5 Incentives for First Time Homebuyers
1. First Time Home Buyer's Program
Save Up to $8,000
The first time home buyer's program is to help new homeowners with the cost of property transfer tax. Property transfer tax is charged by the government of BC whenever a new piece of property is purchased. Although there are conditions in using this benefit, it can cover the cost of property transfer tax on a property of up $500,000.
How is property transfer tax calculated on a $500,000 property? How can I save this much?
Property transfer tax is 1% on the first $200,000 and 2% on the remaining $200,000 - $2,000,000.
Therefore, 1% of $200,000 is $2,000. Then there is a 2% on the remaining amount. 2% of $300,000 is $6,000.
There is a potential to save $8,000 on your first purchase.
2. First Time Home Buyer's Incentive
Save Up to $15,000
The first time home buyer's incentive is relatively new program introduced by CMHC in late 2019. It gives first time home buyers the opportunity to borrow up to 5-10% of the downpayment for a home. This has to be paid in fair market value after 25 years, or when the property is sold; Whichever one is first. However, if you're a new home buyer with only 10% downpayment, you may be eligible to borrow an additional 10% which will eliminate the cost of high premium insurance.
Example of First-Time Home Buyer's Incentive
As Vancouver property go up in value, its become harder for individuals to save enough for a downpayment. Imagine you're looking for a newly constructed apartment worth $500,000. Except you only have $50,000 in savings. By using the CMHC premium insurance calculator, you can view how much additional cost you'll have to pay. At a 3% interest rate, $13,950 will be added to your mortgage. You'll be paying interest on this amount since its added to your mortgage.
3. Home Buyers Plan
Saving vary depending on circumstance
The homebuyers plan recently increased the amount you can take from your RRSP of up to $35,000 in 2019. The amount taken out has to be repaid over 15 years. (1/15 per year). The amount is $35,000 per individual meaning your partner will be able to contribute an additional $35,000 with a total contribution limit of $70,000. This is a great option if an individual doesn't have enough downpayment, or if they expect annual raises or bonuses in their existing income.
Repayment when using the Home Buyers Plan
1/15 of the existing amount has to be paid back each year over a 15 year period. If the maximum amount of $35,000 is taken out. $2,334 will have to be paid back each year. Repayment start on the second year after you withdraw the funds. If you taken the funds out in 2020, repayment will start 2022.
4. First Time Homebuyers' Tax Credit
Save Up to $750
First time homebuyers' tax credit was first introduced to cover legal expenses, appraisal, and other taxes. It must be claimed in the first year of purchasing your house and is non-refundable
How is the new tax credit calculated
It's calculated by multiplying the lowest personal income tax rate for the year (15% in 2009) by $5,000. This generally approximates to around $750 in rebate.
5. GST/HST New Housing Rebate
Save Up to $10,000+
This rebate is to help recover some cost for new, or substantially renovated housing. This rebate is meant for primary residency, with a built house with market value of up to $450,000. Rebate varies greatly depending on the situation.