A home is usually the single largest investment that most people make in their lives. Achieving your dream can be made easier by taking advantage of various Government Programs for home buyers and property owners. Some of the programs are targeted to first-time buyers, while others apply more generally. Other programs benefit those in the industrial, commercial and multi-unit property market. Your REALTOR can provide information on these programs and help you to determine your eligibility.
- CMHC Purchase Plus Improvements Program
- RRSP Home Buyers' Plan
- 5% Down Payment Program
- HST New Housing Rebate
- Land Transfer Tax Rebate Program
- First-time Buyer Incentive
- First-time Buyer Credit
Canada Mortgage and Housing Corporation (CMHC) insured mortgage loans are available to cover the purchase price of a home as well as an amount to pay for immediate major renovations or other improvements that the purchaser may wish to make to the property.
This option eliminates the need to obtain secondary financing after the purchase to pay for improvements. The homebuyer obtains a single first mortgage, makes a single mortgage payment, and benefits from first mortgage interest rates.
The insured loan will be based on the lower of:
- The purchase price plus the actual cost of improvements or the “as improved” market value. Prior to approval, CMHC will determine the market value of the property after renovations/ improvements. The lending value will not exceed the market value of the property after renovations/ improvements.
- Applicants must have the following:
- A minimum of 5% down payment of total cost (purchase price plus renovations/ improvements).
- Cost estimates for renovations/improvements.
- Qualifications to obtain a CMHC insured loan through an approved lender.
- The amount depends on the home's purchase price:
- If the home costs $500,000 or less, you'll need a minimum downpayment of 5%.
- If the home costs more than $500,000 or less, you'll need a minimum of 5% down on the first $500,000 and 10% on the remainder.
- If the home costs more than $1,000,000 or more, mortgage loan insurance is not available.
|Maximum Mortgage (95%)||$118,750|
|Minimum 5% down payment||$6,250|
For more information call CMHC at (416) 221-2642 or www.cmhc.ca.
The Home Buyers' Plan (HBP) is a program that allows you to withdraw up to $35,000 in a calendar year from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability. Couples and common-law partners can withdraw up to $35,000 each.
For example: Alex and Michelle, young couple, can withdraw up to $35,000 from their RRSPs for a total of $70,000, allowing them to contribute more towards their down payment.
Note: Budget 2019 proposes to increase the Home Buyers' Plan withdrawal limit to $35,000. This would be available for withdrawals made after March 19, 2019.
- You must be considered a first time home buyer
- You must have a written agreement to buy or build a qualifying home for yourself or a related person with a disability
- You must intend to occupy in the qualifying home as your principal place of residence within one year after buying or building it
Note: Even if you or your spouse or common-law partner has previously owned a home, you may still be considered a first time home buyer.
The four year period begins on January of the fourth year before the year you withdraw funds. It ends 31 days before the date you withdraw the funds. For example: If you withdraw funds on March 31, 2019, the four-year period begins on January 1, 2015 and ends on February 28, 2019.
Participate in HBP again:
If you have previously participated in the HBP, you may be able to do so again if your repayable HBP balance on January 1st of the year of the withdrawal is Zero and you meet all the other HBP eligibility conditions.
Withdrawal of Funds:
If you receive a withdrawal in one year and another in January of the following year, we consider the January withdrawal to have been received in the year the first withdrawal was made.
If the January withdrawal is received before you acquire your qualifying home, or no later than 30 days after you acquire it, and all the other relevant conditions described in the chart below are met, it is an eligible withdrawal. For this purpose, your HBP balance on January 1st is not a relevant condition and does not have to be zero.
If you meet the applicable HBP conditions, you cannot withdraw more than $25,000. Your RRSP issuer will not withhold tax from the funds you withdraw that total $25,000 or less.
An amount exceeding $25,000 will have to be reported as income on your income tax and benefit return for the year you received it. In addition, your RRSP issuer will have to withhold tax on the amount in excess at the time of the withdrawal.
Your RRSP deduction may be affected by your participation in the HBP
If you participate in the HBP, certain rules limit the deduction of your RRSP contributions made during the 89 day period before you withdrew funds under the HBP. Under these rules, you may not be able to deduct part or all of the contributions made during this period for any year.
Repay the Funds withdrawn:
- Your repayment period starts the second year after the year you withdraw funds from your RRSPs for the HBP
- You have 15 years to repay the amounts you withdraw from your RRSP under HBP. However, you can repay the full amount at any time.
Note: Home buyers withdrawing funds do not have to pay the income tax on the amount withdrawn, as long as the funds repaid into an RRSP in the future.
Existing homeowners can use the HBP to purchase a more accessible home or a home for a disabled dependent relative where the individual withdrawing the funds:
- Qualifies for the disability tax credit (DTC) and is buying a home that is more accessible for the individual or is better suited for the care of the individual.
- Is related to a disabled individual who qualifies for the DTC and is buying a home for the benefit of the disabled individual that is more accessible for, or better suited for, the care of the disabled individual.
- Is related to a disabled individual who qualifies for the DTC and is withdrawing an amount for the disabled individual to buy a home that is more accessible for, or better suited for, the care of the disabled individual.
With as little as a 5% down payment, from personal or other sources (see below for eligible other sources), all home buyers have access to mortgage insurance enabling then to enter the housing market, as long as they can manage the costs of home ownership.
- Mortgage insurance for 95% mortgages is available to both first time and repeat home buyers. Homebuyers have the option of using personal sources, such as savings or gifts, or other sources, such as lender incentives, borrowed funds/credit, or sweat equity (the amount of money spent to help construct the home) for the required 5% down payment.
- Buyers using the program may consume up to 32% of their gross monthly household income for payments on loans for 95% of the lending value of the house where the 5% down payment comes from other sources, will be 2.9% of the mortgage loan. This premium can be added to the mortgage.
- The maximum amortization period is 25 years.
- Insurance premiums on loans for 95% of the lending value of the house where the 5% down payment comes from personal sources will be 2.75% of the mortgage loan.
- Insurance premiums on loans for 95% of the lending value of the house where the 5% down payment comes from other sources will be 2.9% of the mortgage loan. This premium can be added to the mortgage.
- Borrowers are required to demonstrate, at the time of application, their ability to cover closing costs equal to at least 1.5% of the purchase price.
- Where the minimum equity requirement is being met by way of a financial gift, the funds must be in possession of the borrower 15 days before making an offer to purchase.
For more information call CMHC at 1-800-668-2642 or access through www.cmhc.ca
Find out if you are eligible for the GST/HST new housing rebate
You may be eligible for a new housing rebate for some of the GST/HST paid if you are an individual who: built, or engaged someone else to build, a house on land that you already owned or leased
- Qualifying housing also includes mobile homes (including modular homes) and floating homes. For mobile and floating homes, you may have the option to treat your mobile or floating home as a purchased home or as an owner-built home when claiming your new housing rebate
- constructed or substantially renovated your own home, or hired someone else to construct or substantially renovate your home for use as your (or your relation’s) primary place of residence and the fair market value of the house when the construction is substantially completed is less than $450,000.
- substantially renovated, or engaged someone else to substantially renovate, your existing house (at least 90% of the interior of the existing house must be removed or replaced to be a substantial renovation
- purchased a share of the capital stock of a co-operative housing corporation (co-op); or
- purchased a new or substantially renovated house from a builder where you leased the land from that builder under the same agreement to buy the house and the lease is for 20 years or more or gives you the option to buy the land.
- You were an owner-occupant in the last five years and your previous house was destroyed involuntarily (for example, by fire) and is subsequently rebuilt.
Find out which GST/HST new housing rebate you can claim
The GST/HST new housing rebate allows an individual to recover some of the goods and services tax (GST) or the federal part of the harmonized sales tax (HST) paid for a new or substantially renovated house that is for use as the individual's, or their relation's, primary place of residence, when all of the other conditions are met. Additionally, other provincial new housing rebates may be available for the provincial part of the HST whether the GST/HST new housing rebate for the federal part of the HST is available or not.
In certain circumstances, a transitional new housing rebate may be available in addition to any GST/HST new housing rebate and provincial new housing rebate for which you may be eligible, even if the house is not your primary place of residence.
The new housing rebate is not available to a corporation or a partnership.
- An eligible new Home buyer can claim a rebate for 36% of the federal portion (5%) of the HST paid on a new Home with a pre-tax price less than or equal to $350,000 with a maximum of $6,300.
- Where, the pre-tax price is more than $350,000, but less than $450,000, the tax will be reduced proportionately
- New homes priced $450,000 before HST or higher would not receive a rebate.
- An eligible new Home buyer can also claim a rebate of 75% of the Ontario portion (8%) of the HST, capped at a maximum of $24,000.
For more information, see Guide RC4028, GST/HST New Housing Rebate.
In the GTA, most builders include the HST in the price of the house, and any rebate would be assignable to the builder as they would be absorbing the net HST cost.
Land Transfer Tax (LTT) Rebate Program
When you buy land or an interest in land in Ontario, you pay land transfer tax. First-time homebuyers of an eligible home may be eligible for a refund of all or part of the tax:
- For agreements of purchase and sale entered into before December 14, 2007, the refund only applies on the purchase of a newly constructed home.
- For agreements of purchase and sale entered into after December 13, 2007, the refund applies to all homes, whether newly constructed or resale.
For conveyances or dispositions that occur before January 1, 2017, the maximum amount of the refund is $2,000.
Beginning January 1, 2017, the maximum amount of the refund is $4,000. The increased limit of $4,000 applies only to conveyances or dispositions that occur on or after January 1, 2017, regardless of the date the agreement of purchase and sale was signed.
Beginning January 1, 2017, no land transfer tax would be payable by qualifying first‑time purchasers on the first $368,000 of the value of the consideration for eligible homes. First‑time purchasers of homes greater than $368,000 would receive a maximum refund of $4,000.
The refund will be reduced if one (or more) of the purchasers is not a first‑time homebuyer. The refund will be proportionate to the interest acquired by the individuals who qualify for the refund.
Requirements to qualify for the refund
To qualify for a refund:
- The purchaser must be at least 18 years old.
- The purchaser must occupy the home as their principal residence within nine months of the date of transfer.
- The purchaser cannot have ever owned an eligible home, or an interest in an eligible home, anywhere in the world, at any time.
- If the purchaser entered into an agreement of purchase and sale before December 14, 2007, the home must be a newly constructed home and the purchaser must be eligible for the Tarion New Home Warranty.
Time limit to apply for refund
A qualifying purchaser must apply for the refund within 18 months after the date of registration of the conveyance or the date the unregistered disposition occurs.
- amounts up to and including $55,000: 0.5%
- amounts exceeding $55,000, up to and including $250,000: 1.0%
- amounts exceeding $250,000: 1.5%
- amounts exceeding $400,000, where the land contains one or two single family residences: 2.0%
For more information call the Ontario Finance Ministry at 1-800-263-7965.
|These four portions added up together total the LTT payable. A simple formula is as follows:|
|**Purchase Price||Calculation of LTT|
|$0 to $55,000||0.5% x purchase price|
|$55,001 to $250,000||(1% x purchase price) minus 275|
|$250,001 to $400,000 (residential)
$250,001 plus (business)
|(1.5% x purchase price) minus 1525|
|$400,001 plus (residential only)||(0.2% x purchase price) minus 3525|
|**If the purchase price falls within this range, then apply the appropriate formula to the purchase price. For example on a $200,000 property, the LTT calculation would be [(1% x $200,000) minus 275 = $1725].|
The First-Time Home Buyer Incentive helps qualified first-time homebuyers reduce their monthly mortgage carrying costs without adding to their financial burdens.
There are a few qualifiers to apply for this incentive:
- you need to have the minimum down payment to be eligible
- your maximum qualifying income is no more than $120,000
- your total borrowing is limited to 4 times the qualifying income
If you meet these criteria, you can then apply for a 5% or 10% shared equity mortgage with the Government of Canada. A shared equity mortgage is where the government shares in the upside and downside of the property value.
The First-Time Home Buyer Incentive launches September 2, 2019*.
How does it work?
The Incentive enables first-time homebuyers to reduce their monthly mortgage payment without increasing their down payment. The Incentive is not interest bearing and does not require ongoing repayments.
Through the First-Time Home Buyer Incentive, the Government of Canada will offer:
- 5% for a first-time buyer’s purchase of a re-sale home
- 5% or 10% for a first-time buyer’s purchase of a new construction
|Incentive by Property Type|
|PROPERTY TYPE||INCENTIVE (%)|
|New Construction||5% or 10%|
|New or re-sale mobile/manufactured home||5%|
The total amount of funding will be $1.25 billion over 3 years.
Note: The program is expected to be ready to receive Incentive applications starting September 2, 2019. If approved for the Incentive, the purchase transaction must close on or after November 1, 2019.
Let’s look at a specific situation*
Anita wants to buy a new home for $400,000. She’s saved the minimum required down payment of $35,000 (5% of the purchase price).
Under the First-Time Home Buyer Incentive, Anita can apply to receive $40,000 in a shared equity mortgage (10% of the cost of a new home) through the program.
This lowers the amount Anita needs to borrow and reduces the monthly expenses.
As a result, Anita’s mortgage is $228 less a month or $2,736 a year.
Ten years later, Anita sells her home for $420,000. The Incentive will need to be repaid as a percentage of the home’s current value.
For more information, see First-Time Home Buyer Incentive
First-Time Home Buyer Tax Credit Program
The First-Time Home Buyer Tax Credit offers a $5,000 non-refundable income tax credit amount on a qualifying home acquired after January 27, 2009. For an eligible individual, the credit will provide up to $750 in federal tax relief. Go to the Home Buyers’ Credit section to see if you are eligible.
You can claim $5,000 for the purchase of a qualifying home in the year if both of the following apply:
- you or your spouse or common-law partner acquired a qualifying home
- you did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years (first-time home buyer)
For more information, see Home buyers' amount.
JOHN R MILLER
RE/MAX Real Estate Centre Inc.
“Je parle 'maisons' aussi!"