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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. Instead, you'll rely heavily on your savings to pay for your down payment, and for the closing costs that come with purchasing a home.

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. Read the pages linked below to find out more about the first-time homebuyer tax credits and rebates, grants and programs available in Canada. You can also scroll down for an in-depth summary of the programs first-time homebuyers should know about in Canada.

 

A guide to first-time homebuyer programs

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. 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

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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The Home Buyers' Plan

The Home Buyers' Plan (HBP) isn't a credit or rebate. Instead, the 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 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 FHSA 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. 

Mortgage default insurance for first-time homebuyers

Mortgage default insurance (also known as CMHC insurance) allows all homebuyers to buy a home with a down payment of as little as 5%. This is especially important for first-time homebuyers who may not have had enough time to save a 20% down payment, especially in hot real estate markets like Vancouver and Toronto. You'll have to pay for mortgage default insurance for any mortgage that has a down payment of less than 20% (these are known as high-ratio mortgages).

Mortgage default insurance is offered by the Canada Mortgage and Housing Corporation (CMHC) and other private insurers. Cash grants are rare, but the programs available can help buyers save thousands of dollars. It's important to understand that mortgage default insurance is not cheap, and it's always a good idea to try and avoid paying for it by saving a larger down payment.

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