First-Time Homebuyer Incentives in Canada

Buying your first home is an exciting milestone, but saving for a down payment and managing closing costs can feel overwhelming. The good news is that there are several federal, provincial, and municipal programs that may help eligible first-time homebuyers in Canada.

Understanding these incentives early can help you build a stronger home-buying plan, reduce upfront costs, and make better use of your savings.

1. First Home Savings Account (FHSA)

The First Home Savings Account, commonly known as an FHSA, is one of the most valuable savings tools available to eligible first-time homebuyers in Canada.

An FHSA allows eligible Canadians to contribute up to $8,000 per year, with a lifetime contribution limit of $40,000. Contributions may be tax deductible, and qualifying withdrawals used to purchase a first home can be tax-free.

This provides a powerful combination of benefits: you may receive a tax deduction when contributing and avoid tax when withdrawing funds for a qualifying home purchase.

To open an FHSA, you must generally be a Canadian resident, at least 18 years old, and meet the first-time homebuyer requirements. Unused annual contribution room may carry forward, subject to program rules.

2. Home Buyers’ Plan (HBP)

The Home Buyers’ Plan allows eligible first-time homebuyers to withdraw funds from their Registered Retirement Savings Plan to purchase or build a qualifying home.

Eligible buyers may withdraw up to $60,000 from their RRSP under the HBP. If buying with a spouse or partner who also qualifies, you may be able to withdraw up to $120,000 combined.

The funds must generally be repaid to your RRSP over a 15-year period. If required repayments are not made, the missed amount may be added to your taxable income for that year.

The HBP can be used together with an FHSA, allowing eligible buyers to combine multiple savings strategies for a larger down payment.

3. First-Time Home Buyers’ Tax Credit

The First-Time Home Buyers’ Tax Credit is a federal non-refundable tax credit that may help eligible buyers recover a portion of their purchase costs.

Eligible first-time buyers may claim up to $10,000, which can result in a federal tax credit of up to $1,500.

The credit may also be available to certain buyers with disabilities, even if they are not purchasing their first home, where the home is intended to improve accessibility or mobility.

4. Land Transfer Tax Rebates

Land transfer tax can be a significant closing cost, especially in Ontario and other provinces where it applies.

Eligible first-time homebuyers in Ontario may qualify for a provincial land transfer tax rebate of up to $4,000. If purchasing a home in the City of Toronto, eligible buyers may also qualify for a municipal land transfer tax rebate of up to $4,475.

Depending on the purchase price and eligibility, these rebates can reduce or eliminate a portion of the land transfer tax payable at closing.

5. GST/HST New Housing Rebate

If you are purchasing or building a new home, you may qualify for a GST/HST New Housing Rebate, depending on the purchase price, property type, and occupancy requirements.

The rebate may apply to certain newly constructed homes, substantially renovated homes, or owner-built homes. The rules can be complex, and eligibility depends on the details of the purchase.

Your lawyer, builder, accountant, or tax professional can help confirm whether a rebate may be available.

6. First-Time Home Buyer GST Rebate for New Homes

The federal government has proposed a new GST rebate for first-time homebuyers purchasing new homes. Under the proposal, eligible buyers may receive relief from GST on qualifying newly built homes up to certain purchase-price thresholds.

Because this program is subject to legislation, eligibility requirements and effective dates may change. Buyers considering a new construction purchase should confirm the current rules with their lawyer, builder, accountant, or mortgage professional before relying on the incentive.

7. Provincial and Municipal Programs

Some provinces and municipalities offer additional programs that may help first-time homebuyers. These may include land transfer tax rebates, down payment assistance, shared-equity programs, or affordable housing initiatives.

Programs vary by location and may have income limits, purchase-price limits, residency requirements, or application deadlines.

For example, buyers in Ontario may benefit from the provincial land transfer tax rebate, while buyers in Toronto may have access to both provincial and municipal rebates.

Before making an offer, check whether there are programs available in the city or province where you plan to purchase.

8. RRSP and FHSA Planning Can Make a Big Difference

Many first-time buyers focus only on saving a down payment in a regular savings account. However, using an FHSA and RRSP strategically may provide tax advantages that help your savings grow faster.

For example, an FHSA contribution may reduce your taxable income, while an RRSP contribution may also create a tax deduction. If you qualify for the Home Buyers’ Plan, RRSP funds may later be used toward your home purchase.

The right strategy depends on your income, tax situation, timeline, and savings goals. Speaking with an accountant or financial advisor can help you decide how to structure your contributions.

Do Not Forget About Other Down Payment Options

In addition to government programs, first-time buyers may have other down payment options available.

Depending on the lender and mortgage insurer requirements, your down payment may come from:

• Personal savings

• An FHSA

• An RRSP withdrawal through the Home Buyers’ Plan

• A non-repayable gift from an immediate family member

• Proceeds from investments

• Certain employer or relocation programs

Your mortgage professional can help you understand acceptable down payment sources and the documentation required by lenders.

Plan for Closing Costs

First-time homebuyer incentives can help, but buyers should still budget for closing costs. These may include legal fees, home inspection costs, title insurance, appraisal fees, moving expenses, property tax adjustments, condominium fee adjustments, and land transfer tax not covered by rebates.

A good rule of thumb is to set aside approximately 1.5% to 4% of the purchase price for closing costs, depending on the property and location.

Speak With a Mortgage Professional Before You Start Shopping

The best time to explore first-time homebuyer incentives is before you begin house hunting. A mortgage professional can help you review your qualification, down payment options, estimated closing costs, and mortgage products available to you.

They can also help you understand how an FHSA, RRSP withdrawal, gifted down payment, or land transfer tax rebate may fit into your overall purchase plan.

Buying your first home is not just about saving a down payment—it is about using every available tool to make your purchase more affordable and financially sustainable.