First Time Home Buyer - Mortgage Requirement

The following mortgage requirement does NOT apply to property purchases register prior to February 20, 2008.

Mortgage Paydown Requirements
The mortgage paydown requirements described in this section are NOT applicable to property purchases registered on, or after, February 20, 2008. Also, the mortgage paydown requirements described in this section are not applicable to property purchases registered before February 20, 2008, and paid down on, or after,February 20, 2008.

For property purchases registered prior to February 20, 2008, and paid down before February 20, 2008, the requirements with respect to how much the financing maybe reduced during the first year the purchaser owns the property are outlined in the following sections.

These restrictions apply to all types of financing, including re‐advanceable mortgages and lines of credit. All payments made against the principal amount of the mortgage (both regular and lump‐sum payments) are used to determine how much the mortgage has been reduced. Sometimes the type of financing used, such as a re‐advanceable mortgage or a line of credit, enables the purchaser to borrow money in addition to the money borrowed to finance the home.

When calculating how much the mortgage has been reduced, only the amounts borrowed to finance the home are considered.At the end of the first year after the exemption is claimed, the ministry sends the home owner a letter as part of a routine follow‐up procedure. The home owner must return the completed letter to the Property Transfer Tax office in order to maintain their eligibility for the exemption.

If the property purchase was registered before February 20, 2008, the homeowner may also be asked to provide a complete history of their mortgage account up to February 20, 2008.

Exception
If a mortgage is reduced before February 20, 2008 beyond the allowable paydown limit as a result of the proceeds from a life or critical illness insurance policy, the mortgage paydown restriction is not imposed and the exemption continues to apply.

However, the insurer must pay the proceeds directly to the lender as a term and condition of the policy. First Time Home Buyers' Program Page 7 of 16A pro‐rated exemption is available where a purchaser reduces the eligible indebtedness below the allowable limit before February 20, 2008.

The pro‐rated exemption is based on the date the mortgage was paid down below the required level of financing. Where a pro‐rated exemption is available, the pro‐ration is applied to the obligation that is broken first (either the one‐year occupancy requirement or the one‐year mortgage paydown restriction).

Mortgage Paydown Limits
A mortgage cannot be reduced before February 20, 2008 by more than the greater of: $13,000,
and the amount that would reduce the mortgage to 70% of the fair market value of the property (calculated on the date the application is made to register the transfer at the Land Title office).


For example, if the value of the property registered was $375,000, 70% mortgage is $262,500, the maximum amount by which the mortgage maybe reduced is $13,000.
For example, if the value of the property registered was $375,000, 80% mortgage is $300,000, the maximum amount by which the mortgage maybe reduced is $37,500 (80% to 70% => $300,000 - $262,500 = $37,500)