FIRST TIME HOME BUYERS
The First Time Home Buyer Plan (HBP) is for individuals who are considered first home buyers. What determines a first time home buyer is if neither the individual nor the individual’s spouse or common-law partner owned and lived in another home in the year of the home purchase or in any of the four preceding calendar years.
Individuals considered first time buyers will also be eligible for the First-Time Home Buyers’ Tax Credit (HBTC), which can assists first-time home buyers with the costs associated with the purchase of a home, such as legal fees, disbursements and land transfer taxes, which are a particular burden for first-time home buyers, who must also save for a down payment.
Most successful real estate professionals will want to ensure you have a pre-approved mortgage in place before they take you out looking for a home. This is to ensure that they are showing you property within your affordable price range.
A pre-approved mortgage provides an interest rate guarantee from a lender for a specified period of time, and for a set amount of money. This time frame is usually 60 to 120 days. These calculations are based on information provided by purchaser(s) and may be subject to certain conditions being met before the mortgage is finalized. A pre-approved mortgage is one of the first steps a home buyer should take before beginning the buying process.
ADDITIONAL HIDDEN COST
There are additional costs often overlooked in the buying process. These costs include closing costs (up to 2.5% of the basic purchase price), adjustment costs, interest adjustment costs between buyer/seller, and the cost of land transfer tax.
Additionally, there is the cost of a home inspection by a professional building inspector. You will also be responsible for paying the fees and disbursements for the lawyer or notary acting for you in the purchase of your home.
Finally, you will be required to have property insurance in place by the closing date. And let us not forget the cost of moving. So factor these expenses into your initial costs.
Choosing a real estate agent or broker
In Ontario, real estate salespersons or brokers must be registered with the Real Estate Council of Ontario (RECO). RECO administers the Real Estate and Business Brokers Act, which regulates real estate brokerages, brokers and salespersons.
A registered real estate professional:
has deposit insurance. This insurance protects consumers from losing their deposit money if the brokerage or salesperson commits fraud or has financial trouble. In these cases, consumers may be covered up to $100,000 per claim. This insurance is administered by RECO
has met educational standards set by RECO
has to follow laws and a code of ethics. If you have a complaint about a broker or salesperson, RECO will investigate and take appropriate action
Before working with a real estate agent or broker:
ask for references or recommendations
confirm that they are registered by using RECO’s registrant search
make sure you read and understand the contract you are signing with them
Ontario Land Transfer Tax
When you buy land or an interest in land in Ontario, you pay land transfer tax. This tax is payable when you acquire a property or land, and is paid to the province when the transaction closes. Land transfer tax is usually based on the purchase price for the land, but may also include any amount remaining on a mortgage or debt assumed as part of the purchase arrangement.
In some cases, however, land transfer tax is based on the fair market value (FMV) of the purchased land. An example of this would be if the transfer of a lease with a remaining term exceeds 50 years. Also, if the transfer of land is from a corporation to one of its shareholders or to a corporation, if shares of the corporation are issued.
Effective January 1, 2017, the tax rates for land transfer tax will depend on the date of the agreement of purchase and sale.
If an agreement of purchase and sale is entered into after November 14, 2016, and registration or the disposition occurs on or after January 1, 2017, the tax rates on the value of the consideration are as follows:
- amounts up to and including $55,000: 0.5%
- amounts exceeding $55,000, up to and including $250,000: 1.0%
- amounts exceeding $250,000, up to and including $400,000: 1.5%
- amounts exceeding $400,000: 2.0%
- amounts exceeding $2,000,000, where the land contains one or two single family residences: 2.5%.