Question: Do Couples Lose First-Time Home Buyer Status if One Partner Bought in The Past Canada?
Answer: Yes, couples lose their first-time home buyer status. For federal programs like the Home Buyers’ Plan, you are disqualified if either you or your spouse/common-law partner owned and occupied a home in the four preceding years. Prior ownership by one partner during this period generally makes the couple ineligible for these benefits.
What Happens to Your First-Time Home Buyer Status When Your Partner Has Owned a Home Before?
Buying your first home together is an exciting milestone for any couple. You spend countless hours browsing listings and imagining your future. During this process, you likely hear about valuable programs for new buyers. This leads to an important question many couples face: do couples lose first-time home buyer status if one partner bought in the past Canada? The answer is not a simple yes or no. Your eligibility depends on the specific government program you want to access. Some programs offer benefits to the individual, while others look at the couple as a single unit.
Understanding these distinctions is important for your financial planning. Losing access to a tax credit or a rebate could mean needing thousands of extra dollars at closing. This post clarifies how a partner’s past homeownership affects your joint eligibility for major first-time buyer incentives. We will explore each program, from the Home Buyers’ Plan to land transfer tax rebates, so you can make an informed decision. This knowledge empowers you to plan your purchase strategically and maximize the benefits available to you as a couple.
Defining a First-Time Home Buyer
Before exploring specific programs, you must understand the government’s official definition of a first-time home buyer. It is more detailed than simply never having owned property. Generally, you are considered a first-time home buyer if you did not occupy a home that you or your current spouse or common-law partner owned in the preceding four years. This four-year window is a critical detail that many people miss. It is officially called the “look-back period.”
This rule means that even if you owned a home five years ago, you might have regained your first-time buyer status. The condition applies to both you and your partner. If your partner owned the home you both lived in within that four-year period, then you both fail the first-time buyer test for certain programs. This definition serves as the foundation for most federal incentives. Each program then applies this rule with slight variations, which we will explore next. It is essential to check your personal history and your partner’s before assuming you qualify for any benefits.
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Related Article: Does the First Time Home Buyer Pay Land Transfer Tax Ontario?
Related Article: Do First Time Home Buyers Get a Tax Break in Ontario?
Claiming the First-Time Home Buyers’ Amount
The First-Time Home Buyers’ Amount is a non-refundable tax credit designed to help with closing costs. These costs can include legal fees, inspections, and other expenses. This credit provides tax relief in the year you purchase your home. For a couple where one partner is a previous homeowner, your ability to claim this credit is quite flexible. As long as one of you qualifies as a first-time home buyer, you can claim the credit on your income tax returns.
To qualify, the home must be purchased by the individual who meets the first-time buyer definition, or jointly with their partner. The qualifying person must intend to occupy the home as their principal residence within one year of buying it. You can claim the full amount, but the credit can be split between partners. However, the total combined claim cannot exceed the maximum allowable amount. This tax credit provides a helpful financial cushion after your purchase, and a partner’s prior ownership does not prevent you from accessing it entirely.
Land Transfer Tax Rebates and Mixed-Status Couples
The Land Transfer Tax (LTT) rebate is one of the most significant financial benefits for first-time buyers. This provincial rebate can save you thousands of dollars at closing. Unfortunately, this is the area where a partner’s previous homeownership has the biggest negative impact. For the provincial LTT rebate, the rules are very strict. If you buy a home with a partner who has ever owned a home anywhere in the world, you lose eligibility for the entire rebate. It does not matter if you are a first-time home buyer yourself.
The program treats the couple as a single entity. If one partner is disqualified, the entire application is disqualified. There is no partial rebate. This “all or nothing” rule often surprises couples. Some consider putting the home solely in the name of the first-time buyer to claim the rebate. This strategy carries significant legal and financial risks. It can complicate mortgage financing and does not reflect the true ownership of the property. You should speak with a real estate lawyer before considering such a step to understand all potential consequences for your future and your relationship.
Using a First Home Savings Account (FHSA)
The First Home Savings Account (FHSA) is a powerful new tool for aspiring homeowners. It combines the best features of an RRSP and a Tax-Free Savings Account (TFSA). Your contributions are tax-deductible, and your qualifying withdrawals to buy a first home are non-taxable. Much like the Home Buyers’ Plan, eligibility for opening and using an FHSA is determined on an individual basis. This is excellent news for couples where only one partner is a first-time home buyer.
The partner who has never owned a home can open an FHSA, contribute to it, and use the funds for a down payment. They must meet the definition of a first-time buyer at the time the account is opened and at the time of withdrawal. The partner who previously owned a home is not eligible to open an FHSA. The funds from the qualifying partner’s FHSA can be used towards the purchase of a home you buy together. This allows you as a couple to leverage this excellent savings tool, even if only one of you qualifies to open the account. It provides another avenue to build your down payment faster.
Developing Your Home Buying Strategy
When one partner has owned a home before, you need a clear strategy. Your first step is to review each program’s rules carefully. The partner who qualifies as a first-time buyer can still access significant benefits individually. They can use their RRSP through the Home Buyers’ Plan and save using a First Home Savings Account. As a couple, you can still claim the First-Time Home Buyers’ Amount on your taxes. This combined support can make a major difference in your ability to purchase a home.
The biggest financial hurdle will be the loss of the Land Transfer Tax rebate. You must budget for this tax as part of your closing costs. Open communication about your finances is key. You should discuss how you will cover the additional cost. Consulting with professionals is also very important. A mortgage advisor can outline your financing options, while a real estate lawyer can explain the implications of property title. This preparation ensures you move forward with confidence, fully aware of the financial landscape and ready to secure your new home together.
Conclusion
So, do couples lose first-time home buyer status if one partner bought in the past? The answer is a mix of yes and no. You do not lose access to all programs. Eligibility is often individual, allowing the partner who has never owned a home to access powerful tools like the HBP and the FHSA. You can also benefit from the federal tax credit as a couple. These programs provide substantial financial assistance and should be a core part of your savings and purchase plan.
However, the past ownership of one partner does eliminate eligibility for the valuable provincial Land Transfer Tax rebate. This is a significant cost you must prepare for. Understanding this from the start prevents surprises and financial stress before closing. By knowing which doors remain open and which ones are closed, you can build a realistic budget and a smart home-buying strategy. Your journey to owning a home together is still very much achievable. With the right information and professional guidance, you can navigate the process successfully and turn your dream into a reality.
