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Published in

Real Estate

15 Sep 2021

Every single time you pass across your favorite house or visit housewarming party of your acquaintance, a thought might have startle you when will I be organizing a housewarming. If you have fabricated your mind to buy your first ever dream house read through the article and also read our article on MAKE A CAPTIVATING OFFER AND GET THE HOUSE!!!

Two people with first home buyer carpet

First-time homebuyer incentive

If this is the first time you are buying a house in Canada, you can take advantage of First-Time Home Buyer Incentive. It is a government-approved program to accelerate affordability for Canadians to purchase their first home. It offers a DEPOSIT of up to 5% or 10% of the purchase price, which you have to pay back when you sell the property or within 25 years from the purchase date. Lets see how does it work?

  • Suppose you receive a 5% incentive of the home’s purchase price of $500,000, or $25,000, but now your home values $300,000, your payback would be 5% of the current value or $15,000.

  • Alike the price decrease, if your property price increases to $1 million, your repayment value will be 5% of the current value or $50,000.

You can get 5%- 10% on a preconstruction house, 5% on an old house, and 5% on a newly constructed home. The qualified residential property includes: - Single-family homes - Semi-detached homes - Duplex - Triplex - Fourplex - Townhouses - Condominium units - Mobile homes What are the criteria to be eligible for a First-time homebuyer incentive?

  • People who are purchasing the property for investment purposes do not qualify for this program.
  • Your total annual income should not be above $120,000 except if you live in Vancouver, Toronto, or Victoria. The residents in the cities, as mentioned earlier, earn no more than $150,000 )
  • If you have any other debts, they should not accumulate more than four times your income. The residents in the cities, as mentioned earlier, do not have debt obligations more than 4.5 times of their income.)
  • It is the first time you and your spouse are buying a house in Canada.
  • You hold Canadian citizen, or permanent resident or temporary resident authorized to work in Canada.
  • You have the required minimum down payment with funds from a savings account, withdrawal/collapse of a Registered Retirement Savings Plan (RRSP), or a gift from a relative/immediate family member.
  • Your first mortgage accounts for no less than 80% of the property's value and is content to mortgage loan insurance.
House with sold sign

Home Buyers’ Plan (HBP)

HBP is a government program to help Canadians buy or build their dream home. It lets you withdraw funds from your Registered Retirement Savings Plans (RRSPs) before you retire. However, with a condition to pay back drawn money within a 15 years window. If you are withdrawing up to $35,000, your RRSP issuer will not hold back tax. You cannot draw RRSP if it is a locked-in or group RRSP fund. To draw money from RRSP, you should meet the following criteria:

  • You are a first-time homebuyer.
  • You hold a written agreement stating that you are building or buying a house.
  • You are a Canadian resident.
  • You aim to live at least one year in the house.
  • You can borrow money via HBP even if you have utilized it before. But make sure you have paid back all the withdrawn funds.
A girl with piggy bank suggesting to save money

How to save for your home?

To pay your house's deposit and upfront costs, you need to save a portion of your money every month. You can choose from the following:

Tax-Free Savings Account (TFSA)

This account allows you to save money or invest money free from tax obligations.

Saving with a Registered Retirement Savings Plan (RRSP)

As the name says, this account lets you save money to retire. You only pay taxes on RRSP savings when you withdraw the money.

You can also choose to invest in low-risk mutual funds, share market, short-term guaranteed investment certificates (GIC), and other options in the financial market.

If you have acquired the necessary down payment for your dream house. You can start looking for mortgage broker (read our article BUYING A HOUSE NEED MORTGAGE? ALL YOU NEED TO KNOW ) Also, read about the advantages of being a homeowner on THE EMOTIONAL AND FINANCIAL BENEFITS OF BEING A HOMEOWNER . If you have any questions on Ontario regulations regarding Housing for repair and maintenance for more information visit BUILDING A HOUSE OR BUYING ONE? ONTARIO HOUSE REGULATIONS TO KNOW .

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