world of mortgages? Look no further than Ottawa Mortgage Services. Our team is the best mortgage agent in Ottawa and can guide you through securing the best mortgage for your first home purchase. Contact us today to learn more about our services and how we can help you achieve your homeownership goals.

Contact Ottawa Mortgage Services to learn more

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