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One would think the term “First Time Home Buyer” (FTHB) can be simply defined.  Unfortunately, it is not.  The FTHB definition differs according to the program, CCRA HBP or Toronto Land Transfer Tax (LTT).

When discussing financing options with their mortgage specialist, buyers may consider withdrawing funds from their RRSP to put toward their down payment.  This can be done tax free under the Canada Revenue Agency Home Buyers’ Plan (HBP) so long as certain conditions are met, including the requirement for the buyer to be a FTHB.  For the purposes of the HBP, a FTHB is a person who has NOT:

• At any time during the period beginning January 1 of the fourth year before the year of the withdrawal and ending 31 days before the date of withdrawal, you or your spouse or common-law partner owned a home that you occupied as your principal place of residence.”

This means for the HBP, one can potentially be considered to be a FTHB every five years.  FTHBs under the HBP often take this to mean they are also eligible for the FTHB land transfer tax (LTT) rebates, which gives Toronto FTHBs an instant rebate of up to $5,725 off the LTT(MLTT + Provincial Land Transfer Tax PLTT combined).  That is not so.  In order to qualify for the LTT rebates, a FTHB is a person:

• who has never owned a home ANYWHERE IN THE WORLD; and
• whose spouse has not owned a home anywhere in the world while being the spouse of the FTHB

The term “spouse” means married or in a common law relationship (continuously lived together for at least 3 years – or shorter if parents of a child).

See the difference?  For LTT rebate purposes, your FTHB status will never reset.  Also, for LTT rebate purposes, you will not be considered to be a FTHB if your spouse (married or common law) owned a home while being your spouse.

It is entirely possible for one to be considered a FTHB for the purposes of the HBP, but not a FTHB for the purposes of LTT rebates.  Buyers are urged to consult an experienced mortgage specialist and real estate lawyer, lest they be shocked by having to pay more than anticipated.

For more information on the Home Buyers’ Plan, including spousal eligibility, you can visit theCRA website. For more information on LTT, please visit the City of Toronto City of Toronto.

This post content is sponsored by Royal Bank of Canada, however the views and opinions expressed herein represent my own and not those of Royal Bank of Canada or any other party and do not constitute financial, legal or other advice.