Programs for Home Buyers initiated by the Government

  • Government Initiated programs for Home buyers
  • CMHC Purchase Plus Improvements
  • RRSP Home Buyers’ Plan
  • 5% Down Payment Program
  • GST New Housing Rebate
  • Land Transfer Tax or LTT Rebate Program

Government initiated programs for Home Buyers

A home is often the only big investment maximum people make during their life time, and by the way of taking benefits of the different Government programs for home buyers and owners, you can make the way of realizing your dream even easier. Some of these programs are particularly designed for the first-time home buyers, whereas some covers buyers in general. Other programs are structured to help people in the commercial, industrial and multi-unit property market. You can get information about these programs and details about your eligibility from your REALTOR.

  • CMHC Purchase Plus Improvements Program
  • RRSP Home Buyers’ Plan
  • 5% Down Payment Program
  • GST New Housing Rebate
  • Land Transfer Tax Rebate Program

CMHC Purchase Plus Improvements

Program

The mortgage loans that are insured by the Canada Mortgage and Housing Corporation also known as CMHC covers the purchase price along with an additional sum to be used in immediate improvements or renovations, the buyer might need to make to the home.

This program eliminates any need to opt for a second loan to gather the expenses to be made to the newly bought property. The buyer avails only a single mortgage, the first one, and needs to make a single payment for the mortgage, and can avail the benefits of the interest rates of the first mortgage.

Details

The covered mortgage will depend on the lower of:

  • The price of purchase and the real cost of the renovations or the exact market value for “as improved”. Before the loan is approved, the exact value of the property in the market after the modifications will be determined by CMHC.
  • Application made for the loan should include the following:
  • Minimum 5% of the total cost including the purchase price and the cost of renovations should be given as a down payment.
  • Estimated cost of the improvements or renovations.
  • Eligibility to get a CMHC covered loan through a ratified lender.

For further information you can directly call CMHC at (416) 221-2642 or check their website www.cmhc.ca.

EXAMPLE:

Purchase Price

$100,000

Renovations/improvements costs

$25,000

Total cost

$125,000

 

Lending Value

$125,000

Maximum Mortgage (95%)

$118,750

Minimum 5% down payment

$6,250

 

RRSP Home Buyers’ Plan

Program

The HBP or Home Buyers’ Plan is a program that enables you to withdraw as much as $20,000 from your RRSP or Registered Retirement Savings Plan for purchasing or building a property that qualifies as a home.

In case you meet all the conditions of HBP, it needs not to be included into your income and the RRSP issuer will not charge any tax for this amount. Before withdrawing the fund, one needs to come at a written contract that the amount will be spend for purchasing or building a qualifying home that will be occupied by the person within one year after buying or building the property.

In case you are purchasing the home together with other individuals or your spouse, every party involved can withdraw up to $20,000 from each of their RRSPs. However, one cannot withdraw a fund from RRSP under HBP, in case the qualifying home is owned by the person or his/her spouse for over 30 days before the withdraw.

Details

  • For purchasing or building a qualifying home each of the owners can withdraw up to $20,000 from their respective RRSPs. Couples can withdraw up to $40,000.
  • One should meet with all the conditions of being a first time home buyer. One will not be taken as a first time buyer, if he/she or his/her spouse has owned a house that has been his/her primary residence in the last 5 years. The 5 years is counted as the 4 years before the withdrawal and the time of the year ending 31 days prior to the date of the withdrawal.
  • Buyers withdrawing funds under HBP do not need to pay any tax on the amount as long as it is repaid to the RRSP in due time.
  • The re-payment period is 15 years, and the countdown begins from the second calendar year following the year the amount was withdrawn. Moreover, a home procured under BHP must be acquired within October 1 of the calendar year following the year of withdrawal. As for example, people making withdrawals in 2000, need to acquire the qualifying home within 1st October, 2001 and their repayment will begin by the end of 2002 or beginning of 2003.
  • There is also a special rule which does not entitle a buyer for tax reduction in case the amount is withdrawn within 90 days from the date of RRSP deposit. Subsequently, to avail the tax deductions and to use the sum under the program, the money should have been in the RSSP for a minimum of 90 days before withdrawal.

People already with a home ownership can also use the HBP for buying a home that has better accessibility or a home for an incapacitated reliant relative in case he/she meets with the following:

  • Is eligible for DTC or disability tax credit and is purchasing a home that has better accessibility or care options for the individual with disability.
  • Is a relative of the disabled who is eligible for DTC and is purchasing the home for better accessibility or enhanced care options.
  • Is a relative of a disabled individual who is eligible for DTC and is withdrawing the amount for the incapacitated individual to purchase a home with better accessibility or is better suitable for the disabled person.

One can also take the benefits of HBP more than once in case:

  1. The balance at your HBP owing to the earlier partaking is zero as per 1st January of the year you want to engage in a new participation.
  2. You are eligible as a first-time buyer and meet the conditions of HBP that are applicable as per your conditions.

5% Down Payment Program

Any home buyer can get mortgage insurance that can help them to get into the housing market, with only 5% down payment that can be collected from personal or other sources as mentioned in the next section.

Details

  • Coverage of 95% loans is available for first time as well as repeat home buyers. Personal sources like savings, gifts, and other sources, like, borrowed money, sweat equity or lender incentives can be used for gathering the 5% of money needed for the down payment.
  • Purchasers under this program can use as much as 32% of the gross monthly earnings for paying the loans that can amount to as much as 95% of the lending value where the 5% of down payment is collected from other sources, will make 2.9% of the debt value. This sum might be included with the mortgage.
  • 25 years is the maximum period of authorization.
  • Premiums of the insurance in case 95% of the value is taken as a loan and the 5% of the down payment made is gathered from personal sources, will be 2.75% of the mortgage amount.
  • Premiums of the insurance in case 95% of the value is taken as a loan and the 5% of the down payment made is gathered from other sources, will be 2.9% of the mortgage debt and this can also be added with the mortgage.
  • The borrower need to show in the application that he/she holds the capability to cover up the closing expenses that is minimum 1.5% of the purchase amount.
  • In case the minimum requirement for equity is achieved through financial gift, the fund must be in custody of the applicant at least 15 days prior of writing the application.

For further information call CMHC at 1-800-668-2642 or visit www.cmhc.ca

GST New Housing Rebate

Program

You might be eligible to ask for a deduction on some part of the GST paid on the cost of purchase or the expenses made for building your home. You may be eligible for the program if:

  • You are buying a new or renovated home including the land from a builder.
  • You are purchasing a new modular, mobile or floating home from a vendor or builder.
  • You are buying a share of the capital stock in a co-operative housing association.
  • You build or renovate your existing home.
  • Your home had been devastated in fire and has been rebuilt.

Details

  • Resale homes need not to pay the 6% for GST.
  • The 6% GST is applicable on new homes. The buyers can claim for 36% deduction on the 6% that is added with the cost of purchase up to a maximum of $7,560 for homes that costs within $350,000 before the GST.
  • In case of new homes with a price within $350,000 and $450,000 before the GST, the rebate will reduce proportionally.
  • There will be no rebate for new homes priced $450,000 or higher before GST.

Note:

In GTA, the GST is normally included into the cost of the house by the builders, and any form of deduction is offered to the builder as they bear the net GST expense.

Land Tranfer Tax (LTT) Rebate Program

Program

For the first time home buyers who opt for a newly built home, the LTT rebate is applicable. Buyers of any other category are required to pay the tax in full. The maximum amount of rebate on LTT is $2,000.

Details

  • An exceptional one year endowment to the LTT was put forward in 1996 Ontario Budget, which was rehabilitated every year and presently is a long-standing program.
  • The first time home buyers who opt for a newly built home, the LTT rebate is applicable. Buyers of any other category are required to pay the tax in full.
  • The highest amount of rebate is $2,000. In case an individual do not own 100% of the newly purchased/built home, the amount of rebate will be reduced according to his/her percentage of interest.
  • $2,000 rebate equals the LTT to be paid on a buying cost of $227,500.
  • Individuals over 18 years of age without any previous interest in any other homes are eligible for the rebate. It goes the same for their spouses as well.
  • Buyers enjoying OHOSP or Ontario Home Ownership Savings Plan based LTT refunds are not qualified.
  • On ownership transfer, a real estate transfer tax is charged. The amount of the tax is determined as per the cost of the property
  • for a sum of $55,000 and below the tax is 0.5%
  • for the amount over $55,000 up to $250,000 (inclusive) the tax is+1.0%
  • for the sum over $250,000 up to $400,000 (inclusive), it is +1.5% or in case of business properties, +1.5% on the sum in excess of $250,000
  • In case of residential properties for the sum over $400,000, the tax is +2.0%

You can get more information on the same from Ontario Finance Ministry by calling 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)

(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].