Your Guide to Being A First Time Home Buyer in Ontario

By Arthur Favier

For most homeowners, their property is their biggest financial investment. So if you’re looking to become a first time home buyer in Ontario, you need to have your finances in order before you start your search. 

There are many financial factors to consider, such as the size of down payment you can afford, monthly mortgage payments, and more. And by understanding your options as a first time home buyer, you can be more confident in your ability to purchase a place.

Closing costs are one of the biggest expenses that home buyers and sellers face, even without a mortgage. These costs can include things like inspection fees, title insurance, and appraisal fees that the lender may require which can be rather substantial. Fortunately, the Canadian government offers incentives for first time home buyers to make it easier for them to break into the real estate market. Depending on where you live in Canada, you’re eligible for different first time home buyer programs.

Keep reading for a closer look at some home buying tips and to learn how you can save money as a first time home buyer.

The Home Buyers’ Amount

In 2009, the Home Buyers’ Amount was introduced as a part of Canada’s Economic Action Plan. It allows buyers to recover expenses such as closing costs incurred from legal expenses, inspections, and land transfer taxes. 

The tax credit works out to be a $750 rebate. For residents in Quebec, an additional $750 tax credit is available. Home buyers will have to claim the amount on their tax return the year the property was purchased to receive the rebate. In addition, there is a list of requirements to be eligible for the tax credit, including the following: 

• You must occupy the home within one year of purchase
• The home must be registered under your or your spouse’s name
• You cannot have owned a home in the last four years
• You cannot have lived in a home owned by your spouse in the last four years.

The Home Buyers’ Plan (HBP)

The Home Buyers’ Plan allows purchasers to withdraw from their RRSPs to put towards a downpayment for a home. The limit to withdraw is $35,000 and must be repaid to your RRSP within 15 years. If you’re purchasing a home with another buyer, you can double the amount for a combined total of $70,000 from your RRSP. Withdrawing the maximum amount of $35,000 for one person would mean an annual repayment of around $2,300.00 over 15 years. Before using this program, be sure to do your research to find out if it’s a viable option for you.

First time home buyer land transfer tax rebate

In British Columbia, Ontario, and Prince Edward Island, first time home buyers are eligible for a land transfer tax (LTT) rebate. To apply, buyers cannot have owned a home or interest in a home anywhere in the world. 

The maximum rebate amounts for LTT are as follows:

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

First time Home Buyer Incentive

The first time Home Buyer Incentive helps Canadians purchase their first home by offering a percentage of the home’s total purchase price for the down payment. The incentive is designed to reduce monthly mortgage payments, offering:

• 5 to 10% for first time home buyers purchasing a newly constructed home
• 5% for a first time home buyer’s purchase of an existing home
• 5% for a first time home buyer’s purchase a mobile/manufactured home, whether existing or new

The purchaser has to repay the incentive within 25 years or when the property is sold. The amount repaid depends on the property’s fair market value at the time of repayment. If a home buyer received a 10% incentive, they would repay 10% of the home’s value at the time of repayment.

GST/HST new housing rebate

In Canada, a new build will have GST and HST levied on the price, but the GST/HST new housing rebate returns a portion of the federal taxes paid. Certain provinces provide an additional rebate for the portion of the provincial component. 

This rebate only applies to newly built houses, construction of a home on a purchased lot, or significant renovations on an existing home. The rebate isn’t exclusively available to first time home buyers and can be used by anyone who meets the eligibility criteria.

Canada Greener Homes

While not exclusively offered to first time home buyers, Canada Greener Homes is an incentive in development for homeowners planning to make renovations. Homeowners can receive grants of up to $5,000 and interest-free loans of up $40,000 to make energy-efficient retrofits to their homes. This program is expected to be launched in 2021-2022. 

Canada Mortgage and Housing Corporation (CMHC) insurance for first time home buyers

CMHC insurance (or mortgage default insurance) allows home buyers to make a down payment as low as 5% of their purchase price. This type of insurance might benefit first time home buyers who can’t afford the standard 20% down payment, particularly in Canada’s top real estate markets such as Toronto. Since this type of insurance isn’t cheap, it’s always advised to save as much as possible for a larger down payment.

Mortgage rates for first time home buyers

Buying your first home is a major financial cost, but getting the best deal on your mortgage can help you save some money. Many home buyers are surprised to find out they can get the best mortgage rates when buying their first home. Many factors affect mortgage rates, such as the state of the economy, interest rates, unemployment rate, credit score, and more. It’s not required that you stick with your home bank when applying for a mortgage. In fact, it’s advised that you shop around to find the best rates.