Buying Your First Condo In Toronto? These First-Time Homebuyer Programs Can Help You

By: Reza Afshar

Buying Your First Condo In Toronto? These First-Time Homebuyer Programs Can Help You

Tags: Downtown Toronto condos, homebuyers and mortgage programs, Downtown Toronto real estate

If you have your heart set on a condo in Downtown Toronto as a first-time homebuyer, but you feel that you still need more money in the bank or a year or two to get the thing rolling, you should take a peek into the different mortgage and first-time homebuyer programs that the Canadian Government offers. They are exclusively designed to give first-time homebuyers the jumpstart they need. 
So far, dozens of Torontonians, among other Canadians, have chosen one or more programs that got them closer to their dream of condo ownership in the great Toronto neighborhoods
If you are also ready to settle in Toronto and want to own a Toronto condo, here are your options to accelerate the process.

The RRSP Home Buyer's Plan
You are allowed to take some money out of your RRSP (Registered Retirement Savings Plan) under the Canadian Home Buyer's Plan. It is maxed at $35,000, and you can either use it for the down payment or other costs related to your condo purchase, but it cannot be used for any other non-home-purchase-related purposes. If you are buying with a spouse or partner, both of you can apply and get $70,000 together.
You will pay the money back over the next 15 years, and it is tax-free as long as you don't default on the yearly minimum payment, which is 1/15 annually. You can, of course, make more frequent payments to reduce your debt more quickly, and if you do, a new yearly minimum will be calculated every year, and it will get smaller and smaller.
 The program also cuts you some slack by allowing you to start paying the RRSP funds back two years after the withdrawal. This is wonderful considering, you will have two full years to recover financially after your first big condo purchase investment. 
Eligibility criteria
  •             - you are a resident of Canada, and you are buying your very first property, or you have not owned a                         property for the past four years
  •              - you are only withdrawing funds from your RRSP
  •              - the RRSP funds need to be already in the account for 90 days before they are eligible for withdrawal
  •              - you need a home purchase agreement as proof that you will use the money as intended 
  •              - you will be given 30 days to withdraw the money after the home has been registered to your name                         (shared ownership is also acceptable)
  •              - you have to move into the condo within 12 months from the date you bought the condo
  The First-Time Homebuyer Incentive

                                                                    Photo by Precondo CA

Another possible shortcut to bring you closer to a condo or homeownership is the CHMC's First-Time Homebuyer Incentive. Get a cash boost from the Canadian Housing and Mortgage Corporation (CHMC) in the amount of 5% or 10% of the home's worth. If you are buying resale, you can get 5%, and if you are going for a brand new condo, you can squeeze out 10% of the sales price. The incentive has to be paid back, but it is interest-free. The repayment takes place either after 25 years of ownership or if you decide to sell the condo before the 25-year mark. What's important to know is that you will pay back the percentage of the home's worth and not the amount you obtain, which means it could be more or it could be less than what the CHMC gives you. This means that the CHMC owns a share of 5% or 10%, and 5% or 10% of any profits from the sale goes to them. 
 So, if the value of your Toronto condo goes up and you sell it for more than you initially bought it for, the CHMC gets 5% or 10% of the sale. The same goes for if the property drops in value. The CHMC will not require you to give them back the full amount, but the percentage they invested, even if it means they get back less than they invested. Here is what you have to do to qualify.
Eligibility criteria:
  •              - annual income lower than $120,000
  •              - at least a down payment of 5% but under 20%
  •              - the home's value is not to exceed a mortgage amount of $480,000 which means the home's worth                       cannot be more than 4x of what you make
The First-Time Homebuyer's Tax Credit
Thanks to the Government's First-Time Homebuyer's Tax Credit, homebuyers, including Toronto condo buyers, can get a tax refund that can be as high as $750. While this may not seem as much as the incentives, it is still good money that you can invest in a minor update or buy a piece of furniture or anything else you consider a priority.
The applicants need to make sure they understand that they claim a 15% refund only on the first $5,000 of the down payment, and that amount totals to $750. The application process is quite straightforward and simple. 
Eligibility criteria:
  •              - you have not owned a home in the past four years 
  •              - you pay your taxes regularly 
  •              - if you are buying with a partner, they must meet the same criteria
  •              - the condo needs to be listed as your or your partner's primary residence, and you have to move in                         within the first year of the purchase
The Downtown Toronto real estate market is very vibrant, and the different first-time homebuyer mortgage programs are a great tool to enable Toronto condo and other home buyers to enter the real estate market with an advantage. 
If you need additional information on Downtown Toronto condos and the mortgage programs, contact Reza Afshar here.