Incentives for first-time home buyers

Buying your first home in Canada is both a major milestone and slightly overwhelming. With real estate prices still high across the country, especially in urban areas, along with inflation and rising interest rates, first-time home affordability is a major cause for concern among young Canadians. According to Statistics Canada, in 2024, 59% of young adults aged 20 to 35 said they were concerned about housing affordability, while 45% of Canadians reported significant concerns about their ability to afford housing.

This guide is here to help first-time homebuyers navigate the federal and provincial incentives available to them to ease the financial burden associated with entering the real estate market. From new savings accounts to tax credits and land transfer tax rebates, know that options are available to assist you. To learn more about the different housing rebates and savings accounts you may qualify for, check out all this and more below.

What is considered a first-time homebuyer in Canada?

According to Remax, a first-time home buyer is someone who has not owned a home in the past four years, including the buyer, their spouse, or common-law partner if co-ownership is intended. What's interesting about this definition is that even if you’ve owned a home before, you could still qualify as a first-time buyer again, as long as four years have passed. For example, the Canada Home Buyers' Plan (HBP) allows Canadians to re-qualify if they have not owned a primary residence for four years.

This flexible definition means that even former homeowners can still access beneficial incentives, such as the First Home Savings Account (FHSA) and the Home Buyers Plan (HBP), opening the door for more potential homeowners to participate in the housing market. It can also benefit Canadians who may have previously owned a home with someone else, or inherited a home they never had the opportunity to live in.

Federal government incentives & rebates for first-time home buyers

If you're a Canadian citizen interested in buying your first home, you may be eligible to participate in the following incentives and rebates offered by the federal government of Canada:

1. First-Time Home Savings Account (FTHSA)

The first-time home savings account (FTHSA) is a powerful tool Canadian home buyers may want to consider participating in. This was recently launched back in 2023 and offers the same tax benefits as an RRSP and a tax-free savings account (TFSA), meaning that all contributions into the account are considered tax-deductible, while qualifying withdrawals are tax-free when used toward purchasing your first house.

Canadians can contribute up to $8,000 a year with a lifetime maximum of $40,000. Additionally, unused contribution room from the previous year can be carried forward, allowing you to catch up in future years. To qualify for this account, you must be a Canadian resident and over the age of 18. You must also not have lived in a home you or your spouse have owned in the past four years. To have your FHSA contributions count toward your tax return for the year, you have to open the account and make a contribution by December 31 each calendar year.

According to the Government of Canada, nearly 1 million Canadians have established a Tax-Free First Home Savings Account (FHSA), indicating its growing popularity and usefulness as an option for first-time home buyers.

2. Home Buyers Plan (HBP)

The Home Buyers’ Plan allows eligible first-time home buyers to withdraw up to $35,000 from their Registered Retirement Savings Plan (RRSP) to put toward the purchase price of a qualifying home. This money can be withdrawn from a registered retirement savings plan (RRSP) tax-free, offering a double tax advantage. If you’re purchasing with a partner who also qualifies, you can combine withdrawals for up to $70,000.

The catch with the Home Buyers’ Plan is that anyone who uses it must pay back the withdrawn registered retirement savings plan funds within 15 years, starting the second year after you purchase a qualifying home. Failing to repay the money you borrowed from your RRSP will result in the borrowed money being added to your taxable income for that year.

3. Home Buyers Tax Credit (HBTC)

The Home Buyers’ tax credit is another first-time home buyer incentive offered by the Federal Government of Canada. It works similarly to a tax rebate, allowing eligible home buyers to claim an income tax credit of up to $10,000 on a qualifying home. By doing so, home buyers can receive up to $1,500 in a non-refundable tax credit.

Qualifying homes eligible for this tax credit include condos, apartments, townhouses, single-family homes, including resale and homes under construction. Additionally, the four-year eligibility requirement also applies to this credit for you and your spouse or common-law partner.

4. GST/HST New housing rebate

If you're thinking about buying a newly built home or substantially renovating an existing home, you may qualify for the GST/HST rebate. This rebate enables eligible homeowners to get back a percentage of the federal Goods and Services Tax (GST) or Harmonized Sales Tax (HST) paid on their home purchase price.

Buyers of homes priced at $350,000 or less are eligible for a 36% GST rebate, up to a maximum amount of $6,300. The refund is gradually reduced for properties valued between $350,000 and $450,000, but it is not available for homes priced at $450,000 or more. There are additional provincial refunds available in various provinces, including Ontario. For example, Ontario provides a rebate of up to $24,000 on the provincial share of the HST, even if the properties are priced above $450,000.

Provincial & municipal incentives for those buying their first home

Beyond federal housing rebates for Canadians, Canadians can also save money on the purchase of their first home, as each province has their own programs in place to assist Canadians:

Ontario land transfer tax rebate

Eligible first-time home buyers can receive a land transfer tax refund up to a maximum of $4,000. This would mean that, if the home you purchase in Ontario costs $368,000 or less, you would not have to pay any land transfer tax whatsoever. Conversely, if the home you purchase costs more than $368,000, you could receive a major discount on your land transfer tax, up to a maximum refund of $4,000. This rebate can greatly lower upfront closing costs, especially in urban areas where LTT adds up quickly.

Eligibility requirements

Eligibility requirements for the Ontario First-Time Home Buyer Incentive are as follows:

• You are a first-time home buyer, meaning you have not previously owned a home in Canada or any other country.

• Your spouse or common-law partner is also a first-time home buyer who has never owned a home (note that if you or your spouse/partner has owned a home in the past, you may still be eligible for the refund at a discounted rate).

• You are 18 years of age.

More information is available on the Government of Ontario website.

British Columbia First-Time Home Buyers’ Program

In British Columbia, the First-Time Home Buyers Program provides a partial or complete exemption from the property transfer tax. You can get a full exemption if your home is worth $500,000 or less and you fulfill the residency and occupation standards. A partial exemption is offered for residences valued at up to $525,000. This can result in savings of thousands of dollars, depending on the home value.

You can find more information about eligibility requirements here.

Toronto land transfer rebate

The Toronto First-Time Home Buyer Incentive is offered by the municipality and is only available to buyers who purchase homes in the City of Toronto. The Toronto First-Time Home Buyer Incentive functions much like the Ontario First-Time Home Buyer Incentive in that it serves as a property transfer tax rebate. First-time buyers eligible for this assistance program can receive a rebate of up to $4,475 on the municipal transfer tax they owe. More information on this rebate is available here.

Can you combine incentives?

Yes, many homeowners' incentives can be combined to maximize your overall savings. In fact, using multiple incentives is a strategic way to make owning your first home more realistic. Let's use an example to demonstrate how combining numerous incentives can aid you in your home-buying process:

Jane is buying a $550,000 townhome in Ontario. She uses her first home savings account (FHSA) to save $8,000 annually for five years. After five years have passed, she has a total of $40,000 in her account. To increase her down payment, Jane decides to withdraw $35,000 from her RRSP under the Home Buyers Amount and claims $1,500 in HBTC. She also receives a $4,000 Ontario LTT refund and a $4,475 Toronto municipal rebate. Now, let's say that Jane is in the 30% tax bracket. With this in mind, her total approximate savings would then be:

• FHSA tax refund: $12,000

• HBP tax deferral: $10,500

• HBTC tax credit: $1,500

• Ontario LTT refund: $4,000

• Toronto LTT rebate: $4,475

With all of these incentives combined, she was able to reduce her upfront costs by a total of $32,475. This includes tax-free savings, down payment help, and tax credits.

One thing to keep in mind is that each program has its own eligibility rules, deadlines, and application process you'll need to follow. For example, HBP withdrawals must be paid back over 15 years, and FHSA funds must be used within 15 years of you opening your account. Additionally, some rebates are only available for your closing costs. If you're having trouble understanding your eligibility requirements, speak with a mortgage broker or lender for assistance.

Step-by-Step Checklist: How to use these incentives

To help you navigate homeowners' incentives, here's what you need to do and remember:

1. Confirm your eligibility for each incentive: Remember, FHSA, HBP, tax credits, and local rebates all have different eligibility requirements. Research each to ensure you qualify.

2. Open an FHSA: Start contributing to an FHSA as early as possible to build up your tax-deductible savings up to $8,000 each tax year, up to $40,000.

3. Set aside RRSP contributions for the HBP: Build savings you can later withdraw tax-free (up to $35,000) from your registered retirement savings plan.

4. Estimate your LTT: Use online calculators to determine your costs and potential rebates if you qualify for these provincial and municipal incentives.

5. Check your GST/HST rebate eligibility: If you're buying a new build or renovating a property, check to see if you qualify for GST/HST rebates.

6. Gather your documents: Keep track of all your contribution receipts, withdrawal documents, and any legal documents to file your taxes correctly and apply for your rebate programs.

7. Speak with someone: When in doubt, talk to a mortgage broker or financial advisor to help you apply for these rebates strategically.

Common pitfalls to avoid

With so many rebates available, navigating the entire process can be daunting and stressful. Here are some of the most common pitfalls to look out for:

Missing the HBP repayment deadline

If you skip a year’s repayment, the missed amount is added to your taxable income, reducing your overall return. Make sure you set a calendar reminder to prevent this.

Not contributing early to an FHSA

Many buyers open an account too late to benefit fully from tax-deductible contributions. Open up an FHSA today, even if you aren't able to make the full annual contribution limit. Something is better than nothing.

Assuming you automatically qualify

Each program has its own eligibility rules. Make sure to read the requirements beforehand to save yourself time and energy.

Forgetting about municipal-level programs

People often miss out on local rebates, such as Toronto’s LTT rebate, simply because they don’t know they exist. Before buying a home, double-check municipal programs to avoid missing out!

Failing to track documentation

You’ll need to keep receipts, notices of assessment, and legal documents to claim certain credits or rebates. Make sure to keep a physical and digital copy handy.

What happens if I don’t use my FHSA funds within 15 years?

If you do not use your FHSA funds within 15 years of opening the account, you must close the account. Luckily, you will be able to withdraw and transfer the funds to another account you have open, tax-free.

Can I re-qualify for the Home Buyers’ Plan in the future?

Yes, you can re-qualify for the home buyer's plan in the future as long as you have not owned a principal residence for four years.

Do all homes qualify for the GST/HST New Housing Rebate?

No. The rebate is only available to new construction homes and homes that have been substantially renovated.

Protect your home with BrokerLink

Buying your first home is a big financial decision, but with government rebates, you can make the process more manageable. Whether you're in the market or recently purchased a property and need to protect your home, the experienced brokers at BrokerLink are here to help you find affordable home insurance, including:

• Additional interest home insurance

• Comprehensive and broad home insurance

• Home insurance appliance coverage

• Tenants insurance

• Condo insurance

• Vacation property insurance

We'll also help you qualify for discounts like those for bundling home and auto policies, installing home security features like a home alarm system, and more! Contact BrokerLink over the phone or get a free home insurance quote using our online tool!

Get a home insurance quote

First time home buyer FAQs

What should my credit score be if I want to buy a home as a first time buyer?

The goal is to have the highest possible credit score when buying a home. That said, it’s still possible to buy a home with a lower credit score, it just might be harder to obtain a mortgage and/or the terms of your mortgage loan might be less advantageous. Generally speaking, you will need a credit score of between 620 and 680 to qualify for a mortgage, but the higher your credit score (e.g. if it’s in the 700s or 800s), the more options you will have and the better your interest rates will be.

How much are monthly mortgage payments for first time home buyers?

Monthly mortgage payments depend on a variety of factors. Such factors include the purchase price of your home, the down payment you made when you bought your home, your mortgage interest rate, your mortgage amortization period, and the principal amount of your mortgage loan.

Where can I buy home insurance as a first time home buyer?

As a first time home buyer, we recommend buying insurance from an insurance broker. An insurance broker can walk you through the process and ensure you have adequate coverage for your new home. An insurance broker can also review the terms of your mortgage agreement to make sure your policy complies with any contractual obligations. Further, since brokers are home insurance experts, they can offer tips to save money on home insurance and an expert opinion on whether to purchase any extra coverage, such as sewer backup coverage, equipment breakdown coverage, overland water coverage, etc.

What is the difference between home insurance and homeowner’s insurance?

There is none! Many people wonder about the difference between home insurance vs. homeowner’s insurance, but the truth is that they are the same. They are both names for the same type of insurance. Property insurance and house insurance are two other names for home insurance, and they all refer to the same thing.

If you have any questions, contact one of our local branches.