First time home buyers programs
Both the government of Canada and the Ontario government have established programs to assist first time home buyers. The three best known programs are the RRSP Home Buyer’s Plan, the Ontario Home Ownership Savings Plan and the Land Transfer Tax rebate.
RRSP Home Buyer’s Plan
The RRSP Home Buyer’s Plan was introduced by the federal government, and allows first time home buyers to withdraw up to $20,000 from their RRSP tax free to use towards the purchase of a home. To qualify as a first time home buyer, purchasers must not have lived in a home owned by themselves or their spouses in the last five years. If both you and your spouse qualify under the Plan, you can each withdraw up to $20,000 from your RRSPs for a total of $40,000.
Before you are entitled to withdraw the money from your RRSP, you must have entered into a written agreement to purchase or build a home that you intend to occupy as your principal residence. The purchase of a cottage, for example, would not qualify for this program because it is not a principal residence.
Money can be withdrawn from your RRSP provided it has been in your RRSP for at least 90 days. If you have signed an Agreement of Purchase and Sale and you have at least 90 days until your closing, you can open an RRSP and make a contribution, receive the tax deferred benefit and then withdraw the same money and put it towards the purchase of your home.
Money withdrawn under this federal program must be paid back to your RRSP within 15 years. People generally deposit one fifteenth of the amount withdrawn back to the RRSP over each of the following 15 years. If you do not pay the full amount back to your RRSP within 15 years, the amount outstanding will be subject to tax when you file your income tax return in the following year.
Ontario Home Ownership Savings Plan
The second program for first time home buyers is the Ontario Home Ownership Savings Plan. This program provides a tax credit for contributions of up to $2000 to the plan each year. The savings you accumulate under this Plan can then be used towards the purchase of a home. To qualify, you must earn less than $40,000, or if you have a spouse, you and your spouse combined must earn less than $80,000. You can obtain additional information about this program from your lawyer, your local bank, or you can call the Ontario Home
Land Transfer Tax rebates
First time home buyers may also be eligible for a Land Transfer Tax rebate on purchases of newly built homes. We can determine if you qualify for a rebate.