The journey toward homeownership for first-time buyers is complex and difficult to achieve. There are an array of programs and incentives that can assist you in realizing your dream of owning a home. From financial assistance programs to tax credits and rebates, these resources aim to help you buy a home and ease the burden of closing costs and other expenses associated with your home purchase.
Tax-Free First Home Savings Account (FHSA)
The FHSA is a terrific way to help future homebuyers get a head start on saving for their first home and make the dream of homeownership a reality. Qualified first-time homebuyers can contribute $8,000 per year for 5 years for a total of $40,000 or $80,000 for a couple. Your contribution room starts when you open a plan, and you can carry forward a maximum of $8,000 in unused contributions to the next year.
Like an RRSP, contributions are tax-deductible and, like a TFSA, all withdrawals that include investment growth will be non-taxable. There is no requirement to repay as there is with the RRSP Home Buyers’ Plan (HBP). You can use both the FHSA and the HBP for the same home purchase.
You can transfer money from your RRSP to your FHSA. This strategy gives you a tax-free RRSP withdrawal, although you don’t get a tax deduction for the transfer, and this does not affect your RRSP contribution room.
If you don’t end up purchasing a home, you can withdraw your money on a taxable basis or your account balance can be transferred to your RRSP, giving you additional RRSP contribution room.
Here is more information on this fabulous way to save for a home.
RRSP Home Buyer’s Plan (HBP)
First-time buyers can withdraw up to $60,000 per person tax-free from their RRSPs ($120,000 for couples) to buy or build a qualifying home, which can be a big boost to your overall down payment amount and may help you reach the 20 percent down needed to avoid paying mortgage default insurance premiums.
Even if you have your downpayment, here is a strategy that may make sense for you. If you have enough RRSP contribution room, contribute your $60,000 at least 90 days before closing. That contribution can give you a significant refund that can bolster your downpayment or help with other costs associated with your home purchase. The funds need to be kept within the account for 90 days before you can make the withdrawal.
You will need to repay the withdrawn funds over fifteen years starting the second calendar year after withdrawal. If you don’t repay, then 1/15th of the amount will be included in your taxable income each year.
Land Transfer Tax Rebate
Land transfer tax, which is a percentage of your new home’s purchase price, is typically a big surprise to Brampton, Toronto, and GTA first-time homebuyers because the amount can be substantial. In Ontario, first-time homebuyers can receive a full or partial rebate of up to $4,000. If you are thinking of buying a home in the city of Toronto, you can receive an additional rebate of up to $4,475.
First-Time Home Buyer Tax Credit
First-time buyers can claim a portion of their home purchase on their tax return for the year of purchase. It was great news when budget 2022 doubled this tax credit to $10,000, giving first-time buyers up to $1,500 in federal tax relief for homes purchased on or after January 1, 2022. This tax relief can help with all kinds of first-home expenses.
New 30-Year Amortization on Insured Mortgages (Less Than 20% Down)
Thirty-year amortizations are available to first-time homebuyers purchasing a new build. To qualify, you must buy a new construction home and be a first-time buyer or have experienced a marriage or common-law breakup. This lowers monthly payments and allows you to qualify for a larger mortgage, providing more flexibility for homebuyers. Effective December 15, 2024, extending your payments over 30 years will be available for all first-time buyers, whether a new construction home or not.
HST New Housing Rebate
If you are purchasing a new construction home or completing significant renovations to an existing one, whether you are a first-time buyer or not, you can recover some of the HST that you paid if you meet all eligibility requirements. Ontario will refund 75% of their portion of the HST on the first $400,000 of the value of your home, which is $24,000. An additional maximum of $6,000 is available from the federal portion.
You must apply within two years of your closing date and the home must be used as your or an immediate family member’s primary residence. It’s important to note that only immediate family members can be on the home’s title, or this rebate will not be available. For more information, check out the CRA’s Guide – GST/HST New Housing Rebate (RC4028).
CMHC Eco Plus Program
All homeowners purchasing a qualifying energy-efficient home with an insured mortgage are eligible for up to a 25 percent mortgage insurance premium refund, which can be a substantial savings. If you buy a home and renovate it to make it more energy-efficient you can also apply for this refund.
Sagen has a similar program called the Energy Efficient Housing Program and for Canada Guaranty it is called the Energy Efficient Advantage Program.
First-Time Buyer Incentive Program – Cancelled
The government has canceled this shared equity program, with no new applications accepted after March 21, 2024. This was not a popular program because homeowners hesitated to share their equity gains with the government, especially if they completed costly renovations. Established in 2019, the program had a goal of $1.25 billion to help 100,000 homebuyers, but fell considerably short, assisting only 23,000 homebuyers for approximately $285 million.
