Government Programs for First Time Home Buyers
1. RRSP Program
First time buyers may use this federal plan to withdraw up to $20,000 tax free from their own RRSP and apply it towards the purchase of a home.
In order to apply:
- you must be an RRSP holder;
- you must be a resident of Canada at the time of withdrawal;
- you must be a first time home buyer or someone who has not owned and occupied a home as their principal residence within the last 5 years;
- you must complete a T-1036 Form in order to withdraw the RRSP funds from your
institution; and - you may only withdraw the funds after you have entered into a valid agreement to
purchase a home.
Any funds you wish to withdraw under the program must have been in your RRSP for at least 90 days. You can even make a contribution to your RRSP early in the year before the RRSP deadline. In other words, you can make a contribution to your RRSP, receive a tax refund, and 90 days later withdraw that same contribution for use in buying a home under the program.
Once you have applied the RRSP funds to the purchase of your home, you are required to pay back the RRSP over a maximum of 15 years. A minimum of 1/15 of the amount withdrawn must be deposited back into your RRSP in each of the 15 years following your home purchase. You may also repay the withdrawal amount in larger and more regular installments. However, if you fail to repay the minimum amount required in any given year, then that amount will be included in your taxable income for that particular year during which you missed a repayment to your RRSP.
2. Land Transfer Tax Refund for First Time Home Buyers of New Homes
First time home buyers entering into an agreement to buy newly constructed homes after March 31, 1999 are eligible for an instant refund of their Land Transfer Tax paid up to $2,000 per home.
In order to apply:
- you must be a first time buyer;
- you must be purchasing a new home;
- you must enter into an Agreement of Purchase and Sale; and
- you must register the conveyance at a Land Registry Office upon closing.
If your spouse owned a home before you were married, you will qualify for half the rebate. If your spouse owned a home at any time while you were married, you will be disqualified from claiming the rebate. You will be disqualified even if you are a common law spouse under the Family Law Act. (That definition applies if you were living together for three years, or if you have a child together.)
When you register the transfer of the property, the Land Registry Office will provide you on closing with a credit. Otherwise, you may later request a rebate through an application to the Ministry of Finance.
CAUTION: These plans are enacted by statute or regulation by various governments. They are generally specific to be in effect for a period of time and the respective governments extend and change plans periodically. It is prudent to verify the conditions in effect with your respective fund managers.