The Truth About Canadian First-Time Homebuyer Programs

If you're a first-time homebuyer, you're probably aware of some new changes that could help you buy a home. Today, we're going to dive into four upcoming programs that can make a difference and one major flop that didn't quite hit the mark.

The First Home Savings Account (FHSA)

The First Home Savings Account (FHSA) is a new program announced in late 2023. Here's what you need to know:

• Annual Contribution: You can contribute up to $8,000 annually.
• Initial Investment: You can open an account with as little as $2.
• Total Contribution: You can save up to $40,000 over the years.
• Investment Flexibility: No restrictions on what you can invest in.
• Tax Savings: This account helps you save on income taxes when buying your first home.

Pros and Cons

"Combining the benefits of a TFSA and an RRSP into one is a good move, but the $8,000 per year cap could be limiting for those in expensive markets."

While the FHSA has its advantages, the contribution cap of $8,000 per year can be a drawback, especially if you're in a high-cost market. Nonetheless, it's a beneficial tool if used wisely.

RRSP Contribution Program

The RRSP Contribution Program has seen significant changes:

• Increased Contribution: The limit has increased from $35,000 to $60,000.
• No Annual Limit: Unlike the FHSA, there's no cap on how much you can contribute annually.
• Repayment Period: The repayment period has been extended from 15 to 20 years.

Key Points

• Money must sit in the RRSP for at least 90 days.
• Employers often offer RRSP matching programs, which can be beneficial.
• This program can provide substantial tax savings, especially for mid to high-income earners.

Property Transfer Tax (PTT) Exemption

The Property Transfer Tax (PTT) Exemption has also been updated:

• Full Exemption: Increased to $835,000 (from $500,000).
• Partial Exemption: Applies to properties valued up to $860,000.
• New Construction: For new builds, the exemption can go up to $1.1 million.

Simplifying the Exemption

"Most people spend more than $500,000 on their first home in British Columbia. The new limits are a welcome change, though they should have been higher."

For new construction, you can get significant tax relief, making this a highly beneficial program for first-time buyers in British Columbia.

30-Year Amortizations for New Builds

A new rule allows first-time buyers with less than 20% down to opt for a 30-year amortization on new builds. Here are the details:

• Eligibility: Only available for new homes with an insured mortgage.
• Purchase Price Cap: The property must be under $1 million.
• Occupancy Requirement: You must live in the property.

The Catch

"This might benefit those already planning to buy new builds, but it's unlikely to sway many first-time buyers. Most of these homes are presales, which could be ready years down the line."

The Big Flop: Down Payment Assistance Program

The Down Payment Assistance Program turned out to be more of an equity share scheme. Few people used it, and it has now been discontinued. The major issues were:

• Misunderstanding: Many thought it was direct down payment assistance, which it wasn't.
• Equity Sharing: The government would share in your property's equity, complicating matters.
• Low Uptake: Very few people actually benefited from it.

Our Favorite Program

Out of all the programs, the Property Transfer Tax (PTT) Exemption stands out as the most beneficial, especially for those buying new construction. The increased limits provide substantial tax savings and make a significant difference in high-cost areas like British Columbia.

Final Thoughts

If you're a first-time buyer, take advantage of these programs where you can, but don't rely solely on government assistance. Being proactive and planning wisely will always put you in a better position.

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