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First time home buyers Incentive VS RRSP Home buyers plan
Buying a home for the first time is no easy task, and there are numerous factors to consider in order to make the best decision possible. To help individuals with this major purchase, the government offers two incentive programs: the First Time Home Buyer Incentive (FTHBI) and the RRSP Home Buyer Plan (HBP). In this article I will explain the difference between the 2 programs, and will tell you a broad overview of what is good and bad with these Canadian programs.
What is the first time home buyers incentive?
The first time home buyers incentive is a government run program through CMHC that gives you 5% towards your down payment of a used home, or 10% towards your down payment on a new home! The program is only available to Canadian citizens who have never owned a home before, or are buying their first home. This means that if you had a condo with your ex-wife, you won’t qualify. You also can’t buy a home that you already own, you must be buying a brand new home or one that has never been owned by anyone. The maximum purchase price for this program is $750,000 for new homes and $500,000 for used homes. You also have to qualify based on your income and debt load.
How Do I qualify for the first time home buyers incentive?
Are you a first-time homebuyer looking to get into the real estate market? If so, you may be eligible for the First Time Home Buyers Incentive. This program is available to qualified buyers who are purchasing their first home and can provide them with a 10% or 5% shared equity mortgage loan with the Government of Canada. Here’s what you need to know about qualifying for this incentive.
In order to be eligible for this program, potential borrowers must meet certain criteria such as having an annual household income of $120,000 or less and saving at least 5% of the purchase price as a down payment. They also must meet other requirements such as being a Canadian citizen or permanent resident and using the property as their primary residence in order to qualify.
The first time home buyer incentive is based on your total household income and your total household debt. Your household income must be less than $150,000 if you’re buying a new home, or $125,000 if you’re buying a used home.
Summary of the first time home buyers incentive
You are given 5% towards a new home or 10% for a new home.
Repayable loan, to be paid either when you sell the home or at 25 year mark
0% interest on the loan
You must still have your own down payment
You can qualify for more if you are in Vancouver, Victoria or Toronto
Based on your income
If you make more than $125,000 you cannot qualify
You can finance up to 4x your annual income
What is the RRSP Home Buyers Plan?
The RRSP Home Buyers Plan (HBP) is an advantageous program created by the Canadian government that allows first-time home buyers to withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSP) to purchase or build a qualifying home. The withdrawals are tax-free and can be used towards the down payment of a home. With the help of this plan, many Canadians have been able to purchase their dream homes without having to break the bank.
The HBP was designed with first-time homebuyers in mind but there are certain conditions for eligibility. To be eligible for this plan, one must not have owned a home in the past four years and must also meet other criteria set out by the Canada Revenue Agency (CRA). With the help of this plan, many Canadians have been able to purchase their dream homes without having to break the bank.
How to qualify for Canada’s RRSP Home Buyer Plan (HBP)?
With Canada’s RRSP Home Buyer Plan (HBP), you can withdraw up to $35,000 from your Registered Retirement Savings Plan (RRSP) to put towards the purchase of a home. To qualify for HBP, there are certain requirements that must be met. Firstly, an individual must be considered a first-time homebuyer by having not owned a primary residence in the past four years. Secondly, both potential buyers must each have RRSPs and open their own separate HBP accounts at any Canadian financial institution. Lastly, the withdrawn funds must remain in the HBP account for at least 90 days before being used as part of the down payment on their new home. The HBP is a great way for first-time home buyers to save money on their down payment.
Summary of the RRSP Home buyer plan
Allows you to take out up to $35,000 from your RRSP
For first time home buyers, or someone who has not lived in or owned a property for over 4 years
Interest free loan against your RRSP for 15 years
Start repayment at 2 year mark
Not debt serviced as a loan
Multiple people purchasing the same property can use this up to $35k each as long as they are first time home buyers.
Both the First Time Home Buyers Incentive and RRSP Home Buyer Plan offer beneficial programs for those buying their first homes. While both programs have advantages, it’s important to carefully consider your individual needs when deciding which one is best for you. Everyone’s financial situation is unique, so be sure to talk to me to determine which option would provide the most benefit before making any final decisions.
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Sean Rampersaud
Sean has been a mortgage broker in Canada for 14 years. We have helped countless amounts of clients achieve their mortgage goals! Call me anytime at 780-278-4847
