For years, the federal government touted the many benefits of the first-time home buyer incentive. This plan was supposed to help younger people get into the real estate market by easing the burden of the down payment…but what happened to the first-time home buyer incentive in Canada?
Out of nowhere, they cancelled the incentive in early 2024. We still get many inquiries about it from clients due to its former popularity. Often, people are dismayed to find that it is no longer available. However, there are still resources that can help you find and secure your home, and these tend to be more practical in the real world.
Looking for more first-time home buyer tips and advice? You’ll find plenty of insight in our Buying Checklist, which you can download for free right here.
The Now-Defunct First-Time Home Buyer Incentive
It may seem a moot point to talk about the first-time home buyer incentive since it no longer exists, but it still pops up all over the Internet. Knowing what it was will help prevent you from wasting your time so you can explore actual possibilities of assistance when buying your first home.
Under the now-obsolete first-time Home Buyer Incentive, the federal government would put up anywhere from 5 to 10% toward your home. It helped reduce the burden of coming up with a large sum for a down payment.
It worked on paper, at least. But this incentive also came with strings attached. You would have to repay the loan within 25 years or when you sold the home, whatever came sooner. Though technically it was interest free, the government would have been entitled to a portion of the increase in the value of your house.
For example, imagine you bought a house for $500,000. You received $25,000 from the government for a total of 5%. If the value rises and you later sell the home for $600,000, you still have to pay back 5%. Except now 5% worked out to $30,000.
It was a good plan in theory, just not without its flaws. Stringent eligibility requirements and low uptake rendered the program ineffective, especially with real estate values as high as they are.
Are you still deciding whether now is the time to buy your first home? The posts below can help you weigh your options:
- How to Buy a Home in Peterborough With Help From Family
- Why Now Is the Time to Buy a Home in Peterborough
- Should You Buy or Rent a House in Peterborough?
Other First-Time Home Buyer Programs
One incentive may be gone, but fortunately, there is other help for first-time home buyers. Unfortunately, none of these involve government help for first-time home buyers. However, that also means they don’t have an equity share in your property. Let’s take a look at some of the other plans in more detail.
First Home Savings Account
Since this program kicked off in April 2023, you might say that it is a replacement for the First-Time Home Buyer Incentive, and a more effective one at that. Instead of using the government’s money, you use your own, which gives you more control.
The First Home Savings Account (FHSA) contribute up to $8,000 to a tax-free investment account to a maximum of $40,000. All investment earnings are also yours and can go toward your home purchase. After buying your house, you can transfer any leftover funds to an RRSP or simply close the account.
Thinking about relocating? Check out our Complete Peterborough Relocation Checklist.
First-Time Home Buyer Plan
The Home Buyer Plan allows you to draw upon your existing savings and investments to purchase your first qualifying home. Under the newest guidelines, you can withdraw a maximum of $60,000 from a tax-sheltered account without a tax penalty.
If you have a partner who is also a first-time home buyer, then you can both tap into your investments and double the benefit to $120,000. In fact, you can both use the First Home Savings Account as well to expand your purchasing power even more.
The downside of both of these plans is that it can take a long time to save and earn sufficient funds to cover your down payment on a home. The best advice is to start saving as early as you can. A few dollars here and there may not seem like much, but it can add up over time, especially when compounded with interest or dividends.
Should your first home purchase be in Peterborough? There are a few great reasons to consider it, as you’ll see in the posts below:
- Is Peterborough a Good Place to Live?
- Is Peterborough Dog Friendly?
- Why You Should Consider Moving to Peterborough
First-Time Home Buyer Tax Credit
What is the first-time home buyers tax credit? First-time home buyers in Canada can look forward to a little relief come tax time. With the First-Time Home Buyer Tax Credit, you can claim up to $10,000, which will reduce the amount owing by $1,500. A tax credit may not seem exciting, but it does often result in a refund in the year you buy your home.
Those funds could go toward your moving expenses, or even better, your home decor allowance! Every little bit helps as you begin achieving the impressive milestone of buying your first house.
Do you want personalized guidance through all of the steps to buying a house for the first time? Our Peterborough real estate agents are here with help and advice for first-time home buyers. Reach out to team@jeffandkatie.ca or call 705-243-9797 to start the conversation today.
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