New Ontario LTT Rebate for First-Time Buyers

18 January 2017
Life and the City

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In an effort to help first-time homebuyers, Ontario has doubled the Land Transfer Tax (LTT) rebate for first-time home buyers from $2,000 to $4,000. That means that a first-time home buyer will pay no  provincial tax on homes sold for $368,000 or less. 

Note that this rebate is only available if the first-time buyer is moving in to the property within 9 months of the closing date.

To find out if you qualify for this new rebate and to figure out how much tax relief you can claim on your first home, visit www.FirstHomeRebate.ca, and watch the informative video here.

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Under the new “modernized” land transfer rates, repeat buyers of detached or semi-detached homes or condos or townhomes can expect to pay the following:

“Modernized” Ontario Land Transfer Tax Rates
Home Purchase Price             Tax Rate
Up to $55,000                              0.5%
$55,000 to $250,000                  1.0%
$250,000 to $400,000                1.5%
$400,000 to $2-million                2.0%
$2-million and over                      2.5%

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Current programs to help first-time homebuyers

There are already a few programs in place to help first-time home buyers. These include:

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Home Buyer’s Plan

First-time homebuyers have an opportunity to use their RRSP contribution towards a down payment, using the Home Buyer’s Plan (HBP). Under the federal HBP, you can withdraw up to $25,000 from any RRSP account, as long as those savings were deposited more than 90 days before your request to withdraw. (Your mortgage lender can provide the official Canada Revenue Agency form or you can get this form T1036 by going online.) Keep in mind, you have to pay back this interest-free loan over a 15-year period and any year you don’t make a payment, that annual sum is added to your income and taxed at your marginal rate. The good news is that couples can withdraw a total of $50,000 combined from their RRSP accounts, which can make a huge contribution towards a down payment. To qualify for the HBP you and your spouse must not have lived in a home owned by either person for the five years prior to using the HBP.

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First-Time Homebuyer’s Tax Credit

Homebuyers who have not owned a home within the last four years may be eligible for the first-time homebuyer’s tax credit (HBTC) through the Government of Canada’s Economic Action plan. The credit is based on $5,000 multiplied by the lowest federal income tax rate for that year. For example, the lowest federal income tax rate for 2014 is 15%, so the value of the credit would be $750. You can learn more about the first time homebuyer’s tax credit on the Economic Action Plan website.

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Land Transfer Tax (LTT) Refund

As a first-time homebuyer, you can receive a refund from the Ontario government of up to $2,000 of the land transfer tax you paid on your first home. (Keep in mind, other provinces have similar programs.)

To qualify for this refund, you must be 18 or older, you cannot have previously owned a home (or an interest in a home, which includes putting your name on the deed of your parent’s cottage in order to avoid probate fees), and this all applies to property anywhere in the world. Typically, your lawyer will apply for the fee as you finalize your real estate purchase, but if that doesn’t happen you have 18 months after the registration date of the sale.

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GST/HST New Housing Rebate

First-time homebuyers residing in provinces that have combined provincial and federal sales tax, which includes Nova Scotia, New Brunswick, Newfoundland, Ontario, and B.C., are eligible for an HST tax rebate through the federal government.

While rebates and conditions vary from province to province, the program is designed to help with the federal portion of the HST new homebuyers have to pay. You can find out if you’re eligible for an HST New Housing Rebate, as well as all necessary application forms on Service Canada’s website.

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Energy Efficient Housing

Finally there’s the Energy Efficient Housing rebates. While not restricted to first-time homebuyers, these rebates can certainly help first-time buyers.

There are a variety of rebates both at the federal and provincial levels. For instance, Genworth offers the Energy-Efficient Housing program. Available across Canada, this rebate provides a partial refund of up to 25% of the Genworth Canada insurance premium, based on the date of application for the mortgage insurance. If you bought a $300,000 home with only 5% down, you would have to pay $10,800 in insurance premiums. Under the Energy-Efficient refund program, you could save $1,620 off those premium rates. For eligibility requirements, see Genworth’s website. The Canada Housing and Mortgage Corporation offers a similar rebate and can apply to a purchase or a renovation. Go online for more information.

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Questions about Ontario's new LTT rebate? Just ask us!

Information courtesy of OREA and this MoneySense article.