Canadian First Time Home Buyers Increase their Budgets

According to a Bank of Montreal Study the average first time home buyers have increased their budget to $316,000.00

This is up almost 6% from an average of $300,000 in last year’s report on first time home buyers.  

What is even more interesting is that buyers in Vancouver, Calgary and Toronto real estate have even higher budgets for their first homes.  

key-3-939487-mThe numbers from the online interviews conducted by BMO from January 25 – March 6, 2014: 

Approximately 30%  of the 513 Canadians interviewed online for the study said they expected assistance from parents or family.

Nearly 61%  said they have made cuts to their lifestyle to save for their first home.

To view the article from the Globe and Mail Click Here.

Who is a First Time Home Buyer – For Land Transfer Tax Refund Purposes

Who qualifies as a first a first time home buyer in order to qualify for the Land Transfer Tax refund?  Seems like a simple question.  However, the answer isn’t as simple as the question implies. 

What is Land Transfer Tax

The Provincial Land Transfer Tax applies to all transfers of land in Ontario.  If the transfer of land is in Toronto, there is an additional Municipal Land Transfer Tax. first time home buyer

In general, if you buy land or an interest in land in Ontario, you must pay  land transfer tax (provincial and possibly municipal), whether or not the transfer is registered at one of Ontario’s land registry office. 

Land includes any buildings, buildings to be constructed, and fixtures (such as light fixtures, built-in appliances and cabinetry).

The land transfer tax payable is normally based on the amount paid for the land, in addition to the amount remaining on any mortgage or debt assumed as part of the arrangement to buy the land.

For more information about Land Transfer tax, and how it is calculated Click Here.

Who Qualifies for a Frist Time Home Buyers Credit? 

First-time homebuyers may be eligible for a refund of all or part of the tax. For transfers where:

  • the agreement of purchase and sale was entered into after December 13, 2007, the refund applies to all homes, whether newly constructed or resale.
  • the agreement of purchase and sale was entered into before December 14, 2007, the refund only applies on the purchase of a newly constructed home.

Applications for a refund must be made within 18 months after the date of the transfer.

To claim a refund, the requirements are as follows:

  • The purchaser cannot have previously owned a home, or had any ownership interest in a home, anywhere in the world, at any time.
  • If the purchaser has a spouse, the spouse cannot have owned a home, or had any ownership interest in a home, anywhere in the world, while he or she was the purchaser’s spouse. If this is the case, no refund is available to either spouse.
  • The purchaser must be at least 18 years of age.
  • The application for a refund must be made within 18 months after the date on which the conveyance or disposition occurred. (Note that an application for the refund can be completed upon the electronic registration of the conveyance).
  • The purchaser must occupy the home as his or her principal residence no later than nine months after the date of the conveyance or disposition.
  • The purchaser cannot have previously received an Ontario Home Ownership Savings Plan (OHOSP) based refund of land transfer tax.
  • If the agreement of purchase and sale is entered into before December 14, 2007, the home must be newly constructed.

First time home buyers or new and resale homes are eligible to receive refunds of the provincial and Toronto Land Transfer Taxes.

Am I a First Time Home Buyer?

Do I qualify for the First Time Home Buyers Refund?

There are several situations which have come across my desk where clients have been surprised that they did not qualify for the First Time Home Buyers Land Transfer Tax Refund.  I have accumulated some of the common questions/concerns below. 

1.  I am purchasing a property for the first time, but my parent has to be put on title at the insistence of the bank.  My parent is not a first time home buyer. 

In this situation, it will be necessary to pay land transfer tax at the time of registration and apply for a refund from the ministry.

If the parent did not acquire a beneficial interest in the property as a result of the conveyance:

  • the ministry will accept the fact that the parent was on title as a trustee for the child, and
  • the child would qualify for the newly constructed home refund, provided that evidence of the trust is submitted (e.g., a letter from the bank confirming that the parent is on title for mortgage purposes).

For example, where a parent who is not a first-time purchaser and a child who is a first-time purchaser, purchase a home with equal 50/50 interests, the child may claim a refund of 50% of the land transfer tax payable. The child’s claim cannot exceed 50% of the maximum allowable refund (i.e. 50% of $2,000).

2.      I inherited a property from an estate, but did not “purchase” the property.  Can I still claim the first time home buyers refund when I “purchase” my first home? 

To claim a refund, you cannot have owned a home, or an interest in a home, anywhere in the world. Previous ownership in a property means you do not qualify. The method of acquiring the property (e.g., purchase, gift or through an inheritance) is not considered.

3.      I am purchasing a property and I have never owned a home previously. However, my spouse has a property that he/she purchased prior to us becoming spouses. 

Your partner’s eligibility for a first time home buyers refund depends on whether you are “spouses” as defined in section 29 of the Family Law Act.

For land transfer tax purposes, “spouse” means either of two persons who are married to each other, or who are not married to each other and who have cohabited:

  • continuously for a period of not less than three years; or
  • in a relationship of some permanence, if they are the natural or adoptive parents of a child.

If you are not spouses according to the definition above, then your partner may claim a refund based on his/her interest acquired in the home.

If you are “spouses”, and the home was owned by one of the partners while you were spouses with each other (no matter how long ago or for how long), then you do not qualify for the first time home buyers refund, even if you did not live in the property together.   

For example if a husband owned a property prior to getting married, and sold it the day after he got married.  His wife has never owned interest in a property.  The wife would not be entitled to a first time home buyers refund.  (See Number 4 if the property was sold prior to becoming spouses). 

The situation does not change if title to the property is in one partner’s name alone. 

4.      I am purchasing a property, and I have never owned a property before.  My spouse owned a property prior to us becoming spouses, however he/she sold the property prior to us becoming spouses.   

In this circumstance, you are entitled to the first time home buyers refund, even though the first spouse is not a first-time homebuyer.  You can claim a refund up to the maximum, as long as the property was not owned  while you were each other’s “spouse.”

What this means is that if a husband who is a first time purchaser, and a wife who is not a first time home purchase a home, they can claim the  full land transfer tax refund if the home was sold prior to becoming spouses. 

It is important to remember that for land transfer tax purposes, “spouse” means either of two persons who are married to each other, or who are not married to each other and who have cohabited:

  • continuously for a period of not less than three years; or
  • in a relationship of some permanence, if they are the natural or adoptive parents of a child.

5.      I moved to Canada from another country.  I previously owned property in that country, however, sold it prior to coming to Canada. 

You would not be entitled to the refund.  A purchaser cannot have previously owned a home, or had any ownership interest in a home, anywhere in the world, at any time.

Contact Us to determine your eligibility for the land transfer tax first time home buyers refund.

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