Getting into the housing market in Prince Edward Island can be complex at the best of times, but buying your first home tends to make things even more complicated. You've no doubt got hundreds of questions about how to save a down payment, whom to trust with your mortgage, and what rebates you might be eligible for as a first-time homebuyer.
At Ratehub.ca our aim is to make the process as simple as possible. On this page, you'll find the most important things you'll need to know about buying your first home in Prince Edward Island. First-time homebuyer regulations are generally set on a provincial or municipal level, so it's good to get information specific to where you live.
Across Canada, most provincial first-time homebuyer programs are a rebate of the land transfer taxes that you are required to pay in your home province. Prince Edward Island has both a land transfer tax and a rebate for first-time homebuyers.
This is great news, as the price of homes on Prince Edward Island tend to be much lower than they are in some of Canada's big cities like Toronto, Vancouver, and Montreal. Prince Edward Island first-time homebuyers are lucky in that they both get to enjoy lower property prices as well as a first-time homebuyer rebate.
Prince Edward Island land title tax
In provinces like Ontario, Quebec, and British Columbia, land transfer taxes can be as much as 5% of the purchase price. Land title taxes on Prince Edward Island are comparable with other provinces, but are still on the lower end, capping out at 1% of the purchase price.
The rates are listed in the table below.
|On the first $30,000||No tax|
Let's say you purchased a home that cost $150,000 on Prince Edward Island. Because the home costs more than $30,000, you'd be taxed 1% of the purchase price, equal to $1,500.
Prince Edward Island first-time homebuyer rebate
The Prince Edward Island first-time home buyer rebate offers a complete rebate of the land transfer tax on two conditions:
- The property must cost less than $200,000
- The property is being occupied as the primary residence of the applicant
Admittedly the $200,000 cap does rule out a lot of houses on Prince Edward Island. The average home price in Charlottetown in late 2020 was north of $300,000 (source: Remax). However, if you're able to find a lower-priced home, a rebate of the land transfer tax is will definitely help out.
Ready to find a great rate?
While most first-time homebuyer grants and tax rebates exist at the provincial level, there are some programs that are federally administered. This means that they're available to first-time homebuyers in every province and every city, including in Prince Edward Island.
Here are a few of the main federal programs that you should look into when buying your first home. Keep in mind that they may have different eligibility criteria than the programs in Prince Edward Island do, so be sure to look into the details.
First-Time Home Buyers Tax Credit
The First-Time Home Buyers Tax Credit is a pretty straightforward program for people who've bought their first home. It's a tax credit of up to $750 that can be claimed on your tax return in the year you purchased the home.
The First-Time Home Buyers tax credit is also available to Canadian homebuyers with a disability, even if it isn't their first home. If this might apply to you, it's worth speaking to a mortgage broker or your mortgage provider about it.
RRSP Home Buyers' Plan
The RRSP Home Buyers' Plan lets you borrow up to $35,000 from your RRSP (registered retirement savings plan) in order to fund the downpayment of your first home. For couples, the maximum amount you can borrow is $70,000.
You will need to pay this amount back over the next 15 years. If you fail to pay it back, you'll be charged income tax on the unpaid amount (your RRSP deposits should already have been tax-deferred).
GST/HST New Housing Rebate
If you have purchased a new, off-the-plan, or substantially renovated property, you will likely need to pay GST or HST on it, on top of your other closing costs. The GST/HST New Housing Rebate aims to make this less of a burden for first-time homebuyers.
This rebate is equal to 36% of the GST paid on the purchase. You'll receive the full rebate if your home has a market value of $350,000 or less. For homes priced between $350,000 and $450,000, you'll receive a partial rebate.
Mortgage rates for first-time homebuyers
As long as you have good credit and a sufficient down payment, you will likely be able to qualify for the best mortgage rates in the market, even if you’re a first-time homebuyer. It’s not necessary to apply for a mortgage from the financial institution you do your everyday banking with. In fact, you may be able to get better rates by shopping around. Many first-time homebuyers use mortgage brokers to help facilitate the mortgage application process.compare rates today
As a first-time homebuyer in Prince Edward Island, finding and qualifying for the best mortgage rates in Canada might seem like a daunting task. However, it's less effort than you might assume, especially thanks to modern tools like the ones on Ratehub.ca.
Below are a couple of tips, tricks, and tools that can help you find and be approved for the lowest mortgage rates in Canada, even as a first-time homebuyer.
Comparing rates from multiple lenders
Mortgage rates will always vary between different mortgage providers, even on the exact same product! This is because every lender has a different marketing and monetization strategy, and is comfortable with different levels of risk. For example, if you are a particularly risky borrower, the mortgage providers offering the lowest rates may not approve your mortgage, forcing you to borrow from a lender with higher rates.
The best way to make sure you're getting the best rate that you're able to be approved for is to compare quotes from multiple mortgage providers. We can help you do this - just click "let's get started" at the top of this page to begin the process. It's totally free to use and could help you save a lot of money by finding a lower rate.
Using a mortgage payment and affordability calculator
It's important to know how much you can afford. Setting your sights too high will make it harder to be approved for a mortgage, and can end in disappointment. Most first-time homebuyers will have some limitations on their budget, so it's a good idea to understand how much you can actually afford to borrow.
Our mortgage calculators can help you understand how much your regular payments are likely to be (payment calculator), how large a mortgage you can afford to borrow (affordability calculator), as well as whether it's worth refinancing your mortgage (refinance and penalty calculators). The first two are most useful for first-time homebuyers - use the links below to get started.
Saving a larger down payment
Saving a larger down payment will - assuming you were to buy the same home - reduce the overall size of your mortgage. This is good for a couple of reasons. Firstly, it will result in you paying less interest over the course of your mortgage, which can save you thousands of dollars.
Secondly, it makes it easier to qualify for a mortgage. Your lender will look at the ratio between your income and your expected mortgage payments (along with your existing debt payments) in order to decide whether to approve your mortgage application. A lower overall mortgage amount will make this calculation more favorable for you.
Paying off your existing debts
As mentioned above, your mortgage provider will consider your income against your expected mortgage payments when deciding whether to approve your mortgage application. It will also consider your existing debt payment obligations. Your lender needs to be confident that you'll be able to make your mortgage payments, even after paying off your other debts.
To increase the odds of passing this test, it's a good idea to pay off as many of your existing debts as possible. This includes student loans, credit cards, auto loans, and any other outstanding debt that you may be carrying.
Increase your credit score
Increasing your credit score is another way to help you get a lower mortgage rate. If you have good credit (at least 600) you should be able to get a mortgage approved from most of Canada's larger mortgage providers, which are the ones that tend to offer the lowest mortgage rates.
If you have a score of less than 600, you may be forced to get a mortgage from a "B-lender" or a private mortgage provider. These lenders take on risker borrowers, but they charge a much higher mortgage rate. If your credit score isn't good, it could be worth improving it before you apply for a mortgage.
Whether you need a mortgage, credit card, savings account, or insurance coverage, we help you find and compare the best financial products for your specific needs.
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