First Home Savings Account (FHSA)

The The First Home Savings Account (FHSA) is specifically designed to help first-time homebuyers save for their down payment without having to pay taxes on the interest earned on their savings.

This means that the interest earned on the savings in the account is not taxed, nor are withdrawals from the account. Plus, since your contributions to this account are
not taxed, your money will have the opportunity to grow faster in an FHSA than a traditional savings account. If you are interested in creating a FHSA, there are a few things to note:

•  This savings account is eligible to Canadian residents who are at least 18 years of age.
•  You are a first-time homebuyer – you and/or your spouse or common-law partner have not owned a home where you lived in the year in which you open the account or at any time in the previous four years.
•  Allows you to contribute tax-free for up to 15 years.
•  The maximum contribution is $8,000 annually, plus up to $8,000 of your unused contribution room*.
•  Maximum lifetime contribution limit is $40,000.
•  Setting up automatic contributions can help you stay on track.

*You can carry forward any unused FHSA contribution room from the prior years up to a maximum of $8,000 (subject to your lifetime contribution limit of $40,000). Therefore, if you contribute less than $8,000 in a given year, you can contribute the unused amount in a subsequent year in addition to the $8,000 annual contribution limit for that year.

Another thing to consider is combining the First Home Savings Account (FHSA) with the Home Buyers’ Plan (HBP) to help you purchase a qualifying home. See next page for more details!

The Home Buyers’ Plan (HBP)

Did you know? The Canadian government has a program known as the Home Buyers’ Plan (HBP), which is designed to allow first-time home owners to withdraw up to $60,000 from RRSP for the purpose of buying a home! Purchasing with your spouse? You can access a total of $120,000 from your RRSP’s.

The Home Buyers’ Plan is designed as a self-loan, whereby the buyer must repay their RRSP over 15 years should they utilize it for a first home. If the funds are not paid back within 15 years, a portion of the funds withdrawn will be taxed as income each year until paid. This repayment period starts the second year after the year when you first withdrew funds from your RRSP(s) for the HBP; for instance if you withdrew funds in 2024, your first year of repayment will be 2026.

In order to qualify for this plan, you must meet the following criteria:

1. Must be a first-time home buyer
   • You are considered a first-time home buyer if, in the four-year period, you did not occupy a home that you owned, or one that your current spouse or common-law partner owned.
   • If you recently were divorced or separated, you can qualify as a first-time buyer again assuming you have been living separate and apart from your spouse or common-law partner for at least 90 days and are not living in a home owned by a new partner or spouse at the time of withdrawing funds.
2. Must have a written agreement to buy or build a qualifying home.
3.  You must be a resident of Canada when you withdraw funds from your RRSPs under the HBP and up to the time a qualifying home is bought or built.
4.  You must intend to occupy the qualifying home as your principal place of residence within one year after buying or building it.

If you have used the HBP before, you can participate again if your repayable balance is zero on January 1 of the withdrawal year and you meet all other eligibility criteria.
Repayment is over 15 years, usually starting the second year after withdrawal, and any unpaid amounts are taxable. The CRA provides an annual HBP statement showing your payments and balance.

The First-Time Home Buyer GST Rebate

The First-Time Home Buyer GST Rebate is designed to help make purchasing a newly built home more affordable by reducing — or potentially eliminating — the GST you pay on your purchase. Under the new federal program, eligible buyers may recover up to $50,000 in GST on a new home.

Depending on how your purchase agreement is structured, this rebate may either be applied at closing (if assigned to the builder) or claimed after closing through an application to the government. In either case, the program can provide meaningful financial relief and help reduce the overall cost of buying your first home.

IF YOU ARE CONSIDERING PURCHASING A NEWLY BUILT HOME, HERE ARE A FEW THINGS TO NOTE:
• This rebate is available to Canadian citizens or permanent residents who are at least 18 years of age.
• You must be a first-time homebuyer — meaning you have not owned and lived in a home in the year of purchase or within the previous four years.
• The rebate eliminates GST on new homes priced up to $1 million.
• For homes priced between $1 million and $1.5 million, the rebate is gradually reduced.
• Homes priced above $1.5 million are not eligible for this rebate.

Eligible purchases include:
Buying a new home from a builder
Building a home yourself or hiring a builder
Purchasing shares in a cooperative housing corporation
Mobile and floating homes may also qualify under this program

Agreements must be entered into between May 26, 2025 and before 2031, with construction completed by 2036. You have up to two years to claim the rebate after the purchase is complete.

Mortgage Insurance

Mortgage default insurance is designed to protect the lenders from any losses should there ever be a foreclosure.

Purchasing a home with less than 20% down means you will need default insurance. This amount is calculated based on your loan-tovalue ratio (mortgage loan amount divided by the purchase price). The insurance premium is typically added to your regular mortgage payment meaning there are no out of pocket expenses. If preferred, the premium can also be paid as a single lump sum.

NOTE: Some additional insurance measures that are required are title insurance, mortgage protection insurance and property + fire insurance. In addition, some provinces
require a tax on the insurance premium, which is payable at your lawyer/notary office.

For more information on the three Canadian providers, click on the websites below:

• Canada Mortgage and Housing Corporation (CMHC)*
www.cmhc-schl.gc.ca
• Sagen
www.sagen.ca
• Canada Guaranty
www.canadaguaranty.ca

* The CMHC has recently made it so mortgage default insurance will cover up to $1.5 million homes (increased from $1 million), helping more Canadians qualify for insured mortgages.

Closing Costs

The following is a list of closing costs to help you calculate the true expense of purchasing your new home.

LAND TRANSFER TAX: A tax that is charged whenever a property is purchased. These taxes vary by municipality, but the provincial base is 0.5% for the first $52,800, 1% on the next $52,800.01 to $264,000, and 1.5% on the portion over $264,000.01.

GST/HST: This tax is only charged on brand new homes or substantially renovated homes. If a property is valued at $450,000 or less, and will be your primary residence, you may be eligible for a partial rebate but certain conditions may apply. Contact your lawyer/ notary for more detailed information.

LEGAL FEES: Your lawyer/notary will charge you a fee for drawing up the mortgage and conveyance of title. Your lawyer/notary will also conduct a property title search to examine public records on the property and confirm the property’s rightful legal owner. The title search should also reveal if there are any claims or liens on property that can affect your purchase. The amount of the fee will depend on the individual that you use. The typical cost is $1,500. This includes: Land Title Registration, Title Insurance, courier fees, etc.

SURVEY: If you’re purchasing a single-family home, you’ll need to give your lender a survey certificate showing where the property sits within the property lines. Some exceptions are made, however, on low loan-to-value deals and acreage properties. A survey will cost approximately $350, but the lender will often accept a copy of an existing survey.

PROPERTY TAXES: Something that most buyers don’t take into consideration are the property tax balance you will be responsible for upon closing. The amount varies based on location and time of closing; however a good rule of thumb is that if you take possession halfway through the year, you would be expected to pay 50% of the taxes for the year upfront. This is included in the final amount owing when you sign your documents with the lawyer/notary.

CONDO/STRATA FEES: It is important to note that if you are purchasing a condo, townhouse or another property with condo/strata fees that you will need to account for your portion during the month of possession. For example, if your monthly amount totals $304.65 and you close four days prior to month end, you would owe $39.31. These fees are something that your lawyer/notary will include in your purchasers’ statement of adjustments – a document that breaks down all the fees and owing balance prior to signing the final paperwork.

INSURANCE: There are various insurance costs to consider when purchasing a home, such as default insurance, general home insurance and title insurance.

Title Insurance is required by most lenders to protect against losses should a property ownership dispute arise. This insurance is done through your lawyer/notary and
typically runs $100-$300.
Default Insurance is explained on page 11 of this handbook and is only required if you purchase a house with less than a 20% down payment.
Mortgage Insurance is an optional debt replacement that provides protection for your family should anything happen in the future. Many homeowners believe they are covered through their life insurance policy, but mortgage insurance covers the debt owing, rather than paying a lump sum. At DLC, we work with the best-in-class provider,
Manulife, to offer you a complete solution that moves with you, covering the mortgage rather than the home.
Property & Fire Insurance is mandatory and needs to be arranged prior to your closing appointment. Not sure how much to budget for? Get quotes from various insurance companies! Your lawyer/notary or myself can provide recommendations.

After You Buy

Now that you have finished signing your mortgage paperwork and getting the keys to your first home, there are a few things to keep in mind after you buy to protect your investment and ensure future financial success!

Maintaining your home and protecting your investment: Becoming a homeowner is a major responsibility. It’s up to you to take care of your home and protect what is likely your biggest investment.

Make your mortgage payments on time: There are many options when it comes to mortgage payment frequency. Whichever schedule you choose, always make your payments on time. Late or missed payments may result in charges or penalties, and they can negatively affect your credit rating. If you’re having trouble making payments, please contact me as soon as possible.

Plan for the costs of operating a home: You will have several ongoing costs besides your mortgage, property taxes and insurance. Maintenance and repair costs are at the top
of the list, along with expenses for security monitoring, snow removal and gardening. If you own a condominium, some of these costs may be included in your monthly fees.

Live within your budget: Prepare a monthly budget and stick to it. Take a few minutes every month to check your spending and see if you’re meeting your financial goals. If you spend more than you earn, find new ways to earn more or spend less.

Save for emergencies: Your home will need some major repairs as it ages. Set aside an emergency fund of about 5% of your income every year so you’ll be prepared to deal with unexpected expenses.

Seven Steps to Mortgage Financing

Congratulations, you’re ready to buy your first place! Now you understand all the important information when it comes to securing your mortgage, we can get started.

Glossary of Terms

AMORTIZATION:

The period of time required to completely pay off a mortgage if all conditions are met and all payments are made on time.

APPRAISAL:

An estimate of the current market value of a home.

APPRECIATION:
An increase in the value of a home or other possession from the time it was purchased.

CLOSED MORTGAGE:

A mortgage that can’t normally be paid off or renegotiated before the end of the term without the lender’s permission and a financial penalty. Some closed mortgages allow for extra or accelerated payments, but only if specified in the mortgage agreement.

CLOSING DATE:

The date when the sale of the property becomes final and the new owner takes possession of the home

CONVENTIONAL MORTGAGE:

A mortgage loan equal to or less than 80% of the value of a property (that is, where the down payment is at least 20%). Conventional mortgages don’t usually require
mortgage loan insurance.

DEFAULT:

Failing to make a mortgage payment on time or to otherwise abide by the terms of a mortgage loan agreement. If borrowers’ default on their mortgage payments, their lender can charge them a penalty or even take legal action to take possession of their home.

DEFAULT INSURANCE:

This insurance protects the lender in the event that the borrower defaults on their mortgage.

EQUITY:

The cash value that a homeowner has in their home after subtracting the amount of the mortgage or other debts owed on the property. Equity usually increases over time as the mortgage loan is gradually paid. Changes in overall market values or improvements to a home can also affect the value of the equity.

FIXED INTEREST RATE MORTGAGE:

A mortgage with a locked-in interest rate, meaning it won’t change during the term of the mortgage.

GROSS DEBT SERVICE (GDS) RATIO:

The percentage of a person or household’s gross monthly income that goes to pay the mortgage principal and interest, property taxes and heating costs, plus 50% of any condominium maintenance fees or 100% of the annual site lease for leasehold tenure if applicable. To qualify for a mortgage, the borrower’s GDS ratio must be at or below 39% (depending on your lender).

HIGH-RATIO MORTGAGE:

A mortgage loan for more than 80% of the value of a property (that is, where the down payment is less than 20%). A highratio mortgage usually has to be insured against
default with mortgage loan insurance provided by CMHC or a private company.

Congratulations and welcome to homeownership!