Updated April 15, 2024
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According to the 2019 Canadian Income Survey, the median after-tax income of Canadian families and unattached individuals was $62,900 in 2019. In the fourth quarter of 2020, the average price of a detached single-family home in Canada was about $700,000.
To help Canadians purchase homes, a few programs exist to make it easier.
The Home Buyers Plan (HBP)
The Home Buyers Plan (HBP) is a program that allows first-time home buyers to withdraw up to $60,000 per person (formerly $35,000) from each of your RRSP accounts as long as the funds are put towards the purchase of your first home and are repaid within the subsequent 15 years. Learn about Home Buyers Plan eligibility here.
The First-Time Home Buyer Incentive
The First-Time Home Buyer Incentive helps people purchase their first home. Through this program, the Government of Canada provides a percentage of the home’s purchase price to put toward a down payment. This addition to your down payment lowers your mortgage carrying costs making homeownership more affordable.
The incentives are:
- 5% or 10% for a first time buyer’s purchase of a newly constructed home
- 5% for a first time buyer’s purchase of a resale (existing) home
- 5% for a first time buyer’s purchase of a new or resale mobile/manufactured home
The incentive is available to first time home buyers with qualified annual incomes of $120,000 or less. A participant’s insured mortgage and the incentive amount cannot be greater than four times the participant’s qualified annual income.
Learn more about the program and eligibility here.
First Home Savings Account (FHSA)
The First Home Savings Account became available in April 2023. This new registered plan gives prospective first-time homebuyers the ability to save $40,000 on a tax-free basis towards the purchase of a first home in Canada.
Like an RRSP, contributions to an FHSA will be tax deductible, but like a TFSA, withdrawals to purchase a first home, including from any investment income or growth earned in the account, will be non-taxable. The new legislation confirms that a first-time homebuyer can use both the FHSA and the existing Home Buyers’ Plan to purchase their first home.
Should You Buy or Rent a Home?
Buying a home is one of the biggest decisions you’ll make in your life, and it’s a personal choice that’s different for everyone. Consider your lifestyle and financial position as well as the future you envision for yourself and how affordable that future might be.
For more information on how to calculate the financial impact of home ownership, visit these related blog posts:
- Home Ownership Changes in Canada | Are Canadians Still Buying Houses?
- Renting vs. Buying A Home in Canada | What is the Right Financial Choice for You?
- The Right Time to Buy a House | Can You Afford to Buy a Home in Canada?
Since writing this article, the Canadian government announced a new incentive for home ownership, the First Home Savings Account. You can learn more about it here.
We Can Help You Decide
Unsure of how to analyze your financial situation and the impact of home ownership? We are happy to work with our clients to determine the best financial and life decision for you, your family, and your goals.
Connect with us today at www.kwbllp.com!
