Vikramjit Bhatt

Residential

Incentives for First-Time Buyers: Unlocking Opportunities

For first-time buyers in Brampton, Toronto, and the GTA, a realm of programs and tax benefits awaits to facilitate home ownership and alleviate financial burdens related to closing costs and home-related expenses.

Tax-Free First Home Savings Account (FHSA): The FHSA serves as a powerful tool for aspiring homebuyers to start saving for their first home. Qualified first-time homebuyers can contribute $8,000 annually for up to 5 years, totaling $40,000 individually or $80,000 for couples. Contributions mirror RRSP tax deductibility, while withdrawals – including investment growth – are non-taxable. The FHSA doesn't mandate repayment, unlike the RRSP Home Buyers' Plan (HBP). It can be combined with the HBP for the same home purchase. Transferring money from RRSP to FHSA offers tax-free withdrawal, even though there's no transfer tax deduction.

RRSP Home Buyer's Plan (HBP): First-time buyers can withdraw up to $35,000 per person tax-free from their RRSPs ($70,000 for couples) for a qualifying home purchase. This bolsters down payment amounts and aids in reaching the crucial 20% down payment to evade mortgage default insurance premiums. A strategic approach involves contributing $35,000 at least 90 days prior to closing to trigger a tax refund that enhances down payment or covers home purchase costs. Repayment on a 15-year plan starting the second calendar year post-withdrawal avoids taxation, but failure results in inclusion of 1/15th of the withdrawn amount in taxable income annually.

Land Transfer Tax Rebate: First-time homebuyers in Ontario are eligible for a full or partial rebate of up to $4,000 on land transfer tax. Toronto homebuyers can receive an additional rebate up to $4,475.

First-Time Home Buyer Tax Credit: Claim a portion of your home purchase on your tax return, with the credit increased from $5,000 to $10,000 in 2022. This provides up to $1,500 federal tax relief for homes purchased on or after January 1, 2022.

HST New Housing Rebate: Purchasing new construction or performing substantial renovations makes you eligible for recovering some HST paid. Ontario refunds 75% of their portion on the first $400,000 of home value, up to $24,000, with an additional $6,000 from the federal portion.

Green House Program: Qualifying energy-efficient home buyers receive up to 25% mortgage insurance premium refund, applicable also to renovations for energy efficiency.

First-Time Buyer Incentive Program: This federal shared equity program offers 5% for existing homes or 10% for new homes. The incentive must be repaid in full after 25 years, upon sale or other conditions. Limits on shared equity gain or loss were introduced in 2022.

In conclusion, these incentives stand as invaluable aids for first-time buyers in securing their dream homes, providing financial relief, and opening doors to homeownership.

Your Next Home: Navigating the Home Buying Journey

Embrace the excitement of your upcoming journey – purchasing your next home! While you're already experienced as a homebuyer, there are some crucial aspects to consider to ensure a smooth and successful transition to your new abode.

Financial Preparedness: Begin by assessing your financial landscape, encompassing your budget, savings, and credit score. Determine the affordability of your new home. Calculate your equity, the gap between your home's market value and remaining mortgage balance. This equity can serve as a downpayment. Obtain pre-approval before house hunting to lock in a rate and pinpoint your price range.

Selling Your Current Home: Contemplate essential repairs or enhancements to facilitate the sale of your current home. Factor in expenses like agent and legal fees, as well as moving costs. Assess your home's market value through a trusted realtor. We can suggest reliable realtors in Brampton, Toronto, and the GTA. They'll guide you on renovations, repairs, and cost-effective tradespeople.

Buying a New Home: Investigate your desired area's housing market. Define your preferences for size, location, amenities, and budget. A real estate agent will assist in finding properties that meet your criteria. Open houses offer insights into your preferred home type. When you spot a suitable home, ensure your offer is "conditional on financing." Hire an inspector to evaluate the property's condition, uncovering any repairs or issues.

Mortgage Choices: Port your existing fixed-rate mortgage to your new property, retaining your current rate and term. This can save money and avoid discharge fees. Blend your current mortgage rate with the new one for a larger mortgage. For variable-rate mortgages, porting might not apply, necessitating mortgage breakage and a penalty.

Breaking Fixed-Rate Mortgages: If breaking a fixed-rate mortgage, a penalty based on the interest rate differential (IRD) may apply, reflecting the difference between your old rate and current rates for your remaining term.

Bridge Financing: If a gap exists between selling your old home and closing on the new one, bridge financing can help during the interim period. Explore bridge loan options and associated costs for a smooth transition.

Embark on this journey with confidence, equipped with these insights to ensure a seamless and rewarding transition to your new home.