Photo by Tierra Mallorca on Unsplash

If you're considering becoming a first-time buyer, there are tools to help you. Check out the below financial vehicles available to help you reach your goals. 

First Home Savings Account

Since April 1, 2023 the federal government has offered a tax-free First Home Savings Account that allows Canadians under 40 to save up to $40,000 in a tax-free account. The money will be available to them to put toward the purchase of their first home.

• The contributions to the account are tax-deductible (like an RRSP) and the income from the investment is tax-free
• When you take the money out of your account to purchase your home, it is not taxable
• The FHSA can remain open for a maximum of 15 years 
• To qualify as a first-time homebuyer, you or your spouse must not have owned a principal resident where you lived during the calendar year before the account is opened or in the preceding four calendar years 
• You can contribute up to $8,000/year to a lifetime maximum of $40,000.  Any unused portion of the year's contribution can be transferred to a future year
• If you don't use the money in your FHSA to buy a house, you can transfer it to your RRSP (without deducting from your RRSP maximum contribution). 

Ask your financial adviser how to set up your tax-free First Home Saving Account.

Home Buyers' Amount Tax Credit

The First-Time Home Buyers’ Tax Credit (HBTC) allows first-time home buyers to claim a $10,000, non-refundable income tax credit, which could result in tax savings of up to $1,500. There's no approval or application process - just enter the Home Buyer's Amount of $10,000 on line 31270 of your tax return.

You can split this with your spouse or common-law partner, but the combined claim must not exceed $10,000. The credit results in a $1,500 rebate on the taxes you owe for the year BUT if you are getting a refund, it isn't added to the refund as it is a non-refundable tax credit. So, talk to your accountant and plan ahead. 

To be eligible, you (or your spouse or common-law partner) must:

• Buy a qualifying home registered in your (or your spouse’s or common-law partner’s) name. It can be an existing property or under construction and includes single-family structures, townhouses, condo units, apartments, mobile homes and more.
• Be a first-time home owner, meaning that you did not reside in a property that you or your spouse or common-law partner owned in the previous four years.
• The qualifying home must become your principal place of residence within one year after it’s bought or constructed.

Eligible persons with a disability can apply for the tax credit without needing to be a first-time home buyer.

Home Buyers Plan

The Home Buyers' Plan (HBP) is a program that allows you to withdraw from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or a related person with a disability. 

Currently, the HBP withdrawal limit is $35,000. This applies to withdrawals made after March 19, 2019. The HBP allows you to pay back the withdrawn funds within a 15-year period.

Eligibility:

• You must be considered a first-time home buyer
• You must have a written agreement to buy or build a qualifying home, either for yourself or for a related person with a disability
• You must be a resident of Canada when you withdraw funds from your RRSPs under the HBP and up to the time a qualifying home is bought or built
• You must intend to occupy the qualifying home as your principal place of residence within one year after buying or building it. If you buy or build a qualifying home for a related person with a disability or help a related person with a disability to buy or build a qualifying home, you must intend that the related person with a disability occupies the qualifying home as their principal place of residence
• In all cases, if you have previously participated in the HBP, you may be able to do so again if your repayable HBP balance on January 1st of the year of the withdrawal is zero and you meet all the other HBP eligibility conditions

Ourboro

Ourboro is a non-government vehicle available to home buyers in Ontario. This is not meant to be an endorsement for Ourboro. Their company presented their product recently at a panel discussion I attended. Please do your due diligence to determine if this is the right option for you. 

According to Ourboro, this is what they do:

• "Our down payment contribution is not a loan, so there is no interest or additional debt. Instead, we buy a share of your home. When you decide to sell, we each receive our fair share of the gains or losses."
• The company will co-invest up to $250,000 to help you reach a 20% down payment on your house
• To be eligible to participate in the program you must qualify for a mortgage and have at least 5% saved for a down payment
• You must have a credit score of at least 600
• Provide your mortgage  broker with a notice of Assessment (NOA) for the most recent tax year

Ourboro is also no longer able to invest in condos that are more than 30 years old.