tax return for First time home buyers,

[Seesus]

This might have been discussed already on this forum, i am just asking this just to get my understanding straightened out, If i am a first time home buyer for a pre-cons condo that costs around 280 K - and due for occuapncy in 2010, what are the closing costs involved other than phatom rent ?

Moreover, what kind of tax return can i expect the following year ,if i was to use up my RRSP for down payment. I am trying to see if i would even be getting any break on the tax refund if i purchase a brand new firs time condo. Given the above cost of the Condo and closing addition - how much approx will come back to me as a tax refund.

Any and all advise is much appreciated.

Thanks

 

[MadMax]

This might have been discussed already on this forum, i am just asking this just to get my understanding straightened out, If i am a first time home buyer for a pre-cons condo that costs around 280 K - and due for occuapncy in 2010, what are the closing costs involved other than phatom rent ?

Moreover, what kind of tax return can i expect the following year ,if i was to use up my RRSP for down payment. I am trying to see if i would even be getting any break on the tax refund if i purchase a brand new firs time condo. Given the above cost of the Condo and closing addition - how much approx will come back to me as a tax refund.

Any and all advise is much appreciated.

Thanks

As a good rule of thumb....you can expect closing closing costs to come out to about 3-4% of the purchase price. However since you are a first time homebuyer, you would be eligible for a full rebate on the land transfer tax, about a 1% discount. So if your unit costs 280K, you can expect to pay around 8k-11k - 1% ($2800), so you would pay between 5k-8k total. This includes land, lawyers fees, CMHC, disbursements, title, etc.etc. If you put down 20% or more you would also be eligible for a rebate on your CMHC insurance portion of the loan, cutting your closing costs even further.

As far as tax refund is concerned, I am not aware that you would be able to claim any type of refund as a first time home buyer for a pre-construction condo, but I could be wrong. The RRSP portion of your down payment is not taxed, so there wouldn't be any type of refund anyways. You would need to repay your RRSP withdrawal in installments or in a lump sump before the 15th year anniversary of the date of withdrawal. Hope this helps.

 

[Seesus]

As a good rule of thumb....you can expect closing closing costs to come out to about 3-4% of the purchase price. However since you are a first time homebuyer, you would be eligible for a full rebate on the land transfer tax, about a 1% discount. So if your unit costs 280K, you can expect to pay around 8k-11k - 1% ($2800), so you would pay between 5k-8k total. This includes land, lawyers fees, CMHC, disbursements, title, etc.etc. If you put down 20% or more you would also be eligible for a rebate on your CMHC insurance portion of the loan, cutting your closing costs even further.

As far as tax refund is concerned, I am not aware that you would be able to claim any type of refund as a first time home buyer for a pre-construction condo, but I could be wrong. The RRSP portion of your down payment is not taxed, so there wouldn't be any type of refund anyways. You would need to repay your RRSP withdrawal in installments or in a lump sump before the 15th year anniversary of the date of withdrawal. Hope this helps.

Thank You Madmax. This is quite detailed and delivers the exact information i was looking for. As its a pre-con, I am definitely going to pay over 20% (including all the installments). How much do you think this will cut the closing costs down to assuming that its at 8k after getting a full rebate on LTT. How much further can i expect it to drop with the rebate on CMHC insruance ?

Much appreciated.

 

[MadMax]

Thank You Madmax. This is quite detailed and delivers the exact information i was looking for. As its a pre-con, I am definitely going to pay over 20% (including all the installments). How much do you think this will cut the closing costs down to assuming that its at 8k after getting a full rebate on LTT. How much further can i expect it to drop with the rebate on CMHC insruance ?

Much appreciated.

No problem Seesus....anytime. The cost (standard premium) for a loan of up to 80% of the purchase price (in your case) is about 1% of the amount being financed. So if you are putting down 20% which equals to a 224K loan, total - you can expect to save another $2,240 for the CMHC insurance cost. If you are self-employed without 3rd party income validation, then the premium increases to 1.64% of the amount being financed up to 80%. Also if you are planning longer amortization periods the premium will also increase by 0.20% from 25-30 years and 0.40% from 30-35 year amortization.