Purchasing a home in Toronto can definitely be a bit of a challenge, especially for buyers looking to enter the market for the first time. A lack of supply paired with high demand have been driving home prices up, making it that much harder for prospective buyers to get out of the rental market and into a property of their own.
Thankfully, the federal and provincial governments have stepped in with some new programs aimed at helping first-time buyers. If you’re looking to purchase a home in Canada but have found the cost of entry too steep, here’s an exhaustive list of programs that might help to alleviate some of the financial burden, as well as links to the official programs and their required forms.
Home Buyers’ Plan (HBP)
The HBP is a federal program that allows you to withdraw up to $25,000 from your RRSP to make a down payment on your first home or for a family member with a disability. Conditions include having a purchase agreement as well as making the home your primary place of residence for one year. You have fifteen years to pay back the RRSP amount, otherwise it’ll be treated like income (and you’ll be hit with a tax ding).
This is an important program for investors. Having access to money that’s sitting around means you can use those dollars twice, gaining interest on your RRSP until you can use it to invest in a unit. This is what pre-construction condo investing is all about: using all of the resources available to you, and making them work in your favour for a smarter investment.
National Housing Rebate (NHR) vs. the New Residential Rental Property Rebate (NRRPR)
The NHR and NRRPR are the most important rebates for investors, as most current government programs are geared toward getting first-time homebuyers into the market. You have a two-year window to collect these rebates, but you can only pick one.
The NRRPR is for purchasers who expect their unit’s first occupant to be a tenant (investors). The NHR is for those who expect to initially live in the property as a primary resident (end users). Your builder will likely claim the end user NHR on your behalf, and include the rebate in your purchase price. But only the buyer can apply for the investor’s NRRPR. That means that if you’re going the NRRPR route, you’ll have to pay the tax upfront, and be reimbursed a few months down the line.
The qualifications: The home must be a new construction or 90% newly renovated. You’ll be eligible for a GST rebate of 36% of GST paid (up to $6,300). If you’re in a province that charges HST (New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and P.E.I.), then it will cover the federal portion of HST.
The new home must cost $350,000 or less to fully qualify. Homes over $450,000 do not receive a rebate, and units that fall between both prices are on a sliding scale.
Investors may also qualify for the provincial portion of HST. In Ontario, there’s a rebate cap of $24,000 (hardly chump change!) per unit. Called the Ontario NRRP, it’s important not to confuse this with the Federal housing rebates but also to make sure that you apply.
All of this means that the property you invest in should be one that qualifies for the new housing rebates. While 3-bedroom condos are currently in high demand in Toronto, your unit investment needs to be under $350,000 to make the most of these programs. You’ll likely have to go for a one- or two-bedroom pre-construction unit to stay under the limit.
Strategizing your investment around tax and rebates is a smart step in taking reasonable risk in your investments. These are huge costs that ultimately impact your bottom line and ROI, so choosing the right unit is more important than simply picking any unit.
Tax-Free Savings Account (TFSA)
While the TFSA should be a standard account offering from your bank, you may not know about it. You can contribute up to $5,000 a year to savings, tax-free. You don’t even have to go through your bank. It’s worth nothing that online wealth management apps like WealthSimple have it, too. While this isn’t specific to homebuyers, it was introduced to help alleviate the tax burden on people saving to put a down payment on a home. Investors should be using all available resources when it comes to maximizing their investment and strategizing for a better ROI.
Ontario -- Land transfer tax credit
The provincial government reimburses first-time Ontario homebuyers up to $4,000 on a portion of their land transfer tax.
Toronto -- Municipal Land Transfer Tax credit (MLTT)
Toronto offers a rebate for first-time purchasers of new and existing residential properties, as long as you’re a first-time purchaser (or your home has been grandfathered into your possession before 2007). The rebate maximum is $4,475, but the home has to cost less than $400,000.
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