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Looking to buy your first home in BC? Here are programs that can help you with that goal

July 29, 2022 | Posted by: Justin Emilio

Like many housing markets in Canada right now, British Columbia is a hard place to be a first-time buyer. But despite the high prices and low supply, people still manage to find a way. There are a few programs first-time buyers in B.C. can use to reduce the overall cost of becoming a homeowner.

The Home Buyers’ Plan (RRSP withdrawal)

The Home Buyers’ Plan allows you to take up to $35,000 out of an eligible Registered Retirement Savings Plan, or RRSP, so you can put it toward the down payment of your primary residence.

In order to qualify, you must:
     - Be a first-time buyer (you have not occupied a home that you owned or one that your current spouse or common-law partner owned, in the last four years)
     - Be a resident of Canada from when you withdraw the funds until your home is bought or built.
     - Intend to use the home as your principal residence within a year of buying or building it.
     - Any funds you take out of your RRSP are tax-free, but will have to be repaid within 15 years.

First Home Savings Account (Down Payment Assistance) **Coming Jan 2023**

The FHSA is a new kind of registered account that will allow first-time home buyers aged 18 or older to save up to $8,000 per year, up to a total of $40,000, towards the purchase of a home. The account combines the advantages of RRSPs and tax-free savings accounts (TFSAs): Contributions are tax-deductible (like RRSPs), and the money, including any investment growth, is tax-free when withdrawn (like TFSAs). 

The money in an FHSA must be used to purchase a home within 15 years of opening the account; otherwise, the funds must be transferred to an RRSP and become taxable at the time of withdrawal.  

BC First-Time Home Buyers’ Program (PTT Exemption)

The B.C. First-Time Home Buyers’ Program aims to help first-time home buyers by reducing their closing costs.The program targets the land transfer tax (sometimes called a Property Transfer Tax) buyers are expected to pay when they buy their first home.

Qualified buyers can receive the full exception from the tax if the home they purchase is valued at $500,000 or less. They can still get a partial exemption if it’s worth up to $524,000, but any home worth $525,000 or more will cost buyers the full PTT amount.

To get a full exemption, you’ll have to meet the following criteria before your closing date:

     - Be a permanent resident of Canada or a Canadian citizen.
     - Have lived in BC for at least the last 12 months or have filed at least two income tax returns in the province in the last six taxation years.
     - No previous ownership of a property that could be considered your principal residence — anywhere in the world, ever.
     - No previous receipt of the BC first-time home buyers’ tax break.

If you qualify for a full exemption, but the person with whom you’re buying the house doesn’t, you may still be eligible for a partial exemption.

Let’s say your spouse is ineligible because they purchased and lived in a condo in Calgary for several years. If you will be registered on title 50-50, you can still receive the exemption on your half of the home’s value.

Newly Built Homes Exemption (PTT Exemption)

Purchasing a new build or pre-construction home can be a way for first-time buyers to access reasonably priced properties in a way that often allows them to make their down payments incrementally. Going this route in BC can open you up to yet another assistance program.

The Newly Built Home Exemption may reduce or erase the amount of property transfer tax you pay when purchasing a home direct from the builder or developer. Properties purchases under $750,000 (pre GST) may qualify for a full exemption; those worth between $750,000 and $799,999 may receive a partial exemption. Properties at $800,000 and over will pay full PTT.

First-Time Home Buyer Incentive (Down Payment Assistance)

If you are having trouble assembling a down payment, the First-Time Home Buyer Incentive may be able to get you over the hump. You’ll just have to give the Government of Canada a cut of your home’s future value.

The First-Time Home Buyer Incentive is what’s known as a ‘shared equity’ program. If you’re eligible, you can apply for a loan worth 5% or 10% of a home’s purchase price; the amount varies depending on the kind of home you’re buying.  The loan is interest-free, but if you’re approved, the government will have a claim to 5% or 10% of your home’s equity.

When you sell your home, you don’t pay back the dollar amount you borrowed, you pay back 5% of 10% of the property’s sale price. If you bought a $500,000 house by borrowing $25,000, or 5% of its value, for the down payment, you’ll owe the government 5% of whatever the eventual sale price is.

So, if you hold onto your home for 10 years and sell it for $1 million, for example, you’d owe the government $50,000. It’s still just 5% of the proceeds, but double what you originally borrowed because your home has increased in value.

FTHBI applicants must:

     - Be a Canadian citizen, permanent resident or legally authorized to work in Canada.
     - Be a first-time home buyer, meaning you have never owned a home. Homeowners who have gone through a divorce or breakdown of a common-law  partnership are also eligible, as are those who have not lived in a home that they owned (or that was owned by their spouse or common-law partner) for the last four years.
     - Have enough funds to make the minimum down payment.
     - Be pre-approved for a mortgage that is more than 80% of the property’s value, and thus covered by mortgage insurance.

Whether your FTHBI application is approved — and whether the program is useful to you — depends on two key factors:

     - Location. In most parts of the country,  the amount of the mortgage can’t be more than four times your qualifying income. In Toronto, Vancouver and Victoria, the limit is 4.5 times your income.
     - Income. Your total household income can’t be greater than $120,000. In Toronto, Vancouver and Victoria, the cutoff is $150,000.

Those who manage to qualify for the FTHBI will receive one of the following:

     - 5% of the purchase price of an existing home.
     - 5% or 10% of the purchase price for a new construction home.
     - 5% of the purchase price for a new or resold manufactured or mobile home.

For information on which of these programs may be the best fit for your situation, or to create a strategy for your first purchase, reach out to us anytime!

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