After years of high-cost inconvenience and renting, the thought of buying your own home in Canada must have hit your mind. But buying a home in Canada may not always be affordable. Therefore, a minimum of 5% down payment is required to call the place your own. If you are putting less than 20% down payment then you are also required to buy mortgage insurance. However, poor credit history could make the process even tougher. Luckily, down payment assistance programs in Canada exist across the country to assist first time home buyers with limited income.
Below we have prepared a bible about down payment programs, which can hopefully shed some light on the subject, and assist you in purchasing the dream home you deserve.
What is Down Payment Assistance?
Most of often than not, one of the biggest challenges for any potential home buyer in Canada is saving funds for a mandatory 5% down payment. And this is where Canada’s down payment assistance programmes come into play. It’s the process of providing financial assistance to eligible Canadians who want to purchase their first house but require some monetary support when paying hefty sums for a deposit.
How Does Down Payment Assistance in Canada Work?
Depending on the province, different assistance programmes are available throughout Canada. These programmes help potential and eligible first-time homebuyers through grants, rebates, interest-free and tax-free loans. The sole purpose of these down payment programmes is to help home buyers in the country who might otherwise struggle to spare the security deposit of their dream home.
Different Types of Down Payment Programs in Canada
There are different kinds of down payment assistance programmes in Canada. These programmes are designed to help qualified applicants purchase their first home. Here is a list of some important down payment assistance programmes you should be aware of:
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- Tax-free loans
- Interest-free loans
- One-time grants
- Rebates
- Special insurance programmes
Benefits of Down Payment Assistance Programs in Canada
Each down payment assistance programme has a series of requirements and provides a bundle of benefits to the applicants. For this reason, it is essential to research all the plans to understand what they offer. This will also help you choose the one that best suits your needs.
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RRSP Home Buyer’s Plan
RRSP stands for Registered Retirement Savings Plan. If you enrol in this program, it will allow you to take up to a CAD 35,000 tax-free loan in order to fund the down payment for your home. And what’s interesting about this plan is that if you are buying a home along with your partner (who is also a first-time homebuyer), then you are eligible to take up to a CAD 70,000 combined tax-free loan.
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Home Buyer’s Plan
The HBP (Home Buyers Plan) is a 15-year interest-free home loan programme as soon as you begin repaying your RRSP within 2 years of borrowing the amount. You can borrow up to CAD 35,000 per spouse from RRSP in this plan. Remember, you cannot repay the money to your RRSP account.
Note: You can choose not to repay the RRSP money only when you have kept the amount in the account for 90 days before submitting the HBP application.
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Home Buyer Incentive Plan
The RRSP first-time home buyer plan is a shared valuation mortgage plan. In this plan, the government provides about 5% to 10% of the down payment on the purchase of your home in exchange for a valuation of your property. Whenever you sell your property, you are required to pay back the contracted valuation to the government.
Note: Remember, if the value of your home increases over time, then you will also end up paying back even more than you borrowed.
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HBI Plan Eligibility
- In order to qualify for the HBI program, the buyer must have a 5% down payment.
- The eligible person must be a first-time homebuyer.
- A buyer must have a household income of under $120,000.
- A buyer could only take a loan for a little more than four times the qualifying income.
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Land Transfer Tax Rebate
The land transfer tax rebate programme is available in Ontario, British Columbia, and PEI (Prince Edward Island). The land tax rebate program’s policy is to refund a portion of the land transfer tax to first-time homebuyers on their house, townhouse, or condo.
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A New Housing Rebate
If you plan to build a new home or renovate an existing one, you may be eligible for a rebate for some construction or renovation costs. Moreover, you can even claim rebates for ultramodern houses like floating or mobile homes. Remember, the rebate only applies if the house’s market value is less than $450,000 upon completion.
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CMHC Insurance
Canadian Mortgage and Housing Corporation (CMHC) insurance is also popular as mortgage default insurance. CMHC is valuable for prospective homebuyers who find it difficult to put up a 20% down payment on the total property value. Although it is not similar to the traditional insurance system, it secures the lender against the default of the mortgage payments. This programme helps you trade an upfront fee and your commitment to a timely repayment for a lower down payment. Thus, it means CMHC helps reduce one barrier to homeownership for some Canadians.
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Home Buyers’ Tax Credit
The first-time homebuyer tax credit plan allows eligible buyers (disabled home buyers) to recoup some of the costs associated with the purchase of their home. This non-returnable tax credit covers closing costs, house inspections, and legal fees up to CAD 750.
If you want to be eligible to claim this tax, you need to ensure that your purchased house is considered a single-family home. No matter if it’s a condo, townhouse, semi-detached, or duplex (be it a newly built or an existing one).
Who is a First-Time Home Buyer?
A person who is applying for a mortgage and has no previous home under his/her name, a remortgaging, or a buy-to-let investor is classified as a first-time home buyer. If you or your common-law partner (spouse) have previously bought a home, you will be considered a first-time home buyer.
If you are suffering from any disability or buying a home for someone with a disability, then you do not have to be a first-time home buyer. Therefore, the property must be bought with the intent of providing greater accessibility.
Down Payment Assistance in Ontario
Let’s say you are a first-time home buyer and would want to purchase property in Ontario. Do not worry, we have government programmes and down-payment assistance programmes available to help you purchase your dream home.
Ontario has city wise down payment assistance programs in Canada just like the City of Windsor, Region of Waterloo, or the City of Kingston.
Down Payment Assistance Alberta
If you are a first-time homebuyer and want to buy a home in Alberta, then you can help yourself with two main plans.
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- Attainable Homes in Calgary, i.e. the ASHC (Alberta Social Housing Corporation) program
- PEAK Housing Initiatives
Both of these programmes aim to fund about 5%–10% down payments for the eligible applicants.
Nova Scotia Down Payment Assistance Program
The Nova Scotia Down Payment Assistance Program (DPAP) offers financial support to first-time homebuyers by providing interest-free loans up to $25,000 or 5% of the purchase price of a home. The loan is repayable over a 10-year period and is strictly intended for down payments, not covering financing, closing, or other related costs.
There is a strict eligibility criteria in place. These include a minimum credit score of 650, pre-approval for an insured mortgage, first-time homebuyer status, and a household income less than $145,000. The applicant must have resided in Nova Scotia for a minimum of one year. Further, the property must be the applicant’s primary residence upon purchase and fall within the price range specified as per its location. One can apply for the program by submitting the DPAP Form, without incurring any application charges.
New Brunswick Home Ownership Program
The New Brunswick Home Ownership Program provides financial assistance to first-time homebuyers in the form of a repayable loan. This initiative aims to improve access to homeownership for residents with low to moderate incomes. This initiative focuses on individuals or families whose household income does not exceed $40,000 annually. The program offers up to 50% of the home’s total cost or up to $75,000 for eligible individuals. Loans under this program are amortised for a maximum of 25 years, subject to a term of one year.
To be eligible for a loan under this program, one must satisfy the established eligibility criteria. These include being a resident of New Brunswick for at least a year, being a first-time owner, having a strong credit rating, and others. Designed to extend home ownership to modest-income families, this financial aid is available to purchase and construct a home.
Quebec Down Payment Assistance Programs: Accès Condos
Designed to facilitate condo ownership among low and moderate-income buyers, the Accès Condos is managed by Société d’habitation et de développement de Montréal (SHDM). A participant is required to make a minimum deposit of $1,000, in return for which the SHDM will offer a percentage of the respective condo unit. This credit can be used as the down payment for the home. The program is available in Standard Options and Exclusive Option to interested borrowers.
The Accès Condos program is tailored for those who might not otherwise afford to purchase a home in Montreal’s competitive housing market. It exemplifies innovative policy-making that addresses urban housing challenges, contributing to the broader goal of creating inclusive, sustainable, and affordable housing scenarios.
In a Nutshell
Canada is amongst the most welcoming countries in the world. People from all over the globe have a desire to buy their first home in the Great White North. It is no longer difficult to fulfill that dream with the help of down payment assistance programs in Canada. You can now buy your first home with the help of the above-aforementioned assistance plans, but each plan has different specifications. It is essential that you go through the details of each plan to understand which best suits your needs and requirement.
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Frequently Asked Questions
The down payment assistance programme provides an interest-free refundable loan of up to 5% of the total house cost.
There are different methods to access money for a down payment in Canada, such as utilizing your line of credit, taking a personal loan, or applying for a house mortgage.
In order to qualify for a conventional loan, most first-time home buyers put down at least 3% of the total house cost.
Yes, if your credit score is in check with a good employment history that shows a well-balanced income ratio against your total debt ratio, then you are eligible for a mortgage without even paying any down payment in Canada.
