When shopping for your first home there are a few government programs and incentives you should be aware of. One of them requires careful consideration before signing up while the others are no-brainers and will ease the financial strain of buying your first home.
1) First Time Home Buyers’ Plan
This plan allows you to withdraw up to $25,000 from your RRSP to buy or build a home. There are a few restrictions such as you need to have the RRSP contributions in your RRSP account for at least 90 days before you can withdraw the funds. As always there is a catch, you will have to repay the RRSP withdrawal amount over a period of no more than 15 years. If you do not pay back the amount due for one year (1/15th of the amount) then the amount will be included in your income for that year.
There are various conditions that must be met in order to qualify, and you should check the Canadian government website to make sure you do, but they include items such as:
- You must have entered into an agreement to buy or build a qualifying home.
- You must intend to occupy the qualifying home as a principal residence no later than 1 year after buying it.
- You must be considered a first time home buyer
As attractive as this option is, make sure it’s right for you. Withdrawing those funds from your RRSP and taking the full 15 years to pay it back could affect your retirement savings by quite a bit. If it’s a situation you are comfortable with and buying a home is more of a priority, it can be a great way to get your downpayment.
2) Land Transfer Tax Rebate
Most provinces give first time home buyers a rebate on their calculated land transfer tax. Land transfer tax is a tax applied to all properties when the title is transferred between owners. In Ontario, first time home buyers can receive a rebate up to $2,000. This rebate is typically applied upon registration of your new home but can be claimed later from the Ministry of Finance. Be sure to check with your provincial government to see if this rebate applies.
3) GST/HST New Housing Rebate
This rebate allows for a partial rebate of the GST/HST portion of a newly built home with a value less than $450,000. Since there is no tax on a resale home, unless it has been extensively renovated, this rebate applies to new build homes. The calculation of such rebate varies depending on the purchase price of the property so it’s wise to visit the governments’ website to view the fine details. In most new housing builds the builder typically includes the GST/HST in the purchase price, resulting in the rebate being buried in the purchase price of the home.
With all these rebates make sure you get the right guidance and information so you can find out which ones you qualify for. By checking the correct government resources, between you and your lawyer, you can take advantage of the ones that apply. Hopefully you now have a clearer understanding of what is available to you as a first time home buyer. If you have any further questions feel free to contact us or post a comment below to continue the conversation.
Sutton Group – Select Realty Inc.
A blog helping people understand more about Real Estate in London, Ontario and Canada