First Time Home Buyers Programs in Canada

If you are a first time home buyer in Canada, you can take advantage of the following programs available for your first home purchase.

What are the criteria for first-time homebuyers in Canada?

To qualify for the various federal and provincial first-time homebuyer tax credits and programs in Canada, there are a number of criteria that need to be met. Each program has a different set of criteria. However, there are a number of criteria pertaining to age, citizenship status, how recent is your home purchase, and home occupancy. For federal programs such as the First Time Home Buyers’ Tax Credit and the RRSP Home Buyers’ Plan, the following apply:

• You must be at least 18 years of age
• You must be a Canadian citizen or permanent resident
• The property/home you bought must be in Canada
• You cannot have owned a home within the last four years
• If you’re buying with a spouse (or common law partner) who is not a first-time homebuyer, you cannot have lived in a house that they owned within the last 4 years
• You must have documentation verifying that you have purchased a home
• You must intend to live in the home as your primary residence within one year of purchase

First Time Home Buyers’ Tax Credit

The First Time Home Buyers’ Tax Credit is claimed on your annual tax return in the year you buy a property. This rebate will result in a $750 rebate, assuming you meet the

required conditions. Another $750 tax credit is also available to residents of Quebec.

First-time homebuyer land transfer tax rebate

In three provinces and one city, first-time homebuyers can also claim a land transfer tax rebate. Land transfer taxes are charged by every province except for Saskatchewan and Alberta. An additional land transfer tax is charged by the city of Toronto. In British Columbia, Ontario, Prince Edward Island, and the city of Toronto, first-time homebuyers are eligible for a rebate of these land transfer taxes, subject to certain maximums and conditions. Here are the maximum rebates for the four rebates:

• City of Toronto: $4,475
• Ontario: $4,000
• British Columbia: $8,000
• Prince Edward Island: $2,000

RRSP Home Buyers’ Plan

The first-time homebuyer RRSP (Home Buyers’ Plan) isn’t a credit or rebate. Instead, the RRSP Home Buyers’ Plan (HBP) allows first-time homebuyers to use their tax-sheltered savings in a Registered Retirement Savings Plan (RRSP) for their down payment. As a first-time homebuyer, the HBP lets you withdraw up to $35,000 for your down payment, which must be repaid into your RRSP within 15 years. There are some additional conditions to be aware of, and there’s a risk you may cannibalize your long-term savings by using funds from your RRSP today – be sure to do your research before using this program.

GST/HST new housing rebate

Every newly built home in Canada will have GST (goods and services tax) or HST (harmonized sales tax) levied on the price. The GST/HST new housing rebate is a rebate a portion of the federal component of this tax. Some provinces have their own version of this rebate, which reimburses buyers a portion of the provincial component.

This rebate can only be used on newly-built houses, the new construction of a home on land you own or for substantial renovations to an existing home. It’s not exclusively available to first-time homebuyers, but it’s regularly used by first-time homebuyers that are buying newly-built homes.

First-Time Homebuyer Incentive

Launched in September 2019, the First-Time Homebuyer Incentive is an interest-free loan for eligible first-time homebuyers to help reduce their regular mortgage payments. This incentive contributes up to 10% of the total cost of your home, and you’ll need to pay back the loan within 25 years. By delaying the repayment of this loan, first-time homebuyers can save a significant amount of money over the course of their mortgage. However, it is noteworthy that the First-Time Homebuyer Incentive has very stringent qualification guidelines that can make it difficult for people to access. You can read in detail about the First-Time Homebuyer Incentive by clicking here.

First-time homebuyer savings account (First Time Home Savings Account)

In 2022, the federal government announced the creation of a new program to help buyers save for their first home. The First Home Savings Account, or FHSA, combines features of the Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP), with some advantages over both. As with RRSPs, your contributions to your FHSA are tax-free, and as with TFSAs, any money your First Home Savings Account earns will also be tax-free. Unlike an RRSP, you don’t have to pay yourself back for money you withdraw from the FHSA to buy your first home. You can learn more about the First Home Savings Account by clicking here.

First Time Home Buyers’ Tax Credit

The First Time Home Buyers’ Tax Credit was introduced as part of ‘Canada’s Economic Action Plan’ to assist Canadians in purchasing their first home. It is designed to help recover closing costs such as legal expenses, inspections, and land transfer taxes.

The Home Buyers’ Tax Credit, at current taxation rates, works out to a rebate of $750 for all first-time buyers. After you buy your first home, the credit must be claimed within the year of purchase and it is non-refundable. In addition, the home you purchase must be a ‘qualified’ home, described in more detail below. If you are purchasing a home with a spouse, partner or friend, the combined claim cannot exceed $750.1

To receive your $750 claim, you must include it with your personal tax return under line 369.2

How do you qualify for the First Time Home Buyers’ Tax Credit?

In order to be eligible for the First Time Home Buyers’ Tax Credit, your home must meet the following requirements:

• Be within Canada
• Be an existing or new home
• Be a single, semi, townhouse, mobile home, condo, or apartment
• Can include a share in a co-operative housing corporation that gives you possession of the home
• You must intend to occupy the home within one year of purchase

In order to be eligible for the First Time Home Buyers’ Tax Credit, your home must meet the following requirements:

• You or your spouse must purchase a qualifying home
• The home must be registered in either your name or your spouse’s name
• You cannot have owned a home in the previous four years
• You cannot have lived in a home owned by your spouse in the previous four years
• You must present documents supporting the purchase of the home.

Ontario Land Transfer Tax Rebate

First-time homebuyers in Ontario can qualify for a rebate equal to the full amount of their land transfer tax, up to a maximum of $4,000.

To qualify for the Ontario Land Transfer Tax Refund for First Time Home Buyers, you must meet the following criteria:

• You must be a Canadian citizen or permanent resident of Canada,
• You must be 18 years of age or older,
• You must live in the home within 9 months of purchasing it,
• You cannot have owned a home before, and
• If you have a spouse, they cannot have owned a home during the time they have been your spouse.

Based on the Ontario land transfer tax rates, the rebate will cover the full tax amount up to a maximum home purchase price of $368,333. For homes with purchase prices over $368,333, homebuyers will qualify for the maximum rebate, but will still owe the remainder of their land transfer tax. If you are buying your home with your spouse, but only one of you qualifies for this rebate, you can still receive 50% of the rebate.

Tip: You have to apply within 18 months of the date of transfer to qualify for this rebate.

If you qualify, your real estate lawyer will help you file the necessary paperwork. You can either file for your land transfer tax rebate electronically, or download the Ontario Land Transfer Tax Refund Affidavit for First-Time Purchasers of Eligible Homes here. For more information, visit the Land Transfer Tax Refund for First Time Home Buyers website.

Toronto Land Transfer Tax Rebate

First-time homebuyers who live in the City of Toronto can qualify for a rebate equal to the full amount of their municipal land transfer tax, up to a maximum of $4,475. This rebate applies whether you’re buying a Toronto townhouse, house or condo. You can also qualify for the Ontario rebate in addition to the Toronto rebate.

To qualify for the Toronto Municipal Land Transfer Tax Rebate for First Time Purchasers, you must meet the following criteria:

• You must be a Canadian citizen or permanent resident of Canada,
• You must be 18 years of age,
• You must live in the home within 9 months of purchasing it,
• You cannot have owned a home before, and
• If you have a spouse, they cannot have owned a home during the time they have been your spouse.

Based on the Toronto land transfer tax rates, the rebate will cover the full tax amount up to a maximum home purchase price of $400,000. For homes with purchase prices over $400,000, homebuyers will qualify for the maximum rebate, but will still owe the remainder of their land transfer tax. If you are buying your home with your spouse but only one of you qualifies for this rebate, you can still receive 50% of the rebate.

If you qualify, your real estate lawyer will claim the rebate electronically through Teraview when they register your transfer/deed. For more information, visit the Municipal Land Transfer Tax Rebate website.

RRSP Home Buyers’ Plan

If you’re a first-time homebuyer in Canada, one great source of funding for your mortgage down payment is a Registered Retirement Savings Plan (RRSP). The Canadian government’s RRSP Home Buyers’ Plan (HBP) allows first-time homebuyers to borrow up to $35,000 from their RRSPs for a down payment, tax-free. If you’re purchasing with someone who is also a first-time homebuyer, you can both access $35,000 from your RRSP for a combined total of $70,000. However, since the HBP is considered a loan, it must be repaid within 15 years.

First-time homebuyer eligibility

In order to be eligible as a first-time homebuyer, you must meet the following criteria:

• RRSP funds you borrow must be in your account for at least 90 days prior to withdrawal
• You cannot have owned a home within the previous 4 years
• If you’re buying with a spouse (or common law partner) who is not a first time home buyer, you cannot have lived in a house they owned for 4 years
• You have entered into a written agreement to buy or build a qualifying home
• You must intend to live in the home within one year of purchase as your primary residence
• If you have used the Home Buyers’ Plan before, you cannot have any outstanding balance due
• You must make the withdrawal from your RRSP within 30 days of taking title of the home
• You must be a Canadian resident

If you make a withdrawal from your RRSP, but do not meet the first time home buyer eligibility requirements, this withdrawal will be taxed and you must include it in your income tax statement as taxable income.

Buying with a partner

If both you and your spouse (or common law partner) meet the first time home buyer eligibility requirements, each of you can withdraw up to $35,000 from your RRSPs for a total of $70,000.

If only you qualify as a first time home buyer, you will still be able to withdraw the $35,000, provided you have not lived in, as your primary residence, a house owned by your spouse or common law partner.

How the HBP process works

It’s important to note that any funds you withdraw for the home buyers’ plan must be in your account for 90 days prior to your withdrawal.

In order to participate in the Home Buyers’ Plan, you must print off a copy of Form T1036. This form is available from Canada Revenue Agency’s website. You must fill out Section 1 and then give the form to the financial institution that holds your RRSP so they can fill out Section 2. Your financial institution will send you a T4RSP form, which will confirm how much you withdrew from your RRSP as a part of the Home Buyers’ Plan. You must reference this form in your income tax return for the year you made the withdrawal.

Don’t forget you must make the withdrawal within 30 days of taking title of the home. If you try to make the withdrawal more than 30 days after you take title of the home, your withdrawal will no longer be eligible for the HBP and you will be taxed on the amount you withdraw.

Finally, beginning 2 years from your purchase, you must make annual payments over 15 years to pay back the loan to your RRSP. Canada Revenue Agency will send you a Notice of Assessment, which will indicate the amount of the loan you have repaid, the balance left to be repaid, and the amount of your next payment. To start repaying the loan, you must make a contribution to your RRSP in the year the repayment is due or in the first 60 days of the following year.

Repaying the loan

Since the Home Buyers’ Plan is considered a loan, you must repay the amount you withdrew from your RRSP within 15 years, with the first payment due 2 years after you first withdrew the money. Canada Revenue Agency will send you a Notice of Assessment that will indicate the amount of the loan you have repaid, the balance left to be repaid and the amount of your next payment. To start repaying the loan, you must make a contribution to your RRSP in the year the repayment is due or in the first 60 days of the following year.

Let’s look at an example where you buy a home in 2013, and withdraw $19,500 from your RRSP to put towards your down payment. Your first payment is due 2 years later, in 2015.

Step 1 : Calculate the minimum annual RRSP repayment

$19,500 total RRSP withdrawal ÷ 15 years to repay = $1,300 minimum annual repayment

If you decide to contribute more than your minimum annual payment in a given year, your go-forward minimum monthly payment will adjust accordingly. Continuing with our example above, let’s assume you contributed the minimum payment in 2015 of $1,300. In 2016, you decide to make a large contribution of $8,075. We now must calculate the minimum annual contribution for 2017 and all subsequent years.

Step 2 : Calculate the adjusted annual RRSP repayment after lump sum payment

$19,500 total RRSP withdrawal – $1,300 2015 RRSP repayment = $18,200

$18,200 – $8,075 2016 RRSP repayment = $10,125 remaining RRSP loan balance

$10,125 remaining RRSP loan balance ÷ 13 remaining repayment years = $778.85 annual repayment

Missing payments

If you do not make your minimum repayment one year, you have to include the amount you did not pay as RRSP income on your taxes. To do this, subtract any amount you did repay from your minimum repayment amount and put the answer in line 129 on your return. This amount will be taxed (which defeats the purpose of taking out this tax-free loan), and your HBP balance will be reduced accordingly.

Step 1 : Calculate your taxable income due to RRSP underpayment

$1,300 minimum annual RRSP repayment amount – $1,000 actual annual payment made = $300 taxable income

GST/HST New Housing Rebate

What is the GST/HST New Housing Rebate?

If you’re buying a newly built home, you’ll need to pay HST or GST on top of the purchase price. You pay it for the same reason that you pay sales tax on almost everything else you buy. Whether you’ll pay GST or HST depends on your province, as will your final tax rate. But no matter where you live, you can qualify for one of two housing rebates. While the rebate is often used by first-time home buyers, it’s available to everyone.

First, the new housing rebate equals 36% of the GST that all buyers need to pay when buying a new home in Canada. This rebate is up to $6,300 and valid on homes with a fair market value of $350,000 or less. If you’re buying a home priced above this amount but still less than $450,000, don’t fret. There’s still a partial rebate that can be claimed.

What’s in it for those paying HST? In HST participating provinces (New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island) the rebate is 36% of the federal component (the GST) of the tax. There may be additional provincial rebates available for the remainder of the HST.

Who’s eligible for the GST/HST rebate?

As long as you, and anyone else you’re buying with, are an individual home buyer and not a corporation or business partnership, you’re eligible for this rebate if:

• Your home is listed as your primary place of residence, and
• You’ve purchased a new or substantially renovated a single, semi, condo, townhouse, mobile, or modular home from a builder, or you purchased a share of interest in a co-operative home.

And yes, first-time home buyers are also eligible for the GST/HST new housing rebate, on top of other programs available to them.

What if I’m building my home?

In the case of owner-built houses, you’ll have to have built your new home on land that was previously owned or leased by you. If this requirement is fulfilled, then you need to be able to show that more than 90% of the interior from the previously existed house was removed or replaced. You can also qualify if you owned a non-residential property and later rebuilt it into your home. Lastly, for costs from major additions to the house to be eligible for any rebates, those additions must have increased living space by a factor of two.

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Calculating the GST/HST New Housing Rebate

For both the GST and HST rebates, the calculations are similar. Let’s take a look at how you would calculate the taxes and rebates on a home purchased in Ontario.

First, we’ll say the home you purchased was valued at $320,000. In some cases, the builder of your home will have already included the HST in the purchase price. The only difference here is that you’ll be able to automatically include the purchase price plus HST amount in your mortgage. However, in all other cases, you’ll pay whatever HST rate is applicable in your province or territory (13% in Ontario) on top of the $320,000 pre-tax price:

$320,000 x 13% = $41,600 ($16,000 GST portion of HST and $25,600 provincial portion of HST)

Next, we’ll calculate the value of the rebate that can be claimed. In this case, it’s 36% x $16,000 ($5,760) for the GST portion of the HST and 75% x $25,600 ($19,200) for the provincial portion of the HST. That adds up to $24,960.

It’s important to note that for new homes in Ontario, the maximum rebate amount for the provincial portion of the HST is capped at $24,000. It’s the maximum amount available on any new home valued at $400,000 or more.

Which form will I need?

There are two different tax forms. The first is for houses purchased from a builder (Form GST190), which will ask you to fill in information about the claimant (details about your place of residence and contact info), house, and builder. The second is for owner-built houses (Form GST191).

You just need to submit one of these forms along with your personal income taxes for the year. This needs to be done within two years of the actual closing date.

The bottom line the GST/HST new housing rebate is a simple rebate to claim. However, unlike some other rebates and incentives, it’s not automatic. Instead, it requires you to apply manually. It’s important that you don’t forget to do this at tax time!

As a general rule, it’s a good idea to hire a tax accountant to assist you with your taxes if you’ve made any large financial transactions in a given year. Buying a new home certainly meets that standard, so it’s probably worth getting some professional advice.

The First-Time Homebuyer Incentive

What is the first-time homebuyer incentive?

The first-time homebuyer incentive is a kind of interest-free loan for qualified first-time homebuyers to help decrease their regular mortgage payments. The incentive contributes up to 10% of the total cost of the home, which you’ll need to pay back within 25 years. By delaying the repayment of this interest-free amount, first-time homebuyers can save a significant amount of money over the course of their mortgage. Launched in September 2019, the first-time homebuyer incentive is offered by the Canada Mortgage and Housing Corporation (CMHC).

More specifically, the first-time homebuyer incentive is a shared equity mortgage. That means the CHMC will technically be a part-owner of your home, although you’ll have exclusive access to it. There’s more detail on the technicalities of shared equity mortgages below.

How does the first-time homebuyer incentive work?

The first-time homebuyer incentive sees the CMHC pay for up to 10% of the cost of your first home, as part of a shared equity mortgage. The incentive provides 5% of the purchase price for an existing home or 10% for a newly built home. The additional contribution will lower the cost of your regular mortgage payments.

Example: With a $400,000 mortgage, a 2.5% fixed rate, and a 25-year amortization, your monthly payment would be around $1,792 (Source: Ratehub Mortgage Payment Calculator). With the CMHC covering 10%, your new mortgage would be $360,000, with a new monthly payment of $1,613. That’s a saving of $179 per month.

A shared equity mortgage means that a second party – in this case, the CMHC, a branch of the federal government –

shares ownership of the home, based on how much they invest. With the full 10% of the first-time homebuyer incentive, that would mean the CMHC owns 10% of your home. However, the incentive provides you exclusive access to the home – you won’t need to share 10% of it with the government!

You’ll need to pay back the CMHC contribution within 25 years or when you sell the home, whichever comes first. While the incentive amount is interest-free, the amount of money you’ll need to pay back will fluctuate alongside the value of your home.

Example: If you bought a home worth $500,000 today, a 10% CMHC contribution would be $50,000. However, if you pay back the CMHC contribution when the house has grown in value to $750,000, that 10% figure would be $75,000. That’s how much you’d need to pay back.

Basically, you’ll have to pay back the percentage borrowed (5% or 10%) of the value of the home at the time you sell or pay back the incentive. You’ll pay more than you initially borrowed if the home increases in value, less if the home depreciated.

Sounding pretty good so far? Unfortunately, the first-time homebuyer inventive is not without its flaws.

Qualifying for the first-time homebuyer incentive

One of the weaknesses of the first-time home buyer inventive is the range of restrictions put in place on who can use it, and on what kind of homes it can be used. Here are the four main requirements for qualifying for the first-time homebuyer incentive.

First-time homebuyer: You need to be a first-time homebuyer to be eligible. This is a pretty obvious rule, considering the name of the program! For this program, a first-time homebuyer is defined as never having owned a home anywhere in the world, and to not have lived in a home owned by their spouse or common-law partner in the last 4 years.

Household income: Your household income must be less than $120,000 to qualify. That means you and your partner’s income (if you have a partner) must be less than $120,000 combined. The current average income in Canada is around $55,000, so while most people will still be eligible with this rule, it doesn’t leave a lot of wiggle room. Minimum down payment: You must have the minimum required down payment saved in cash. For properties worth less than $500,000, that’s 5% of the overall property price. For homes worth between $500,000 and $1 million, the minimum down payment is 5% of the first $500,000 plus 10% of the rest. The incentive amount is not counted as part of the down payment.

Four times your income: The maximum amount you’re able to borrow is four times your qualifying income. That means the maximum amount you can borrow and still be eligible for the incentive is $480,000, and that’s only if you earn exactly $120,000 a year. This is the most restrictive requirement, as it significantly limits the number of mortgages that will be eligible for the incentive, especially in Canada’s more expensive cities, like Toronto, Vancouver and Calgary.

Taken together, these restrictions seriously limit the number of Canadian first-time homebuyers that are actually eligible for the incentive. Not only will they have to earn close to an average income, but they will need to buy a very modestly priced home compared to their earnings.

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The bottom line

So, is the first-time homebuyer incentive right for you? Well, maybe. Firstly, you’ll need to decide whether you are eligible for the incentive. Then, crunch some numbers to determine your mortgage affordability with and without the incentive. If

you want to buy a home that’s more expensive than the maximum allowed under the incentive, then it might not be for you. On the other hand, understanding the different options available to you might influence your purchasing decision.

Of course, it’s impossible to accurately predict future home prices and, therefore, how much the incentive will actually cost you. There are also other options to consider – like a joint mortgage – that can help reduce the financial burden of your first mortgage. It’s best to speak to a mortgage broker to determine whether or not the first-time home buyer incentive is right for you.

The First Home Savings Account (FHSA)

The first-time homebuyer savings account, officially known as the First Home Savings Account, (FHSA) is a new tax shelter proposed by the federal government as part of its housing plan in the 2022 budget. If you’re curious to learn more about the first-time homebuyer savings account and how it works, you’re in the right place.

First Home Savings Account: Eligibility and key facts

• The First Home Savings Account (FHSA) is a new tool for Canadians to save to buy a first home
• The program will be open to all Canadians who are first-time homebuyers and at least 18 years old
• Money contributed to an FHSA is tax-deductible, similar to RRSP contributions
• FHSA contributions will be limited to $8,000 per year with a lifetime maximum of $40,000
• FHSA withdrawals will not need to be repaid
• You have 15 years to buy a home from the time you open your FHSA. If you have not done so, the funds can be transferred to an RRSP or RRIF without paying any tax

What is the First Home Savings Account?

The First Home Savings Account (FHSA) is a tax shelter proposed by the federal government in the 2022 budget to help Canadians save money to buy a first home.

This tax-free home savings account will combine the features of two savings plans you might already be using: the Tax-Free Savings Account (TFSA) and the Registered Retirement Savings Plan (RRSP). Just like your RRSP, contributions to your FHSA will be tax-deductible. This means that any amount you put in your account will be deducted from your taxable income, saving you money on your income tax.

As with your TFSA, any money your FHSA earns will be tax-free. You won’t have to report your investment earnings or pay income tax on them.

The FHSA will have a few advantages over the RRSP. It’s intended specifically as a savings tool for a down payment on a first home, so you won’t have to use up RRSP contribution room to take advantage of the tax savings. And whereas you have to pay yourself back when you withdraw money from your RRSP to buy a first home, your FHSA withdrawals won’t need to be repaid.

Under the proposal, FHSA contributions will be limited to a maximum of $8,000 per year and $40,000 over your lifetime.

What does the First Home Savings Account mean for first-time homebuyers?

If you’re planning to buy your first home, the FHSA will reduce some of the administrative burden that comes with using existing savings programs. You won’t have to open an RRSP or use your contribution room to take advantage of the tax savings. And because there’s no repayment period the FHSA will have less of an impact on your taxes over the long term.

It also means that you’ll be able to save more money tax-free to buy your first home. Currently, you can withdraw up to $50,000 from your RRSP. With the FHSA, you will be able to withdraw as much money as you’re able to earn in your account. If you’re buying a home with another first-time homebuyer, you’ll both be able to withdraw the maximum from both accounts – potentially $180,000 or more.

Who is eligible for the First Home Savings Account?

The FHSA will be open to all Canadians who are first-time homebuyers. When it was initially proposed in last fall’s election campaign, only Canadians between the ages of 18 and 40 were eligible. However, when the budget was detailed earlier this month, the upper age limit on eligibility was removed.

When can I open a First Home Savings Account?

The government says it’s working with financial institutions to create the accounts, and it hopes the first FHSA accounts will be available in early 2023.