Government Programs for Home Buyers and Property Owners
Achieving your dream of owning your own home can be made easier by taking advantage of various Government Programs for home buyers and property owners. Some of the programs are targeted to first-time buyers, while others apply more generally. Your real estate professional can provide information on any of these programs or use the contact information provided.
PROGRAMS FOR HOME BUYERS
CMHC Purchase Plus Improvements
Canada Mortgage and Housing Corporation (CMHC) insured mortgage loans are available to cover the purchase price of a home as well as an amount to pay for immediate major renovations or other improvements that the purchaser may wish to make to the property.
This option eliminates the need to obtain secondary financing after the purchase to pay for improvements. The homebuyer obtains a single first mortgage, makes a single mortgage payment, and benefits from first mortgage interest rates.
DetailsThe insured loan will be based on the lower of:
Prior to approval, CMHC will determine the market value of the property after renovations/improvements.
- The purchase price plus the actual cost of improvements, or,
- The “as improved” market value.
The lending value will not exceed the market value of the property after renovations/improvements.
Applicants must have the following:
For more information call CMHC at (416) 221-2642 or www.cmhc.ca.
- A minimum of 5% down payment of total cost (purchase price plus renovations/improvements).
- Cost estimates for renovations/improvements.
- Qualifications to obtain a CMHC insured loan through an approved lender.
RRSP Home Buyers' Plan
The Home Buyers’ Plan (HBP) is a program under which you can, generally, withdraw up to $20,000 from your registered retirement savings plan (RRSPs) to buy or build a qualifying home.
Withdrawals that meet all applicable HBP conditions do not have to be included in your income, and your RRSP issuer will not withhold tax on these amounts. However, before you can withdraw funds you must have entered into a written agreement to buy or build a qualifying home which you must occupy no later than one year after buying or building the home.
If you buy the qualifying home together with your spouse or other individuals, each of you can withdraw up to $20,000. You cannot withdraw an amount from your RRSP under the HBP if you or your spouse owned the home more than 30 days before the date of your withdrawal.
Existing homeowners can use the HBP to purchase a more accessible home or a home for a disabled dependent relative where the individual withdrawing the funds:
- Up to $20,000 per person could be withdrawn tax-free from RRSPs to buy or build a principal residence. Couples —including common-law — will be able to withdraw up to $40,000.
- You have to meet the first-time buyer’s condition. You are not considered a first-time home buyer if you or your spouse owned a home that you occupied as your principal place of residence in the past 5 years. To determine past 5 years, the 4 years preceding the year you make your withdrawal plus the period in the year you make your withdrawal ending 31 days before your withdrawal is the rule adopted.
- Home buyers withdrawing funds do not have to pay income tax on the amount withdrawn, as long as the funds are repaid into an RRSP in the future.
- The 15-year repayment period will begin in the second calendar year following the calendar year in which the withdrawal is made. In addition, a qualifying home must generally be acquired before October 1 of the calendar year following the year of withdrawal. For example, those making withdrawals under the plan in 2000 will have until October 1, 2001 to acquire a qualifying home and their first annual repayment will be due by the end of 2002 or the first two months of 2003.
- A special rule denies a tax deduction for contributions to an RRSP that are withdrawn within 90 days of the RRSP deposit being made. Consequently, to get the normal tax break for a contribution and to use those funds under the plan, the money must be in your RRSP for at least 90 days before a withdrawal is made.
- qualifies for the disability tax credit (DTC) and is buying a home that is more accessible for the individual or is better suited for the care of the individual;
- is related to a disabled individual who qualifies for the DTC and is buying a home for the benefit of the disabled individual that is more accessible for, or better suited for, the care of the disabled individual, or;
- is related to a disabled individual who qualifies for the DTC and is withdrawing an amount for the disabled individual to buy a home that is more accessible for, or better suited for, the care of the disabled individual.
Five Per Cent Down Payment Program
With as little as five per cent down payment, from personal or other sources (see below for eligible other sources), all home buyers have access to mortgage insurance enabling then to enter the housing market, as long as they can manage the costs of home ownership.
- Mortgage insurance for 95 per cent mortgages is available to both first time and repeat home buyers. Homebuyers have the option of using personal sources, such as savings or gifts, or other sources, such as lender incentives, borrowed funds/credit, or sweat equity (the amount of money spent to help construct the home) for the required five per cent down payment.
- Buyers using the Program may consume up to 32 per cent of their gross monthly household income for payments on loans for 95 per cent of the lending value of the house where the five percent down payment comes from other sources will be 2.9 per cent of the mortgage loan. This premium can be added to the mortgage.
- The maximum amortization period is 25 years.
- Insurance premiums on loans for 95 per cent of the lending value of the house where the five percent down payment comes from personal sources will be 2.75 per cent of the mortgage loan. Insurance premiums on loans for 95 per cent of the lend-ing value of the house where the five percent down payment comes from other sources will be 2.9 per cent of the mortgage loan. This premium can be added to the mortgage.
- Borrowers are required to demonstrate, at the time of application, their ability to cover closing costs equal to at least 1.5% of the purchase price.
- Where the minimum equity requirement is being met by way of a financial gift, the funds must be in possession of the borrower 15 days before making an offer to purchase.
For more information call CMHC at 1-800-668-2642 or access through www.cmhc.ca
GST New Housing Rebate
You may be eligible to claim a rebate for a part of the GST you pay on the purchase price or cost of building your home if:
- you buy a new or substantially renovated home (including the land or if you lease the land) from a builder;
- you buy a new mobile home (including a modular home) or a floating home from a builder or vendor;
- you buy a share of capital stock of a co-operative housing corporation;
- you construct or substantially renovate your own home, or carry out a major addition (or hire another person to do so); or
- your home is destroyed in a fire and is subsequently rebuilt.
- Resale homes are exempt from the 6% GST.
- New homes are subject to the 6% GST. New home buyers can apply for a 36% rebate of the 6% GST applicable to the purchase price to a maximum of $7,560 for homes costing $350,000 or less before GST.
- For new homes priced between $350,000 and $450,000 before GST, the GST rebate would be reduced proportionately.
- New homes priced $450,000 before GST or higher would not receive a rebate.
NOTE: In the Greater Toronto Area, most builders include the GST in the price of the house, and any rebate would be assignable to the builder as they would be absorbing the net GST cost.
Land Transfer Tax (LTT) Rebate Program
First-time homebuyers who purchase a newly constructed home will receive a rebate of the Land Transfer Tax (LTT). All other buyers will continue to pay the full applicable tax. The maximum LTT rebate is $2,000.
- The 1996 Ontario Budget announced a special one-year provision to the LTT that was renewed every year and is now a permanent program.
- FIRST-TIME BUYERS who purchase a NEWLY CONSTRUCTED HOME will receive a rebate of the LTT. All other buyers will continue to pay the full applicable tax.
- The maximum rebate is $2000. If an individual owns less than 100% interest in the newly built home, the amount of the rebate would be reduced and calculated according to the amount of interest in the home.
- A rebate of $2,000 is equivalent to the LTT payable on a purchase price of $227,500 (net of GST).
- Only individuals who are at least 18 years of age, have not (or spouse) previously owned an interest in a home anywhere qualify for the rebate.
- Individuals who have received an Ontario Home Ownership Savings Plan (OHOSP) based refund of the LTT do not qualify.
- A real estate transfer tax is assessed on real property when ownership of the property is transferred from one party to another. The tax is a percentage of the value of the property based on a graduated scale:
- 0.5% on amounts up to and including $55,000;
- +1.0% on the amount exceeding $55,000 up to and including $250,000;
- +1.5% on amounts above $250,000 up to and including $400,000 for residential /+1.5% on the amount in excess of $250,000 for business properties;
- +2.0% of the amount in excess of $400,000. [residential only]
For more information call the Ontario Finance Ministry at 1-800-263-7965.
PROGRAMS FOR PROPERTY OWNERS
Residential Rehabilitation Assistance Program
The Residential Rehabilitation Assistance Program (RRAP) is a federal government program that provides financial assistance to renovate or repair housing that needs to be up to basic health and safety standards, or to convert non-residential properties to affordable housing. Deferred maintenance, cosmetic replacements, improvements for resale, and works carried out before a RRAP loan is approved are not eligible.
RRAP provides funding under various categories, each with distinct eligibility criteria. In most cases, to be eligible, homeowner or tenant incomes must be below the Core Need Income Threshold (CNIT), a limit set by the Canada Mortgage and Housing Corporation (CMHC) based on household size and area.
Also, rents must be at or below the Median Market Rent (MMR) established by CMHC for the area.
- Homeowners may apply if the value of their house is below a specific figure, and if their household income is below the CNIT.
- Eligibility is limited to properties lacking basic facilities or in need of major structural, electrical, plumbing, heating, or fire safety repairs.
- Maximum total loan for the Toronto area is $16,000.
- Offers financial assistance to landlords of affordable rental housing to pay for mandatory repairs to self-contained units occupied by tenants with incomes below the CNIT.
- Eligibility is limited to projects having pre and post-RRAP rents at or below the MMR for the local area. In addition, the property must lack basic facilities or require major structural, electrical, plumbing, heating, or fire safety repairs.
- Assistance is in the form of a fully forgivable loan of up to 100 per cent of the cost of mandatory repairs. Landlords must enter into an agreement that places a ceiling on the rents that may be charged after the repairs are completed, and limits rent increases during the term of the agreement.
- The landlord must also agree to limit new occupancy to tenants with incomes below the CNIT.
- In the Toronto area, the maximum assistance per unit is $16,000.
Rooming House (RRAP)
- Offers assistance to owners of Rooming Houses with rents affordable to low-income individuals.
- The property must lack basic facilities, or require major structural, electrical, plumbing, heating, or fire safety repairs.
- The assistance is in the form of a fully forgivable loan of up to 100 percent of the cost of mandatory repairs.
- In the Toronto area, the maximum assistance per bed unit is $16,000.
Residential Conversion (RRAP)
- To be eligible, landlords must own and convert non-residential properties to create affordable rental accommodation.
- Limited to properties that are environmentally safe and can be feasibly converted to residential accommodation, which will be viable based on agreed upon post conversion rents. The applicant must be able to demonstrate that the appropriate residential zoning and building permits can be obtained.
- In the Toronto area, the maximum assistance is $24,000 for each self-contained rental unit.
Persons with Disabilities (RRAP)
- Offers financial assistance to homeowners and landlords to undertake accessibility work to modify dwellings occupied or intended for occupancy by persons with disabilities.
- Homeowners may apply if the value of their property is below a specific figure, and if their household income is below the CNIT.
- Landlords may apply for modifications to units occupied by tenants with incomes below the income threshold.
- Modifications must be related to housing and be reasonably related to the disabled occupant’s disability.
- In the Toronto area, the maximum assistance is $24,000. For homeowners, the maximum forgivable component is $16,000.
Secondary/Garden Suite (RRAP)
- Offers assistance to convert/develop existing residential properties that can reasonably accommodate a secondary self-contained unit.
- Eligibility is limited to existing family housing residential properties where a self-contained secondary or garden suite is being created.
- The property must meet municipal zoning and building requirements for secondary/ garden suites.
- Landlords must enter into an Operating Agreement, which establishes the rent that can be charged during the term of the Agreement. A ceiling is also placed on the income of households who will occupy the newly created self-contained unit.
- Assistance is in the form of a fully forgivable loan up to a maximum of $24,000.
For more information call CMHC at 1-800-704-6488 or in the City of Toronto, call (416) 392-7620.