Government Programs for First-Time Home Buyers in Ontario
As a Realtor, I need to know about the different government programs currently offered to potential homeowners/homebuyers in Ontario. Here’s what I know about government programs for first-time homebuyers this year:
The Home Buyers Plan
First time home buyers of Mississauga real estate may be eligible to borrow up to $25,000 from their RRSP’s tax-free (and interest-free!) to purchase property. The Purchaser of that property must be planning to live in the house and MUST be a First Time Home Buyer to qualify. Go HERE for much more information!
First Time Home Buyers Tax Credit
This is a tax credit against your income, meaning you will pay less tax at the end of the year (or get more of a refund). This program allows First Time Home Buyers to claim up to an additional $5000 (works out to $750) towards their return, claiming things like lawyers’ fees, and Land Transfer Tax. In order to qualify their property had to be purchased in the Tax Year claimed, be lived in by the purchaser and the purchaser must be a First Time Home Buyer. In each household, only the individual with the highest income can claim the credit. Go HERE for much more information!
Land Transfer Tax Refund for First Time Home Buyers in Ontario
Beginning January 1, 2017, the maximum amount of the refund is $4,000 (For conveyances or dispositions that occur before January 1, 2017, the maximum amount of the refund is $2,000). The increased limit of $4,000 applies only to conveyances or dispositions that occur on or after January 1, 2017, regardless of the date the agreement of purchase and sale was signed.
Beginning January 1, 2017, no land transfer tax would be payable by qualifying first time purchasers on the first $368,000 of the value of the consideration for eligible homes. First time purchasers of homes greater than $368,000 would receive a maximum refund of $4,000.
Beginning January 1, 2017, eligibility for the first time homebuyers refund program is restricted to Canadian citizens and permanent residents of Canada. See HERE for much more information!
Five Percent Down Payment Program
This doesn’t exist any longer. New Canadian mortgage rules impact high-ratio buyers – those with less than 20% down payment (as per Dominion Lending Centres states):
As of Oct. 17, 2016; a stress test used for approving high-ratio mortgages will be applied to all new insured mortgages – including those where the buyer has more than 20 per cent for a down payment. The stress test is aimed at assuring the lender that the home buyer could still afford the mortgage if interest rates were to rise. The home buyer would need to qualify for a loan at the negotiated rate in the mortgage contract, but also at the Bank of Canada’s five-year fixed posted mortgage rate, which is an average of the posted rates of the big six banks in Canada. This rate is usually higher than what buyers can negotiate. As of Sept. 28, 2016; the benchmark rate posted was 4.64 percent, buyers do not pay this rate, but it is a metric used to qualify for access to the variable or short term rate products.
Other aspects of the stress test require that the home buyer will be spending no more than 39 per cent of income on home-carrying costs like mortgage payments, heat and taxes. Another measure called total debt service includes all other debt payments and the TDS ratio must not exceed 44 per cent.
This measure affects home buyers who have at least 20 per cent for a down payment but are seeking a mortgage that may stretch them too thin if interest rates were to rise. It also affects lenders seeking to buy government-backed insurance for low-ratio mortgages.