Buying your first home in Toronto?

Or are you buying in the surrounding areas such as Etobicoke, Mississauga, Oakville, or beyond?   There are first time homebuyer programs you should keep in mind when doing your mortgage planning. They’re brought to you by both the federal, provincial, and Toronto governments.

Two key things you’ll need to save for when buying your home

As you probably know, two key things you’ll need to budget for are your down payment (at least 5% of the home’s first $500,000, plus 10% of any amount over $500,000), and your closing costs (budget at least 1.5% of the purchase price of your home – click here for a breakdown).

Luckily, the various levels of government have created several first-time homebuyer programs to try to you with this big investment.

In Toronto, four first time homebuyer programs are available:

1. The federal Home Buyer Plan
2. The federal First-time Home Buyer’s Tax Credit
3. The Ontario Land Transfer Tax Rebate
4. The Toronto Municipal Land Transfer Tax Rebate

So how do these programs work?

1. The Home Buyer Plan (HBP)

I’ve gone into detail on this program in other posts, such as this one which covers smart RRSP strategies for first-time homebuyers.  In brief, if you’ve been saving money in an RRSP, as a first-time homebuyer, you are entitled to withdraw up to $60,000 for use toward the purchase of your home.  Essentially, the government is allowing you to borrow from yourself to boost the amount of your down payment.  You need to pay it back over 15 years.  It’s a pretty sweet deal.

=> To qualify for this, you are considered a first-time homebuyer as long as you haven’t owned a home in the last five years.

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

Make sure you don’t forget about this one.  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’re considered a first-time homebuyer if neither you nor your partner have owned a home in the last five years.  If you’re eligible for the Disability Tax Credit, and you’ve 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. 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 home buyer under this program, you or your spouse must not ever have owned a home, anywhere in the world.

4. Municipal Land Transfer Tax Rebate

And finally, if you are buying in the City of Toronto “proper”, and you’re a first-time homebuyer, you’re also entitled to a refund of Toronto’s municipal land transfer tax, up to $4,475. (Note: there has been some discussion of adding a land transfer tax in other Ontario municipalities, such as in Mississauga.  At the time I’m writing this, only Toronto actually has an LTT, but that is subject to change.)

=> To be eligible for this rebate, you only qualify if you’ve never owned a home, anywhere in the world, ever.

The official government links

For the more detail and the most up-to-date information on these programs, please refer to the government information websites.  The links are as follows:

Home Buyers’ Plan

First-time Home Buyers’ Tax Credit

Ontario Land Transfer Tax Rebate

Toronto’s Municipal Land Transfer Tax

What do you think?  Are our governments doing enough to help first-time homebuyers?  Or should they expand or add to the above programs?  Let me know!

Happy home buying!

Photo credit: [c] Viorel Kurnosov for vecteezy.com