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First-Time Home Buyer Incentives in Ontario

If you’re buying a home for the first time, Ontario has a number of 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 $35,000.

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.

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 also a second land transfer tax.  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.

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 $5,000 non-refundable income tax credit that results in up to $750 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

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.

More details about the CMHC insurance program: CMHC website

5. CMHC First  Time Buyer Incentive Program

The First Time Home Buyer Incentive Program (FTHBI), announced in March 2019, aims to make housing more affordable for first-time Buyers in Canada. It’s essentially a shared equity program – where the Canada Mortgage and Housing  Corporation (CMHC) contributes part of the downpayment in exchange for sharing in the appreciation (or loss) when the home eventually sells.

For resale homes, CMHC will contribute up to 5% towards the downpayment; for new construction homes and condos, they’ll contribute up to 10%.

Qualifications and Restrictions

  • First-time home Buyers, a.k.a. you meet one of the following criteria:
    • You or your partner have never purchased a home before
    • You’re  a Canadian citizen or permanent resident
    • You’ve recently experienced a breakdown of a marriage or common-law partnership
    • In the last 4 years, you did not occupy a home that you or your current spouse or common-law partner owned
  • Maximum salary of $150,000 in Toronto ($120,000 elsewhere)
  • The value of your mortgage must be greater than 80% of the value of your property
  • You can borrow up to 4.5 times your household income
  • The total value of the mortgage plus the CMHC portion is limited, which effectively means that it’s only available for properties worth a maximum of $722,000
  • You must come up with a minimum 5% downpayment on your own and qualify for a mortgage
  • Resale homes: CMHC will contribute up to an additional 5%; newly built homes: CMHC will contribute up to 10%

The Details – the FTHBI

  • For qualifying Buyers of resale homes: the borrower must have at least 5% of the purchase price as a downpayment. Under the FTHBI program, the CMHC kicks in up to 5%.
  • For qualifying Buyers of new construction homes: the borrower must have at least 5% of the purchase price as a downpayment and CMHC will contribute up to 10% of the purchase price.
  • The money from CMHC is provided interest-free, and because it’s an equity share and not a loan, there aren’t any traditional repayments required.
  • Under this program, your monthly mortgage payments are reduced (because your downpayment is higher with CMHC’s contribution), thus making it more affordable to own your first home.
  • When it comes time to sell your home, CMHC is repaid via a proportionate % of the price of the home – if they gave you 5% to buy it, they get 5% of the sale price when you sell it (whether prices go up or down).

Read about the FTHBI on the government’s website.

6. 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.
This website may only be used by consumers that have a bona fide interest in the purchase, sale, or lease of real estate of the type being offered via the website. The data relating to real estate on this website comes in part from the MLS® Reciprocity program of the Toronto Regional Real Estate Board. The data is deemed reliable but is not guaranteed to be accurate.