First-Time Home Buyer Incentives in Ontario: Save Thousands with These Programs

TL;DR: First-Time Home Buyer Incentives in Ontario

1. First Home Savings Account (FHSA) – Save up to $40,000 tax-free for your first home, with contributions reducing your taxable income.

2. Home Buyers’ Plan (HBP) – Withdraw up to $35,000 from your RRSP tax-free to use toward your home purchase.

3. Land Transfer Tax Refund – Get up to $4,000 back on your land transfer tax when buying your first home.

4. First-Time Home Buyers’ Tax Credit (HBTC) – Claim $10,000 for a $1,500 tax refund to help cover closing costs.

5. Stack Incentives for Maximum Savings – Combine these programs to reduce upfront costs and make homeownership more affordable.

   
   

What First-Time Home Buyer Incentives Are Available in Ontario?

Buying your first home is such an exciting milestone, but let’s be honest—it can also feel a bit overwhelming. Between saving for a down payment and figuring out all the extra costs, it’s easy to wonder if homeownership is even possible. The good news? There are some fantastic programs and incentives available for first-time buyers in Ontario that can make things a whole lot easier.

In this post, I’ll walk you through the best incentives for first-time homebuyers, how they work, and how you can use them to save money.

What Is the First Home Savings Account (FHSA) and Why Should You Open One?

If you’re saving for your first home, the First Home Savings Account (FHSA) should be your new best friend. It’s a newer program, and honestly, it’s one of the best ways to stash away cash for a down payment.

How Does the FHSA Work?

The FHSA is a bit of a mashup between a TFSA and an RRSP, giving you the best of both worlds. You can contribute up to $8,000 a year (to a lifetime maximum of $40,000), and your contributions are tax-deductible. That means you’re saving for your home and getting a break on your taxes. Win-win, right?

Plus, the money you save grows tax-free. You can invest it in stocks, bonds, or ETFs to help your savings grow even faster. And when you’re ready to buy your first home, you can withdraw the funds tax-free to use for your purchase.

How Can You Get the Most Out of an FHSA?

• Start ASAP: The earlier you open an FHSA, the faster you can build your savings.

• Invest smartly: Don’t just let the money sit there—invest it to maximize your returns.

• Pair it with other programs: The FHSA works beautifully alongside the Home Buyers’ Plan (HBP), which we’ll talk about next.

  
  

How Does the Home Buyers’ Plan (HBP) Help First-Time Buyers?

The Home Buyers’ Plan (HBP) is another way to help you boost your down payment. If you’ve been contributing to an RRSP, this program lets you borrow from it to buy your first home without paying taxes on the withdrawal.

What Are the Basics of the HBP?

• You can withdraw up to $35,000 from your RRSP tax-free.

• If you’re buying with a partner, you can both withdraw, giving you up to $70,000 combined.

• You’ll need to repay the amount you borrowed within 15 years, starting two years after your purchase.

What’s the Difference Between the HBP and FHSA?

Both programs are great, but they serve different purposes. The FHSA is about growing your savings tax-free, while the HBP lets you access funds you’ve already saved in your RRSP. The best part? You can use both together for maximum savings.

What Is the Land Transfer Tax Refund, and How Do You Get It?

If you’ve never heard of land transfer tax, let me fill you in: whenever you buy a home in Ontario, you have to pay a tax to the provincial government just to transfer the property into your name. For homes in the Greater Toronto Area (GTA), there’s also a municipal land transfer tax.

Luckily, if you’re a first-time buyer, you can get some of that money back through the land transfer tax refund.

How Much Is the Land Transfer Tax in Ontario?

The tax amount depends on the price of your home, ranging from 0.5% to 2.5% of the purchase price. For example, if you’re buying a $500,000 home, you could owe up to $6,475 in land transfer tax.

How Much Can You Get Back with the Land Transfer Tax Refund?

As a first-time buyer, you can get a refund of up to $4,000 on the provincial land transfer tax. For homes under $368,000, this might cover the entire tax.

How Do You Claim the Refund?

Your lawyer usually handles this during the closing process, so it’s pretty straightforward. Just make sure you meet the eligibility requirements: you must be a first-time buyer, and the home has to be your primary residence.

What Is the First-Time Home Buyers’ Tax Credit (HBTC), and How Does It Work?

The First-Time Home Buyers’ Tax Credit (HBTC) is another way to save some money after purchasing your first home.

How Much Can You Get with the HBTC?

You can claim $10,000 for a qualifying home purchase, which gives you a $1,500 tax refund. This can help cover closing costs, moving expenses, or any other expenses that pop up when you buy a home.

How Do You Claim the HBTC?

It’s simple—just include it when you file your income taxes for the year you bought your home. If you’re not sure how to do this, your accountant or tax software can guide you through it.

What Other Resources Are Available for First-Time Buyers in Ontario?

In addition to these big programs, there are other resources that can help make homeownership more affordable.

Are There Affordable Housing Programs in Ontario?

Some municipalities, like London, Ontario, have programs to support affordable homeownership. These programs are often tailored to help first-time buyers who need an extra hand to get into the market.

What About Energy Efficiency Rebates?

If you’re buying a home that needs a few upgrades, look into energy efficiency rebates. These programs can help you save money on renovations and lower your utility bills.

Should You Attend Workshops for First-Time Buyers?

Yes! Workshops are a great way to learn about budgeting for your first home, understanding closing costs, and applying for mortgages. If workshops aren't your thing, reach out to a mortgage professional, they'll help you through the entire home-buying journey.

How Can You Combine Incentives to Save the Most Money?

If you’re wondering, "What’s the best way to save for my first home?", the answer is to combine these programs. Here’s how:

1. Open an FHSA to grow your savings tax-free.

2. Use the HBP to withdraw additional funds from your RRSP.

3. Claim the land transfer tax refund and the HBTC to reduce your upfront and ongoing costs.

When you stack these incentives, you’ll make the most of what’s available and save thousands of dollars in the process.

What Are the Biggest Mistakes First-Time Buyers Make?

Let’s talk about a few common mistakes so you can avoid them:

• Waiting too long to open an FHSA: The sooner you start, the more you can save.

• Forgetting to claim refunds or tax credits: These programs exist to help you—don’t leave money on the table!

• Not budgeting for closing costs: These can add up quickly, so make sure you plan for them.

Ready to Take the First Step?

Buying your first home is a huge milestone, and it’s normal to feel a little overwhelmed. But with programs like the FHSA, HBP, and tax credits, you can make it happen—and save a ton of money along the way.

If you’re ready to start your journey, I’m here to help. As a mortgage agent in London, Ontario, I specialize in helping first-time buyers navigate the process and find the best solutions for their needs.

Let’s chat and make your dream of homeownership a reality!