Many strategies are available to you regarding your first purchase. The video below will offer you one strategy that may be helpful if you’re a first time buyer and looking for that starter home. Click here to watch the video.
On the practical side, first-time buyers should be aware of the closing costs, land transfer taxes, lawyers fees and potential home repairs that just can’t wait. Owning a home for the first time can feel like haemorrhaging money without a Band-Aid in site. There is some good news though! First-time buyers, however, are offered some amazing breaks. Here are some options that should be considered.
This program can be very useful for first time buyers who need to a lot of money up front. It allows you to withdraw up to $25,000 from your registered retirement savings plan (RRSPs) to buy a home, provided you meet the criteria, like simply being a first time buyer. In terms of paying the loan back, you have 15 years. Best part: You don’t pay any interest at all. For more info and to see if you qualify, visit the Canada Revenue Agency web site.
Land transfer taxes was once the sole domain of Ontario, but now Toronto wants a piece of the land transfer tax pie. So a buyer pays a whole lot more in land transfer taxes today than before 2008. The silver lining? First time buyers get a decent break on both the Ontario and Toronto land transfer taxes. How much you pay all depends on the purchase price of your home. For example, the Ontario land transfer tax on a $400,000 home will cost you $4475. If you are a first time buyer, and qualify for a rebate, you can have up to $2000 of this tax refunded. So, on that $400,000 home you would effectively be paying $2475. In Toronto, the amount of land transfer tax you will pay also depends on the purchase price of your home as well. So, for a $400,000 home, you will pay $3725 in land transfer taxes. The rebate is bigger for Toronto to a maximum of $3725. So, if you qualify for the full refund of a $400,000 home, you would effectively pay no land transfer tax. Visit Toronto Real Estate website determine your land transfer tax.
If you purchase your home with between 5% and 20% down on a conventional mortgage, you’ll need CHMC mortgage loan insurance. It insures the bank so they will not lose money on what they consider a high ratio mortgage. The cost is ultimately passed on to you, the buyer. Many lenders will add this amount into the mortgage so you won’t have to pay for it all at once. The less you put down on your new home, the more you will pay in CHMC insurance.
On another note: As of 2019, CHMC allows first-time homebuyers to participate in a shared-equity mortgage program, called the First-Time Homebuyers’ Incentive. The program permits households with qualified annual incomes under $120,000 to receive between 5 and 10 per cent of the cost of their home’s value in down-payment assistance, in exchange for a corresponding equity stake.
Many first time buyers may qualify for this tax credit when filing your taxes. The claim cannot exceed $750. And keep in mind that if you have a spouse or common-law partner, only one of you may claim this credit. For more details on qualifying, visit the Canada Revenue Agency website.