First Time Home Buyers

Buying your first home is a big milestone, however to get there can be a long journey. To do so you're required to save at least a 5% down payment, qualify for a mortgage, and have sufficient money left over for both closing costs (minimum 1.5% of the purchase price) as well as furnishing your place. Not to mention being able to afford the mortgage payment and new costs associated with home ownership (i.e. property taxes, home insurance, etc.). Owning a home is a rewarding experience and can teach you a lot about financial discipline. Home ownership can also be a lucrative long term investment as you begin to build equity by paying off your mortgage.

To make it easier for first time home buyers to purchase a property, the government has implemented several programs with financial incentives. The main ones are: the First-Time Home Buyers' Tax Credit, RRSP Home Buyers' Plan, and the Land Transfer Tax Rebate.

To qualify for the Home Buyers' Tax Credit or the RRSP Home Buyers' Plan:

• An individual or their spouse/common-law partner must not have owned and lived in another home in the year of the new home purchase or in the preceding four years. This condition is however waived if the home was purchased for a person with a disability. In that case, the tax credit can still be claimed as long as the home was meant to be better suited to the personal needs of the person with the disability.
• The property must be located in Canada
• The individual or their spouse/common-law partner intends to occupy it as their primary residence within one year of the purchase

The conditions to qualify for the land transfer tax rebate are slightly different and vary across the provinces that offer the rebate.

First-Time Home Buyers' Tax Credit
The First-Time Home Buyers' Tax Credit is a $5,000 tax credit meant to assist first time buyers with the financial burden of purchasing a home. It can be claimed against personal income and provides a rebate of $750 (multiplying $5,000 by the lowest personal tax bracket of 15%). It can be claimed on line 369 of your personal income tax return in the year you purchase a home.

The $5,000 tax credit may be split between the individual and their spouse/common-law partners as long as the total does not exceed $5,000. It can also be split between any individuals that decide to jointly purchase a property.

Source: http://www.cra-arc.gc.ca

RRSP Home Buyers' Plan
The RRSP Home Buyers' Plan (HBP) allows you to withdraw up to $25,000 from your RRSP to be used as down payment for your home purchase with no tax consequences. It is a great way to access savings that would otherwise be taxed if withdrawn prior to retirement. To withdraw funds from your RRSP for this purchase you must present an agreement to buy or build a qualifying home for yourself (or an individual with a disability).

Conditions:

• You must be a resident of Canada
• You, your spouse/common-law partner, or the person with a disability you're purchasing the home for cannot own the property more than 30 days before the withdrawal
• You must be the annuitant of the RRSP to make a withdrawal
• The money must be in the RRSP for at least 90 days before a withdrawal can be made
• You will not be able to withdraw funds from a locked-in or group RRSP
• If you've participated in HBP before, your repayable HBP balance on January 1st of the year of your intended withdrawal must be zero. That means that your total previous withdrawal must equal the total of your repayments and total portion included in income (if only partial repayment was made)
• All funds must be withdrawn in the same year
• Once the withdrawal is made you must purchase the home before October 1st of the year, after the year of withdrawal
• The withdrawal amount must be repaid into your RRSP within 15 years - 1/15 must be repaid every year. Any unpaid portion will be taxed like regular income. Repayment stars the second year following the year of withdrawal.

To participate in the HBP you must take the following steps:

• Complete form T1036 (you can find it online) and provide it to your RRSP holder
• Withdraw funds
• Receive a T4RSP statement from your RRSP holder containing details of the withdrawal and include it in your personal tax return
• You will receive a notice of assessment showing you HBP details and how much must be repaid the following year.

Source: http://www.cra-arc.gc.ca

Land Transfer Tax Rebate
The often forgotten cost of purchasing a property is the land transfer tax. It is levied by the provincial government and must be paid upfront when purchasing a home. The cost can add up to quite a lot, especially on higher priced properties. You can access the Rates.ca Land Transfer Tax Calculator to figure out exactly how much you'd be expected to pay on a home purchase. Thankfully the governments of Ontario, British Columbia and PEI offer a land transfer tax rebate to first time homebuyers.

Ontario
In Ontario to qualify for the rebate:

• Purchaser must be at least 18 years of age
• Purchaser must occupy the home as their principal residence within 9 months of the date of purchase
• Purchaser cannot have previously owned an interest in a property anywhere in the world. This condition also applies to the purchaser's wife while they've married.
• Refund must be requested within 18 months of the date of purchase

The refund for properties in Toronto can be up to a maximum of $3,725 while properties outside of Toronto could qualify for a maximum refund of $2,000. The total refund is determined based on the following schedule:

Non-Toronto Residents
Purchase Price	Rebate
First $55,000	0.5%
Next $172,500	1.0%

Toronto Residents
Purchase Price	Rebate
First $55,000	0.5%
Next $345,500	1.0%

Source: http://www.fin.gov.on.ca

British Columbia
In BC to qualify for the full rebate:

• Purchaser must be a Canadian citizen or permanent resident
• Purchaser must have lived in BC for 12 consecutive months prior to the purchase or must have filed 2 income tax returns as a BC resident within the 6 years preceding the purchase
• Purchaser cannot have previously owned an interest in a property anywhere in the world
• Purchaser cannot have previously received a first time homebuyers' exemption or refund
• The fair market value of the property cannot be greater than $425,000
• The land is no larger than 1.24 acres
• Purchaser must use property as their primary residence

*If the three last conditions are not met the purchaser can still qualify for a partial rebate.

The refund is determined based on the following schedule:

Purchase Price	Rebate
$0 - $425,000	Full Rebate
$425,001 - $449,999	($450,000 - purchase price)/25,000 x land transfer tax payable

Source: http://www.sbr.gov.bc.ca

Prince Edward Island
In PEI to qualify for the rebate:

• Purchaser must be a Canadian citizen or permanent resident
• Purchaser must have lived in PEI for 6 consecutive months prior to the purchase or must have filed 2 income tax returns as a PEI resident within the 6 years preceding the purchase
• Purchaser cannot have previously owned an interest in a property considered their principal residence
• Purchaser cannot have previously received a first time homebuyers' exemption or refund
• The greater of the purchase price or assessed value of the property must not exceed $200,000

A full rebate is provided as long as all the above conditions are met.
Source: http://www.gov.pe.ca