Government Programs for First-Time Home Buyers

Buying a new home is by no means cheap, and moving into large urban areas like the GTA or Vancouver makes that statement all the more true. But the Government of Canada wants people to invest in real estate, and contribute to the economy. To accomplish this, the government has provided many government programs to help first-time home buyers.

Home Buyers' Plan (HBP)

The Home Buyers' Plan (HBP) is a federal government program that allows you to withdraw funds from your registered retirement savings plan (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability. You can withdraw up to $25,000 in a calendar year.

Your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the HBP, or they may not be deductible for any year.

Generally, you have to repay all withdrawals to your RRSPs within a period of no more than 15 years. You will have to repay an amount to your RRSPs each year until your HBP balance is zero. If you do not repay the amount due for a year, it will have to be included in your income for that year.

Land Transfer Tax (LTT) Refund

This program is for residents of Ontario. You may receive a refund from the Ontario government of up to $2,000 of the land transfer tax you paid on your first home. Other provinces have similar programs. Here's how it works:

• You must be at least 18 years old.
• You cannot have previously owned a home, or an interest in a home, anywhere in the world.
• Your spouse cannot have owned a home, or an interest in a home anywhere while they were your spouse.
• You may receive the refund at the time you register your home purchase. If not, you must apply for it no later than 18 months after the registration date.

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First-time Home Buyers' Tax Credit (HBTC)

You or your spouse can claim this tax credit on your annual income tax return. The credit is based on an amount of $5,000. To calculate, multiply the lowest personal income tax rate for the year (15% in 2011 and 2012) by $5,000. For these years, the maximum credit is $750. Here's how it works:

• You or your spouse must have acquired a qualifying home acquired after January 27, 2009.
• You cannot have lived in another home owned by you or your spouse in the year you buy your first home – or in any of the 4 preceding years.

HST New Housing Rebate

The federal government provides an HST rebate of up to 36% to buyers who purchase either a newly built, or greatly renovated, home. The rebate is intended to encourage people to build upon and improve their properties.

Some provincial government provides an even more generous rebate. for example, Ontario offers up to 75% off the provincial part of the HST.

You may be eligible to claim a rebate for a part of the HST you pay on the purchase price of a newly constructed home or the cost of building your home.