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First Time Home Buyer Programs

Buying your first home is a big step to take. It is likely to be the biggest first investment you will make and can be an exciting and stressful time for you. Luckily, there are a range of options available to make that decision. If you are a First Time Home Buyer looking to make that journey let Mortgage Squad Agents help you find a solution that is right for you.

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    First Time Home Buyer Incentive

    The First Time Home Buyer Incentive is a Canadian program that helps people purchase their first home. The Canadian government offers you either 5% or 10% of the home’s purchase price to put towards a down payment, which combined with your down payment amount can make the process of buying your first home more affordable. The First Time Home Buyer Incentive gives the government a shared equity in your mortgage and must be fully paid back when you sell the property or within 25 years, whichever occurs first. If you get the 5% or the 10% incentive the government owns that percentage of your property and the amount you have to pay back is that same percentage of your property’s value.
    • For example, let’s say you purchased a home for $200,000 and received the 5% incentive, in this case it would be $10,000. If your property’s value increased to $300,000 you would be required to pay back 5% of that, meaning $15,000. Similarly, if your property value decreased then that loss applies to the share that you owe to the government.
    You are considered a First Time Home Buyer if:
    • You have never purchased a home before
    • You did not occupy a home that you or your current spouse or common-law partner owned in the last 4 years
    • You have experienced the breakdown of a marriage or common-law partnership
    To qualify for the First Time Home Buyer Incentive:
    • You or your partner are considered a first time home buyer
    • Your total annual qualifying income is not greater than $120,000
    • Your total borrowing is no more than 4 times your qualifying income
    • You are a Canadian citizen, permanent resident, or a non-permanent resident authorized to work in Canada
    • You meet the minimum down payment requirements with traditional funds
    • The property must be used as your residence and not as a rental or investment property.
    The type of property you are purchasing influences the amount that you are able to claim with the first time home buyer incentive.

    RRSP Home Buyer’s Plan for a First Time Home Buyer

    The Canadian government has an RRSP Home Buyer’s Plan that allows a first time home buyer to borrow up to $25,000 tax free from their RRSP for a down payment. The amount borrowed is considered a loan and needs to be paid back within 15 years. If you and your spouse or common-law partner both meet the eligibility requirements for being a first time home buyer you can each withdraw up to $25,000 from your RRSPs. This brings the total amount you can potentially access via this program to $50,000. Since the RRSP Home Buyer’s Plan is considered a loan you are required to pay it back to your RRSP within 15 years with the first payment due two years after withdrawal. If you use this first time home buyer program then you will receive a Notice of Assessment from the Canada Revenue Agency indicating your next payment date and amount, and the balance left to be repaid.

    Land Transfer Tax Rebate for First Time Home Buyers

    When you purchase property you may be required to pay a Land Transfer Tax. If you are a first time home buyer your province or municipality may have a program that can lessen the burden. Some provinces and municipalities offer a Land Transfer Tax Rebate that allows you to receive some portion of the costs back as a rebate. In Ontario the Land Transfer Tax Rebate provides a maximum of $4,000, while the one offered by the city of Toronto is a maximum of $4,475. The amount given scales up based on the value of the property and can cover the full cost of the land transfer tax. For Ontario and Toronto, the rebate covers up to the maximum with the home buyer responsible for the remaining tax amount. In British Columbia there is a maximum rebate amount of $8,000 for properties worth $500,000 or less, a partial refund for homes valued between $500,001 and $524,999, and no rebate available for homes valued at $525,000 or greater. Different provinces and municipalities will have a different criteria, rebate amount, and application process. If you are a first time home buyer and are looking for help with your home purchase, trust the experienced team at Mortgage Squad Agents to find a solution that is right for you.

    Tips for Getting a Investment Property

    Because the burden to prove eligibility is greater on self-employed individuals, it pays to be well prepared before applying for a loan. The following should be considered before going into apply for a Self-Employed Mortgage:

    First-Time Home Buyers’ Tax Credit

    In 2009 the Government of Canada introduced the First-Time Home Buyers’ Tax Credit to help with closing costs associated with buying a home. If you qualify as a first time home buyer and your property meets the requirement, you need to apply within the year you purchase to receive the $750 non-refundable tax credit.

    In order to be qualified as a first time home buyer for this tax credit:

    • You or your spouse must purchase a qualifying home in either of your names.
    • You have not owned or lived in a home owned by you or your spouse in the previous four years
    • You can provide proof of purchase documents for the home

    In order for your home to be eligible for this first time home buyer tax credit:

    • You or your spouse must purchase a qualifying home in either of your names.
    • You have not owned or lived in a home owned by you or your spouse in the previous four years
    • You can provide proof of purchase documents for the home

    GST/HST New Housing Rebate for a First Time Home Buyer

    If you purchase a newly built home, do substantial renovations on your home, or rebuild a home that has been destroyed by a fire you may be able to claim the GST/HST New Housing Rebate. The value of your home factors in how much you may receive, decreasing to a partial rebate if your property is valued at above $350,000. While you do not need to be a first time home buyer to claim this rebate, you can apply for it in addition to the other benefits available.

    Is it harder to get a mortgage if I am self employed?

    Obtaining a Self-Employed Mortgage can be more difficult than a traditional mortgage as the borrower has to take extra steps to prove to the lender that they are capable of maintaining regular payments on their mortgage. It is possible that depending on the financial institution, that Self-Employed Mortgages are not offered at all. Where they are offered, there is also the chance that banks will significantly increase the interest rates for these loans, making them a more difficult consideration for borrowers. To give a better chance at being approved, lenders are expected to offer a large down payment, up to 20% or higher, as well.

    Another difficulty associated with Self-Employed Mortgages is the lack of a T4. A full time Employee can provide proof of income through a simple T4, however a self-employed individual must provide a stated income form, which shows the amount the potential borrower claimed to have earned, and then must provide documentation which can prove the stated amount is accurate.

    Lenders will also apply the Debt Service Ratio when considering your eligibility for a loan. This is a measurement which determines your ability to maintain regular payments on a loan after all your financial responsibilities have been considered. These include monthly bills, car loans, lines of credit, student debt and any other loans.

    If after considering these other factors the bank is confident that you are able to meet their requirements for regular payments, you will be eligible for a loan.

    Commonly Asked Questions

    You are considered a First Time Home Buyer if you have never purchased a home before, you did not occupy a home that you or your current spouse or common-law partner owned in the last 4 years, or if you have experienced the breakdown of a marriage or common-law partnership.
    Depending on your situation you may be able to apply for many first time home buyer incentives more than once. If you have received a first time home buyer benefit before there are some benefits you may be eligible for and in some cases your spouse may be eligible for them even if you are not.
    If you are a first time home buyer you can take advantage of various first time home buyer programs that are available to you. These include the First Time Home Buyer Incentive, RRSP Home Buyer’s Plan, a Land Transfer Tax Rebate, the First-Time Home Buyers’ Tax Credit, and the GST/HST New Housing Rebate.

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