Zoocasa - After just over four years from launching, the Canada Mortgage and Housing Corporation (CMHC) announced last week that the first-time homebuyer incentive is being discontinued. The cutoff for submitting new applications or resubmitting existing ones to the program is at midnight on March 21, 2024.
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While this decision may seem like a blow to affordability for first-time home buyers, a variety of alternative options remain accessible across Canada. Here’s what you need to know about the change and what other incentives are available for first-time home buyers in Canada.
What is the First-Time Homebuyer Incentive?
The first-time homebuyer incentive was originally introduced in 2019 to help first-time buyers get into the housing market by reducing monthly mortgage payments. The government took on partial ownership of the property and would offer a 5% or 10% contribution towards the down payment in the form of a shared equity mortgage.
To participate in the program, buyers’ combined qualified income can not exceed $120,000, at least one buyer must be a first-time home buyer, and you must have the minimum down payment. These eligibility requirements have been cited as one of the reasons why the program is being discontinued, as many first-time home buyers are not eligible.
Alternative Incentives for New Homebuyers
Fortunately for Canadian homebuyers, numerous incentives remain available to assist in financing your first home purchase. Depending on which city or province you live in, you may have access to even more rebates or incentives than the following listed below. It’s important to check with your local municipal or provincial government to discover additional rebates that may be available specifically in your area.
The Home Buyers’ Plan
The Home Buyers’ Plan allows first-time homebuyers to withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSP) for a down payment on a home. The limit is per individual, meaning if you are buying a home with a partner then you both can withdraw up to $35,000 each, bringing the total amount to $70,000. Funds withdrawn from the RRSP must be paid back over 15 years.
First Home Savings Account (FHSA)
The First Home Savings Account (FHSA) became available in April 2023 and allows first-time homebuyers to contribute up to $8,000 to the account annually, tax-free. The account acts as a tax-free savings account (TFSA), however, the money withdrawn from the account must be used for the purchase of your first home to avoid paying tax on it.
Land Transfer Tax Refund in Ontario, British Columbia, and PEI
After you’ve purchased your home, a few expenses must be paid upfront as part of the closing costs. Land transfer tax is part of the closing costs and, depending on the home you bought, can be quite a significant amount. To help first-time homebuyers manage these expenses, a land transfer tax rebate exists in Ontario, British Columbia, and Prince Edward Island. It’s important to note that you can only claim this rebate once.
In Ontario, the maximum LTT rebate is $4,000 and must be applied within 18 months of the transfer date. In British Columbia, if you purchase a property for under $500,000, then you qualify for a full rebate and if the property is above $500,000 then you may qualify for a partial rebate. In order to receive the full LTT rebate in PEI, the purchased home must be between $30,000 and $200,000.
The Home Buyers’ Amount (HBA)
The Home Buyers’ Amount (HBA) is a non-refundable tax credit for first-time home buyers. Homebuyers can declare $10,000 on their tax return for the year in which they bought their qualifying home. Qualifying homes include existing homes and homes under construction.