Updated 2024
If you’re buying a home for the first time, you’re in luck! Ontario has a number of excellent first-time home buyer incentive programs. Here’s what you need to know:
#1 – Home Buyer Plan for First-Time Home Buyers (HBP)
The federal government’s Home Buyers’ Plan (HBP) is a program that allows first time home buyers to withdraw money from their registered retirement savings plan (RRSPs) to buy or build a qualifying home. This money is not taxed as income as it would normally be when you withdraw for an RRSP…but you do have to pay it back. You have 15 years to repay the money into your RRSP, starting two years after the initial withdrawal. The maximum you can withdraw from your RRSP to help fund your home purchase is $60,000.
Some things to know about the first-time buyer RRSP Plan in Ontario:
- The home must be a principal residence (meaning you are living there vs. renting it out)
- You can take the cash out of your RRSP up to 30 days after buying the home
- If you withdraw from your RRSP before closing on your new home, you must own or build the home by October 1st of the following year.
Qualifying as a first-time home buyer for the RRSP Plan:
- The Canadian government defines a first-time buyer as someone who has not owned a home that they occupied as their principal place of residence during the period beginning January 1st of the fourth year before the year of withdrawal and ending 31 days before your withdrawal.
- So basically, if you owned and sold a home five years ago, or had a property that wasn’t your principal residence, you are still considered a first-time homebuyer.
Related: For more info on the HBP, visit the CRA website.
#2 – Land Transfer Tax Refunds for First Time Home Buyers
When you buy a home in Ontario, you’ll have to pay land transfer tax when you take possession of the property – and if you’re buying in the City of Toronto, there’s a second land transfer tax too (sorry!). Thankfully, the provincial and Toronto governments have first-time home buyer incentive programs related to land transfer tax.
Ontario Land Transfer Tax Refund
The Ontario government incentivizes first-time home buyers by offering a refund on the land transfer tax in Ontario, up to a maximum of $4000.
To qualify for the land transfer tax refund:
- You must never have owned a home ever, anywhere
- If the person you are buying a home with has owned a home before, the amount of the refund will be reduced
City of Toronto Land Transfer Tax Refund for First-Time Buyers
If you are buying in the City of Toronto, Toronto has an additional Municipal Land Transfer Tax with an additional rebate for first-timers that maxes out at $4,475.
Related: Land Transfer Tax
Related: Land Transfer Tax Calculator
#3 – First Time Home Buyer Tax Credit (HBTC)
The costs associated with purchasing a home can be a particular burden for first-time home buyers, who must pay these costs on top of saving the money for a down payment. Closing costs include one-time items such as lawyer fees, HST (on newly constructed homes), and adjustments (e.g. taxes or utilities prepaid by the seller) that allow you to complete the house purchase.
To assist first-time home Buyers with these costs, the government created the First-Time Home Buyers Tax Credit, a $10,000 non-refundable income tax credit that results in up to $1500 in federal tax relief.
Who Qualifies as a First Time Home Buyer for Ontario’s Tax Credit?
- The home must be used as your principal residence
- You did not live in a home owned by you or your spouse in the previous four years
- If you buy with a spouse/friend/family member, they must be a first-time home buyer too
- You OR your spouse/friend/family member can claim the credit, or you can share it – the maximum credit between you and any other owners is $750
Related: More details about Ontario’s First Time Home Buyer Tax Credit here
#4 – Canada Mortgage and Housing Corporation Insurance (CMHC)
The Canada Mortgage and Housing Corporation helps buyers by providing mortgage loan insurance so that a buyer can buy a home sooner–with as little as 5% down payment. As of December 15, 2024, mortgage loan insurance will be an option for properties priced up to $1.5 million.
Related: More details about the CMHC insurance program: CMHC website
#5 – First Home Savings Account (FHSA)
In effect as of April 1, 2023, the First Home Savings Account is intended to give prospective first-time buyers an additional way to save money for their downpayment, tax-free.
- Prospective homebuyers can contribute up to $8,000 of tax-free savings each year
- There’s a lifetime contribution limit of $40,000
- If you don’t contribute the full amount each year, you’re allowed to carry forward a maximum of $8,000 to use the following year.
- The First Home Savings Account has a maximum participation period of 15 years, so you have to transfer the money and close the account 15 years after opening it to avoid being taxed.
- The home must be a principal residence – the FHSA cannot be used to purchase an investment property.
- You must move into the home within one year of purchasing it
- If you need access to the funds for any reason other than buying a first home, you’ll be taxed on the withdrawals.
#6 – 30-Year Amortization for First-Timers
As of December 15, 2024, insured first-time home buyers (in other words, with downpayments of less than 20%) will be able to amortize their mortgage payments over 30 years (instead of 25 years). By spreading repayment back over a longer period of time, borrowers benefit from lower monthly payments – and may be able to borrow more than they could previously.
For example: A first-time buyer buys a property for $800,000 with a 10% downpayment. At a 4-year fixed interest rate of 4.09%, the mortgage payment decreases by $362 monthly, when amortized over 30 years instead of 25, from $3,822 to $3,460.
