Both the government of Canada and the Ontario government have established programs to assist first time home buyers. The two best known programs are the RRSP Home Buyer's Plan and the Land Transfer Tax rebate. A realtor can help you find the right type of home at the right price, prepare your offer to purchase, and present your offer to the seller. In most cases, there is no direct cost to you for these services.

First let's take a look at the RRSP First Time Home Buyer's Plan

The RRSP Home Buyer's Plan (HBP) was introduced by the federal government, and allows first time home buyers to withdraw up to $20,000 from their RRSPs tax free to use towards the purchase of a home.

To qualify as a first time home buyer, purchaser must not have lived in a home owned by himself or his spouse 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Money can be withdrawn from your RRSP provided it has been in your RRSP for at least 90 days.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Money withdrawn under this federal program must be paid back to your RRSP within 15 years. People generally deposit one fifteenth of the amount withdrawn back to the RRSP over each of the following 15 years.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.

What if you don't have any money in your RRSP?

Do not worry, you can still take advantage of the Home Buyers Plan (HBP). If you are earning income, or have earned income in the past few years, you are entitled to contribute to an RRSP. What is not very well known about the HBP is that you can contribute to an RRSP retroactive. Therefore, check to see what your RRSP contribution limit is. It is shown on your previous years Notice of Assessment, or call Revenue Canada.

If you need help raising a downpayment, the HBP may be of some use to you. If there are significant unused contributions from previous years, take out a short-term RRSP loan to cover them. After 90 days, you repay your loan by cashing in your RRSP and you use your tax refund for the downpayment on your new home.

A tax refund is an acceptable downpayment if it is in hand at the time of closing.

For more information on Registered Retirement Savings Plans (RRSP), visit the website of Canada Customs and Revenue Agency (CRA).

Ontario Land Transfer Tax Refund for First Time Home Buyers

Land Transfer Tax applies to all transfers of land in Ontario. The maximum claim amount is $2,000. First-time homebuyers may be eligible for a refund of all or part of the tax. For agreements of purchase and sale entered into before December 14, 2007, the refund only applies on the purchase of a newly constructed home. For agreements of purchase and sale entered into after December 13, 2007, the refund applies to all homes, whether newly constructed or resale.

To qualify and claim a refund, you:

• must be at least 18 years of age; must occupy the home as your principal residence within 9 months of after the date of transfer; and
• cannot have owned a home, or an interest in a home, anywhere in the world. In addition:
• your spouse cannot have owned a home, or an interest in a home, anywhere in the world while being your spouse; and
• in the case of a newly constructed home, you must be entitled to a Tarion New Home Warranty.

Click here for more details.

Here is a handy Land Transfer Tax Calculator for your convenience: (based on purchase price of a resale residential home. Please note that this calculation is based on a resale property and not on a newly constructed home which typically includes GST in the price; if you are buying from a builder, i.e. buying a newly contstructed home, the Ontario Land Transfer Tax is calculated on a price which is net of GST and therefore the Ontario Land Transfer Tax will be slightly less for a new home than for a resale home with the same price.)

Municipal Land Transfer Tax Refund

This one is applying to buyers who purchase properties in the City of Toronto. As a taxation measure granted under the City of Toronto Act,2006, Toronto City Council approved a new Municipal Land Transfer Tax effective February 1, 2008 that will be applied to purchases on all properties in the city of Toronto in addition to the Province's Land Transfer Tax.

You may be eligible for a rebate of the MLTT if you are a first-time purchaser of a newly constructed or re-sale residential property with two or less single-family residences. The rebate for first-time purchasers is up to a maximum of $3,725.00.

For information about the refund, visit the website of the City of Toronto.

Tips for the First Time Home Buyers

• From the moment you think about buying a home, start planning. One of the first steps on the road to purchasing a home is to save money for the down payment. Most people finance the purchase of their homes with a mortgage loan. Traditionally, financial institutions would only give mortgage loans for up to 75% of the value of the home, and therefore required a 25% down payment on the purchase of a home. However, with mortgage insurance, you can now obtain a mortgage loan for up to 95% of the value of the home with as little as a 5% down payment, for a home worth up to $300,000.


• To qualify for a mortgage loan, you will be subject to a credit check. Request a copy of your credit report. (One of the ways to check your credit report is to get it via Equifax. This is paid service but the advantage is it's fast. You can also get a FREE credit report by mail from TransUnion. ) Carefully examine it for errors, and clean it up before you talk to a lender. For at least one year prior to purchasing a home, you should ensure that every credit card invoice, rent cheque, car payment and other debt is paid in full and on time.


• If you are you currently renting, check your lease for an early termination clause. If you'll be subject to penalties, try to time your closing with the expiration of the lease.


• It's going to help you along the way if you could ask your lender to pre-approve, rather than pre-qualify you for a mortgage. Pre-qualification only tells how much you can afford. Pre-approval goes a step further. Although not a final loan commitment, the pre-approval letter can be shown when bidding on a home. This information is important to the sellers since they do not want to accept an offer that is likely to fail because financing cannot be obtained. Once you determine how much you can afford to pay for a home, try to stay within your budget. I would recommend speaking to an experienced mortgage broker to help you get this step done easier.


• When you know how much you can afford, your realtor will help you to determine what type of house will fit your family life style the best, then it'll be the time for you to out looking at properties. When you view a property, list the positives and the negatives. Don't stop your inspection at the property line. Examine the surrounding area. Is it safe, well maintained and moderately quiet? Is it convenient to work, schools and shops? Ask about zoning and that vacant lot across the street.


• When you decide on a lender (a bank, your credit union, or a mortgage lender) and a mortgage, get every detail in writing, in particular, the lock-in rate, privileges and fees.


• Read all the documents related to the purchase of the property, and have a professional review them. You're signing a binding, legal document.

It is always wise to have a good realtor to help you in this house hunting process. If you are ready to find your first home, give me a call at (416) 705-5812!