Saving money for a down payment is the biggest hurdle every first-time home buyer faces. Not only are house prices in Ontario high, there is low inventory and tough competition. So having your down payment ready and waiting when that dream home hits the market is essential.

But how do you save up that all-important lump sum? By taking all the help you can get. An experienced mortgage broker doesn’t just help you get the lowest mortgage rate possible…they help you take advantage of every incentive program out there too!

Let’s take a look at a few government assistance programs that help you with your down payment specifically.

First Of All, You Need To Know If You Qualify As A First Time Buyer For Down Payment Assistance.

To be considered a “first-time home buyer” in Ontario generally means you’re someone who has never owned a home before. However, there are some exceptions to this rule. For instance, if you went through a separation or divorce in the past, you may still qualify as a first-time buyer.

Additionally, if you previously owned a home that you didn’t actually purchase yourself (like if you inherited it or received it as a gift), the government of Ontario would still consider you a first-time home buyer.

It’s also important to note that most government assistance programs for first-time buyers have income limits. This means that your yearly income needs to be below a certain amount in order to qualify for financial assistance when buying your first home. The specific income limit can vary depending on where you live and which program you’re applying for but, let’s go through them one by one so you can decide which might be best suited for you.

Simcoe County’s Affordable Homeownership Program

If you’re looking to buy a home in Simcoe County, they’ve got a really good program called the Affordable Homeownership Program that can give you a serious boost. Basically, they’ll lend you up to 10% of the purchase price to use towards your down payment. And the best part is that, if you live in that home for a full 20 years, you don’t have to pay that loan back at all! It’s completely forgiven.

Now, if you do end up selling before those 20 years are up, you’ll have to repay the loan amount in full. Plus, you’ll owe a percentage of any capital gains you made on the property. To qualify, the property has to be valued at $593,879 or less, and your household income as a renter needs to be $103,200 or under annually before tax.

The Home Buyers’ Plan

The Home Buyers’ Plan can really help out if you’re looking to buy your first home. Basically, it allows you to withdraw up to $60,000 from your retirement savings account, or RRSP. And you don’t have to pay any taxes on that money upfront as long as you use it for a down payment on a house that will be your main residence.

To qualify, you do have to meet a few requirements. First off, it has to be your first time buying a home. You also need to be a resident of Canada from the time you take out the money until you actually purchase or build the house. And you have to move into that home and make it your principal place of living within one year.

The best part is getting all that cash tax-free out of your retirement fund. But there is a catch – you do eventually have to pay all that money back into your RRSP however, you have the next 15 years after buying the home to do so.

The First-Home Savings Account

The First-Home Savings Account is a special type of savings account designed to help you save up for your first home. It combines some of the best features of other registered accounts like RRSPs and TFSAs.

Here’s how it works: Any money you deposit into this account can be deducted from your taxable income for that year, similar to an RRSP contribution. This reduces your annual taxes owed. Additionally, any investment gains or interest earned on the money in the account is completely tax-free while it’s in there, just like a TFSA.

You need to know that there are annual and total limits on how much you can contribute. Each year, you can deposit up to $8,000 into the account. And the absolute maximum you can put in over time is $40,000 in total. 

That amount may not sound like much for a down payment on a home today, especially with how expensive real estate is in Canada. But you can actually combine the First-Home Savings Account with the Home Buyers’ Plan to boost your down payment savings. So, strategically using both the special savings account and withdrawing from your RRSPs can really accumulate a solid down payment over time.

Additionally, Save For Your Down Payment The Old Fashioned Way

When it comes to buying a home in Canada, the mortgage rules require you to have a down payment of at least 5% for properties under $500,000. But if the home costs more than that, you’ll need to put down an even bigger down payment amount. So it’s really important to start saving up as much as you can for that down payment as soon as possible. The more you can put down upfront, the better position you’ll be in when it comes to your overall monthly budgeting.

Talking to a mortgage broker pretty early on in your home buying journey is a smart decision. It’s free to work with a mortgage broker and these professionals can crunch the numbers and let you know how much home you can realistically afford based on your finances. Plus, they can help you make a strategic financial plan to help you achieve your home buying dreams. They can even pre-approve you for a certain mortgage amount after collecting a few documents and some additional information from you to get your mortgage started.

Last but not least, do whatever you can to get your finances in top shape because it will help increase your chances of qualifying for the best mortgage rates and terms.

If you want to get a rough idea of your home buying budget right now, feel free to use my handy mortgage calculator tool or give me a call and let’s talk. With the calculator you just plug in some basic details about your income, debts, and down payment savings, and it’ll estimate what price range you should be looking for. If you want a more accurate estimate I can take a deeper look.

There are many ways you can save for a down payment and, with wise budgeting and expert advice, you can find that first home you’ve been dreaming of. Taking advantage of these government programs, sticking to your budget, creating extra income, and staying on top of the market will help you reach your down payment goals. 

Give me a call today at 705-315-0516 or book a consultation online and we’ll explore your mortgage options. Maybe a first home is still a few years away but I can start you on the path to saving up for that down payment.