First-Time Home Buyers Programs

Purchasing your first home is an exciting milestone in life. While rewarding, it also requires financial planning to save up for essential costs like the down payment and navigate complicated mortgage financing, legal processes, and closing fees. The good news is that several helpful federal and provincial government incentives and programs are available to assist first-time home buyers in Canada.

This comprehensive guide will explain all the key steps and resources you need to fully take advantage of these benefits and make buying your home more affordable in 2024.

Do you Qualify as a First-Time Home buyer in Canada?

The first step is ensuring you meet the eligibility criteria to be considered a first-time home buyer and access the various programs. These commonly include:

• Not owning a home as the sole or joint owner in the last four years. Exceptions often apply in cases like divorce, separation, or assisting a disabled relative with a purchase.
• Being a Canadian citizen or permanent resident over the age of 18.
• Purchasing a home located in Canada that you intend to occupy as your primary residence within a defined timeframe after buying it.
• Documentation confirming you purchased a qualifying home, such as a purchase agreement or land title certificate.

For example, Mark (age 28) and his fiancée (age 26) would likely qualify based on being Canadian citizens who have never owned a home before. However, Juanita (age 33) may not qualify because she co-owned a home with her ex-husband that they sold in late 2021 after divorcing.

Before applying, always confirm that you meet the eligibility criteria for any first-time home buyer program. Your advisor can help verify this.

What are the Programs for First-time Home Buyers in Canada?

The federal government offers several programs aimed at assisting first-time home buyers:

First Home Savings Account (FHSA)

This tax-free account launched in 2023 combines features of a Register Retirement Savings Plan (RRSP) and Tax-Free Savings Account (TFSA) but is designed specifically for saving for a first home.

You can contribute up to $8,000 annually, with unused room carried forward yearly. The lifetime contribution limit is $40,000. The account is offered at most banks and credit unions to encourage uptake.

For example, Priyanka has contributed $10,000 to her FHSA over the past two years. She still has $18,000 left to continue contributing annually until she hits the lifetime maximum.

Home Buyers’ Plan (HBP)

This program allows you to withdraw up to $60,000 tax-free from your RRSP toward your first home purchase.

You must repay the funds to your RRSP within 15 years to avoid paying tax on the withdrawal amount.

Your RRSP must be open for at least 90 days before withdrawing under the HBP program.

The HBP withdrawal limit and repayment window were increased in recent federal budgets.

For example, Lee could withdraw $50,000 tax-free from his RRSP, which he’d contributed for ten years, toward his first home. He has 15 years to repay this amount in his RRSP account.

Combining the FHSA and HBP gives first-time buyers a significant advantage in quickly and tax-efficiently saving for their down payment.

First-Time Home Buyer’s Tax Credit

This $1,500 non-refundable tax credit is claimed when filing your income tax return for the year you purchased your first home. It helps cover closing costs like legal fees, inspections, and title insurance.

For example, when Anu and Josh file their 2024 tax return in early 2025 after purchasing their first home, they can each claim the $1,500 tax credit for a total of $3,000.

GST/HST New Housing Rebate

This program provides a partial rebate on GST/HST when purchasing newly built or substantially renovated homes.

You can apply for the rebate after closing by submitting documentation to the Canada Revenue Agency. The rebate is offered to all Canadians, not just first-time home buyers.

For example, the 5% GST paid on James’ $400,000 newly constructed home would equal $20,000. After closing, he would be eligible to receive a partial rebate on this amount by applying through the CRA.

Land Transfer Tax Rebates

First-time buyers are offered partial rebates on provincial land transfer taxes in BC, Ontario, Toronto, and Prince Edward Island (PEI).

Depending on location, the maximum rebates range from $2,000 in PEI to $8,000 in BC. [Source]

For example, a first-time buyer in Ontario purchasing a $650,000 home would qualify for the maximum $4,000 provincial land transfer tax rebate.

Provincial Credits and Grants

Some provinces, such as BC, PEI, Quebec, and Saskatchewan, offer additional first-time buyer tax credits of up to $750.

First-time buyer grants are also offered in provinces like Alberta, New Brunswick, Nova Scotia and Nunavut. [Source]

For instance, the New Brunswick First-Time Home Buyers’ Program provides qualifying first-time buyers with up to $2,000 in financial assistance.

First-Time Home Buyer Incentive (Discontinued)

The First-Time Home Buyer Incentive was a shared equity program launched by the Canadian government in 2019 to help make homeownership more affordable for qualifying first-time buyers.

However, as of March 31, 2024, the program no longer accepts new applications. The application deadline was March 21, 2024. No new approvals will be granted after March 31, 2024. [Source]

For those who already had their First-Time Home Buyer Incentive application approved before March 2024, the program will continue to be administered, and the incentive will still need to be repaid based on the original terms.

The First-Time Home Buyer Incentive provided 5% or 10% of a home’s purchase price towards the buyer’s down payment. This incentive reduced the required mortgage amount and lowered monthly payments.

While the First-Time Home Buyer Incentive is no longer available for new applicants, other down payment programs and government incentives mentioned may still benefit first-time buyers.

Knowing your tax obligations

Principal Tax Exemption

• Allows capital gains tax exemption when selling a primary residence in Canada. This represents one of the most significant tax benefits for Canadian homeowners.
• To qualify, you must report and designate the home as your principal residence for each year you wish to claim the exemption. This is done when filing your taxes.
• The exemption can only be claimed by Canadian residents.

Residential Property Flipping Rule

• Residential property owners must own a home for at least 366 days before selling it to qualify for the total capital gains exemption as a principal residence.
• This was introduced in 2022 to discourage short-term property speculation and “flipping”.
• Capital gains on homes owned less than 366 days must be reported as taxable income.

Accommodation sharing

• Income from renting a home or rooms for short-term stays (like through Airbnb) must be reported annually and considered taxable.
• The rental income may be classified as business income if significant services are provided along with the accommodation.
• Expenses associated with the rental can be deducted against the income.

Tax Incentives for Canadian Homeowners

In addition to programs and credits explicitly aimed at first-time home buyers, the federal government also offers some other helpful tax incentives that all Canadian homeowners can utilize:

Home Accessibility Tax Credit (HATC)

The Home Accessibility Tax Credit (HATC) provides federal tax relief on expenses related to certain home renovations or alterations that improve accessibility for seniors and persons with disabilities.

For the 2022 and subsequent tax years, the federal government has increased the maximum eligible renovation expense amount of the HATC to $20,000 per year, which provides the maximum non-refundable tax of $3,000 annually. All other existing eligibility criteria and rules for the HATC remain unchanged. [Source]

To qualify, renovations must be made to an eligible dwelling occupied by a qualifying senior or person with a disability. Eligible renovations include structural changes for wheelchair access, walk-in bathtubs, grab bars, stair lifts, and renovations to bathrooms, bedrooms, and entryways.
Check with your tax advisor or the CRA to ensure renovations qualify and to claim the maximum HATC amount.

Multigenerational Home Renovation Tax Credit (MHRTC)

MHRTC is a new refundable tax credit that can be claimed on your 2023 Income Tax and Benefit Return, which offers a 15% tax credit on up to $50,000 in expenditures to construct a secondary suite in your home for a senior or adult child to live in.

Getting Additional First-Time Home Buyer Assistance

Besides government programs, connect with:

• Mortgage brokers – Can explain financing options and assist with getting approved.
• Bank advisors – Understand all mortgage products/incentives offered by their institution.
• Real estate lawyers – Guide legal documents and identify costs/incentives available to clients.
• Down payment assistance – If eligible, we can provide down payment gifts or loans based on income, profession, or other criteria.
• Deposit guarantees – Alternative to cash deposit to include with an offer. Provides deposit guarantee document instead.

Seek knowledgeable advisors to help ensure you maximize benefits and choose the right mortgage and home for your needs and budget.

At Best Mortgage Online, our advisors are standing by to help you navigate the first-time home-buying journey and take advantage of all the incentives available. Contact us to start and make your first home a reality this year!

FAQs

Article Sources

1. 2024 Canada First-Time Home Buyer’s Guide – Programs & Incentives – ratehub.ca
2. First-Time Home Buyer Guide – nerdwallet.com
3. First-time home buyer programs – bmo.com