2024 Canada First-Time Home Buyer's Guide - Programs & Incentives
Jamie David, Sr. Director of Marketing and Mortgages
Being a first-time home buyer can be both exciting and stressful – but it also tends to be very expensive, especially if you don’t have any pre-existing assets to help you get a mortgage. After all, most first-time home buyers in Canada don’t have proceeds from the sale of a property to fund their first purchase! Fortunately, the Canadian government offers a number of first-time home buyer incentives and programs to ease the financial burden of breaking into the housing market.
This page includes all of the resources you'll need to get started on your home buying journey. Find out more about the first-time home buyer incentive, RRSP plan, tax credits and rebates, grants, and programs available in Canada in 2023, including the newest federal program, the First Home Savings Account. There are also some helpful links to our provincial first-time home buyer pages, where you can learn more about the various incentives and programs available at the provincial level.
You can get started with the helpful video below, and then read on for more information.
WATCH: How much mortgage can you afford in 2023?
How do I qualify as a first-time home buyer in Canada?
To qualify as a first-time home buyer in Canada, you must meet the following criteria set out in the Income Tax Act:
- You are a Canadian resident at the time you withdraw any funds from a registered government plan for the use of a first-home purchase
- You must have not, at any time in the current calendar year or preceding four calendar years, lived in a home you owned, or jointly owned, or that your spouse or common-law partner owned or jointly owned.
- However, you can regain your first-time home buyer status in the case your marriage or common-law relationship breaks down, as long as you have lived separate and apart from your former partner for at least 90 days, unless you start to live in a new principal residence with a new spouse or common-law partner during that time frame.
How much do I need for a down payment as a first-time home buyer?
The amount you save for your home purchase down payment doesn’t depend on your status as a first-time home buyer. However, in Canada, home buyers must have a minimum percentage of the home’s purchase price on hand. The amount depends on how much the home costs:
- If the purchase price is less than $500,000, the minimum down payment is 5%.
- If the purchase price is between $500,000 and $999,999, the minimum down payment is 5% of the first $500,000, and 10% of any amount over $500,000.
- If the purchase price is $1,000,000 or more, the minimum down payment is 20%
What is the Canadian government incentive for first-time home buyers?
The First Time Home Buyer Incentive (FTHBI) is a program offered through the federal government that helps boost first-time home buyers’ down payments. The FTHBI provides an interest-free loan of between 5% - 10% of the home’s total cost. This amount needs to be paid back within 25 years or when the home is sold, whichever comes first. In exchange, the government shares the equity built up in the home; you’ll pay back more if it appreciates in value, or less if it depreciates, up to a maximum gain or loss of 8% per annum.
Read more about the First-Time Home Buyer Incentive here.
What is the maximum RRSP contribution amount for a first-time home buyer?
Using the RRSP Home Buyers’ Plan (HBP), someone saving for a home purchase can deposit up to 18% of their previous year’s income, or up to the year’s maximum RRSP contribution limit, whichever is higher. However, those using the HBP can only withdraw a maximum of $35,000 to use towards their home purchase.
What is the FHSA limit in Canada?
The First Home Savings Account is another program offered by the federal government to help first-time home buyers save a down payment. Savers can deposit up to $8,000 into their FHSA annually, up to a lifetime maximum of $40,000, however, withdrawals are not capped, meaning any income earned within the account can be accessed tax-free. Those who are saving up for a home purchase with a partner can each have an FHSA if they are both first-time buyers, up to a combined contribution limit of $80,000.
What bank has FHSA in Canada?
As the First Home Savings Account is a brand-new product and launched on April 1, 2023, many of Canada’s financial institutions are still in the process of adding it to their product lines. Currently, Questrade, Royal Bank of Canada, and National Bank of Canada offer the FHSA.
Read more about where to find the First Home Savings Account
Programs for first-time home buyers in Canada
Here are some of the main first-time home buyer incentives and rebates you should be aware of. Have a look at this video, and then read on to learn more.
WATCH: First-Time Home Buyer Programs in Canada: What you need to know
First Home Savings Account
The First Home Savings Account is a new savings vehicle that was announced in the 2022 federal budget, and became available as of April 1, 2023. It combines features from both TFSAs (Tax Free Savings Accounts) and RRSPs (Registered Retirement Savings Plans), but has advantages over both. Your contributions to your First Home Savings Account (FHSA) are tax-free, and you don't have to pay yourself back when you take out money from your first home account to purchase your first home.
Account holders can contribute up to $8,000 annually to the account, with room rolling forward if they don’t use it all during the calendar year, up to a lifetime maximum of $40,000. Partners who are saving for a first home together can each have an FHSA, with a combined total room of $80,000. As well, savers can combine the funds saved in the FHSA with those saved in the Home Buyers’ Plan when it comes time to purchase their home.
In order to access the First Home Savings Account, account holders must have entered into an agreement to purchase a home. Alternatively, the funds can be transferred into an RRSP at any time, without tax penalty. Overall, the account can be kept open for 15 years, or until you purchase your first home (it must be closed within the year of entering into an agreement of purchase and sale).
Though the First Home Savings Account came into effect as of April 1, 2023, it is not yet widely available from all of Canada’s financial institutions. You can learn more about the First Home Savings Account on our blog and in this informative video on our YouTube channel.
RRSP Home Buyers' Plan
If you haven’t purchased a home within the last four years (or lived in a spouse’s home in the same timeframe), you may qualify for the RRSP Home Buyers' Plan (HBP).
The HBP isn't a credit or rebate. Instead, it allows first-time home buyers to use their tax-sheltered savings in a Registered Retirement Savings Plan (RRSP) for their down payment. As a first-time home buyer, 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. As well, the money must be in your RRSP at least 90 days before the purchase of your house.
The RRSP Home Buyers' Plan is advantageous for Canadians because, generally speaking, early withdrawals from RRSPs are considered taxable income. In this case, they’re exempt, but you must start repaying the amount borrowed from the RRSP two years after you buy, in annual instalments over the 15-year timeline. Failure to make an HBP repayment will result in that portion of the funds being earmarked as taxable income for that tax year.
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Land Transfer Tax Rebate
Some Canadian provinces charge a land transfer tax when you buy a house. This is generally between 0.5% and 2.0% of the purchase price of the property, and represents the largest closing cost you'll have to pay. In an effort to help first-time home buyers, several provinces rebate some or all of this tax if you're eligible.
You can receive a rebate on some of the land transfer tax you pay if you live in British Columbia, Ontario or Prince Edward Island. Home buyers in the City of Toronto are also eligible to receive a rebate on the city’s land transfer tax, in addition to the provincial rebate.
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
First Time Home Buyers' Tax Credit
The First Time Home Buyers' Tax Credit, introduced in the 2009 federal budget, allows first-time home buyers in Canada the opportunity to recover some of the costs associated with their purchase. It helps offset legal fees, inspections and other similar closing costs. The First Time Home Buyers' Tax Credit is a non-refundable credit and was valued at $750 until the 2022 budget was passed, which increased the credit amount to $1,500.
GST/HST New Housing Rebate
The GST/HST New Housing Rebate offers money back to Canadians who buy a newly-built home, substantially renovate an existing home, or rebuild a home that was destroyed due to fire. In all three cases, an individual will incur GST/HST on their purchase. The GST portion of a new home purchase or renovation can be rebated to all Canadians who qualify. It's not exclusively available to first-time home buyers, but it's regularly used by first-time home buyers that are buying newly-built homes.
This rebate applies to the federal component of this tax, but some provinces also have their own version of this rebate, which reimburses buyers a portion of the provincial component.
First-Time Home Buyer Incentive
Launched in September 2019 by the Canada Mortgage and Housing Corporation (CMHC), the First-Time Home Buyer Incentive (FTHBI) is an interest-free loan for eligible first-time home buyers to help reduce their regular mortgage payments. This incentive contributes up to 10% of the total cost of your home (5% for an existing home, and 10% for a newly-built home), which you’ll need to pay back within 25 years or when you sell the home, whichever comes first. The FTHBI is also a type of equity-share mortgage, meaning the government retains a share of the home’s equity, sharing in any increase or decline in its value over time.
By reducing the overall mortgage amount through a larger down payment, the FTHBI can help first-time home buyers save a significant amount of money over the course of their mortgage. However, the program has been less popular than anticipated due to its very stringent qualification guidelines that can make it difficult for people to access.
You can read in detail about the First-Time Home Buyer Incentive on our blog, including a thorough examination of eligibility criteria.
Other tax incentives for Canadian homeowners
Homeownership in Canada can be financially challenging; to help offset some of these costs, the federal government offers a number of tax incentives for homeowners. While some are specifically for first-time home buyers – such as the First Time Home Buyers’ Tax Credit and Land Transfer Tax Rebate – others can be utilized by anyone who owns their home. These include:
Multigenerational Home Renovation Tax Credit (MHRTC)
The newest tax credit to be offered to homeowners, the MHRTC is designed to make it more affordable for multiple members of the same family to live together in one dwelling. This credit offers a refund for eligible expenses for renovations that create self-contained secondary units, such as “in-law suites”. Up to $50,000 can be claimed for each completed qualifying renovation, with a credit of 15% of costs, up to a maximum of $7,500 for each claim.
Home Accessibility Tax Credit
The HATC is a non-refundable tax credit for renovations that make the home accessible for those with disabilities. The alterations must be created to allow an individual to be mobile or functional within the dwelling, gain access to the building, or reduce their risk of harm within it. The HATC has an annual expense limit of $20,000, and can be claimed by eligible or qualifying individuals.
Tax obligations for homeowners
Principal tax exemption
A big perk for homeowners in Canada is that they do not need to pay capital gains when selling their principal residence. However, in order to qualify for the exemption, those selling their home must report the sale to the CRA, and designate it as their principal residence when filing their personal income tax return. This must be done the year the home is sold.
Underused housing tax
Introduced in January 2022 to help address the nation’s housing shortage, the federal government now requires an annual federal tax of 1% on the ownership of vacant or underused housing. While the tax “generally applies to foreign national owners” of Canadian real estate, some Canadian homeowners – such as those who own a property as part of a partnership, or as trustee of a trust, may need to file a UHT return. However, there are some exemptions which homeowners can see if they qualify for using the CRA’s self-assessment tool. As the UHT is a new tax, affected owners have until April 30, 2024 to file their returns for the 2022 calendar year, without penalty or interest.
Residential property flipping rule
First introduced in the federal government’s 2022 budget, this is a new deeming rule that requires taxpayers to own a property for at least 365 consecutive days in order to claim the principal residence exemption or 50% capital gains inclusion. Properties that are sold earlier than this timeframe will now be considered “flipped” properties – defined as buying and selling a residential property within a short time period to realize a profit – and their proceeds will now be taxed fully as business income. This also applies to rental properties, as well as “assignment sales”, where the rights to purchase a property change ownership before its official sale closing. However, there are some exemptions – homeowners can visit the CRA’s website to learn more.
Accommodation sharing refers to renting out part or all of a residential property – including both primary and secondary residences – usually for a short term of time, and often through a third-party website such as AirBnB. Any income obtained from accommodation sharing must be reported to the CRA, and is subject to income tax. The CRA will usually consider the income to be from a rental property if basics such as heat, laundry, utilities and parking, are provided. However, if the property rental includes services such as cleaning, meals, and security, the CRA may instead define the income to be self-employed business income. Property owners can learn more here.
More information for first-time home buyers
Below are some other general tips on how to buy a house as a first-time home buyer in Canada. Check the links in each section for more information on any of these topics.
What are the criteria for first-time home buyers in Canada?
To qualify for the various federal and provincial first-time home buyer 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 Home Buyer 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 home buyer programs and incentives to get more specific eligibility information.
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.
Provincial first-time home buyer programs
Most first-time home buyer programs are found at the federal level, but there are several provinces that have their own programs as well (along with the land transfer tax rebates we mentioned earlier). Quebec, for example, offers an additional tax credit (max $750) to first-time homebuyers.
To properly understand what you'll be eligible for in your province, it's worth speaking to a mortgage broker near you - consultations are free. Below are all of our provincial first-time home buyer pages, where you can find detailed, province-specific information.
- First-Time Home Buyer Alberta
- First-Time Home Buyer British Columbia
- First-Time Home Buyer Manitoba
- First-Time Home Buyer New Brunswick
- First-Time Home Buyer Newfoundland and Labrador
- First-Time Home Buyer Nova Scotia
- First-Time Home Buyer Ontario
- First-Time Home Buyer Prince Edward Island
- First-Time Home Buyer Quebec
- First-Time Home Buyer Saskatchewan
First-time home buyer education topics
- First Home Savings Account
- First Time Home Buyers' Tax Credit
- First-Time Home Buyer Incentive
- RRSP Home Buyers Plan
- Land Transfer Tax Rebate
- First-Time Homebuyer Grants
- First-Time Homebuyer Loans