As a first-time homebuyer it can feel a bit trepidatious embarking on your first homebuying journey, however that hasn’t stopped thousands of Canadians from successfully becoming new homeowners through the support of key government assistance programs.
While the average price of homes in Ontario has been elevated, many experts forecast price growth to decelerate into 2023.1 In combination with key first time homebuyer programs, that means buying a new home could get a bit easier.
There are several new programs and financial incentives available to first time homebuyer that can be leveraged to help make affording your new Canadian home much easier. Nevertheless, each program has its own separate set of eligibility criteria, so it’s important to know the programs that might work well for you and which to avoid.
Here’s a quick review of some of the most useful first-time homebuyer government assistance programs that you should consider utilizing if you are still considering making the leap to homeowner status.
1. First Time Home Buyer Incentive (FTHBI)
One of the biggest barriers to homeownership for many first-time homebuyers is saving up for a down payment. According to recent data from the National Bank of Canada, it can take and average of anywhere between 7 to 17 years for the average homebuyer to save for a typical down payment, depending on where you choose to plant roots.2
The First-Time Homebuyer Incentive (FTHBI) program makes it easier for first time homebuyers to afford buying a new home by providing a financial incentive, between 5-10% of the property’s purchase price, as a benefit on top of any down payment you have already saved and utilize toward your purchase.
The FTHBI is an equity sharing program, meaning it leverages future appreciation in the home. Either after 25 years or when you go to sell your home, you will have to repay between 5-10% of the property’s market value at the time of repayment.
Certain floors and ceilings do apply to the amount needing to be repaid and consumers must meet specific eligibility criteria to qualify for the FTHBI program. For example, your total qualifying income cannot exceed $150,000 in areas like Toronto and Vancouver.
Additionally, this program is specifically reserved for first-time homebuyers and your down payment must come from allowable sources, such as savings, RRSP, or gift from a family member.
Learn More: https://www.placetocallhome.ca/fthbi/first-time-homebuyer-incentive
2. Home Buyer’s Plan (HBP)
It’s common for your financial goals to change over the course of your life. In fact, the financial goals you prioritize now may not be the same as those goals for your future self.
Nevertheless, the Home Buyer’s Plan (HBP) program give first time homebuyers the option to prioritize homeownership today by enabling you to fund the purchase of a new home using up to $35,000 from an owned, eligible registered retirement savings plan (RRSP).
Tapping into your existing savings that’s been earmarked for retirement can be extremely powerful and it can be done on a tax-free basis as to help fund your down payment on a new primary residence.
One main caveat with this plan is that you need to be a resident of Canada when you take your distribution up until when the purchase or build has been completed. Additionally, you must repay your RRSP within a 15-year repayment window.
While there are some limitations with this plan, keep in mind that it can also be combined with other first time homebuyer assistance programs to maximize your total buying potential.
Learn More: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/what-home-buyers-plan/participate-home-buyers-plan.html
3. First Home Savings Account (FHSA)
An often-overlooked government-sponsored assistance program for first-time buyers is the new First Home Savings Account (FHSA) program. This program was first introduced back in 2022 and was designed with the goal of empowering first-time homebuyers to save for a new home purchase.
The FHSA program allows first-time homebuyers to save up to $8,000 annually, with a $40,000 lifetime contribution limit, on a tax-free basis. Contributions are tax deductible and withdrawals, when used to purchase a first home, would be non-taxable.
Another great perk to opening a FHSA is that any funds in the account that do not go towards the purchase of a qualifying property can be transferred into a RRSP or RRIF tax-free. If they are not transferred in this way, they could be subject to tax basis. Eligible new buyers can open a new FHSA on or after April 1, 2023.
Learn More: https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/first-home-savings-account.html
4. Land Transfer Tax Refunds for First Time Homebuyers
Despite elevated home prices, there are still a few ways to save money if you are a first-time homebuyer. In fact, there are several rebate and land transfer tax refund programs to incentivize new homeownership.
The first program is Ontario’s Land Transfer Tax Refund, which allows qualifying first-time homebuyers to recoup a portion of the provincial land transfer tax you are required to pay as part of your overall closing costs.
You could potentially get back up to $4,000, depending on the value of your home, so long as you are at least 18 years old, are a Canadian citizen (or permanent resident), and occupy the property as your primary home within 9 months of registering it into your name.
Additionally, if you are a first-time homebuyer in Toronto, you can potentially take advantage of its First Time Purchaser Rebate incentive that has the same qualifying requirements as the provincial program, but with a higher maximum of up to $4,475. If you’re smart, you can even stack these two programs to recoup even more money, for a combine benefit of up to $8,475.
Learn More: https://www.ontario.ca/document/land-transfer-tax/land-transfer-tax-refunds-first-time-homebuyers OR https://www.toronto.ca/services-payments/property-taxes-utilities/municipal-land-transfer-tax-mltt/municipal-land-transfer-tax-mltt-rebate-opportunities/
5. Habitat For Humanity GTA Programs
If you’re finding it difficult to make the transition from renting to owning the Greater Toronto Area (GTA), consider applying for housing through one of many Habitat for Humanity housing programs.
For years Habitat for Humanity has helped residents of the Greater Toronto Area find safe and affordable places to live. While its not technically a government-sponsored organization, Habitat for Humanity continues to help build multi-unit buildings across GTA.
The result is that it can leverage housing resources to give low- and moderate-income, first-time buyers access to purchase properties, such as condominiums and townhomes, at affordable price points.
While you do have to meet certain income eligibility requirements, this organization may be a great resource to consider when buying your first primary residence. Overall, Habitat for Humanity of GTA has helped over 500 families through its affordable homeownership programs.
Learn More: https://habitatgta.ca/
1 Global Property Guide. (n.d.). Canada Residential Real Estate Market Analysis 2023. https://www.globalpropertyguide.com/North-America/Canada/Price-History
2 Galea, I. (2022, July 27). It’s taking Canadians years longer to save for a down payment, data show. The Globe and Mail. https://www.theglobeandmail.com/business/article-saving-down-payment-real-estate/