First-Time Home Buyer Incentives in Canada: Programs That Actually Save You Money
Rising housing costs can make it challenging to buy a house in Canada, especially for first-time buyers. Fortunately, there are plenty of government programs to assist first-time buyers. These incentives can reduce the upfront costs of homeownership, provide tax benefits, or offer more favourable mortgage terms.
Key Takeaways
• The Home Buyers’ Plan allows withdrawals of up to $60,000 from your RRSP tax-free for a down payment.
• The First-Time Home Buyers’ Tax Credit provides up to $10,000 in tax relief for qualifying first-time buyers.
• The First Home Savings Account combines RRSP and TFSA benefits for tax-efficient home savings.
• First-time homebuyers can now access 30-year amortization periods on insured mortgages.
• Provincial programs offer additional incentives, including land transfer tax rebates and exemptions.
• Multiple incentives can often be combined to maximize financial benefits.
But First. Who qualifies as a first time buyer?
Key Criteria for First-Time Status in Ontario:
• Never Owned a Home: You must have never owned a home or an interest in a home, anywhere in the world.
• Spousal or Partner Rule: If you have a spouse or common-law partner, they cannot have owned a home while living with you during the relationship.
• Four-Year Rule: For federal programs, you are considered a first-time buyer if you did not occupy a home that you or your current spouse or common-law partner owned in the current calendar year or the four preceding calendar years.
• Occupancy: You must intend to occupy the home as your principal residence, usually within nine months of the purchase.
That’s me! Bring on the savings.
1. First Home Savings Account (FHSA)
This is the most powerful tool available right now. The FHSA combines the best parts of an RRSP and a TFSA. This is another one brought to you by the CRA.
Learn more directly from the CRA here:
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account.html
Here is how it works:
• Contribute up to $8,000 per year
• Lifetime maximum of $40,000
• Contributions are tax deductible
• Withdrawals for a qualifying first home are tax free
That means you reduce your taxable income today and pay zero tax when you withdraw for your home.
If you are planning to buy in the next one to five years, you should already have this open.
This is a no-brainer.
2. Home Buyers’ Plan (HBP) Using Your RRSP
The Home Buyers’ Plan is a federal program that allows first-time homebuyers to withdraw money tax-free from their Registered Retirement Savings Plan to finance their home purchase.
Official CRA details here:
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/what-home-buyers-plan.html
You can withdraw up to $60,000 from your RRSP tax free to use toward your down payment. If you are buying as a couple, that is up to $120,000 combined.
The program essentially lets you borrow from your future self, with a 15-year repayment period that begins two years after the withdrawal.
Important details:
• You must repay it over 15 years
• Repayment typically begins two years after withdrawal
• If you miss a repayment, that amount gets added to your taxable income
This is not free money. It is a strategic loan from yourself.
But when structured properly, it dramatically increases buying power.
3. First Time Home Buyers’ Tax Credit
The Home Buyers’ Amount is a federal tax credit for first time buyers.
If you qualify, you can claim up to $10,000 on your tax return in the year you bought your home.
It reduces your tax bill. If you do not owe taxes, you do not get a cheque.
It’s not life changing money but it’s still money back in your pocket.
Take it.
4. Ontario Land Transfer Tax Rebate
If you are buying in Ontario, this is big.
Ontario details here:
https://www.ontario.ca/document/land-transfer-tax/land-transfer-tax-refunds-first-time-homebuyers
First time buyers can receive up to $4,000 back on provincial Land Transfer Tax. That rebate is typically applied right at closing.
For many buyers, this eliminates most or all of the provincial land transfer tax.
If you are buying in Toronto, there is also a municipal land transfer tax rebate that can stack on top:
The Land Transfer Tax when I bought my first home was about $4,200. Remove the $4,000 and I paid $200 at closing.
Beautiful.
5. GST HST New Housing Rebate
First-time buyers of newly constructed homes can benefit from GST or HST Housing Rebates, which return a portion of the sales tax paid on new housing.
Federal rebate details here:
https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4028/gst-hst-new-housing-rebate.html
If you are buying a newly built home, you may qualify for the HST rebate. We can consider this when buying a condo because market value has to be under $450,000 for the full federal portion. This can mean thousands back.
This needs to be reviewed carefully before you sign. Builders are in this to make themselves money, not save you your money.
Do not assume it is included. Confirm it in writing.
We can thank the 10-day cooling off period and lawyer review to confirm this.
6. 30 Year Amortization for Insured First Time Buyers
If you are buying with less than 20 percent down, this is considered an insured mortgage.
First-time buyers purchasing with less than 20 percent down can access 30-year amortization in certain scenarios.
More information from CMHC here:
https://www.cmhc-schl.gc.ca/professionals/project-funding-and-mortgage-financing/mortgage-loan-insurance/mortgage-loan-insurance-homeownership-programs/home-start
What does that mean?
Lower monthly payments, which can improve qualification ratios and expand your purchase options.
What No Longer Exists
The federal shared equity First Time Home Buyer Incentive program was discontinued in March 2024.
It is no longer available for new applications.
If someone is telling you they will get you 5 to 10 percent from the government toward your down payment, they are outdated.
Which is fine, because this was not a great way into home ownership.
Good riddance.
How to Stack These Properly
This is where most buyers miss opportunity.
Here is how smart buyers structure it:
• Contribute to an FHSA annually
• Use RRSP under the Home Buyers’ Plan if needed
• Apply Ontario land transfer tax rebate at closing
• Claim the First Time Home Buyers’ Tax Credit the following tax year
• Review GST HST rebate eligibility if buying new
Used together, these can reduce tax, increase down payment strength, and shrink closing costs significantly.
Not one program. All of them aligned.
Common Mistakes First Time Buyers Make
• Waiting too long to open an FHSA
• Not understanding the four year rule
• Forgetting HBP repayment requirements
• Assuming rebates are automatic
• Not speaking to a mortgage broker early enough
How to Apply for a First-Time Homebuyer Incentive
• Gather your financial documentation including proof of income, identification, bank statements, and confirmation of down payment funds.
• Contact a mortgage professional to get pre-approved for financing.
• Determine application timing carefully. Some programs must be applied for before closing, while others are claimed on tax returns after purchase.
• Keep copies of all submitted documents and correspondence.
• Understand any ongoing requirements such as minimum occupancy periods or repayment schedules.
• After closing, maintain detailed records for tax purposes.
• Review repayment obligations annually, particularly for the Home Buyers’ Plan.
As always, the best first step is to get in touch with a realtor and a lender who are active, educated, and work well together.
This is a partnership that will help you find a home and save you a lot of money.
Work together with us and your path to ownership becomes significantly easier.
If you are thinking about buying this year, next year, or even years to come, the best move you can make right now is simple.
Build the plan.
