Good news for 1st time buyers  

President's Pen, by Diane Hatfield, Ottawa Real Estate Board President, The Now Emc - Thursday, January 3, 2008

Land transfer tax is just one of the many costs associated with purchasing a home.  It represents the cost of having a property transferred to your possession from the previous owner’s.  This tax is paid to the province through a Land Registry office, and is calculated as a percentage of the property’s purchase price.  (For example, the land transfer tax owed on a home worth $230,000 would be $2,025.)  All homebuyers are required to pay this tax.

Since 1996, the provincial government has offered a land transfer tax rebate to first-time homebuyers who purchased a newly-built home (meaning one that is eligible for a warranty under the Tarion program). First-time buyers who purchased resale homes were not eligible for this rebate.  

But in December, the Ontario Liberal government announced proposed legislation that will extend the land transfer tax rebate to first-time buyers who purchase resale homes.  The rebate will apply to agreements of purchase and sale that were entered into after midnight on December 13, 2007.

Once this proposed amendment becomes law, all first-time home buyers in Ontario will become eligible for a rebate of up to $2,000 of the land transfer tax they are required to pay to the province upon purchase of their home.  Until the new law is passed and given Royal Assent, first-time homebuyers purchasing resale homes must continue to pay the land transfer tax upon registration.  The land transfer tax rebate isn’t the only program out there designed to help first-time home buyers, though.  Another government initiative that may be of assistance to people hoping to purchase their first home is the RRSP Home Buyer’s Plan (HBP), which allows, potential buyers to withdraw up to $20,000 from their registered retirement savings plan to put towards their down payment.  That’s $20,000 each, so if you and your spouse each have separate RRSPs, you may be able to withdraw up to $40,000.  That’s 20 per cent of a $200,000 home, meaning that it would allow you to take out a conventional mortgage and save the insurance costs associated with a high ratio mortgage.

Buyers can only participate in the HBP once, and funds withdrawn from RRSPs must be repaid within 15 years of withdrawal on a schedule mandated by the Canada Revenue Agency.  The HBP is only open to residents of Canada, and the home you are purchasing must be intended as your principal place of residence (so vaction homes and cottages would not qualify).