First-Time Buyers represent the largest group of purchasers in today’s real estate market. Recognizing this, Lenders and Insurers have developed progressive ways to allow for many Canadians to purchase their first home, which would otherwise not have been possible under traditional programs. The most common program utilized today by First-Time Buyers is the 95% high-ratio financing program through both the Canadian Mortgage and Housing Corporation (CMHC), and Genworth Financial (formerly GE Mortgage Insurance). Learn more about High Ratio Mortgage Insurance.
There are other programs available for First-Time Buyers in order to assist them with the purchase of their first home. Applicants are often enticed by some lenders with 5% down by offering cash back programs for the down payment or for the purchase of appliances etc. Just be aware that these mortgages are offered a significantly higher than discounted rates, and the cash back is pro-rated in the case that you re-finance your mortgage.
There are also programs available through Genworth Financial and secondary mortgage lenders through a self-insured program, that allow for 95% financing with higher premiums for the greater risk they take on these types of transactions.
These can vary significantly and applicants should consult with a mortgage professional for details on how these programs work. CMHC also permits first-time buyers to borrow their 5% from any other source under certain conditions. For further assistance in understanding these programs and how they work, please feel free to contact us at 416 989 1000.
Minimum down payment requirements for non-owner-occupied homes will increase to 20% from 5%, and the way that rental income is considered has been scaled back as well. This rule will have the most dramatic impact of all three changes, but only on real estate investors.
The Home Buyers' Plan (HBP) is a program that allows you to withdraw up to $25,000, from your registered retirement savings plan (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability. For more information please click on the link: http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/menu-eng.html
If you buy land or an interest in land in Ontario, you must pay Ontario's land transfer tax. If you are a first time home buyer, you may be eligible for a refund for all or a part of the tax. For more information, please follow this link. http://www.rev.gov.on.ca/en/tax/ltt
Land Transfer Tax Calculator:
http://www.torontorealestateboard.com/LTT_splash/ltt_calculator.html
Wednesday, July 7, 2010
HST and real estate
Do I have to pay Tax?
The harmonized sales tax introduced by the Liberal Government in Ontario went into effect in July 2010. Although tax is collected at a rate of 13% on the sale price of good and services, it doesn't apply to every type of home or every type or real estate.
New Home purchases are subject to HST but may qualify for an HST rebate. Resale homes are sold without HST. Land may be exempt from tax, but realtors and other professionals must charge HST on the purchase price. However, if the home is going to be your primary place of residence, it may qualify for a partial HST rebate, depending on sale price.
You can get the HST Rebate application here
You do not have to pay HST on the purchase price of a used residential home. Revenue Canada defines "used residential property" to include a previously occupied house, condominium, summer cottage, vacation property or non-commercial hobby farm.
HST applies to most of the services provided in completing the real estate transaction. For example, 13% HST is applied to the commission a realtor charges for facilitating a sale. The tax is paid by the person responsible for paying the commission - generally the seller.
HST also applies to many of the other services involved in the real estate transaction, including appraisal feed, referrals, surveys and legal assistance. HST is charge on these fees regardless of whether the house purchase is itself HST exempt or not.
One exception is that mortgage broker fees are HST exempt if the fees are charged separately from any taxable real estate commissions. As well, mortgages and interest on mortgages are HST exempt.
HST is not normally due and payable when the real estate transaction is completed - generally the "closing date". In some cases, HST could be payable on transfer of possession. Your realtor can answer your questions about closing dates and HST payments. For additional information contact you local Revenue Canada Tax Services Office.
The harmonized sales tax introduced by the Liberal Government in Ontario went into effect in July 2010. Although tax is collected at a rate of 13% on the sale price of good and services, it doesn't apply to every type of home or every type or real estate.
New Home purchases are subject to HST but may qualify for an HST rebate. Resale homes are sold without HST. Land may be exempt from tax, but realtors and other professionals must charge HST on the purchase price. However, if the home is going to be your primary place of residence, it may qualify for a partial HST rebate, depending on sale price.
You can get the HST Rebate application here
You do not have to pay HST on the purchase price of a used residential home. Revenue Canada defines "used residential property" to include a previously occupied house, condominium, summer cottage, vacation property or non-commercial hobby farm.
HST applies to most of the services provided in completing the real estate transaction. For example, 13% HST is applied to the commission a realtor charges for facilitating a sale. The tax is paid by the person responsible for paying the commission - generally the seller.
HST also applies to many of the other services involved in the real estate transaction, including appraisal feed, referrals, surveys and legal assistance. HST is charge on these fees regardless of whether the house purchase is itself HST exempt or not.
One exception is that mortgage broker fees are HST exempt if the fees are charged separately from any taxable real estate commissions. As well, mortgages and interest on mortgages are HST exempt.
HST is not normally due and payable when the real estate transaction is completed - generally the "closing date". In some cases, HST could be payable on transfer of possession. Your realtor can answer your questions about closing dates and HST payments. For additional information contact you local Revenue Canada Tax Services Office.
Tuesday, July 6, 2010
$ reasons why homeownership makes sense
Home ownership can be the best investment you’ll ever make – despite the regular headaches. If you’re in the market to buy a home, think about a few tax tips that could save you a bundle in taxes.
1. Principal residence exemption. You’re likely aware that selling a home can be a tax-free event. The reason? Each “family unit” is entitled to designate one property as their principal residence. A family unit consists of you, your spouse or common-law partner, and any unmarried children under age 18. You have to ordinarily inhabit a place to call it your principal residence, but you’ll be entitled to an exemption to shelter any capital gains on a sale of your principal residence later. If you own more than one property, speak to a tax pro about the exemption because the rules can be complex.
2. Home Buyers’ Plan (HBP). The HBP will allow you to borrow, tax-free, up to $25,000 from your registered retirement savings plan (RRSP) for the purpose of buying or building a home.
You must be a first-time home buyer, which will be the case if you or your spouse (or common-law partner) haven’t owned a home that you occupied as a principal residence in the year of the RRSP withdrawal or the preceding four years.
You generally must repay the amount back to your RRSP over a 15-year period. Be aware that I’ve simplified the rules here. Check out Canada Revenue Agency’s publication RC4135, available at cra.gc.ca, for more.
3. First-Time Home Buyers’ Tax Credit. The 2009 federal budget introduced a new tax credit for first-time home buyers. If you buy a home and you and your spouse (or common-law partner) haven’t owned a principal residence that you occupied in the year of your purchase or the preceding four years, then you may be entitled to a tax credit worth up to $5,000, multiplied by 15 per cent (the applicable percentage for 2010), or $750. The credit can be claimed by either spouse, or both, as long as the total doesn’t exceed the allowable $750.
4. Deducting expenses. You may be entitled to claim a deduction for a portion of home costs such as mortgage interest, property taxes, utilities, repairs, landscaping, and more. How? Two ways.
First, think about establishing a home-based business and a home office which is your principal place of business, or is used on a regular and continuous basis for meeting clients. If this doesn’t suit your fancy, then consider renting out part of your residence to a tenant.
Your property will still be considered your principal residence even when you use it to earn income (from rents, or a business) as long as the partial use of the place for income-producing purposes is ancillary to the main use as your principal residence, you don’t make any structural change to the property, and you don’t claim capital cost allowance (CCA) on the property. Finally, don’t forget to claim moving expenses if you make a qualifying move to a new residence.
5. Multiplying exemptions. It may be possible to shelter the capital gains on more than one principal residence. This generally involves putting each property into separate names rather than holding them jointly. The rules are complex enough to make your head spin, so speak to a tax pro for more details.
With thanks to Tim Cestnick, who is managing director at WaterStreet Family Wealth Counsel and author of 101 Tax Secrets for Canadians.
1. Principal residence exemption. You’re likely aware that selling a home can be a tax-free event. The reason? Each “family unit” is entitled to designate one property as their principal residence. A family unit consists of you, your spouse or common-law partner, and any unmarried children under age 18. You have to ordinarily inhabit a place to call it your principal residence, but you’ll be entitled to an exemption to shelter any capital gains on a sale of your principal residence later. If you own more than one property, speak to a tax pro about the exemption because the rules can be complex.
2. Home Buyers’ Plan (HBP). The HBP will allow you to borrow, tax-free, up to $25,000 from your registered retirement savings plan (RRSP) for the purpose of buying or building a home.
You must be a first-time home buyer, which will be the case if you or your spouse (or common-law partner) haven’t owned a home that you occupied as a principal residence in the year of the RRSP withdrawal or the preceding four years.
You generally must repay the amount back to your RRSP over a 15-year period. Be aware that I’ve simplified the rules here. Check out Canada Revenue Agency’s publication RC4135, available at cra.gc.ca, for more.
3. First-Time Home Buyers’ Tax Credit. The 2009 federal budget introduced a new tax credit for first-time home buyers. If you buy a home and you and your spouse (or common-law partner) haven’t owned a principal residence that you occupied in the year of your purchase or the preceding four years, then you may be entitled to a tax credit worth up to $5,000, multiplied by 15 per cent (the applicable percentage for 2010), or $750. The credit can be claimed by either spouse, or both, as long as the total doesn’t exceed the allowable $750.
4. Deducting expenses. You may be entitled to claim a deduction for a portion of home costs such as mortgage interest, property taxes, utilities, repairs, landscaping, and more. How? Two ways.
First, think about establishing a home-based business and a home office which is your principal place of business, or is used on a regular and continuous basis for meeting clients. If this doesn’t suit your fancy, then consider renting out part of your residence to a tenant.
Your property will still be considered your principal residence even when you use it to earn income (from rents, or a business) as long as the partial use of the place for income-producing purposes is ancillary to the main use as your principal residence, you don’t make any structural change to the property, and you don’t claim capital cost allowance (CCA) on the property. Finally, don’t forget to claim moving expenses if you make a qualifying move to a new residence.
5. Multiplying exemptions. It may be possible to shelter the capital gains on more than one principal residence. This generally involves putting each property into separate names rather than holding them jointly. The rules are complex enough to make your head spin, so speak to a tax pro for more details.
With thanks to Tim Cestnick, who is managing director at WaterStreet Family Wealth Counsel and author of 101 Tax Secrets for Canadians.
Subscribe to:
Posts (Atom)