Are You Ready to Buy a Home?
First – do you have the financial resources? You should have five percent of the purchase price of a home for the down payment, but ideally even more.
Second – do you suppose to stay in your new home for some time? Moving can be costly and you will want to build some equity before having to relocate.
What Can You Afford?
If you haven’t already gone through the mortgage pre-qualification procedure, you will need to meet with a lender or mortgage broker. They will begin to let you know how much of a mortgage you will qualify for. Mortgage rates vary substantially and it is important that you shop around for the best rate, terms and options.
Government Help for First-Time Home Buyers in Ontario
Recognizing the value of homeownership to Canadians, the government offers incentives to help first- time homebuyers get their financial footing. Here are some popular offerings that thousands of Canadians have taken advantage of:
Home Buyers’ Plan: One of the most well-known and utilized programs is the Home Buyers’ Plan. This plan allows eligible people to withdraw up to $25,000 tax free from their Registered Retirement Savings Plan (RRSP) to purchase or build a qualifying home.
To qualify as a first-time home buyer you cannot have owned a home as a principal residence for four years before the date of the withdrawal of funds.
People using this plan have to start repaying the amount two years after withdrawing the funds and the quantity must be entirely repaid within 15 years.
Tax-free savings account: Tax-free savings accounts (TFSA) allow people to save money and not pay tax on any interest accrued. This is great way to save for a down payment on a home as the money is often more accessible than an RRSP.
GST/HST New housing rebate program: Newly built homes are subject to five per cent GST/HST but there are some circumstances when you may be eligible to claim a rebate for a part of the GST/HST you pay on the purchase price or cost of building your home.
If the home you buy is less than $350,000, you can claim a GST/HST rebate to a maximum of $8,750. For homes priced between $350,000 and $450,000, the GST/HST rebate is reduced proportionately.
New homes priced at $450,000 or higher (before GST/HST) do not receive a rebate.
Home Buyers’ Tax Credit (HBTC): Like the Home Buyers’ Plan, if you haven’t lived in another home owned by you or your spouse or common-law partner in any of the four preceding years and you acquire a qualifying home (a housing unit located in Canada that will be your principal residence), you can claim an amount of $5,000 for the Home Buyers’ Tax Credit (HBTC). This provides up to $750 in federal tax relief.
This initiative is designed to help first-time homebuyers with the costs associated with the purchase of a home such as legal fees and land transfer taxes.
This tax credit is claimed on income tax returns in the year you purchase a home. There is also opportunity for individuals who purchase a home that is more accessible for a disabled person to claim this tax credit.
Land Transfer Tax Credit (Ontario): For Ontario residents, you can claim up to $2,000 if you are purchasing a home as a principal residence as long as you and your spouse or common-law partner has never owned a home, or an interest in a home, anywhere in the world. Applications for this tax credit must be made within 18 months of purchasing the property. (Written by Genworth Canada)