In today’s market, purchasing property for the first time in British Columbia, or any other part of Canada, can be a little complicated. The price of homes in Canada had been rising steadily for years, even before the pandemic. However, despite recent decreases in property prices, average incomes still make it challenging to buy a house in Greater Vancouver.
As challenging as it may be, home ownership is still within reach for many first-time purchasers in Vancouver but it requires careful planning and perhaps a little assistance from the government.
Here are some ways to jump start your way to your home buying journey:
Start as soon as you can! To be able to afford in the Vancouver market, the time to save is now. Set up a monthly auto-deposit, even if it is a small amount, those numbers will add up if you are consistent. Want to know what your goal should be? Check out our calculator to help estimate your costs.
There are a few government assistance programs that can be accessed by first time home buyers. We’ve gathered them here for you.
The HBP is a federal initiative that allows first-time homebuyers to take out tax-free borrowing from their RRSPs of up to $35,000 each. When using the HBP, first-time home buyers are required to repay the amount taken to their RRSP within 15 years, beginning in the second year from when the funds were borrowed. If they don’t make a payment, it counts as income for that year and is taxable.
The initiative does have some conditions, though. For example, home buyers can only access money that was placed more than 90 days prior to withdrawal, and borrowing funds from an RRSP results in temporarily reducing retirement savings.
Home buyers must submit papers to their banking institution in order to access the funds, which is a little more difficult than simply taking money out of a savings account.
The First-Time House Buyer Incentive (FTHBI) assists qualified first-time home purchasers to reduce their monthly mortgage payments without increasing the financial strain of repaying an RRSP loan.
The Canadian government will increase the down payment for eligible Canadians by 5% or 10% of the value of the home (up to 10% for newly constructed homes and 5% for existing homes). They may borrow less money as a result, which would cut their monthly payments. But it’s not entirely free. When the home is sold or after 25 years, whichever comes first, the government will get repayment equal to a certain percentage of the home’s fair market value.
In BC, to qualify for FTHBI, your household income must not be greater than $150,000 and mortgage amount no more than 4.5 times than your income.
Check out if you qualify: https://www.placetocallhome.ca/fthbi/first-time-homebuyer-incentive
A tax-free first house savings account (FHSA) will be made available by the federal government in 2023 in an additional effort to make home ownership more feasible in Canada.
A savings account that enables first-time buyers who are 18 years of age or older to put aside up to $8,000 per year, up to a maximum of $40,000, for a down payment on a property. The account combines RRSP and tax-free savings account (TFSA) benefits. Like RRSPs, contributions are tax deductible, and any investment growth is tax-free when money is withdrawn (like TFSAs). An FHSA’s funds must be utilized to buy a home within 15 years of the account being opened; otherwise, they must be moved to an RRSP and will be subject to taxes when withdrawn.
You don’t have to go down this journey alone. Connect with a real estate agent(s) who can work with your wants and needs and a mortgage broker can help break down what you require to get yourself into your first home. Every situation is different and connecting with professionals will help you set realistic goals.
Team Kleiner is always available to answer your questions. So reach out to us today!