Buying your first home can be an exciting and rewarding experience. Not only does it likely represent the biggest and most important investment you will make, but it can represent so much more; freedom, independence and growth. But outside of the obvious benefits listed above, what are some of the advantages a First Time Home Buyer (FTHB) is entitled to? We’re going to map it out for you in two different scenarios. The first is if the person(s) on title is a first time home buyer and the second is if there are two people buying a home and only one is a FTHB. For example if a couple is buying a house, and one party is not a first time buyer and the other is.
All parties are First Time Home Buyers:
One of the parties is a First Time Home Buyer and the other is NOT:
There are basically three different levels to this; Federal, provincial and municipal (Toronto). The Federal aspect is the First Time Home Buyer’s Tax Credit (HBTC) which entitles you to a rebate of $750 on your income tax return so long as you can show $5,000 in expenditures, including LTT. To qualify, neither party buying the house can have lived in a house they owned in the year of your purchase or the previous 4 years. If one of the parties is not eligible, the one who is a FTHB cannot claim this rebate. The other Federal aspect is being able to access your RRSP tax free. When withdrawing funds from your RRSP account, you pay taxes on it. However, if you are a first time home buyer, you are able to use up to $25,000 tax free. Even if one party is not eligible, the one who is can use this benefit.
Next is the provincial land transfer tax rebate. The land transfer tax payable is dependent on the purchase price of the home. You will receive up to $2,000 of this money back, so if your total LTT is less than $2,000 you will get a full refund. If only one party purchasing the home is eligible, you will get half of this rebate. To calculate LTT, use this calculator.
When purchasing a home in Toronto, an additional Land Transfer Tax is payable. A First Time Home Buyer is entitled to a rebate of up to $3,725 and half of that, $1,862.50, when only one applicant is eligible.
That is basically the ins and outs of buying a home for the first time. There are different ways to make sure you are taking full advantage of these programs and proper ways to apply for them. Make sure you discuss this with your mortgage broker or real estate lawyer so you get what you are entitled to.
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