Buying a first home is a very exciting time but it can also feel overwhelming with so many decisions to make and all the costs involved. Getting ready to purchase your first home or condo involves much more than just saving for the down payment. When buying a home there are more costs involved than most first-time buyers are aware of.
In addition to the down payment home buyers must budget for the following:
- Moving Expenses
- Legal fees
- Home Inspection
- Home appraisals – your financial institutions may require an appraisal
- Taxes – both property tax and land transfer tax
Thankfully, first-time homebuyers have access to government programs to help with the first home or condo purchase. These programs help first-time buyers offset some of the costs once you decide to make the leap to homeownership.
The Home Buyers’ Plan (HBP)
This federal program allows you to withdraw up to $35,000 tax-free from your Registered Retirement Savings Plan (RRSP) as a loan to buy your first home.
To qualify you must be a first-time buyer, have an agreement to buy or build, and intend to live in the qualifying home as your primary residence within one year of purchase. You can make several withdraws or a single withdrawal from your RRSP in the same calendar year.
To avoid penalties, you must pay back the HBP loan within 15 years starting the second year after the withdrawal.
First-Time Home Buyer Incentive
This new buyer incentive programs’ goal is to reduce the monthly mortgage payment with a shared-equity mortgage with the federal government. New buyers can claim 5 – 10% of a property’s purchase price to put toward a down payment. Either within a 25 year period or when the home is sold, the same percentage value of the home is paid back. The homeowner can also pay back the incentive in full at any time.
The Home Buyers’ Tax Credit (HBTC)
If you are a first-time homebuyer with a qualifying home you could receive up to $5,000 of the purchase from the Home Buyers’ Tax Credit.
A qualifying home falls under most residential structure types and includes single-family, semi-detached, condominium, and townhouse properties that are complete or under construction. However, the home must be occupied as your primary residence no later than one year after purchase.
To file for the credit you simply enter the $5000 as a credit when filing your tax return.
Land Transfer Tax Rebates
When buying a home there are land transfer taxes that must be paid. To determine potential land transfer tax, use this calculator. Land transfer taxes are based on the purchase price and are paid when you close on the home. In Ontario, first-time buyers receive a reduction on their land transfer tax. Ontario first-time buyers can receive a rebate of up to $4,000 and for those purchasing a home in Toronto – they may also receive a rebate of up to $4,475 from the City of Toronto. Toronto has in addition to the Ontario land transfer tax an additional City of Toronto land transfer tax hence the double tax credits (Ontario and Toronto).
If you are thinking about buying your first home, it would be my pleasure to walk you through every step of the home buying process. Reach out.