Purchasing your first home is one of the most exciting-and daunting-milestones in life. In Ontario, the government offers several programs to help first-time homebuyers ease the financial burden of buying a home. From down payment assistance to tax rebates, these incentives can significantly reduce your costs and help you get into your dream home faster.
In this blog, we'll explore the key first-time homebuyer incentives in Ontario, how they work, and how you can take advantage of them.
1. First-Time Home Buyer Incentive (FTHBI)
What is it? The First-Time Home Buyer Incentive is a government program that offers a shared equity loan to help you reduce your monthly mortgage payments. This loan is interest-free for the first five years and can be repaid anytime.
How does it work?
- The government will contribute 5% of the purchase price for a resale home or 10% for a newly constructed home.
- For example, if you're purchasing a home for $500,000, you could receive a loan of $25,000 for a resale property or $50,000 for a new build.
- The loan must be repaid when the property is sold, or after 25 years, whichever comes first. However, the government's share of the home's value is calculated based on the market value when you sell (or at the end of the loan term). This means if your home increases in value, the amount you owe will also increase.
Eligibility:
- Must be a first-time homebuyer (you or your spouse have not owned a home in the last four years).
- The household income must be less than $120,000 per year.
- The home purchase price must not exceed four times the household income (for example, if your household income is $100,000, the purchase price can be no more than $400,000).
Tip: This incentive is a great option for buyers who want to lower their monthly mortgage payments without adding more debt.
2. Land Transfer Tax (LTT) Rebate for First-Time Buyers
What is it? In Ontario, when you buy a home, you're required to pay a land transfer tax. However, first-time homebuyers can take advantage of a rebate on this tax.
How does it work?
- Provincial LTT Rebate: First-time homebuyers can receive up to $4,000 in rebate for the Ontario portion of the land transfer tax.
- Municipal LTT Rebate: If you're purchasing a home in Toronto, you may also qualify for a rebate on the municipal portion of the land transfer tax, which could add up to another $4,475 for first-time buyers.
For example, if you purchase a home for $500,000, the total land transfer tax is around $7,000. As a first-time buyer, you could be eligible to receive $4,000 from the provincial rebate and $4,475 from the municipal rebate in Toronto, effectively eliminating your land transfer tax.
Eligibility:
- Must be a first-time homebuyer.
- The home must be intended as your primary residence.
- You must not have previously owned a home or had any interest in a property anywhere in the world.
Tip: If you're buying a property in Toronto, make sure to take advantage of both the provincial and municipal rebates to save significantly on closing costs.
3. Home Buyers' Plan (HBP)
What is it? The Home Buyers' Plan (HBP) allows first-time homebuyers to withdraw up to $35,000 from your Registered Retirement Savings Plan (RRSP) to use toward your home purchase.
How does it work?
- You and your spouse (if applicable) can each withdraw up to $35,000 from your RRSPs, for a total of $70,000.
- The money withdrawn must be used to buy or build a qualifying home.
- The amount you withdraw is tax-free, but it must be repaid to your RRSP over a 15-year period, with annual minimum payments starting two years after the withdrawal.
Eligibility:
- You must be a first-time homebuyer (you haven't owned a home in the last four years).
- The funds must be used to purchase or build a home that will be your primary residence within one year of the withdrawal.
Tip: Make sure you understand the repayment terms, as failure to repay your RRSP will result in a tax penalty.
4. GST/HST New Housing Rebate
What is it? This rebate helps reduce the amount of GST (Goods and Services Tax) or HST (Harmonized Sales Tax) you have to pay on the purchase of a new or substantially renovated home.
How does it work?
- The rebate is available for homes purchased for less than $350,000 (for homes above this price, the rebate is gradually reduced).
- The maximum rebate on GST is up to 36% of the GST paid, which could be a maximum of $6,300 on a new home.
- There's also a provincial rebate available for Ontario residents, which can reduce the amount of HST you owe on new homes.
Eligibility:
- Must be the buyer's first home.
- The home must be intended as your primary residence.
- The home must be newly built or substantially renovated.
Tip: For new home buyers, this is an excellent opportunity to save on tax costs when purchasing a newly constructed home.
5. Ontario Energy and Property Tax Credit (OEPTC)
What is it? Though not directly related to buying your first home, this credit can provide ongoing relief for homeowners in Ontario who are facing high property taxes and energy costs.
How does it work? The OEPTC provides rebates for property taxes and energy costs for low- to moderate-income seniors and families. While it's not a down payment assistance program, it can help reduce your overall living costs after purchasing your home.
Eligibility:
- You must be a resident of Ontario.
- You must meet income and age criteria (it's typically available to seniors and low-income individuals or families).
Tip: This credit can be helpful for first-time homeowners on a budget, especially those buying in areas with higher property taxes.
The path to homeownership in Ontario can feel overwhelming, but with the right knowledge, first-time buyers can take full advantage of a variety of government incentives designed to make the process more affordable. From down payment assistance and tax rebates to savings programs, these incentives help reduce the financial burden and make owning your first home more achievable.
Be sure to review each incentive carefully, consult with your mortgage broker or financial advisor, and ensure you meet the eligibility criteria. With these programs in place, your dream of owning a home in Ontario may be closer than you think!
