There are few things in life as exciting as purchasing your first house or condo. That said, even the most financially-prepared buyer can be surprised by the costs associated with buying a home. Fortunately, the Canadian and Ontario governments offer financial help for purchasers who are new to the process. If you’re about to embark on your first house or condo hunt, here are three first time home buyer benefits you should know about.
1) FIRST TIME HOME BUYERS’ LAND TRANSFER TAX REFUND
One of the most significant first time home buyer benefits is a refund for the provincial land transfer tax. The land transfer tax (LTT) is a source of confusion for some home buyers, but here’s what you need to know. Everyone who purchases land in Ontario has to pay the LTT, which exists on a sliding scale. Those who buy property valued at $55,000 or less will pay 0.5 per cent, while those with property valued at $2 million or more will pay 1.5 per cent. Most buyers fall somewhere in the middle. If you qualify for the land transfer tax refund, you could get all or some of that money back.
Refunds on the tax can be up to $4000, but the overall amount will be reduced in cases where only one purchasing spouse qualifies. Note that Toronto also charges a land transfer tax, and the provincial refund doesn’t apply to it.
2) FIRST TIME HOME BUYERS’ TAX CREDIT
The first time home buyers’ tax credit can help you recoup closing costs such as legal and inspection-related expenses. At the current taxation rate, the amount buyers are entitled to is $750. In cases where two spouses buy a home together, this amount is still the sum total that they’ll receive.
If you’re familiarizing yourself with first-time homebuyer benefits, don’t forget to look into whether you’re eligible for this federal credit. To qualify, you must not have owned a home in the last four years (or lived in one owned by your spouse within the same period of time). You must also buy your new property with the intention of occupying it within a year.
3) THE HOME BUYERS’ PLAN
The federal home buyers’ plan (HBP) allows you to take up to $25,000 from your registered retirement savings plan (RRSP) and put it toward buying or building your first home. So long as this money is repaid within 15 years (at a rate of at least one-fifteenth per year), it’s tax-free. The plan also allows many buyers to make a 20 per cent downpayment when they wouldn’t otherwise have the means to do so. By meeting this downpayment threshold, you can avoid insurance premiums imposed by the Canada Mortgage and Housing Corporation (CMHC).
Under the HBP, the criteria for being a first timer is the same as it is for the first time home buyers’ tax credit. You can also qualify for the plan if you have a family member with a disability who you want to purchase or build a home for.
Receiving first-time home buyer benefits is just one way to help contain costs during the purchase process. From finding homes that fit your budget to entering into effective negotiations, there are many steps that you and your real estate agent can take to help ensure that you save as much money as possible.