The good news begins with a generous definition of who is a first time home buyer: to qualify as a first-time home buyer, which generally means you and/or your spouse (whoever will be on the Title and Mortgage for the home) must not have owned a home in Canada for 4 years. And now, to the two plans currently available to Canadians.
First-Time Home Buyer’s Tax Credit (HBTC)
The First-time Home Buyers’ Tax Credit was introduced to assist Canadians in purchasing their first home. It is designed to help recover closing costs, such as legal expenses, inspections, and land transfer taxes, so you can save more for money for a down payment.
The Home Buyers’ Tax Credit, at current taxation rates, works out to a rebate of $750 for all first-time buyers. After you buy your first home, the credit must be claimed within the year of purchase and it is non-refundable. In addition, the home you purchase must be a ‘qualified’ home, described in more detail below. If you are purchasing a home with a spouse, partner or friend, the combined claim cannot exceed $750.
You will qualify for the HBTC if:
- you or your spouse or common-law partner acquired a qualifying home; and
- 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.
The RRSP Home Buyers’ Plan – for first-time home buyers (HBP)
The Home Buyers’ Plan (HBP) is a program that allows you to withdraw funds from your registered retirement savings plan (RRSPs) to buy or build a qualifying home for yourself or for a related person with a disability. You can withdraw up to $25,000 in a calendar year. You must qualify as a first-time home buyer, which generally means you and/or your spouse must not have owned a home in Canada for 4 years.
Your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the HBP, or they may not be deductible for any year – see here http://www.cra-arc.gc.ca/E/pub/tg/rc4135/rc4135-e.html#P233_15310
Generally, you have to repay all withdrawals to your RRSPs within a period of no more than 15 years. You will have to repay an amount to your RRSPs each year until your HBP balance is zero. If you do not repay the amount due for a year, it will have to be included in your income for that year.
All the info here http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/hbp-rap/menu-eng.html
And here’s some more info on how long the money must be in your RRSP before you withdraw it for the HBP. Let’s say a qualified first-time home-buyer contributed to his RRSP near the end of February. The buyer then finds a home with a willing seller, but is unable to get a possession date late enough to meet the following requirement: “Your RRSP contributions must remain in the RRSP for at least 90 days before you can withdraw them under the HBP, or they may not be deductible for any year.”
It turns out that the client actually has 30 days after possession to still take out his money from his/her RRSP and use it for the Home Buyer’s Plan.
Moreover CRA does not care if the buyer uses that money to buy a car, go on vacation or spend it on anything else, as long as he/she buys a qualified home and is a first time buyer.