First-Time Home Buyer in Canada | Complete Guide

• Home ownership is a great investment (24%).
• Growing families require additional space (32%).
• Proximity to friends and family (20%).
• More affordable location (22%).
• Desire for amenities such as near a waterfront or better weather (18%).
• The need to move away from renting as it has no positive monetary outcome  (19%).

While many of us would love a spacious home with lots of amenities, it’s important to be realistic and keep your home aspirations in check with your income. Twenty-four percent of Canadians who currently want to purchase a home said they don’t see many available properties within their budget, which is preventing them from buying a home now. 

When making an offer on your first home, it’s not just the mortgage costs and down payment that you need to factor in. You’ll also have to consider the expenses of managing a home, such as basic maintenance, property taxes, utilities, and more. Experts say you should expect to spend anywhere from 2% to 5% of the value of your home on maintenance each and every year. Using a tool such as a mortgage affordability calculator can help to determine what you can and can not afford.

When it comes to down payments, most of the time, bigger is better. But you don’t always need to put 10% or 20% down to buy a home in Canada. Canada’s lending rules have specific guidelines around minimum down payment amounts:

• The minimum down payment is 5% for homes under $500,000. You can calculate a 5% down payment, by multiplying the final sale price by 0.05.
• For houses between $500,000 and $999,999, you need 5% for the first $500,000 of the purchase price and 10% for the amount above $500,000. Calculate this minimum down payment by multiplying the first $499,999 by 0.05 and the remaining amount by 0.1. Then add the two results together.
• For homes costing $1 million or more, the minimum down payment is 20%. You can determine a 20% down payment by multiplying the final sale price by 0.2.

Not everyone gets away with having a minimum down payment. There are cases where a lender may need a bigger down payment in order to approve you for a mortgage.

People who have a poor credit history or are self-employed, for example, often need to put down more than the minimum down payment. If the monthly mortgage payments on a certain home are too large for a homebuyer’s budget, a bigger down payment may be required to lower the size of the mortgage — and the size of those payments — to a more manageable level.

One of the most intense challenges for first-time homebuyers is stepping into the market when the housing supply has largely dried up.

Housing supply varies day by day. There’s no guarantee that the type of house you’d like to buy will be available when you want to buy, or that multiple other buyers won’t challenge you for it in an intense bidding war.

But on the other hand, you may start looking for a house at a time when a large number of sellers decide to list their properties, or when a large number of newly built houses are set to hit the market. We recommend reaching out to a real estate agent who specializes in the area, or multiple areas, where you’d like to purchase. They’ll be able to inform you on how competitive the local market is — and how much higher than the asking price you might have to pay.

• You must be at least 18 years of age
• You must be a Canadian citizen or permanent resident
• The property/home you bought must be in Canada
• You cannot have owned a home within the last four years
• If you're buying with a spouse (or common law partner) who is not a first-time homebuyer, you cannot have lived in a house that they owned within the last 4 years
• You must have documentation verifying that you have purchased a home
• You must intend to live in the home as your primary residence within one year of purchase

The First-Time Homebuyer RRSP (Home Buyers' Plan) isn't a rebate or credit. The RRSP Home Buyers' Plan (HBP) allows first-time homebuyers to use their tax-sheltered savings in a Registered Retirement Savings Plan (RRSP) for the down payment on their home. As a first-time homebuyer, the HBP allows you to withdraw up to $35,000 for your down payment, which must be repaid into your RRSP within 15 years. There are some additional conditions to be aware of, and there's a risk you may cannibalize your long-term savings by using funds from your RRSP now - be sure to do extensive research before using this program..

Created in September 2019, the First-Time Homebuyer Incentive is an interest-free loan for eligible first-time homebuyers to help lower their regular mortgage payments. This incentive contributes up to 10% of the total price of your house, and you’ll need to pay back the loan within 25 years. By delaying the repayment of this loan, first-time homebuyers can save a significant portion of money over the course of their mortgage. However, it is important to note that the First-Time Homebuyer Incentive has very stringent qualification guidelines that can make it harder for people to access.

While buying your first home, you might have access to a number of tax breaks. These include the First Time Home Buyers' Tax Credit which is claimed on your annual tax return in the same year you purchase your property. Until 2022, this resulted in a $750 rebate, assuming you met the requirements. When the 2022 budget was passed, the rebate amount for 2022 and subsequent taxation years was raised to $1,500. Another $750 tax credit is also available to Quebec residents.

In three provinces and one city, first-time homebuyers can additionally claim a land transfer tax rebate. Land transfer taxes are charged by all provinces excluding Saskatchewan and Alberta. An additional land transfer tax is charged by the city of Toronto. In Ontario, British Columbia, Prince Edward Island, and the city of Toronto, first-time homebuyers are eligible for a rebate of these land transfer taxes, subject to certain maximums and conditions.

Here are the maximum rebates for the four rebates:

• Ontario: $4,000
• British Columbia: $8,000
• Prince Edward Island: $2,000
• Toronto: $4,475

In Canada, every newly built home will have GST (Goods and Services Tax) or HST (Harmonized Sales Tax) levied on the price. The GST/HST new housing rebate is a rebate of a portion of the federal component of this tax. Other provinces have their own version of this rebate, which can reimburse buyers a portion of the provincial component.

Please note that this rebate can only be used on newly-built houses. This means that it needs to be new construction of a home on land you own or for substantial renovations to an existing home. It's not exclusively available to first-time homebuyers, but it's routinely used by first-time homebuyers that are buying newly-built houses.

The federal government announced in 2022 the creation of a new program to help new buyers save for their first house. The First Home Savings Account, or FHSA, blends features of the Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plan (RRSP), with some advantages over both. Like RRSPs, your contributions to your FHSA are also tax-free, and like TFSAs, any money your First Home Savings Account earns, will also be tax-free. Unlike an RRSP, you don't have to pay back money you withdraw from the FHSA to purchase your first home. You can read more about the First Home Savings Account on our blog.