For a first time home buyer, purchasing a new home can be very exciting, and at the same time, creates an abundance of questions. We want to help to make this process as simple for you as possible by answering all your questions and helping you to understand how the mortgage process works. The information you are about to read will not only educate you on the basics of home mortgage loans, but will also help you to prevent making mistakes that may be common among the first time home buyer, potentially saving you time and thousands of dollars.
RRSP Home Buyer’s Plan
If you haven’t purchased a home within the last four years (or lived in a spouse’s home in the same timeframe), you may qualify for the government’s Home Buyer’s Plan. With this plan, you may borrow up to $25,000 tax-free from your RRSP to fund your down payment. Just keep in mind that the money must be in your RRSP at least 90 days before the purchase of your house.
The First Time Home Buyer’s Plan is advantageous for Canadians because generally speaking, early withdrawals from RRSPs are considered taxable income. In this case, they’re exempt but you must start repaying the amount borrowed from the RRSP two years after you buy over a 15-year period.
First-Time Home Buyer’s Tax Credit
This credit, introduced in the 2009 federal budget, allows first-time buyers in Canada the opportunity to recover some of the costs associated with their purchase. It helps offset legal fees, inspections, and other similar closing costs. The First-time Home Buyer’s Tax Credit is a non-refundable credit and is valued at $750.
GST/HST New Housing Rebate
This rebate offers money back to Canadians who buy a newly built home, substantially renovate an existing home, or rebuild a home that was destroyed due to fire. In all three cases, an individual will incur GST/HST on their purchase. The GST portion of a new home purchase or renovation can be rebated to all Canadians who qualify.