If you have ever tried to buy your first home in Canada, you already know it feels like learning a new language. There are rebates, tax credits, special accounts, stress tests, and rules that make your head spin. The good news is this. There are more programs available today than ever before to help first time buyers get into the housing market.
Most people do not realize how much money they leave on the table simply because they didn’t know what they were eligible for. And with the new federal rule that wipes out the 5% GST on many new homes, first time buyers can save tens of thousands of dollars.
So let’s walk through everything you need to know if you are buying your first home to live in as your principal residence in 2026.
Why This Matters Even If You Are Just Thinking About Buying
Buying your first home is one of the biggest financial decisions you will make. A little planning can make the difference between scraping together a down payment and having a solid financial cushion after closing.
These incentives do not just reduce your tax bill. Many of them lower your upfront cash requirement, reduce your mortgage payment, or boost your ability to qualify for a loan. In other words, they help you get into the market sooner and with less stress.
1. The New Federal GST Rebate on New Homes Up to $50,000 and the new Ontario Housing Rebate for First Time Home Buyers
This is the newest and most generous incentive for first time home buyers. If you buy a newly built home and you are the first person to live in it, you may not have to pay the 5% federal GST.
Who qualifies
You must be a first time home buyer. That means you and your spouse or partner have not owned and lived in a home anywhere in the world during the current or previous 4 calendar years. You also must use the home as your primary residence.
How much you can save
- Full rebate on homes up to $1,000,000
- Partial rebate between $1,000,000 and $1,500,000
- No rebate above $1,500,000
Since 5% GST on a $1,000,000 home is $50,000, the savings are substantial.
Proposed New Ontario HST Rebate for First-Time Home Buyers (2025 Announcement)
- In the 2025 Fall Economic Statement, Ontario announced its intention to mirror a proposed federal measure that would provide a full rebate of the provincial portion of the HST on qualifying new homes valued up to $1 million for first-time home buyers. This new rebate would be in addition to the existing Ontario HST New Housing Rebate and is subject to the passage of federal legislation.
Simple example
If you buy a brand new condo for $900,000, the GST is $45,000. Under the new rule, you can get back the full amount. That is real money back in your pocket.
If you live in Ontario, a brand new condo for $900,000, the 13% HST (instead of the GST mentioned above) on the property is $117,000. The amount you can get back (or done via a reduction of sale price depending on the final legislation) is substantial for a first time home buyer.
2. Land Transfer Tax Rebates Across Canada
Every province charges land transfer tax when you buy a home. Some charge a lot. Luckily, several provinces offer rebates for first time buyers.
Summary Chart of First Time Buyer Land Transfer Tax Rebates
| Province or City | Maximum Rebate | Eligibility Notes |
| Ontario | $4,000 | First time buyer, must occupy the home as a principal residence |
| Toronto (Municipal) | $4,475 | Applies only within the City of Toronto |
| British Columbia | Full exemption up to $500,000, partial up to $525,000 | First time home buyer |
| Prince Edward Island | Full exemption | First time buyer and must occupy the home |
| Other provinces | Varies or none | Check local rules |
Why this matters
Land transfer tax is due on closing and often catches buyers off guard. A rebate can reduce your closing day cash requirement by thousands of dollars.
3. First Home Savings Account The FHSA
The First Home Savings Account (FHSA) is one of the most powerful tools available to first-time home buyers because it lets you save for a home with two major tax benefits. It works like a hybrid of an RRSP and a TFSA: you usually get a tax deduction when you contribute, and you can withdraw the money tax-free when you buy your first home. No other account in Canada gives you both.
Who can open an FHSA
You must be a Canadian resident, at least 18 years old, and you cannot be older than 71 in the year you open the account. You also need to meet the “first-time home buyer” test. That means you did not live in a home that you owned or your spouse or partner owned in the current year, or in the 4 previous calendar years. The key is whether you lived in the home, not whether your name was on the title.
If you rented for the past few years or owned a rental property that you never lived in, you will likely qualify.
How contributions work
You can contribute up to $8,000 per year, to a lifetime maximum of $40,000. If you don’t hit your $8,000 limit in a given year, you can carry forward up to $8,000 to the next year. So if you contributed nothing this year, you could put in $16,000 next year.
Contributions are tax-deductible, just like an RRSP. That means if you put in $8,000, you may get back a few thousand dollars at tax time depending on your tax bracket.
You can open more than one FHSA at different financial institutions, but your limits stay the same across all accounts. You can also transfer money from your RRSP into your FHSA, but those transfers are not tax-deductible and still count toward your lifetime FHSA room.
Inside the account, you can invest however you like: ETFs, mutual funds, GICs, stocks, and more. Any growth is tax-free.
How withdrawals work
Withdrawals are tax-free as long as they meet the rules. To make a qualifying withdrawal, you must:
- Be a Canadian resident at the time of withdrawal
- Still meet the first-time buyer test
- Have a written agreement to buy or build a home in Canada before October 1 of the year after your withdrawal
- Intend to live in the home within 1 year of buying or building it
- Not have bought the home more than 30 days before your withdrawal
You can only make a qualifying withdrawal once. After that, you must close the FHSA by the end of the following year.
If you don’t end up buying a home
Here’s the part many people love. If you do not buy a home, you can transfer your FHSA funds tax-free into your RRSP or RRIF. This does not use up RRSP room. Withdrawals from your RRSP or RRIF later will be taxed as normal, but you never lose the tax deduction or the tax-free growth.
If you choose to withdraw the money as cash instead, that withdrawal is taxed as regular income.
Why the FHSA matters
The FHSA can stay open for up to 15 years, or until December 31 of the year you turn 71, whichever comes first. You can use the FHSA and the Home Buyers’ Plan (HBP) together, which means some buyers can access well over $100,000 tax-free for their first home. For many Canadians, this is the single most effective way to accelerate a down payment.
If used properly, the FHSA gives first-time buyers a massive head start — and, in many cases, thousands in tax savings along the way.
4. The Home Buyers Plan Using Your RRSP
The Home Buyers Plan is one of the most powerful tools available to first-time home buyers because it lets you borrow from your RRSP tax-free to help fund your down payment. Normally, if you take money out of your RRSP, you pay tax on the full amount. But under the HBP, you can withdraw up to $60,000 per person (or up to $120,000 as a couple) without triggering tax, as long as you follow the rules.
Here is how it works in plain English.
Who qualifies
To use the HBP, you must meet the “first-time home buyer” test. That means you cannot have owned and lived in a home as your principal residence at any time during the 4 previous calendar years, plus the time up to 31 days before your RRSP withdrawal. If you lived in a home owned by your spouse or partner during that period, that also counts and you would not qualify.
But there’s a reset rule. If you have been renting and not living in a home you or your spouse owned for at least 4 years, your first-time buyer status comes back. This helps many people who went through a separation or sold a home years ago and are now ready to buy again.
You must also have a written agreement to buy or build a home in Canada, and you must plan to move into the home within 1 year.
How the withdrawal works
When you are ready to withdraw funds from your RRSP, you complete a simple form (T1036). The money must have been in your RRSP for at least 90 days before withdrawal, or it won’t qualify.
You can make multiple withdrawals, but they must all happen within the same calendar year, or in January of the following year.
The home must be acquired or built by October 1 of the year after you withdraw the funds. This gives you time to finalize construction or close on a purchase.
How repayment works
The HBP works like an interest-free loan from your RRSP to yourself. After you withdraw the funds, you don’t start repaying right away. Repayments start in the fifth year after the year of your withdrawal. From that point, you have 15 years to repay the full amount back into your RRSP.
Each year, you must repay 1/15th of the amount you took out.
For example:
- If you withdrew $60,000, your minimum annual repayment is $4,000.
- If you repay less than the required amount, the shortfall is added to your taxable income for that year instead.
Repayments are made by contributing to your RRSP and designating the amount as an HBP repayment on your tax return.
Other things to keep in mind
- You cannot use locked-in RRSPs for the HBP.
- If you used the HBP before, you can use it again only if your previous balance is fully repaid by January 1 of the year you want to participate again.
- The HBP can be combined with the FHSA, which means some buyers can access well over $100,000 tax-free toward their down payment.
- If you become a non-resident or pass away before full repayment, special tax rules apply.
Bottom line
The HBP is one of the few programs that directly boosts your down payment without tax consequences. Used correctly, it can make the difference between buying now or waiting years. Just make sure you understand the repayment schedule so there are no surprises later.
5. Home Buyers Tax Credit A Small Bonus
The Home Buyers Tax Credit is a small but helpful federal credit that puts $1,500 back in your pocket the year you buy your first home. It is based on a $10,000 amount claimed on your tax return and calculated at the 15% federal rate. To qualify, you must buy a home in Canada, have it registered in your name, and plan to move in within 1 year. You also must not have lived in another home you or your spouse owned in the year of purchase or in the 4 previous years, which effectively creates a 5-year lookback. If you and your spouse both qualify, you can share the $10,000 claim, but the combined total cannot exceed $10,000. There is also a special rule for people with disabilities: if the home is purchased to better meet accessibility needs, you may claim the credit even if you are not a first-time buyer under the regular test.
6. CMHC Mortgage Insurance What First Time Buyers Really Need to Know
CMHC mortgage insurance is not a special program for first-time buyers, but most first-time buyers end up using it because it allows you to buy a home with less than 20% down. Without this insurance, lenders will not approve a high-ratio mortgage.
Down payment rules
- 5% on homes up to $500,000
- 5% on the first $500,000 plus 10% on the portion from $500,000 to $999,999
- 20% minimum if the home is $1,000,000 or more (insurance not available)
These rules apply across all major insurers (CMHC, Sagen, Canada Guaranty).
Source: CMHC Mortgage Loan Insurance – Government of Canada
(https://www.cmhc-schl.gc.ca/en/finance-and-investing/mortgage-loan-insurance)
How much does CMHC insurance cost?
This is the part many first-time buyers don’t fully understand.
The insurance premium is added to your mortgage, not paid upfront, and the percentage depends on how much you put down.
Here are the standard rates:
| Down Payment Amount | CMHC Premium Rate |
| 5% to 9.99% | 4.00% of mortgage amount |
| 10% to 14.99% | 3.10% |
| 15% to 19.99% | 2.80% |
| 20%+ | No CMHC insurance allowed or required |
These premiums are capitalized (rolled into your mortgage), so you pay interest on them over the life of your mortgage.
Simple example: $850,000 home with minimum down payment
Because the home price is under $1,000,000, CMHC insurance is allowed.
Down payment required:
- 5% of $500,000 = $25,000
- 10% of $350,000 = $35,000
- Total minimum down payment = $60,000
Mortgage amount before premium:
$850,000 – $60,000 = $790,000
Premium (5% down bracket):
$790,000 × 4% = $31,600
New mortgage after premium:
$821,600
This means your mortgage is $31,600 higher simply because of the CMHC fee.
Why CMHC insurance matters for first-time buyers
Most first-time buyers do not have 20% down, especially in Ontario and BC.
CMHC insurance is what makes the purchase possible:
- Lower down payment
- Easier approval
- Reasonable interest rates
But it also increases your mortgage amount by thousands to tens of thousands of dollars.
Understanding this early helps first-time buyers:
- Budget properly
- Compare down payment strategies
- Decide whether it’s smarter to wait or enter the market sooner
7. Other Important Rules That Catch First Time Buyers Off Guard
Closing costs
Most first-time buyers only budget for the down payment, but the real shock comes on closing day. Closing costs can run 1.5% to 4% of the purchase price depending on the province, city, and the type of home you are buying. These costs include legal fees, land transfer tax, title insurance, prepaid adjustments, and any inspection or appraisal fees.
To show how different the numbers can be across Canada, here are three simple examples for the same $850,000 home.
Example 1: $850,000 Home in Toronto
Toronto has both Ontario land transfer tax and a Toronto municipal land transfer tax. Even after applying the first-time buyer rebates, the numbers are still significant.
Approximate closing costs:
- Ontario land transfer tax: about $13,475
- Toronto municipal land transfer tax: about $13,475
- First-time buyer rebates (Ontario + Toronto): –$8,475
- Legal fees & disbursements: $2,000 to $2,500
- Title insurance: $500 to $1,000
- Adjustments (prepaid utilities, taxes, condo fees if applicable): $300 to $800
Estimated total closing costs: ~$21,000 to $23,000
Example 2: $850,000 Home in the Rest of Ontario (Outside Toronto)
Here, only the Ontario land transfer tax applies.
Approximate closing costs:
- Ontario land transfer tax: about $13,475
- First-time buyer rebate: –$4,000
- Legal fees & disbursements: $2,000 to $2,500
- Title insurance: $500 to $1,000
- Adjustments: $300 to $800
Estimated total closing costs: ~$12,300 to $13,800
This is significantly lower than Toronto because there is no municipal land transfer tax.
Example 3: $850,000 Home in Calgary
Alberta does not have provincial land transfer tax. This makes closing costs much lower.
Approximate closing costs:
- Legal fees & disbursements: $2,000 to $2,500
- Land title & registration fees: usually under $500
- Title insurance: $300 to $600
- Adjustments: $300 to $800
Estimated total closing costs: ~$3,100 to $4,400
For the exact same home price, a buyer in Calgary may pay $20,000 less in closing costs than a buyer in Toronto.
Why this matters
A first-time buyer saving for a 5% down payment on an $850,000 home needs $42,500 for the down payment…
but depending on where the home is located, they may need anywhere from $3,000 to $24,000 in additional closing costs.
This is why understanding rebates, land transfer taxes, and your province’s rules is just as important as saving for the down payment. Closing costs can make or break your financing plan — especially in cities like Toronto.
Putting It All Together A Simple Example
Let’s say you are buying your first home in Ontario for $850,000. Here is what you might save.
- Federal GST rebate if it is a new build, full 13% rebate if it is a new build located in Ontario
- Ontario land transfer tax rebate of $4,000
- Toronto land transfer tax rebate of $4,475 if applicable
- FHSA withdrawal of up to $40,000 tax free
- HBP withdrawal of up to $60,000 per person
- Home Buyers Tax Credit $1,500
These programs combined can easily reduce your cash needs by tens of thousands of dollars.
Understanding What “First-Time Home Buyer” Really Means
Most Canadians are surprised to learn that “first-time home buyer” doesn’t actually mean your first home ever. For most federal programs, including the FHSA and the Home Buyers’ Plan, the rule is based on a 4-year lookback period. As long as you (and usually your spouse or partner) have not owned and lived in a property as your principal residence during the past 4 years, your status resets and you can qualify again. It’s a strange tax quirk, but it helps a lot of people who are restarting after major life changes.
Example 1: Married, Divorced, Then Rented for 4 Years
Let’s say you were married and lived in a home owned by you and your spouse. After your divorce, you moved out and rented for 4 years. During that time, you never owned or lived in another home as your principal residence.
In this case:
- After 4 years of renting, your “first-time home buyer” status resets.
- You can qualify for the FHSA.
- You can qualify again for the Home Buyers’ Plan, as long as any previous HBP balance is fully repaid.
- For the new GST rebate, the previous home with your former spouse only matters if you lived in it during the lookback period — which you didn’t.
So yes — you would qualify across the major programs. The law is not trying to punish people after divorce; it simply looks at whether you owned and lived in a home in the last 4 years.
Example 2: You Owned a Rental Property but Never Lived in It
Here’s another common scenario. You bought a rental in your twenties but never lived in it yourself. It was always an investment property.
In that case:
- You never occupied the property as your principal residence.
- For the FHSA, HBP, and GST rebate, mere ownership is not a problem.
- The government only cares whether you lived in the property, not whether your name was on the title.
So even if you have owned a rental for 10 years, you may still be considered a first-time home buyer if you never lived in it.
Final Takeaway
Most first time home buyers do not take full advantage of the programs available to them. Some forget to open an FHSA. Others discover too late that they qualified for a land transfer tax rebate. And many assume the new GST rebate does not apply to them when it actually does.
Next Steps
We help everyday Canadians navigate the confusing world of taxes—so you can keep more of what you earn. Want to make sure you’re not leaving money on the table? Book a consultation with my team today.
Until next time, happy Canadian Real Estate Investing.
Cherry Chan, CPA, CA
Your Real Estate Accountant
