The Fastest Way to Get a Downpayment as a First Time Home Buyer
If you’re a First Time Home Buyer eager to get into the house of your dreams but don’t have the downpayment to make it happen—we have a great strategy for you! It’s called an RRSP Loan, and it could help you create up to $35,000 in available downpayment in only 90 days!
Did you know…that’s enough for a downpayment on a $600,000 home!
What is an RRSP Loan?
Most banks and credit unions offer RRSP Loans to their customers. Its an easy loan to qualify for and can also help to build your credit! The bank will loan you up to $35,000 to reinvest into an RRSP account at the same institution.
How Does my RRSP Loan Become a Downpayment?
Once your funds have been in the RRSP account for 90 days, you can withdraw them using the Home Buyers' Plan (HBP). The Home Buyers' Plan (HBP) is a program that allows first-time home buyers to withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSP) to use towards the purchase of a home. The funds must be repaid within 15 years and there are no penalties or taxes on the withdrawal as long as it is repaid on time.
What About Repaying the RRSP Loan?
The best part about this strategy? The money you invest into your RRSP (as long as it’s before February 28th, 2024) can be claimed on your 2024 taxes. Although you’ve taken a loan that will need to be repaid with interest, you may get anywhere from 20 per cent to 50 per cent of your RRSP contributions back as an income tax refund based on your marginal tax rate. The refund you receive can be put towards some of your outstanding RRSP Loan immediately.
What Other Programs are Available to First Time Home Buyers?
First-Time Home Buyer Incentive (FTHBI)
The First-Time Home Buyer Incentive (FTHBI) program provides eligible first-time home buyers with a shared equity mortgage of 5% or 10% towards the purchase of a home. The program aims to make homeownership more affordable by reducing monthly mortgage payments.
First-Time Home Buyer Tax Credit (HBTC)
The First-Time Home Buyer Tax Credit (HBTC) is a tax credit of up to $750 that is available to first-time home buyers to help offset the costs associated with purchasing a home. The credit is non-refundable and can only be claimed in the year of purchase. *The 2022 budget proposed that the First Time Home Buyer Tax Credit be increased to $1500 in 2023 and subsequent years. Be sure to follow along for updates.
The GST/HST New Housing Rebate is a program that provides eligible first-time home buyers with a rebate on the GST/HST paid on a new or substantially renovated home. The amount of the rebate is based on the purchase price of the home, and the maximum rebate is $6,300. To be eligible for this program either you or your immediate family must occupy the home at possession and the purchase price of the new cannot exceed $450,000.
The CMHC Green Home Program is a program that provides eligible first-time home buyers with a premium refund of up to 25% if they purchase a home that is energy-efficient and has a high level of sustainability. The program also offers a free energy assessment of the home.
In 2022, the Government of Canada created a new type of savings account specifically for first-time home buyers. It’s called the First-TIme Home Buyer’s Savings Account or FHSA. The FHSA is a tax-free way for Canadians to save up to $40,000, ($8,000 per year for 5 years) to buy their first home.
There are many first-time home buyer programs in Canada that can help make purchasing your first home more affordable and accessible. From financial assistance to tax credits and low-interest loans, these programs offer a variety of benefits that can help you achieve your dream of homeownership. Be sure to research all of the available programs and consult with a mortgage professional to determine which ones are right for your unique situation.
