The Government of Canada, the Quebec government and various cities, including Montreal offer a number of government programs for first-time home buyers that help homebuyers save on the purchase of their first home. From tax-credits to down-payment plans, to even receiving a lump-sum payment for first-time buyers, there are a wealth of programs available to save the first-time buyer money on their first home.
Many of my first-time buyer clients ask me about government tax credits and programs that can help with the financial burden of buying their first home.
I thought I’d take this post to outline four of the biggest government programs for first-time home buyers as well as tax-credit that could save you thousands of dollars on the purchase of your first home.
The Canadian government offers a First-Time Home Buyers Tax Credit for qualifying buyers and qualifying homes. You can claim up to $5000 against your income to a maximum refund of $750 if you and/or your spouse bought a qualifying home. In order to qualify as a first-time buyer neither you nor your spouse could have owned a home in the current year or the four years preceding the current year. In the case of a person who has a disability, if the home helps the person live in a better environment suited to their needs and care, they also qualify, even if they owned a home in the current year or the four years preceding. The same applies to anyone buying a home for a disabled relative. A qualifying home for first-time buyers can be an existing or new home (detached, townhome or semi-detached), condo, apartment, or co-op in Canada as long as it is in the first-time buyers (or their spouse’s) name. Either or both of the spouses can claim the tax credit and even if you buy with qualifying friends, you can divide the claim, to a total of $5000.
If you are a first-time buyer or looking to purchase a home for a disabled relative, you can check out the Canada Revenue Agency’s HBTC website.
If you’ve been busy squirreling money away in your RRSP and are thinking about making a home or condo purchase, as a first-time buyer this is a great program to use to your advantage.
How it works is if you or your spouse did not own a home in the previous 4 years and if you did, if it was not your personal residence, then you can withdraw up to $25,000 per person from your RRSP’s tax-free when you purchase your first-home. Or a total of $50,000 per couple. The money must be in the RRSP for a minimum of 90 days and you will have 15 years to pay back the money into your RRSP, with payments that must be made every year (1/15th each year), or you can pay it back earlier if you wish. If you fail to make a payment in a given year it will be taxable for that year. Basically all existing and new homes, condos and revenue properties will qualify. If you have savings in your RRSP but are missing the liquid cash required for a down-payment, this may be a great way to get into ownership.
you can withdraw up to $25,000 per person from your RRSP’s tax-free when you purchase your first-home. Or a total of $50,000 per couple
But what if you haven’t contributed to your RRSP? A great solution if you have the money is to put the money into your RRSP and get all the tax benefits of the contribution and then withdraw it after 90 days for the down payment. Remember you can go back from both you and your spouse’s unused contribution room from a number of previous years. Even if you haven’t been contributing to an RRSP and need additional funds for a down payment, an interesting option can be to borrow the amount from a financial institution for 90 days and then immediately pay it back after 90 days from the amount your withdraw from the RRSP (tax-free), and use the tax refund as additional downpayment on the home. You will then have 15 years to pay back the funds into the RRSP.
A great solution if you have the money is to put the money into your RRSP and get all the tax benefits of the contribution and then withdraw it after 90 days for the down payment.
For more information take a look at the Canada Revenue Agency’s website.
When you purchase a new home or condo in Quebec you are required to pay GST and QST taxes on the purchase, which you do not have to pay if you buy an existing home from the previous owner, if they are not a business. The same applies to the costs to substantially renovate your existing home. If you purchase a new home or condo up to a maximum of $450,000 for the GST and up to $300,000 for the QST, you can claim the New Housing Rebate. You can claim up to a maximum of 36% of the GST and 36% of the QST paid (up to a maximum of $6,300), however for the GST the amount you can claim decreases for homes priced $350,000 or more and likewise for the QST on homes priced $200,000 or more.
For more information New Housing Rebate on the Revenu Quebec website.
Government programs for first-time home buyers also exist at the city level. Montreal and several other cities and municipalities offer home ownership programs to encourage first-time home buyers to move into their areas. The City of Montreal’s Home Ownership Program offers a lump-sum payment to first-time buyers who purchase an eligible (up to 3 units) building, condo or home. Eligible buyers are either first-time buyers who buy a new residential unit, families with at least one child under 18 who are first-time buyers and purchase an existing building with 1-3 above-ground units, or families with at least one child under 18 who already own and buy a newly-built 3-bedroom property. Buyers can quality to receive up to $6,250 in lump sum payment and 100% refund of the real estate transfer tax (otherwise known as the welcome tax). You could be looking at up to $10,000 in money back in your pocket.
Be sure to check on the websites of the municipality you are looking to buy in for their eligible programs and refunds. Check out the City of Montreal’s housing section for all the details on the Montreal programs.
Buying your first home can be an exciting and rewarding process, and there are a number of government programs for first-time home buyers at all three levels of government that exist and can help the first-time buyer save as much as possible on the purchase of their first-home.
A good real estate broker can advise you on the many government programs for first-time home buyers offered by the Canadian, Quebec and municipal governments that you may be able to benefit from, depending on your particular situation and the type of property you are buying or renovating. If you are thinking of making a purchase or sale of real estate, I invite you to contact me for other ways I can help you save thousands of dollars on your first home purchase.
An earlier version of this article I wrote appeared in the Montreal Times newspaper.
I'm Andrew Mitchell, Chartered Real Estate Broker and Owner of Vistacor Realty Group. I help buyers, sellers and investors in the West Island, Montreal and Vaudreuil-Soulanges areas buy and sell homes. My goal is to provide you with useful, straight-forward insights and relevant real estate market updates. Contact me with any questions. Follow me on twitter here.