Clay Jarvis
Kurt Woock
Beth Buczynski
The challenges faced by first-time home buyers in Alberta might not be as daunting as they are in Ontario or B.C., but they’re still very real.
In addition to facing stiff competition in a supply-challenged market, Alberta’s first-time buyers must also save significant down payments and adhere to Canada’s strict mortgage guidelines. If interest rates are elevated, this all gets much trickier.
But there are ways to make buying your first home in Wild Rose Country a little easier. Some are government incentives that lower the cost of homeownership, others are home buying strategies that can increase your buying power.
Let’s dig into all of it and get you ready for your first foray into the Alberta market.
Incentive programs for first-time home buyers in Alberta
The average Alberta home price — about $450,000 in October 2023 — is below the national average. But houses in the province, particularly in Calgary, aren’t exactly cheap.
Federal and provincial programs can help make your first home more affordable.
Alberta-only incentive programs
Attainable Homes Calgary
Attainable Homes Calgary (AHC) provides loans to help first-timers fund 5% down payments. If you can provide $2,000 up front, AHC will lend you the remaining amount.
Other details include::
- To participate, annual household earnings must be no more than $131,424.
- AHC is a shared equity arrangement. That means you’ll pay AHC a portion of any appreciation in your home’s value in addition to paying back the amount you borrowed initially. The amount depends on how long you own the home. If you own your home for five or more years, 25% of any appreciation goes to AHC, and that percentage increases if you sell sooner.
- You’ll have to purchase a property offered by AHC.
Trading, at minimum, 25% of your home’s long-term potential growth in return for an amount equal to 3% of the home’s original value may not be an ideal solution if you see home ownership as a way to build wealth over time. But if you’re having trouble saving a down payment and buying a home as soon as possible is your top priority, AHC might be worth looking into.
First Place Home Ownership Program
First Place is a program that transforms surplus school sites into townhouses that are then sold to first-time buyers at market prices.
As with AHC, First Place’s features may help some buyers but may not be a good fit for everyone. To be eligible, you must:
- Have a combined household income under $130,000.
- Have personal net worth of $25,000 or less, excluding RRSPs and your mortgage down payment.
- Reside in your unit for the first five years of ownership.
- Qualify for a mortgage pre-approval, with or without a co-signer.
One aspect of First Place requires a little clarity. Buyers must pay the City of Edmonton the total land costs associated with their townhouse unit after five years. The intent is to remove the cost of land from your initial home purchase so that you start with a lower mortgage.
Federal assistance for first-time home buyers
Home Buyers’ Plan
Using the Home Buyers’ Plan (HBP), you can withdraw up to $60,000, tax-free, from your registered retirement savings plan (RRSP) to put towards your home purchase in Alberta.
You must use funds that have been in your account for at least 90 days, and you must repay any funds you withdraw within 15 years. You have until October 1st of the year following your withdrawal to buy or build your home.
First-Time Home Buyers’ Tax Credit
The First-Time Home Buyers’ Tax Credit, also known as the Home Buyers’ Amount, is a non-refundable credit of $10,000 for first-time home buyers. It results in a tax rebate of up to $1,500.
This isn’t the kind of assistance that will help you buy a house or qualify for a mortgage, but it will make that first year of homeownership a little more affordable.
GST/HST New Housing rebate
If you purchase or build a new house, or significantly renovate your primary residence, you could recoup some of the Goods and Services Tax (GST), or the federal portion of the Harmonized Sales Tax (HST), that you paid.
Different rules apply depending on property type and location, so make sure the new home you have your eye on is eligible for a rebate.
First Home Savings Account
The First Home Savings Account (FHSA) is a way for first-time buyers to accelerate their down payment savings.
The FHSA combines aspects of an RRSP with those of a tax-free savings account. Deposits are tax-deductible, and once they’re in your FHSA, they can be invested in a number of different ways. The earnings from those investments are tax-free.
You can deposit up to $40,000 in an FHSA. Generally, you can contribute up to $8,000 each year, but because any unused contribution amount is added to the limit in subsequent years, the maximum amount may vary from year to year.
Getting ready for your first home purchase in Alberta
Most of the programs and tools we’ve discussed provide additional assistance for first-time home buyers in Alberta. But you’ll need to do a few things on your own before looking for any outside help.
Strengthen your finances
Unless you’re buying your first home with cash, you’ll need a mortgage. Before you apply for a mortgage, you should:
- Improve your credit score. If you don’t know your credit score, or haven’t checked it in a while, it’s a good idea to do so. Your credit score represents the risk you pose to lenders.You’ll want to get it as high as possible before applying for a mortgage.
- Pay down your debt. Regardless of how strong your credit score is, paying off debt will tell lenders two important things: that you can prioritize your spending and that your money isn’t tied up with credit obligations that might hinder your ability to make mortgage payments.
- Build up your down payment.The bigger your down payment, the better off you’ll be. You’ll borrow less, which means paying less interest and posing less of a risk to your lender, who may offer you a better mortgage rate as a result.
Know your home buying budget
Understanding how much house you can actually afford is a critical part of the home buying process. Making an offer on a home you can’t follow through on can trigger both legal and financial nightmares.
Here’s how to get a reasonable idea of what you can afford.
1. Use a mortgage calculator
A mortgage calculator can give you a general sense of what you can afford, which is helpful if you’re just getting started.
A mortgage payment calculator estimates your potential monthly payment, which you can then compare to your current income.
A mortgage affordability calculator show you what the upper end of your home search is likely to look like
2. Consider closing costs
Closing costs such as legal fees and title insurance can add tens of thousands of dollars to your home purchase. Closing costs calculators can help you estimate these one-time, upfront expenses that will affect your home-buying budget.
When you buy a home in Alberta, you’ll also pay a land transfer registration fee, which consists of two parts:
- You’ll be charged $50, plus $2 for every $5,000 in property value for the acquisition of a municipal property.
- You’ll also have to pay a mortgage registration fee of $50, plus $1.50 for every $5,000 of the mortgage amount.
So, if you purchase a $300,000 home using a $30,000 down payment, your total land and mortgage registration costs will be $301.
» MORE: Crunch the numbers with our land transfer tax and fee calculator.
3. Get pre-approved for a mortgage
The most effective way to establish your home buying budget is to reach out to a lender or mortgage broker and get pre-approved for a home loan. During this process, the lender reviews your finances. Once pre-approval is complete, you’ll know how much a lender is willing to loan you at a particular interest rate. With a pre-approval letter in hand, sellers will know they can take your offer seriously.
It’s crucial that you stick to the budget established by your pre-approval. If you place a bid on a home that requires a larger mortgage than the one you’ve been offered, you may not get approved for the amount you need.
» COMPARE: Current Mortgage Rates in Calgary, Alberta
Your first mortgage application
A mortgage pre-approval doesn’t commit you or the lender to anything.. You’ll still need to formally apply for a mortgage after a seller accepts your offer.
Before you officially apply for a mortgage, try to do the following:
- Think about the kind of mortgage you want. Mortgages come in several varieties, and the differences can be significant. Fixed-rate and variable-rate mortgages, for example, come with unique costs and conditions. You’ll also have to choose between an open or closed mortgage based on whether you plan on paying off your mortgage early.
Compare mortgage offers. You don’t necessarily have to get your mortgage from the lender who pre-approved you, so take some time to compare the rates and loan offers from multiple lenders. If that sounds too complex or stressful, or isn’t something you’d enjoy doing, you can always align yourself with a mortgage broker and have them handle the comparisons for you.
Frequently asked questions about Alberta first-time home buyers
Alberta’s down payment requirements are the same as they are elsewhere in Canada, which means a minimum down payment of 5% on properties worth under $500,000. The average price of homes sold in Alberta in April 2023 was $462,086, which would require a minimum down payment of $23,104.
First-time home buyers in Calgary may be eligible for the Attainable Homes Calgary program, while first-timers in Edmonton may be a fit for the First Place Home Ownership Program. Alberta’s first-time home buyers can also look into national programs and products, like the or the Home Buyers’ Plan or First Home Savings Account.
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