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A Guide for First-Time Homebuyers

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Jamie David

Buying your first home can be both exciting and stressful. It also tends to be very expensive, especially if you don't have any pre-existing assets to help you get a mortgage, as is the case with most first-time homebuyers in Canada. Instead, you'll rely heavily on your savings to pay for your down payment, and for the closing costs that come with buying a house.

In an effort to make buying your first home easier, the Canadian government offers a variety of incentives for first-time homebuyers. First-time homebuyers in Ontario, BC, Prince Edward Island and the City of Toronto, for example, can qualify for a land transfer tax rebate. That's just one of many different first-time homebuyer programs you may be eligible for.

This page includes all of the resources you'll need to get started on your homebuying journey. Find out more about first-time homebuyer tax credits and rebates, grants and programs available in Canada, including the newest federal program, the First Home Savings Account. There are also some helpful links to our provincial first-time homebuyer pages, where you can learn more about the various incentives and programs available at the provincial level. 

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, recency of home purchase, and home occupancy that are generally similar among them. 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

The First-Time Homebuyer Incentive program in particular has more restrictive criteria pertaining to your mortgage loan amount versus your household income. 

Make sure to read the information on our site about the various federal and provincial first-time homebuyer programs and incentives to get more specific eligibility information.

A guide to programs for first-time homebuyers

Below you'll find a detailed summary of the most important programs available to first-time homebuyers in Canada. Follow the links to dedicated articles on the programs for more detailed information.

First Time Home Buyers' Tax Credit

If you’re buying your first home, you may have access to a number of tax breaks. These include the First Time Home Buyers' Tax Credit which is claimed on your annual tax return in the year you buy a property. Until 2022, this rebate resulted in a $750 rebate, assuming you met the required conditions. When the 2022 budget was passed, the rebate amount for 2022 and subsequent taxation years was increased to $1,500. 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

Mortgage rates for first-time homebuyers

As long as you have good credit and a sufficient down payment, you will likely be able to qualify for the best mortgage rates in the market, even if you’re a first-time homebuyer. It’s not necessary to apply for a mortgage from the financial institution you do your everyday banking with. In fact, you may be able to get better rates by shopping around. Many first-time homebuyers use mortgage brokers to help facilitate the mortgage application process.

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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 on our blog. 

First-time homebuyer savings account (First 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 on our blog. 

Quick links to provincial first-time homebuyer education centres

While the programs described above are available to first-time homebuyers throughout the country, it's also a good idea to check out what incentives and programs specific provinces are offering to first-time homebuyers. You can learn more about them on our provincial first-time homebuyer education centres below. 

 

More information for first-time homebuyers

Below are some other general tips on how to buy a house as a first-time homebuyer in Canada. Check the links in each section for more information on any of these topics.

Down payment

For first time home buyers, the down payment is probably the main thing you'll need to think about for your first purchase. In Canada, you must put down a minimum of 5% as a down payment for homes less than $500,000. If the purchase price is between $500,000 and $1 million, you'll need 10% on the amount between $500,000 and $1 million. For houses over $1 million, the minimum down payment is 20%.

Mortgage default insurance

Mortgage default insurance, also sometimes known as CMHC Insurance (although CMHC is just one of three mortgage default insurance providers in Canada), may seem like a strange concept, but it’s relatively straightforward. If you have a down payment of less than 20% of the home’s value, you must purchase mortgage default insurance. But this doesn’t act as insurance for you. Rather, it protects your lender in case you don’t make your mortgage payments. It’s designed to make financial institutions comfortable with lending to individuals who don’t have a large down payment.

Mortgage insurance is calculated as a percentage of the value of the mortgage amount. If your down payment is between 5% to 9.99%, the mortgage insurance will represent 3.6% of the mortgage amount. For down payments of 10% to 14.99%, the mortgage insurance will cost 2.40%. And for down payments of 15% to 19.99%, mortgage insurance costs 1.80%.

Mortgage default insurance isn’t available for homes with a purchase price of more than $1 million. As a result, anyone buying a house in excess of this amount must have at least 20% as a down payment on their purchase.

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