The First-Time Home Buyers’ Provincial Land Transfer Tax Rebate. How much of a refund will I get?

Wow!  Here is yet another government program to help with first-time home buyer closing costs.  THE FIRST-TIME HOME BUYERS’ PROVINCIAL LAND TRANSFER TAX REBATE. Qualifying first-time home buyers may be eligible for a rebate of their Provincial Land Transfer Taxes, when they purchase a qualifying home.  The maximum rebate amount allowed is $2,000.

All transfers of land in Ontario, Canada, are subject to the Provincial Land Transfer Tax.*  In general, when you buy land (or an interest in land) you must pay the PLTT.  The PLTT is paid by the purchaser(s) at the time that the transfer is registered.  To qualify for the rebate, you and your spouse must be at least 18 years of age, have never owned or owned an interest in a home (anywhere in the world), and you must occupy this home as your principal residence within 9 months of the date of the transfer.  As of December 13, 2007 this rebate now applies to both resale and new home purchases. (New homes must qualify for and be registered in the Tarion New Home Warranty program.)

If all purchasers do not qualify under the program, then the rebate amount rewarded will be reduced accordingly.  The rebate amount will then be calculated proportionate to “the percentage of ownership” of the remaining qualifying buyer(s).

Example:
a) Sue and Bob purchased a home together for $200,000 – with a potential PLTT of $1,725 due at closing.  Sue qualifies under the program, but her husband Bob does not.  Sue may claim 50% of the $2,000 maximum allowed.  Sue qualifies for a maximum PLTT rebate of $1,000.  Their Provincial Land Transfer Taxes payable at closing will now be reduced to only $725. ($1,725 – $1,000 = $725)

b) If both Sue and Bob had qualified under the program, then they would have received a PLTT rebate of $1,725.  The government would have paid their PLTT for them!

So now you know how to have all, or a part of your Provincial Land Transfer Taxes paid for by the government!  Neat!  The government will help you buy your “very first home”.  

 *In Toronto, there is a second “Municipal” Land Transfer Tax in addition to the PLTT.

Next post: The Canadian Mortgage and Housing Corporation (CMHC) Programs.  What are the available CMHC programs, and how will they help me buy my first home?

For more information:
The First-Time Home Buyers’ Provincial Land Transfer Tax Rebate: http://www.rev.gov.on.ca/
(Direct link active as of May 20, 2009
First-Time Home Buyers’ Provincial Land Transfer Tax Rebate

The Ontario New Home Warranty:
www.tarion.com

To read all of my general disclaimers:
Visit my “About” page.

Buyer Programs and Government Tax Incentives. How Do They Help Me?

We have all seen the headlines, “Canada’s Economic Action Plan Offers Incentives for Homeownership” and so on.  Neat.  The government will help me buy a house, you say.  While it is a good time to be a first time home buyer – you still need to make sure that the steps that you take to home ownership are the right ones for you and your family’s situation.

Let us begin with the government plan that we are most familiar with:

The HOME BUYERS’ PLAN (HBP).  This program is for the benefit of qualifying first time home buyers only, or for a related person with a disability.  You can withdraw funds to buy or build a qualifying home once you have entered into an official agreement of purchase, and you must occupy that home within one year of your withdrawal.  In 2009 the government will now expand this program to a maximum RRSP withdrawal of $25,000 per purchaser.  This is a tax-free withdrawal, that has the added requirement of repayment, during a 15 year period.  To benefit from the tax-free option you must have held these RRSP investments for more than 3 months prior to your withdrawal date.  Neat!  Now you have the down payment that you need to buy your first home.

For some people, withdrawing their funds from their RRSP’s and paying this balance back in 15 years will be “easy as pie”, and will make good financial sense.  For other people, they will make the choice to hold onto their initial RRSP investments and not touch them.  They know that the value of an RRSP invested early enough will reap a far larger reward down the road, with the added value of compound interest.  Invest in RRSP’s when you are young, for only the first few years, and do not touch these investments until you retire… and you will end up with a lot more money for a lot less financial effort.  The longer you wait in years, to start investing in your RRSP’s, the more money you will be forced to commit to investing up front, to reach your retirement goals.

Which choice is right for you?  Well, only you can decide that one.  Start your Financial Family Plan and start asking each other the important questions.  How much income do we each bring in? (gross/net, support, baby-bonuses etc.)  How much debt do we each have?  (cars, credit cards, student loans, other)  What is our current monthly budget?  (track everything that you spend for one month, and divide once yearly payments by 12) Will one of us be “not working” for a time in the future? (maternity leave, school/training, stay at home parent etc.)  Can we live off of one income, and commit the second one to monthly RRSP (retirement), RESP (education) investments, mortgage payment options (bi-weekly frequency, annual top-offs/downpays etc.) and future savings for Home Maintenance, Emergencies and future Large Purchases?  How about savings for Family Vacation and Gifts? (Birthdays, Seasonal Holidays etc.)

Gather all of this information together and sit down together and discuss it.  Is homeownership right for us at this time?  If not now – when?  (set an actual goal date and mark it on the calendar)  How much are we comfortable spending right now (per month) on a mortgage payment (your current rent), taxes, heat, electricity, water, home insurance?  How much do we spend per month on non-housing things? (food, fun, clothing, sports/clubs, transportation, car insurance/maintenance/gas)  Are there things that we could trim off of our current budget? (to increase your monthly savings to your future down payment fund, or to eliminate current debt faster?)

So set a date with your family (actually mark it on the calendar), to plan for your family’s financial future.  You will be amazed when you find out what you are really spending each month/year.  Knowledge is power.  If you want to own your first home and stop paying “the man” - then start an action plan to do so.

Next post:  The First-Time Home Buyers’ Tax Credit (HBTC).  I hear that it will assist me with the costs associated with purchasing my new home!

For more information:
The Home Buyers’ Plan: www.cra-arc.gc.ca
A direct link to information on the HBP (active as of May 14, 2009) is:
The Home Buyers’ Plan (HBP)

To read all of my disclaimers see my About page.