Mortgage Basics

First Time Home Buyers Incentives in Ontario

First Time Home Buyers Incentives in Ontario
Written by
  • tvine
| Nov 1, 2022
Reviewed, Jun 9, 2023

Key Takeaways

  • Ontario has a number of incentive programs in place for first time home buyers.
  • Included in these are the land transfer tax refund, the Home Buyer’s Plan, and the First Time Home Buyer Incentive.
  • The City of Toronto also offers its own municipal land transfer tax rebate (a maximum of $4,475), which is separate to, and can be claimed concurrently with, the Ontario provincial land transfer tax refund.

Are you a first-time buyer?

Ontario First-Time Home Buyer Incentive

Ontario is currently one of the most expensive and competitive property markets in Canada. As the most populous province in the country, the Ontario market has super-heated over the pandemic, with factors like low supply, rising immigration, lower interest rates, and changing work/life habits, all contributing to a perfect storm of sky-high prices across most property verticals. From Toronto to the Greater Toronto Area (GTA), and further afield to smaller cities around Ontario, first-time home buyers are facing more challenges than ever to get their foot in the door. Luckily, there are some incentives and programs in place to help first time home buyers save some of the money they will need to secure their first home. From land transfer tax refunds to low interest mortgage options, we’ve broken down the main ways to help yourself get started finding a first home in Ontario.

Incentive: Receiving a Land Transfer Tax Refund

The land transfer tax refund is an incentive offered by the Government of Ontario to first time home buyers. If the purchase price of your home is less than $368,000, you will not pay any land transfer tax. If the price is above $368,000, however, you will receive $4,000, the maximum refund available. This refund applies to both new build and resale homes. If your land transfer tax ends up being more than $4,000, the total amount will be discounted by $4,000. There are some limitations to keep in mind, namely that the refund will be reduced if one (or more) of the purchasers is not a first-time homebuyer.

Is the Land Transfer Tax Refund different in Toronto vs other Ontario cities?

The City of Toronto provides support to first time home buyers by offering an additional land transfer tax rebate. On top of the provincial land transfer tax refund, first-time home buyers in Toronto can also receive a municipal rebate of up to $4,475. Like the provincial refund, this also applies to both new builds and resale homes. You must be a Canadian citizen or permanent resident to be eligible for the rebate, or be expected to become either of these within 18 months of buying your home. Although the City of Toronto offers this municipal tax rebate, it’s also usually more expensive overall in land transfer taxes to buy a new property in Toronto. Similarly, it’s worth keeping in mind that land transfer taxes also apply to condos – although you’re likely to pay less for a condo given that the price for one is typically lower than a house.

Toronto & Ontario Land Transfer Tax Rates 2022

Home Purchase Price Toronto Land Transfer Tax Rate (Municipal) Ontario Land Transfer Tax Rate (Provincial) First Time Home Buyer Combined Rebate
First $55,000 0.5% 0.5% Full Rebate
$55,000 to $250,000 1% 1% Full Rebate
$250,000 to $400,000 1.5% 1.5% Full Rebate (up to $368,000)
$400,000 to $2,000,000 2% 2% $8475 Maximum Rebate
Over $2,000,000 2.5% 2.5% $8475 Maximum Rebate

Both municipal and provincial land transfer taxes are calculated at the same rate, with a total of $4,000 available as a provincial refund, and $4475 as a municipal tax rebate for the City of Toronto only. The provincial refund kicks in for homes with a purchasing price of $368,000, and the municipal rebate applies for homes above $400,000 or more.

What to Expect as a First Time Home Buyer in Ontario

Lockdown sent many prospective homeowners hunting for more space and larger properties, with secondary markets like Oshawa, Hamilton, and Oakville experiencing huge growth, as well as urban centers like Toronto, which saw an influx of new homebuyers through immigration and foreign investment. When you factor in low supply levels and 0.25% interest rates, it’s easy to see why the Ontario housing market is superheated right now.

Compared to other provinces like Saskatchewan and Alberta, Ontario has one of the most competitive markets in the country (and potentially the world.) 2022 looks set to be another record year in terms of average property price increases, with every residential property type available increasing in price during the pandemic, many by at least 25% in the last two years. Becoming a first time home buyer in this context is understandably daunting.

As a first time home buyer in Ontario, there are a few things to keep in mind when searching for a home:

Be prepared for lots of competition

Multiple markets in Ontario are extremely competitive at the moment. Prospective buyers are competing with multiple offers for their dream homes – many of which are well above asking price. Some buyers are even skipping housing inspections with unconditional offers, just to get their place on the property ladder. Be patient, have a strategy, and don’t be disheartened if you don’t get the first house you go for. Getting preapproved for a mortgage is a good way to be prepared if you want to make an offer, as it’ll show the seller you’re serious and can afford the home you’re bidding on.

Expand your search horizons

In a market as hot as this, you’ll need to be flexible if you’re truly set on finding a home. Look at your budget, reassess your non-negotiables, and think about looking further afield or at properties you might not have initially considered that could still suit your needs. Alternatively, it’s also possible to simply expand your search further afield. With remote and hybrid working becoming a mainstay after the pandemic, now could be the time to find a home in the suburbs. To help you start your search, we’ve outlined a number of great neighborhoods you might not have considered later on in this post.

Explore your options for FTHB incentives

Ontario has a number of provincial, plus some municipal, first time home buyer

incentives available. Below you’ll find a list of the main programs available, plus what you’ll need to qualify for them.

First-Time Home Buyer Programs in Ontario

Although Ontario remains one of the most competitive housing markets in the country, there are a number of incentives in place to provide assistance if you want to get on the property ladder. Here are three of the most prominent, and widely available first-time homebuyer programs in the province at the moment.

The Home Buyer’s Plan

The Home Buyer’s Plan (HBP) lets you withdraw up to $35,000 from your RRSP to put toward a down payment on a home, which you would repay over a 15 year period. To qualify, you must be a first time home buyer, and have a written agreement to buy or build a qualifying home for yourself (or a related person with a disability). You must be a Canadian resident when you withdraw funds from your RRSP, and up to the time a qualifying home is bought or built. You must also intend to occupy the home as your principal place of residence within one year after buying or building it.

First Time Home Buyer Incentive

The First-Time Home Buyer Incentive (FTHBI) is a shared-equity mortgage with the Government of Canada. The FTHBI offers the recipient one of the following:

  • 5% or 10% for a first-time buyer’s purchase of a newly constructed home
  • 5% for a first-time buyer’s purchase of a resale home
  • 5% for a first-time buyer’s purchase of a new or resale mobile/manufactured home

The FTHBI means that the government will have a shared investment (or equity) in your home, yet it allows the borrower the chance to save less of a down payment, or to contribute to their existing down payment and get lower monthly mortgage payments. 

The recipient repays the FTHBI based on the rate they take out, and on the property’s market value at the time of repayment. For example, if you received a 5% incentive, you would repay 5%, if you received 10%, you’d repay 10%. You must repay after 25 years or when the property is sold (whichever comes sooner). You can also repay in full any time before 25 years or the property sale, without any prepayment penalty. 

Land transfer tax refund

The land transfer tax refund applies to any land-transfer tax paid after the first $368,000 of qualifying homes. To claim the refund, you must be over the age of 18, and have not owned a home or stake in a home prior to purchasing your property (this includes inherited homes). The maximum refund is $4,000, and will be applied on qualifying homes over $368,000. For homes below that price, you would not pay any land transfer taxes in Ontario.

Frequently Asked Questions

What do I need to qualify for First-Time Home Buyer Programs in Ontario?

To qualify for first-time home buyer programs in Ontario, you must be a Canadian citizen or permanent resident at the time of purchase, or become one within 18 months of buying your property. To be considered a first-time home buyer, you cannot have owned a home previously anywhere in the world, or have had an interest in a property (e.g. being a co-signer). Your spouse must also not have had an interest in a property during the time in which you have been together. Some programs, like the Ontario land transfer tax refund, also require that you be at least 18 years old.

There are a number of less expensive yet established cities beyond the GTA, with access to great quality of life, culture, and amenities. Here is a list of some popular cities and regions outside Toronto where the average property price is still well under $1million.

Location Price January 2021 Price January 2022 % Change
Kingston $449,100 $578,300 +28.8%
Kitchener-Waterloo $674,700 $924,900 +37.1%
London $506,400 $697,700 +37.8%
Niagara Region $561,200 $748,800 +33.4%
Ottawa $594,800 $689,700 +16.0%
Peterborough $526,300 $692,000 +31.5%

Final Thoughts

In today’s market, buying a first property in Ontario takes a little bit more research and patience than some other places in Canada. As long as you’re flexible, have a healthy down payment, and you understand exactly how much mortgage you can manage, you may still be able to find a home close to what you had in mind. The market is at an all-time high right now, so some realistic thinking and planning ahead is necessary, and you might need to explore new locations or rethink your budget. Be sure you understand the new mortgage stress test rules once you’ve found the kind of home you’re looking for, and then take advantage of every possible first time home buyer incentive you possibly can. These programs are in place to provide advantages specifically to first time home buyers, so it makes sense to capitalize on them.

If you’ve already found your dream home and want to explore your next steps, get in touch with a nesto Advisor today, and we’ll help you get started.

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