Mortgage Basics

First Time Home Buyers Incentives in Ontario

First Time Home Buyers Incentives in Ontario

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    Purchasing your first home is an exciting milestone, but qualifying as a first-time home buyer can be challenging. As with many first-time home buyers in Ontario, you may be counting on the many incentives available to help reduce the costs of purchasing your first home. 

    This post provides an extensive list of the first-time home buyer incentives available in Ontario and some local homeownership programs that may be of interest if you plan to settle in an area of Ontario that provides additional incentives. 

    Key Takeaways

    • First-time home buyers (FTHB) in Ontario may be eligible for various programs and incentives, such as land transfer tax refunds and rebates on home purchases.
    • To qualify for these incentives, you must meet specific eligibility criteria that differ based on the incentive. 
    • In addition to provincial incentives, many other national and local programs are available to first-time home buyers (FTHB).

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    Ontario First-Time Home Buyer Incentives

    First-time home buyer incentives in Ontario have been designed to assist buyers in purchasing their first home. These programs provide eligible individuals with financial relief to offset some of the costs of buying their first home. 

    In Ontario, there are many incentives designed for first-time buyers (FTB) that are provincially or  municipally specific and others that are available federally throughout Canada:

    Who Qualifies for a First-time Home Buyer Incentive in Ontario?

    The qualification criteria for each incentive vary mainly in defining a first-time buyer (FTHB). For most incentives, you must have never owned or lived in a home owned by a spouse or common-law partner in the past 4 fiscal years to qualify as a first-time buyer (FTHB). 

    Each program will vary, so it’s essential to read the fine print and ensure you and, if applicable, your spouse/partner qualify under each incentive’s definition of a first-time buyer (FTB) before applying. 

    Ontario Real Estate Overview

    The current state of the housing market in Ontario is vastly different from a few years ago. Current Ontario Real Estate Association (OREA) stats indicate that inventory levels are up while sales have slowed significantly. 

    • Sales activity decreased by 8% from November 2022
    • Home sales were 33.4% below the 5-year average for November 2023. 
    • Home sales have declined 12.9% on a year-to-date basis from the same period in 2022. 
    • The average price of a residential home across Ontario in November 2024 was $833,525, up 0.6% from November 2022. 
    • The number of new listings increased 12.9% from November 2022, the largest number in any November in more than 5 years.

    We can contribute Ontario’s housing market outlook to the increase in interest rates, making homeownership a hard-to-obtain goal for many first-time buyers trying to enter the market.

    What is Buying a Home Like for First-time Home Buyers?

    Qualifying for a mortgage in Ontario now requires a significant down payment or income to meet qualifying criteria. You need to make approximately $180K annually to qualify for the average-priced home in Ontario. 

    Some areas of Ontario still have affordable homes for first-time buyers willing to relocate for home affordability. However, these homes are typically located in smaller towns further from city centres and in more remote areas of the province. 

    What Down Payment Should You Expect to Pay in Ontario?

    Ontario has higher home prices when compared to other provinces in Canada, so you are likely to need a higher down payment amount to purchase a home. Here’s a breakdown of the down payment requirements based on the purchase price:

    • The minimum down payment for homes up to $500,000 is 5%.
    • For homes between $500,000 and $999,999, the minimum down payment is 5% on the first $500,000 and 10% on the remaining amount.
    • For homes valued at $1 million or more, the minimum down payment is 20%.

    For example, if you are purchasing a home in Ontario with an average purchase price of $833,525, you will be required to put down 5% on the first $500,000 ($25,000) and 10% on the remaining $333,525 ($33,352.50) for a total of $58,352.50. 

    If your down payment is less than 20% of the purchase price, you must obtain mortgage default insurance through Canada Mortgage and Housing Corporation (CMHC) or other private mortgage insurers, Sagen and Canada Guaranty. This insurance protects the lender in case you default on your mortgage payments. 

    A higher down payment can result in lower mortgage default insurance premiums, potentially saving you money in the long run. You can avoid paying mortgage default insurance if you put down 20% or more, regardless of the home price. 

    First-Time Home Buyer Programs in Ontario

    Many incentives are in place to assist first-time buyers in getting on the property ladder. Here are 2 Ontario-specific programs available to first-time buyers in the province. 

    Incentive: Receiving a Land Transfer Tax Refund

    One of the most commonly overlooked closing costs is land transfer taxes. Anytime you purchase property or land, you must pay land transfer taxes in full when you close on the property. In Ontario, qualifying first-time buyers may be eligible to receive a refund of up to $4,000. 

    To qualify for the land transfer tax refund, you must meet the following criteria:

    • 18 years of age or older.
    • Cannot have owned a home or had an interest in a home anywhere in the world.
    • Your spouse cannot have owned or had an interest in a home anywhere in the world while they were your spouse.
    • Cannot have previously owned a home through gift or inheritance.
    • Occupy the home as your principal residence within 9 months of purchase.

    Incentive: First-Time Home Purchase Rebate in Toronto

    Purchasing a home in Toronto requires an additional municipal land transfer tax with the Ontario land transfer tax. If you’re buying a home in the Toronto area as a first-time buyer, you may be eligible for the additional Municipal Land Transfer Tax (MLTT) Rebate

    This rebate provides up to $4,475 on the municipal portion of the land transfer tax you must pay. To qualify for the Toronto land transfer tax rebate, you must meet the same eligibility criteria as the Ontario rebate. 

    First-Time Home Buyer Programs in Canada Nationwide

    In addition to the programs and incentives available in Ontario, the federal government has implemented nationwide programs to support first-time buyers across Canada. These programs aim to make homeownership more accessible and affordable. 

    Home Buyers’ Plan (HBP)

    The Home Buyers’ Plan (HBP) allows first-time home buyers to withdraw up to $60,000 from their Registered Retirement Savings Plan (RRSP) and use the funds to purchase a home. The amount withdrawn under the HBP is tax-free and must be repaid into the RRSP over 15 years.

    To be eligible for the HBP, you must meet the following criteria:

    • Be considered a first-time home buyer.
    • Be a resident of Canada through the period you make your first eligible withdrawal from your RRSP under the plan and until you buy or build a qualifying home.
    • Have a written agreement to buy or build a qualifying home for yourself or a disabled person.
    • Intend to occupy the home as your primary residence within 1 year of purchase. 
    • If buying or building for a disabled person, the person must intend to occupy the home as their principal place of residence within 1 year.

    First-Time Home Buyer’s Tax Credit (HBTC)

    The First-Time Home Buyer’s Tax Credit (HBTC) is a non-refundable tax credit available to first-time home buyers in Canada. This credit allows you to claim up to $10,000, providing a tax credit of up to $1,500 for eligible home buyers. 

    To be eligible for the HBTC, you must meet both of the eligibility criteria:

    • You or your spouse/common-law partner acquired a qualifying home.
    • You did not live in another home inside or outside Canada that you or your spouse/common-law partner owned in the year of acquisition or any of the four preceding fiscal years.

    GST/HST New Housing Rebate

    The GST/HST New Housing Rebate provides a rebate on the Goods and Services Tax (GST) or Harmonized Sales Tax (HST) paid on the purchase of a new or substantially renovated home. This rebate helps reduce the overall cost of buying a new home. 

    Details vary by province, but in Ontario, the new home rebate application must be completed and filed within two years of the closing date of your new home. The maximum rebate for owner-built houses will depend on whether you have paid HST on the land purchase. The Ontario rebate is limited to a maximum of $24,000 if you paid HST on purchased land or purchased from a builder and $16,080 if you did not pay HST on purchased land. 

    What to Expect as a First-Time Home Buyer in Ontario

    As a first-time home buyer in Ontario, setting realistic expectations and preparing for the process is important. Here are some things you can expect:

    • Financial considerations: Before you begin your search, evaluate your financial situation and determine how much you can afford. Consider factors such as your income, expenses, and potential mortgage payments.
    • Research and planning: Take the time to research different neighbourhoods, property types, and amenities that are important to you. This will help you narrow your search and find a home that suits your needs.
    • Real estate market fluctuations: The real estate market is dynamic. Stay informed about market trends, interest rates, and any changes in government policies that may impact the housing market.
    • Home inspections: Before finalizing your purchase, it’s essential to have a professional home inspection. This inspection will identify potential property issues and help you make an informed decision.
    • Closing costs: In addition to the purchase price, various closing costs are associated with buying a home. These costs include legal and title fees, home inspection, appraisal, land transfer taxes, and property insurance. Be sure to budget for these expenses.

    Popular Cities & Neighborhoods for First-Time Home Buyers in Ontario

    Many less expensive areas beyond the GTA offer a great quality of life, culture, and amenities. Here is a list of popular cities and regions outside Toronto where homes are priced well below the national average. 

    Location Price November 2023 Price November 2022 % Change
    Chatham-Kent $406,636 $392,215 +3.7%
    Cornwall and District $393,545 $419,792 -6.3%
    Kingston and Area $543,000 $568,800 -4.5%
    London and St. Thomas $592,100 $585,900 +1.1%
    North Bay $397,000 $376,000 +5.6%
    Sudbury $431,400 $406,400 +6.2%

    Local Homeowner Programs in Ontario

    In addition to the provincial and nationwide programs, many local municipalities in Ontario offer relief for first-time home buyers to settle in the area. These local programs can provide additional financial assistance and support for first-time buyers. 

    • The Region of Waterloo offers a Homeownership Down Payment Assistance Program for residents who have resided in the region for at least the last year. Eligible first-time home buyers with a household income of up to $101,300 can receive a 5% loan when purchasing a home for $506,000 or less in the Waterloo Region. 
    • The County of Simcoe offers a Homeownership Program offering forgivable loans of 10% to eligible individuals or families up to a maximum of $50,000. The loan will be forgiven if you remain in your home for 20 years. 
    • The County of Lambton offers Homeownership Down Payment Assistance to eligible households living in rental accommodations. The program provides a 10% down payment in the form of a 20-year forgivable loan on properties with a maximum purchase price of $325,000.
    • The Dufferin County Homeownership Program provides moderate-income families with down payment assistance through a loan or second mortgage. Repayment is required when the home is sold. 
    • The Kingston and Area Home Ownership Program assists low to moderate-income households in buying an affordable home. The program provides down payment assistance in the form of a forgivable loan. Households currently renting in Kingston or the County of Frontenac can apply for 10% of the purchase price to a maximum of $44,000. To be eligible, you must have a household income of $94,000 or less and purchase a home priced at $440,000 or less. 
    • Muskoka offers the Gateway Muskoka Homeownership Program, a locally funded down payment assistance program to help make homeownership a reality. To qualify for 10% up to a maximum of $70,000, the maximum purchase price of the home must be 644,560, and household income must be at or below 108,300.
    • Brantford offers the B-Home (Brantford Home Ownership Made Easier) Program for eligible buyers currently renting with a household income up to $90,000 in the area and wish to purchase in Brantford or Brant County. Qualified buyers can receive 5% loan assistance when buying a home of $400,000 or less if household income is less than $90,000.
    • The Niagara Regions Welcome Home Niagara Homeownership Program provides 5% down payment assistance up to a maximum of $23,408.30 to eligible residents of the Niagara region. The maximum purchase price cannot exceed $468,166, and gross annual income must be below $85,900.
    • Chatham-Kent offers an Affordable Homeownership program. If you meet eligibility criteria, you can receive 10% of the purchase price of a home up to $25,000 in the form of a 20-year interest-free loan with a maximum purchase price of $410,895. 

    Frequently Asked Questions

    How much down payment do I need as a first-time home buyer in Ontario?

    As a first-time home buyer in Ontario, the minimum down payment required depends on the property’s purchase price. For homes priced up to $500,000, the minimum down payment is 5%. For homes between $500,000 and $999,999, the minimum down payment is 5% on the first $500,000 plus 10% on the remaining balance. The minimum down payment for homes over $1 million is 20%.

    Can I qualify for more than one first-time home buyer program in Ontario?

    Yes, qualifying for multiple first-time home buyer programs in Ontario is possible. Each program has its own set of criteria and eligibility requirements. It’s important to review the specific details of each program and determine if you meet the qualifications.

    What should I consider when choosing a city or neighbourhood as a first-time home buyer in Ontario?

    When choosing a city or neighbourhood in Ontario, consider factors such as affordability, proximity to amenities, transportation options, schools, and community atmosphere. It is important to find a location that aligns with your budget, lifestyle preferences, and long-term goals.

    Final Thoughts

    In today’s market, buying a property as a first-time buyer in Ontario takes more research and patience than in other areas of Canada. As long as you’re flexible, have a healthy down payment, and understand exactly how much mortgage you can manage, you may still be able to find a home within your budget and in your preferred location.

    While the Ontario housing market is experiencing a slowdown, prices are still at all-time highs, making planning ahead necessary. You might need to explore new locations or rethink your budget. Once you’ve found the kind of home you’re looking for, be sure you understand the mortgage stress test rules and take advantage of every possible first-time home buyer incentive you are eligible for. 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 mortgage expert today, and we’ll help you get started.

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