Government Programs For First-Time Homebuyers

The government of Canada offers a variety of grants and special programs to help ease the financial strain, as a way to encourage more Canadians to take the leap into home ownership.

In this article, you’ll find an overview of the programs available in Ontario, including a description of each, whom it’s for, and how to apply. We are here  to help you make sense of the resources available to first-time home buyers.

1. Home Buyers' Plan (HBP) 

2. The Home Buyers’ Tax Credit (HBTC)

3. Land Transfer Tax Rebate

4. First-Time Home Buyer Insentive (New)

Home Buyers Plan (HBP)

The Home Buyers' Plan (HBP) is a program that allows you to withdraw from your registered retirement savings plans (RRSPs) to buy a home. First-time home buyers purchasing a home jointly with a spouse or partner can each withdraw up to $35,000 from their own RRSP under the HBP, for a total down payment of $70,000. Amounts withdrawn under the HBP must be repaid to your RRSP over a 15-year period.

The general rule is that you must repay the amount you withdrew in equal annual instalments over 15 years. The first instalment is due the second calendar year following the year in which you withdrew the money but can be made up to 60 days after that year-end. Repayments are not tax-deductible as an RRSP contribution nor do they affect your RRSP room.

Tax credits for first-time home buyers

To assist first-time home buyers with the costs associated with the purchase of a home, including legal fees, disbursements and land transfer taxes, the Government of Canada introduced a tax credit for first-time home buyers in 2009. The First-Time Home buyers Tax Credit (HBTC) is a non-refundable tax credit that reduces the amount of taxes you owe. If you’ve taken a leap into the real estate market, you may be able to claim up to $5,000 on your taxes. If you buy a property with friends, your spouse or anyone else, you can all potentially claim the credit as long as everyone qualifies — but the total claim amount can’t exceed $5,000 for one property.

Land Transfer Tax Rebate

When you buy land or an interest in land in Ontario, you pay land transfer tax. First-time home buyers of an eligible home may be eligible for a refund of all or part of the tax. In Ontario there is a rebate available to help first-time home buyers offset the cost of their land transfer tax. There is also a land transfer tax rebate available for first-time home buyers in the city of Toronto.

To claim a refund, you must be at least 18 years of age, you cannot have owned a home or an interest in a home anywhere in the world, and your spouse cannot have owned a home or interest in a home, anywhere in the world while he or she was your spouse. Previous ownership in a home means you do not qualify for the land transfer tax first-time home buyers refund. The method of acquiring the home (e.g., purchase, gift or through an inheritance) is not relevant.

Consult with your real estate lawyer regarding the maximum amount you can claim.

First-Time Home Buyer Incentive

The First-Time Home Buyer Incentive helps first-time home buyers without adding to their financial burdens. Eligible first-time home buyers who have the minimum down payment for an insured mortgage can apply to finance a portion of their home purchase through a shared equity mortgage with the Government of Canada.

It offers:

• 5% or 10% for a first-time buyer’s purchase of a newly constructed home
• 5% for a first-time buyer’s purchase of a resale (existing) home
• 5% for a first-time buyer’s purchase of a new or resale mobile/manufactured home

The Incentive’s shared-equity mortgage is one where the government has a shared investment in the home. The incentive is registered as a second mortgage on the home, and the borrower does not incur any additional interest on this incentive. It must be paid back in full when either the home is sold or after 25 years, whichever is first.

It works like this:

• You receive a 5% incentive of the home’s purchase price of $200,000, or $10,000. If your home value increases to $300,000 your payback would be 5% of the current value or $15,000. 
• You receive a 10% incentive of the home’s purchase price of $200,000, or $20,000 and your home value decreases to $150,000, your repayment value will be 10% of the current value or $15,000. 

Just as the name implies, this incentive is for first-time home buyers. You’re considered a first-time home buyer if:

• you have never purchased a home before
• you did not occupy a home that you or your current spouse or common-law partner owned in the last 4 years (the 4-year period begins on January 1 of the fourth year before the Incentive is funded and ends 31 days before the date the Incentive is funded)
• you have recently experienced the breakdown of a marriage or common-law partnership (even if you don’t meet the other first-time home buyer requirements)

The home buyer will have to repay the Incentive based on the property’s fair market value at the time of repayment. If a home buyer received a 5% Incentive, they would repay 5% of the home’s value at repayment. If a home buyer received a 10% Incentive, they would repay 10% of the home’s value at repayment.

The home buyer must repay the Incentive after 25 years, or when the property is sold, whichever comes first. The home buyer can also repay the Incentive in full any time before, without a pre-payment penalty.