Government Programs

A home is usually the single largest investment that most people make in their lives. Achieving your dream can be made easier by taking advantage of various Canadian Government programs for Candian home buyers and property owners. Some of these programs are targeted to first-time buyers, while others apply more generally: 

• CMHC Purchase Plus Improvements Program
• RRSP Home Buyers' Plan
• 5% Down Payment Program
• HST New Housing Rebate
• Land Transfer Tax (LTT) Rebate Program
• First-Time Home Buyer Incentive
• First-Time Home Buyer Tax Credit

CMHC Purchase Plus Improvements Program

Canada Mortgage and Housing Corporation (CMHC) insured mortgage loans are available to cover the purchase price of a home as well as an amount to pay for immediate major renovations or other improvements that the purchaser may wish to make to the property.

This option eliminates the need to obtain secondary financing after the purchase to pay for improvements. The home buyer obtains a single first mortgage, makes a single mortgage payment, and benefits from first mortgage interest rates. 

The insured loan will be based on the lower of: The purchase price plus the actual cost of improvements, or the “as improved” market value. Note: For CMHC insured mortgage loans, the maximum purchase price or as-improved property value must be below $1,000,000. 

Prior to approval, CMHC will determine the market value of the property after renovations/improvements. The lending value will not exceed the market value of the property after renovations/ improvements. 

CMHC Applicants must have the following:

• Qualifications to obtain a CMHC insured loan through an approved lender.

• Cost estimates for renovations/improvements.

• A minimum of 5% down payment of total cost (purchase price plus renovations/improvements). The required down payment amount depends on the home's purchase price:

  • If the home costs $500,000 or less, you'll need a minimum down payment of 5%. 

  • If the home costs more than $500,000, you'll need a minimum of 5% down on the first $500,000 and 10% on the remainder.

For more information, see www.cmhc.ca.

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RRSP Home Buyers' Plan

The Home Buyers' Plan (HBP) is a program that allows you to withdraw up to $35,000 in a calendar year from your registered retirement savings plans (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability. Couples and common-law partners can withdraw up to $35,000 each, allowing them to contribute more towards their down payment. 

Eligibility Conditions:

• You must be considered a first-time home buyer. (You are considered a first-time home buyer if, in the four year period prior to a home purchase, you did not occupy a home that you owned, or one that your current spouse or common-law partner owned). 

• You must have a written agreement to buy or build a qualifying home for yourself or a related person with a disability.

• You must intend to occupy the qualifying home as your principal place of residence within one year after buying or building it.

Participate in HBP again:
If you have previously participated in the HBP, you may be able to do so again if your repayable HBP balance on January 1st of the year of the withdrawal is Zero and you meet all the other HBP eligibility conditions.

Withdrawal of Funds:
If you receive a withdrawal in one year and another in January of the following year, the Canadian government considers the January withdrawal to have been received in the year the first withdrawal was made.

If the January withdrawal is received before you acquire your qualifying home, or no later than 30 days after you acquire it, and all the other relevant conditions described in the chart below are met, it is an eligible withdrawal. For this purpose, your HBP balance on January 1st is not a relevant condition and does not have to be zero.

If you meet the applicable HBP conditions, you cannot withdraw more than $35,000. Your RRSP issuer will not withhold tax from the funds you withdraw that total $35,000 or less.

An amount exceeding $35,000 will have to be reported as income on your income tax and benefit return for the year you received it. In addition, your RRSP issuer will have to withhold tax on the amount in excess at the time of the withdrawal.

Your RRSP deduction may be affected by your participation in the HBP. If you participate in the HBP, certain rules limit the deduction of your RRSP contributions made during the 89-day period before you withdrew funds under the HBP. Under these rules, you may not be able to deduct part or all of the contributions made during this period for any year.

Repay the Funds withdrawn:

• Your repayment period starts the second year after the year you withdraw funds from your RRSPs for the HBP.

• You have 15 years to repay the amounts you withdraw from your RRSP under HBP. However, you can repay the full amount at any time.

Note: Home buyers withdrawing funds do not have to pay the income tax on the amount withdrawn, as long as the funds are repaid into an RRSP in the future.

Existing homeowners can use the HBP to purchase a more accessible home or a home for a disabled dependent relative where the individual withdrawing the funds:

• Qualifies for the disability tax credit (DTC) and is buying a home that is more accessible for the individual or is better suited for the care of the individual.

• Is related to a disabled individual who qualifies for the DTC and is buying a home for the benefit of the disabled individual that is more accessible for, or better suited for, the care of the disabled individual.

• Is related to a disabled individual who qualifies for the DTC and is withdrawing an amount for the disabled individual to buy a home that is more accessible for, or better suited for, the care of the disabled individual.

For more information, see https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/what-home-buyers-plan.html

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5% Down Payment Program

With as little as a 5% down payment, from personal or other sources (see below for eligible "other" sources), all home buyers have access to mortgage insurance, enabling them to enter the housing market, as long as they can manage the costs of home ownership.

Details:

• Mortgage insurance for a 95%-mortgage is available to both first-time and repeat home buyers. For the required 5% down payment, home buyers can use personal sources, like savings or gifts, or other sources, such as lender incentives, borrowed funds/credit, or sweat equity (the amount of money spent to help construct the home).

• Insurance premiums on loans for 95% of the lending value of the house where the 5% down payment comes from personal sources will be 2.75% of the mortgage loan.

• Insurance premiums on loans for 95% of the lending value of the house where the 5% down payment comes from other sources will be 2.9% of the mortgage loan. This premium can be added to the mortgage.

• Buyers using the program may consume up to 32% of their gross monthly household income for payments on loans for 95% of the lending value of the house.

• The maximum amortization period is 25 years.

• Borrowers are required to demonstrate, at the time of application, their ability to cover closing costs equal to at least 1.5% of the purchase price.

• Where the minimum equity requirement is being met by way of a financial gift, the funds must be in possession of the borrower 15 days before making an offer to purchase.

For more information, see www.cmhc.ca

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HST New Housing Rebate

The GST/HST new housing rebate allows an individual to recover some of the goods and services tax (GST) or the federal part of the harmonized sales tax (HST) paid for a new or substantially renovated house that is for use as the individual's, or their relation's, primary place of residence, when all of the other conditions are met.

Additionally, other provincial new housing rebates may be available for the provincial part of the HST, whether the GST/HST new housing rebate for the federal part of the HST is available or not.

In certain circumstances, a transitional new housing rebate may be available in addition to any GST/HST new housing rebate and provincial new housing rebate for which you may be eligible, even if the house is not your primary place of residence.

You may be eligible for a new housing rebate for some of the GST/HST paid if you are an individual who: 

• Built, or engaged someone else to build, a house on land that you already owned or leased.

• Constructed or substantially renovated your own home, or hired someone else to construct or substantially renovate your home for use as your (or your relation’s) primary place of residence and the fair market value of the house when the construction is substantially completed is less than $450,000.

• Substantially renovated, or engaged someone else to substantially renovate, your existing house (at least 90% of the interior of the existing house must be removed or replaced to be a substantial renovation).

• Purchased a share of the capital stock of a co-operative housing corporation (co-op).

• Purchased a new or substantially renovated house from a builder where you leased the land from that builder under the same agreement to buy the house, and the lease is for 20 years or more, or gives you the option to buy the land.

• You were an owner-occupant in the last five years and your previous house was destroyed involuntarily (for example, by fire) and is subsequently rebuilt.

Qualifying housing also includes mobile homes (including modular homes) and floating homes. For mobile and floating homes, you may have the option to treat your mobile or floating home as a purchased home or as an owner-built home when claiming your new housing rebate.

The new housing rebate is not available to a corporation or a partnership.

How much of a rebate can you claim:

• An eligible new home buyer can claim, up to a maximum of $6,300, a rebate for 36% of the federal portion (5%) of the HST paid on a new Home with a pre-tax price less than or equal to $350,000.

• Where, the pre-tax price is more than $350,000, but less than $450,000, the tax will be reduced proportionately

• New homes priced $450,000 before HST or higher would not receive a rebate.

• An eligible new home buyer can also claim a rebate of 75% of the Ontario portion (8%) of the HST, capped at a maximum of $24,000.

Note: In the GTA, most builders include the HST in the price of the house, and any rebate would be assignable to the builder as they would be absorbing the net HST cost.

For more information, see www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4028.html.

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Land Transfer Tax (LTT) Rebate Program

When you buy land or an interest in land in Ontario, you pay land transfer tax. First-time home buyers of an eligible home 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.

For conveyances or dispositions that occur before January 1, 2017, the maximum amount of the refund is $2,000.

Beginning January 1, 2017, the maximum amount of the refund is $4,000. The increased limit of $4,000 applies only to conveyances or dispositions that occur on or after January 1, 2017, regardless of the date the agreement of purchase and sale was signed.

Beginning January 1, 2017, no land transfer tax would be payable by qualifying first‑time purchasers on the first $368,000 of the value of the consideration for eligible homes. First‑time purchasers of homes greater than $368,000 would receive a maximum refund of $4,000.

The refund will be reduced if one (or more) of the purchasers is not a first‑time home buyer. The refund will be proportionate to the interest acquired by the individuals who qualify for the refund.

To qualify for a refund:

• The purchaser must be at least 18 years old.

• The purchaser must occupy the home as their principal residence within nine months of the date of transfer.

• The purchaser cannot have ever owned an eligible home, or an interest in an eligible home, anywhere in the world, at any time.

• If the purchaser entered into an agreement of purchase and sale before December 14, 2007, the home must be a newly constructed home and the purchaser must be eligible for the Tarion New Home Warranty.

A qualifying purchaser must apply for the refund within 18 months after the date of registration of the conveyance or the date the unregistered disposition occurs.

Tax Rates:

• Amounts up to and including $55,000: 0.5%

• Amounts exceeding $55,000, up to and including $250,000: 1.0%

• Amounts exceeding $250,000: 1.5%

• Amounts exceeding $400,000, where the land contains one or two single family residences: 2.0%

For more information, see https://www.ontario.ca/document/land-transfer-tax/land-transfer-tax-refunds-first-time-homebuyers

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First-Time Home Buyer Incentive

The First-Time Home Buyer Incentive helps qualified first-time home buyers reduce their monthly mortgage carrying costs without adding to their financial burdens.

Qualifications to apply:

• You need to have the minimum down payment to be eligible.

• Your maximum qualifying income is no more than $150,000 in Toronto or Vancouver Metropolitan areas, $120,000 elsewhere.

• Your total borrowing is limited to 4 times the qualifying income.

If you meet these criteria, you can then apply for a 5% or 10% shared equity mortgage with the Government of Canada. A shared equity mortgage is where the government shares in the upside and downside of the property value.

How does it work?

The Incentive enables first-time home buyers to reduce their monthly mortgage payment without increasing their down payment. The Incentive is not interest-bearing and does not require ongoing repayments.

Through the First-Time Home Buyer Incentive, the Government of Canada will offer:

• 5% for a first-time buyer’s purchase of a re-sale home.

• 5% or 10% for a first-time buyer’s purchase of a new construction.

Let’s look at a specific situation:

Anita wants to buy a new home for $400,000. She’s saved the minimum required down payment of $35,000 (5% of the purchase price). 

Under the First-Time Home Buyer Incentive, Anita can apply to receive $40,000 in a shared equity mortgage (10% of the cost of a new home) through the program. This lowers the amount Anita needs to borrow and reduces the monthly expenses. As a result, Anita’s mortgage is $228 less a month or $2,736 less a year.

Ten years later, Anita sells her home for $420,000. The Incentive will need to be repaid as a percentage of the home’s current value. This would result in Anita repaying 10%, or $42,000, at the time of selling the house.

For more information, see www.placetocallhome.ca/fthbi/first-time-homebuyer-incentive.

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First-Time Home Buyer Tax Credit

The First-Time Home Buyer Tax Credit offers a $10,000 non-refundable income tax credit amount on a qualifying home. For an eligible individual, the credit will provide up to $750 in federal tax relief. 

You can claim $10,000 for the purchase of a qualifying home in the year if both of the following apply:

• You or your spouse or common-law partner acquired a qualifying home.

• You did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years (first-time home buyer).

For more information, see www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/line-369-home-buyers-amount.html.


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