What is the First Time Home Buyers’ Program?
The provincial government created the First Time Home Buyers’ Program to support BC residents home ownership. There are two main components associated with it:
- Provincial Property Transfer Tax exemption
- Registered Retirement Savings Plan (RRSP) contributions
Provincial Property Transfer Tax Exemption
Property Transfer Tax, or PTT, is BC’s largest tax and is paid on virtually every legal transfer of land in the province. PTT is paid by the buyer in addition to the purchase price on closing.
In BC, property transfer tax is 1% of the property purchase price up to and including $200,000, 2% of the property purchase price greater than $200,000, up to and including $2,000,000, and 3% of the purchase price greater than $2,000,000.
PTT needs to be paid upfront on closing and cannot be worked into a mortgage, so having an exemption can provide considerable financial relief to first time buyers; however, there are some discussions regarding the effectiveness of the First Time Home Buyers’ Program due to the criteria properties must meet in order to qualify.
In order for a buyer to qualify, they must:
- Be a Canadian citizen or permanent resident
- Have lived in BC for at least one year prior to the date the property is registered, or filed at least two income tax returns as a BC resident in the last six taxation years.
- Have never owned a registered interest in a property that was their principal residence anywhere in the world.
- Have never received any First Time Home Buyers’ exemption.
In order for a property to qualify, it must:
- Be the buyers’ principal residence
- Be 1.24 acres or less
- Have a fair market value of $500,000 or less (here is where the discussion on effectiveness revolves)
With the drastic increase in home valuations, buying a property of $500,000 or less is extremely restrictive for buyers looking in higher priced markets.
In Victoria, the $500,000 or less price point means that most first time home buyers will not qualify for the exemption.
RRSP Contributions
Fortunately, the RRSP contributions feature of the First Time Home Buyers’ Program has all the same qualifications as the PTT exemption, except there is no cap price on the property purchased.
Effectively, qualifying buyers can pull up to $35,000 from their RRSPs to put towards the downpayment of their first home, and not have it count towards their taxable income.
An important note–in order to pull the amount up to $35,000 from an RRSP account tax-free, the money needs to have been in the RRSP account for a minimum of 90 days.
So, if you are thinking about buying your first home soon–meet with your bank to talk about RRSP contributions before you begin your search to ensure you can take full advantage.
As always, if you have any questions, please never hesitate to reach out. If you haven’t yet, receive our buyer’s e-guide right to your inbox when you sign-up for our monthly newsletter.
Thank you for being here,
Alex Hughes* and Ricki-Lee Jewell, Victoria, BC Real Estate Agents
*Personal Real Estate Corporation
