Buying your first home can seem like a difficult, complicated process, especially in the current climate. Besides the down payment required for this purchase, you can also expect high interest rates on your mortgage for some time to come. In the article below, we’ll talk about a few incentives and subsidies that could help you achieve your dream of owning a home, as a first-time buyer.

The Home Buyers’ Plan (HBP)  

This plan allows you to withdraw funds from your RRSP for the purchase of your first home. This kind of withdrawal has no tax consequences, provided it does not exceed the $35,000 per borrower limit. To qualify for this plan, you must be either purchasing your first qualified home, or not have owned a home within the previous five years. This is an interest-free withdrawal, and you have 15 years in which to repay it. For example, take someone who withdraws $15,000 under the HBP in 2023: this person will have to reimburse one fifteenth (1/15) of that RRSP withdrawal amount on their 2025 income taxes. Repayment is not mandatory, but $1,000 will be added to their taxable income for that year, and that amount will be taxable. As such, repaying the HBP is preferable, though not mandatory. This is why the FHSA is so attractive: no repayment is required.

Tax-free First Home Savings Account (FHSA)  

The FHSA is the new tax-free savings account introduced by the federal government in 2023. This account is a new, extremely attractive way of helping individuals set money aside for the purchase of their first home. As this is a new product, please refer to our full article on the subject, here.

HBP loan

The HBP loan is a financial strategy intended for customers who are buying or building a first home that qualifies under the Home Buyers’ Plan. To take advantage of the HBP, you need a signed commitment (proof of purchase, notarized deed, or other document). The RRSP-HBP loan is not a cash loan, nor is it a down payment loan. It is a hypothetical loan, set up to trigger a tax return. Instead of repaying your loan, you’ll repay your HBP. For example, take an employee earning about $70,000/year who doesn’t have an RRSP. We could recommend a $35,000 HBP loan which, in this case, would trigger a tax return of about $11,000. This person’s only subsequent commitment would be to repay their HBP over 15 years, at a rate of one fifteenth (1/15) per year. It’s important to remember that, because the lender cannot qualify you based on a future tax return, the HBP loan cannot be used as the sole source of the down payment amount. But the loan can provide you with more cash on hand to purchase your first home.

***Please note: The rule stipulates that funds must have been held in the RRSP account for a minimum of 90 days. Accordingly, the institution providing you with the HBP loan lends you the money for three months, and you have to pay the interest on those three months, in order to benefit from the tax savings.

Tax credit

You may be eligible for a tax credit on the purchase of your first home. You and/or your spouse must have purchased a home for the first time, and this home must be your primary residence. If you meet the established criteria, you may be eligible for a credit of up to $1,500 in Quebec and $1,500 in Canada.

CMHC’s First-Time Home Buyer Incentive (FHBI)***

The CMHC has a program that can help you pay the down payment on your home. Consult your mortgage broker to find out if this incentive is available to you.

To learn more about the various incentives and subsidies available to you, or to get the financial support you need, feel free to book an appointment with one of our advisors.