21 Jun First Time Home Buyers

If you are a first time home buyer, congratulations! A home is generally considered the largest investment most people will make in their life.

The first step is to find out how much you can afford.  Our mortgage calculator can help.  Before it’s time to go looking for a home be sure to get a pre-approval.  This will allow you to secure a great rate as well as establish the confidence that when you do find your home, you will have the financing in place.

Below is a list of great programs, rebates and tax credits available to help reduce some of the costs of buying your first home.

First Time Home Buyers Programs

• RRSP Home Buyers Plan
• Ontario Land Transfer Tax Credit
• Toronto Municipal Land Transfer Tax Credit
• ’0%’ Down Mortgages (via the 5% cash back mortgage)

First Time Home Buyers RRSP Plan (up to $25,000)

The First Time Home Buyers RRSP Plan (HBP) allows first time home buyers to withdraw up to $25,000 from RRSPs to buy or build a home for yourself or for a related person with a disability. The withdrawn amount must be repaid within 15 years, subject to a minimum annual repayment that is 1/15 of the amount withdrawn. If the full $25,000 is withdrawn, the minimum annual repayment is $1,667. If less than the minimum is repaid in any particular year, the balance is added to the taxpayer’s income.  To qualify for the Home Buyers Plan, an individual must not have not owned a home during the last 4 full calender years.

First Time Home Buyers Ontario Land Transfer Tax Credit (up to $2000)

The Land Transfer Tax Credit is a refund of the cost of the provinces land transfer tax up to a maximum of $2,000. This will allow first time home buyers to purchase a home up to $227,500 without having to pay any land transfer fee.  Any amount higher than $227,500 is taxed a rate of approximately 1.5%. To qualify the property must be owner occupied. The first time home purchaser may claim the full maximum amount or a  proportion of the maximum refund amount. To qualify for the Land Transfer Tax Credit, you cannot have ever owned a home, or an interest in a home, anywhere in the world. The refund can be given instantly at the lawyers office but advise the lawyer prior to the closing date if you qualify for the rebate.

The refund amount is reduced when one or more of the transferees are not a first time home buyer. The reduction will be proportionate to the interest in land acquired by the individuals who are not first time home purchasers. For example, a parent who is not a first time home buyer and child who is a first time home purchaser, purchase a home with equal 50/50 interests, the child may claim 50% of the land transfer tax refund. The child’s claim cannot exceed 50% of the maximum allowable refund, i.e., 50% of $2,000.

’0%’ Down Payment

Although 0% mortgages are no longer insured by CMHC, 5% down payment mortgages with a 5% cash back component are.  CMHC also permits down payments to come from borrowed sources (Visa, Line of Credit, family) provided this is disclosed to the lender.

Used in conjunction a home buyer can borrow their down payment and obtain a 5% cash back mortgage allowing them to pay off the borrowed money once the home closes.  5% cash back mortgages are available from several lenders and will usually carry a premium charge of 1.5% or higher over traditional mortgages.