Toronto is the second priciest city in Canada when it comes to home-buying. It is therefore no surprise that along with a sizeable down payment, many first-time homebuyers need other forms of financial assistance when it comes to making that leap from renting to buying. There are a few incentive programs designed to encourage first home-buyers. We cover a few of them over here.
Ontario Home Ownership Savings Plan (OHOSP)
Conceived as a savings vehicle for first time homebuyers in the province of Ontario, this plan allows you to open a savings account in any financial institution that will give you a tax credit of up to $500 per person ($1000 per couple) on your income tax return. It is not a tax shelter so any interest earned is taxable. To qualify your net income must not exceed $40,000 ($80,000 for couples). There is a maximum contribution to the account of $2000 per year ($4000 per couple) although there is no limit to how much you can actually put into the account. You can make contributions for 5 consecutive years before you have to close the account and you have 2 years to buy a home once the account is closed. You can ask your financial institution for more information on this incentive.
First-Time Home Buyers Tax Credit (HBTC)
The Canadian government has also devised a tax credit scheme to assist new home buyers with their first purchase of real estate. According to the government information page: 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. You can read more about this incentive at the Revenue Canada Agency website.
First-Time Home Buyers RRSP Plan
The most well-known of all first-time home buyer incentives is the RRSP plan that allows first-time buyers to withdraw their RRSPs without penalty in order to use the money towards a down payment on their first property purchase. You then have 15 years in which to repay the amounts taken. You can consult your financial institution for more information on this program.
Ontario First-Time Home Buyer’s Land Transfer Tax Credit
The province of Ontario provides this tax refund of the land transfer tax up to $2000 for first time home buyers up to a maximum property price of $227,500, after which the cost is charged at a rate of 1.5%. So basically, you won’t have to pay the land transfer costs for the first $227,500 on your new home. You can read more about this over here //bit.ly/1B5boNL.
Raising the money needed to purchase your first home is never easy, which is why the federal and provincial governments offer these incentives to new homebuyers to help ease the financial burden. With a little planning, good budgeting and the help of these tax credits and incentives, you can be well on the path to homeownership!