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Government godsend

Don’t look now but one-fourth of 2009 is already behind us.

Don’t look now but one-fourth of 2009 is already behind us. The market has been showing signs of stabilization, at least in the better parts of the GTA and, as a result, a question of ever-increasing popularity has to do with the many government programs in place to aid purchasers.

Here’s an overview of some of the most beneficial ones.

First Time Home Buyers’ Tax Credit
If you qualify as a first time buyer you may be eligible for a 15 per cent income tax credit on your closing costs such as legal fees, land transfer taxes, etc. The maximum tax relief possible is capped at $750, or on a total of $5000 in closing costs. This credit is applicable for closings after Jan. 27, 2009. To qualify as a first time buyer neither you, nor your spouse or common-law partner, may have owned and lived in another home during the year of the current home purchase or in any of the four years preceding.

RRSP Home Buyers’ Plan
To qualify for this plan, again, you must fall under the same classification of a first-time buyer. Under this benefit you, as well as your spouse or common law partner, can withdraw up to $25,000 from your RRSP’s, to buy or build a home, tax free. The maximum withdrawal amount used to be $20,000, but has since been increased to $25,000 for closings after Jan. 27, 2009. You will need to repay the withdrawn amount, of course, but you have a 15 year period in which to do so. There are also other details to be aware of. For example, the tax-free withdrawal is not granted on funds withdrawn within 90 days of their initial deposit, and you generally have until Oct. 1 to acquire a home, in the year you’ve made the withdrawal.

five-per-cent down program
While zero-per-cent down is no longer an option, many might argue that’s a good thing, the ability to purchase with five-per-cent down remains. Mortgage insurance is available on 95 per cent mortgages, to afford consumers the option of purchasing. If the five-per-cent down payment comes from personal sources the insurance premium will be 2.75 per cent. This premium rises to 2.9 per cent if the down payment comes from other sources. If you’re looking to take advantage of this plan you will need to demonstrate, at the time of your application, your ability to cover closing costs equal to at least 1.5 per cent of the purchase price. The maximum amortization period available is 25 years.

Land Transfer Tax Rebates
First-time buyers of new and resale homes are eligible to receive a maximum rebate of $2000 on the provincial LTT and a maximum of $3725 on the Toronto LTT. A common misconception is that this is available only on brand new homes, but that was recently revised to include resale homes as well. I’ve discussed the details of these rebates in a recent article.

– Amit is a Realtor/Developer with Re/Max. amitp@rogers.com

 
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