Right at the top of the bucket list of most Canadians, is the strong desire to own a home. This may come from the fact that the hot Canadian real estate market performed really well even in the times that the US real estate market was slow. This makes the concept of a first time home buyer incentive alluring. After all, who wouldn’t appreciate a fast and effective means to strike off first time home purchase off the list?
As such, first time home buyer incentives such as the recent CMHC First Time Home Buyer Incentive Program, the Land Transfer Tax Incentive and RRSP Withdrawal are gaining ground rapidly amongst home buyers in recent times.
Who is a first time home buyer?
To know if you qualify for any of these incentives at all, you should confirm if you fit into the strict description of a first time home buyer which this definition could be different for a variety of programs.
To be considered a first-time buyer, you should neither have owned a house before; nor should you have lived in a house owned by either you or your spouse within the past four or five years, depending on the program (regardless of if you’ve bought/sold a property earlier than four or five years prior to application for the incentive)
Fall within this category? Read on!
“I am a Montrealer; which First Time Home buyer incentives should I take specific note of?
There are provincial differences between the availability of these incentives. For instance, while the land transfer tax rebate is non-existent in Quebec, it is applicable to Ontario. Should you want to purchase a $500,000 property as a first-time home buyer in Toronto or another city in the GTA such as Mississauga, you can calculate how much of land transfer rebate you are able to access from your land transfer tax. In this instance, the final land transfer tax is $4,500 for Toronto, $6,000 for Montreal; and even lesser pay is required for Mississauga.
For the RRSP however, the terms and conditions applied to taking from pension plans are the same all over Canada.
Do Terms and Conditions Apply for the CMHC First Time Home Buyer Incentive?
Yes. This program can only be accessed by first time home buyers who would be using CMHC-insured mortgages. Thus anyone under any of the categories listed below are automatically ineligible:
· If your home purchase price is $600,000 or above
· If the down payment of your house is at least 20% of your purchase price
Also keep in mind that to qualify for a government shared-equity incentive, you:
· You must be a citizen or permanent resident of Canada
· You or your partner must be a first-time home-buyer (see section ‘Who is a first-time home-buyer?’ above), and
· Your annual household income must not exceed $120,000.
Why the CMHC first time home buyer incentive is perfect for Montrealers
If you meet the criteria for qualifying for this government shared-equity incentive as a Montrealer, there is a high probability that you’d be able to fully utilize the opportunity. Here’s why: the average property in Montreal costs around $400,000, which is much more affordable than some other Canadian cities such as Toronto, thus fitting smugly into the financial requirement for the program (at a home purchase price of $600,000 or less). For this reason, this incentive can be a push in the right direction for a first time home buyer in Montreal.
Should you use it?
You might be at cross-roads, trying to decide whether using this incentive is in your best interest or not- despite being qualified for it. So, should you use it?
We’d advise that if you are eligible, and don’t have enough money to pay for the down payment OR if the incentive helps you buy a bigger house that’s more suitable for your household needs, then you could make use of this incentive.
“What if this isn’t my situation?”
However, if you are able to afford the kind of house you want, using this incentive to buy something more expensive might not be in your best interest. Here’s why:
A home, as a form of leveraged real estate investment, already has its own complexities. As such, sharing your home with the government (yes, even as little a share as 5%) might not augur well with you in the long run. Consider this government-owned fraction of your house e.g. 5%; as a loan taken on the house, which you’d have to pay- not as the amount borrowed, but based on your home’s future market value at the loan maturation date. If you look at it from that angle, you are more aware of the complexities of getting involved in this program, and can ask yourself the critical question: “Do I really need to use this incentive?”
Reaching a logical, yet wholesome conclusion about the use of a first time home buyer incentive as a Montrealer requires both patience and the application of well-researched facts. The use of online real estate tools in particular, help in making solid home-purchase calculations like land transfer tax, mortgage, and provide an estimate of how much you as a first time home buyer, might be spending on acquiring your new home.
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