The good news is governments want to help you buy a home. In addition to all sorts of federal and provincial tax credits, there are even municipal first-time homebuyer grants available in some cities. This is where your province or city simply gives you money in order to buy a home there — typically with a few conditions.
James Harrison summarizes these incentives well:
“Your first home will likely be one of the single largest investments of your life. Fortunately, there are several government incentives that can help make this important milestone more affordable. A few major programs include:
This federal government program allows eligible first-time home buyers to withdraw up to $25,000 tax-free from their RRSPs to finance the purchasing or construction of a qualified home. This program is aimed at first-time home buyers, but you can also qualify if it has been at least 4 years since you last owned a home.
The ability to borrow from your RRSP is the quickest way to save for a down payment if done properly. With the Home Buyer’s Plan what you’re basically doing is lending yourself money from your RRSP. You’re required to pay it back in installments over the next 15 years, or face tax consequences. The first repayment will be due the second year after the withdrawal.
The reason borrowing from your RRSP is so effective, is that you can purchase your house with pre-tax dollars instead of after-tax dollars. (That means the money you earned and deposited into your RRSP was never taxed at source.)
At the moment you can only withdraw $25,000 from your RRSP for the down payment. (There’s talk of this limit being raised.)
So, if both you and your partner are purchasing a home for the first time, you can each access $25,000, for a total of $50,000.
To participate in this program, pick up “Form T1036” from your bank or income tax office, and submit it to the institution responsible for your RRSPs. For more information on the Home Buyer’s Plan check out this article at CRA’s website.
The HBTC is a $5,000 non-refundable tax credit intended to support first-time buyers with the many additional costs associated with purchasing a home, including legal fees, HST on newly constructed homes, disbursements and land transfer taxes.
To confirm whether or not you meet the criteria, be sure to research all the details on the Department of Finance Canada Website. Search under ‘First Time Home Buyers Tax Credit’.
The Home Buyers Tax Credit (HBTC) is a 15% credit up to a maximum of $5,000 in home purchase costs, providing up to $750 in federal tax relief. When you purchase a new home, be sure to claim this credit on your income tax returns that year.
Here is a convenient guide from CMHC regarding the HBP and HBTC federal government incentives.
When you buy any kind of land in Ontario, you’re required to pay Ontario’s land transfer tax, which is based on the total amount paid to buy the land. The Ontario government offers first-time home buyers a refund on this land transfer tax, up to a maximum of $2000. Each province is different, so do check.
To be eligible for the refund, you must be at least 18 years of age, and neither you nor your spouse can have previously owned a home anywhere in the world. The refund can be claimed at the time of registration or claimed directly from the Ministry of Finance.
Kyle Prevost points out there is also tons of eco-specific cash available if you purchase an energy-efficient home. A good place to start is at Natural Resources’ website.
Sincere thanks to James Harrison for his excellent article.