Government Programs
Homebuyers often overlook or are unaware of government plans and programs that can help you buy a home. These opportunities, offered at different levels of government, are well worth investigation as they can save you thousands of dollars.
The Ontario Home Ownership Plan
The Ontario Government offers the Ontario Home Ownership Savings Plan (OHOSP) for individuals earning less than $40,000 per year or couples with a combined income under $80,000. You must be 18 years or older, be an Ontario resident with a social insurance number. You are not eligible if you or your spouse have ever owned an eligible home or if you have ever held an OHOSP.
You can open an OHOSP at most banks or trust companies by completing an OHOSP application form. There may be a management or administration fees, so ask before you apply. OHOSP’s are fully transferable; you can move it from one financial institution to another. Joint OHOSP’s are not available, so in the case of a couple, spouses will each have to open their own account. Remember that only one spouse is allowed to claim the OHOSP tax credit based on your combined income and combined contributions.
Once your OHOSP is opened, you deposit the money you are saving towards a down payment on your home. You may deposit any amount, but you receive a tax credit on annual contributions of up to $2000 for an individual or $4000 for a couple. Your financial institution will issue an official receipt that you include with your claim.
Depending on your income and how much you deposit in your OHOSP, you can earn tax credits of up to $500 individually or $1000 for a couple each year for up to five years. You must close your account and use the funds to buy an eligible home within seven years ore else repay your cumulative tax credits with interest. If you close your home without purchasing a home, you receive 75% of the funds from your bank or trust company. The other 25% is forwarded to the Ministry of Finance to cover the taxes and interest. The balance (if any) is then returned to you with interest.
When you are ready to buy your home and have entered into an Agreement of Purchase and sale. In order to be eligible, your home be located in Ontario and be suitable for year-round residence. You may use the money towards a home you are building, but not towards the purchase of a building lot.
About four weeks before closing, you will need to complete an OHOSP Home Purchase Declaration, available from your bank or trust company. The funds will be released to your real estate lawyer to be applied to the purchase of your home. It is advisable to use an experience, reputable real estate lawyer, but if you choose not to, you can make arrangements to have the OHOSP funds released to you. In order to do so, you will have to obtain and complete a Discretionary Release Form from the Ministry of Finance. This form is also necessary if you are building your own home.
You can find more detailed information about the Ontario Home Ownership Savings Plan online at:
www.rev.gov.on.ca/images/irie_6305_ohosp.pdf.
The RRSP Home Buyers’ Plan
The Federal Government allows you to withdraw up to $20,000 from your RRSP to purchase or build a home. No income tax is deducted from these funds, provided they are repaid into your RRSP according to a specific repayment schedule.
You can find more detailed information about the RRSP Home Buyers’ Plan online at:
www.ccra-adrc.gc.ca/E/pub/tg/rc4135eq/rc4135-01e.pdf
or
www.ccra-adrc.gc.ca/E/pub/tg/rc4135eq/rc4135eq.html.