HOME BUYER PROGRAMS

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.

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Details

The insured loan will be based on the lower of:

• The purchase price plus the actual cost of improvements, or,
• The "as improved" market value. Prior to approval, CMHC will determine the market value of the property after renovations/improvements. The lending value will not exceed the market value of the property after renovations/improvements.

Applicants must have the following:

• 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.

EXAMPLE:
Purchase Price	$100,000
Renovations/improvements costs	$25,000
Total cost	$125,000
Lending Value	$125,000
Maximum Mortgage (95%)	$118,750
Mimimum 5% down payment	$6,250
* Where the loan-to-value ratio is greater than 90%, the maximum house price including the cost of improvements is $250,000 in Toronto.

 

RRSP Home Buyers' Plan

The Home Buyers' Plan (HBP) is a program under which you can, generally, withdraw up to $20,000 from your 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.

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Details

• Up to $20,000 per person could be withdrawn tax-free from RRSPs to buy or build a principal residence.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.

You can participate in the HBP more than once if:

• your HBP balance for your previous participation is zero on January 1 of the year you want your new participation in the HBP to occur; and
• you meet the first-time buyer's condition and all other HBP conditions that apply to your situation.

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:

• 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.

Details

• Mortgage insurance for 95 per cent mortgages is now available to both first time and repeat home buyers.
• Buyers using the Program may consume up to 32 per cent of their gross family income for payments of principle, interest, property taxes and heating, and total debt load cannot exceed 40 per cent of family income.
• Insurance premiums on loans above 90 per cent of the lending value of the house will be 3.75 per cent of the mortgage loan. This premium can be added to the mortgage.
• Price restrictions include a $250,000 ceiling on homes purchased in the Greater Toronto Area.
• The maximum amortization period is 25 years.
• 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.

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.

Details

• Resale homes are exempt from the 7% GST.
• New homes are subject to the 7% GST. New home buyers can apply for a 2.52 % rebate of the 7% GST applicable to the purchase price to a maximum of $8,750 for homes costing less than $350,000 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.