First Time Home Buyer Incentives in Ontario
Buying your first home often comes with higher upfront costs, which is why several programs exist to help first-time buyers reduce friction and plan more confidently. In Ontario, these incentives generally fall into three categories: tax rebates, registered savings tools, and financing options.
This guide explains what’s available today and how first-time buyers commonly use these tools together when deciding how to fund a purchase.
Who Qualifies as a First-Time Home Buyer
In most cases, you are considered a first-time home buyer if you have never owned a home before. Some programs also allow eligibility if you have not owned a home in the past four to five years, or if you are purchasing with a spouse who qualifies.
Eligibility rules vary by program, so confirmation is always important before relying on any single incentive.
Land Transfer Tax Rebate
First-time buyers in Ontario may qualify for a rebate on provincial land transfer tax, which can help reduce closing costs.
Key details:
• Provincial rebate of up to $4,000
• Applies only to the Ontario portion of land transfer tax
• Typically applied automatically at closing if eligible
For purchases in Toronto, an additional municipal land transfer tax rebate may also apply, subject to eligibility.
Insured Mortgages and Minimum Down Payments
Many first-time buyers are able to purchase with a smaller down payment by using an insured mortgage.
Key points:
• Minimum down payment can be as low as 5%, depending on purchase price
• Mortgage default insurance is required and added to the mortgage
• Qualification rules are stricter, including stress test requirements
This option can help buyers enter the market sooner, particularly at entry-level price points. The tradeoff is higher monthly payments and a smaller initial equity position. For some buyers, insured mortgages make sense as a first step when paired with strong income and long-term planning.
First Home Savings Account (FHSA)
The First Home Savings Account is designed specifically for a first home purchase and is often the most efficient place to save toward a down payment.
Key features:
• Contributions are tax deductible
• Withdrawals for a qualifying first home are tax free
• Up to $8,000 per year, with a $40,000 lifetime limit
• Unused contribution room carries forward
Because of its structure, FHSA funds are commonly the first account buyers draw from when purchasing.
RRSP Home Buyers’ Plan (HBP)
The Home Buyers’ Plan allows first-time buyers to access RRSP funds without immediate tax.
Key details:
• Up to $60,000 per person can be withdrawn
• Withdrawals are not taxed at the time of purchase
• Funds must be repaid over 15 years
• Repayments generally begin the second year after purchase
This tool can help bridge a gap, but repayments affect future cash flow and should be considered as part of a broader plan.
Tax-Free Savings Account (TFSA)
TFSAs offer flexibility that can be useful during a purchase.
Key points:
• Withdrawals are tax free
• There is no repayment requirement
• Funds can be re-contributed in future years, subject to CRA rules
TFSAs are often used to supplement a down payment, cover closing costs, or maintain a cash buffer after purchase.
RRSP Withdrawals Outside the Home Buyers’ Plan
Withdrawing RRSP funds outside the Home Buyers’ Plan is usually the least favourable option.
Important considerations:
• Withdrawals are treated as taxable income
• Withholding tax applies immediately
• This can reduce affordability and create a tax bill
Because of this, RRSP withdrawals outside the HBP are typically a last resort.
First-Time Home Buyers’ Tax Credit
First-time buyers may also qualify for a federal tax credit after purchasing.
Key details:
• Based on $10,000 multiplied by the lowest personal income tax rate
• Provides up to $1,500 in tax relief
• Claimed on your personal tax return for the year of purchase
While this does not reduce costs at closing, it can help offset expenses in the year you buy.
How First-Time Buyers Commonly Decide Which Funds to Use
When buyers have multiple accounts available, the goal is usually to reduce tax impact while preserving flexibility.
A practical approach many first-time buyers follow looks like this:
Use FHSA funds first, since they are designed for home purchases and withdrawals are tax free.
Use RRSP Home Buyers’ Plan funds next, keeping in mind the 15-year repayment requirement.
Use TFSA funds as needed, since withdrawals are tax free and flexible.
Avoid RRSP withdrawals outside the HBP unless absolutely necessary due to the tax impact.
This framework isn’t required, but it reflects how many buyers approach the decision in practice.
Final Thoughts
First-time buyer incentives can meaningfully reduce barriers, but the real value comes from understanding how they work together. Clear planning around contribution limits, repayment obligations, and tax consequences helps buyers make decisions with fewer surprises and more confidence.
If you’d like a full overview of what buying looks like from start to finish, see our article on how the home buying process works in Ontario.
