Buying your first home?
Be sure you have all the facts.
Benefits For First Time Home Buyers – 5 Ways to Save Money For Buying Your First Home
- Determine how much you can afford: Be realistic about where you want to live and what type of home you will likely be able to afford. Consulting a financial advisor or mortgage professional early on will put you on the right path to fulfilling your goal.
- Create a budget: Keep track of all the money that comes in and out. Balancing expenses against income will help you determine what adjustments you might need to make to your spending habits in order to build savings.
- Open a separate savings account: Deposit a set amount of money every month through an automatic withdrawal from your paycheque or other bank account.
- Have fun at home: Going out for dinner, clubbing or a movie can really add up on your monthly expenses and kill your budget. Host movie nights or potluck dinners at home and see your savings grow.
- Spend using cash: Every pay day give yourself an allowance in cash to get you through to the next pay day. If you don’t have cash handy, you might think twice before buying something you don’t really need.
FIRST TIME HOME BUYERS MONEY SAVERS
Get up to $7,500.00 back!
First Time home buyers RRSP – quick details – must be in account for 90 days before purchase – $25K tax tree towards your first home – 15 years to pay back (A husband and wife can each take $25K out allowing for a $50,000 down payment tax tree) – Tax Refund pays back almost 1/3 depending on your tax bracket.
- Qualifying for the HBP – You must not have lived in a home owned by you or your spouse in the last 5 years. You must have entered into a written agreement to buy or build a home that you intend to occupy as your principal residence.
- Repaying your RRSP – You have up to 15 years to repay the amount you borrowed from your RRSP. You must start to make repayments in the second year after the year in which you made your withdrawal(s). In general, you have to repay 1/15 of the total amount you withdrew each year. After 15 years, any amount you have not paid back to your RRSP will be taxed. You will owe this tax when you file your income tax return in the following year.
More information from Canadian Mortgage and Housing Corporation (CMHC) – http://www.cmhc-schl.gc.ca/en/co/buho/buho_008.cfm
Land Transfer Tax (LTT) Refund
You may receive a refund from the Ontario government of up to $2,000 of the land transfer tax you paid on your first home. Other provinces have similar programs.
Here’s how it works:
- You must be at least 18 years old.
·You cannot have previously owned a home, or an interest in a home, anywhere in the world.
· Your spouse cannot have owned a home, or an interest in a home anywhere while they were your spouse.
· You may receive the refund at the time you register your home purchase. If not, you must apply for it no later than 18 months after the registration date.
Land Transfer Tax Refund for First Time Home Buyers – http://www.fin.gov.on.ca/en/refund/newhome/
First-Time Home Buyers’ Tax Credit
Through Canada’s Economic Action Plan, the federal government introduced the First-Time Home Buyers’ Tax Credit (HBTC) to help with the purchase of a first home.
About the Initiative
The HBTC assists first-time home buyers with the costs associated with the purchase of a home, such as legal fees, disbursements and land transfer taxes, which are a particular burden for first-time home buyers, who must also save for a down payment. The $5,000 non-refundable HBTC amount applies to qualifying homes acquired after January 27, 2009, and provides up to $750 in federal tax relief.
The GST Rebate on New Homes
Buy new homes valued at less than $450,000!
The GST rebate is available upon the purchase of new homes valued at less than $450,000. This rebate will amount to a 36% kickback of the 5% GST portion of the HST. For instance, in a new home that is valued at $100,000 the GST portion of the HST would be $5,000. Multiply this amount by 36% and an individual will be eligible for a rebate of $1,800 on the purchase of this new home. This will be true for any purchase of a new home of which its value does not exceed $350,000. Once this amount is exceeded, there will be a gradual dwindling of the amount rebated until the value of $450,000 is exceeded, at which point such rebate will total $0. The formula to calculate the amount that the rebate will decline can be found on the GST191 form, and this rebate operates separately from the Ontario Provincial Rebates.
The Ontario Provincial Rebate on New Homes
Buy new homes for any amount up to $400,000!
The Ontario provincial rebate is available upon the purchase of new homes for any amount up to $400,000. This portion of the available rebate operates differently, however, in comparison to its GST counterpart. A house priced in excess of $400,000 will not result in forfeiture of the entire rebate, as is the case for the GST portion, but rather a rebate will be awarded for every dollar spent up to $400,000 but none thereafter. This rebate is applicable for 75% of the amount charged for the PST portion of the HST (8%) on the first $400,000 spent. For example, if one were to purchase a new home valued at $500,000, the PST portion of the HST rebate would be 8%, or $40,000. Of this amount, only $32,000 was taxed on the first $400,000, and this only this amount will be eligible for rebate calculations. You must then multiply this number by the 75% portion that will be returned as a rebate, resulting in a rebate of $24,000. This is the maximum amount available for a rebate on any new home valued over $400,000.
How the Builder Applies the Rebate
The Ontario new housing rebate will enable builders to pay or credit the Ontario new housing rebate to the individual purchaser of new housing, just as they currently can pay or credit the GST new housing rebate. If a builder did not pay or credit the rebate at the time of purchase, the individual will be able to file a rebate application for the Ontario new housing rebate with the government directly. To apply for this rebate, an individual would use Form RC7190-ON, GST190 Ontario Rebate Schedule. Typically, however, these rebates are incorporated into the price listed upon the sale and purchase of the new home. If this discount is in fact incorporated into the price, then the rights to the proceeds of it are being transferred to the builder upon signing the agreement.
Forms and Guidelines – http://www.cra-arc.gc.ca/E/pub/gp/rc4028/README.html