Your guide to first-time home buyer incentives in Canada

While your new home will probably be one of your largest purchases in your life, it doesn’t have to feel daunting–or financially overwhelming. Thanks to various government first-time home buyer incentives and programs, you just might qualify to save on some of your costs and afford the home of your dreams. 

What are the first-time home buyer incentives offered in Canada? 

Is this home your first purchase, ever? If so, you might just qualify for some of these first-time home buyer perks.

1. The CMHC First-time Buyer Incentive Program (FTHBI)‍

Get a part of your down payment for your home

With this incentive, the Canada Mortgage and Housing Corporation (CMHC) will help contribute a part of the down payment for your home. This contribution will be interest-free, and while this might seem too good to be true, there is a catch: they share in the home’s equity if and when you eventually sell. That means, you still need to repay 5% to 10% of your home’s value–whether it’s gone up or down–upon selling. 

If the home you’re looking at is an existing home, the CMHC will give you up to 5%, whereas if you’re looking for new construction houses or condos, they’ll provide up to 10%. 

To qualify for this first-time home buyer incentive:

• You’ve never bought a home before this one
• Your marriage or common-law partnership has ended
• You did not occupy a home that you or your current spouse or common-law partner owned, in the last four years
• You have a maximum salary of $120,000–but a maximum salary of $150,000 if you live in Toronto, Vancouver, or Victoria
• The mortgage (including the CMHC contribution) has to be $480,000 or lessYou must qualify for a mortgage and offer a minimum 5% down payment (not including the CMHC offering)

2. First Time Home Buyer Tax Credit (HBTC)

Get a tax credit for a first-time home purchase

To help off-set the amount of expenses first-time home buyers deal with when it comes to closing on their homes–think lawyer feels, land transfer taxes, appraisal costs, etc.–the Canadian government created the First-Time Home Buyers Tax Credit. 

With this credit, first-time home buyers can receive a non-refundable income tax credit of $10,000 which results in up to $1,500 in federal tax relief. 

How do you qualify for this tax credit? 

• You must live in the home and use it as your principal residence (and not be renting it out) 
• In the past four years, you haven’t lived in a home owned by you or your spouse
• If buying a home with a spouse, friend, or family member, they must also be a first-time home buyer

3. Canada Mortgage and Housing Corporation (CMHC) Insurance

Get the option to offer a lower down payment

If your property will cost less than $1 million and if you’d prefer to own sooner than later, you don’t have to wait to save the 20% down payment. Through the CMHC, buyers can qualify for mortgage loan insurance even with as little as a 5% down payment. 

But, note, while that means you don’t need to offer up a larger sum of money, you will see an increase in your monthly payments thanks to mortgage insurance premiums. 

4. The Home Buyers’ Plan (HBP)

Pull some money from your RRSP

Despite the fact most Canadians use their registered retirement savings plans (RRSPs), for–as the name suggests–retirement, there is one other time you can pull money, tax-free. 

The Home Buyers’ Plan (HBP) is a program offered through Canada’s federal government that allows first-time home buyers to pull up to $35,000 from their RRSPs to buy or build a qualifying home. 

While the withdrawn money is not taxed as income,  you do have to pay it back. Starting two years after the initial withdrawal, you’ll have 15 years to return the money into your account. 

Some important things to know when it comes to the HBP:

• You need to live in the home you’re purchasing, and not rent it out
• You can withdraw from your RRSP up to 30 days after buying the home
• If you pull the money before closing on your home, you must own or build the home by October 1st of the following year

5. Land Transfer Tax Refunds for First-Time Home Buyers

Get a rebate on this closing cost 

On top of your mortgage payments, you’ll also have to remember you’ll pay a land transfer tax when you take possession of the property. But while that may make your closing cost a little high, some provinces, like Ontario, offer first-time home buyer incentives.

In Ontario, that incentive comes in the form of a refund on the land transfer tax, up to a maximum of $4,000.

However, a few things to keep in mind in regards to this perk: 

• To qualify, you must have never previously owned a home or property 
• If the person you’re buying the home with is not a first-time home buyer, the amount of the refund will be reduced 

And, because cities like Toronto also implement a Municipal Land Transfer Tax, they also offer first-time home buyers an additional rebate that maxes out at $4,475. 

Want help considering all your options? Get in touch with one of our mortgage experts to help you kickstart your home-buying journey.