First Time Home Buyers

The definition of a first-time home buyer from the perspective of Canada Revenue Agency (CRA) for tax purposes is as follows:

“A first-time home buyer is anyone who has not lived in a home owned by oneself or one’s spouse or common-law partner in the year of acquisition, or in any of the four preceding years. Thus, even if you or your spouse or common law partner have previously owned a home that you lived in, so long as you have not been doing so in the 5 years prior to your new home purchase, you are considered a first-time home buyer.”

With regards to municipal and provincial government land transfer tax:

Land transfer tax rules differ in that you can only ever qualify once and you would need to occupy the property as your principal residence within 9 months of your purchase. Thus, if your first property purchase is strictly for investment purposes, a key implication of this 9 months’ requirement is that it will not be eligible for the provincial rebate of $4,000, nor will you qualify for the municipal rebate of $3,725 if you are buying a home in Toronto. The CRA, however, will permit you to purchase a property as an investment and still qualify as a first-time home buyer on your second property.

In Toronto, there are four first-time homebuyer’s programs available:

  1. The Federal Home Buyer Plan (HBP)
  2. The Federal First-time Home Buyer’s Tax Credit (HBTC)
  3. The Ontario Land Transfer Tax Rebate
  4. The Toronto Municipal Land Transfer Tax Rebate

The first two privileges afforded to first-time home buyers are under CRA and the latter two are at the municipal and provincial government land transfer tax purposes.

1.The Federal Home Buyer Plan (HBP)

If you have been saving money in an RRSP, as a first-time homebuyer, you can borrow up to $25,000 from your RRSPs for a down payment, which represents a substantial amount for most first-time home purchasers (When withdrawing RRSP’s for the purposes of the HBP, form T1036 (HBP Request to Withdraw Funds from an RRSP form) must be filled out. This is typically done by the financial institution on the home buyers’ behalf). 

Repayment of the borrowed amount is to be made over a period of 15 years, commencing 2 years after the withdrawal is made. The RRSP is a source of refund on your tax return and, depending on your marginal tax bracket, could result in an upwards of  46%  return.

To qualify for this, you are considered a first-time homebuyer as long as you have not owned a home in the last 5 years.

2.The Federal First-time Home Buyer’s Tax Credit (HBTC)

As a first-time homebuyer, you can claim up to $5,000 in total as a tax credit when you purchase your first home. This entitles you to up to $750 in federal tax relief.

You are considered a first-time homebuyer if neither you nor your partner has owned a home in the last five years.  If you are eligible for the Disability Tax Credit, and you have had to move and buy a home that is more accessible for you, you can claim the HBTC, even if you have owned a home in the last five years.

3.The Ontario Land Transfer Tax Rebate

Part of your closing costs goes to Ontario Land Transfer Tax.  You can claim a refund of up to $4,000 of your Ontario land transfer tax payable at the time of purchase of your new home.

To qualify as a first-time homebuyer under this program, you or your spouse must not ever have owned a home, anywhere in the world.

4.The Toronto Municipal Land Transfer Tax Rebate

If you are buying in the City of Toronto “proper”, and you are a first-time homebuyer, you are also entitled to a refund of Toronto’s municipal land transfer, up to $3,725. 

To be eligible for this rebate, you only qualify if you have never owned a home, anywhere in the world.

To assist you further in understanding how the program works and mortgage pre-approval under the program and different programs of Canadian Mortgage and Housing Corporation (CMHC), Genworth Financial and Canada Guaranty, please feel free to Contact Us for a free consultation on New to Canada Program, Business for Self (Alt-A) Program, Purchase Plus Improvement Program.

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