|Speaking with a client this week, they were mentioning a government program that gives them $10,000 for being a first-time home buyer. I hadn't heard of this before, and usually I am someone who is fairly on top of all this information. For this reason, I was surprised, and I decided to do some research.
It turns out, the client was half-right. I also didn't know about this and it got me thinking that it would be good to summarize all the government programs and incentives currently available to BC and Vancouver area residents. As with a summary, I am including only the most important details for simplicity, please reference the source for all details. Without further adieu:
Home Buyers Plan (HBP)
This Canada Revenue Agency (CRA) program allows Canadians residents to borrow up to $25,000 from RRSP's to use towards the purchase of their home. The advantage of this is that this money is not subject to withholding tax. It is technically a loan though, so it must be repaid over the course of 15 years. The program is also commonly believed to only be available to first-time home-buyers, however those who have owned before but not in the previous 4 years are also eligible, provided they haven't used it before and have a balance still owing from the previous Home Buyers Plan.
Line 369 – Home Buyers Amount
The interesting thing about definitions is depending on who defines them, what sounds like one thing can be something totally different. This program is a good example. As stated on the CRA website regarding eligibility for this program:
“You did not live in another home owned by you or your spouse or common-law partner in the year of acquisition or in any of the four preceding years (first-time home buyer).”
I suppose the CRA believes you are born again every 4 years. Regardless, the eligibility is basically as stated above, and entitles you to save $750 on your taxes.
First Time Home Buyers Program (BC)
In British Columbia, when someone normally purchases a property, they are subjected to the Property
Transfer Tax. This tax is applied at a rate of 1% of the first $200,000 purchase price, and 2% of every dollar thereafter. For example, for a $300,000 property, you would have to pay $4,000 (1% of $200,000 + 2% of $100,000). With this program, anyone purchasing a home for $425,000 or less gets a full exemption from paying this tax.
However, for the BC government, first-time really means first-time, so you can only use this once. However, if your spouse has never owned a home before, its possible to use it a second time.
This is not really a government program as much as it was an appeasement to the public outrage about the huge cash-grab that is the HST. It is also changing due to the fact that the HST is being abolished and is being returned to the old two-tax system of the GST and PST. As of April 1, 2012 until the HST is eliminated, purchasers of new homes will be able to save 5% of the HST on up to $850,000 of their purchase, for a maximum “savings” of $42,500.
First Time Home Buyers Bonus (BC)
And the savings keep on coming. If you are a REAL first-time home-buyer, and you purchase a new home after Feb. 21, 2012, and you are single with an income of less than $150,000, you will get 5% of the purchase price of your home back, up to a maximum of $10,000. If you make between $150,000 and $200,000, you get a partial benefit.
Energy Efficient Building Programs
While this is not necessarily a government program, it is nonetheless worth mentioning. As is commonly known, if you purchase a home with less than 20% down-payment, your mortgage is required by law to be insured with mortgage default insurance, and the insurance premium is added to your mortgage. For example, for someone with a $300,000 mortgage who purchased a home with 5% down and 30 year amortization, the mortgage insurance premium would be $8,850. If you purchase a home that meets the energy efficient standards and has the certification, you can save 10% of the regular premium plus any premiums paid for extended amortization over 25 years.
In the example above, that person would get rebated $1,425.
Many Creative Ways To Save On Your Mortgage And House
I am always looking for information that will help my clients to save or make extra money and I have much more information that can help home buyers and home owners to improve their finances beyond just getting a great rate or favourable terms and conditions on their mortgage financing.
Everyone's situation is unique and unique situations call for unique solutions. My next article will be addressing what the banks and their employees consider to be solutions, and I can tell you that you do not want to go there. For a unique solution to your specific needs from a trusted and BBB accredited source, please give me a call or write me to arrange a mortgage review.