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Home Buyers’ Plan (HBP)

There are a few government programs that can help you to save money if you are buying a house. There is a Home buyers’ Plan of the Canadian Government that enables eligible buyers to take out up to twenty five thousand dollars from their Registered Retirement Savings Plan or RRSP to make a down payment or to start construction of a house. Married couples buying a house jointly can have access to fifty thousand dollars if both spouses are eligible for the maximum amount of twenty five thousand dollars each. This fund of twenty five thousand or fifty thousand dollars is exempted from income tax if it is repaid as per the repayment schedule of the government.

How the Plan Works

Homebuyers who have not owned a house or a property that they have used as their principal place of residence in the past five years are eligible for the Home Buyers’ Plan.

Repayment Schedule

The amount of money withdrawn from the RRSP fund should be repaid within fifteen years. Else, the fund will lose its status of exemption from tax or tax deference. The repayment starts from the second year from the time the fund is withdrawn. The annual repayment is evenly split into fifteen in case the maximum term is opted for. If anyone wants to repay the withdrawn amount in ten years, then the annual repayment is calculated accordingly. All relevant information pertaining to the repayment schedule is available in the Home Buyers Plan webpage of www.ccra-adrc.gc.ca, the official website of Canadian Customs and Revenue Agency.

CMHC’s Five Percent Down

Mortgage insurance provided by CMHC or Canada Mortgage & Housing Corporation is available to all homebuyers who make a down payment of five percent or more. CMHC will insure a mortgage against payment defaults for up to ninety five percent of the value of a house. This empowers homebuyers who are unable to make a down payment greater than five percent. This plan is available to all homebuyers, whether they are buying their first home or a second property. However, the property should be their principal residence for the owner to qualify for the plan.

The premium payable for such mortgage insurance is computed on the sliding scale basis. Homeowners can have premiums compiled with the mortgage and they can be paid monthly. There is alternative mortgage insurance available from some financial services companies. All relevant information can be found on www.cmhc-schl.gc.ca, the official website of CMHC.

Help the Planet, Help Your Wallet

CMHC is offering a ten percent refund on the premium paid towards mortgage insurance if the property is environmentally friendly. Owners of energy efficient homes or those who wish to bring about renovations that will make a property for eco friendly will qualify for this refund. Old homes can be renovated to be more eco friendly and energy efficient. New homes can have energy efficient features. Such transformations or existing features will also enable homeowners to opt for a longer repayment term for the mortgage. A standard twenty five years amortization can be increased up to forty years. This immediately reduces the monthly mortgage payment. These initiatives are in furtherance of the energy conservation programs of the government to fight climate change and reduce emissions of greenhouse gases.

How It Works

Homeowners must opt for a thorough energy assessment by a qualified advisor accredited with the Department of Natural Resources in Canada, also known as Natural Resources Canada or NRCan. The energy assessment and labeling system developed by NRCan assists homeowners to choose energy-saving features in their homes. An NRCan energy advisor can study the eco friendliness and energy efficiency of a property for a fee and rate it between zero and one hundred. The advisor can suggest ways to increase the efficiency and hence rating in order to get the benefits assured by the government. All relevant information pertaining to such ecoEnergy initiatives can be found on http://oee.nrcan.gc.ca.

Land Transfer Tax (LTT) Rebate

Those who are buying a house for the first time and buyers of resale homes can get rebates on the tax levied on land transfer in Toronto and the province. There is a maximum rebate of two thousand dollars on tax levied on land transfer in the province. The maximum rebate on Toronto land transfer tax for homebuyers is three thousand, seven hundred and twenty five dollars.

The eligibility criteria for the rebate are the buyer should be eighteen years old or older at the time of the purchase, the property should be the principal place of residence of the buyer, the owner should not have owned any other property in the past or own one at the present and their spouse should not own a home presently or have any kind of ownership interest in a residential property in Canada or in the world. A buyer still qualifies for some rebate if their spouse had owned a property before their wedding.