Incentives for the first-time home buyers – and not only!

Public Investment in Your Home

This program allows the future owner of a house or apartment to receive an investment from the Government of Canada in the amount of 5% of the purchase price of the real estate, if the property is sold by the previous owners. If the house has just been built and has not been occupied before, the amount of investment can go up to 10% of the sale price.

If you participate in this program, Canada becomes a minority shareholder owning a specified share in your real-estate property. As long as you own your house or apartment, you do not have to pay the government any interest or dividends, which makes sense since your home does not generate any financial profit. (In fact, this non-profit assumption is the reason why the real estate purchased under this program cannot be a rental property.)

As an investor in your property, Canada acquires the same advantages – and bears the same risks – as any other real-estate investor. If the market value of your home increases, at the time when you sell or remortgage your property, the government will receive its fair share of the property’s increased sale price. If, God forbid, the price of the real estate falls, the government will share in your loss.

As with any real-estate transaction in Canada, closing such a deal has many legal requirements and considerations, and you can benefit from professional advice when applying for the program. But if you want to know if you can participate in this program, here are a few requirements to consider:

• As I mentioned, the real estate purchased under this program cannot be used as a rental or investment property. It should become your primary residence in Canada.
• The program is designed for low-income home buyers: the total annual income of the household cannot exceed $120,000 (or $150,000, if the property is located in Toronto, Vancouver, or Victoria).
• The total amount of the mortgage should not exceed 4 times annual household income (or 4.5 times, if the property is in Toronto, Vancouver, or Victoria).
• To be eligible for the program, you or your partner must buy a home for the first time. However, it should be noted that the criteria of the program also include people who are going through a divorce or separating from their common-law partner. In addition, people who have not owned a home for more than four years are also considered "first-time buyers"!
• You should be a Canadian citizen or a permanent resident.
• The down-payment for the property should come from your own funds: personal savings, your RRSP account (see the section below) or from an irrevocable financial gift from your close family member.

You can get additional information about this program from the First-Time Home Buyer Incentive website of the Government of Canada.

Buying Real Estate from your RRSP Savings

Under the Home Buyers’ Plan, you can withdraw up to $35,000 from your registered retirement savings account (RRSP), tax free, for the purchase or construction of a home dwelling. If you buy or build a house with a partner, you can both withdraw $35,000 each! If you have a disability, your relatives can also withdraw funds from their RRSP accounts to purchase real estate for you, even if they do not live with you.

You do not have to be a first-time-ever buyer of real estate to participate in this program: there are several other opportunities. As with the investment program described above, the house or apartment you are buying should become your primary residence. The amount withdrawn from your RRSP will need to be paid back into your retirement savings account within 15 years.

You can find out more about this incentive program in the Home Buyers’ Plan section of the Canada Revenue Agency’s website.

Ontario Land Transfer Tax Rebate for First-Time Home Buyers

Ontario residents who are buying a home for the first time are eligible for a refund of all or part of the land-transfer tax that is withheld at the time of the real-estate sale transaction. The maximum amount of the tax rebate on housing outside of Toronto is $4,000; for the real-estate purchase within Toronto boundaries, it is $4,475.

To learn more about this program, go to Land Transfer Tax Refunds for First-Time Homebuyers in the Ontario’s Ministry of Finance website. This program too has plenty of legal small print, but it is worth figuring it out before your next annual tax return.