When it comes to taking advantage of programs designed to help first-time buyers, even a little bit of help can go a long way, especially if you’re looking to buy in some of Canada’s priciest cities.
As of January 2025, the average property price in Canada can rise as high as $734,200 this year and is only expected to increase over the next 2 years. This figure can often be much higher in hot markets such as Toronto and Vancouver. The steep price of buying a home makes it even more important for first-time homebuyers to take advantage of tax credits, first-time buyer grants, rebates and incentives that can help offset the cost of purchasing a property.
If you’re thinking of buying your first home, the good news is there are several programs that can help you realize your dream of stepping onto the property ladder.
Federal programs
The Government of Canada offers 3 programs to help first-time homebuyers: the First-Time Home Buyers' Tax Credit, the Home Buyers’ Plan (HBP) and the First Home Savings Account (FHSA).
First-Time Home Buyers Tax Credit (HBTC)
With its amount doubled in 2022, the HBTC allows eligible first-time buyers to claim a $10,000 credit on their tax return, amounting to a tax rebate of $1,500. This sum can be used to cover things like legal fees or moving or closing costs.
You could be eligible if you and your partner bought a home that meets the government’s criteria. An important requirement is that you must not have lived in another home that you’ve owned for any of the 4 years before you bought this one. An exception to this requirement would apply if you are a person with a disability.
The Home Buyer’s Plan (HBP)
First-time buyers may also qualify for the HBP, a government program that allows you to withdraw money from your RRSP to buy or build a home.
This home can be for yourself or a related person with a disability, and you must meet the government’s criteria to qualify. If you’re eligible, you can borrow up to to $60,000 interest-free from your RRSP. This is per person – so if you’re buying with a partner, you could be eligible to use $120,000 to finance your home as a couple.
Unlike other early withdrawals from your RRSP, the HBP isn’t considered taxable income as long as you re-invest it within 15 years. Any amount not repaid will be treated as taxable income for that year.
First Home Savings Account (FHSA)
A First Home Savings Account (FHSA, also sometimes known as a Tax-Free First Home Savings Account) is a savings account from the federal government that became available for Canadians in 2023. It allows Canadians to save money for their first home purchase, providing tax benefits and other incentives to help them afford a home.
Participants have up to $8,000 of contribution room per year. The lifetime limit they can contribute is $40,000.
FHSAs are typically designed to be flexible, easy to use, and tax-free with features like automated transfers from your regular chequing account and the ability to easily track your progress toward your goal.
They work much like a registered retirement savings plan (RRSP) or tax-free savings account (TFSA) because they combine the features of both.
Provincial programs
Added to the Canadian government programs, many provinces offer plans to help first-time homebuyers. For example, Saskatchewan's First Time Homebuyer’s Credit provides a non-refundable tax credit of up to $1,050, while Québec offers a tax credit of up to $750 on qualifying homes. The 4-year rule also applies to these programs.
There are a few other options that vary by province that can help first-time buyers.
GST/HST New Housing Rebate (NHR)
If you’re buying a newly-built home or an existing property that has been "substantially renovated," you could apply to claim an HST/GST tax rebate.
This could apply if you’re purchasing a home directly from the builder or custom building your own property, for example. While the details vary from province to province, you could qualify for a rebate of the provincial tax (HST) or the federal tax (GST) that you paid on the purchase price. The maximum rebate you could qualify for is $6,300.
It’s worth noting that this rebate is open to all homebuyers, not just those buying for the first time. However, if your first property falls under an eligible category, you may be able to combine this rebate with other GST/HST rebate programs being proposed exclusively for first-time buyers to maximize your savings.
Land Transfer Tax Rebate (LTTR)
In most provinces and cities, you’ll need to pay land transfer tax when you buy a property.
The amount of tax you’ll pay is a percentage that is calculated depending on how much you paid for your home, which can amount to several thousands of dollars in closing costs. Land transfer tax is an upfront payment that can’t be factored into your mortgage, so it’s important to consider how this lump sum will impact the final cost of your property.
However, you may get some or all of this money back, as most provinces offer a partial or full tax rebate to help first-time buyers offset this cost.
Municipal programs
On top of what’s available at the federal and provincial levels, help may also be available through your municipality. This can be especially useful when buying in markets with property prices that are higher than the national average. For example, in Toronto, buyers can receive up to an additional $4,475 land transfer tax rebate.
You may also keep an eye out for things like affordable homeownership programs. These are not specific to first-time buyers, but they can help buyers with a lower household income, or in some cases help people buy homes up to a maximum purchase price. In Ontario, municipalities like Waterloo, Windsor, Simcoe, and many others have specific programs available, often through the Shared Equity Homeownership program | PDF 351 kb.
Other things to consider if you’re a first-time buyer
Along with knowing what incentives or rebates you might qualify for, it’s good to have a wider picture of what you can afford – including those additional closing costs such as land transfer tax.
Calculate your down payment
To start, you’ll need to determine how much you can put towards the cost of the house upfront, known as a down payment. This needs to be a minimum of 5% of the property price, but can range all the way up to 20% for more expensive homes. If you’re a first-time buyer, you won’t have money from the sale of a previous home to put towards this, so your down payment will likely come from your own savings.
Get pre-approved
It’s also a good idea to get pre-approved for a mortgage before starting the hunt for a home. As of 2018, all homebuyers must undergo a mortgage stress test, which is designed to prove to your lender that you can still make your monthly payments even if interest rates go up. As of June 2021, this means your monthly payments will be tested at the actual rate of borrowing, as well as an inflated “stress test” rate. Your inflated stress test rate is the higher of 5.25% or the interest rate you negotiate with your lender plus 2%.
You can run your own stress test using a calculator online, or by working out what your monthly payments would be at the stress test rate to make sure it is still within your budget.
Expect the unexpected
Finally, expect the unexpected when it comes to house hunting, especially in hotter markets where you might have to face a bidding war when trying to land your dream home. Working with an experienced realtor, doing plenty of research and being prepared to be patient can all help when it comes to making an offer.
Buying your first home can be an exciting experience, but it doesn’t have to be stressful. With some advance planning, you can find out which first-time homebuyer programs and incentives might help with the financial side of owning your first home.