Richard  Alfred

Richard Alfred

Real Estate Broker

Century 21 Innovative Realty Inc., Brokerage *

Mobile:
416-432-4322
Office:
416-298-8383
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Government Programs for Home Buyers

Government Programs for Home Buyers

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 Government Programs for home buyers and property owners. Some of the programs are targeted to first-time buyers, while others apply more generally. Other programs benefit those in the industrial, commercial and multi-unit property market. Your REALTOR can provide information on these programs and help you to determine your eligibility.

 


 

CMHC Purchase Plus Improvements

Features

  • Flexible advancing options for small- or large-scale improvements and new construction.
  • Insured financing up to 95% of “as-improved” value for 1 or 2 unit owner-occupied properties, and up to 90% for 3 to 4 unit owner-occupied properties.
  • Down payment requirements are based on the lending value as determined by CMHC, which is the lower of the market value or the purchase price/cost of construction.
  • Energy efficiency rebate

    CMHC Green Home offers a premium refund up to 25% to borrowers who buy, build or renovate for energy efficiency using CMHC-insured financing.

For Improvements

Flexible Advancing Options

CMHC Improvement offers a choice of flexible advancing options, making it easy to access funds for immediate improvements when purchasing a home.

Single advances: improvement costs less than or equal to 10% of the as-improved value.

Progress advances: improvement costs greater than 10% of the as-improved value.

  • Basic Service: Lender validation of advances without pre-approval from CMHC.
  • Full Service: CMHC validation of advances for up to 4 consecutive advances at no cost.

As-Improved Value

For loans involving improvements, the property is assessed on a dual basis:

  1. The as-is value (the current market value of the property), and
  2. The as-improved value (the market value of the property after improvements), which is used to determine the LTV ratio and down payment requirements.

(If proposed improvements are generally accepted to add value to a property, the lender can submit to CMHC the as-is value plus the cost of improvements.)

The lending value is the lesser of:

  • The as-improved value, or
  • The as-is value plus the cost of improvements.

You will need documentation to support the as-improved value. Examples include a list of improvements and cost estimates, plans for major renovations or a building permit, as applicable.

 

RRSP Home Buyers' Plan

With the federal government's Home Buyers' Plan, you can use up to $35,000 of your RRSP savings ($70,000 for a couple) to help finance your down payment on a home.

To qualify, the RRSP funds you're using must be on deposit for at least 90 days. You must also provide a signed agreement to buy or build a qualifying home.

The best part is the withdrawal is not taxable as long as you repay it within a 15-year period. The payback amount is at least one-fifteenth a year of the amount you withdrew from your RRSP

Advantages

Using your RRSP's as a down payment may be a great option as you have the ability to draw from some of your existing resources and it might possibly allow you to accumulate the 20% down payment needed to avoid having to pay default insurance premiums. Even if you already have enough money for your down payment, it may make sense to access your RRSP savings through the Home Buyers' Plan.

For example, if you have already saved $35,000 for a down payment and assuming you still had enough "contribution room" in your RRSP for a contribution of that amount, you could move your savings into an RRSP at least 90 days before your closing date. Then, simply withdraw the money through the Home Buyers' Plan. The advantage? Your $35,000 RRSP contribution will count as a tax deduction this year. Use any tax refund you receive to repay the RRSP or other expenses related to buying your home. But remember, you will have to pay that amount back to your RRSP over the next 15 years.


 

Five Per Cent Down Payment Program

A down payment is the amount of money you put towards the purchase of a home. Your lender deducts the down payment from the purchase price of your home. Your mortgage covers the rest of the price of the home.

The minimum amount you need for your down payment depends on the purchase price of the home.

If your down payment is less than 20% of the price of your home, you must purchase mortgage loan insurance.

Table 1: The minimum down payment based on the purchase price of your home
Purchase price of your home Minimum amount of down payment
$500,000 or less
  • 5% of the purchase price
$500,000 to $999,999
  • 5% of the first $500,000 of the purchase price
  • 10% for the portion of the purchase price above $500,000
$1 million or more
  • 20% of the purchase price

If you’re self-employed or have a poor credit history, your lender may require a larger down payment.

Normally, the minimum down payment must come from your own funds. It’s better to save for a down payment and minimize your debts.

Example: How to calculate your minimum down payment

The calculation of the minimum down payment depends on the purchase price of the home.

If the purchase price of your home is $500,000 or less

Suppose the purchase price of your home is $400,000. You need a minimum down payment of 5% of the purchase price. The purchase price multiplied by 5% is equal to $20,000.

If the purchase price of your home is more than $500,000

Suppose the purchase price of your home is $600,000. You can calculate your minimum down payment by adding 2 amounts. The first amount is 5% of the first $500,000, which is equal to $25,000. The second amount is 10% of the remaining balance of $100,000, which is equal to $10,000. Add both amounts together which gives you total of $35,000.


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HST New Housing Rebate

Ontario New Housing Rebate

The HST in Ontario is 13% in which GST is 5% and the provincial sales tax is 8%.

The amount of rebate you can receive for the GST Portion is 36% of the GST tax amount up to a maximum of $6,300.

The amount of rebate you can receive for the PST Portion is 75% of the PST tax amount up to a maximum of $24,000 if you paid HST on the land the property is on, and $16,080 if not.

 

Calculating the GST/HST New Housing Rebate

For both the GST and HST rebates, the calculations are similar. Let’s take a look at how you would calculate the taxes and rebates on a home purchased in Ontario.

First, we’ll say the home you purchased was valued at $320,000. In some cases, the builder of your home will have already included the HST in the purchase price. The only difference here is that you’ll be able to automatically include the purchase price plus HST amount in your mortgage. However, in all other cases, you’ll pay whatever HST rate is applicable in your province or territory (13% in Ontario) on top of the $320,000 pre-tax price:

$320,000 x 13% = $41,600 ($16,000 GST portion of HST and $25,600 provincial portion of HST)

Next, we’ll calculate the value of the rebate that can be claimed. In this case, it’s 36% x $16,000 ($5,760) for the GST portion of the HST and 75% x $25,600 ($19,200) for the provincial portion of the HST. That adds up to $24,960.

It’s important to note that for new homes in Ontario, the maximum rebate amount for the provincial portion of the HST is capped at $24,000. It’s the maximum amount available on any new home valued at $400,000 or more


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Land Transfer Tax Refund

Ontario

To be eligible for this provincial LTT rebate, you must be a Canadian citizen or permanent resident and over 18 years of age. If you have a spouse, they must not have owned a home in the time they’ve been your spouse. You must also live in the home within 9 months of purchasing it.

You must apply for the rebate within 18 months of the transfer date, and the maximum provincial LTT rebate is $4,000. The rebate will cover the full amount up to a maximum purchase price of $368,333. For homes over $368,333, you’ll still receive the maximum rebate but will be responsible for paying any tax still owing.

In Ontario, if you’re buying with a spouse who is not a first-time buyer, you may be eligible to receive a partial rebate of 50%.

Toronto

In Toronto, you can claim a Municipal Land Transfer Tax (MLTT) rebate in addition to the provincial rebate. This rebate is available on both new and resale residential properties, and you must meet all the same provincial criteria to qualify. However, if you’re not a Canadian citizen or Permanent Resident when you purchase the property but will become so in 18 months of the property purchase, you can qualify and apply for the MLTT rebate.

The maximum MLTT rebate amount is $4,475. The rebate will cover the full amount on a property price of up to $400,000. The same as the provincial rebate, you’ll receive the full rebate on properties valued over this price and will need to pay the remainder of the land transfer tax.

 

 

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