Home Buyer Plan
Under the Home Buyer Plan (HBP), you may borrow up to $35,000 tax-free from your RRSP (Registered Retirement Savings Plan) to fund your down payment. If you plan to purchase a home with a partner who is also a first-time purchaser, you can each borrow up to $35,000, or $70,000 combined, tax-free.
To qualify for this program, you must be a first-time home buyer plan, defined as anyone who has not purchased a house or lived in a home their spouse owned in the last four years. (There are also different requirements for people with disabilities. You can find out more at the link below.)
The HBP funding is treated as a 15-year interest-free loan as long as you start making annual repayments to your RRSP account no more than two years after borrowing the money from your RRSP. Keep in mind, the money in your RRSP must have been available for at least 90 days before the Home Buyer Plan application is submitted.
When repaying your HBP withdrawals, you do not have to repay the money into the same RRSP account — you can contribute to an RRSP account. Instead, the repayment happens when you designate a portion of your RRSP contribution as part of your HBP loan repayment on your taxes.
First-Time Home Buyer Incentive
The First-Time Home Buyer Incentive (HBI) program was announced by the Canada Mortgage and Housing Corporation (CMHC) in June 2019. The incentive is a shared equity mortgage with the Government of Canada. The Canadian government will provide 5% or 10% of your down payment on a new home or 5% of a down payment on an existing home in exchange for an equal percentage of equity in your property.
In return, when you sell your home, you’ll pay back the percentage of equity that you share with the government. Therefore, if your house increases in value, you will pay more than you first received.
Buyers must have 5% of a down payment to be eligible for this program. You must also be a first-time home buyer plan and have a household income of less than $120,000 annually (or $150,000 in Toronto, Victoria, and Vancouver). There are also restrictions on the property and mortgage. To use this program, you must borrow less than four times your qualifying income (or 4.5 times your income in Toronto, Victoria, and Vancouver). You are free to combine the HBI with the HBP.
First-Time Home Buyer Tax Credit
The First-Time Home Buyers’ Tax Credit (HBTC), first introduced in the 2009 federal budget, allows first-time homebuyers to recover some of the costs related to their purchase. This non-refundable tax credit covers inspections, legal fees, and other similar closing costs and is valued at up to $750.
Dwellings that qualify for the tax credit include new and existing single-family homes, condos, townhomes, semi-detached homes and duplexes. The requirement to be a first-time buyer does not apply if you have a disability.
The eligibility requirements for HBTC are similar to those for the Home Buyer Plan. It would help if you claimed the credit in the tax year you purchased your home.
CMHC Green Home
An energy-efficient home doesn’t just save the environment — it also nets you some savings. If your newly purchased house or condo is built to specific energy standards, you can claim a CMHC Green Home rebate of up to 25% on your mortgage loan insurance premium. The rebate will also kick in if you’re renovating your existing home or building a new one with energy-efficient upgrades and features that bring your dwelling under a 55 rating on EnerGuide or decrease the gigajoules per year your home uses a certain amount.
To apply, fill out the application found here and send it to the Canada Mortgage and Housing Corporation.
Land Transfer Tax Rebate
Homes purchased in Canada are subject to a land transfer tax ranging from 0.5% to 2.0% of the purchase price. Depending on where you are located, this can equal thousands of dollars. Suppose you are a first-time homebuyer purchasing in British Columbia, Ontario or Prince Edward Island. In that case, you may be eligible to receive a rebate on a portion of the land transfer tax.
In addition to the provincial rebate, first-time homebuyers in Toronto can refund the city’s land transfer tax. Other provinces and municipalities may also offer different rebate programs to help residents offset the cost of land transfer tax.
GST/HST New Home Buyer Rebate
The GST/HST New Housing Rebate offers you money back on the portion of the GST (goods and services tax) or HST (harmonized sales tax) you must pay when you build a house or substantially renovate your existing house. You could also qualify for a refund on a portion of the GST or HST you pay when building an add-on to your current home or converting a commercial property into a residential home.
You can only claim this rebate if the house’s value is less than $450,000. This rebate is also available for non-traditional homes like mobile and floating homes.
Contact us today for more information.