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Saving for a down payment on a house, townhome or apartment in Metro Vancouver and the Fraser Valley can seem like a tough task, considering the very high housing prices in the region. It takes a lot of discipline (and often sacrifice) to save up for a down payment on a home. There are several government savings programs that can help you save money for a down payment on a home. Here are a few examples:
1) Home Buyers' Plan (HBP): This program allows first-time homebuyers to withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSP) tax-free to use towards a down payment on a home. To be eligible, you must not have owned a home in the past four years and intend to use the home as your primary residence.
2) First-Time Home Buyer Incentive: This program allows eligible first-time homebuyers to borrow 5% or 10% of the purchase price of a home from the government, which can be used towards the down payment. The amount borrowed is considered a shared equity mortgage, and must be paid back within 25 years or when the home is sold.
3) First Home Savings Account: The FHSA is designed to encourage first-time buyers to save toward buying their first home. Starting in 2023, eligible contributors will be able to contribute up to $8,000 per calendar year and up to a lifetime maximum of $40,000 over a 15-year period. Account holders will have 15 years from account opening to use the funds in the FHSA toward the purchase. If two people are purchasing a home together, both may use their own FHSA funds toward the purchase, giving them a maximum of $80,000 if both contribute the full amount. After making a tax-free withdrawal toward the purchase of a home, the account must be closed within one year, and another FHSA cannot be opened in the future.
4) Tax-Free Savings Account (TFSA): A TFSA is a savings account that allows you to earn tax-free investment income. You can contribute up to $6,000 per year, and the money can be used for any purpose, including a down payment on a home.
5) Canada Mortgage and Housing Corporation (CMHC) Mortgage Loan Insurance: CMHC provides mortgage loan insurance to lenders, which allows borrowers to obtain a mortgage with a down payment as low as 5% of the home's purchase price. This can help make home ownership more affordable for those who may not have a large down payment saved.
It's important to note that these programs have specific eligibility criteria, and it's important to research and understand the details of each program before deciding which one is right for you. Moreover, I advise my buyer clients to maintain financial balance in their lives by adhering to some basic common sense affordability guidelines. After all, there is more to life than over-extending to buy and own a home at the expense of life's other goals, like retirement savings.
Regardless of which of these programs you might choose to utilize, they can surely be helpful in purchasing your first house, townhome or apartment in Metro Vancouver and the Fraser Valley.