So, you’re buying your first home. Super exciting stuff. As a first time home buyer, there are a lot of exciting steps you’ll be taking – and we’ll be here to help you along the way through the entire experience.
Guide to buying a home
We know it can be a lot. So, we’re here to lighten the (mental) load, and help you be prepared.
How much you need
• If you’re purchasing a home under 500K, your down payment needs to be at least 5%
• If you’re purchasing a home that’s more than $500,000 and less than $1 million the minimum down payment is 5% on the first $500,000 plus 10% of the remaining balance
• If you’re purchasing a home that’s $1 million or more, the minimum down payment is 20%
How to come up with a down payment
But if you’re like most Canadians, you may need to rely on other sources for your down payment...
Home Buyer’s Plan (HBP): If you’re using your RRSP for a down payment, you can withdraw up to $25,000, without paying a tax penalty if you’re a first time home buyer. You’ll need to begin to repay your RRSP two years after you’ve withdrawn the money. You’ll have 15 years to repay the funds. Make sure you meet all the requirements to participate in the HBP. You can read all of them here.
Don’t forget to factor in all your closing costs, and the amount of the mortgage that you’re planning for. Making sure you plan ahead will lead to the financial stability of your family in the future.
Closing costs include: Land transfer tax, registration costs, title insurance and legal fees.
Land Transfer Taxes
If you’re a first time home buyer, there are some really sweet tax benefits you can take advantage of when you’re buying a home. They’re different for every province, and they can be a little confusing, so we’re breaking it down for you.
You have to pay land transfer tax in Ontario and Toronto, and it’s due when you’re closing the mortgage.
Ontario transfer tax amounts:
• 0.5% on the first $55,000 of the house price
• 1.5% on the next $150,000 of the house price
• And, 2% on amounts over $400,000
Land Transfer Tax Rebate
The First Time Home Buyers Land Transfer Tax Rebate basically reduces or eliminates the amount of Land Transfer Taxes you pay when you buy your first home. Which, we know you care about, since buying a home is a big investment (congrats, btw!).
What’s in it for me/How does it work…
• Something cool for you Ontarians: the province recently doubled the first-time homebuyers’ Property Transfer Tax refund to $4,000.
• If your property is less than $368,250 you don’t have to pay the tax. Score! You just have to make sure you meet the requirements below.
• If your home is over $368,250 you qualify for the maximum rebate, but still owe the remainder of their land transfer tax.
And, if you live in (the city of) Toronto there’s an additional rebate...
On top of the Ontario rebate (we just talked about) first-time homebuyers in who live in the City of Toronto can qualify for a rebate equal to the full amount of their municipal land transfer tax, up to a maximum of $3,725.
To qualify for the full exemption…
• Be 18 years of age or older,
• Live in the home within 9 months of purchasing it
• You cannot have owned a home before anywhere in the world
• If you have a spouse, they cannot have owned a home during the time they have been your spouse.
Phew! We know that’s a whole lot of info. Don’t worry you don’t have to memorize the above, we’re going to be here along the way to help you with all the details. And, if you’re still have questions, concerns, just feel like chatting, our Mortgage Specialists know the ins and outs and are here to help. You can Live Chat with them, or shoot them an email here.