It’s not easy being a first-time home buyer in B.C. But despite the high prices and low supply, people still make it happen.
Some first-time home buyers in B.C. get over the finish line with financial help from relatives. Most, however, have to rely on a combination of strategy, sacrifice, professional guidance and government assistance.
If you’re a prospective B.C. first-time home buyer, expect the path to be steep and bumpy. A little planning and the right combination of assistance programs, however, can keep you moving in the right direction.
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First-time home buyer programs in B.C.
There are a few programs first-time buyers in B.C. can use to reduce the overall cost of becoming a homeowner.
B.C. First-Time Home Buyers’ Program
The B.C. First-Time Home Buyers’ Program aims to help first-time home buyers by reducing their closing costs. The program targets the land transfer tax (sometimes called a property transfer tax) buyers must pay when they buy their first home.
Qualified buyers can receive the full $8,000 exception from the tax if the home they purchase is valued at $500,000 or less. They can still get a partial exemption if it’s worth up to $524,000. Any home worth $525,000 or more will cost buyers $8,500 in land transfer tax.
To get a full exemption, you’ll have to meet the following criteria before your closing date, including:
- Be a permanent resident of Canada or a Canadian citizen.
- Have either lived in B.C. for at least the last 12 months or filed at least two income tax returns in the province in the last six taxation years.
- Never previously owned a property that could be considered your principal residence — anywhere in the world, ever.
- No previous receipt of the B.C. first-time home buyers’ tax break.
You may still be eligible for a partial exemption even if you’re buying a house with someone who doesn’t. For example, let’s say your spouse is ineligible because they once purchased and lived in a condo in Calgary. If you are splitting your home purchase 50-50, you can receive the exemption on your half of the home’s value.
» MORE: Crunch the numbers with our land transfer tax and fee calculator.
B.C. Home Owner Grant
Another tax-focused program, the B.C. Home Owner Grant, offers eligible homeowners an annual reduction in property taxes of up to $770. If your property is in the Victoria region, Metro Vancouver or the Fraser Valley, the grant tops out at $570.
To receive the full grant, your home’s value will have to be assessed at $2,125,000 or less. If your home is worth more than the threshold amount, your grant will be reduced by $5 for each $1,000 over the threshold it is. There is no grant available for homes with a value that exceeds $2,239,000 (or $2,279,000 in a rural, northern area).
The B.C. Home Owner Grant isn’t specifically intended for first-time buyers, but they are welcome to apply for it once they’ve taken possession of their home.
To qualify, you must:
- Live in B.C.
- Be a Canadian citizen or permanent resident.
- Be either the registered owner of the home or the spouse or relative of its deceased owner.
- Use the property as your principal residence.
Newly Built Homes Exemption
Purchasing a new build or pre-construction home can be a way for first-time buyers to access reasonably priced properties by making their down payments incrementally. Going this route in B.C. can open you up to yet another assistance program.
The Newly Built Home Exemption may reduce or erase the amount of property transfer tax you pay when purchasing a freshly constructed home. Properties worth less than $750,000 that sit on 1.24 acres of land or less may qualify for a full exemption of $13,000. Those worth between $750,000 and $800,000 that are built on lots greater than 1.24 acres may receive a partial exemption.
One thing you may have noticed about these provincial programs is that they’re after-the-fact cost-cutters. If you need help with the upfront costs of purchasing a home, you may need to turn to the feds.
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Federal programs first-time home buyers in B.C. can use
The federal government has rolled out three programs that can help first-time home buyers in B.C. increase their purchasing power.
First-Time Home Buyer Incentive
If you are having trouble assembling a down payment, the First-Time Home Buyer Incentive (FTHBI) may be able to get you over the hump. You’ll just have to give the Government of Canada a cut of your home’s future value.
The FTHBI is what’s known as a ‘shared equity’ program. If you’re eligible, you can apply for a loan worth 5% or 10% of a home’s purchase price.The amount varies depending on the kind of home you’re buying. The loan is interest-free, but if you’re approved, the government will have a claim to 5% or 10% of your home’s equity.
When you sell your home, you won’t pay back the dollar amount you borrowed. You’ll pay back 5% or 10% of the property’s sale price. If you buy a $500,000 house and borrow $25,000, or 5% of its value, for the down payment, you’ll owe the government 5% of whatever the eventual sale price is.
So, if you hold onto your home for 10 years and sell it for $1 million, for example, you’d owe the government $50,000. It’s still just 5% of the proceeds, but double what you originally borrowed.
Home Buyers’ Plan
In order to qualify, you must:
- Be a first-time buyer.
- Be a resident of Canada from when you withdraw the funds until your home is bought or built.
- Intend to use the home as your principal residence within a year of buying or building it.
Any funds you take out of your RRSP are tax-free, but they have to be repaid within 15 years.
First Home Savings Account
Launched on April 1, 2023, the First Home Savings Account (FHSA) is a savings and investment tool to help first-time home buyers boost their down payment savings.
You’re allowed to contribute up to $8,000 per year to an FHSA, up to a maximum of $40,000. The contributions, which are tax-deductible, can be used to purchase investment products — stocks, bonds, GICs — that might increase your savings more rapidly. The earnings these investments generate are tax-free.
Approaching the B.C. market as a first-time home buyer
Prepare for competition — and frustration
As a first-time buyer in B.C., you’ll have to navigate two forces that are beyond your control: insufficient supply and stubbornly high home prices.
At the end of August 2023, there were fewer than 31,000 housing units for sale across all of B.C., according to the British Columbia Real Estate Association. Those homes aren’t just for B.C. residents to bid on; they’re also popular targets for out-of-province investors and retirees, as well as new arrivals from other countries.
You could be outbid by experienced, well capitalized buyers with the ability to increase both their down payments and offers. It’s important not to get discouraged when this happens. It’s also important not to get drawn into a bidding war you can’t afford to win.
Real estate activity in B.C. has calmed since the pandemic era frenzy, , but prices remain high. Across the first 8 months of 2023, the average price in the province was $973,011. (Homes worth $1 million or more require down payments of at least 20%.) So long as housing supply remains constrained, it’s unlikely that prices in B.C. will decline. .
Boost your down payment and strengthen your finances
First-time home buyers are subject to the same down payment rules as everyone else. You must provide at least a 5% down payment on properties that cost less than $500,000. If the property you have your eye on costs more than that — and most homes in B.C. do — your down payment will have to be higher.
While saving up a down payment, you should also try to pay down as much debt as you can afford. Lenders look very closely at your debt service ratios, which indicate how much of your income goes toward debt each month. If those ratios skew too far toward debt, you may not be approved for the mortgage you need. .
If the dual challenges of saving while paying down debt seems a little daunting, speak to your bank’s mortgage advisor or a mortgage broker early on in your home buying journey. An experienced mortgage professional can run the numbers for you, tell you how much mortgage you can afford and possibly pre-approve you for that amount. They can also give you strategies for strengthening your overall finances before applying for a loan.
You can also do some general estimating on your own, using a mortgage calculator.
Familiarize yourself with the B.C. mortgage market
Finding a home is one thing; getting it financed is another. As a first-time home buyer in B.C., you’ll want to get a sense of what’s in store for you as a first-time mortgage holder, too.
Mortgage rates in B.C. are, like those in other provinces, sky-high. An elevated mortgage rate can decrease your buying power significantly while driving up the cost of your monthly mortgage payment. You’ll want to set realistic expectations around the mortgage you can actually afford. It might be smaller than you think.
High mortgage rates also mean passing a more stringent mortgage stress test. Canada’s lending rules dictate that you must be able to qualify for your mortgage at a rate 2% higher than what you’re actually offered. If you’re hoping to get approved at a rate of 6.5%, for example, your finances will have to support the same mortgage at 8.5%. That can be a high standard for anyone to meet, let alone a first-time buyer.
The bottom line for first-time home buyers in B.C.
Buying your first home in B.C. might be challenging, but it shouldn’t be impossible, especially if you follow these tried and true first-time home buyer tips:
- Create a budget to keep your down payment savings on track.
- Eliminate any unnecessary spending.
- Generate as much income as possible.
- Keep an eye on the market to see if competition is heating up or easing.
- Get guidance from professionals who understand both the real estate and mortgage landscapes, such as a real estate broker or a realtor.
Buying your first home in B.C. requires patience and dedication, so don’t take it personally if the market doesn’t cooperate. There’s nothing wrong with delaying your plans until buying a home fits more comfortably in your budget.
Frequently asked questions about B.C. first-time home buyers
First-time home buyers in B.C. have to follow the same down payment rules as everyone else. For a home worth less than $500,000, your down payment must be at least 5% of the purchase price. Your lender may require you to make a larger down payment depending on a home’s price and your financial situation.
Eligible first-time buyers can access the B.C. First-Time Home Buyers Program, the B.C. Homeowner Grant and the Newly Built Homes Exception. They can also use federal programs like the First-Time Home Buyer Incentive, Home Buyers Plan and the First Home Savings Account.