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Loans and borrowing

4 financial incentives for your first property

October 12, 2023
Angela Iermieri*
Financial Planner | Desjardins Group

From interest-free loans to tax holidays, tax credits and HBPs, there are many sources of financial support available to help you achieve your goal of buying a home.

With the real estate market showing no signs of slowing down and prices continuing to rise, you may be feeling a lot of stress and uncertainty. After drawing up your budget and getting preapproved for a mortgage, have you looked into the various financial incentives the government offers for first-time homebuyers? Follow the advice of our experts, tax specialist Josette St-Amand and financial planner Angela Iermieri. They've got tips to help you achieve your homebuying dreams while easing your financial worries.

1. Interest-free loan of up to 10% of the home's value

The First-Time Home Buyer Incentive, which came out in the 2019 federal budget, is for first-time homeowners whose family income is $120,000 or less. To qualify, you must make the minimum 5% down payment, which the incentive does not replace; it simply provides additional financial support to make it easier to buy a home. You'll reduce the borrowing amount and mortgage payments. It's an interest-free loan, administered by the Canadian Mortgage and Housing Corporation (CMHC) External link. This link will open in a new window., that allows homebuyers to finance 5% or 10% of their home, which must be repaid after 25 years or when the house is sold, whichever comes first.

Repaying the home buyer incentive

"The loan repayment amount is calculated on the home's fair market value at the time, so if the incentive is 5%, you'll have to pay 5% of the new value of the home. The higher the home value, the higher that amount will be. It can be repaid in full at any time with no pre-payment penalty." - Angela Iermieri, financial planner.

2. Withdraw up to $35,000 thanks to the famous HBP

It can be challenging to save for a down payment, but what's nice is that you can take up to $35,000 ($70,000 per couple) from your RRSP(s) to help finance it. You won't pay tax or interest on the withdrawal, but you have to start repaying it in the second year after you take it out, which you can spread over 15 years. If you don't have that amount, you could use the HBP with no RRSP "90-day loan" strategy.

Another benefit of the HBP

The bigger your down payment, the less mortgage loan insurance you'll have to pay. And if you're putting at least 20% down, you might not have to take out any at all.

3. Tax credits for first-time homebuyers (Quebec residents)

If you just bought your first home or haven't lived in another home owned by you or your partner during the current year or for the past 4 years, you might be eligible for a tax credit for first-time homebuyers. Offered by the federal and provincial governments, this $10,000 non-refundable tax credit could lower your tax bill by $1,253 at the federal level and $1,400 in Québec ($1,500 prior to 2023), for a combined total of $2,653. Before you file your tax return, check whether you qualify: 

Line 31270 - Home buyers' amount (Canada.ca) External link. This link will open in a new window.  External link. This link will open in a new window.

Line 396 - Home buyers' tax credit (revenuquebec.ca) External link. This link will open in a new window.

Tell your accountant that you've bought a new property. They will verify your eligibility for this credit.

 External link. This link will open in a new window.  External link. This link will open in a new window.

4. Municipal and "welcome" tax holidays

To attract new residents, some municipalities offer tax holidays for new buyers, generally varying from 1 to 5 years. In some municipalities, you're exempt from property taxes and in others, land transfer taxes (commonly known as "welcome taxes"). Before you buy, contact your municipality to find out the details.

Property taxes

If your municipality doesn't offer monthly payment, divide the annual amount and add it to your mortgage payment. Put that money in a dedicated account and use it to pay your annual taxes.

Angela Iermieri

Financial planner

3. Tax credits for first-time homebuyers (Ontario residents)

If you just bought your first home or haven't lived in another home owned by you or your partner during the current year or for the past 4 years, you might be eligible for a federal tax credit for first-time homebuyers. This $10,000 non-refundable tax credit could lower your tax bill by $1,500. Before you file your taxes for this year, check the homebuyer's amount and the credit you can claim External link. This link will open in a new window..

Tell your accountant that you've bought a new property. They will verify your eligibility for this credit.

 Tell your accountant that you've bought a new property. They will verify your eligibility for this credit.  External link. This link will open in a new window.

4. Land transfer tax refund for first-time homebuyers

First-time homebuyers in Ontario can receive a full or partial refund of their land transfer tax up to a maximum of $4,000. Find out if you qualify and if your home is eligible External link. This link will open in a new window..

Also, if the home is purchased in Toronto, there's an additional municipal transfer tax. It applies within the following boundaries: Steeles Avenue as the North border, Etobicoke as the West border, Scarborough as the East border and Lake Ontario as the South border.

First-time homebuyers can be refunded for this tax, up to a maximum of $3,725.

Even though these incentives make it easier to buy a home, your decisions should always be based on your financial capacity.

Angela Iermieri

Financial planner