Buying a home will likely be one of the largest expenses in your lifetime. To help, the Canadian government offers several programs for new home buyers, including tax relief in the form of the Home Buyers’ Amount and First Home Savings Account and help with your downpayment through the First-Time Home Buyer Incentive and the Home Buyers’ Plan.
And depending where you live, you may also qualify for additional first time home buyers’ rebates and tax credits as well.
Taking advantage of these programs can offer huge relief to first time home buyers and their bank accounts.
Let’s take a look at each of these programs in more detail so you’re familiar with your options.
Key Takeaways
- Federal and provincial incentives, tax credits, and programs are available for first time home buyers.
- The Home Buyers' Amount is a non-refundable tax credit of up to $1,500.
- Opening a First Home Savings Account allows you to save money tax-free for your first home purchase.
- The Home Buyers’ Plan and First-Time Home Buyer Incentive can help with the cost of your down payment.
4 best federal Canadian programs for first time home buyers
There are a surprising number of programs for first time home buyers, most with the intention of keeping things affordable.
Below is a brief listing of federal government programs in Canada available to assist first time home buyers.
| Program | Eligibility | Highlights |
|---|---|---|
| Home Buyers’ Amount Tax Credit | * You or your partner must have acquired a qualifying home * You haven’t lived in another home owned by you or your partner in the last 4 years | * New home buyers can claim up to $10,000 towards their purchase * Up to $1,500 of tax relief |
| Home Buyers’ Plan | * You haven’t lived in another home owned by you or your partner in the last 4 years | * Maximum of $35,000 withdrawn from RRSP * You have 15 years to pay back the amount to your RRSP * Repayments don’t affect your RRSP deduction limit |
| First-Time Home Buyer Incentive | * Income cannot exceed $120,000 in most areas * Income cannot exceed $150,000 in Toronto, Vancouver, and Victoria * The amount borrowed isn’t more than 4 times your income (most areas) * The amount borrowed isn’t more than 4.5 times your income (Toronto, Vancouver, Victoria) * You or partner are a first time home buyer * Canadian citizen, permanent resident, or authorized to work in Canada * Meet the minimum downpayment requirement through traditional means * You must live in your home, not use it as an investment property | * Receive 5% to 10% of the home’s purchase price for use as part of the downpayment * 5% or 10% for home of new construction * 5% for an existing home * 5% for mobile or manufactured homes (new and existing) |
| First Home Savings Account | * Canadian resident * 18 to 71 years old * Must be a first time home buyer | * $40,000 max savings, tax free * Withdrawals to purchase a first home are non-taxable * $8,000 annual contribution limit * Can hold mutual funds, securities, government and corporate bonds, GICs, and more |
Home Buyers’ Amount tax credit
This program, simply referred to as the Home Buyer’s Amount, is meant for first time buyers to get a break on their taxes during that first year of owning their home.
You won’t see this money until you file your taxes, and because it’s based on taxes paid, higher income earners see the biggest results – the maximum amount you can receive is $1,500.
To qualify, you or your partner cannot have owned another home, and your new home must be from the list of eligible options:
- single-family houses,
- semi-detached houses,
- townhouses,
- mobile homes,
- condominium units, and
- apartments in duplexes, triplexes, fourplexes, or apartment buildings.
If you own a home as part of a co-operative housing corp., you may still qualify for this program. However, if your share in the co-op only gives you the right to tenancy, then you don’t qualify for the credit.
Because this is a tax credit, you won’t see this rebate until you file your taxes in the spring. So, depending on when you purchased it, you could be waiting 11 months for this to come in.
Home Buyers’ Plan
The Home Buyers’ Plan (HBP) is a very popular plan among Canadians as it helps with the down payment for first time home buyers.
The premise behind the HBP is to use cash already saved within your RRSP. Instead of waiting to use these investments in retirement, you can use part of the funds as a downpayment on your first home. It’s interest free (since essentially you’re borrowing it from yourself), but you must repay the money back to your RRSP within 15 years of taking it out. There’s also a minimum amount you’ll need to repay each year.
The maximum amount you can use is $35,000 of your RRSP to fund the purchase of a home.
It’s a unique program but how much it will help you really depends on your income level and how well you save for your retirement. Taking advantage of the HBP won’t impact your future contributions to your RRSP, nor will it reduce the amount of money you can shelter in your RRSP beyond the usual limits.
The other important detail is that you must be purchasing a qualifying home in Canada – you can see the list of qualifying homes above.
First-Time Home Buyer Incentive
The First-Time Home Buyer Incentive is essentially a government investment in your first home, an interest-free loan of 5% or 10% of the home’s purchase price – with a caveat that you can’t borrow more than 4 times your annual income.
The idea behind this incentive is to make purchasing a first home more affordable by relieving some of the stress of the down payment and in turn, lowering your monthly mortgage payment.
Applicants must have a qualifying annual income of under $120,000 and have not owned a home within the past 4 years. If you’re recently divorced or have separated from your common-law partner, you may still qualify.
Exceptions are made for people in more expensive housing markets such as Vancouver, Victoria, and Toronto. The annual income maximum is raised to $150,000 per year and the amount borrowing is no more than 4.5 times your annual income.
The incentive must be paid back in full once either of these milestones occur:
- it’s been 25 years since you bought the property,
- you sell the home,
- you and your partner (who you applied for the program with) split up,
- the mortgage is ported to another lender, and/or
- a partial release of security occurs (this is considered a sale).
First Home Savings Account
Starting April 1, 2023, folks who’ve never owned a home in Canada can save up to $8,000 each year in a tax-sheltered savings account, up to a lifetime maximum of $40,000. The First Home Savings Account (FHSA) is available to Canadians between the ages of 18 and 71 years of age, and the use of these funds must be for a primary residence and not a rental property.
It’s sort of an RRSP-meets-TFSA hybrid account, offering the best of both worlds. Not only are contributions tax-deductible as with an RRSP, any withdrawals are non-taxable, like an TFSA.
And just like a TFSA, it’s important not to over contribute to the plan. Over contributions are penalized with a 1% penalty each month.
If you plan to buy a home in the future, you should definitely open one of these bank accounts as soon as you’re able. Opening an FHSA sooner rather than later will allow you to begin accumulating contribution room. Plus, you’re limited to holding the account for only 15 years, although at that point you can simply transfer your funds to an RRSP.
Home insurance can add a significant amount to your monthly budget. Check out our tips for saving on home insurance here.
Provincial first time home buyers programs
There are also a few provincial programs to help first time home buyers. These can be combined with the federal programs, potentially leading to better affordability and a larger tax return.
Take a look at these provincial options.
| Program | Eligibility | Highlights |
|---|---|---|
| GST/HST New Housing Rebate | * You bought a brand new or substantially renovated home * You built a house on land you own or lease * You substantially renovated your current house * You built a major addition onto your house * You converted a non-residential property and turned it into your home * You purchased a share as part of a housing co-op | * Essentially a Federal Government program that offers some tax relief on large housing projects * Only applicable to primary residences, but a similar program exists for rental properties |
| Land Transfer Tax Rebate | * Ontario, Quebec, BC, and PEI all offer land transfer tax rebates of various levels * Only for first time home buyers | * Each of the qualifying provinces have various levels for this tax rebate |
| Saskatchewan First-Time Homebuyers’ Tax Credit | * Eligible taxpayers can claim up to $1,050 * You must occupy the home within a year of purchasing it | * Can be added to the federal home buyer’s tax credit * As with the federal tax credit, this can be shared with a spouse or partner |
| Quebec Home Buyers’ Tax Credit | * You bought your first home (in Quebec) within the last tax year * You bought a home intending it to be the main residence for a disabled relative (must meet accessibility requirements also) | * Maximum of $1,500 per qualifying home |
GST/HST New Housing Rebate
This GST/HST New Housing Rebate is for new builds and complete retrofits of existing residences. The idea is to provide tax relief when purchasing lumber and materials for a large renovation project.
It’s a fairly complicated process but your builder and accountant should be familiar with the process and be able to guide you along the way.
More detailed information can be found at GST/HST New Housing Rebate.
There’s also a tax rebate available for landlords who’ve recently purchased a new residential rental property. It’s for anyone who has:
- bought a new construction home from a builder, or one that’s been substantially renovated,
- built or hired someone to build a housing property or an addition to an existing housing property,
- significantly renovated or hired someone to renovate a housing property,
- converted a formerly non-residential property into a housing property, and/or
- entered into an agreement where you’re leasing or subleasing land to someone else.
For more information about this rebate, see the GST/HST New Residential Rental Property Rebate PDF.
Land Transfer Tax Rebate
Land transfer taxes are fees paid to either a provincial or municipal body for the purchase of a home. These taxes are usually based on the purchase price of the home, but vary between provinces and municipalities.
It turns out that Ontario, BC, and PEI all offer land transfer tax rebates, as do the cities of Toronto and Montreal. The details are as follows:
- Ontario: Receive a maximum rebate of $4,000 if your home is more than $368,000.
- BC: Receive a maximum rebate of $8,000 if your home is valued at a max of $500,000
- PEI: Receive a maximum rebate of $2,000 if your home is valued at a max of $200,000
- Toronto: Receive a maximum rebate of $4,475 if your home is valued at a max of $400,000
- Montreal: Between $5,000 – $7,000 for existing property.
The scope of these rebates can vary, so it’s important to speak with a lawyer or financial advisor if you live in one of these regions.
Saskatchewan First-Time Homebuyers’ Tax Credit
Eligible first time home buyers in Saskatchewan may be entitled to a non-refundable tax credit of $1,050, on top of the federal government’s tax credit. In fact, you have to be eligible for the federal Home Buyers’ Plan in order to qualify for this provincial credit.
Most of the eligibility requirements are the same as those for the federal program. It has to be your first home purchase and you and/or your partner have to move in within a year of buying it. It can also be a home you’ve purchased for a disabled relative to live in. This first property you’ve bought can be a variety of types, including semi-detached houses, townhouses, condos, etc.
It’s important to note that if you had help in purchasing your home via a loan through the Graduate Retention Program First Home Plan, you won’t be eligible for the Saskatchewan tax credit.
Quebec Home Buyers’ Tax Credit
Much like Saskatchewan, the province of Quebec offers a tax credit for first time home buyers, for a maximum amount of $1,500.
To be eligible, Quebec residents must have purchased their first home and intend for it to be their primary residence, or have bought a property for a disabled relative to use as their primary home. The home must be located in Quebec, but can take a variety of forms, as with the other tax credits we’ve mentioned.
The city of Montreal also provides assistance for first time home buyers. Those purchasing their first home may be entitled to a lump sum between $5,000 and $15,000 in financial assistance.
Eligibility criteria depend on the type of home you’ve bought and the number of children you have.
To find more information, visit Montreal’s Home Purchase Assistance Program.
It’s also noteworthy that this municipal program can’t be combined with other provincial or federal tax credits or assistance programs for first home buyers.
Are you a first time home buyer?
There are plenty of first time home buyers incentive programs available throughout Canada, including those offered by federal, provincial, and municipal governments.
Have you recently taken the plunge into the real estate market? Have you taken advantage of, or plan to take advantage of, any of these programs? Or are there any programs you know of that we’ve missed?
We love hearing from our readers, so feel free to leave comments in the section below.
FAQ
What program is best for first-time home buyers?
The best program for first time home buyers depends on your goals. If you want assistance with your down payment, the RRSP Home Buyers’ Plan or First-Time Home Buyers Incentive may be the best programs for you.
Is there a tax break for first time home buyers in Canada?
Yes. First time home buyers can apply for the Home Buyers’ Amount, which allows you to claim up to $10,000 and receive up to a $1,500 credit on your taxes. You can also get tax relief through a First Home Savings Account where contributions can be withdrawn tax free for a qualifying home.
Can I use a first time home buyer program twice in Canada?
Yes, it’s possible to qualify for new home buyer programs more than once if you meet the criteria. For example, you can use the Home Buyers’ Plan twice if you’ve previously paid back your withdrawals and you meet all the other qualifications, including being classified as a first time home buyer again.
Do first time home buyers pay land transfer tax?
Nearly all home buyers must pay a land transfer tax, whether it’s their first home or not. Alberta and Saskatchewan are the only provinces that don’t charge this tax. Some municipalities also charge a similar tax, so you may end up paying a land transfer tax to your city and province. However, certain provinces offer land transfer tax rebates.
What's the best FHSA in Canada?
With reasonable fees and both a robo advisor AND an online brokerage for DIY investing, the best FHSA in Canada is offered by Questrade. You can even purchase ETFs at no charge with Questrade – easy investments for your future home.
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