So you’ve managed to sacrifice, budget, and save. The reward? Your very first home. As a first-time home buyer, there are a few opportunities available for you to recover and/or gain some extra funding. Let’s take a look:
First-Time Home Buyer Tax Credit (HBTC)
How much do I get?
This rebate issued by the Government of Canada is intended to help you recover the cost of closing fees. If you are purchasing the home with a partner or spouse, the maximum tax credit is still capped at $750 combined. The credit must be flied with your personal tax return in the same “tax” year the property was purchased in.
- The property must be a qualifying home*
- You must not have owned a home as your primary residence within the last four years
- The home must be registered in your name (or your partner’s)
*The qualifying property will be located in Canada, as either an existing or pre-construction home. This applies to a single-detached, semi-attached, townhomes, mobile homes, condos, and multi-person dwellings. In addition, you occupy the home.
Special notes: If the total of your tax credit is greater than your federal income tax, you will not receive the First-Time Home Buyer Tax Credit.
B. The RRSP Home Buyer’s Plan (HBP)
How much do I get?
- Up to $25,000, interest-free
The RRSP Home Buyer’s Plan is a loan from your existing RRSP. Assuming you have the maximum available funds, you can withdraw up to $25,000. This exemplifies yet another reason to contribute to your RRSPs.
- You must not have been a home owner (primary residence), within four years of the withdrawal
- You must intend to occupy the purchased property within one year
- There must not be any outstanding balance on a previous HBP (if you have used it before)
Special notes: The loan MUST be paid back in full within 15 years
C. Land Transfer Tax Rebate
This tax rebate only applies to Ontario, British Columbia, and Prince Edward Island. Some provinces have large land transfer taxes while others have small title transfer fees. Each province produces their own criteria and calculations necessary for the land transfer tax rebate.
Special note: The City of Toronto is the only city in Canada to have a Municipal land transfer tax, with that being said, they also provide a rebate on their LTT.
Using our Land Transfer Tax Calculator, we determined the following numbers below:
For a $200,000 mortgage:
For a $500,000 mortgage:
1 The City of Toronto Land Transfer tax is calculated independently from the Province of Ontario so you are made accountable to both if you live in Toronto. So although your amount due for a $500,000 mortgage is $0 in Toronto, you must still pay the $4475 Ontario Land Transfer Tax.
If you are in the market to purchase your first home, it would be wise to take advantage of any (hopefully all) the rebates we just listed above. The various levels of government in Canada put these measures in place to relieve the financial burden of being a first-time home buyer, so why not use it?