Buyers in Toronto will be happy to know that there at least five government programs for first-time home buyers. These can ease the financial burden or make it easier for you to get a mortgage when you set out to find that perfect place.
The criteria for each program differs and not all may apply to you. Although, every bit helps when you are making what will probably be the biggest purchase you have ever made. Here is a brief run down on these five programs:
First-Time Home Buyers’ Credit
This program is through the Government of Canada and it provides a 15 per cent income tax credit towards closing cards for eligible applicants. The credit applies to a maximum of $5,000 in closing costs which would result in a credit of $750. The FTHBC must be claimed in the year the home is purchased. Claimants are only eligible if both they and their partner have not owned or lived a home for the year they buy and four preceding years. For more information check out the link here: http://www.fin.gov.on.ca/en/bulletins/ltt/1_2008.html
RRSP Home Buyers’ Plan
The Home Buyer’s Plan (HBP) allows you to withdraw up to $25,000 from your RRSP to buy or build a home. Couples can withdraw up to $50,000 and the best part is that you are not taxed on the withdrawal as you normally would be. However, you must repay this money into your RRSP to enjoy this tax exemption. The plan allows fifteen years to do so.
To qualify, neither you nor your spouse can have occupied a home as your principal residence in the past five years. There are other stipulations, so for more details check the website here for more details and how to apply: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/menu-eng.html
Five Percent Down Payment Program
This program is not a deduction or rebate. Although, it does make it easier for first-time home buyers to get their foot in the door. This program allows perspective homebuyers to access mortgage insurance for as little as five percent down on the purchase price. To qualify, home buyers must meet the requirements of a five year fixed-rate mortgage. They must also be above to prove that they can cover closing costs of 1.5 percent of the purchase price.
Properties eligible for the Five Percent Down Program must be owner-occupied and the mortgage cannot exceed a 25 year amortization. The home cannot exceed $1 million and proof must be provided for the source of the down payment funds. There may be more requirements depending on your circumstances, so it is a good idea to talk to a mortgage broker. You can also read up on the CMHC program at their website here: http://www.cmhc-schl.gc.ca/en/co/moloin/moloin_003.cfm
Land Transfer Tax Rebates
When you purchase a home you must pay Land Transfer Tax. This tax is levied provincially based on the purchase price of the home. Some municipalities, such as Toronto, levy their own Land Transfer Tax in addition to the provincial fee.
The maximum provincial Land Transfer Tax (LTT) rebate is $2,000 and the maximum Toronto rebate (MLTT) is $3,725. The provincial rebate is based on a percentage of the purchase price from .5 percent on the first $55,000 and increasing incrementally to 2 percent for anything over $400,000. The Toronto rebate uses a similar structure.
If you are eligible for a rebate of all or a portion of the MLTT you owe. Your lawyer will be able to claim the rebate electronically through Teraview software when he/she registers your transfer/deed. For more information on the provincial rebate, please check the website here: http://www.fin.gov.on.ca/en/bulletins/ltt/1_2008.html
HST New Housing Rebate
The final program is a rebate on part of the HST you pay when you purchase a home. It can be a renovated home from a builder, a new mobile home, shares in a co-op, or substantial renovations to your home, even from fire.
New home buyers can apply for a 36 percent rebate of the federal portion of the HST paid up to a maximum of $6,300 on a home costing less than $350,000. Homes costing more than this receive less of a rebate and homes over $450,000 no longer qualify. However, new home buyers can also apply for a rebate of 75 percent on the provincial portion of the HST up to a maximum of $24,000. For more information, check out the federal website here: http://www.servicecanada.gc.ca/eng/goc/gst_new_housing.shtml. For provincial information, check this link http://www.fin.gov.on.ca/en/refund/newhome/index.html.
Questions about these programs?
If you are a first time home buyer looking to purchase a home in Toronto or the surrounding GTA. We offer a free consultation to review all of the government programs for first-time home buyers. You contact us here to get started.