As a first time home buyer, there are two major benefits that the government has provided you to help you save money!
First Time Home Buyer’s Program – The BC provincial government has offered first time home buyers a break on the Property Transfer Tax (PTT) when buying their first home.
What is the PTT?
- PTT is a tax charged to the buyer on every single property purchase. If you are purchasing a new property, its an additional tax in addition to the sales tax (GST/Transitional Tax)
How much is it?
- Calculated as 1% of the first $200,000 and 2% of the balance
- Example: $400,000 purchase, PTT = $6000
- This is a tax that is part of your closing costs and must be paid up front. It can not be added to your mortgage.
When does a first time buyer qualify?
- Must be a Canadian Citizen or permanent resident
- You have never owned a primary residence anywhere in the world at any time
- Property must be located in BC
- Property must be used as your primary residence
- If you purchase a property at $475,000 or less, you are fully exempt from the PTT (Huge savings!)
- If you purchase between $475,001 and $500,000, there is a partial exemption
- If you purchase above $500,000, you are no longer eligible.
- For more information on how much of an exemption you are eligible for: http://www2.gov.bc.ca/gov/topic.page?id=47FA8BF59DC045A5862895B554A1180A&title=First%20Time%20Home%20Buyers%27%20Exemption%20Amounts#current-exempt
For more information and details on the this program, please visit the Government of BC Website: http://www2.gov.bc.ca/gov/topic.page?id=BBD16E2D7C1841A7BBD420E3AC5380F1
Home Buyer’s Plan – The Federal government offers the Home Buyers Plan (HBP), which allows first time home buyers to borrow up to $25,000 from their RRSP’s to use towards their down payment) up to $50,000 for a couple).
- The major benefit of this is that because you are tapping into RRSP’s, you are getting a tax break on your down payment – using pre-tax dollars.
- You are required to repay this “RRSP” loan within 15 years (but there are no restrictions around repaying it sooner).
- The first payment must be made within 2 years of your home purchase
- The minimum repayment each year would be 1/15th of the amount you borrowed.
- If you do not make your annual minimum payment, the full amount will need to be reported as taxable income when you file your taxes.
- If you make a repayment but it is less than the minimum amount, the difference will need to be reported as taxable income when you file your taxes.
- If your annual repayment is more than the minimum amount, then we can re-calculate your minimum annual repayment moving forward.
- When you make this repayment, you need to make sure it is reported properly when you file your taxes so the government knows this repayment was specifically a repayment towards your RRSP loan and not just a new RRSP contribution
- Can not have owned a home in the last 5 years
- Must sign an agreement to buy a home and must intend to live in it as a primary residence within a year
- If you have used the home buyers plan in the past, you can not have an outstanding balance
- You must make the withdrawal within 30 days of taking title of the home
- The money has to be in the RRSP account for a minimum of 90 days prior to the withdrawal
For more information and details on this program, please visit the CRA website: http://www.cra-arc.gc.ca/hbp/