If you’re looking to buy a home, the current real estate environment can be very daunting.Between the pandemic, rising inflation, and the housing crisis, becoming a homeowner seemsmore unattainable than ever. In this article, you will find an overview of…
- PEI has several incentive options for first-time home buyers that will help you save money and make buying a home more accessible.
- Included in these are PEI’s Down Payment Assistance Program and property tax exemptions for first-time home buyers. There are also several federal programs you can take advantage of wherever you are in Canada.
- PEI is a stunning place, rich with Canadian history and tradition. If you’re a tentative first-time home buyer, checkout our list of popular PEI neighborhoods for a sense of different regions and pricing.
Prince Edward Island First-Time Home Buyer Incentive
With Canada’s interest rates now higher than they’ve been in decades, PEI’s hot housing market is finally starting to show signs of cooling down. But unlike other provinces that have already seen decreases in home prices, PEI home prices remain steady. While the buying frenzy seems to have slowed, the cost of an average PEI home has stabilized at around $416,000 – 25% higher than last year’s prices.
In this article, we break down what you need to know about PEI’s First Time Home Buyer Incentive, the Down Payment Assistance Program and property transfer tax exemption for first-time buyers. We will also cover details about the federal RRSP Home Buyer’s Plan, the First Time Home Buyer Tax Credit and the GST/HST New Housing Rebate. Finally, we look at some of the most appealing PEI neighborhoods to buy a first home.
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Prince Edward Island Down Payment Assistance Program
The draw of buying property in PEI remains strong, especially for young families and first-time buyers. Some people are even willing to relocate in order to afford a larger home that’s well within the range of $300k to the low $400ks.
To help first-time home buyers in PEI, the provincial government has created an interest-free loan program called the Down Payment Assistance Program (DPAP). The loan provided is interest-free to provide funding assistance for up to 5% of the purchase price of the home, with the loan topping out at $12,500.
If you are interested in applying for the DPAP loan, keep in mind that it may only be used to fund the downpayment of the home. However, payments can be waived over the first year.
In order to qualify for this loan you must be a first-time home buyer, which means:
- You cannot have purchased a home before.
- You cannot have lived in a home within the last four years that you or your spouse/common-law partner has owned.
- You may be considered a first-time home buyer if you have recently divorced or separated from your spouse or common-law partner.
To qualify for this loan, you must also be a Canadian citizen, your annual household income must be at most $85,000, and the purchase price of your new home must be under $250,000. The property you are purchasing must also become your primary residence.
PEI Real Property Transfer Tax First-Time Home Buyers Exemption
For experienced property buyers, a “real property transfer tax” is applied to land and property that changes ownership, with the new owner being responsible for paying this tax. In the province of Prince Edward Island, “real property” means:
- Land, including land covered by water.
- Land and any building or structure on it.
- Land with a number of types of machinery and/or equipment affixed to it.
Excluded from this list are:
- Growing or non-harvested crops.
- Complete or parts of mines underground.
- Land used as a public right-of-way.
- Mobile homes.
If you are a first-time home buyer and have been residing in the Province of Prince Edward Island for over six months – exactly 183 days – then you may be eligible to apply for a Declaration – First-Time Home Buyers form for the Department of Finance, Taxation and Property Records.
Even if you have not been residing in PEI for a full six months prior to buying your first home, you may still be eligible for a refund of the real property transfer tax as soon as you have lived in your new home for six months after the day of purchase.
Federal First-Time Home Buyer Programs
Besides Edmonton’s and Calgary’s programs, first-time home buyers in Alberta have access to a wide range of federal assistance programs to help them purchase a property in Canada.
RRSP Home Buyer’s Plan
The RRSP Home Buyer’s Plan lets you take out up to $35,000 from your RRSP to put toward a downpayment on a home, which you’d then repay over a 15 year period. To qualify, you must be a first time homebuyer who is a Canadian resident at the time you withdraw funds from your RRSP, and up to the time a qualifying home is either bought or built. You also have to live in the home as your primary place of residence within the year after buying or building it.
First Time Home Buyer Tax Credit
The federal First Time Home Buyer Tax Credit or ‘Home Buyer’s Amount’ is available for eligible first time homeowners. This incentive provides you and your spouse or common law partner up to $750 in tax rebates on the income you pay taxes on in the year you buy your home.
If you have a disability and you claim the Disability Tax Credit on your tax return, you can also claim the First Time Home Buyer’s Tax Credit, even if you’ve already owned a home in the past.
You will need to meet the following criteria, if this is the case:
- You must claim the disability amount on your tax return in the same tax year that you purchase the home
- The home must be suitable for the disabled person’s needs (ie your needs)
- You have to occupy the home within one year of purchasing it
GST/HST New Housing Rebate
For new housing in Canada, the land transfer tax refund lets homebuyers recover some of the land-transfer tax paid after the first $368,000 on qualifying homes. To claim this rebate, you must be over the age of 18, and must not have owned a home, either in whole or part, prior to purchasing your property (this includes inherited properties). You must also intend to live in the property as your primary place of residence. The maximum refund you can receive is $4,000, and will be applied on qualifying homes over $368,000. For homes below that price, you would not pay any land transfer taxes.
Frequently Asked Questions
Can Foreign Nationals Receive a Real Property Transfer Tax Rebate?
No. Only permanent residents and Canadian citizens can qualify for a land transfer tax rebate. Furthermore, in order to qualify you must also have lived in PEI for six months prior to the date of your home purchase, (or apply again once living in the new home for six months).
Can I Get a GST/HST New Housing Rebate if I’m not a First-Time Buyer?
Yes. You do not have to be a first-time home buyer to apply to a GST/HST new housing rebate. To qualify, you must have,
- Purchased a new or substantially renovated house from a builder.
- Purchased a new or substantially renovated mobile, modular or floating home from a builder, manufacturer or vendor.
- Purchased a share of the capital stock of a cooperative housing corporation (co-op).
Popular Neighborhoods for First-Time Home Buyers on Prince Edward Island
The frenzy of home-buying seems to have calmed across the country. In the most expensive cities of Toronto and Vancouver, the average prices of homes have actually gone down. While the home prices in PEI remain steady and are still wildly inflated for the region, they are well below the national average for the price of a home.
If you value a community feel, great food, musical tradition, and beautiful sunsets, maybe you’re already considering moving to PEI. Here are some neighborhoods to consider whether you’re looking to put down roots, or are already a local looking to buy your first property.
|Location||Average Price of PEI Detached House, 2022|
Are you willing to relocate for more affordability? Have you calculated how much mortgage you can afford? Location and budget considerations are especially important in this financial climate, so be sure to keep these programs and incentives in mind. Whether you’re looking for a semi-remote pastoral landscape to start your hobby farm, or a quaint neighborhood with a full range of services, Prince Edward Island has a bit of everything, making it an ideal place for first-time home buyers to put down roots. If you’re ready to buy your first home in PEI, get in touch now for a chat with one of our trained mortgage professionals.
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