Your journey into buying a house in British Columbia can be an exhilarating experience, yet at the same time, it is something that can leave you feeling daunted. There are a number of costs involved when it comes to purchasing a property that one needs to keep in mind.
However, good news for those who qualify as first-time home buyers is that there are a variety of benefits offered by both the federal and the provincial governments for such buyers.
In order for a first time buyer to get a better idea of what he or she can afford while searching for homes, it is helpful to know about the various benefits that are available.
Why Do First-Time Home Buyers Receive Additional Benefits?
Buying a home involves more than the purchase price. Buyers may need to budget for:
- Down payment
- Property transfer tax
- Legal and notary fees
- Home inspection
- Appraisal costs
- Moving expenses
- Mortgage-related expenses
- Property taxes and insurance
For someone entering the housing market for the first time, these costs can add up quickly.
First-time buyer programs are designed to reduce some of these upfront financial pressures. However, eligibility requirements vary between programs, so buyers should review the rules carefully before relying on a particular incentive.
1. First Home Savings Account (FHSA)
First Home Savings Account will be valuable for those who are planning to buy a house in the future.
The FHSA enables qualified individuals to save money only for the first home and take advantage of the taxation benefits. In general, contributions can be tax-deductible, and qualifying withdrawals for the purchase of the home will be free of charge.
Thus, the FHSA will be more suitable for those buyers who have time to accumulate enough money for the down payment.
For instance, those who plan to buy a house several years later may use an FHSA within their general savings program.
2. Home Buyers' Plan
The Home Buyers' Plan of the federal government will give the opportunity for qualified buyers to withdraw money from the RRSP for the purchase or construction of a qualifying home.
Thus, it will be one more source of funds for making the down payment. But the money that you withdraw must be paid back under the terms of the program.
3. Tax Credit for First-Time Home Buyers
In addition to the mentioned eligible first-time buyers, there is also a federal tax credit called First-Time Home Buyers' Tax Credit.
As you already understood, the credit is designed to give tax relief to a first-time buyer in the year of an eligible home purchase. The tax credit might not cover a big part of the whole cost of buying a house, but it could cover some of it.
With all of these eligible programs, tax savings may be beneficial in reducing the burden of home ownership.
4. British Columbia Property Transfer Tax Exemption
One of the most essential advantages to consider in B.C. is the First Time Home Buyers' Program for Property Transfer Tax.
According to the Government of British Columbia, "eligible first time buyers may be exempt from property transfer tax fully or partially." In case of properties under the new rules, the full exemption will be provided if the fair market value of the property does not exceed $500,000. As for properties with higher values, they can receive a partial exemption depending on the criteria of the program.
There are also some requirements related to residency, citizenship or permanent residency, previous homeownership, the use of the property, and its features.
Since the property transfer tax is one of the biggest expenses during the process of closing the deal, it is necessary to examine whether you are eligible or not.
5. Tax Benefit For Purchasers Of New Builds
Purchase of a new build may have yet another B.C. tax benefit attached to it.
With the newly built home exemption offered by the provincial government, one can potentially lower their property transfer tax on the purchase of their principal residence. At the moment, the maximum exemption amount for eligible newly built properties stands at $1.1 million, with a partial exemption possible at the rate of $1.15 million.
This tax benefit is not the same as the usual first time homebuyer exemption, and qualification will depend on both the property in question and the purchaser's situation.
Anyone looking at buying a new condo, new build, or other qualifying property should review the relevant qualifications before claiming the exemption.
6. Additional Advantages to Consider in Terms of Affordable Mortgages
Other first-time home buyers may benefit from mortgage products that offer greater flexibility in the area of amortization.
When an insured mortgage is concerned, the increased amortization can result in decreased monthly payments. On the other hand, increased amortization will lead to higher total interest payments over the course of the mortgage.
It is due to this reason that monthly affordability cannot be the only factor taken into account.
7. Grant to Homeowner and Saving for the Future
It is not necessary for all the benefits associated with being a homeowner to be aimed only at first-time buyers.
In case of eligibility, the B.C. Homeowner Grant can prove useful in decreasing the annual tax on the property. In such a way, an ongoing benefit can become very useful once the property is bought.
The key thing to understand is that homebuying is associated with both one-time and ongoing expenses. Thus, a prospective buyer should take into account taxes, utility bills, maintenance costs, and mortgage payments.
How Can These Benefits Work Together?
One of the biggest advantages of understanding the available programs is that some benefits may form part of the same overall home-buying plan.
For example, an eligible buyer might:
- Build savings through an FHSA.
- Use eligible RRSP funds through the Home Buyers' Plan.
- Review eligibility for the First-Time Home Buyers' Tax Credit.
- Determine whether they qualify for a B.C. Property Transfer Tax exemption.
- Consider whether a newly built property qualifies for a separate exemption.
- Structure their mortgage around their monthly budget and long-term plans.
Not every buyer will qualify for every program. Each incentive has its own conditions, and some programs have specific definitions of who qualifies as a first-time buyer.
What Should First-Time Buyers Look Into Before Making an Offer?
Before making any commitments regarding purchasing a piece of real estate, it is worth considering more than the listed price.
Here are some aspects to consider:
Check How Much Money You Have
Determine how much money you will have to put aside for the down payment and closing costs. Do not spend all your funds on buying the property.
Understand the Maximum Amount of Your Mortgage
The maximum amount approved by the lender is not necessarily what you would want to pay as the monthly payment.
Check Current Eligibility Requirements
Current federal and B.C. government programs’ eligibility requirements can differ from what they were last year.
Budget for Additional Expenses
Take into account all other expenses such as legal fees, inspections, appraisals, property taxes, insurance, moving, and possible repair costs.
Seek Mortgage Advice Prior to House Hunting
Seeking mortgage advice prior to looking for houses can help you learn about financing options.
How Sunlite Mortgage Can Assist You
The first time home buyers in British Columbia need not only to know about their incentives but also about other components that will make up the whole preparation for buying a home.
Sunlite Mortgage is there to assist the home buyers in BC with mortgage consultation on mortgage choices.
It might be better not to think about a house price only but about the whole package including financing, closing costs, incentives, and all expenses of owning a home.
Conclusion
There could be a variety of government programs that a first-time home buyer in B.C. could have access to, such as the FHSA and Home Buyers' Plan, which would save you some money or give you additional tax benefits. All of these could be very helpful while buying a house.
However, eligibility for each program is different, and programs themselves could vary in time. Therefore, prior to counting on any of these, one should check all the details of the program and consider them in their finances.
And for 1sr time home buyers, it could definitely be beneficial to do so prior to making an offer.
Sign in to leave a comment.